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Business Competitiveness:A 21st Century Model for the CaribbeanPresented to the ECCU Business Symposium and Innovation ForumSt Kitts and Nevis Tuesday October 22, 2013
1
Structure of Presentation
• A Working Definition• Theorising Competitiveness –19th and
20th century models• Michael Porter’s Diamond and Five Forces
Model• The Global Competitive Index model• Is there a Caribbean model of Business
Competitiveness?2
Definitions
World Economic Forum’s Global Competitiveness Report: competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country (GCR 2103/2014, p. 3
Harvard Business School’s Institute for Strategy and Competitiveness : a nation’s competitiveness…..is based on the productivity with which it produces goods and services. 3
From Absolute to Comparative to Competitive Advantage
• Absolute Advantage – Adam Smith 1776• Comparative Advantage – David Ricardo
1817• Competitive Advantage – Michael Porter
1990
4
Absolute Advantage or“Anything you can do I can do better”
Countries should specialise in what they have absolute advantage in due to natural advantage (land, labour, capital)
Results in reduced or no
trade
Inefficiencies in production
process
5
Comparative Advantage
• Countries should produce those items they can make most efficiently even if other countries can produce the item more efficiently.
Presumes bilateral trade, full
employment
Small economies could not
be competitive
Transportation Costs not included
6
Determinants of Global Competitive Advantage:The Porter Diamond
DemandConditions
FactorConditions
Related andSupportingIndustries
Firm Strategy,Structure, and
Rivalry
Firm Level Competitiveness – Porter’s Diamond
Source: International Business : Environments and Operations ,Daniels and Radebaugh
7
• Demand conditions—observation of need or demand
– usually in home country– production started near the observed market
• Factor conditions— availability and terms for acquiring them
• Related and supporting industries—existence of infrastructure
• Firm strategy, structure, and rivalry– influenced by other three conditions
Existence of the four favorable conditions does not guarantee that an industry will develop in a locale
Absence of one of the four conditions from a country may not inhibit companies from becoming globally competitive
PORTER’S CONDITIONS FOR COMPETITIVE SUPERIORITY
8
Industry CompetitivenessPorter’s Five Forces
9
What of the Caribbean?
10
Wint’s (2003) Model of Competitiveness for SIDS in the Caribbean
11
Alvin G. Wint, Competitiveness in Small Developing Economies, 2003 ,UWI Press
World Economic ForumGlobal Competitiveness Index (2013)
• Definition of competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country (GCR 2103/2014, p. 3)
• Competitiveness of a country measured based on 12 Pillars (Factors)
12
Global Competitive Report 12 Pillars of Competitiveness
Quality of Institutions
Infrastructure Macroeconomic Environment
Health and Primary
Education
Higher Education and
Training
Goods Market
Efficiency
Labour Market
Efficiency
Financial Market
Development
Technology Development Market Size Business
SophisticationInnovation
13
Caribbean CompetitivenessA Human Capital Development Approach
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Competitiveness Based on Innovation
In the current context, policymakers must avoid complacency and press ahead with the structural reforms and critical investments required to ensure that their countries can provide a prosperous environment and employment for their citizens. They must identify and strengthen the transformative forces that will drive future economic growth. Particularly important will be the ability of economies to create new value-added products, processes, and business models through innovation.
Going forward, this means that the traditional distinction between countries being “developed” or “developing” will become less relevant and we will instead differentiate among countries based on whether they are “innovation rich” or “innovation poor.” It is therefore vital that leaders from business, government, and civil society work collaboratively to create enabling environments to foster innovation and, in particular, to create appropriate educational systems
( Source: Global Competitiveness Report 2013-2014, p. xiii)
15
5th Pillar – Higher Education and Training - Barbados
INDICATOR MEASURE RANK/148Secondary education enrollment, gross %*
103.7 23
Tertiary education enrollment, gross %
61.8 33
Quality of the educational system
5.3 6
Quality of math and science education
5.5 9
Quality of management schools
5.1 26
Internet access in schools 5.1 38
Availability of research and training services
4.7 41
Extent of staff training 4.5 3216
9th Pillar of GCI – Technology Development - Barbados
INDICATOR MEASURE RANK/148Availability of latest technologies
5.9 28
Firm-level technology absorption
5.2 44
FDI and technology transfer 5.0 35
Individuals using Internet, %*
73.3 32
Fixed broadband Internet subscriptions/100 pop.*
23.8 27
Int’l Internet bandwidth, kb/s per user*
69.5 33
Mobile broadband subscriptions/100 pop.*
36.4 44
Availability of latest technologies
5.9 28 17
12th Pillar of Competitiveness – Innovation - Barbados
INDICATOR MEASURE RANK/148 Capacity for innovation 3.4 81 Quality of scientific research institutions
4.2 45
Company spending on R&D 3.0 78
University-industry collaboration in R&D
4.3 39
Gov’t procurement of advanced tech products
3.6 54
Availability of scientists and engineers
4.3 63
PCT patents, applications/million pop.*
11.3 32
18
Modified Model of Competitiveness for the Caribbean
Global Competitiveness
Macroeconomic Stability
Infrastructural Development
Firm Level Competitiveness
Innovation
Higher Education and
Training
Technology Development
19
The Third Prong in the Growth Strategy for the ECCU
Transportation
Energy
Environment Education and Skills Training
Research and Development
Information Technology
Governance
Source: Hon Sir Dwight Venner, ECCB Annual Report, 2012/2013
20
OECS expenditure on Education• Relatively high (approx. 5% of GDP) compared
to other CARICOM countries• Almost 100% achievement of MDG of
universal primary education• Better outcomes from expenditure could be
gained including more targeted programmes• Increasing or introducing user fees at tertiary
level
The Eastern Caribbean Economic and Currency Union Macroeconomics and Financial Systems, Alfred Schipke, Aliona Cebotari, and Nita Thacker, IMF, 2013
21
Focus on Higher Education and Training in the OECS• Innovation and Technology Development are
enabled by Higher Education and Training• Increased numbers of persons in Higher
Education directly proportional to development indices (HDI; GCI)
• Investment in Higher Education and Training has to be a Public Private Partnership in the OECS and wider Caribbean
• Higher Education and Training must Enhance Entrepreneurship and Develop Entrepreneurial Behaviours.
22
Do countries with higher income per capita have higher tertiary enrollment rates?
Most countries with gross national income (GNI) per capita less than $1000 have tertiary GERs less than 11%. Tajikistan (20%) and Kyrgyz Rep (49%) are the two exceptions.
Countries with GNI pc more than $20,000 have tertiary GERs higher than 50% except for Qatar (10%), Luxembourg (10.5%), Brunei (17.2%), and Liechtenstein (36.0%).
Most countries with a GNI pc higher than $20,000 have tertiary GERs higher than 50%.
0 10000 20000 30000 40000 50000 60000 70000 80000 900000
10
20
30
40
50
60
70
80
90
100
R² = 0.202130699748016
GNI per capita, Atlas method (current US$)
Gro
ss e
nro
lmen
t ra
tio
. T
erti
ary
(IS
CE
D 5
an
d 6
). T
ota
l
Source: UNESCO Institute for Statistics in EdStats, Nov. 2012 Note: Data is for the most recent year between 2009 and 2011.
Slovenia
Brunei
Norway
Switzerland
United States Finland
Oman
Luxembourg, Qatar
Belarus
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/EXTDATASTATISTICS/EXTEDSTATS/0,,contentMDK:21528857~menuPK:4324013~pagePK:64168445~piPK:64168309~theSitePK:3232764,00.html?tertiary
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Which countries have the lowest tertiary enrollment rates?
These countries have less than 4% of tertiary age students enrolled in tertiary education.
33 countries have less than 10 percent of tertiary age youth enrolled.
50 countries have more than half of tertiary age youth enrolled.
8 countries have tertiary GERs higher than 80% and 4 countries have tertiary GERs higher than 90%: Finland, the United States, Cuba, and Korea, Rep.
10 Countries with the Lowest Tertiary Gross Enrollment Rates
(2008-2011)
1 Turks and Caicos Islands 0.08
2 Malawi 0.72
3 Niger 1.51
4 Eritrea 1.99
5 Tanzania 2.11
6 Chad 2.17
7 Central African Republic 2.57
8 Burundi 3.25
9 Afghanistan 3.33
10 Dominica 3.57
Source: UNESCO Institute for Statistics in EdStats, Nov. 2012Notes: Figures are most recent year with data between 2008-2011. Purple =
2011; Black = 2010; Blue = 2009; Green = 2008. Data were not available for 72 of 214 countries.
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/EXTDATASTATISTICS/EXTEDSTATS/0,,contentMDK:21528857~menuPK:4324013~pagePK:64168445~piPK:64168309~theSitePK:3232764,00.html?tertiary
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The Road to being Innovation Rich
• Focus on higher education linked to national goals (agriculture, agriprocessing, transportation, Tourism, Financial Services)
• Private Sector should partner with the Public sector for HE, skills training, R&D
• Financial Sector should support innovation, entrepreneurship, financing for SME’s 26
EPILOGUE
TESSA’S STORY
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References• Daniels, J and Radebaugh, L (2012) International Business:Environments and
Operations, Pearson.• ECCB Annual Report, 2012-2013 http://
www.eccb-centralbank.org/PDF/ar_2013.pdf • Schipke, A., Cebotari, A. Thacker, N., (2013) Eastern Caribbean Economic and
Currency Union: Macroeconomics and Financial Systems, IMF. • Schwab, Klaus (2013) World Economic Forum: The Global Competitiveness
Report 2013-2014. http://www.weforum.org/reports/global-competitiveness-report-2013-2014
• Wint, A (2003) Competitiveness in Small Developing Economies, UWI Press.• Harvard Business School Institute for Strategy and Competitiveness. http://
www.isc.hbs.edu/index.html• UNESCO, Edstats
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/EXTDATASTATISTICS/EXTEDSTATS/0,,contentMDK:21528857~menuPK:4324013~pagePK:64168445~piPK:64168309~theSitePK:3232764,00.html?tertiary
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THANK YOU