technology competitivness unit -ii

8/8/2019 Technology Competitivness Unit -II

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DEFINITION AND INDICATORS OF COMPETITIVENESS

Competitiveness is the process by which oneentity is a person, a corporation, or a country, the global is to

win. Competition between business rivals within and outside

the boundaries of a country has intensified in recent times. To

be competitive, several factors must exist : ability, the desireto win, commitment or perseverance, and the availability of

certain resources. For a company, being competitive means

producing or providing, in timely and cost effective manner,

a product or service that meets the test of the market placeand the needs of customers. To maintain its competitive

position the company must continue to outperform its

business rivals. In todays global markets, those rivals maybe

operating within local, regional, national or global market


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At the Macro level the competitiveness of

national reflects the standard of living of their citizens.

National competitiveness is a consolidation of the micro level performance of companies and individuals the

true agents of economic growth. Issues of

competitiveness have gained prominence in the post

cold war era. The communism, the trend towarddemocracy, the opening of the market in the eastern bloc

and reduced military spending have created a new

environment for business. Countries objectives have

converged on creating sustainable economic growth

In 1985, the U.S. Presidents commission on

Industrial Competitiveness (Council on competitiveness,

1994) defined competitiveness as


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The degree to which a nation can, under free and

fair market conditions, produce goods and services that

will meet the test of international markets, whilesimultaneously maintaining or expanding the real income

of its citizens

The Washington based U.S Council on

Competitiveness adopted this definition and depicted the

determining factors of competitiveness as a four section

pyramid, shown in figure below.


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The Competitiveness Pyramid

InvestmentNo economy can operate successfully without

proper investment. The creation of wealth requires aproductive base as the foundation of economic growth.Investment s in technology, factories, equipment,

infrastructure and people help create such a foundation.

Investment in Productive Facilities

(Factories, R&D, Technology

Productivity(Quality should exist)

Trade

High

Standardof Living


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Productivity

The next step is improving productivity.

Productivity reflects the efficiency with which goods andservices are produced. High levels of productivity provide anorganization with a distinct advantage over its rivals.Productivity helps drive cost down and improve profitability.Efforts to improve productivity should not, however, sacrifice

quality. Gone is the time when quality was considered a luxury; today, it is a minimum requirement an essential factor.Product quality and performance are determinants of overallcompetitiveness.

Trade

Trade connects production with markets. Todays trade isglobal. Trade operations have become more complex with the

creation of trade blocs such as the European Union (EU)


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The North American Free Trade Agreement (NAFTA), The

Asian Pacific Economic Corporation (APEC), and the

Association of Southeastern Asian Nations known as theASEAN. Each bloc has been created with the objective of

fostering commercial activities within the blocs. These

commercial clusters, however do not operate completely

as closed entities ; they are still open to free trade tononbloc nations. This is why treaties such as the General

Agreement on Tariffs and Trade (GATT) and the World

Trade Organization (WTO) play key roles in modern world.

Suffice it to say that products or services that cannot betraded in open markets do not produce the economic

growth that can trigger a significant improvement in

standard of living.


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StandardofLiving

Gross Domestic Product (GDP) and Gross

National Product (GNP) are economic measures of theamount of wealth created in a country. This wealth is

passed to the citizens and reflected in their standard of

living . It is possible to determine a countrys

competitiveness on the basis of its citizens standard ofliving as defined by GDP per person. A nations

technological advancement is a major contributor to its

economic prowess. Technology also permits people to

accumulate wealth. EG ; In 1999 the net worth of a singleindividual Bill Gates, founder of Microsoft is estimated

to exceed $90 billion, More than the combined GDP of

several countries ; his wealth and power are a direct result

of Microsoft's dominance in Information technology.


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MANAGEMENT OF TECHNOLOGY AND GLOBALCOMPETITIVENESS.

Management of Technology plays amajor role in creating and maintaining competitiveness in theglobal arena. MOT activities maybe undertaken at the

national / international, or macro, level, or at the firm ormicro, level.

At the macro levelcountries must be able to :

Create an economic growth policy, taking into considerationthe fact that technology policy is a major contributor to

economic strength.

Provide an infrastructure permitting the support oftechnological enterprises and the facilitation of commerceand trade. Planning for HRD must also be an integral part of

any technology development strategy.


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Encourage cooperation between government, industry

and education and research institutions.

Energize and support technological innovation anddevelop plans to enhance creativity and support R&D

activity.

Promulgate necessary but unburdensome legislation

and regulation measures to protect the environment andstrengthen social structure.

In the past, national competitive advantage

focused on the availability and successful exploitation ofraw materials, labor, transportation and sources of

capital. This factors are still important today. However in

todays global economy, multinational corporations have

crossed national boundaries to establish their facilities


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Where production cost is lowest. This globalization of

production has erased most of the traditional bases upon

which the industrialized countries such as the UnitedKingdom, have built their competitive advantage.

Industrialized countries are now taking advantage of the

explosion of knowledge to create advanced technology

that will help them maintain a competitive edge. At thesame time however, improvements in communication and

transport technology have brought the world closer

together and facilitate the rapid migration of technology

across borders, thereby decreasing the widetechnological gap among countries. This changes world

conditions and the changing environment of business

make it evident that competitive advantage is increasingly

dependent on our talent and skill in managing technology


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and technological enterprises.

The National Academy of Engineerings

Committee on Engineering as an International Enterpriseconcluded that the comparative strength of a nationstechnical enterprise depends upon the following factors :

The strength of national research enterprise

The quality of technical education The presence of a large pool of technical talents.

The strength of information technology infrastructure

The ability to cultivate individual creativity and

initiative. Synergy between basic research and downstreamtechnical activities such as design and productioncapabilities.

The scale of domestic markets and the openness of


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Global markets as engines for innovation and its

commercialization.

The ability to continually modernize plant andequipment in private industry and the commitment to do

so.

Collaboration between industries and universities and

the government. National savings and the level of investment in

industrial modernization.

National policies supporting initiative to enhance

adoption, adaptation and diffusion of technology and

related know how.

Public support of generic and domestically developed

technologies.


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A COMPARISON OF INTERNATIONAL COMPETITIVENESS :

ECONOMIC INDICATORS

The economic performance of a nation is

commonly expressed in terms of its gross domestic

products. This index reflects the wealth created within

the borders of a nation and represents the output (totalmarket value) produced by people, firms and

governments domestically. Firms owned by other

countries and foreign citizens working within the country

contribute to this index. In 1993 the GDP of the UnitedStates was $6.5 Trillion. In 1998 it was more than $8.5

Trillion.

The GDP index is different from the GNP index,

which measures output produced by citizens of a country


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either within or outside of the borders of that country. Eg ;

For a country such as Japan, GNP includes profits made by

Japanese firms in the United States and for the UnitedStates, GNP includes profits made by U.S. companies

oversees and earnings of U.S citizens abroad but not

profits and earnings of Japanese Companies or citizens

located in the United States.The GDP index is becoming more commonly

used index because it correlates well with many other

economic indicators, such as industrial production and

employment. GDP can be adjusted for inflation toproduce another index, called real GDP. This is a good

index for tracing the actual increases or decreases in a

nations output after adjustments for inflation.


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THE U.S COUNCIL ON COMPETITIVENESS

In 1986, a group of chief executivesrepresents a large number of business leaders, and labor

organizations formed a council to conduct studies aimed at

improving U.S competitiveness in World markets. Known as

the Council on Competitiveness and located in Washington,D.C., it publishes an annual competitiveness index. The

publication assesses U.S economic performance relative to

that of a group of advanced industrialized nations known as

the GroupofSeven (G -7). The head of the G -7 nationsmeet annually to discuss economic issues affecting their

countries. The G 7 countries are the United States,

Canada, Japan, France, Germany, Italy, and the United

Kingdom ;


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In 1996, Russia joined the group.

1.Standardof Living Indexes

Standard of living is a reflection of how well people live in

a certain country or region of the world. It reflects the

distribution of a countrys wealth among its citizens. TheCouncil on Competitiveness defines standard of living as

gross domestic product per person. This index of standard

of living assumes that the countries wealth is distributed

evenly among inhabitants regardless of social or politicaldifferences.


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0

1020

30

40

50

6070

80

90

U.S Germany Japan France Italy Canada U.K

Column1

Long Term RealGrowth in Standardofliving (1973 1993)

The figure shows the growth in standard of living for

the G -7 countries between 1973 and 1993. As can be seen

in the figure healthy gains were achieved by

Japan, Germany, and Italy during the 20 year period.


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Of all the G 7 countries, the U.S had the lowest gain. Thistrend has been revising since 1992, with the U.S emergingas a better competitor. A more representative index for

the standard of living is Purchasing Power Parity (PPP).This index measure how much it cost to but a standardbasket of goods and services in a country relative to howmuch the same basket costs in the United States. It adjust

for current prices and exchange rates between countries.The basket of goods and services is selected on the basisof peoples purchasing patterns and is updatedperiodically to account for changes overtime.

2. Trade Indexes

The U.S trade balance in merchandise goods and servicesfrom 1984 to 1995. A trade balance represents the

difference between the total


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value of merchandise goods and services exported by a

country and the total value of merchandise goods and

services imported. The trade deficitis an index of therelative competitiveness of a countrys industry and

services organizations. The U.S moved from a positive

trade balance in the early 1980s to a serious trade deficit

in 1980s progressed. The negative trend continued in1990s reaching $210 million in 1997. A great contributor

to the U.S. deficit is the loss of a competitive edge to

countries such as Japan, Germany and the Asian Tiger

Nations. This is particularly true in the manufacturedgoods sector. In services sector, the United States has a

positive trade balance.


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3.Productivity Indexes.

Productivity , as defined earlier, is the ratio of output to

input. It reflects the efficiency of an operation. Severalindexes can be used to express and track productivity. The

most common index used to track productivity in

manufacturing is output per worker hour input, as

shown in figure below. The index commonly used to tracknational productivity as an indicator of national

competitiveness is based on GDP per total employed

persons.


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4. Investment Indexes

Investment in R&D, plant and equipment (P&E), and

education provides a base for long-term economicgrowth.. Therefore, it is very important to track these

indicators and to sound the alarm when they take a

wrong turn. Savings are another indicator, reflecting the

accumulation of resources necessary to unleashinvestment.

5.Patent Index.

Another index of competitiveness is the number of

patents granted per year, as patents reflects

innovativeness or a countrys ability to create technology.

In the United States, the share of patents granted to U.S

inventors declined in the 1970s and 1980s but began


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Increase in the early 1990s. The upswing indicates renewed

emphasis on creativity and on the importance of

technology in winning the global competition.

technology competitivness unit -ii

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