Simultaneous Revolutions

New
Competitors
New Rules
of Competition
Industry Structure
Changes

New Regulatory
Environment

New Political
Agendas
The
Business

New Technologies
New Employees
and New Values

Increasing
Customer Expectation

Systematic Approach to IS
Vision
Strategy
Tactics
Business Plan

Competitive Options
Roles, Roles, and Relationships
Redefine/Define
Telecommunications as the Delivery Vehicle
Success Factor Profile

Three Roles of IS
Efficiency

Effectiveness
Competitive Advantage

Three Roles of IS
Efficiency

Doing things better overall

Effectiveness

Doing better things within the organization

Competitive Advantage

Doing better and new things for the

customer

Business Competitive
Environment
The global market will come to you, if you dont
come to it.

Competition Can Be
Local
Regional
National
International

Going to be taking a look at competition,

defining it and then focusing on global
competition.

Why Do We Care?

What Is Competitiveness?
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 while simultaneously maintaining or
expanding the real income of its citizens

Three Inputs to improving domestic performance

Human Resources
Capital
Technology

Competitiveness: A Link to National Goals

Human
Resources

Capital

Technology

Trade
Policy

Improved
Domestic
Performance

New
Competition

Decreased
Budget
Deficit

Increased
World Market
Competitiveness
Reduced
Trade
Deficit

Stronger
National
Security

More and
Better Jobs

Increased
Standard of
Living
Figure 2-1

How does a company gain a

competitive advantage?

Provide a value to customers

Real
Perceived

Knowing/Understanding
- Products

- Customers
- Competitors

International Competitive Advantage

The way companies achieve competitive
advantage in the global industry is based on
the role played by the home nation.

The Diamond National Advantage

Chance

Firm Strategy,
Structure and
Rivalry

Factor

Demand

Conditions

Conditions

Related and
Supporting
Industries

Government
Fig. 2-2

The Governments Role

Catalyst

Challenger

Business Competitive
Environment

Position Some Important Factors

1. The definition of competitiveness.
2. The key elements of competitive advantage.
3. The role of the nation relative to companies
that compete successfully on a global basis.
4. The role of government within a nation.

While contemplating the idea that information

technology could make a difference.

Competitiveness is the Pivotal

Business Issue
in the 21st Century

Global Economy
Why the emphasis on globalization and
the importance of global competition?

Business Environment
The global market will come to
you, if you dont go to it.

An Essential Roadmap?
Do nations, companies and individuals need to build
wealth in a knowledge-based global economy?
How significant in creating wealth are breakthrough
technologies in microelectronics, biotechnology, new
materials, telecommunications, robotics, and
computers?

Do these factors explain why relatively new

industries are growing explosively and existing
industries are being transformed?

Michael Porter Contributions

1985 - Presidential Commission and
Competitiveness Definition
1987 - Competitive Model and Value Chain

1990 - Competitiveness of Nations Study

Present - Institute for Strategy and Competitiveness,
Harvard Business School

Competitiveness Definition
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 while simultaneously
maintaining or expanding the real income
of its citizens.

How Does a Company Compete?

If the bottom line to a business is
profit, then the top line is value to
customer.

A Good Optional Strategy?

To produce quality products and
services through effective leadership
of skilled employees using advanced
methods through the innovative use
of technology.

A Good Competitor:
1. Knows its products and services.
2. Knows its customers.
3. Knows its competitors.

Competitiveness of Nations
The striking internationalization of competition
in the decades after World War II has been
accompanied by major shifts in the economic
fortunes of nations and their firms.
1. How did this happen?

2. What can one learn from this?

3. What can companies and countries do with this
knowledge?

Competitiveness of Nations
Why (how) are companies in a
particular nation able to gain a
dominant competitive position in
a specific industry against the
worlds best competitors?

Competitiveness of Nations
The point of all of this:
Helps to anticipate from which country future
competition is likely to come from?
Helps to understand at least in basic terms the
types of companies that will be primary
competitors?
Could help to anticipate what could be their
primary competitive strategies?

Nations do not compete!

Organizations Compete

Within Industries
What is the role of the nation?

Previous Basis of Competitive Analysis

Porter
Economists
Politicians
Companies

Companies and Industries

Unit Cost of Labor Adjusted
for Inflation
Balance of Payment
The Right Strategies to
Compete in Global Markets

To Understand Competitiveness
The industry was the basic unit of
analysis.
Industries are organizations that
directly compete with each other.
Some industries are well-defined,
while others are not.

A Major Message
The role of the nation has
increased as competition has
shifted more to the creation and
assimilation of knowledge.

The ways that firms achieve and

sustain competitive advantage in
global industries provide the necessary
foundation for understanding the role
of the home nation in the process.

Diamond of National Advantage

Chance

Firm Strategy,
Structure and
Rivalry

Factor

Demand

Conditions

Conditions

Related and
Supporting
Industries

Government

Competitive Success Is Not the Direct Result of:

Natural Resources
Labor Pool
Interest Rates and Currency Value

Economies of Scale
. . . Traditional Economic Thinking

Factor Conditions
The nations position in factors of production
that are prerequisites to compete in a specific
industry.
Infrastructure
People Skills and Training
Factors Unique to a Specific Industry

A nation usually does not inherit but creates

the most important factors.

Factor Conditions
Physical Resources:
Abundance, quality, accessibility and cost of
land, water, minerals, timber, hydroelectric

power, etc.
Climatic conditions.
Location and geographic size.
Time zone re: global communication.

Factor Conditions
Infrastructure: Type, quality, and user cost.

Transportation
Communication
Mail/freight Delivery
Health Care
Schools
Housing Stock
. . .Quality of life--to live and to work.

Factor Conditions
Capital Resources: (Amount and cost of
money)
Secured Debt

Unsecured Debt
Equity and Venture Capital

Savings Rate
Tax Incentives
Fiscal and Monetary Policies

Factor Conditions
Knowledge Resources: Scientific, technical and
market knowledge that pertains to goods and
services.
Universities
Government Research Facilities
Private Research Facilities

Business and Scientific Literature

Market Research Databases
Trade Associations

Factor Conditions
Human, knowledge and capital
factors are mobile.
Other elements of the diamond
are more important to explain
international success.

Therefore
Competitive advantage from
factor conditions depends on
how effectively and efficiently
they are mobilized and
deployed in the economy.

Demand Conditions
The sophistication of customer demand.
The more demanding the local buyers the
better to hone the global competitiveness of
home-based companies..
The local market provides an early picture of
the emergence of buyer needs.
This factor is a major positioner for success.

Related and Supporting

Industries
Successful companies need suppliers who are:
1. Home-based.
2. Competitive on an international level.
A close relationship with suppliers contributes
to innovation and upgrading of products.
Prompts a range of interconnected suppliers
that are all internationally competitive.

First Strategy, Structure and

Rivalry
The way in which companies are
created, managed and choose to
compete domestically.

Firm Strategy, Structure and Rivalry

Study Findings:
Company and individual goals vary.
No one management style is universally
appropriate.
Differences in background of CEO and
different company structures.
Company structures are different.
Contrasts in people motivation to work and
learn.
Career choices of the best students varies.

Firm Strategy, Structure and Rivalry

Italy
Joined the ranks of advanced nations in the past two decades.
Overall growth in world export share was second only to
Japan.
Illustrates the power of a growing alignment between national
circumstances and the shifting demands of modern global
competition.
Benefited from a shift from standardized, mass-produced
products toward more customized, higher-style, higherquality goods.
In many cases style was combined with investment in stateof-the-art production equipment.
Achieved advantage based on segmentation, differentiation
and process innovation.

Role of Government
Serve as a challenger and catalyst to companies to
compete successfully:

Focus on specialized factor creation.

Avoid intervening in capital factor and currency markets.
Enforce strict product, safety and environmental
standards.
Limit cooperation among industry rivals.
Promote goals that lead to sustained investment.
Deregulate competitors.
Enforce domestic antitrust policies.
Reject managed trade.

Eveready Batteries
Employs 350 people in Kenya.
40% of Eveready batteries sold in Kenya are
counterfeit.
If this continues, the company will terminate its
operation in Kenya.

Kenya
80% of counterfeit goods are estimated to come
from China.
The business community blames much of their
troubles on high costs, such as power and water,
and government corruption.
The government run port of Mombasa is notorious
for bribery and kick-backs.

Companies gain an advantage

against competitors by responding
to pressures and challenges.

Conclusions
The diamond of national advantage makes sense as a
means of understanding global economic success.
Domestic success does prepare companies to compete
globally.
Major European and an increasing number of Asian
countries are capable of competing on a global basis.
The global marketplace is only going to get tougher
based on more, tougher competitors.
The diamond can help to anticipate new competitors.