Building a Competitive Nigeria:
The Role of the National Competitiveness
Council of Nigeria
Professor Michael E. Porter
Harvard Business School
National Competitiveness Council of Nigeria
Lagos, Nigeria
March 21, 2013
This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), “Building the
Microeconomic Foundations of Competitiveness,” in The Global Competitiveness Report (World Economic Forum), “Clusters and the New Competitive Agenda for
Companies and Governments” in On Competition (Harvard Business School Press, 2008), and ongoing research on clusters and competitiveness. No part of this publication
may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the
permission of Michael E. Porter. Further information on Professor Porter’s work and the Institute for Strategy and Competitiveness is available at www.isc.hbs.edu
Prosperity Performance
Sub-Saharan Africa
PPP-Adjusted GDP per
Capita, 2011 ($USD)
$16,000
Gabon
Average: 4.54%
Mauritius
Botswana
$14,000
$12,000
South Africa
$10,000
$8,000
Angola
Namibia
$6,000
Swaziland
Congo (Brazzaville)
Cape Verde
$4,000
Ghana
$2,000
Average: $3,065
Cameroon Gambia Djibouti Nigeria Sudan
São Tomé and Príncipe
Mauritania
Côte d'Ivoire
Zambia Uganda
Benin
Rwanda
Kenya
Comoros
Tanzania
Guinea Senegal
Ethiopia
Chad
Togo
Mali
Eritrea
Malawi
Liberia
Sierra
Leone
Mozambique
Niger Guinea-Bissau
Zimbabwe
Madagascar
CAR
Congo (Democratic Republic)
Burundi
$0
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Growth in Real GDP per Capita (PPP-adjusted), CAGR, 2001-2011
12.0%
Source: EIU (2012); author’s calculations
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Prosperity Performance Trends
Nigeria and Selected Sub-Saharan African Countries
PPP-Adjusted GDP per
Capita, 2011 ($USD)
$16,000
$14,000
$12,000
$10,000
Botswana
South Africa
Nigeria
$8,000
Kenya
Rwanda
Ethiopia
$6,000
$4,000
$2,000
$0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: EIU (2012); author’s calculations
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Copyright 2013 © Professor Michael E. Porter
Poverty Performance
Nigeria and Selected Sub-Saharan African Countries
Poverty Rate ($1.25 a Day, PPP)
80%
70%
(% of population)
60%
50%
40%
30%
20%
10%
0%
Nigeria
Rwanda
Kenya
Ethiopia
Botswana
South Africa
Source: World Bank (2013).
Note: Country comparison based on the most recent data available as of March 2013.
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Copyright 2013 © Professor Michael E. Porter
What Determines Success of Competitiveness
Organizations?
• Co-led by or heavily involving the private sector with the participation of all
actors. Representation from the national government as well as the state level
• Direct involvement by the President to build consensus and integration into
the process of government
• Institutionalized in a formal structure, with a world-class secretariat
• Common conceptual framework
• Focus on the microeconomic aspects of competitiveness, not just macro
• Develop a strategy, not just discrete policy improvements
• Prioritized and sequenced action plan
• A clear mandate to measure and report progress and create accountability
for implementing entities
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Copyright 2013 © Professor Michael E. Porter
Agenda
• Defining Competitiveness and Prosperity
• Indicators and Enablers of Competitiveness
• Drivers of Competitiveness
• Benchmarking Nigerian Competitiveness
• Geographic Areas and Competitiveness
• Economic Strategy
• Organizing for Competitiveness
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Copyright 2013 © Professor Michael E. Porter
What is Competitiveness?
A country or region is competitive to the extent that firms operating there are
able to compete successfully in the global economy while supporting high
and rising wages and living standards for the average citizen
• Competitiveness is the long-run productivity of a location as a place to do
business
- Productivity of existing firms and workers
- Ability to achieve high participation of working age citizens in the
workforce
• Competitiveness is not:
- Low wages
- A weak currency
- Jobs per se
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Two Sources of Prosperity
Inherited Prosperity
Created Prosperity
• Prosperity derived from inherited
natural resources / endowments
– Prosperity is limited
• Prosperity arising from productivity
in producing goods and services
– Prosperity is unlimited
• Dividing the pie
• Expanding the pie
• Companies are the central actors in
the economy
• Government usually the central actor
in the economy
• Revenue from resources allows
unproductive policies and
practices to persist and encourages
corruption
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• Government’s role is to create the
enabling conditions for
productivity and foster private sector
development
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Copyright 2013 © Professor Michael E. Porter
Labor Productivity Level and Growth
Sub-Saharan Africa
Real GDP per
Employee (1990 GK$),
2011
$16,000
Average: 2.53%
South Africa
$14,000
$12,000
$10,000
$8,000
Nigeria
Mozambique
$6,000
Ghana
Senegal
$4,000
Côte d'Ivoire
$2,000
Cameroon
Kenya
Zimbabwe
Average: $3,962
Angola
Zambia
Uganda
Tanzania
Congo (Democratic Republic)
$0
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
Growth in Real GDP per Employee, CAGR, 2001-2011
6.0%
8.0%
Note: Several countries are omitted due to lack of labor data.
Source: Groningen Growth and Development Centre, Total Economy Database (January 2012). GDP calculated using Geary Khamis calculation methodology.
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Copyright 2013 © Professor Michael E. Porter
Workforce Participation
Sub-Saharan Africa
Labor Force
Participation (2011)
65.0%
Average: 1.43%
Botswana
60.0%
55.0%
Tanzania
Congo (Democratic Republic)
50.0%
Ghana
Uganda
Kenya
45.0%
Côte d'Ivoire
40.0%
Gabon
Senegal
Zambia
Mozambique
Mauritius
Average: 43.47%
Angola
Cameroon
South Africa
Namibia
35.0%
Nigeria
Zimbabwe
30.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
Change in Labor Force Participation Rate, 2001-2011
Note: Several countries are omitted due to lack of labor data.
Source: EIU (2012), author’s calculations
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4.0%
6.0%
Copyright 2013 © Professor Michael E. Porter
Agenda
• Defining Competitiveness and Prosperity
• Indicators and Enablers of Competitiveness
• Drivers of Competitiveness
• Benchmarking Nigerian Competitiveness
• Geographic Areas and Competitiveness
• Economic Strategy
• Organizing for Competitiveness
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Copyright 2013 © Professor Michael E. Porter
Indicators and Enablers of Competitiveness
Productivity Growth
Domestic
investment
Exports
Domestic
innovation
Imports
Inbound
foreign direct
investment
Outbound
foreign direct
investment
Country Competitive Environment
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Copyright 2013 © Professor Michael E. Porter
Domestic Investment Performance
Gross Fixed
Investment (% of GDP),
2011
55.0%
Sub-Saharan Africa
Average: 5.11%
Niger
50.0%
São Tomé and Príncipe
Cape Verde
45.0%
Congo (Brazzaville)
40.0%
35.0%
Mozambique
30.0%
25.0%
Chad
Average: 23.57%
Mali
20.0%
15.0%
Eritrea
Swaziland
10.0%
Botswana
Gabon
Sudan
Mauritania
Gambia
Djibouti
Senegal
Tanzania
Mauritius
Congo (Democratic Republic)
Uganda
Ghana
Malawi
Togo
Benin
Rwanda
Burundi
Namibia
Guinea
Zimbabwe
Cameroon
Ethiopia
South Africa
Madagascar Zambia
Sierra Leone
Kenya
Nigeria
Angola
Guinea-Bissau
Côte d'Ivoire
CAR
Comoros
5.0%
-25.0% -20.0% -15.0% -10.0%
Note: Includes inbound FDI
Source: EIU (2012)
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Change in Gross Fixed Investment (% of GDP), 2001-2011
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Copyright 2013 © Professor Michael E. Porter
Export Performance
Exports of Goods and
Services (% of GDP),
2011
60.0%
Sub-Saharan Africa
Gabon
Swaziland
Zimbabwe
(43.8%, 66.9%)
Congo (Brazzaville)
(18.0%, 97.0%)
Mauritius
Chad
Côte d'Ivoire
50.0%
Nigeria
Botswana
Namibia
40.0%
Djibouti
Angola
Guinea
Togo Zambia Ghana
Gambia
Cape Verde
Mali
South Africa
Mozambique Congo (Democratic Republic)
Madagascar
Kenya
Senegal
Tanzania
Cameroon
Malawi
Sudan
Guinea-Bissau
Niger
Eritrea
Uganda
Benin
Sierra
Leone
São Tomé and Príncipe
CAR
Comoros
30.0%
20.0%
Ethiopia
10.0%
0.0%
-40.0%
Average: 34.72%
Rwanda
Burundi
Average: 4.30%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
Change in Exports of Goods and Services (% of GDP), 2001-2011
Source: EIU (2012), authors calculations
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Copyright 2013 © Professor Michael E. Porter
Composition of Exports
World Export Market
Share (current USD)
Nigeria’s Exports By Type of Good
Processed Goods
Semi-processed Goods
Unprocessed Goods
Services
TOTAL
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
2006
2007
2008
2009
2010
Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director.
Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics.
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Inbound Foreign Investment Performance
Inward FDI Stocks as
% of GDP, Average
2000-2010
100.0%
Stocks and Flows, Sub-Saharan Africa
Liberia
(178.6%, 625.8%)
Average: 26.3%
Congo
90.0%
Zambia
80.0%
Equatorial Guinea
70.0%
60.0%
Gambia
Chad
50.0%
Cape Verde
40.0%
30.0%
20.0%
10.0%
Eritrea
Mauritania
Mozambique
Uganda
Malawi
10.0%
Average: 43.1%
Swaziland
Côte d'Ivoire
Guinea
Zimbabwe
Ethiopia
Madagascar
Cameroon
Ghana
CAR
Mauritius
Mali
Niger
Benin
Togo Guinea-Bissau
Kenya Comoros
Gabon
Botswana
Senegal
Burundi Rwanda
0.0%
0.0%
Sao Tome and Principe
Djibouti
Namibia
South Africa
Angola
20.0%
30.0%
Nigeria
Sierra Leone
Congo (Democratic Republic)
40.0%
50.0%
60.0%
FDI Inflows as % of Gross Fixed Capital Formation, Average 2000-2010
Source: UNCTAD, World Investment Report (2011)
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Copyright 2013 © Professor Michael E. Porter
Outbound Foreign Investment Performance
Stock and Flows, Sub-Saharan Africa
Outward FDI Stocks
as % of GDP, Average
2000-2010
7.0%
Average Stocks:16.68%
South Africa
(.34%, 19.92%)
Kenya
Liberia
(448.9%, 458.6%)
Botswana
(3.87%, 9.43%)
6.0%
5.0%
Nigeria
4.0%
CAR
Zimbabwe
Gabon
Swaziland
Mauritius
3.0%
Zambia
(4.01%, 2.98%)
Togo
2.0%
Chad
Senegal
Angola
(4.72%, 1.9%)
Cameroon
Guinea
1.0%
Namibia
Malawi
Benin
Guinea-Bissau
Côte d'Ivoire
Madagascar
0.0%
-1.0%
-0.5%
Uganda
Cape Verde
Mozambique
Mauritania
0.0%
Rwanda
Burundi
Mali
0.5%
Niger
Average Flows: 14.64%
1.0%
1.5%
2.0%
Equatorial Guinea
FDI Outflows as % of Gross Fixed Capital Formation, Average 2000-2010
Source: UNCTAD, World Investment Report (2011)
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Copyright 2013 © Professor Michael E. Porter
Agenda
• Defining Competitiveness and Prosperity
• Indicators and Enablers of Competitiveness
• Drivers of Competitiveness
• Benchmarking Nigerian Competitiveness
• Geographic Areas and Competitiveness
• Economic Strategy
• Organizing for Competitiveness
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Copyright 2013 © Professor Michael E. Porter
What Determines Competitiveness?
Endowments
•
Endowments, including natural resources, geographical location, population, and country size, create
a foundation for prosperity, but true prosperity arises from productivity in the use of endowments
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Copyright 2013 © Professor Michael E. Porter
What Determines Competitiveness?
Macroeconomic Competitiveness
Human Development
and Effective
Political Institutions
Sound Monetary
and Fiscal Policies
Endowments
Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but is not
sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country size, create
a foundation for prosperity, but true prosperity arises from productivity in the use of endowments
•
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Copyright 2013 © Professor Michael E. Porter
What Determines Competitiveness?
Sound Monetary
and Fiscal Policies
•
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Fiscal Policy:
Effective public spending
aligned with revenues over
time
•
Monetary Policy:
Low levels of inflation
•
Economic Stabilization:
Avoiding structural
imbalances and cyclical
overheating
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Human Development
and Effective
Political Institutions
Endowments
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Copyright 2013 © Professor Michael E. Porter
What Determines Competitiveness?
Human Development
and Effective
Political Institutions
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Human Development
and Effective
Political Institutions
Endowments
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•
Human Development:
Basic education, health
care, equal opportunity
•
Rule of Law:
Property rights, personal
security, and due process
•
Political Institutions:
Stable and effective
political and governmental
organizations and
processes
Copyright 2013 © Professor Michael E. Porter
Competitiveness and Poverty Reduction
Social
Development
Economic
Development
• There is a strong connection between economic and social development
• Improving competitiveness requires improving the economic and social
context simultaneously
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Copyright 2013 © Professor Michael E. Porter
Rank in Global
Corruption Index, 2011
Corruption Perception Index, 2010
Low
corruption
Botswana
Mauritius
Rwanda
Namibia
South Africa
Ghana
Gambia
Zambia
Madagascar
Senegal
Gabon
Tanzania
Malawi
Swaziland
Benin
Mali
Mozambique
Ethiopia
Eritrea
Mauritania
Togo
Uganda
Burundi
Sierra Leone
Nigeria
Zimbabwe
CAR
High
corruption
Niger
Cameroon
Kenya
Côte d´Ivoire
Guinea
Angola
Chad
Congo (Dem. Republic)
Equatorial Guinea
Sudan
Improving
Worsening
Change in Rank, Global Corruption Report, 2011 versus 2006
Note: Ranks only countries available in both years (160 countries total)
Source:Global Corruption Report, 2010
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Copyright 2013 © Professor Michael E. Porter
Human Development Performance
Nigeria vs. Selected Sub-Saharan African Countries
(indicators as of 2010)
Nigeria
South Africa
Kenya
Ethiopia
Rwanda
Botswana
NA
6.0%
6.7%
4.7%
5.0%
7.8%
School enrollment, primary (% gross)
83.3%
101.7%
113.3%
101.6%
142.6%
110.1%
School enrollment, secondary (% gross)
44.0%
93.8%
60.2%
35.7%
32.2%
81.7%
NA
NA
4.0%
7.3%
5.5%
7.4%
61.3%
NA
87.4%
NA
71.1%
84.5%
Health expenditure per capita (current US$)
$62.8
$648.7
$36.8
$15.7
$55.5
$614.6
Life expectancy at birth, total (years)
51.4
52.1
56.5
58.7
55.1
53.1
Mortality rate, infant (per 1,000 live births)
80.8
35.5
50.1
54
41.5
21.3
Prevalence of HIV, total (% of population ages 15-49)
3.7%
17.3%
6.2%
1.6%
3.0%
23.7%
Education Indicators
Public spending on education, total (% of GDP)
School enrollment, tertiary (% gross)
Literacy rate, adult total (% of people ages 15+)
Health Indicators
Source: World Bank (2013).
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Copyright 2013 © Professor Michael E. Porter
What Determines Competitiveness?
Microeconomic Competitiveness
Quality of the
Business
Environment
State of Cluster
Development
Sophistication
of Company
Operations and
Strategy
Macroeconomic Competitiveness
Human Development
and Effective
Political Institutions
Sound Monetary
and Fiscal Policies
Endowments
Productivity ultimately depends on improving the microeconomic capability of the economy and the
sophistication of local competition revealed at the level of firms, clusters, and regions
• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but is not
sufficient to ensure productivity
• Endowments, including natural resources, geographical location, population, and country size, create
a foundation for prosperity, but true prosperity arises from productivity in the use of endowments
•
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Copyright 2013 © Professor Michael E. Porter
What Determines Competitiveness?
The quality of the
business environment
in which companies
compete, company
productivity, innovation,
and growth
Microeconomic Competitiveness
Quality of the
National
Business
Environment
State of Cluster
Development
Sophistication
of Company
Operations and
Strategy
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Human Development
and Effective
Political Institutions
Endowments
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Copyright 2013 © Professor Michael E. Porter
Quality of the Business Environment
The Diamond
Context for
Firm Strategy
and Rivalry
• Local rules and incentives that
encourage investment and productivity
Factor
(Input)
Conditions
• Access to high quality business
inputs
–
–
–
–
Qualified human resources
Capital availability
Physical infrastructure
Scientific and technological
infrastructure
– e.g. incentives for capital investments,
IP protection, sound corporate
governance standards
Demand
Conditions
• Open and vigorous local competition
− Openness to foreign competition
− Strict competition laws
• Sophisticated and demanding local
needs
Related and
Supporting
Industries
– e.g., Strict quality, safety, and
environmental standards
• Availability and quality of suppliers and
supporting industries
• Many things matter for competitiveness
• Successful economic development is a process of successive upgrading, in which the
business environment improves to enable increasingly sophisticated ways of competing
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Copyright 2013 © Professor Michael E. Porter
Quality of the Business Environment
Ease of Doing Business Indicators (Nigeria, 2013)
Ranking, 2013
(vs. 185 countries)
Favorable
Unfavorable
200
180
160
140
Nigeria’s GDP per
capita rank: 109
120
100
80
60
40
20
0
Ease of
Doing
Business
Rank
Getting Credit
Protecting
Investors
Dealing with
Construction
Permits
Enforcing
Contracts
Resolving
Insolvency
Starting a
Business
Trading
Across
Borders
Paying Taxes
Getting
Electricity
Registering
Property
Source: World Bank Report, Doing Business (2013).
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Copyright 2013 © Professor Michael E. Porter
What Determines Competitiveness?
Microeconomic Competitiveness
Quality of the
National
Business
Environment
State of Cluster
Development
Sophistication
of Company
Operations and
Strategy
Concentrations of firms
in particular fields,
including suppliers,
supporting services and
related institutions.
Clusters enable
productivity and new
business formation
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Human Development
and Effective
Political Institutions
Endowments
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Copyright 2013 © Professor Michael E. Porter
What Is a Cluster?
Tourism Cluster in Cairns, Australia
Public Relations &
Market Research
Services
Travel Agents
Tour Operators
Food
Suppliers
Attractions and
Activities
Hotels
Souvenirs,
Duty Free
Airlines,
Cruise Ships
Restaurants
Maintenance
Services
e.g. Australian Tourism
Commission,
Great Barrier Reef Authority
Local
Transportation
e.g., theme parks,
casinos, sports
Property
Services
Government Agencies
Local Retail,
Health Care, and
Other Services
Banks,
Foreign
Exchange
Educational Institutions
Industry Groups
e.g. James Cook University,
Cairns College of TAFE
e.g. Queensland Tourism
Industry Council
Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden
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Clusters in Developing Countries
Cut Flower Cluster in Kenya
Horticultural Agencies, NGOs & Industry Associations
Horticultural Crops Development Authority (HCDA)
Government Export Policies Targeting Horticulture
Plantstock
Non-Government Organizations
(e.g., The Rural Enterprise Agri-Business Promotion Project)
Greenhouse;
Shading Structures
Trade & Industry Associations
(e.g., Kenya Flower Council)
Irrigation
Technology
Post-Harvest
Cooling
Technology
Grading / Packaging
Sheds
Packaging &
Labeling Materials
Refrigerated Trucks
Pre-Cooling
Technology
Post-Harvest
Handling;
Transport to Market
Flower Farming
Fertilizers,
Pesticides,
Herbicides
Freight Forwarders
Clearing and
Forwarding Agents
Education, Research & Quality Standards Organizations
Research Institutions
(e.g., Kenya Agricultural Research Institute)
Agricultural Cluster
Horticultural
Cluster
Air Carriers
(Commercial /
Charters)
Public Universities with Post Graduate Degrees in Horticulture
(e.g., University of Nairobi)
Quality & Standards
(e.g., EUREGAP Standard, Kenya Plant Health Inspectorate Services)
Tourism Cluster
Sources: MOC student team research by Kusi Hornberger, Nick Ndiritu, Lalo Ponce-Brito, Melesse Tashu, Tijan Watt, Harvard Business School, 2007
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Copyright 2013 © Professor Michael E. Porter
Why Clusters Matter?
• Clusters increase productivity and operational efficiency
• Clusters stimulate and enable innovations
• Clusters facilitate commercialization and new business formation
• Healthy clusters drive competitiveness and competitiveness improvement
• Clusters are regional and local in large countries
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Copyright 2013 © Professor Michael E. Porter
Evidence on the Impact of Clusters
Strong Clusters Drive Regional Performace
•
Existence of strong clusters
•
Job growth
•
Breadth of industries within each
cluster
•
Higher wages
•
Strength in related clusters
•
Higher patenting rates
•
Presence of a region’s clusters in
neighboring regions
•
Greater new business formation,
growth and survival
Source: “Cluster and Entrepreneurship” by Mercedes Delgado, Michael E. Porter, and Scott Stern (2010); “The Economic Performance of Regions” by Michael E. Porter (2003)
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Copyright 2013 © Professor Michael E. Porter
Nigeria’s Film Cluster
(“Nollywood”)
Inputs
Support
Electronics
Industry
(DVD production)
Video Rentals
Tourism & Hospitality
Industry
Video Sales
Production Services
(Make-up,
Costumes, Catering)
Advertising
marketing agencies
Post-Production
Services
Film Production
Film
Production
Companies
Film Distribution
Video Parlors
Export:
English Speaking Africa
and Nigerian Diaspora
Self-Employed
Producers
TV (NTA)
Government Agencies:
• National Film and Video Censors Board
• Nigerian Film Corporation
• Nigerian Film Institute (Nigerian Film Corporation)
• Nigerian Intellectual Property Commission
Nigerian film
Road shows
(Government)
Source: MOC Student Project, 2008. Team Members: Mridul Chowdhury, Tamas Landesz, Massimiliano Santini, Luis Tejada, Gloria Visconti.
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Copyright 2013 © Professor Michael E. Porter
Nigeria’s National Cluster Export Portfolio
2000-2010
1.0%
Oil and Gas Products
(-.68%, 3.51%)
Leather & Related Products
(4.03%, 4.04%)
Change in Nigeria’s Overall
World Export Share: 0.13%
0.9%
World Export Market Share, 2010
0.8%
0.7%
0.6%
Tobacco
0.5%
0.4%
Footwear
Fishing & Fishing Products
Transportation & Logistics
0.3%
0.2%
Agricultural Products
Nigeria’s Overall
World Export Share: 0.53%
Plastics
Metal Mining & Manufacturing
0.1%
Chemical Products
Heavy Machinery
Business Services
0.0%
-0.6%
-0.4%
20130321—National Competitiveness Council of Nigeria Presentation—FINAL
-0.2%
0.0%
0.2%
Change in World Export Market Share, 2000-2010
36
0.4%
0.6%
= $2.5 billion
Copyright 2013 © Professor Michael E. Porter
Clusters in an Economy Are Related
Fishing &
Fishing
Products
Entertainment
Hospitality
& Tourism
Agricultural
Products
Processed
Food
Jewelry &
Precious
Metals
Transportation
& Logistics
Distribution
Services
Business
Services
Financial
Services
Aerospace
Vehicles &
Defense
Information
Technology
Chemical
Products
Apparel
Footwear
Furniture
Construction
Materials
Heavy
Construction
Services
Lighting &
Electrical
Equipment
cations
Equipment
Biopharmaceuticals
Prefabricated
Enclosures
Building
Fixtures,
Equipment &
Services
Analytical
Education &
Instruments
Knowledge
Medical
Creation
Devices
CommuniPublishing
& Printing
Textiles
Forest
Products
Power
Generation &
Transmission
Heavy
Machinery
Motor Driven
Products
Tobacco
Oil & Gas
Products &
Services Plastics
Aerospace
Engines
Leather &
Related
Products
Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries) in both directions.
20130321—National Competitiveness Council of Nigeria Presentation—FINAL
Production
Technology
37
Metal
Automotive
Manufacturing
Sporting,
Recreational &
Children’s
Goods
Copyright 2013 © Professor Michael E. Porter
Cluster Relatedness and Economic Diversification
World Export Share
Nigeria, 2010
Fishing &
Fishing
Products
0.15% - 0.53%
0.54% - 3.49%
>3.50%
Textiles
Agricultural
Products
Processed
Food
Jewelry &
Precious
Metals
Transportation
& Logistics
Distribution
Services
Business
Services
Financial
Services
Medical
Devices
Building
Fixtures,
Equipment &
Services
Furniture
Construction
Materials
Heavy
Construction
Services
Lightning &
Electrical
Equipment
Communications
Services and
Equipment
Power
Generation
Forest
Products
Heavy
Machinery
Motor Driven
Products
Oil &
Gas
Aerospace
Engines
Leather &
Related
Products
20130321—National Competitiveness Council of Nigeria Presentation—FINAL
Production
Technology
Tobacco
Plastics
Footwear
Aerospace
Vehicles &
Defense
Analytical
Instruments
Biopharmaceuticals
Chemical
Products
Apparel
Entertainment
Information
Tech.
Education &
Knowledge
Creation
Publishing
& Printing
Prefabricated
Enclosures
Hospitality
& Tourism
Mining & Metal
Automotive
Manufacturing
Sporting
& Recreation
Goods
38
Copyright 2013 © Professor Michael E. Porter
Cluster Relatedness and Economic Diversification
World Export Share
Nigeria, 2000
Fishing &
Fishing
Products
0.01% - 0.39%
0.40% - 1.0%
>1.00%
Textiles
Agricultural
Products
Processed
Food
Jewelry &
Precious
Metals
Transportation
& Logistics
Distribution
Services
Business
Services
Financial
Services
Medical
Devices
Building
Fixtures,
Equipment &
Services
Furniture
Construction
Materials
Heavy
Construction
Services
Lightning &
Electrical
Equipment
Communications
Services and
Equipment
Power
Generation
Forest
Products
Heavy
Machinery
Motor Driven
Products
Oil &
Gas
Aerospace
Engines
Leather &
Related
Products
20130321—National Competitiveness Council of Nigeria Presentation—FINAL
Production
Technology
Tobacco
Plastics
Footwear
Aerospace
Vehicles &
Defense
Analytical
Instruments
Biopharmaceuticals
Chemical
Products
Apparel
Entertainment
Information
Tech.
Education &
Knowledge
Creation
Publishing
& Printing
Prefabricated
Enclosures
Hospitality
& Tourism
Mining & Metal
Automotive
Manufacturing
Sporting
& Recreation
Goods
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Copyright 2013 © Professor Michael E. Porter
Clusters as a Tool For Economic Policy
•
A forum for collaboration between the private sector, trade associations,
government, educational, and research institutions
•
Brings together firms of all sizes, including SME’s
•
Creates a mechanism for constructive business-government dialog
•
A tool to identify problems and action recommendations
•
A vehicle for investments that strengthen multiple firms/institutions
simultaneously
•
Fosters greater competition rather than distorting the market
•
Enhances the efficiency and effectiveness of traditional economic policy areas,
such as training, R&D, export promotion, FDI attraction, etc.
•
Sound cluster policy addresses all clusters, and does not pick winners
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Copyright 2013 © Professor Michael E. Porter
Organize Public Policy around Clusters
Business Attraction
Education and
Workforce Training
Export Promotion
Market Information
and Disclosure
Clusters
Specialized Physical
Infrastructure
Natural Resource Protection
Science and Technology
Infrastructure
(e.g., centers, university
departments, technology
transfer)
Quality and environmental
standards
• Clusters provide a framework for organizing the implementation of many
public policies and public investments directed at economic development
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Copyright 2013 © Professor Michael E. Porter
What Determines Competitiveness?
Microeconomic Competitiveness
Quality of the
National
Business
Environment
State of Cluster
Development
Sophistication
of Company
Operations and
Strategy
The capacity of firms, in
terms of skills, capabilities
and management practices
Macroeconomic Competitiveness
Sound Monetary
and Fiscal Policies
Human Development
and Effective
Political Institutions
Endowments
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Copyright 2013 © Professor Michael E. Porter
Sophistication of Firms
Sources of Competitive Advantage
Differentiation
(Higher Price)
Competitive
Advantage
Lower Cost
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Copyright 2013 © Professor Michael E. Porter
Competitive Advantage and the Value Chain
Firm Infrastructure
(e.g., Financing, Planning, Investor Relations)
Human Resource Management
Support
Activities
(e.g., Recruiting, Training, Compensation System)
Technology Development
(e.g., Product Design, Process Design, Market Research)
M
(e.g., Services, Machines, Advertising, Data)
Inbound
Logistics
Operations
(e.g., Customer
Access, Data
Collection,
Incoming
Material
Storage,
Service)
(e.g., Branch
Operations,
Assembly,
Component
Fabrication)
Value
a
Procurement
r
g
Outbound
Logistics
Marketing
& Sales
After-Sales
Service
(e.g., Order
Processing,
Warehousing,
Report
Preparation)
(e.g., Sales
Force,
Promotion,
Advertising,
Proposal
Writing, Web
site)
(e.g., Installation,
Customer
Support,
Complaint
Resolution,
Repair)
i
n
What
buyers are
willing to
pay
Primary Activities
• The value chain is the set of activities involved in delivering value to customers
• All competitive advantage resides in the value chain. Strategy is manifested in
choices about how activities in the value chain are configured and linked together
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Copyright 2013 © Professor Michael E. Porter
Operational Effectiveness Versus Strategy
Operational
Effectiveness
Strategic
Positioning
• Assimilating, attaining, and
extending best practices
• Creating a unique value
proposition
Doing things better
and better
20130321—National Competitiveness Council of Nigeria Presentation—FINAL
Doing things differently to
deliver superior value
45
Copyright 2013 © Professor Michael E. Porter
What Creates a Successful Strategy?
• A unique value proposition compared
to competitors
• A distinctive value chain embodying
choices about how the organization will
operate differently to deliver on its
value proposition
• Making clear tradeoffs, and choosing
what not to do
• Integrating activities across the value
chain to fit together and reinforce
each other
• Continuity of strategic direction
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Copyright 2013 © Professor Michael E. Porter
Levels of Strategy
Competitive or
Business Strategy
• How to compete in each distinct business or
industry
Corporate Strategy
• What set of businesses to compete in
• Capturing synergies across business units
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Copyright 2013 © Professor Michael E. Porter
Corporate Strategy
Time
Sharing
Hollywood
Pictures
The Walt Disney Company, 2010
Marvel
Guided
Travel
Real
Estate
Development
Motion
Picture
Distribution
Resort
Hotels
Cruise
Line
Pixar
Family
Motion
Pictures
Theme
Parks
Sports
Team
Animated
Feature Films
Traveling
Shows
Multimedia
Productions
Broadway
Productions
Broadway
Theater
Direct
Marketing
Consumer
Products
Television
Programming
Disney
Records
Disney
Interactive
Media
Retail
Stores
Acquired
Through Cap
Cities / ABC
Merger
Recent
Adult
Cable
Channels
Youth
Books and
Educational
Materials
Hollywood
Records
Hyperion
Books
Disney
Channel
Adult
Publishing /
Newspapers
20130321—National Competitiveness Council of Nigeria Presentation—FINAL
•
•
•
•
Shared characters
Shared brand
Shared family values
Cross-promotions
48
Television
Network
Radio
Stations
ESPN
Television
Stations
Copyright 2013 © Professor Michael E. Porter
Diversification in Emerging Economies
Typical Business Groups
Computer
Wholesaler
Fast Food
Franchises
Financial
Services
Real Estate
Services
Airline
Imports/
Distribution
Tobacco
Food
Processing
Grocery
Stores
Hotel
Textiles
Industrial
Parts
Car
Dealership
Sugar
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Copyright 2013 © Professor Michael E. Porter
Improving Competitiveness
Themes
• Many things matter for competitiveness
• Progress must be made simultaneously on multiple fronts
• The weakest links will constrain productivity and retard development
• Foreign investment will depend on the relationship between competitiveness
and prevailing wages and taxes
• As economies develop, they face transition points that require many
dimensions of competition to be transformed
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Copyright 2013 © Professor Michael E. Porter
Stages of National Competitive Development
Shifting Policy Imperatives
Factor-Driven
Economy
InvestmentDriven Economy
Low Cost Inputs
Productivity in Standard
Products and Services
• Monetary and fiscal, political,
and legal stability
• Market opening
• Improving basic human capital
• Efficient basic infrastructure
• Lowering the regulatory costs
of doing business
• Increasing local rivalry
• Creating advanced
infrastructure
• Setting incentives and rules
encouraging productivity
• Cluster formation and
activation
Innovation- Driven
Economy
Unique Products, Services,
and Production Methods
• Building advanced skills
• Creating world class
scientific and technological
institutions
• Setting incentives and rules
encouraging innovation
• Cluster upgrading
• Efficient access to endowments
Source: Porter, Michael E., The Competitive Advantage of Nations, Macmillan Press, 1990
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Copyright 2013 © Professor Michael E. Porter
Harvard Country Competitiveness Model
Subindex Impact Across Stages of Development
0.21
0.35
Microeconomic
Competitiveness
0.48
Human Development
Micro Political
and Effective
Institutions
SIPI
0.49
0.42
Macro Policy
0.36
0.30
Low Income Countries
0.23
Middle Income Countries
Macroeconomic Policy
0.16
High Income Countries
Notes: - Weights in a linear model across all economies: Micro: 0.31, SIPI: 0.41, Macro Policy: 0.28
- Middle-stage weights are an average of Low- and High-stage weights.
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Copyright 2013 © Professor Michael E. Porter
Agenda
• Defining Competitiveness and Prosperity
• Indicators and Enablers of Competitiveness
• Drivers of Competitiveness
• Benchmarking Nigerian Competitiveness
• Geographic Areas and Competitiveness
• Economic Strategy
• Organizing for Competitiveness
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Copyright 2013 © Professor Michael E. Porter
ISC Competitiveness Model
Nigeria’s Competitiveness Profile, 2012
Country Competitiveness
115
Macroeconomic
Competitiveness
Microeconomic
Competitiveness
128
91
Political Institutions
112
Fiscal and Monetary
Policies
National Business
Environment
Company Operations
and Strategy
113
92
77
Factor Conditions
(110)
Rule of Law
127
Context for Strategy and
Rivalry (93)
Related and Supporting
Industries (74)
Human
Development
Demand Conditions
(95)
115*
Significant
disadvantage
Moderate
disadvantage
Neutral
Nigeria’s GDP per capita
rank is 109th
versus 140 countries
Moderate
advantage
Significant
advantage
Note:
Rank versus 140 countries; Color coding based on comparison relative to income; *U.N. Gender Inequality Index data is unavailable for Nigeria. Nigeria’s Basic Health and Education rank is reported as an
average of ranks in reported data.
Source:
Institute for Strategy and Competitiveness, Harvard University (2012), based in part on survey data from the World Economic Forum; analysis prepared based on research findings by Scott Stern, Mercedes
Delgado, and Christian Ketels.
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Copyright 2013 © Professor Michael E. Porter
Agenda
• Defining Competitiveness and Prosperity
• Indicators and Enablers of Competitiveness
• Drivers of Competitiveness
• Benchmarking Nigerian Competitiveness
• Geographic Areas and Competitiveness
• Economic Strategy
• Organizing for Competitiveness
20130321—National Competitiveness Council of Nigeria Presentation—FINAL
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Copyright 2013 © Professor Michael E. Porter
Geographic Influences on Competitiveness
Neighboring Countries
Nation
Regions and Cities
• Regions are the most important economic unit for competitiveness in larger countries,
especially countries beyond subsistence development
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Copyright 2013 © Professor Michael E. Porter
Regions and Competitiveness
• Economic performance varies significantly across sub-national regions (e.g.,
provinces, states, metropolitan areas)
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Copyright 2013 © Professor Michael E. Porter
Regional Prosperity Performance in Nigeria
Percent of State Residents in Poverty
% of Total State Residents
in Poverty
Source: Nigeria Statistical Data Portal (2013).
Note: Most recent data available is from 2009.
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Copyright 2013 © Professor Michael E. Porter
Regions and Competitiveness
• Economic performance varies significantly across sub-national regions (e.g.,
provinces, states, metropolitan areas)
• Many essential drivers of competitiveness reside at the regional level
• Regions specialize in different sets of clusters and cluster strength drives
regional performance
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Copyright 2013 © Professor Michael E. Porter
Regions and Competitiveness
• Economic performance varies significantly across sub-national regions (e.g.,
provinces, states, metropolitan areas)
• Many essential drivers of competitiveness reside at the regional level
• Regions specialize in different sets of clusters and cluster strength drives
regional performance
• Each region needs its own distinctive competitiveness strategy and action
agenda
– Business environment improvement
– Cluster upgrading
– Improving government effectiveness
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Copyright 2013 © Professor Michael E. Porter
Geographic Influences on Competitiveness
Neighboring Countries
“The
Neighborhood”
Nation
Regions and Cities
• Regions are the most important economic unit for competitiveness in larger countries,
especially countries beyond subsistence development
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Copyright 2013 © Professor Michael E. Porter
Competitiveness and Integration with Neighboring Countries
Nigeria’s Neighborhood
• Economic coordination among neighboring countries can significantly enhance competitiveness
• Integration offers greater opportunities than participation in broader economic forums
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Copyright 2013 © Professor Michael E. Porter
Regional Economic Integration and Competitiveness
•
Integration opens trade and investment among neighbors
–
Expands the available market for each country

•
A nation’s neighbors are often its most natural trading and investment partners,
especially in non-resource goods and services
–
The natural path of internationalization for local firms is the neighborhood
–
Open trade and investment make each country a more attractive location for
investment
Integration drives improvements in the business environment
–
Captures synergies in policy and infrastructure
•
Integration harnesses improvements in clusters that cross borders
•
Integration creates greater clout in international negotiations
•
External commitments help overcome domestic political and economic barriers to
reform
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Copyright 2013 © Professor Michael E. Porter
Economic Integration Among Neighbors
Capturing Synergies
Factor (Input)
Conditions
• Improving the
efficiency of the
regional
transportation
network
• Creating an efficient
energy network
• Enhancing regional
communications
and connectivity
• Harmonizing
administrative
requirements for
businesses
• Linking financial
markets
Context for
Strategy
and Rivalry
• Eliminating trade
and investment
barriers within
the region
• Simplifying and
harmonizing
cross-border
regulations and
paperwork
• Coordinating
anti-monopoly
and fair
competition
policies
• Harmonizing IP
protection
Demand
Conditions
• Harmonizing
environmental
standards
• Harmonizing
product quality,
safety and
technical
standards
• Establishing
reciprocal
consumer
protection laws
Related and
Supporting
Industries
• Facilitating crossborder cluster
development
– e.g., Supplier
networks
– Efficient
transport and
logistics
Macroeconomic
Competitiveness
• Coordinating
macroeconomic
policies
• Coordinating
programs to
improve security
and public safety
– Quality
standards
• Opening
government
procurement
within the region
• Facilitating the
movement of
students for higher
education
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Copyright 2013 © Professor Michael E. Porter
Integration and Competitiveness
Central American Logistical Corridor
Belize
Mexico
Guatemala
Honduras
Nicaragua
El Salvador
Roads
Ports
Airports
Logistic Corridor
Costa Rica
Country Boundary
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Panama
Copyright 2013 © Professor Michael E. Porter
Agenda
• Defining Competitiveness and Prosperity
• Indicators and Enablers of Competitiveness
• Drivers of Competitiveness
• Benchmarking Nigerian Competitiveness
• Geographic Areas and Competitiveness
• Economic Strategy
• Organizing for Competitiveness
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Copyright 2013 © Professor Michael E. Porter
What Is an Economic Strategy?
Policy
Improvement
Economic
Strategy
• Implementing best practices in
each policy area
• An overall agenda for creating a
distinctive and more
competitive position for a
country or region, based on its
particular circumstances
• There are a huge number of
policy areas that matter
• No country can (or should try to)
make progress in all areas
simultaneously
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Copyright 2013 © Professor Michael E. Porter
Creating a National (or Regional) Economic Strategy
National Value Proposition
• What is the distinctive competitive position of the nation or region
given its location, legacy, existing strengths, and potential strengths?
– What unique strengths as a business location?
– What roles in the broader neighborhood?
– What types of activities and clusters?
Achieving and Maintaining Parity
with Peers
Developing Unique Strengths
• What elements of the business
environment can be unique strengths
relative to peers/neighbors?
• What existing and emerging clusters
can be built upon?
• What weaknesses must be addressed to
remove key constraints and achieve parity
with peer locations?
• Priorities and sequencing are essential to building competitiveness
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Copyright 2013 © Professor Michael E. Porter
Tests of an Economic Strategy
•
Has the country or region articulated a distinctive position?
– That will create a positive identity?
– That will inspire citizens?
•
Does the strategy build on existing or potential strengths?
– Are the strengths realistic versus neighbors and other peer countries?
•
Does the strategy fit with trends in the neighborhood and the world economy?
•
Is the strategy realistic given the country’s or region’s weaknesses? Can
weaknesses that retard the strategy be neutralized?
•
Are social and political reforms integrated with economic reforms and
pursued simultaneously?
•
Do the policy priorities fit the strategy?
– The choice of policies, and their design?
– The sequence in which policies are implemented?
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Copyright 2013 © Professor Michael E. Porter
Tests of an Economic Strategy
Continued
•
Is there the political will and the political consensus to implement the
strategy?
•
Has the strategy been communicated clearly to all stakeholders?
•
Is the private sector engaged?
•
Is government organized around the strategy?
•
Is there an overall coordinating structure for economic development?
•
Is the quality of governmental agencies and other institutions sufficient for
effective implementation?
•
Are there mechanisms to measure progress and review / modify the strategy
as prosperity improves or conditions change?
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Copyright 2013 © Professor Michael E. Porter
Agenda
• Defining Competitiveness and Prosperity
• Indicators and Enablers of Competitiveness
• Drivers of Competitiveness
• Benchmarking Nigerian Competitiveness
• Geographic Areas and Competitiveness
• Economic Strategy
• Organizing for Competitiveness
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Copyright 2013 © Professor Michael E. Porter
The Process of Economic Development
Shifting Roles and Responsibilities
Old Model
New Model
• Government drives economic
• Economic development is a
development through top down policy
decisions and incentives
collaborative process involving
government at multiple levels,
companies, educational and research
institutions, and private sector
organizations
• Competitiveness is the result of both top-down and bottom-up processes in
which many companies and institutions take responsibility
• Translating policy into action is decisive in determining success
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Government and the Process of
Economic Development
• Competitiveness is affected by numerous government entities and levels of
government
– Multiple agencies and departments (e.g. finance, trade, science and
technology, commerce, regional policy, energy, agriculture) have an
influence on competitiveness
– “Economic” agencies and “social” agencies
– Multiple levels of government (nations, states, cities, etc.)
– Intergovernmental relations with neighboring countries
• Competitiveness is rarely the sole agenda of a single government agency
• A coordinating structure is needed (e.g. “competitiveness policy council”)
that brings together the ministers and department heads necessary to
formulate and implement an economic strategy
• Competitiveness improvement requires sustained efforts across multiple
years and presidential administrations
– Mechanisms are needed to improve the continuity of policy over time
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Copyright 2013 © Professor Michael E. Porter
Failure of Traditional Economic Development Organizations
PRIVATE SECTOR
PUBLIC SECTOR
• Separate ministries with overlapping mandates
General
• Chambers of
Commerce
• Competition for power and issue ownership
• Ministries divided for political reasons which
introduces ideology and single issue focus
Cluster-Specific
• Trade
Associations
• Organizations focus on a single geographic
level (e.g., nation, state, or city)
• Lack of coordination and integration across
different parts of government
• Traditional focus on lobbying for government
support rather than enhancing competitiveness
• Rarely strategic but focus on discrete policy
areas
• Limited effects on areas such as skills,
infrastructure, exports, environmental
improvement and quality certification where
collective action most value enhancing
• Rarely prioritized and sequenced
• Poorly connected to the government policy
formulation process
• No clear mechanisms and accountability for
implementation
New organizational structures for competitiveness are needed
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Copyright 2013 © Professor Michael E. Porter
Organizations for Competitiveness are Needed at
Multiple Geographic Levels
Examples
Groups of Neighboring
Nations
•
e.g., Central America Alliance for Sustainable Development
Nations
•
The National Competitiveness Council (Ireland)
States, Provinces
•
South Carolina Council on Competitiveness
Metropolitan and Rural
Areas
•
Compete Columbus (Ohio)
•
Acoplasticos (Colombia)
Clusters
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Copyright 2013 © Professor Michael E. Porter
Organizing for Economic Development
Presidential Council on National Competitiveness (Korea)
President of Korea
Chairman
Assistant Chairman and
Head of Steering Group
Assistant Chairman for
Regulatory Reform
Assistant Chairman for
Legal System
Management
Support Team
Financial
Regulatory
Reform
Investment
Promotion
Public Sector
Innovation
Regulatory
Reform
Legal and
Institutional
Advancement
Task Forces
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Agenda for the Nigerian Competitiveness Council
• Benchmarking
– Nigeria’s competitiveness position
– Nigerian states
• Identifying specific policy and implementation priorities
• Recommending a coherent and practical national strategy
• Fostering competitiveness improvement at the state level
• Integrating the Council’s work into the government policy process
• Coordinating broad private sector commitment and collaboration
• Creating mechanisms and urgency for action
20130321—National Competitiveness Council of Nigeria Presentation—FINAL
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Copyright 2013 © Professor Michael E. Porter