Chapter 3: International Competitiveness, Productivity and Quality
3.2 ACHIEVING COMPETITIVE ADVANTAGE
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By Gryffindor House
Companies that achieve a competitive advantage manufacture products or provide
services that have greater economic utility, or usefulness, than products or services
supplied by their competitors.
Economic utility is a products ability to satisfy the needs and wants of the customer.
Form utility is created when raw materials are converted into a finished product. Place
utility means that a product, such as ice cream has most value when it is in a freezer.
Factors Affecting Canada’s Competitiveness
Many factors influence a country’s ability to achieve competitive advantage in the global
marketplace. Some characteristics would be your strengths and weaknesses, why you
are better then the competition and why your country is competitive in order to achieve
that advantage in country’s business climate.
There are a number of factors to consider when assessing any country’s
competitiveness strength or position. Criteria such as per capita income and
employment statistics are used as measures, but so are other factors.
As the following list shows, sometimes the same factor has both positive and negative
ramifications for Canadian competitiveness.
Quality and Quantity of natural resources:
Canada’s abundant natural resources in oil and gas, forest products, minerals, and
water are competitive advantages. The borders allow these exports to go through
Canada and the U.S. Although a disadvantage of this would be the cost of transport
and delivery time between Canada and other world markets.
Strength of country’s currency and its exchange rate:
Canada’s currency the past decade had been weak compared to the U.S. dollar. Due to
this Canadian companies have to pay more to import machinery components, and new
technology into the country.
Infrastructure in the country: Canada has strong transportation and communication
systems that support Canadian business production by allowing companies to get their
products to market efficiently and by helping businesses communicate with customers
and suppliers around the world.
Research and development: The level and scope of research development – which
fosters innovation in a country – can affect its competitive position. Canada’s record on
research and development spending varies according to sector with R&D in information
technology and telecommunications infrastructure sectors leading the way.
Workforce Characteristics: The level of education and the extent in training in the
workplace are also factors in a country’s competitiveness. Although the Canadian
workforce is fewer in number then those of some other countries, relative to most
countries, Canada has a well-educated workforce and a high level of literacy. On the
other hand, international and multinational businesses are interested in knowing the
number of days lost due to union-management problems in a country.
Societal characteristics Factors such as the value a country’s citizens place on quality
and productivity at work, level of health care and standard of living. The tolerance and
diversity of a country’s population give Canada an edge in attracting foreign investment
and people from around the world.
Entrepreneurship: Quality and quantity of entrepreneurship in a country greatly affects
competitiveness. The Canadian entrepreneurs help the Canadian economy and our
international competitiveness. Providing business solutions to both Canadian and global
consumers’ needs and wants.
Government involvement: The tax environment such as Canada’s GSP & PST also
affects its economy and its competitive business position relative to other countries.
Canada’s government agreed to participate in free trade agreements in North America.
The membership in the G8, and its efforts to expand trade partnership around the world
are competitive advantages. However, the uncertainty of political situation in Quebec,
sometimes affects the international aspect of trade and foreign investors confidence in
Canada.
Opportunity Cost, and Absolute and Comparative Advantage
Opportunity cost is cost and potential benefit of an opportunity that is deferred or
sacrificed in order to act on another opportunity. Whenever one opportunity is chosen or
pursued by a company or an organization, other is sacrificed. Opportunity cost
calculates in financial terms the benefits of the value of the next best opportunity that
was foregone or not taken.
In business, opportunity costs is expressed in dollars, calculating the costs involved in
not implementing a real alternative in favour of the alternative chosen.
Comparative advantage is an advantage usually created when a company or country
becomes more efficient, has better technology, and has easier access to resources its
competitors. When one country has a lower cost in producing a product at a lower
opportunity cost than another country, it is said to have a comparative advantage. Once
there is a comparative advantage, it can specialize in what it does well and at a
reasonable cost. It can then trade with other countries or exports its products to them.
Absolute advantage is full advantage over competitors or the lack of competitors so as
to enable a company or country to set prices and polices without fear of competition.