Competitiveness For
Entrepreneur
Boston Industrial Model
The Emergence of New Economy
• Mass manufacturing Competition is Over
• Value of intangible assets
• Soft infrastructure critical
• Focus on activities not
industries
Creative Economy Demand Knowledge, Innovation
What is Competitiveness?
Components Of The Macro Environment
Demographic
Economic
Industry
Environment
Global
Political/
Legal
Competitive
Environment
Technological
Sociocultural
Determinants of Productivity and
Productivity Growth
Integration of Macro- and
Microeconomic Reforms
Productivity and the Microeconomic
Business Environment
What is Competitiveness?
• Competitiveness is determined by the productivity with
which a nation uses its human, capital, and natural
resources. Productivity sets a nation’s or region’s standard
of living (wages, returns to capital, returns to natural
resource endowments)
– Productivity depends both on the value of products and services
(e.g. uniqueness, quality) as well as the efficiency with which they
are produced
– It is not what industries a nation competes in that matters for
prosperity, but how firms compete in those industries
– Productivity in a nation is a reflection of what both domestic and
foreign firms choose to do in that location. The location of
ownership is secondary for national prosperity
– The productivity of “local” industries is of fundamental importance
to competitiveness, not just that of traded industries
– Devaluation does not make a country more competitive
Michael E. Porter
Competitiveness Is NOT…
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Abundant Natural Resources
Cheap Labor
Cheaper Currency
Better Government “Incentives”
What is competitiveness ?
New Paradigm of Globalization
Competition
Source: Porter Competitiveness
Vertical/Specific
Industry
Firm Strategy,
Industry
Structure
Market Demand
Global Floor
“ISO” Ceiling
Related and
Supporting
Industry
Low Cost,
Low Value
Trap
Labor
Intensive
Labor
Intensive
Supply
Collaboration Concepts
Competitiveness Is…
Intersection of Public Policy and
Commercial Strategy
Competitiveness Is…
Strategy BEFORE Policy
PUBLIC
PRIVATE
RESTRUCTURE
REPOSITION
Competitiveness Is…
Pursuing Effective Dialogue
INEFFECTIVE
EFFECTIVE
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Individual Company
Ad-hoc Complaints
Operational Level
Laundry Lists
Anecdotal Evidence
Concessions
Opposite Sides
Industry Clusters
Comprehensive Vision
Strategy
Priorities
Data and Analysis
Co-Responsibility
Same Side of Table
Competitiveness Measurement
Competitiveness Evaluation
Competitiveness Cube
Understanding Competitiveness
Competitiveness Measurement
Competitiveness Indexes
Competitiveness Ranking
Stages of Competitiveness
Development
Competitiveness Theories
Porter’s Five Forces
Threat of New Entry
Bargaining Power
of Suppliers
• Differentiation of inputs
• Switching costs
• Presence of substitute
inputs
• Supplier concentration
• Importance of volume to
supplier
• Cost relative to total
purchases
• Impact of inputs on cost or
differentiation
• Threat of forward
integration
• Economies of scale
• Proprietary product
differences
• Brand identity
• Switching costs
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Capital requirements
Access to distribution
Absolute cost advantages
Government policy
Expected retaliation
Rivalry Among
Existing Competitors
• Industry growth
• Fixed costs / value
added
• Overcapacity
• Product differences
• Brand identity
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Switching costs
Concentration and balance
Informational complexity
Diversity of competitors
Corporate stakes
Exit barriers
Threat of Substitutes
• Relative price performance of substitutes
• Switching costs
• Buyer propensity to substitute
Source: Michael E. Porter, Competitive Advantage (New York: Free Press, 1985)
Bargaining Power
of Customers
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Buyer concentration
Buyer volume
Buyer switching costs
Buyer information
Ability to integrate
backward
Substitute products
Price / total purchases
Product differences
Brand identity
Impact of quality /
performance
Buyer profits
The Five Competitive Forces
Force
Entry
Erecting barriers (isolating
mechanisms) create exploit economies of scale,
aggressive deterrence, design in switching costs, etc.
Rivalry
Compete on nonprice dimensions:
cost leadership, differentiation, cooperation, etc.
Substitutes
Buyers
Improve attractiveness compared to
substitutes: better service, more features, etc..
Reduce buyer uniqueness: forward
integrate, differentiate product, new customers, etc..
Suppliers
Reduce supplier uniqueness: backward
integrate, obtain minority position, second source, etc..
Porter’s Diamond Model
Diamond Model
Cluster
Coopetition and the Value Net
A player is your competitor with
respect to customers if customers
value your product less when they
have the other player’s product as
well
Competitors
A player is your competitor with
respect to suppliers if it is less
attractive for a supplier to provide
resources to you when it is also
supplying the other player
Customers
Firm
Suppliers
A player is your complementor
with respect to customers if
customers value your product more
when they have the other player’s
product as well
Complementors
A player is your complementor
with respect to suppliers if it is
more attractive for a supplier to
provide resources to you when it
is also supplying the other player
Source: Adam Brandenburger and Barry Nalebuff, Co-operation (New York: Currency Doubleday, 1996)
CLUSTER MAPS
Cluster Driver
Supporting
Industries
Core Cluster
Cluster Facilitator
Target
Markets
The Collaborative
Competitiveness Development
Competitiveness Directions
The Eight Questions
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How wired is your country?
How fast is your country?
Is your country harvesting it’s knowledge?
How much does your country weigh?
Does your country dare to be open?
How good is your country at making friends?
Does your country’s management get it?
How good is your country’s brand?
Friedman’s “Eight Habits of Highly Effective Countries”
Questions For New Business?
• Is R&D Advantage?
• “high tech”industries Advantage?
• Cheap Labor?
• Abundance Resources?
Directions
• Entreprenue is
– Innovation
– Strategic Management System Thinking
– Collaboration
– Financial tools
– Commercialization, etc.
Enright’s Meso Model
Enright’s Market Failures
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Impacted Information
Managerial Myopia
Under-provision of public goods
Coordinate Failure
Innovation Access
Easy Access to
Resources
Extreme Specialization
Flexibility and
Rapid Response
Limitated Facilitates
Information Spillovers
Faster Innovation Adopters
The Sources Advantage of the Firms
Activities
Resources
Knowledge
Enright 2002
Leap Frog
(Innovation Driven)
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Product Innovation
Process Innovation
Business Model Innovation
Breakthrough Innovation
Clusters
Cluster Concepts
Cluster IS
• “A cluster is a geographically proximate
group of companies and associated
institutions in a particular field, linked by
commonalities and complementarities.“
Michael E. Porter.
Cluster Values
• Competitive strategy is about being
different.
• It deliberately chooses a different set
of activities to deliver a unique mix of
value
Michael E. Porter.
And, cluster is not just an
alliance
Examples: Ceramic Tile Companies
and Suppliers in 30 KM. Radius
Cluster Strategy
• Organic Cluster Strategies
• Transplant Cluster Strategies
• Hybrid Strategies
Cluster Requirements
• A direct dialog with the cluster firms to better
understanding of the industry needs.
• Create awareness of existing support programs
to firms and associations in the industry.
• Designing tailor made support for the industry.
• Involving private sector in their financing and
management.
• Coordination within different Government
departments to support the industry.
Foster Cluster Development
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STATISTICAL OBSERVATION
INDUSTRY STUDIES
FIRMS FORAE(Dialog)
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CHANGE MANAGEMENT
Italy Clusters
USA Clusters
Cluster Maps
Clusters must be evoluing by private and public influrencing actions
Organization Network
Business Improvement For
SME
Clustering
• Scottish Enterprise Model
• Dulch’s 9 Steps
• Cluster Initiative Performance Model
(CIPM)
Scottish Enterprise Methods
New Strategy
Cross-Cutting
Initiative Teams
Organize Cluster
Working Groups
Broad Vision,
Strategy, Initiatives
Key Themes
Working Group
Meetings
Initiative Team
Working Group
Action
Group:
Define Vision,
Key Themes
Co-Chairs
Participants
Initiative Team
Initiative Team
Working Group
Co-Chairs
Participants
New Business
Propositions and
Enabling Actions
for Each Theme
Initiative Team
Initiative Team
Initiative Team
Mobilise
Diagnose
Collaborate
Implement
Scottish Tourism
• One to three hours from our
main markets which are the
central belt of Scotland and
the North of England
• 6pm in the city by 8pm
relaxing in the Scottish
Borders
• Quiet Roads in the Scottish
Borders
Duch’s
9 Step
Methods
Objectives
Impacting the leaders will initiate the change
Methodology
Cluster Drive
Survival
Cluster Motivation
CIPM Model
Cluster Lifecycle
Cluster Actors
Objective Checklist
Target Area of Activity