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This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), “Building theMicroeconomic Foundations of Competitiveness,” in The Global Competitiveness Report (World Economic Forum), “Clusters and the New Competitive Agenda forCompanies and Governments” in On Competition (Harvard Business School Press, 2008), and ongoing research on clusters and competitiveness. No part of this publicationmay be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without thepermission 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

Building a Competitive Nigeria:The Role of the National Competitiveness

Council of Nigeria

Professor Michael E. PorterHarvard Business School

National Competitiveness Council of NigeriaLagos, Nigeria

March 21, 2013

20130321—National Competitiveness Council of Nigeria Presentation—FINAL Copyright 2013 © Professor Michael E. Porter2

Prosperity PerformanceSub-Saharan Africa

Source: EIU (2012); author’s calculations

Angola

Benin

Botswana

Burundi

Cameroon

Cape Verde

CAR

ChadComoros

Congo (Brazzaville)

Congo (Democratic Republic)

Côte d'IvoireDjibouti

Eritrea Ethiopia

Gabon

Gambia Ghana

Guinea

Guinea-Bissau

Kenya

Liberia Madagascar MalawiMali

Mauritania

Mauritius

Mozambique

Namibia

Niger

Nigeria

RwandaSão Tomé and Príncipe

SenegalSierra Leone

South Africa

Sudan

Swaziland

TanzaniaTogo

UgandaZambia

Zimbabwe

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

PPP-Adjusted GDP per Capita, 2011 ($USD)

Growth in Real GDP per Capita (PPP-adjusted), CAGR, 2001-2011

Average: 4.54%

Average: $3,065


Prosperity Performance TrendsNigeria and Selected Sub-Saharan African Countries

Source: EIU (2012); author’s calculations

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

BotswanaSouth AfricaNigeriaKenyaRwandaEthiopia

PPP-Adjusted GDP per Capita, 2011 ($USD)


Poverty PerformanceNigeria and Selected Sub-Saharan African Countries

Source: World Bank (2013).Note: Country comparison based on the most recent data available as of March 2013.

Poverty Rate ($1.25 a Day, PPP)

0%

10%

20%

30%

40%

50%

60%

70%

80%

Nigeria Rwanda Kenya Ethiopia Botswana South Africa

(% o

f pop

ulat

ion)


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 accountabilityfor implementing entities


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


What is Competitiveness?

• 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

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


Two Sources of Prosperity

Inherited Prosperity

• Prosperity derived from inherited natural resources / endowments– Prosperity is limited

• Dividing the pie• Government usually the central actor

in the economy• Revenue from resources allows

unproductive policies and practices to persist and encouragescorruption

Created Prosperity

• Prosperity arising from productivityin producing goods and services– Prosperity is unlimited

• Expanding the pie• Companies are the central actors in

the economy• Government’s role is to create the

enabling conditions for productivity and foster private sector development


Labor Productivity Level and GrowthSub-Saharan Africa

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.

AngolaCameroon


Côte d'Ivoire

Ghana

Kenya

Mozambique

Nigeria

Senegal

South Africa

Tanzania

UgandaZambiaZimbabwe

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%

Real GDP per Employee (1990 GK$),

2011

Growth in Real GDP per Employee, CAGR, 2001-2011

Average: 2.53%

Average: $3,962


Workforce ParticipationSub-Saharan Africa

Note: Several countries are omitted due to lack of labor data.Source: EIU (2012), author’s calculations

Angola

Botswana

Cameroon


Côte d'Ivoire

GabonGhana

Kenya

Mauritius

Mozambique

Namibia

Nigeria

Senegal

South Africa

Tanzania

Uganda

Zambia

Zimbabwe30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%

Labor Force Participation (2011)

Change in Labor Force Participation Rate, 2001-2011

Average: 1.43%

Average: 43.47%


Agenda









Productivity Growth

Country Competitive Environment

Domestic investment Imports

Outboundforeign direct

investment

Domesticinnovation

Inboundforeign direct

investmentExports

Indicators and Enablers of Competitiveness


Domestic Investment PerformanceSub-Saharan Africa

Note: Includes inbound FDISource: EIU (2012)

Angola

Benin

Botswana

BurundiCameroon

Cape Verde

CAR

Chad

Comoros

Congo (Brazzaville)


Côte d'Ivoire

Djibouti

Eritrea

Ethiopia

Gabon

Gambia

Ghana

Guinea

Guinea-Bissau

KenyaMadagascar

Malawi

Mali

MauritaniaMauritius

Mozambique

Namibia

Niger

Nigeria

Rwanda

São Tomé and Príncipe

Senegal

Sierra LeoneSouth Africa

Sudan

Swaziland

Tanzania

TogoUganda

Zambia

Zimbabwe

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

-25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Gross Fixed Investment (% of GDP),

2011

Change in Gross Fixed Investment (% of GDP), 2001-2011

Average: 23.57%

Average: 5.11%


Export PerformanceSub-Saharan Africa

Source: EIU (2012), authors calculations

Angola

Benin

Botswana

Burundi

Cameroon

Cape Verde

CAR

Chad

Comoros


Côte d'Ivoire

Djibouti

Eritrea

Ethiopia

Gabon

Gambia GhanaGuinea

Guinea-Bissau

KenyaMadagascar

Malawi

Mali

Mauritius

Mozambique

Namibia

Niger

Nigeria

Rwanda

São Tomé and Príncipe

Senegal

Sierra Leone

South Africa

Sudan

Swaziland

Tanzania

Togo

Uganda

Zambia

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

-40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0%

Exports of Goods and Services (% of GDP),

2011

Change in Exports of Goods and Services (% of GDP), 2001-2011

Average: 4.30%

Average: 34.72%

Congo (Brazzaville)(18.0%, 97.0%)

Zimbabwe(43.8%, 66.9%)


Composition of ExportsNigeria’s Exports By Type of Good

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2006 2007 2008 2009 2010

Processed GoodsSemi-processed GoodsUnprocessed GoodsServicesTOTAL

World Export Market Share (current USD)

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.


Inbound Foreign Investment PerformanceStocks and Flows, Sub-Saharan Africa

Source: UNCTAD, World Investment Report (2011)

Angola

Benin

BotswanaBurundi

Cameroon

Cape Verde

CAR

Chad

Comoros

Congo

Côte d'Ivoire


Djibouti

Equatorial Guinea

Eritrea

Ethiopia

Gabon

Gambia

Ghana

Guinea

Guinea-BissauKenya

Madagascar

Malawi

Mali

Mauritania

Mauritius

Mozambique

Namibia

Niger

Nigeria

Rwanda

Sao Tome and Principe

Senegal

Sierra Leone

South Africa Swaziland

Togo

Uganda

Zambia

Zimbabwe

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Inward FDI Stocks as % of GDP, Average

2000-2010

FDI Inflows as % of Gross Fixed Capital Formation, Average 2000-2010

Liberia(178.6%, 625.8%)

Average: 26.3%

Average: 43.1%


Outbound Foreign Investment PerformanceStock and Flows, Sub-Saharan Africa

Source: UNCTAD, World Investment Report (2011)

Benin

Burundi

Cameroon

Cape Verde

CAR

Chad

Côte d'Ivoire

Equatorial Guinea

Gabon

Guinea

Guinea-Bissau

Kenya

Madagascar

Malawi

Mali

Mauritania

Mauritius

Mozambique

Namibia

Niger

Nigeria

Rwanda

Senegal

Swaziland

Togo

Uganda

Zimbabwe

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

-1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0%

Outward FDI Stocks as % of GDP, Average

2000-2010

FDI Outflows as % of Gross Fixed Capital Formation, Average 2000-2010

South Africa(.34%, 19.92%)

Average Stocks:16.68% Liberia(448.9%, 458.6%)

Zambia(4.01%, 2.98%)

Botswana (3.87%, 9.43%)

Average Flows: 14.64%

Angola(4.72%, 1.9%)


Agenda









• 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

Endowments

What Determines Competitiveness?


Endowments

Macroeconomic Competitiveness

Human Development and Effective

Political Institutions

Sound Monetary and Fiscal Policies


• Macroeconomic competitiveness sets the economy-wide context for productivity to emerge, but is not sufficient to ensure productivity




Sound Monetaryand Fiscal Policies

Endowments

Human Developmentand Effective

Political Institutions• Fiscal Policy:

Effective public spending aligned with revenues over time

• Monetary Policy: Low levels of inflation

• Economic Stabilization: Avoiding structural imbalances and cyclical overheating




• 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


Political InstitutionsMacroeconomic Competitiveness

Endowments



Human Developmentand Effective



Competitiveness and Poverty Reduction

Social Development

• There is a strong connection between economic and social development

• Improving competitiveness requires improving the economic and social context simultaneously

Economic Development


Corruption Perception Index, 2010

Note: Ranks only countries available in both years (160 countries total) Source:Global Corruption Report, 2010

High corruption

Low corruption

Worsening Improving

Angola

Benin

Botswana

Burundi

Cameroon

CAR

Chad

Côte d´Ivoire

Congo (Dem. Republic)Equatorial Guinea

Eritrea

Ethiopia

Gabon

GambiaGhana

Guinea

Kenya

Madagascar Malawi

Mali

Mauritania

Mauritius

Mozambique

Namibia

Niger

Nigeria

Senegal

Sierra Leone

South Africa

Sudan

Swaziland

Tanzania

TogoUganda

Zambia

Zimbabwe

Rank in Global Corruption Index, 2011

Change in Rank, Global Corruption Report, 2011 versus 2006

Rwanda


Human Development PerformanceNigeria vs. Selected Sub-Saharan African Countries

(indicators as of 2010) Nigeria South Africa Kenya Ethiopia Rwanda Botswana

Education Indicators

Public spending on education, total (% of GDP) 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%

School enrollment, tertiary (% gross) NA NA 4.0% 7.3% 5.5% 7.4%

Literacy rate, adult total (% of people ages 15+) 61.3% NA 87.4% NA 71.1% 84.5%

Health Indicators

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%

Source: World Bank (2013).


• 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



Microeconomic Competitiveness

Sophisticationof Company

Operations andStrategy

Quality of the Business

Environment

State of Cluster Development

Endowments






The quality of the business environment in which companies compete, company

productivity, innovation, and growth






Quality of the NationalBusiness

Environment


Endowments





Quality of the Business EnvironmentThe Diamond

Context for Firm Strategy and Rivalry

Related and Supporting Industries

Factor(Input)

ConditionsDemand

Conditions

• Sophisticated and demanding local needs– e.g., Strict quality, safety, and

environmental standards

• 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

• Local rules and incentives that encourage investment and productivity– e.g. incentives for capital investments,

IP protection, sound corporate governance standards

• Open and vigorous local competition− Openness to foreign competition− Strict competition laws• Access to high quality business

inputs– Qualified human resources– Capital availability– Physical infrastructure– Scientific and technological

infrastructure

• Availability and quality of suppliers and supporting industries


Quality of the Business Environment Ease of Doing Business Indicators (Nigeria, 2013)

Ranking, 2013 (vs. 185 countries)

Source: World Bank Report, Doing Business (2013).

Favorable Unfavorable

0

20

40

60

80

100

120

140

160

180

200

Ease ofDoing

BusinessRank

Getting Credit ProtectingInvestors

Dealing withConstruction

Permits

EnforcingContracts

ResolvingInsolvency

Starting aBusiness

TradingAcrossBorders

Paying Taxes GettingElectricity

RegisteringProperty

Nigeria’s GDP per capita rank: 109


Concentrations of firms in particular fields, including suppliers,

supporting services and related institutions.

Clusters enable productivity and new business formation







Environment


Endowments




20130321—National Competitiveness Council of Nigeria Presentation—FINAL Copyright 2013 © Professor Michael E. Porter31Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden

Restaurants

Attractions andActivities

e.g., theme parks, casinos, sports

Airlines, Cruise Ships

Travel Agents Tour Operators

Hotels

PropertyServices

MaintenanceServices

Government Agenciese.g. Australian Tourism

Commission, Great Barrier Reef Authority

Educational Institutionse.g. James Cook University,

Cairns College of TAFE

Industry Groupse.g. Queensland Tourism

Industry Council

FoodSuppliers

Public Relations & Market Research

Services

Local Retail, Health Care, andOther Services

Souvenirs, Duty Free

Banks,Foreign

Exchange

Local Transportation

What Is a Cluster?Tourism Cluster in Cairns, Australia


Clusters in Developing CountriesCut Flower Cluster in Kenya

Plantstock

Greenhouse; Shading Structures

Irrigation Technology

Pre-CoolingTechnology

Fertilizers, Pesticides, Herbicides

Agricultural Cluster

Horticultural Cluster

Post-Harvest Cooling

Technology

Grading / Packaging Sheds

Packaging & Labeling Materials

Refrigerated Trucks

Freight Forwarders

Clearing and Forwarding Agents

Air Carriers (Commercial /

Charters)

Tourism Cluster

Flower FarmingPost-Harvest

Handling; Transport to Market

Horticultural Agencies, NGOs & Industry Associations

Horticultural Crops Development Authority (HCDA) Government Export Policies Targeting Horticulture

Non-Government Organizations(e.g., The Rural Enterprise Agri-Business Promotion Project)

Trade & Industry Associations(e.g., Kenya Flower Council)

Education, Research & Quality Standards Organizations

Research Institutions(e.g., Kenya Agricultural Research Institute)

Public Universities with Post Graduate Degrees in Horticulture(e.g., University of Nairobi)

Quality & Standards(e.g., EUREGAP Standard, Kenya Plant Health Inspectorate Services)

Sources: MOC student team research by Kusi Hornberger, Nick Ndiritu, Lalo Ponce-Brito, Melesse Tashu, Tijan Watt, Harvard Business School, 2007


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


Evidence on the Impact of ClustersStrong Clusters Drive Regional Performace

Source: “Cluster and Entrepreneurship” by Mercedes Delgado, Michael E. Porter, and Scott Stern (2010); “The Economic Performance of Regions” by Michael E. Porter (2003)

• Existence of strong clusters

• Breadth of industries within each cluster

• Strength in related clusters

• Presence of a region’s clusters in neighboring regions

• Job growth

• Higher wages

• Higher patenting rates

• Greater new business formation, growth and survival


SupportInputs

Film Production Film Distribution

Tourism & HospitalityIndustry

ElectronicsIndustry

(DVD production)

Video Rentals

Production Services(Make-up,

Costumes, Catering)

Video Sales

Film ProductionCompanies

Self-EmployedProducers

Export:English Speaking Africaand Nigerian Diaspora

Government Agencies:• National Film and Video Censors Board• Nigerian Film Corporation• Nigerian Film Institute (Nigerian Film Corporation)• Nigerian Intellectual Property Commission

Video Parlors

TV (NTA)

Nigerian filmRoad shows

(Government)

Advertisingmarketing agencies

Post-ProductionServices

Nigeria’s Film Cluster(“Nollywood”)

Source: MOC Student Project, 2008. Team Members: Mridul Chowdhury, Tamas Landesz, Massimiliano Santini, Luis Tejada, Gloria Visconti.


= $2.5 billion

Agricultural Products

Transportation & Logistics

Footwear

Tobacco

Business Services0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%

1.0%

-0.6% -0.4% -0.2% 0.0% 0.2% 0.4% 0.6%

Wor

ld E

xpor

t Mar

ket S

hare

, 201

0

Change in World Export Market Share, 2000-2010

Fishing & Fishing Products

Plastics Chemical Products

Heavy Machinery

Oil and Gas Products(-.68%, 3.51%)

Metal Mining & Manufacturing

Change in Nigeria’s Overall World Export Share: 0.13%

Leather & Related Products(4.03%, 4.04%)

Nigeria’s Overall World Export Share: 0.53%

Nigeria’s National Cluster Export Portfolio2000-2010


Clusters in an Economy Are Related

FurnitureBuilding Fixtures,

Equipment & Services


Hospitality & TourismAgricultural

Products


Plastics

Oil & Gas Products &

Services

Chemical Products

Biopharma-ceuticals

Power Generation &Transmission

Aerospace Vehicles &

Defense

Lighting & ElectricalEquipment

Financial Services

Publishing & Printing

Entertainment

Information Technology

Communi-cations

Equipment

Aerospace Engines

Business Services

DistributionServices

Forest Products

Heavy Construction

Services

ConstructionMaterials

Prefabricated Enclosures

Heavy Machinery

Sporting,Recreational &

Children’sGoods

Automotive

Production Technology

Motor Driven Products

Metal Manufacturing

Jewelry & Precious Metals

Textiles

Footwear

Processed Food

Tobacco

Medical Devices

Analytical InstrumentsEducation &

Knowledge Creation

Apparel

Leather & Related Products

Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries) in both directions.



Defense





Products


Cluster Relatedness and Economic DiversificationNigeria, 2010

Plastics

Oil & Gas

Chemical Products

Biopharma-ceuticals

Power Generation

Lightning & ElectricalEquipment

Financial Services


Aerospace Engines

Business Services


Forest Products

Heavy Construction

Services



Heavy Machinery

Sporting & Recreation

Goods

Automotive



Mining & Metal Manufacturing

Apparel



Textiles

Footwear

Processed Food

Tobacco

Enter-tainment

Information Tech.

Medical Devices


Knowledge Creation Communi-

cationsServices and

Equipment

0.15% - 0.53%

0.54% - 3.49%

>3.50%

World Export Share



Defense





Products


Cluster Relatedness and Economic DiversificationNigeria, 2000

Plastics

Oil & Gas

Chemical Products

Biopharma-ceuticals

Power Generation

Lightning & ElectricalEquipment

Financial Services


Aerospace Engines

Business Services


Forest Products

Heavy Construction

Services



Heavy Machinery

Sporting & Recreation

Goods

Automotive



Mining & Metal Manufacturing

Apparel



Textiles

Footwear

Processed Food

Tobacco

Enter-tainment

Information Tech.

Medical Devices


Knowledge Creation Communi-

cationsServices and

Equipment

0.01% - 0.39%

0.40% - 1.0%

>1.00%

World Export Share


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/institutionssimultaneously

• 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


Clusters

Specialized Physical Infrastructure

Natural Resource Protection

Science and TechnologyInfrastructure (e.g., centers, university departments, technology transfer)

Education and Workforce Training

Business Attraction

Export Promotion

• Clusters provide a framework for organizing the implementation of many public policies and public investments directed at economic development

Quality and environmental standards

Market Information and Disclosure

Organize Public Policy around Clusters


The capacity of firms, in terms of skills, capabilities and management practices






Environment


Endowments






Sophistication of FirmsSources of Competitive Advantage

Differentiation(Higher Price)

Lower Cost

CompetitiveAdvantage


• 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

Competitive Advantage and the Value Chain

SupportActivities

Marketing& Sales

(e.g., Sales Force,

Promotion, Advertising,

Proposal Writing, Web

site)

InboundLogistics

(e.g., Customer Access, Data

Collection, Incoming Material Storage, Service)

Operations

(e.g., Branch Operations, Assembly, Component Fabrication)

OutboundLogistics

(e.g., Order Processing,

Warehousing, Report

Preparation)

After-Sales Service

(e.g., Installation, Customer Support,

Complaint Resolution,

Repair)

Ma

rg

i

n

Primary Activities

Firm Infrastructure(e.g., Financing, Planning, Investor Relations)

Procurement(e.g., Services, Machines, Advertising, Data)

Technology Development(e.g., Product Design, Process Design, Market Research)

Human Resource Management(e.g., Recruiting, Training, Compensation System)

Value

What buyers are willing to pay


• Creating a unique value proposition

• Assimilating, attaining, and extending best practices

OperationalEffectiveness

StrategicPositioning

Operational Effectiveness Versus Strategy

Doing things better and better

Doing things differently to deliver superior value


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


• What set of businesses to compete in

• Capturing synergies across business units

Levels of Strategy

• How to compete in each distinct business or industry

Corporate Strategy

Competitive or Business Strategy


DirectMarketing

CruiseLine

Corporate StrategyThe Walt Disney Company, 2010

DisneyChannel

FamilyMotionPictures

ConsumerProducts

SportsTeam

Multi-media

Productions

Broadway Productions

Acquired Through Cap Cities / ABC Merger

Traveling Shows

YouthBooks andEducational

Materials

• Shared characters• Shared brand• Shared family values• Cross-promotions

Marvel

HollywoodPictures

RealEstate

Develop-ment

TimeSharing

Television Stations

Broadway Theater

TelevisionNetwork

HollywoodRecords

Motion Picture

Distribution

DisneyRecords

RetailStores

AnimatedFeature Films

TelevisionProgram-

ming

ThemeParks

Pixar

Guided Travel

Disney Interactive

Media

Recent

ESPN

AdultCable

Channels

RadioStations

AdultPublishing / Newspapers

HyperionBooks

ResortHotels


CarDealership

FinancialServices

Sugar

Airline

Hotel

Real EstateServices

ComputerWholesaler

GroceryStores

Fast FoodFranchises

IndustrialParts

Imports/ Distribution

FoodProcessing

Tobacco

Textiles

Diversification in Emerging EconomiesTypical Business Groups


Improving CompetitivenessThemes

• 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


Stages of National Competitive DevelopmentShifting Policy Imperatives

Factor-Driven Economy

Investment-Driven Economy

Innovation- Driven Economy

Source: Porter, Michael E., The Competitive Advantage of Nations, Macmillan Press, 1990

Low Cost Inputs Productivity in StandardProducts and Services

Unique Products, Services, and Production Methods

• Monetary and fiscal, political, and legal stability

• Market opening• Improving basic human capital• Efficient basic infrastructure• Lowering the regulatory costs

of doing business

• Efficient access to endowments

• Increasing local rivalry• Creating advanced

infrastructure• Setting incentives and rules

encouraging productivity• Cluster formation and

activation

• Building advanced skills• Creating world class

scientific and technological institutions

• Setting incentives and rules encouraging innovation

• Cluster upgrading


Harvard Country Competitiveness ModelSubindex Impact Across Stages of Development

0.30 0.23

0.16

0.49

0.42

0.36

0.21 0.35

0.48

Low Income Countries Middle Income Countries High Income Countries

MicroSIPIMacro Policy

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.


Human Development and Effective Political Institutions

Macroeconomic Policy


Agenda









ISC Competitiveness ModelNigeria’s Competitiveness Profile, 2012

Nigeria’s GDP per capita rank is 109th

versus 140 countries

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.


128

Political Institutions 112

Rule of Law127

Human Development

115*

MicroeconomicCompetitiveness

91

Fiscal and Monetary Policies

113

National Business Environment

92

Company Operations and Strategy

77

Country Competitiveness115

Significant advantage

ModerateadvantageNeutral Moderate

disadvantageSignificant

disadvantage

Factor Conditions (110)

Context for Strategy and Rivalry (93)

Related and Supporting Industries (74)

Demand Conditions(95)


Agenda









Geographic Influences on Competitiveness

Neighboring Countries

Regions and Cities

Nation

• Regions are the most important economic unit for competitiveness in larger countries, especially countries beyond subsistence development


Regions and Competitiveness

• Economic performance varies significantly across sub-national regions (e.g., provinces, states, metropolitan areas)


Regional Prosperity Performance in NigeriaPercent 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.




• Many essential drivers of competitiveness reside at the regional level

• Regions specialize in different sets of clusters and cluster strength drives regional performance




• 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


Geographic Influences on Competitiveness

Neighboring Countries

Regions and Cities

Nation

• Regions are the most important economic unit for competitiveness in larger countries, especially countries beyond subsistence development

“The Neighborhood”


Competitiveness and Integration with Neighboring CountriesNigeria’s Neighborhood

• Economic coordination among neighboring countries can significantly enhance competitiveness• Integration offers greater opportunities than participation in broader economic forums


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


• Eliminating trade and investment barriers within the region

• Simplifying and harmonizing cross-borderregulations and paperwork

• Coordinatinganti-monopoly and fair competition policies

• Harmonizing IP protection

• Harmonizing environmental standards

• Harmonizing product quality, safety and technical standards

• Establishing reciprocal consumerprotection laws

• Opening governmentprocurementwithin the region

• Improving the efficiency of the regional transportationnetwork

• Creating an efficient energy network

• Enhancing regional communicationsand connectivity

• Harmonizing administrativerequirements for businesses

• Linking financialmarkets

• Facilitating the movement of students for higher education

• Facilitating cross-border cluster development

– e.g., Supplier networks

– Efficient transport and logistics

– Quality standards

Factor (Input)Conditions

Context for Strategy

and Rivalry

Related and Supporting Industries

Demand Conditions

Economic Integration Among NeighborsCapturing Synergies


• Coordinating macroeconomicpolicies

• Coordinating programs to improve securityand public safety


Roads

AirportsPorts

Logistic Corridor

Integration and CompetitivenessCentral American Logistical Corridor

Mexico

Belize

Honduras

El SalvadorNicaragua

Costa Rica Panama

Guatemala

Country Boundary


Agenda









• An overall agenda for creating a distinctive and more competitive position for a country or region, based on its particular circumstances

• Implementing best practices in each policy area

• There are a huge number of policy areas that matter

• No country can (or should try to) make progress in all areassimultaneously

PolicyImprovement

EconomicStrategy

What Is an Economic Strategy?


National Value Proposition

Creating a National (or Regional) Economic Strategy

• 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?

Developing Unique Strengths Achieving and Maintaining Parity with Peers

• 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


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?


Tests of an Economic StrategyContinued

• 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?


Agenda









Old Model

• Government drives economic development through top down policy decisions and incentives

New Model

• Economic development is a 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

The Process of Economic DevelopmentShifting Roles and Responsibilities


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


Failure of Traditional Economic Development Organizations

PUBLIC SECTOR PRIVATE SECTOR

General Cluster-Specific• Separate ministries with overlapping mandates• Competition for power and issue ownership• Ministries divided for political reasons which

introduces ideology and single issue focus• Organizations focus on a single geographic

level (e.g., nation, state, or city)• Lack of coordination and integration across

different parts of government

• Rarely strategic but focus on discrete policy areas

• Rarely prioritized and sequenced• No clear mechanisms and accountability for

implementation

• Chambers of Commerce

• Trade Associations

• Traditional focus on lobbying for government support rather than enhancing competitiveness

• Limited effects on areas such as skills, infrastructure, exports, environmental improvement and quality certification where collective action most value enhancing

• Poorly connected to the government policy formulation process

New organizational structures for competitiveness are needed


• South Carolina Council on Competitiveness

• e.g., Central America Alliance for Sustainable Development

Organizations for Competitiveness are Needed at Multiple Geographic Levels

Groups of Neighboring Nations

States, Provinces

Metropolitan and Rural Areas

Nations

Clusters

• The National Competitiveness Council (Ireland)

• Compete Columbus (Ohio)

• Acoplasticos (Colombia)

Examples


Task Forces

Organizing for Economic DevelopmentPresidential Council on National Competitiveness (Korea)

Chairman

Financial Regulatory

Reform

Legal and Institutional

Advancement

Public Sector Innovation

Investment Promotion

Assistant Chairman for Regulatory Reform

Assistant Chairman for Legal System

Management Support Team

Regulatory Reform

President of Korea

Assistant Chairman and Head of Steering Group


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

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