Presented by Govind Seepersad

(PhD)Of A-Z Consulting,

Jamaica Ltd

Business Strategy and

Tactics to Beat Your

CompetitionCOMPETIT

IVENESS

1: The Context

Today’s global economy requires increased attention to the issue of competitiveness.  The need to adhere to international trade rules, combined with more rigorous consumer demands, requires businesses to work much "smarter".  Critical to this is the issue of competitiveness: •How does a country, institution or business differentiate itself from the competition? •How does it develop competitiveness strategies? •How can success be defined? •What is the secret to success?

Definition

The ability of the firm to offer products and services that meet the quality standards of the markets at competitive prices while providing adequate returns on the resources employed or consumed in producing them.

2. Competitiveness

3: Global Business Competitiveness

This refers to the ability of the firm to provide goods and services which provide better value than their overseas rivals.

This refers to a competitive advantage but on an international scale.

As there is constant threat from foreign competition, it is essential for businesses to strive to improve competitiveness.

Although there is a tendency to look to government to play a role in maintaining the competitiveness of the Trinidad and Tobago’s businesses, in the final analysis it is a matter for individual firms.

4: Competitiveness and Competitive advantage

The increased pressures placed on developing countries by trade liberalization have warranted the need for entrepreneurs to improve their productivity and competitiveness and focus on comparative advantage.  The commitment to the opening of markets and tariff reduction has reduced protection (and margins) of local businesses and, in turn placed more external pressure on businesses to be more competitive in order to survive.

5: Comparative and Competitive Advantage

Comparative advantage explains how economic resources are most efficiently employed in activities where they perform better than others. Competitive advantage refers to the identification of positions and sources of advantage that lead to desired market performance outcomes such as market share and profitability.

Do you have a comparative advantage?

From an entrepreneurial standpoint, competitiveness can be defined as an indicator of a firm’s ability to supply goods and services at the location and in the form and quality at the time sought after, by buyers at prices that are good or even better than that of potential suppliers.

6: What does competitiveness mean for the Entrepreneur?

7: …and what about Competitiveness at the Enterprise level? This concept takes into consideration the character of

the firm. For individual firms, there are two broad categories that dominate the considerations of competitiveness.

The first is considered to be associated with the supply side and is considered to be influencing efficiency, specifically production cost.

The second is associated with the demand and marketing side and is dependent upon the sophistication of the firm, the efficiency of its marketing strategy, the level of innovation and product differentiation of the outputs of the enterprise.

8: Is that similar to Porter’s Competitive Advantage?

In M. Porter’s (1990) “Competitive advantage of nations” he identified two basic types of competitive advantage: lower cost and differentiation.

Lower cost refers to the ability of the firm to produce a good or offer a service more efficiently at a lower cost than its competitors.

Whereas differentiation is the ability of the firm to provide unique and superior customer value to buyers in terms of product quality, features and after sale service; as a result commanding a higher price.

9. Can a firm achieve both types of Competitiveness?

It is unusual for a firm to have both competitive advantages in respect to a single product; however, it is of logical reasoning that a firm pursue both types of competitive advantages while being relatively more committed to one.

10: So you have decided to go Global, but are you Competitive?

You have decided that you want to export and now you are going to visit the FCOR.

This will require you to assess whether you can trade sustainably in that market, that is, whether you are competitive.

11. So what do I look for to decide whether I am internationally competitive?In the market, you look at:

•Price relative to competitors•Quality•Reliability•Lead time

Hmmmmm

12: If not, how can I increase my competitiveness?

Firms can increase their international competitiveness by:•Rationalisation of output•Relocating to places where product costs are lower•Process innovation•Product innovation

12: If not, how can I increase my competitiveness?

Firms can also increase their international competitiveness by:•Incorporating the latest technology•Sourcing manufacturing inputs from abroad where costs are lower•Seeking out new market opportunities (where market prices are higher or competition is less)•Improving relationships with suppliers and customers

13: Does Government have a role in improving international competitiveness?Governments seek policies which aim to:•Encourage R&D spending (e.g. through tax breaks)•Improve the skills base•Improve the economic infrastructure•Operate macro-economic policies favourable to business expansion•Reduce interest rates to stimulate investment

13: Does Government have a role in improving international competitiveness?

Governments seek policies which aim to:•Reduce tax rates to stimulate enterprise, effort and investment•Deregulation to promote competition•Reduce bureaucracy•Encourage sharing of ideas and best practice•Reduce protectionist barriers to stimulate competition•Encourage investment in human capital

14: How should my Competitiveness strategies be?Innovative, drawing on best practices (that is, how to work better and smarter?)

Efficient, leveraging scarce resources to create a more successful business.

Cooperative, working together to achieve success through an effective public-/private-sector dialogue.

Inclusive, getting all those involved in the competitive process to contribute, particularly to cross-cutting issues.

15: You are saying we should cooperate to compete?

A country’s competitiveness is largely contingent on how effectively government, trade support institutions (eg BDC) and businesses interact and exchange information to ensure sustainable economic growth.  The ability to "cooperate to compete" is essential at all levels of the business process. 

15: You are saying we should cooperate to compete?

The focus should be on improving your understanding of the competitive process by targeting three key issues:1.Assessing your competitiveness – price, quality, reliability, lead time, etc

2.Promoting trade competitiveness through trade promotion strategies·

3.Achieving success through competitiveness

16: I have heard so much about competitiveness, what can I do with the Competitiveness concept?

Develop a Business StrategyThis refers to your firm’s business plan defining:the company vision, overall corporate strategy, and objectives.

The strategy and tactics that will enable the company to reach those objectives, the resources required, and how they are going to be obtained;

1.what the main milestones and steps are along the way;2.who is responsible for causing each step to occur;3.what are the company's business risks and external factors that need to be kept under review for indications that a change in strategy or plan may be required.

17: You are saying I need to develop Competitiveness Strategies?

Yes. To be successful today, your company must become competitor-oriented.

You must pursue the right competitive strategy – avoid strengths of your competitors - look for weak points

- then launch marketing attacks against those weak points.

18: What about the New Paradigm or Resource-Based Theory

The currently dominant view of business strategy – resource-based theory – is based on the concept of economic rent and the view of the company as a collection of capabilities.  The strategy emphasizes economic rent creation through distinctive capabilities. 

Economic rent is what companies earn over and above the cost of the capital employed in their business.  The objective of a company is to increase its economic rent, rather than its profit. 

19: How can I calculate my International Price Competitiveness?

You can use the Value Chain Approach.

Here, the Economic Competitiveness Coefficient (ECC) can be calculated.

It is a measure of your tradable / exportable goods competitiveness when landed in an international market.

It measures the difference in the prices and represents the answer as a ratio.

International Price Competitiveness

The formula is

Where,FLC = Final Landed price at the wholesale market in the foreign country TWP = Total wholesale price of that same country at the wholesale market level Where computed values of the ECC>1 these products are considered to be uncompetitive and values of ECC<1 competitive.

International Price Competitiveness

$4.00

= 3.70 / 4.00 = 0.92

$3.70

ECC<1 competitive $0.40

$0.20

$0.10

$0.25

$0.25

$0.50

$2.00Whole-

sale Price in T & T

Freight Port Charges in FCOR

Taxes Transport from port

to warehous

e

Overheads storage &

distribution

Profit Mark-up

Final Landed PriceFLP

FCORTWP

International Price Competitiveness

= 3.70 / 3.50 = 1.06

$3.70

ECC>1 uncompetitive

$0.40 $3.50

$0.20

$0.10

$0.25

$0.25

$0.50

$2.00Whole-

sale Price in T & T

Freight Port Charges in FCOR

Taxes Transport from port

to warehous

e

Overheads storage &

distribution

Profit Mark-up

Final Landed PriceFLP

FCORTWP

Remember Porter’s Competitive Advantage?

In M. Porter’s (1990) “Competitive advantage of nations”. He identified two basic types of competitive advantage:

lower cost and differentiation.

Lower cost -- the ability of the firm to produce a good or offer a service more efficiently at a lower cost than its competitors.

Differentiation -- the ability of the firm to provide unique and superior customer value to buyers in terms of product quality, features and after sale service; as a result commanding a higher price.

What would you do to become Internationally Competitive?

Thank You