business competitiveness: a 21 st century model for the caribbean presented to the eccu business...

Business Competitiveness:A 21st Century Model for the CaribbeanPresented to the ECCU Business Symposium and Innovation ForumSt Kitts and Nevis Tuesday October 22, 2013

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Structure of Presentation

• A Working Definition• Theorising Competitiveness –19th and

20th century models• Michael Porter’s Diamond and Five Forces

Model• The Global Competitive Index model• Is there a Caribbean model of Business

Competitiveness?2

Definitions

World Economic Forum’s Global Competitiveness Report: competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country (GCR 2103/2014, p. 3

Harvard Business School’s Institute for Strategy and Competitiveness : a nation’s competitiveness…..is based on the productivity with which it produces goods and services. 3

From Absolute to Comparative to Competitive Advantage

• Absolute Advantage – Adam Smith 1776• Comparative Advantage – David Ricardo

1817• Competitive Advantage – Michael Porter

1990

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Absolute Advantage or“Anything you can do I can do better”

Countries should specialise in what they have absolute advantage in due to natural advantage (land, labour, capital)

Results in reduced or no

trade

Inefficiencies in production

process

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Comparative Advantage

• Countries should produce those items they can make most efficiently even if other countries can produce the item more efficiently.

Presumes bilateral trade, full

employment

Small economies could not

be competitive

Transportation Costs not included

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Determinants of Global Competitive Advantage:The Porter Diamond

DemandConditions

FactorConditions

Related andSupportingIndustries

Firm Strategy,Structure, and

Rivalry

Firm Level Competitiveness – Porter’s Diamond

Source: International Business : Environments and Operations ,Daniels and Radebaugh

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• Demand conditions—observation of need or demand

– usually in home country– production started near the observed market

• Factor conditions— availability and terms for acquiring them

• Related and supporting industries—existence of infrastructure

• Firm strategy, structure, and rivalry– influenced by other three conditions

Existence of the four favorable conditions does not guarantee that an industry will develop in a locale

Absence of one of the four conditions from a country may not inhibit companies from becoming globally competitive

PORTER’S CONDITIONS FOR COMPETITIVE SUPERIORITY

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Industry CompetitivenessPorter’s Five Forces

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What of the Caribbean?

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Wint’s (2003) Model of Competitiveness for SIDS in the Caribbean

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Alvin G. Wint, Competitiveness in Small Developing Economies, 2003 ,UWI Press

World Economic ForumGlobal Competitiveness Index (2013)

• Definition of competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country (GCR 2103/2014, p. 3)

• Competitiveness of a country measured based on 12 Pillars (Factors)

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Global Competitive Report 12 Pillars of Competitiveness

Quality of Institutions

Infrastructure Macroeconomic Environment

Health and Primary

Education

Higher Education and

Training

Goods Market

Efficiency

Labour Market

Efficiency

Financial Market

Development

Technology Development Market Size Business

SophisticationInnovation

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Caribbean CompetitivenessA Human Capital Development Approach

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Competitiveness Based on Innovation

In the current context, policymakers must avoid complacency and press ahead with the structural reforms and critical investments required to ensure that their countries can provide a prosperous environment and employment for their citizens. They must identify and strengthen the transformative forces that will drive future economic growth. Particularly important will be the ability of economies to create new value-added products, processes, and business models through innovation.

Going forward, this means that the traditional distinction between countries being “developed” or “developing” will become less relevant and we will instead differentiate among countries based on whether they are “innovation rich” or “innovation poor.” It is therefore vital that leaders from business, government, and civil society work collaboratively to create enabling environments to foster innovation and, in particular, to create appropriate educational systems

( Source: Global Competitiveness Report 2013-2014, p. xiii)

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5th Pillar – Higher Education and Training - Barbados

INDICATOR MEASURE RANK/148Secondary education enrollment, gross %*

103.7 23

Tertiary education enrollment, gross %

61.8 33

Quality of the educational system

5.3 6

Quality of math and science education

5.5 9

Quality of management schools

5.1 26

Internet access in schools 5.1 38

Availability of research and training services

4.7 41

Extent of staff training 4.5 3216

9th Pillar of GCI – Technology Development - Barbados

INDICATOR MEASURE RANK/148Availability of latest technologies

5.9 28

Firm-level technology absorption

5.2 44

FDI and technology transfer 5.0 35

Individuals using Internet, %*

73.3 32

Fixed broadband Internet subscriptions/100 pop.*

23.8 27

Int’l Internet bandwidth, kb/s per user*

69.5 33

Mobile broadband subscriptions/100 pop.*

36.4 44

Availability of latest technologies

5.9 28 17

12th Pillar of Competitiveness – Innovation - Barbados

INDICATOR MEASURE RANK/148 Capacity for innovation 3.4 81 Quality of scientific research institutions

4.2 45

Company spending on R&D 3.0 78

University-industry collaboration in R&D

4.3 39

Gov’t procurement of advanced tech products

3.6 54

Availability of scientists and engineers

4.3 63

PCT patents, applications/million pop.*

11.3 32

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Modified Model of Competitiveness for the Caribbean

Global Competitiveness

Macroeconomic Stability

Infrastructural Development

Firm Level Competitiveness

Innovation

Higher Education and

Training

Technology Development

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The Third Prong in the Growth Strategy for the ECCU

Transportation

Energy

Environment Education and Skills Training

Research and Development

Information Technology

Governance

Source: Hon Sir Dwight Venner, ECCB Annual Report, 2012/2013

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OECS expenditure on Education• Relatively high (approx. 5% of GDP) compared

to other CARICOM countries• Almost 100% achievement of MDG of

universal primary education• Better outcomes from expenditure could be

gained including more targeted programmes• Increasing or introducing user fees at tertiary

level

The Eastern Caribbean Economic and Currency Union Macroeconomics and Financial Systems, Alfred Schipke, Aliona Cebotari, and Nita Thacker, IMF, 2013

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Focus on Higher Education and Training in the OECS• Innovation and Technology Development are

enabled by Higher Education and Training• Increased numbers of persons in Higher

Education directly proportional to development indices (HDI; GCI)

• Investment in Higher Education and Training has to be a Public Private Partnership in the OECS and wider Caribbean

• Higher Education and Training must Enhance Entrepreneurship and Develop Entrepreneurial Behaviours.

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Do countries with higher income per capita have higher tertiary enrollment rates?

Most countries with gross national income (GNI) per capita less than $1000 have tertiary GERs less than 11%. Tajikistan (20%) and Kyrgyz Rep (49%) are the two exceptions.

Countries with GNI pc more than $20,000 have tertiary GERs higher than 50% except for Qatar (10%), Luxembourg (10.5%), Brunei (17.2%), and Liechtenstein (36.0%).

Most countries with a GNI pc higher than $20,000 have tertiary GERs higher than 50%.

0 10000 20000 30000 40000 50000 60000 70000 80000 900000

10

20

30

40

50

60

70

80

90

100

R² = 0.202130699748016

GNI per capita, Atlas method (current US$)

Gro

ss e

nro

lmen

t ra

tio

. T

erti

ary

(IS

CE

D 5

an

d 6

). T

ota

l

Source: UNESCO Institute for Statistics in EdStats, Nov. 2012 Note: Data is for the most recent year between 2009 and 2011.

Slovenia

Brunei

Norway

Switzerland

United States Finland

Oman

Luxembourg, Qatar

Belarus

http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/EXTDATASTATISTICS/EXTEDSTATS/0,,contentMDK:21528857~menuPK:4324013~pagePK:64168445~piPK:64168309~theSitePK:3232764,00.html?tertiary

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Which countries have the lowest tertiary enrollment rates?

These countries have less than 4% of tertiary age students enrolled in tertiary education.

33 countries have less than 10 percent of tertiary age youth enrolled.

50 countries have more than half of tertiary age youth enrolled.

8 countries have tertiary GERs higher than 80% and 4 countries have tertiary GERs higher than 90%: Finland, the United States, Cuba, and Korea, Rep.

10 Countries with the Lowest Tertiary Gross Enrollment Rates

(2008-2011)

1 Turks and Caicos Islands 0.08

2 Malawi 0.72

3 Niger 1.51

4 Eritrea 1.99

5 Tanzania 2.11

6 Chad 2.17

7 Central African Republic 2.57

8 Burundi 3.25

9 Afghanistan 3.33

10 Dominica 3.57

Source: UNESCO Institute for Statistics in EdStats, Nov. 2012Notes: Figures are most recent year with data between 2008-2011. Purple =

2011; Black = 2010; Blue = 2009; Green = 2008. Data were not available for 72 of 214 countries.

http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/EXTDATASTATISTICS/EXTEDSTATS/0,,contentMDK:21528857~menuPK:4324013~pagePK:64168445~piPK:64168309~theSitePK:3232764,00.html?tertiary

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The Road to being Innovation Rich

• Focus on higher education linked to national goals (agriculture, agriprocessing, transportation, Tourism, Financial Services)

• Private Sector should partner with the Public sector for HE, skills training, R&D

• Financial Sector should support innovation, entrepreneurship, financing for SME’s 26

EPILOGUE

TESSA’S STORY

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References• Daniels, J and Radebaugh, L (2012) International Business:Environments and

Operations, Pearson.• ECCB Annual Report, 2012-2013 http://

www.eccb-centralbank.org/PDF/ar_2013.pdf • Schipke, A., Cebotari, A. Thacker, N., (2013) Eastern Caribbean Economic and

Currency Union: Macroeconomics and Financial Systems, IMF. • Schwab, Klaus (2013) World Economic Forum: The Global Competitiveness

Report 2013-2014. http://www.weforum.org/reports/global-competitiveness-report-2013-2014

• Wint, A (2003) Competitiveness in Small Developing Economies, UWI Press.• Harvard Business School Institute for Strategy and Competitiveness. http://

www.isc.hbs.edu/index.html• UNESCO, Edstats

http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/EXTDATASTATISTICS/EXTEDSTATS/0,,contentMDK:21528857~menuPK:4324013~pagePK:64168445~piPK:64168309~theSitePK:3232764,00.html?tertiary

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THANK YOU