globalization and the competitiveness of enterprises and economies in baltic sea region
DESCRIPTION
On Baltic Sea Region Competitiveness and new definitions and approaches to national competitiveness. Some revolutionary innovations are presented in this presentation.TRANSCRIPT
GLOBALIZATION AND THE COMPETITIVENESS OF
ENTERPRISES AND ECONOMIES IN BALTIC SEA REGION
Conference European Integration and Baltic Sea Region: Diversity and Perspectives
September 26-27, 2011, Riga, Latvia
Gints TurlajsMSc Econ, PhD candidate
Accounting & Consulting Institute (www.aci.lv), General Manager
Email: [email protected], Telephone: +371 29409509
BSR at a glance• The competitiveness of enterprises in the
Baltic Sea Region is heterogeneous as the region itself.
• The region 20 years ago was divided by the iron curtain.
• Countries privileged to develop their market economies in relative peace live now together with more troubled ex-soviet economies rapidly converted to free market economies 20 years ago, but still remarkably different.
EU integration and BSR
• The entry of Eastern part BSR countries to the EU has done much good, they are growing and accelerating.
• Dismantlement of borders is beneficial to economies as a whole.
Justification to open bordersJustification to open borders
Price
Quantity
Domestic supply
Domestic demand
Pworld
Q1
A
B
C
Q0
A+B = domestic consumer’s surplusE+C = domestic producer’s surplusQ0 = domestic production quantityQ1–Q0 = imported product quantityD = tariff revenue for governmentG+F=welfare loss to the society (dead weight loss)
Pworld+ tariffD
E
FG
EU GRP figures and BSR place
GDP in per capita in 2010 Purchasing Power Standards (PPS) (EU-27 = 100)
0
50
100
150
200
250
300
LU
NO
US
CH
NL IE AT
DK
SE
BE
DE
Fin
land
UK
EU
15 IS
Euro
17
Euro
16
FR JP
EU
25
ES
EU
27 IT CY
GR SI
MT
PT
CZ
SK
EE
HU PL
CR LT
LV
TR
RO
BG
MK
Contry
%
Source: Eurostat
Differences and strength in them
• GDP figures clearly show the still remaining gap.
• Heterogeneity is a strength of the region as well as it unifies low costs with some of the world’s best enterprises with long established, successful history and accumulated experience.
• BSR enterprises from West part can reach significant savings by using lower costs nearby, linked by inexpensive and effective waterways.
EU innovation performance, 2010
Source: Innometrics, 2011
Gap in innovation
• Gap in innovation between East and West still remaining.
• Estonia is closing up.
• Latvian innovation performance is catastrophic, higher education and science financing is record low.
Clusters and future• As in the whole world many different clusters
are in place in the BSR. • It can be expected that the BSR as a whole
will become more homogenous and competitive with time.
• Also high cost and income countries can be competitive as well and, for example, according to World Economic Forum measurement are considered as most competitive.
Competitiveness is changing
• Competitiveness of enterprises and economies is changing.
• South East BSR countries becoming wealthier and lose low cost advantage.
• All BSR is competitive in the world as a whole, Nordic countries and Germany being considered as some of the globally most competitive.
• Asia is emerging as the new globally economically dominant region.
How relevant is national competitiveness?
• The national boundaries due to globalization are disappearing.
• Especially evident in EU, part of which is BSR.
• However, an industrial cluster usually is comparatively geographically compact and fits into one country.
National and firm competitiveness – how are they related?
• We walk into the shop and select cheapest products with acceptable quality, price is important to us.
• If national competitiveness is the sum of the competitiveness of individual firms, it should work the same.
• Most competitive economies in our understanding could be with low labour costs but developed industry like BRICS.
• We know that goods from China are competitive in shops, the country is building foreign reserves fast.
The Global Competitiveness Index 2011–2012 rankings
IMF figures: World’s richest countries by GDP per capita at PPS, 2010
Flag, Rank Country USD
1 Qatar 88,222
2 Luxembourg 81,466
3 Singapore 56,694
4 Norway 51,959
5 Brunei 48,333
6 United Arab Emirates 47,439
7 United States 46,860
— Hong Kong 45,944
8 Switzerland 41,950
9 Netherlands 40,973
10 Australia 39,764
11 Austria 39,761
12 Ireland 39,492
13 Canada 39,171
14 Kuwait 38,775
15 Sweden 38,204
16 Iceland 36,730
17 Denmark 36,443
18 Belgium 36,274
19 Germany 36,081
20 China, Republic of (Taiwan) 35,604
GCI and GDP
• All of top 10 countries in GCI are in top 25 by GDP (PPS).
• World Economic Forum, the creators of GCI under the leadership of Prof. Michael Porter, indicates that competitiveness is being measured as productivity.
• Is this correct? Approximating competitiveness as productivity makes it very close to GDP.
GCI and competitiveness• GCI constructed and lead by Prof. Michael
Porter, however, draws a different conslusions.
• It is largely based on expert opinions which might be subjective and biased.
• Author proposes a new definition and illustration of firm competitiveness that interplays with definition and illustration developed by M.Porter.
• Competitveness concepts should take into account price competitiveness and dynamics.
Productivity and GDP
Productivity = Value created/WorkersGDP Per Person = Value created/People
They are almost the same!
• There should be also other alternative ways to measure competitiveness.
• The alternative ways should take into account dynamics.
Classical Porter’s diamond of national competitiveness
Factor conditions
Demand conditions
Related & supporting industries
Firms strategy,
structure & rivalry
Classical Porter’s five forces
Threat of substitutes
Threat of new entrants
Bargaining power of customers
Bargaining power of suppliers
Competitive rivalry in an
industry
Author’s proposition: competitiveness of individual
enterprise
Competitiveness of individual enterprise
Product needed by consumers
Attractive price
Effective marketing
Author’ s proposition: Enhanced Porter’s diamond
Factor conditions
Demand conditions
Related & supporting industries
Firm strategy,
structure & rivalry
Natural endowment
Business development, market size, openness
Competitiveness of individual enterprise
Product needed by consumers
Attractive price Effective marketing
Business development, market size, openness
Bargaining power of suppliers
Bargaining power of customers
Threat of entrants
Threat of substitutes
Conclusions• Gap in BSR in GDP at PPS is still remaining,• Gap in BSR in Innovation remaining strong, only
Estonia closing up.• Alternative measures of national competitiveness
should be developed.• Alternative explanation of factors behind
competitiveness has already been developed by author.
• Simple concepts known by every student are useful, but require deeper specialist investigation, new approaches can be developed.