Competitive Advt

Introduction: The success of developing economies around the world can be attributed to the global competitive advantages that they have been able to build over the years. Globalization has removed many barriers for trade and investment across countries. It has also brought in policy changes in many countries that have aligned macroeconomic policies and market regulations. The productivity stems from making the best of the available resources and competing in the most economically intelligent manner. It is not the competitor but the competition which determines the level of productivity for the country. Globalization has made it important that competitiveness policies at the national level find their complement in competitiveness policies at the regional level. Policies at all levels – national, regional and local need to be aligned with competitiveness for economic policy making, the implications are clear that further progress on competitiveness requires more effective policies at the regional level not just a continuation of national reforms. In many countries this will not be an easy task. This paper focuses on how India transforms its competitive advantage to face the global recession which is the challenge for all the countries. In this connection we analyses the Michael Porter’s competitive advantage model, the Diamond model, Regional competencies of India, different strategies adopted by India to sustain its competitive advantage and conclude it by specifying key points and suggestions. Competitive Advantage of a country: Conditions or situations which enables a country to operate in a more efficient or otherwise higher-quality manner than the other countries it competes with, and which results in benefits accruing to that country

Analysis of Michael Porter’s competitive advantage Model

Analysis of Michael Porter’s competitive advantage model :Five Forces model of Porter is an outside-in business unit strategy tool that is used to make an analysis of the attractiveness (value...) of an industry structure. The Competitive Forces analysis is made by the identification of 5 fundamental competitive forces: • • • •

the entry of competitors (how easy or difficult is it for new entrants to start to compete, which barriers do exist) the threat of substitutes (how easy can our product or service be substituted, especially cheaper) the bargaining power of buyers (how strong is the position of buyers, can they work together to order large volumes) the bargaining power of suppliers (how strong is the position of sellers, are there many or only few potential suppliers, is there a monopoly

• •

the rivalry among the existing players (is there a strong competition between the existing players, is one player very dominant or all all equal in strength/size) as a sixth factor could be added: government

“competitiveness at the regional level is conceptually the same as competitiveness at other levels of geography” says Michael Porter, Prof. at Harvard Business School and a leading authority on competitive strategy and international competitiveness. It has to do with the productivity with which the region uses its resources- labour, capital or endowments to produce value. The Diamond model of competitiveness:

In this model the strength across the diamond dimensions becomes the driving force for competitiveness to build. The first is the demand conditions------The tastes and preferences of the domestic population and the quality and safety standards set by the local authority play a significant role in determining the scope and reach of a firm.

The second is the Factor conditions------ The inputs and infrastructural requirements (natural endowments and developed factors) must match the availability in the local surroundings. The third factor would be context for firm strategy and rivalry. The market becomes the local battlefield for domestic and, if permitted, foreign firms to compete for profits and sustainability. The local rules and incentives make the conditions for a good business to prosper. The Final factors are the related and supporting industries which are fundamental for the operations of a business. The presence of clusters rather than isolated firms ensures smoothness in functioning. All these factors are present at the International, national and regional levels making it imperative for the policymakers to ensure improvements from the bottom up. This model captures the essence of productivity by studying the indicators at each of the levels ranges across financial and logistical infrastructure under the factor conditions, business incentives and diversity of firms and competition intensity under the context for rivalry, supplier sophistication under related industries and basic demographics and income distribution patterns under the demand conditions. It helps to study the availability of the high quality, efficient and specialized factors, customer quality and purchasing power the effectiveness with which the factor and demand situation can be matched and the clusters for support in terms of human resource and skills. Thus productivity stems from making the best of the available resources, and competing in the most economically intelligent manner. It is not the competitor but the competition which determines the level of productivity for the industry. The productivity of the country would be benefited by the investments, exports, and the technological and innovation imports. Thus countries should compete to attract industries and create an optimal business environment for the benefits of the competitiveness and productivity to advanced prosperity. The hard data is translated into cold reality in the interest of the nation and the hope that it would be the driving force for a better, more competitive economy.

Regional competencies of India: