STRENGTHENING COMPETITIVENESS

Purpose of a competitiveness strategy is to help companies to secure a high value added position along the global value chain.

 

Globalisation is a process affecting our daily lives through the machinery and equipment which we buy,  and the services which we consume.

 

Those equipments may carry the “made in China” mark; however, they are often designed by  another company and  their components are often manufactured by companies of different nationalities at various locations.

 

Embraer is a leading mid range passenger  airplane.  It emerged and grew with the support of the Government of Brazil; however, its production involves many countries  What triggered the Embraer Project was the diagnostic that competition is not servicing this particular segment, i.e. Airbus and Boeing were  not  present in the mid range passenger transportation market.

 

The second aspect of the successfull enterprise was where the Brazilian industry decided to subcontract important components to competent and efficient suppliers  internationally.   The result was the emergence of global leader. 

 

It is not difficult to multiply such examples, and is not always easy to find a product or service, which is designed and produced  entirely in one country by one supplier.

 

The picture is  not different in health, financial or other services.  The value chain is spread globally.  The moral of the story, hence, is that companies should engineer their position on the value chain in such a way as to increase their value added, and thereby their profitability.

 

Comparative advantage is no longer defined  with reference to finished products, nor with respect to their factor intensity.  It is the positioning of national companies on their respective industrial value chain which influences their relative competitiveness and their business model which  determines their comparative advantage.

 

This process is heavily R&D dependent, and thereby involves national industrial policies.  Foreign direct investment is also affected by this evolution.

 

Foreign  direct investors often prefer vertical specialisation to vertical integration and horizontal specialisation, depending on the size of the host country markets.  Their decision to invest depends  on relative wages and other cost elements, as much as on  host country economic policies and their efficiency.

 

A competitiveness inventory illustrating  the capacity of a particular company is a critical element in constructing the competitiveness scenario for a company.