how nations can enhance their competitive advantage and determinants of national competitiveness
Introduction
Many nations across the world have set up industries to ensure maximum utilization of their resources. Through the trades, there is the production of goods that are used locally or exported internationally. The processes in itself from production to export have enabled many citizens to gain employment and generate income. As a country does this, another is also doing the same. This paper discusses how nations can enhance their competitive advantage and determinants of national competitiveness.
National competitiveness entails rivalry among states to stand out as the best in investment and business. A nation can enhance its competitive advantage through ensuring there is a modest competition of its firms. The competitive advantage of a nation’s firms ensures there is innovation. Once there is innovation, better products are created, which would not only compete in the local market but also internationally. Moreover, changes ensure the quality of products improves hence are demanded across nations since the products are best. Through modernizations, there is the improvement of service delivery such that it is quick and efficient (Cavusgil, Knight & Riesneberger, 2017). Don't use plagiarised sources.Get your custom essay just from $11/page
Through innovations, there is domestic rivalry, and this would easily attract foreign markets since any firm would strive to produce its best. China is thriving due to this; an example is it providing a variety of phones for its local consumers like Techno, Infinix, and Samsung. This attracted international consumers, now the phones mostly sell in African countries (Porter, 1990). Besides, innovations increase productivity. Whatever an individual produces increases compared to what he/she created before the change. The same applies to the firm or capital invested; hence goods produced can reach a broader market (Cavusgil et al., 2017).
The competitive advantage enhancement of a nation is also through information. A government should always strive to empower its citizens with relevant education once they enter the market; they have appropriate and suitable skills (Porter, 1990). The USA is a competitive nation due to this; it ensures that the ability and talent of its children are recognized while they are very young then nurtured. Once the child begins to practice a given profession, he/she is much competent at it.
Nations competitive advantage enhancement is also through the following determinants of national competitiveness:
The first entails demand conditions which involve the nature through which citizens of a given state claim for the product or service. If the demand is high, firms devise means through which production is high, and the product is of high quality. As the firm does this, its competitiveness is improved not only internally but also externally (Porter, 1990).
Moreover, a nation’s competitiveness is also enhanced through firms moving closer to where their demand is high (Porter, 1990). China is a significant beneficiary of this tactic since, for instance, it moved its engineers to Kenya to build the standard gauge railway. Most Chinese live in Kenya, and their main aim for this is so that they can offer their engineering services. They know Kenyans have a deficit of engineers and have used this to enhance their competitiveness. China is, therefore, using the absolute advantage principle (Cavusgil et al., 2017).
The second entails the availability of interrelated and associated industries. In case a firm has a competitor who is threatening its existence, then it would always strive to produce the best goods or offer quality services. In the process, there is competitiveness enhancement, both locally and internationally (Cavusgil et al., 2017). Porter (1990) states that if firms stay close to their supporting firms, they minimize extra costs and create an environment where the firms can learn from each other, resulting in the production of high quality goods and services that are competitive. California is highly competitive due to this. Before the formation of an alliance, do extensive research such that it is mutually beneficial but not dependent. Alliance formation puts comparative advantage principle into practice where trade can take place between nations or competing parties if they are mutually benefiting from each other.
The third is factor conditions, which include human labour, natural resources, technology, enough finances, and social skills. Equipment of a nation with factor conditions ensures competitiveness is high. An example is German, which has a vast number of people endowed with engineering skills (Cavusgil et al., 2017).
The final determinant factor is a firm’s strategy, structure, and competition. If firms of a nation have an intense domestic rivalry, then their competitive advantage due to the production of quality commodities propagated by innovations. Opponents act as extrinsic motivation towards producing the best (Porter, 1990).
Enhancement of a nation’s competitiveness is also through superb National Industrial Policy. Governments stimulate a nation’s competitiveness. The government always forms a National Industrial Policy in collaboration with the private sector. It is a practical economic plan to strengthen specific firms, mostly those that generate much income. The government makes the regulation hence influencing demand for the industries’ produce. Through the policy, it also controls a firm’s supporting industries (Porter, 1990).
Some nations with the best National Industrial Policy include Dubai, which aims at ensuring the country is best in Information and Communication Technology and Singapore, which aims at ensuring it, remains the best in Nuclear Technology. New Zealand changed its National Industrial Policies hence admired. It became one of the most important commercial centers, and yet it was lagging when it had pathetic National Industrial Policies (Cavusgil et al., 2017).
(Cavusgil et al., 2017) states that the National Industrial Policy should have features as discussed: It should encourage the- best infrastructure which includes access to water, modern Information Technology, communication systems and transport like for instance Kenya, which is using standard gauge railway. Best infrastructure enhances quality production and quick distribution of goods hence enhancing competitiveness.
Moreover, it should have tax incentives that encourage savings used in government and private ventures. It also entails financial policies, which include offering competitive firms with low-interest loans hence a steady capital supply (Cavusgil et al., 2017). Finally, it has regulatory systems that ensure the economy of the nation is as stable as possible. Regulatory systems entail aspects like minimizing hoarding and corruption, which could lead to inflation hence affecting the economy of that country (Cavusgil et al., 2017).
According to Abebrese (2017), a thriving industrial policy includes one with sound economic management. It should try to minimize policies that create an environment where the prices of goods are so expensive that people cannot afford it. If banks offer loans, they should do so at affordable rates. The policy should strive to promote education since knowledge is power. A knowledgeable business environment means quality products hence high competitiveness.
The government should ensure there are consultations between the private and private sectors. They should tackle issues collaboratively and share ideas. Working together encourages competitiveness. Finally, Abebrese (2017) states that the government should ensure the commercial environment are friendly. The private sector should have minimal constraints. Businesses should receive support like infrastructure, with employees receiving the best skills and healthcare.
The government has other roles, like ensuring the firms have realistic goals that qualify to finance. In doing so, it will discourage unnecessary wastes, and this is possible through having a team that reviews goals to ensure they are practical and promote national competitiveness. It could also come up with a national policy that provides goods and services that are safe, and the environment is safe for human beings. An environment free from war and one that is politically stable encourages investments hence enhancing national competitiveness (Porter, 1990).
In conclusion, this paper has explained how national competitiveness is enhanced. It has attempted to discuss the broad aspects of competitive advantage of nations, determinants of national competitiveness, and National Industrial Policy. Some basic concepts that were brought out include availability of abundant resources, sophisticated infrastructure, and having a vast network of suppliers and collaborators, just to mention but a few.
REFERENCES
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Porter, M.E. 1990. The Competitive Advantage of Nations. Cambridge, Harvard Business School Publishing. Retrieved on 18th February 2020, from https://hbr.org/1990/03/the-competitive-advantage-of-nations
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