Changing Rules of Global Competition: The New Reality…

“There will be hunters and hunted, winners and losers. What counts in global competition is the right strategy and success” ~ Heinrich von Pierer

In the report “Results of the U.S. President’s Commission on Industrial Competitiveness” by John A. Young writes:  The final report that the Commission submitted to the President was unanimous in its key findings, which were these:

  • There is compelling evidence that this nation’s ability to compete has declined over the past 20 years. We see its effects both in our domestic markets and in our ability to sell abroad.
  • We must be able to compete if we are going to meet our national goals of a rising standard of living and strong national security for our people.
  • Decision makers in both the public and private sectors must make improved competitiveness a priority on their agendas. As a nation, we can no longer afford to ignore the competitive consequences of our actions—or our inaction.

Competitiveness can be defined as the degree to which a nation can, under free and fair market conditions, produce goods and services that meet the test of international markets while at the same time maintaining or expanding the real incomes of its citizens. One-fourth of the goods produced in the world cross national borders, and fully 70 percent of the goods produced here in the United States compete against products made abroad.

These facts lead to this simple conclusion: the wages we get paid—the high standard of living we enjoy—must be earned in the world market.  No single indicator gives an adequate representation of our nation’s competitive performance. The Commission identified five trends, and they all point to a declining ability to compete:

  • First, growth in American productivity has been surpassed by many of our major trading partners. Productivity growth rate is greater than our own. In absolute terms, they are more productive than American industry in autos, steel, and electrical and precision machinery.
  • Second, real hourly wages in the business sector have remained virtually stagnant since 1973, and they have actually declined in the past five years.
  • Third, our manufacturing sector is not generating the kinds of real returns on assets that encourage investments. Twenty years ago the average real pretax return on manufacturing assets was almost 12 percent. In 1983, it averaged about 4 percent. Investors can do a lot better by putting their money in financial assets. Our manufacturing sector is the foundation on which many services rest.
  • The fourth trend that concerned the Commission is even more dramatic: U.S.trade deficits are at all-time highs.
  • The fifth and final warning signal hits close to home. Since 1965, 7 out of 10 U.S. high technology industries have lost world market share.

Our ability to compete in world markets depends on decisions made by both public servants and private citizens in four basic areas, and here are some actions that we can take to attain key goals in each of them. The goals are as follows:

  • Create, apply, and protect technology—it is our greatest competitive advantage;
  • Increase the supply of capital available for investment and reduce its cost to American business;
  • Develop a more skilled, flexible, and motivated work force;
  • Make trade a national priority at home and to strengthen the world trading system in which we operate.

All of us face a new reality—global competition. It requires a new vision and a new resolve. If we can forge these, we can—and will—meet the challenge of this new reality.

In the article “Explode the Myths of Global Competition” by Michael Lind writes:  First myth: “In today’s global economy, any job can be performed anywhere.” This is false or, at best, only a half-truth. All economies, even very open ones, have both a traded sector that is exposed to foreign competition and a non-traded sector that is insulated from it. According to a recent study by the McKinsey Global Institute, only about 11 per cent of the world’s service sector jobs can be performed remotely.

Most services, such as home construction and hospital care, by their very nature must be provided by workers in the same location as their customers. Workers in the non-traded service sector, such as nurses, may face competition from immigrants for jobs in the national labor market, but they are not competing with foreign workers in a global labor market.

Myth: “In order to compete in a global labor market–all students in advanced industrial countries need to be highly trained in science and mathematics.” This, too, is false. According to the U.S. labor department, the 10 fastest-growing occupations in the U.S. in 2002-2012 are: “medical assistants; networks systems and data communications analysts; physician assistants; social and human service assistants; home health aides; medical records and health information technicians; physical therapist aides; computer software engineers, applications; computer software engineers, systems software; physical therapist assistants.”

The future job outlook in other industrial democracies with service economies and ageing populations is similar. It is absurd to tell the nurses of tomorrow that, in addition to being literate and numerate, they need to study trigonometry in order to be effective at their job.

Myth about global competitiveness: “In order to compete in the global economy–the advanced industrial nations must downsize generous welfare states.” The premise is that generous welfare states prevent high-wage countries from competing with low-wage countries such as China and India in traded-sector industries. But scaling back or abolishing the welfare state would do nothing, and the truth is that the scale and scope of national welfare states is far less constrained by the global economy than many believe…

Therefore, it is time to replace the conventional wisdom: In the 21st century, most workers in advanced industrial nations will work in the non-traded domestic service sector. Most will not compete with workers in other countries. And a generous welfare state need not be a hindrance to competitiveness. These statements are not as familiar as the platitudes that make up the conventional wisdom. But they happen to be true.

Competing with multinationals can be considered a big game of chess, with each engagement with a competitor can be broken into an opening, a middle game, and an endgame” ~ Ed.

In the article “How Successful Companies Adapt to Global Competition” by Peter Koeppel writes: The global marketplace is changing rapidly and competition is fiercer than ever.  Industries are under attack from competition that didn’t exist a few years ago. However, instead of fixating on competitors, companies that are standing out in the global marketplace are finding ways of differentiating themselves by creating new markets.

In today’s business environment it’s sometimes more important to be unique rather than the biggest player in your industry. For example, Whole Foods is an example of a smaller grocery retailer that found a profitable niche and brand loyalty among a group of customers interested in a healthier and more eco-friendly lifestyle.

Cirque-du-Soleil, Apple and Starbucks are examples of companies that created new markets and have reaped the rewards from creating innovative products. How profitable can it be creating a new market vs. developing a product that is merely a brand extension?

Research contained in a book ‘Blue Ocean Strategy’ by W. Chan Kim and Renee Mauborgne showed that “86% of product launches that were line extensions accounted for 39% of the profits from all new-business launches from 108 companies tracked, but the remaining 14% of product launches that represented new markets accounted for 61% of profits!” The lesson here is that you don’t have to be mega brand to be profitable.

Understand what your customers want and use that information to your advantage. Successful companies like Dell and Land’s Endare supplying customers with customized computers and clothing, rather than trying to mass produce products appealing to the broadest audience. Competition is constantly evolving in today’s marketplace and the companies and their leaders that are in touch with the ways that winners are differentiating themselves are going to stay a step ahead of the competition.

In the article “Innovation as a Weapon in Global Competition by Stephen Shapiro writes: If you create a business that can adapt quickly and flexibly to the changing economic and cultural landscape, you may have the silver bullet you’re looking for. A key to achieving this kind of quick response is learning how to inject innovation into decision-making at all levels of the organization. It won’t happen by decree from the CEO, and I’m afraid there is no shortcut.

Real innovation requires broad cultural change based on values, guidelines, and outcome-based measurement systems that give flexibility to all employees while mitigating risk for the business as a whole. Done properly, a company can stay ahead of the change curve and beat the competition while also easing its move into new markets.

Successful innovation is continuous, and that very continuity enables companies to keep pace. Executives recognize that their company loses ground when the pace of change outside the company is greater than the pace of change within.  The ability to innovate is much more pervasive and ubiquitous than most of us imagine.

A word about definitions: Innovation is not the same as invention. Invention is something to be pursued in a carefully controlled laboratory atmosphere. Invention is the process of discovering things that have never been discovered before. Innovation is different. In the business world, innovation is the discovery of new ways of creating value. Not everyone can be an inventor, but everyone can be innovative.

What this leads to is the difference between “box” thinking and “line” thinking. When people say you need to get “out of the box” to be innovative, they are right, but for the wrong reasons. The box that most people operate in is focused on activities, computers, people, or departments within a company.  It is the lines, interconnections and interdependencies between the boxes, where innovation emerges. Innovative thinking comes from making connections: Connections between boxes; connections between ideas; connections between companies; or, connections between industries.  Focusing on the lines frees up the organization to improve within the guidelines of the simple structure…

In the article “The Changing Face of Competitive Strategy” by Niceto S. Poblador writes: It is now commonly accepted that the center of gravity of the global economy has shifted away from the U.S. towards Asia –China and India, in particular – and in the case of agricultural products, Brazil.  This observation is quite correct in the sense that these countries are fast becoming the largest economies in terms of total economic output (or GDP), as well as being the largest consumers of energy.

It is also valid in terms of the international flows of manufactures and commodities… The major differences between the old and the new competition are: In competing for markets, traditional competitive strategy stresses positioning in existing, well-defined markets, and striving to enhance market share. The new competition involves pre-positioning in future and yet undefined markets (or so-called ‘Blue Oceans’), and co-developing these markets with others. Here, firms compete not to maximize market share but to maximize value. In today’s global, intensively interconnected business environment, a major challenge faced by business organizations is how to maximize shareholder value and sustain growth, while at the same time creating economic value for all.

Two essential ingredients of strategy are needed to achieve these long-run corporate objectives: (1) Setting up and being the central part of constellations of partners with whom to conceive and co-create a continuous stream of value propositions; and (2) Identifying unique combinations of these value propositions by engaging customers in developing customized services that meet their continuously changing – and equally unique – needs…

In the article “Responding to the Challenges of Global Markets: Change, Complexity, Competition and Conscience” by C. Samuel Craig and Susan P. Douglas write: A new economic order appears to be emerging, characterized by new players and new and more diverse patterns of trade. Firms from nations such as Taiwan, Singapore, Korea and Hong Kong are increasingly taking the initiative in competing in global markets, rather than acting as low-cost suppliers to firms in the Industrial Triad.

The threat of competition from companies in countries such as India, China, Malaysia, and Brazil is also on the rise, as their own domestic markets are opening up to foreign competition, stimulating greater awareness of international market opportunities and of the need to be internationally competitive. Companies which previously focused on protected domestic markets are entering into markets in other countries, creating new sources of competition, often targeted to price-sensitive market segments. Several emerging trends are impacting organizational life. Of these emerging trends, five are noteworthy: globalization, diversity, flexibility, flat, and networks…

According to Dani Rodrik, Professor at Harvard’s Kennedy School of Government “the most serious challenge for the world economy in the years ahead lies in making globalization compatible with domestic social and political stability”. This will ensure that international economic integration does not lead to domestic social disintegration…

“A competitive world offers two possibilities. You can lose. Or, if you want to win, you can change.”