Session 8 Competitive strategy under information economy

What is your choice? Shoes, bags, and other leather products? Perfume, cosmetic? Cars, vehicles?

What is your impression? Why USA is the No.1 country in economy? Which industries are most competitive compared with other countries? Why Japan is the No.2 country in economy? Which industries are most competitive compared with other countries?

Sources of competitive advantage of nations Michael Porter: the competitive advantage of a nation comes from its industrial capability to innovate and upgrade, that is, the industrial competitiveness In the process of globalization, the industrial competitiveness is more and more important Where dose the industrial competitiveness come from? The competitiveness of the companies in certain industry.

Productivity and the business environment Diamond Model Context for firm strategy and rivalry Related and Supporting industries Demand conditions Factor (input) conditions

Factor conditions Presence of high quality, specialized inputs available to firms Nature resources, energy crisis in China (good thing or bad thing) Specialization factors: science and technology, HR, money, management, infrastructure and so on The American management and the large organization

Demand Condition Size of the local demand ： foster care in china Sophisticated and demanding local customers Local customer needs that anticipate those elsewhere ： Values and culture

Related and supporting industries Access to capable, locally based suppliers and firms in related fields –High-quality materials and suppliers –Related industries and supporting industries Presence of clusters instead of isolated industries

Context for firm strategy and rivalry A local context and rules that encourage investment and sustained upgrading, e.g., intellectual property protection Meritocrat incentive systems across all major institutions Open and vigorous competition among locally based rivals Family SME and US large companies Customer-oriented and technology-oriented The goals of individuals and companies The status of the industry

Successful economic development is a process of successive economic upgrading, in which the business environment in a nation evolves to support and encourage increasingly sophisticated ways of competing.

Clusters and competitiveness Clusters increase productivity / efficiency –Efficient access to specialized inputs, services, employees, information, institutions, and “public goods” (e.g. training programs) –Ease of coordination and transactions across firms –Rapid diffusion of best practices –Ongoing, visible performance comparisons and strong incentives to improve vs. local rivals