Network for Quality, Productivity
& Competitiveness - Nepal
Presentation on
Competitiveness
February 13, 2005
By Saroj Rai
Solar Energy Component Coordinator
Energy Sector Assistance Programme (ESAP)
Alternative Energy Promotion Centre (AEPC)
Dhobighat, Lalitpur, Nepal
Tel: +977-1-55 39 390/55 39 391 Fax: +977-1-55 39 392
E-mail: [email protected]
Website: www.aepcnepal.org
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Presentation Overview
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Concept of Competitiveness
Personal Competitiveness
Defining Competitiveness in Business
Competitive Analysis: Michael E Porter’s
5-Force Model
Competitive Advantages
Remaining Topics on Competitiveness
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Concept of Competitiveness
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Competitiveness is the ultimate virtue
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of being able to compete, contest, or strive
to survive, better perform or outperform, etc.
in long run it is survival of the fittest –
Darwinism
Competitiveness at Different Levels
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Person -> Family -> Community -> Nation
Person -> Organisation -> (Industry) Cluster ->
Nation -> Region -> Globe
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Concept of Competitiveness
(continued)
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Factors of Competitiveness
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Physical, mental/educational, psychological,
spiritual/religious,
Cultural, socio-economic, political
Competitiveness at higher levels also depend on that of
the lower levels e.g. family competitiveness depends that
of individual members and so on.
Some Bases of Competitiveness
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Resources & Sizes
Quality, Productivity, Innovation, Improvements
Bargaining Power over Suppliers, Buyers, etc.
Strategy, Focus, Specialisation, etc.
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Concept of Competitiveness
(continued)
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Driving Forces of Competitiveness
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Sense of urgency for survival
Vision, leadership
Competitive environment
Customers’ sophistication
Quality/competitiveness of support
services
Policy and structural frameworks, etc.
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Personal Competitiveness
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Foundation of all levels’ competitiveness
Competing with others is not enough –
compete with yourself!
Strategic career advancement and
competitiveness
Some not-so-conventional personal
management and development frameworks
or tools
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Seven Habits of Highly Successful People – Stephen R.
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Covey
Lord Buddha’s Astangik Marga
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You Can Win – Shiv Khera
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Art of living, yoga, meditation, exercise, etc.
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Defining Competitiveness in
Business
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Conventional definition – too narrow
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race among the players in the industry or sector
to improve your bottom line
Whoever hurts your business.
Broader definition
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Whoever and whatever hurt your business!
Because, Profit = Volume X Unit Price – (Fixed
Cost + Volume X Unit Cost)
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Five-Force Model of Competitive
Analysis and Business Profitability
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Prof. Michael E Porter of Harvard B
School redefined competitiveness in
business in his 5-Force Model for
Competitive Analysis in his book
(Competitive Strategy, 1980)
He argues that besides rivalry among the
industry players, there 4 competitive forces
which determine profitability.
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Five-Force Model
of Competitive Analysis
Threat of
New
Entrants
POTENTIAL
ENTRANTS
INDUSTRY COMPETITION
Rivalry among Existing Firms
Bargaining
Power of
Buyers
BUYERS
Threat of
Substitute
Products
SUPPLIERS
Bargaining
Power of
Suppliers
SUBSTITUTE
RPODUCTS
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Competitive Analysis:
Threat of New Entrants
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Entry Barriers to Address the Threats
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Economies of scale
Product differentiation
Capital requirements
Switching costs
Government policy and regulation
Expected retaliation
Entry-deterring price
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Competitive Analysis:
Bargaining Power of Suppliers
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Suppliers (of materials, equipment, labour,
capital, etc.) are powerful if:
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The supplier group is dominated by a few companies and
is more concentrated than the industry itself
Suppliers face no threat from substitutes
The industry is not an important customer of the supplier
group
The suppliers’ product is an important input to the
industry’s business
Suppliers’ products are differentiated or have built up
switching costs
Suppliers pose a credible threat of forward integration.
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Competitive Analysis:
Bargaining Power of Buyers
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Buyers are powerful when:
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They are more concentrated than the seller
They purchase in large volumes
They have low switching costs
They possess much info about the seller and the
product
They have ability to integrate backward
There are good substitute products
The product is standard or undifferentiated
The product makes little impact on quality of
buyers’ products.
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Competitive Analysis:
Threat of Substitute Products
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Substitute products pose a threat when
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There is an attractive price-performance
alternative
They could improve performance
They are produced by industries earning
high profits
They require none or few switching costs
Buyers have a high propensity to
substitute
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Competitive Analysis:
Rivalry Among Existing Firms
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Rivalry is stronger when:
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There are many equally able competitors
There is slow industry growth
There are high fixed or storage costs
There are no product differentiation or no little
switching costs
Capacity is built up in large increments
There are competitors of diverse interests,
origins, background, etc.
High strategic interests are involved
Exit barriers are high.
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Competitive Advantage
vis-à-vis Other Players
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Prof. Michael E Porter adds in his 2nd book
(Competitive Advantage, 1985) that competitive
advantage of a firm as the other determinant of
profitability.
Competitive advantages (against others in the
industry) result in above-average profitability
Small-but-hard-to-emulate competitive advantages
are sustainable (kaizen is useful to be a “moving
target”)
Value chain analysis is very useful to look for
sustainable and spread out competitive advantages.
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Remaining Topics on Competitiveness
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Competitiveness of an industry/sector
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Competitiveness Advantage of a Nation
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The Diamond Model
Prof. Michael E Porter wrote his 3rd book called
Competitive Advantage of Nations published in
1990.
Competitiveness of a Cluster
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Transforming Porter’s competitive framework to
economic development (thro’ private sector)
(Michael E Porter’s 4th Book)
Thank you.
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