Global competitiveness: Understanding what makes competitiveness global competitiveness

Global competitiveness can be understood as a process in which advanced levels of competitiveness are achieved at different levels, that is, at firm, regional and national levels. As such, competitiveness becomes global when it affects large parts of the world. Definitions of competitiveness move from a general perspective to more specific understanding at the firm and country levels. In doing so, those definitions capture the evolution of the competitiveness process from a micro to a macro level. There are several definitions of competitiveness that must be considered before building a particular understanding of global competitiveness.

Buckley et al (1988) develop a general perspective about the strategic choices that underline global competitiveness and thus argue that competitiveness includes "efficiency (reaching goals at the lowest possible cost) and effectiveness (having the right goals). It is this choice of industrial goals which is crucial. Competitiveness includes both the ends and the means toward those ends. "Global competitiveness, thus, can be understood as the balance between efficiency and effectiveness in the economic realm.

Others build an understanding of competitiveness at the firm-level. For example, the Report of the Select Committee of the House of Lords on Overseas Trade (Low, 1985) focuses on the competitiveness of enterprises. According to the Committee "competitiveness is synonymous with a firm's long-run profit performance and its ability to compensate its employees and provide superior returns to its owners." For Feurer and Chaharbaghi (1994), competitiveness "depends on shareholder and customer values, financial strength which determines the ability to act and react within the competitive environment and the potential of people and technology in implementing the necessary strategic changes." Feurer and Chaharbaghi go on to state that "competitiveness can only be sustained if an appropriate balance is maintained between these factors which can be of conflicting nature."

Scott and Lodge (1985), move the focus of competitiveness to the country level proposing that competitiveness is a "country's ability to create, produce, distribute and/or service products in international trade while earning rising returns on its resources." Others put more emphasis on the economic structure of countries. For the OECD (1992), "competitiveness is the degree to which a nation can, under free trade and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real income of its people over the long-term." Such understanding brings to the fore a proposition that competitiveness embedded in the type of economic system, in this case, a free-market economy. The US Competitiveness Policy Council (1992) adopt the same line of thought and defines competitiveness as "the ability to produce goods and services that meet the test of international markets while citizens earn a standard of living that is both rising and sustainable over the long-run."

The competitiveness Advisory Group (1995) proposes that competitiveness entails "elements of productivity, efficiency and profitability." Competitiveness, however, "is not an end in itself or a target... [but] a powerful means to achieve rising living standards and increasing social welfare- a tool for achieving targets." Accordingly, global competitiveness is achieved, "by increasing productivity and efficiency in the context of international specialization, [this is so, because] competitiveness provides the basis for raising peoples' earnings in anon-inflationary way." In short, as the World Competitiveness Yearbook (IMD World Competitiveness Center, 2014) and the Global Competitiveness Report (WEF 2014) highlight, prosperity is the fundamental outcome of global competitiveness. And thus, if prosperity reaches large parts of the world, one can conceive of the process as global competitiveness.


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Recommended readings

Buckley, P. J., Pass, C. L., & Prescott, K. (1988). Measures of international competitiveness: A critical survey. Journal of marketing management, 4(2), 175-200.

Competitiveness Advisory Group—CiampiGroup (1995). "Enhancing European Competitiveness". First report to the President of the Commission, the Prime Ministers and the Heads of State.

Feurer, R., & Chaharbaghi, K. (1994). Defining competitiveness: a holistic approach. Management Decision, 32(2), 49-58.

IMD World Competitiveness Center (2014). IMD World Competitiveness Yearbook 2014. Lausanne: IMD World Competitiveness Center.

Low, T. (1985). Report of the Select Committee of the House of Lords on Overseas Trade. London: H.M.S.O.

OECD (1992). Technology and the Economy: The Key Relationships. Paris: OECD.

Scott, B. R., & Lodge, G. C. (1985).US competitiveness in the world economy. The International Executive, 27(1), 26-26.

US Competitiveness Policy Council. (1992). "Building a competitive America."The First Report to the President and Congress, Competitiveness Policy Council, Washington, D.C.

WEF (2014). The Global Competitiveness Report 2014–2015. Geneva: World Economic Forum.

Suggested Websites

The IMD World Competitiveness Center's Yearbook

The WEF Global Competitiveness Report