Chapter 3: International Competitiveness, Productivity and Quality3.1 ESTABLISHING A GLOBAL PRESENCE

• A country with global presence is recognized internationally for its reliability, fairness, integrity and the standards of its companies’ products.

• Countries with a negative global presence may have non-democratic governments, unsafe and unfair working environments, lack of environmental protection, and political upheaval.

•Canada’s global presence is important because other countries are aware of our products, standards and

reliabilitygives us access to worldwide capital and markets.

•A company expanding internationally needs to develop a strong presence.

•International companies operate in a few countries only

•Global companies operate in several countries. “Going international” may make or break an organization.

•Many companies set up distribution arrangements, offices and possibly manufacturing plants, as well as hiring local staff.

To build global presence that minimizes risks and maximizes profits, a company should develop a plan: Which product will lead the way as the

company “rolls out?” Which markets should be entered first? What is the best way to enter these

markets? How rapidly should the company expand

internationally?

Competitive Advantage

•To reach the ultimate goal of increased sales and profits, there must be a competitive advantage. •The company must outperform their global competitors. Access to markets and distribution channels are important.•Canada was 8th among 80 countries in competitive growth from the 2002 World Economic Forum Report.

• Canada leads all G7 countries in ease of doing business, according to the 2009 IMD World Competitiveness Yearbook. Also, the Economic Intelligence Unit forecasts Canada as the #1 place to do business in the G7 for the next five years.

According to Consensus Economics, Canada has been a top performer among the G7 in GDP growth over the 2006-09 period and is expected to remain so through 2010-11

Real GDP Growth and Projections (%)

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•A higher GDP means that Canada is being more productive and is in a better position to compete internationally. (note the text has outdated info)

•Canada’s manufacturing sector has lagged here is a lack of research & development (R&D). Canada has been slower to adopt new technologies and has been more dependent on services rather than manufacturing. •Competitiveness is linked to R&D by governments and companies. Innovation must be encouraged by productive management strategies. The National Research Council conducts R&D for the government.

•Governments also support private R&D; for example, MD Robotics’ Canadarm for NASA has given Canada stature and competitive advantage in space technology.• •Governments usually insist on high quality and performance standards on their purchases and this stimulates companies to update their performance and environmental standards. 

3.2 ACHIEVING COMPETITIVE ADVANTAGE

•Companies that achieve a competitive advantage manufacture products or provide services that have greater economic utility, or usefulness, than products or services supplied by their competitors.

•Economic utility is a product’s ability to satisfy the needs and wants of the customer. Form utility is created when raw materials are converted into a finished product. Place utility means that a product, such as ice cream has most value when it is in a freezer.

Factors Affecting Canada’s Competitiveness

• Quality and Quantity of natural resources• Strength of country’s currency and its exchange rate• Infrastructure in the country• Research and development• Workforce Characteristics• Entrepreneurship• Government involvement• Opportunity Cost, and Absolute and Comparative

Advantage

 Opportunity Cost

• Is the cost and potential benefit of an opportunity that is deferred or sacrificed in order to act on another opportunity.

• Whenever one opportunity is chosen or pursued by a company or an organization, other is sacrificed.

• Opportunity cost calculates, in financial terms, the benefits of the value of the next best opportunity that was foregone or not taken.

Comparative Advantage• an advantage usually created when a company or

country becomes more efficient, has better technology, and has easier access to resources its competitors.

• When one country has a lower cost in producing a product at a lower opportunity cost than another country, it is said to have a comparative advantage.

• Once there is a comparative advantage, it can specialize in what it does well and at a reasonable cost. It can then trade with other countries or exports its products to them.

Absolute advantage

•If a country can produce a good at a lower cost or with a higher rate of productivity

Canadian Fish headsChinese Toys

3.3 THE MEANING OF PRODUCTIVITY

• Productivity refers to the amount of work that is accomplished in a unit of time using the factors of production.

The factors of production are • land,• labour, • capital,• technology and entrepreneurship.

Business Purpose and Goals

• KEY GOAL = PROFIT• AIM – in Mission Statement• example of a mission statement –• “to…empower our people to help customers become

more successful by providing them with the indispensable information, insight, and solutions”.

Productivity

•For a company, productivity measures the relationship between “inputs” and “outputs”

•how well a company uses the resources it has (meaning people, machines, production lines, parts, supplies, or raw materials) to perform more profitable or more competitively.

•Such measures can be adapted to any kind of organization.

Factors Influencing a Country’s Productivity

  Efficient use of human and physical resources Costs associated with labour (for example, wages and

salaries, benefits, workers’ safety and insurance costs, payroll administrator)

Accessibility and quantity of a country’s usable nature resources

Quality and availability of a nation’s technology Quality of education and of government services Quality of business leadership and strategy General work ethic and healthy lifestyle Efficiency of plants and of organizational structures Size of both domestic and international markets for a

country’s products and services • Amount of support given to research and development

3.4 CANADA’S GLOBAL CHALLENGE

• In Canada, about one-third of our domestic product and about 40% of our jobs depend on international trade.

• Another challenge that Canada faces is maintaining our standard of living.

• The main economic indicators of standard of living include average family income and expenditures, household ownership of durable goods (such as the number of telephones and personal computers), number of physicians per 1000 people, and the literacy rate of the country.

• Canada has scored high on standard of living assessments. By maintaining a good standard of living, it will help retain and attract talented people who will help Canada increase productivity.

• Canada mostly wants people who work in what is called the “knowledge economy”.

 The Knowledge Economy

•knowledge economy refers to the increased reliance of business, labor, and government on knowledge, information, and ideas-and information technology to put them to practical use.•Adheres to the saying “brain over brawn”.

• Improvements and changes are welcomed in most industries. The greatest changes taking place in industries today is in the technology industry

Categories of Industries

1.High-knowledge: more than 40 % of these industries’ employees are knowledge workers. Examples include: information technology, education, government, microelectronics, biotechnology, telecommunications and computers.

2. Moderate-knowledge industries: between twenty percent and forty percent of these industries’ employees are knowledge workers.

• Examples include: job-training services and real-estate sales, customer service, sales representatives and finical services.

3. Low-knowledge services: • Less than 20%of these industries’

employees are knowledge workers.

• Examples include: retail sales, meat processing, truck driving, and any type of manual labor.

Intellectual Capital

• Intellectual capital is the sum of knowledge, information, intellectual property, talent, and experience within a country or an organization.

• Intellectual capital includes ideas, is part of a company’s human capital, and is a factor in company’s or country’s competitiveness and its ability to create wealth.

• Some people believe that intellectual capital is more important then human resources when it comes to a source of wealth.

Thriving in the Knowledge Economy

• Not all ideas happen on purpose, 3M Corporation’s discovery of Post-it notes was, “the result of a scientist creating a glue that didn’t stick well.” You have to be able to see beyond your mistakes and see something else that may work in the economy.

• Knowledge is the prime source of competitive advantage in the global economy.

• Managers must learn to develop, share, use, and measure knowledge to create more value for customers, employees, and shareholders.

• One key idea in the knowledge economy is that knowledge is developed when people work with one another. Knowledge must be connected to existing information.

Innovation and Quality•Innovation forces competitors to struggle to catch up. A good example is the computer software market. Microsoft Windows programs are constantly changing and improving to help users become more efficient and adapt to an ever-changing hardware market.

•Innovation is the key to finding new ways of increasing productivity and goes beyond investment in research. Since there are always ways to improve, innovation requires constant change and improvement

Taxation and Innovation

• Taxation is the method used to generate the finances required to run the country. The money collected by municipal, provincial, and federal governments from individuals and businesses is spent on a variety or programs and projects, both domestically and internationally.

• Canada’s corporate tax rate is higher than many of its global competitors. As a result Canada may have difficulty attracting foreign investment compared to other countries.

Rationalization

• This is the process used by organization or company to change its organizational structure, its product line, or its production process to become more efficient, productive and competitive.

•This can cause large changes such as new factories, developing new technology but also may close factories or cause disregarding of outdated technology.

 Causes and Effects of Rationalization

• Companies may have to rationalize parts of their business due to changes in consumer demand for its products.

• Some companies will merge with other companies to bring in more profits for the parent company. It also can contribute to economies of scale.

Privatization

• a type of rationalization• Some people argue that privatizing electrical

power, prisons, health care, or highways will bring about more productive systems. Those who support privatization believe that the private sector is more efficient and effective than the public sector at running an organization. They believe that government is wasteful or inefficient, and that taxpayers do not like to see their taxes spend on poorly run services.

Developed Nations and Economies

•Canada is referred to as a developed or industrialized nation. Developed nations tend to have a high standard of living and produce a sophisticated range of products such as computers and automobiles. Developed nations, also called newly industrialized economies (NIE’s), such as Vietnam and China, have made the transition to more sophisticated manufacturing. They have moved away from an economy based largely on textiles, shoes and clothing, and agricultural products.• •There are also countries that are known as less-developed nations. These largely agricultural-based countries have a tendency to experience political and military instability more often.

Total quality management (TQM)

• This is a method of managing organizations with a commitment to continuously improve the products, processes, and the work habits of employees; management also is determined to consistently meet customer needs.

 Market-driven organizations

•those that respond to market needs by providing customers with high quality goods and services that are low cost and available when required. •To successfully compete globally and improve their competitive advantage, Canadian companies must be market driven.

The International Organization for Standardization (ISO)

•The ISO’s job is to promote development of voluntary standards and related world activities, facilitate the international exchange of goods and services, and to develop cooperation in intellectual, scientific, technological, and economical activities. •ISO is non-government and was established in 1947. They are now a worldwide federation of national standards organizations for 140 countries. They have published 12000 standards including the ISO 9000 series on quality management and assurance.

•The ISO 9000 are the requirements a business needs to meet to have its Quality Management System (QMS) verified and registered. Verified businesses advertise the QMS on their facilities. There are 400 000 verified businesses worldwide. •Many large company and government buyers now require businesses to meet certain ISO standards.

3.5 QUALITY CONTROL AND CONTINUAL IMPROVEMENT

• Quality Control•Deming’s “14 points for management” Always continuously improve the product or service to

stay competitive and create jobs Encourage education of the workforce, both on and off

the job Allow workers to take responsibility for and pride in

their work Remove communication barriers between

management and the factory floor Encourage teamwork between departments to

improve product quality and to create common goals