GEO 2301  EOCNOMIC GEOGRAPHY

Lecturer: Prof.  Chu Kim Yu

Tutor: Miss  Bertha Ip

 

 

Tutorial 1

Competitiveness between Firms and Among Nations

February 28th 2000

 

Competitive advantages of Firms and Among Nations

Changes and trends of competitive advantages among Nations

Industrialization

 

 

 

 

                                    96712152 Tsoi Koon Lung

                                    98518901 Leung Chuk Kwan

                                    98712601 Tam Yee Wa

 

Competitive advantages of firms and among nations,

and their relationships

 

  The thing that you can make use of and become outstanding from competitors is what we called "competitive advantages". The basic unit in competition is firm, a competitive firm can gain competitive advantages for the whole industry, through industrial cluster the country can also gain competitive advantages.

 

Competitive advantages of firms

  Competitive advantages of firms can be revealed in an well-organized value chain, and this depends on whether the firm has a flexible competitive strategy. Industry structure and positioning within the industry are the two main concerns in determining competitive strategy. There is not an absolutely good strategy for all the firms, since different industries have different structure, firms may face to different threats in different industries, but there should have a particular advantageous factor in an industry. Positioning involves competitive advantage and scope, which provide the generic strategies.

  All of these can be revealed as a value chain for a firm, the linkage between its up and down-stream industries form a value system. A good strategy can manage a cost-effective value chain, and communicate with the related and supporting industries in order to minimize the production cost.

Competitive advantages of nations

  Competitive advantage of nations can be seen as an integrated system comprises the factor conditions, demand conditions, related and supporting industries, firm strategy, structure and rivalry. Favorable condition is to develop specializing advanced production factor, maintain a large national market with rapid growth, and harmonize related and supporting industries, and innovating flexible strategies, then the industry may probably obtain advantages. These elements are integrated and interacted with each other, a competitive strategy might manage these well to create competitive advantages by itself. However, "chance" and "government" are the elements that a firm cannot intervene, "chance" might provide entrance for new competitors, government policies might encourage or limit the development of the competitive advantages of firms. Actually, competitive advantage of a Nation is build up by the industrial cluster within the Nation, which is the clustering of the related and supporting, upstream and downstream industries. They are clustered together because they can share information and technology between themselves, and can minimize the shared production cost.

 

 It should be emphasized that this is a dynamic system with high variability, the elements can strengthen each other but not to create competitive advantages by itself.

 

 

 

Changes and Trends of the advantages of competitive advantages among Nations

  The traditional comparative advantage theory simplifies the cost of production into some main factors such as land, labor, and transportation etc. However, this theory cannot explain why South Korea, with very limited raw materials, is so competitive in steel industry.

  In order to simplify the phenomena, Michael Porter developed a competitive theory which emphasis factors such as strategy, integration ability of firms. It also emphasis the importance of government in creating environment for the growth of enterprises.

Changes of competitive advantage among Nations

  For Porter, competitiveness is merely high productivity and efficient production. There're three revolution in productivity. After each revolution, productivity increased by hundreds of time. So, let's have an overlook of these revolutions.

  The first is the Agricultural Revolution before 10,000 years ago. It takes place, independently, at different regions at a time variation of several thousands years. It increases the productivity of land by thousands of time. Civilization begins as human is no longer the slave of nature. The second is the Industrial Revolution begins in England. By using machines, productivity increased by hundreds time. Industrial Revolution enables British to construct an empire where the sun never shines within it.

  We are now undergoing the third revolution in productivity--the Information Revolution. According to Manuel Castells (newspaper distributed by Dr.Chu. this is not a part of text but to remind you to add the reference if you it is suitable), USSR cannot respond well to the challenge of information age. Their political lacks of flexibility block the free flow of information, disfavoring environment for competition. Thus, its economy collapse and the federation disintegrated. Again, the Information Revolution drastically increases the productivity. An American Commerce Department report point out that the average cost one bank transaction conducted via clerk, ETC, and mobile phone is US$1.3, 0.3, and less than 0.03 respectively. This time, the United States adapted to the Information Revolution first. Actually, the Revolution is deeply influenced by the US. The US government encourages communication between universities and firms. It invests large amount in fundamental research. The innovative ideas can find the support from engineer and the stock market.

  The US occupies the largest share in producing information. These may produce by US government, media, Hollywood, universities, laboratories, and private research institutions. This information is money and power.

 

 

 

 

 

 

 

Reference

Berry, B.J.L. et al (1989), "Competitive Geography of the Global Economy: Cultures, Corporations and the Nations State", Economic Geography, Vol. 65, No.1, pp. 1-18

Porter, M. (1990), The Competitive Advantage of Nations, Ch.2 & Ch.3, pp. 33-130

Daly, M.T. (1994),"The Road to Twenty-First Century: the myths and miracles of Asian Manufacturing", Ch.8, Corbridge, S.Martin, R. and Thrift, N. (eds.), Money, Power and Space, pp.165-188

Peet, R. (1990), "Global transformation through industrialization", Ch.9, Global Capitalism, theories of societal development, pp.145-170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appendix

 

Source from: Porter, M. (1990), The Competitive Advantage of Nations, Ch3, pp127