Presentation

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Presentation 4Strategic Groups of Nations
and the Global Competitive Structure

• By
• Prof. Dr. Zafar U. Ahmed
• President and CEO
• Academy for Global Business Advancement Inc.,
• Texas AM University at Commerce,
• Commerce, Texas, USA

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Thought Starter

• In an increasing interdependent global economy,
  a nations international trade
• is of critical importance for its
• prosperity and status on global stage

3
The Stages in Nation Evolution

• Rostows Five Stages of Economic Development
• Traditional Society
• Transitional Society
• Takeoff Society
• Technological Maturity
• High Mass Consumption

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The Stages in Nation Evolution

• Rostows Five Stages of Economic Development
• Traditional Society
• Economic change and improvement are not
  sufficient to increase output per capita
• Most of the economy is oriented toward producing
  primary products
• i.e. Agriculture, Fuel, Forestry, Raw materials,
  to name a couple
• Majority of people live and work in rural sectors
• Literacy is low
• Little economic exchange in organized markets
  takes place

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The Stages in Nation Evolution

• Rostows Five Stages of Economic Development
• Transitional Society
• Transition society has some sort of association
  with cultures
• Such cultures include various transfers of more
  developed nations values, attitudes,
  institutions, best practices, technology, foreign
  aid, foreign direct investment etc
• Development of Physical and social infrastructure
  has begun in a small but important way

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The Stages in Nation Evolution

• Rostows Five Stages of Economic Development
• .
• .
• Takeoff Society
• At this stage, nations experience an accelerated
  growth rate
• Improvement in production leads to expansion of
  supporting and related industries
• Capital stock is very active and dynamic
• Some key sectors generate sufficient capital to
  finance further growth
• Nations need to obtain foreign exchange to
  finance many developmental projects

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The Stages in Nation Evolution

• Rostows Five Stages of Economic Development
• .
• .
• Takeoff Society
• Export typically accounts for a very high
  percentage of the annual flow of total foreign
  currency earnings
• Physical and social infrastructure have been
  developed to sustain steady development

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The Stages in Nation Evolution

• Rostows Five Stages of Economic Development
• .
• .
• .
• Technological Maturity
• The economy is effectively applying modern
  technology to the full range of its economic
  activities
• Unskilled labor and capital-intensive industries
  are replaced by more skilled labor as well as
  more advanced technology-intensive industries
• Productivity and wages increase very rapidly
• Local economy will be highly depended on global
  economy

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The Stages in Nation Evolution

• Rostows Five Stages of Economic Development
• .
• .
• ..
• .
• High Mass Consumption
• Per capita income has increased to levels that
  provide purchasing power beyond that of basic
  necessities
• Consumers start shifting their attention from the
  quantity of products to the quality of products
  in order to augment quality of life

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Strategic Groups of Nations and the Global
Competitive Structure

• Porters Stages of National Competitive
  Development

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Strategic Groups of Nations and the Global
Competitive Structure

• Porters Stages of National Competitive
  Development

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Strategic Groups of Nations and the Global
Competitive Structure

• Porters Stages of National Competitive
  Development

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Strategic Groups of Nations and the Global
Competitive Structure

• Porters Stages of National Competitive
  Development

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Strategic Groups of Nations and the Global
Competitive Structure

• 1. The Industrial Giants
• This group has the highest economic power
• i.e. USA, Japan, Germany etc
• The countries in this group play a vital role in
  the world community
• i.e. G -- 7 group, EU, working for global
  pollution, resource degradation problem etc
• The nations in this group compete with each other
  for world leadership in the economic, political
  and technological spheres

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Strategic Groups of Nations and the Global
Competitive Structure

• The Industrial Gi2. Rising Starts
• This group comprises of Four Tigers
• First tigers are South Korea, Taiwan, Hong Kong
  and Singapore
• The later two are Malaysia and Thailand
• These countries are also characterized by
  unusually rapid export growth and strong and
  dynamic agricultural sectors
• Rising stars have experienced much higher per
  capita income growth while income distribution
  has been more equal than in other developing
  countries

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Strategic Groups of Nations and the Global
Competitive Structure

• 2. Rising Starts
• Three growth related factors explain why the
  rising stars differ from other groups of nations
• 1st is the high investment rate supported by the
  rapid growth in domestic savings
• 2nd is the high and rising stock of human capital
  supported by universal primary and secondary
  education
• Changes in Total Factor Productivity per worker
• Their superior performance can be derived from
  three main sources
• Capital allocating to high return investments
• Value productivity as compared to physical
  productivity
• The quick absorption of Western Technology

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Strategic Groups of Nations and the Global
Competitive Structure

• 3. Latin Americans
• Latin Americans countries share the same history,
  common problems and same solutions
• They began to develop their import substitution
  industries
• They started with basic production technologies,
  rising to middle and moderately high technologies
• They have adopted this kind of industrialization
  strategy because they believe that the size of
  their domestic markets and natural resources were
  sufficient to support industrial expansion

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Strategic Groups of Nations and the Global
Competitive Structure

• 4. The Populous Countries
• Although China and India are the two most
  populous countries, there are some very distinct
  characteristics
• China adopted a Communist path to development
  whereas India (being a democracy) followed mixed
  economy, which gradually expanded the role of the
  state bureaucracy
• High tariffs, and tight quotas on imports,
  particularly for consumer goods, were applied to
  protect domestic producers
• Controlled allocation of foreign exchange in time
  became the chief means of control

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Strategic Groups of Nations and the Global
Competitive Structure

• 5. The Former Socialists
• When communist regime took over Russia in 1971,
  they gave priority to developing heavy industry
  and military strength
• Later, priorities were shifted to consumer
  products, agriculture, light industries and
  construction
• Per capita consumption started growing but these
  rises were accompanied by a steep hike in the
  cost of real resources
• Though there was a huge surplus of unnecessary
  products, there were shortages of necessary
  consumer products, especially food

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Strategic Groups of Nations and the Global
Competitive Structure

• 5. The former Socialists
• Hungary stands out as an early persistent
  reformer even under the communist regime
• In 1993 Czechoslovakia split into the Czech
  Republic and Slovakia
• In Poland and Yugoslavia, reform programs started
  in 1990, with macroeconomic discipline to curb
  inflationary pressure
• Hungary and Poland embrace free market reforms

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Strategic Groups of Nations and the Global
Competitive Structure

• 6. The Industrial Nichers
• This group include smaller industrial nations
• i.e. Belgium, Norway, Sweden, and Israel
• Major disadvantage of smaller nations is their
  small domestic market
• It is not large enough to permit rapid
  development of scale economies
• Technological advances in the larger countries
  have led to increased competitive pressures on
  small industrial country firms
• Similarly, the newly industrialized countries are
  increasing their competitive pressures in other
  industrial segments which are driven by price
  competition

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Strategic Groups of Nations and the Global
Competitive Structure

• 7. The Commodity Nichers
• The economies of countries among this commodity
  nichers group thrive on the extraction of
  precious minerals such as petroleum products
• i.e. Saudi Arabia, Kuwait, United Arab Emirates,
  Qatar, Oman, Bahrain
• These countries can manipulate the worlds
  economy and market of petroleum products
• With similar resources and structures, countries
  in this group share a common strategic outlook
• They are all trying to shift from oil
  overdependence and public-sector driven growth to
  private sector initiatives and a diversified
  industrial base

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Strategic Groups of Nations and the Global
Competitive Structure

• 8. The Subsistents
• Nearly 50 of the worlds countries are
  classified as less than developing nations
• i.e. African and South Asian Countries
• Common characters of this group are
• Sharp economic decline
• Decrease in export revenues
• Curtailment of foreign investment
• Malnutrition
• High maternal and child mortality
• Rwanda, A Case in Point

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Strategic Groups of Nations and the Global
Competitive Structure

• Identifying the Nations Competitors and
  Alliances
• Each nations policymakers must proceed to
  formulate their countrys competitive and
  cooperative strategies
• By doing this they will have a better sense of
  which countries they can effectively compete
  with, and which countries they can cooperate with
  in the global marketplace

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Strategic Groups of Nations and the Global
Competitive Structure

• Identifying the Nations Competitors and
  Alliances
• Types of Competitors
• Strong VS. Weak Competitors
• Close VS. Distant Competitors
• Strong VS. Weak Alliances
• Close VS. Distant Alliances

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In Conclusion

• By analyzing the global competitive structure
  and their own nations strategic group, policy
  makers can identify their nations relative
  strengths and weaknesses, along with the
  opportunities and threats that derive from
  competing and cooperating within and among
  strategic groups