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Whats Happening?!

Comcast to offer Internet telephone service in early 2006.


Semiconductor industry is projecting a slowdown in
demand this year that should bounce back in 2006.
Cisco is going to sell EMC storage devices.
MacWorld is in San Francisco today.
Fortune 500 Best Places to Work
4. Genentech
5. Xilinx
13. Adobe Systems
24. Network Appliance
27. Cisco Systems
43. Symantec
64. Intuit
79. Granite Construction
91. Morrison & Foerster

1. Wegmans Food Markets,
New York
Not on the list: HP and Intel
Analysis Term Paper Assignments
Arias, Michael Intel
Chung, Man Wing IBM
Demant, Jason Intel
Gorenshteyn, Vladimir Intel
Gregorio, Jonathan Oracle
Gutman, Max Intel
Hendrix, James Oracle
Johnson, Chris Apple
Liu, Jun-Jie Dell
Nguyen, Kim Dell
Nguyen, Tan Plantronics
Paulsen, Mitchell IBM
Schultz, James Cisco
Semnani, Cyrus Dell
Sherrill, Rebecca Knight-Ridder
Sinha, Rashi Cisco
Thomson, Adam Oracle
Wang, Kevin Apple
Xu, Stanley Plantronics
Zhu, Li Yi Dell
Dang, Khanhvi IBM
Johnson, Chris Apple
Wang, Kevin Apple
Schultz, James Cisco
Sinha, Rashi Cisco
Liu, Jun-Jie Dell
Nguyen, Kim Dell
Semnani, Cyrus Dell
Zhu, Li Yi Dell
Chung, Man Wing IBM
Paulsen, Mitchell IBM
Dang, Khanhvi IBM
Arias, Michael Intel
Demant, Jason Intel
Gorenshteyn, Vladimir Intel
Gutman, Max Intel
Sherrill, Rebecca Knight-Ridder
Gregorio, Jonathan Oracle
Hendrix, James Oracle
Thomson, Adam Oracle
Nguyen, Tan Plantronics
Xu, Stanley Plantronics
Key Factors
1. Industry definition.
2. Big Picture data regarding the industry.
3. Business and IT leaders.
4. Porter Competitive Model analysis.
5. Business Strategy Model.
6. Identifying strengths and weaknesses of the company.
7. Figuring out who runs the business on a day-to-day basis
and the relationship with the person running the IS
organization.
8. Concluding what the company changed through the use
of Information Systems.
The Information Technology Environment
ERA I
Data
Processing


ERA II
End User
Computing



ERA III
Strategic
Systems


Administrative
Framework

Regulated
Monopoly


Free
Market


Regulated
Free Market
Source: Cash, McFarlan, McKenney and Appleton, Corporate Information Systems Management,
Richard D. Irwin,1992, 3/E, p. 11, adapted.
Organizational
Individual
Business
Processes
Productivity/
Efficiency
Effectiveness
Competitive
Advantage
Primary
Target
Justification/
Purpose
Figure 1-5
How Fragile is Business Success?
How much of the answer to this question is related to
business leadership and strategies?
How much of the answer to this question is related
to information technology leadership and strategies?
IT Significance
If your business lives by information technology
can it also die by information technology?
How much of an IT dependency does a company
have?
How much change must they deal with in defining
their business to be successful in the future?
A Quick IS Assessment
1. How is Business?

2. Is the Information Systems Manager a
Member of the Top Management Team?

3. What Percentage of the Operating Budget
of the Business is for Information Systems?
Examples of Successful Company
Use of I/S to Compete
Boeing Airplane Company
Wal-Mart Stores
Bissett Nursery Corp.
Federal Express
Charles Schwab
USAA
L.L. Bean
Progressive Corp.
Your quota is 5
companies!
Best ISTC Industries
Retail Industry:
L. L. Bean
Dillards Dept. Store
The Gap
Home Depot
Kmart
Mens Wearhouse
Mervyns
J C Penney
Toys R Us
Wal-Mart Stores
Transportation Industry:
American Airlines
American President Co.
British Airways
CSX
Delta Airlines
FedEx
Singapore Airlines
Union Pacific
United Airlines
UPS

Worst ISTC Industries
Construction Industry

Petroleum Industry
Federal Government
Can the IS be right if:
1. The business climate is bad.
2. The business strategy is wrong.
3. The business leadership is wrong.
Business Strategy and IS
Concepts.
Relative To (Bigger Picture).
Company Examples.
Conclusions
To logically and effectively position information
systems within an organization one must begin
by understanding the environment and the
company itself.

Then and only then can you understand the
significance of the role of information systems.
Chapter 1 Summary
Business and
Information Systems
Management
Key Messages
Business Success
Business Success Factors
3 Necessary Perspectives
Simultaneous Revolutions
Business Driver Model

Using IS to Compete
Systematic Approach
Objective of IS
Successful Use of IS

To logically and effectively position information systems
within an organization, one must begin by understanding
the environment and the company itself.
Business Success
Purpose: to create a customer.
Goal: satisfaction of customer needs.
Provide value to customers through Marketing
and Innovation.
A successful business is responsive, flexible,
adaptable, innovative, resilient, talented and
financially strong.
Competitiveness and Globalization
Market leader benefits

Three Necessary Perspectives
Business Environment

Enterprise Environment

IT Environment

Business
Success
Figure 1-1
SIMULTANEOUS REVOLUTIONS
NEW RULES
OF
COMPETITION

INDUSTRY
STRUCTURE
CHANGES
THE
BUSINESS
NEW
COMPETITORS
NEW POLITICAL
AGENDAS
NEW
TECHNOLOGIES
NEW EMPLOYEES
AND NEW VALUES

NEW REGULATORY
ENVIRONMENT
EVER INCREASING
CUSTOMER EXPECTATIONS
Figure 1-2
Regulation
Market Technology
Employees/
Work
Organization
Business Processes
Solutions to Business Requirements
Figure 1-3
Business Drivers
Using IS to Compete
Goal: Create the Necessary Environment
to Use Information Systems to Compete.
Roles of IS:
Efficiency
Effectiveness
Competitive Advantage
Systematic Approach to IS
Vision
Strategy
Tactics
Business Plan
Competitive Options
Roles, Roles, and Relationships
Redefine/Define
Telecommunications as the Delivery Vehicle
Success Factor Profile
Possible Exam Questions
1. What is the purpose of a business? What
factors contribute to the success of a business?
2. Why are three different perspectives needed to
understand the significance of IS within a
company? What are they?
3. What factors help determine whether a
company should decide to use information
systems to compete?
Chapter 2 Introduction
Business Competitive
Environment
Objective of the Chapter
1. Define competitiveness.
2. Understand the role of the host country relative
to the global competitiveness of companies
based within the country.
3. Understand the necessary role of businesses and
government relative to competitiveness.
4. Points 2 and 3 will dictate an understanding of
the Diamond of National Advantage.


Defining Competitiveness
The degree to which a nation can, under free
and fair market conditions, produce goods and
services that will meet the test of international
markets while simultaneously maintaining or
expanding the real income of its citizens.
Competitiveness: A Link to National Goals
Human
Resources
Capital
Technology
Improved
Domestic
Performance
Improved
Competitiveness
in World Market
Trade Policy
New
Competition
Reduced
Trade
Deficit
Decreased
Budget
Deficit
Stronger
National
Security
More and
Better Jobs
Increased
Standard of
Living
Who Makes This Happen?
Governments cannot legislate success.
Governments provide the infrastructure and/or
the environment for companies to compete.
Fiscal and monetary policy
Education system
Protection of intellectual property rights
Other factors that are prerequisites to compete
within a specific industry.
Governments do not compete, companies do.

How is Competitive Advantage
Gained?
Providing value to the customer.
What is a good strategy for this?
Produce quality products and services
through effective leadership of skilled
employees using advanced methods through
the innovative use of technology.
Boils down to: Work smarter not harder.
The Diamond of National Advantage
Firm Strategy,
Structure and
Rivalry
Related and
Supporting
Industries
Demand
Conditions
Factor
Conditions
Chance
Government
The Diamond of National Advantage
Factor Conditions: The prerequisites to
compete in a specific industry
Transportation
Communications
Logistics
Personnel training as a product of education
system
Etc.

The Diamond of National Advantage
Demand Conditions: The sophistication of the
customers demand.

More sophisticated demands means more difficult
competition which forces the company to
compete more effectively.
The Diamond of National Advantage
Related and Supporting Industries: Home-
based suppliers who are also successful
competitors on the international level.

The Diamond of National Advantage
Firm Strategy, Structure and Rivalry: How
companies are created, structured and managed
and how they compete in the domestic market.

Varies from country to country based on a
number of different factors.


The Diamond of National Advantage
Role of the Government: Serve as an enabler,
challenger and catalyst to companies so that
they can compete successfully.

Role of Companies: Create pressure within
the company for innovation and welcome the
challenge to compete against the best in the
industry.
Chapter 2
Business Competitive
Environment


1. The definition of competitiveness.
2. The role of the nation relative to companies
that compete successfully on a global basis.
3. The role of government within a nation.
4. Things that companies need to emphasize.

While contemplating the idea that information
technology could make a difference.

Position Some Important Factors
Global Economy
Why the emphasis on globalization and
the importance of global competition?
The global market will come to
you, if you dont go to it.
Business Environment
An Essential Roadmap?
Do nations play a significant role that enable
companies and individuals to build wealth in a
knowledge-based global economy?
How significant in creating wealth are breakthrough
technologies in microelectronics, biotechnology, new
materials, telecommunications, robotics, and
computers?
Do these factors explain why relatively new
industries are growing explosively and existing
industries are being transformed?
US Status
In the 1990s the US was the run away leading performer
in the industrial world.
Interest rates are at a forty year low.
Inflation has been a minor issue.
The US claimed nine of the ten largest companies in the
world by 1998 compared to only two in 1990.
Nine of the fifteen most profitable banks are in the US
compared to none in 1990.

The wealthiest man in the world is an American.

American billionaires measure in the hundreds.
US stock markets remain relatively high.
Some Important Questions
Is the US prosperity sustainable?
Is global integration a boon or a threat to this prosperity?
Should global integration be slowed?
What rules should be applied to the creation and protection
of new ideas. (intellectual property rights)

What skills are needed to succeed in this new economy?
Can nations create a social system in which entrepreneurial
spirit can flourish without also creating income and wealth
inequities that threaten the system?
How serious is the competitive threat of the European Union?
Global (International) Trade
The US has truly become a global economy.

1950 - Global trade represented 10% of the US
economy.
2000 - Global trade was nearly 25% of a much bigger
US economy.
The US is not in isolation to the rest of the world!
Foreign Direct Investment
Since 1985 foreign direct investment in the US has
increased five-fold.
Five percent of the total labor force works for
companies that are wholly or partially foreign owned.
Employees of companies that work for companies that
export earn more than those that do not.
Forty percent of productivity improvements are in
exporting companies.
What Countries Own:
Nokia
Burger King
Chrysler
Airbus
Benetton
Gillette
Shell
Finland
UK

Germany

France, Spain, UK, Germany



Italy

US

Netherlands
A Complex Political Environment
Three of five American registered voters approve of free
trade.
Most agree that imports give them a larger selection of
goods to choose from and that foreign competition
forces US companies to be more competitive.
They also feel that imports help lower-income families
afford a higher standard of living by lowering prices.
They have concerns regarding the environment, human
rights, jobs, taxes, societal problems and sovereignty.
Trade Issue Attitudes
Attitudes lie along income, education, age and gender
divides.
Free trade proponents tend to be those that see themselves
benefiting from globalization: men, those that are better
educated, richer and live in cities.
Those who question globalization include women, the
elderly, those who are less well educated or poorer and those
that live in rural areas.
How Trade Works
General Agreement on Tariffs and Trade (GATT)
A loose agreement that had a restricted scope and limited
powers based on an agreement that was originally signed
in the late 1940s.
World Trade Organization (WTO)
Created in 1995, the WTO has the job of administering
trade agreements, resolving trade disputes and conducting
future trade negotiations.
WTO
WTO members must abide by the groups rulings.
The most important of which is to give every
member the same set of low tariffs and other
favorable trade rules.
The most significant recent development was the
admission of China to the WTO in 2000.
Michael Porter Contributions
1985 - Presidential Commission and
Competitiveness Definition

1987 - Competitive Model and Value Chain

1990 - Competitiveness of Nations Study

Present - Institute for Strategy and Competitiveness,
Harvard Business School


Presidential Commission
Letter to President Reagan
Mr. President, it has been a great honor to serve
you and the Nation. The competitive challenge
calls for the leadership only you can provide.
We thank you for your vision, interest and
initiatives in making competitiveness a priority
on our national agenda.
John A. Young
Chairman
Presidents Commission
on Industrial Competitiveness
Competitiveness Definition
The degree to which a nation can, under
free and fair market conditions, produce
goods and services that will meet the test of
international markets while simultaneously
maintaining or expanding the real income
of its citizens.
Source: Presidents Commission
on Industrial Competitiveness
Competitiveness: A Link to National Goals
Human
Resources
Capital
Technology
Improved
Domestic
Performance
More and
Better Jobs
Increased
Standard of
Living
Stronger
National
Security
Decreased
Budget
Deficit
Trade
Policy
New
Competition
Increased
World Market
Competitiveness

Reduced
Trade
Deficit
Figure 2-1
Presidential Commission
Recommendations:

1. Create, apply and protect technology.

2. Spur new industries and revive old ones.

3. Pursue productivity gains through technology.

4. Reduce the cost of capital to American industry. Increase the
supply of capital available for investment, reduce its cost and
improve its ability to flow freely to its most productive uses.





Who is going to make it happen?



1. Government cannot legislate competitive
success.
2. Government should highlight the importance
of competitiveness.
3. Everyone must recognize the competitive
challenge and its significance.
How Does a Company Compete?
If the bottom line to a business is
profit, then the top line is value to
customer.

A Good Possible Strategy?
To produce quality products and
services through effective leadership
of skilled employees using advanced
methods through the innovative use
of technology.



A Good Competitor:


1. Knows its products and services.
2. Knows its customers.
3. Knows its competitors.
Competitiveness of Nations
The striking internationalization of competition
in the decades after World War II was
accompanied by major shifts in the economic
fortunes of nations and their firms.
1. Where did this happen? How did this happen?
3. What can companies and countries do with this
knowledge?

2. What can one learn from this?
Competitiveness of Nations
Why (how) are companies in a
particular nation able to gain a
dominant competitive position in a
specific industry on a global basis
against the worlds best competitors?
Competitiveness of Nations
Helps to anticipate from which country future
competition is likely to come from?

Helps to understand at least in basic terms the
types of companies that will be primary
competitors?

Could help to anticipate what could be their
primary competitive strategies?
The point of all of this:
Organizations Compete


Within Industries
What is the role of the nation?
Nations do not compete!
Porter Companies and Industries
Economists Unit Cost of Labor Adjusted
for Inflation
Politicians Balance of Payment
Companies The Right Strategies to
Compete in Global Markets
Previous Basis of Competitive Analysis

The industry was the basic unit of
analysis.

Industries are organizations that
directly compete with each other.

Some industries are well-defined,
while others are not.


To Understand Competitiveness
The role of the nation has
increased as competition has
shifted more to the creation and
assimilation of knowledge.
A Major Message
Competitiveness of Nations Study
1. Denmark
2. Germany
3. Italy
4. Japan
5. Korea
6. Singapore
7. Sweden
8. Switzerland

9. United Kingdom
10. United States
Copenhagen School of Economics
Deutsche Bank
Ambrosetti Group (transportation company)
MITI, Hitotsubashi University and the Industrial
Bank of Japan
Seoul National University
Economic Development Board
University of Basel, University of St. Gallen, Union
Bank of Switzerland
The Economist
Harvard Business School

Institute of International Business, Stockholm School
of Economics

Competitiveness of Nations Study
1. Denmark
2. Germany
3. Italy
4. Japan
5. Korea
6. Singapore
7. Sweden
8. Switzerland
9. United Kingdom
10. United States
If were to initiate a similar study
today, what country or countries
would you possibly eliminate?
If you were to initiate a similar study
today, what country or countries
would you probably add?
Industry Case Studies
Denmark
Agriculture Machinery
Building Maintenance
Services
Consultancy Engineering
Dairy Products
Food Additives
Furniture
Pharmaceuticals
Specialty Electronics
Telecommunications
Equipment
Waste Treatment
Equipment
Germany
Automobiles
Chemicals
Cutlery
Eyeglass Frames
Harvesting/Threshing
Combines
Optical Instruments
Packaging, Bottling
Equipment
Pens and Pencils
Printing Presses


Rubber, Plastic Working
Machinery
X-ray Equipment

Italy
Ceramic Tiles
Dance Club and Theater
Equipment
Domestic Appliances
Engineering/Construction
Factory Automation
Equipment
Footwear
Packaging and Filling
Equipment
Ski Boots
Wool Fabrics

Japan
Air Conditioning Machinery
Home Audio Equipment
Car Audio Equipment
Carbon Fibers
Continuous Synthetic
Weaves
Facsimile Equipment
Forklift Trucks
Microwave and Satellite
Communications Equip.
Musical Instruments
Optical Elements and
Instruments

Robotics
Semiconductors
Sewing Machines
Shipbuilding
Tires for Trucks and
Buses
Trucks
Typewriters
Videocassette Recorders
Watches

Korea
Apparel
Automobiles
Construction
Footwear
Pianos
Semiconductors
Shipbuilding
Steel
Travel Goods
Video and Audio
Recording Tape
Wigs

Singapore
Airlines
Apparel
Beverages
Ship Repair
Trading
Sweden
Car Carriers
Communication
Products
Environment Control
Equipment
Heavy Trucks
Mining Equipment
Newsprint
Refrigerated Shipping
Rock Drills
Semihard Wood
Flooring
Teller-operated Cash
Dispensers

Switzerland
Banking
Chocolate
Confectionery
Dyestuffs
Fire Protection Equipment
Freight Forwarding
Hearing Aids
Heating Controls
Insurance
Marine Engineers
Paper Product Mfg.
Equipment
Pharmaceuticals
Surveying Equipment


Textile Machinery
Trading
Watches

United States
Advertising
Agricultural Chemicals
Commercial Aircraft
Commercial
Refrigeration and
Air-Conditioning
Computer Software
Construction Equipment
Detergents
Engineering and
Construction
Motion Pictures
Patient Monitoring
Equipment
Syringes
Waste Management
Services

Advertising
Agricultural Chemicals
Commercial Aircraft
Commercial Refrigeration and Air-Conditioning
Computer Software
Construction Equipment
Detergents
Engineering and Construction
Motion Pictures
Patient Monitoring Equipment
Syringes
Waste Management Services

United States

The ways that firms achieve and
sustain competitive advantage in
global industries provide the necessary
foundation for understanding the role
of the home nation in the process.
Firm Strategy,
Structure and
Rivalry
Factor
Conditions
Demand
Conditions
Related and
Supporting
Industries
Diamond of National Advantage
Chance
Government

Natural Resources

Labor Pool

Interest Rates and Currency Value

Economies of Scale
Competitive Success Is Not the Direct Result of:
. . . Traditional Economic Thinking
The nations position in factors of production
that are prerequisites to compete in a specific
industry.
Infrastructure
People Skills and Training
Factors Unique to a Specific Industry
While some factors could be based on natural
resources, a nation usually does not inherit
but creates the most important factors.
Factor Conditions

Physical Resources:
Abundance, quality, accessibility and cost of
land, water, minerals, timber, hydroelectric
power, etc.
Climatic conditions.
Location and geographic size.
Time zone re: global communication.
Possible Factor Conditions

Infrastructure: Type, quality, and user cost.
Transportation
Communication
Mail/freight Delivery
Health Care
Schools
Housing Stock
. . .Quality of life--to live and to work.

Possible Factor Conditions
Capital Resources: (Amount and cost of
money)


Secured Debt
Unsecured Debt
Venture Capital
Savings Rate
Tax Incentives
Fiscal and Monetary Policies
Possible Factor Conditions

Knowledge Resources: Scientific, technical and
market knowledge that pertains to goods and
services.


Universities
Government Research Facilities
Private Research Facilities
Business and Scientific Literature
Market Research Databases
Trade Associations
Possible Factor Conditions
Human, knowledge and capital
factors are mobile.

Other elements of the diamond
are more important to explain
international success.


Factor Condition
Consideration


Competitive advantage from
factor conditions depends on
how effectively and efficiently
they are mobilized and
deployed in the economy.
Therefore
The Japanese created and
expanded needed factors at a
rate far exceeding that of all
other nations.
Study Conclusion
Factor Conditions:
US Semiconductor Industry
Universities to train engineers and other
professional technical employees.
Economical space for manufacturing facilities.
Good transportation facilities.
Good communications system.
Access to raw materials.
Water.


Brazilian Chicken Industry
Second largest chicken producer after the US.
Two large poultry companies: Perdigao and Sadia.
Has factor condition advantages:
A large domestic market that allows an
economy of scale.
A large number of farmers to raise chickens.
Cheap, abundant corn and soya for chicken feed.

The sophistication of customer demand.
The more demanding the local buyers the
better to hone the global competitiveness of
home-based companies.
The local market provides an early picture of
the emergence of buyer needs.
This factor is a major positioner for success.

Demand Conditions

Successful companies need suppliers who are:
1. Home-based.
2. Competitive on an international level.
A close relationship with suppliers contributes
to innovation and upgrading of products.
Prompts a range of interconnected suppliers
that are all internationally competitive.


Related and Supporting
Industries
The way in which companies are
created, managed and choose to
compete domestically.
First Strategy, Structure and
Rivalry
Study Findings:
Company and individual goals vary.
No one management style is universally
appropriate (or common).
Differences in background of CEO and
different company structures.
Company structures are different.
Contrasts in people motivation to work and
learn.
Career choices of the best students varied.

Firm Strategy, Structure and Rivalry
Country Examples
Germany
Italy
Japan
Firm Strategy, Structure and Rivalry
Germany
The preeminent trading nation when considering the entire
postwar period.
The breadth and success of German industries can only be
understood in a historical context--achieved over decades.
Have a very international orientation and export early.
Industry success includes a wide range of industries but
Germany does not dominate them as does the U.S. or Japan.
International success is built on many small and medium
sized companies.
They compete in highly sophisticated products and segments
rather than high-volume ones.

The economy is extensively clustered.
There is wide-spread private ownership.
The structure of companies tends to be hierarchical and
patriarchal.
Managers and workers are well trained in their industries.
Pragmatism characterizes German management.
Discipline and order is evident in the way that companies are
managed.
Owners often have a deep involvement in all aspects of the
business, especially in technical areas.
Managers maintain an enduring relationship with employees.
Companies are particularly adept at complex production
processes.
Selling is technical versus advertising or intangible appeals.
Complex product are supported by similar service requirements.

Achieve high levels of customer loyalty.
Labor is very organized and is represented on company boards.
New business formulation has traditionally been weak but has
changed in the past decade.
Most executives have technical or scientific backgrounds.
Have a stubborn desire to achieve technical and quality
excellence.
Invariably compete on the basis of differentiation versus cost.
Unrelated product diversification is rare.
Companies do not hesitate to invest abroad.
Industry is prestigious and attracts outstanding people.
The unique strength of the German economy is its capacity to
upgrade its advantage by increasing the quality of human and
technical resources.
Germany Share of Total World Exports
Bisquettes of Coal, Coke 70.4%
Potassium Sulfate 59.4%
Reciprocating Pumps 58.1%
High Pressure Steel Conduit 55.4%
Fresh Milk and Cream 54.5%
Rotary Printing Presses 51.1%
Iron, High Carbon Steel Coil 49.8%
Synthetic Luminophores 47.1%
Spinning, Reeling Machines 42.7%
Clothes Dryers 41.3%
Aircraft over 15,000 kg 38.1%

Jukeboxes 36.5%
Polyvinyl Chloride Plates 35.9%
Rubber, Plastics Machines 35.5%
Combine Harvester-Threshers 35.3%
Packaging, Bottling Equip. 34.1%
Sewing Machine Needles 33.2%

Seventeen industries where Germany had 33% or
more of the worlds export market.
German Companies
BASF AG - Chemicals (1861)
Bayer AG - Chemicals (1863)
Bayerische Motoren Werke AG - Autos, Motorcycles (1913)
Bertelsmann AG - Publishing (1835)
Daimler-Benz AG - Autos and Aerospace (1882)
Henkel KGaA - Detergents and Chemicals (1876)
Hoechst AG - Chemicals (1863)
Friedrich Krupp GmbH - Steel, Engineering, Trading (1587)
Mannesmann AG - Steel Tubes, Auto Parts, Etc. (1885)
Robert Bosch GmbH - Electronic Auto Equipment (1886)
Siemens AG - Electrical and Electronics (1847)
Volkswagen AG - Automobiles (1937)

Firm Strategy, Structure and Rivalry
Italy
Joined the ranks of advanced nations in the past two decades.
Overall growth in world export share was second only to
Japan.
Illustrates the power of a growing alignment between national
circumstances and the shifting demands of modern global
competition.
Benefited from a shift from standardized, mass-produced
products toward more customized, higher-style, higher-
quality goods.
In many cases style was combined with investment in state-
of-the-art production equipment.
Achieved advantage based on segmentation, differentiation
and process innovation.
The worlds leading exporter in textile/apparel, household goods
and personal products and third in food and beverages.
Are generally not successful where standardization, high-volume
mass production, or heavy investments in fundamental research
are involved.
Companies tend to be highly specialized and compete through
constant model changes.
Companies tend to be medium to small that compete primarily
through export with limited direct foreign investment.
Large private firms tend to dominate the home market.
Successful industries are highly clustered including geography.
Remains a study in contrasts--industry successes and failures.
Clearly contradicts its image as a country.


Companies are often managed by a commanding leader involved
in all activities.
Below the leader is often fluid, relatively unstructured (chaotic?)
operation involving an interpersonal competition that would be
rare in Japan.
Managers are resourceful improvisers and able to adjust to
changes, to circumvent constraints and to adapt to new rules.
Most companies are privately owned and owners, managers and
workers are closely attached to an industry.
Deal with customers on a family-like and personal basis.
Business is important and a magnet for talented individuals.
Entreprenuership thrives in Italy--they are risk takers who are
individualistic and desire independence.
These factors lead to a long-term orientation and a commitment
to sustained investment.

Italy Share of Total World Exports
Meal and Pellets of Wheat 69.5%
Worked Building Stone 62.2%
Aperitifs 58.1%
Glazed Ceramic Sets 56.6%
Precious Metal Jewelry 49.6%
Fresh Stone Fruit 45.5%
Rubber and Plastic Footwear 41.9%
Fabrics of Combed Wool 41.8%
Domestic Washing Machines 38.2%
Steel High Pressure Conduits 35.9%
Sweaters of Synthetic Fibers 34.0%
Handbags 33.7%
Woolen Sweaters 33.1%
Leather Footwear 32.8%
Fourteen industries with one third of worlds export market.
Italian Companies
Fiat SpA - Autos and Farm Equipment (1899)
Olivetti - computers and office equipment (1908)
IRI Holding Co. (state owned) - 541 companies 5% of GNP
Ente Nazionale Idrocarburi - Petroleum & Petrochemical (1953)
Perelli SpA - Power Transmission, T/C Cables, Tires (1872)
Benetton - clothes manufacturer (1955)
Luxotica - frame manufacturers (NY Stock Exchange)
Gewiss - electrical fittings
Marposs - precision measuring equipment
Safilo - frame manufacturers
Persol - frame manufacturers
Iris - ceramics
Small Businesses in Italy
Exemplify flexibility and thrive in niche markets.
Provide more than 2/3 of private-sector industrial
employment.
Escape many of Italys oppressive labor laws.
Exports increased 20% during a down economy.
99% of Italys small businesses are owned by one or two
families.
To survive Asian competition they concentrate on a higher
level of specialization and devote more time to quality and
innovation versus price.
Many companies were founded following the end of WWII.
(Less than 100 employees)
Firm Strategy, Structure and Rivalry
Japan
Not far behind Germany in becoming a world economic
power.
Lacked Germanys historical position.
Achieved competitive advantage in some industries and failed
in others.
The role of the government and management practices does
not explain the success of Japanese industries.
Has an extraordinarily high share of world exports in many
industries with a complete absence of a natural resource
intensive industry.
There is a unique ability in Japan for the diamond to
function as a system.
Possesses a large pool of literate, educated and increasingly
skilled human resources.
Created and upgraded needed factors that far exceeded that of all
other nations.
Benefit from a large pool of trained engineers.
A technical orientation is pervasive and many managers have
engineering backgrounds.
Japanese companies are hierarchical and disciplined.
Cooperation and subordination are the norm with a unique
ability to coordinate across functions.
Relationships between labor and management are respectful and
strikes are rare.
Many of the talented people flow to industry.
An international outlook promoted by the amount of domestic
rivalry is the single biggest explanation for the success of
Japanese industries.
Japanese companies often define their goals in terms of volume
and market share.
Strategies often follow a path of standardization and mass
production with a major emphasis on quality.
Companies relentlessly upgrade their competitive advantage.
Ownership of companies is predominantly held in institutions
and other companies.
Workers define their status on how well the company is doing.
Continual learning is emphasized and accepted.
Have become more willing to form new companies.

Japan Share of World Exports
Motorcycles 82.0%
TV Image and Sound Recorders 80.7%
Dictating Machines 71.7%
Calculating Machines 69.7%
Mounted Optical Elements 67.5%
Photo & Thermocopy Apparatus 65.9%
Still Cameras and Flash Equip. 62.2%
Cash Registers and Accounting
Machines 62.0%
Outboard Marine Piston Engines 61.0%
Electric Gramophones 59.0%




Microphones, Loudspeakers and Amplifiers 55.7%
Motorcycle Parts & Accessories 53.4%
Track-Laying Tractors 51.8%
Pianos & Musical Instruments 51.0%
Self-Propelled Dozers 50.6%
Color TV Receivers 49.5%
Portable Radio Receivers 48.4%
Other Radio Receivers 47.9%
Special-Purpose Vessels 46.8%
Electric Typewriters 45.0%
Steam Boiler Plants & Parts 42.8%
Motor Vehicle Radio Receivers 42.5%
TV Picture Tubes 42.2%

Prepared Sound Recording Equipment. 41.5%
Photo Chemical Products 41.5%
Metalworking Lathes 39.7%
Coarse Ceramic Housewares 39.3%
New Bus or Truck Tires 39.1%
Buses 38.7%
Sewing Machines 38.7%
Iron, Steel Seamless Tubes 38.7%
Self-Propelled Shovels, Excavators 38.4%
Computer Peripheral Units 37.9%
Lorries and Trucks 37.5%
Other Electronic Tubes 36.5%

Metal Cutting Machine Tools 36.5%
Generating Sets with Piston Engine 36.1%
Other Cargo Vessels 35.7%
Iron, Simple Steel Rolled Plate 35.2%
Continuous Synthetic Weaves 34.7%
Clocks, Watch Movements 33.8%
Rolling Mill Parts and Rolls 33.4%
Liquid Dieletic Transformers 33.4%

Forty-three industries with over one third of the
worlds export market share.
Japanese Companies
Honda Motor - Autos and Motorcycles
Sony Crop. - Consumer Electronics
Bridgestone Corp. - Tires
Matsushita Electric - Consumer Electronics
Toyota Motor Corp. - Automobiles
Nissan Motor Corp. - Automobiles
Nomura Securities - Brokerage
Hitachi - Computers and Electronics
NEC - Computers and Electronics
Fujitsu - Computers and Electronics
Mitsui Group - Trading and Holding Co.
Sumitomo Group - Trading and Holding Co.
Mitshubishi Group - Trading and Holding Co.
Study Postscript
1. The second largest economy in the world.
2. Arrogance based on what they had accomplished
including an assumption that the only way their economic
endeavors would go is up.
3. A rigidity in approach that takes too long in a fast paced,
global economy.
What happened to Japan since 1990?
Forget the North Pole!
Santas Workshop is in China
Ironic
What makes Christmas festive for Americans is produced
in the worlds officially atheistic country.
What this picture provides is a lesson in globalization and
an example of how trade and tradition have brought
together China and the US in a mutually beneficial
relationship.
Country Examples
Germany
Italy
Japan
Firm Strategy, Structure and Rivalry
Germany
The preeminent trading nation when considering the entire
postwar period.
Have a very international orientation and export early.
International success is built on many small and medium
sized companies.
They compete in highly sophisticated products and segments
rather than high-volume ones.
The breadth and success of German industries can only be
understood in a historical context--achieved over decades.
Industry success includes a wide range of industries but
Germany does not dominate them as does the U.S. or Japan.


The economy is extensively clustered.
There is wide-spread private ownership.
The structure of companies tends to be hierarchical and
patriarchal.
Managers and workers are well trained in their industries.
Pragmatism characterizes German management.
Discipline and order is evident in the way that companies are
managed.
Owners often have a deep involvement in all aspects of the
business, especially in technical areas.
Managers maintain an enduring relationship with employees.
Companies are particularly adept at complex production
processes.
Selling is technical versus advertising or intangible appeals.
Complex product are supported by similar service requirements.

Achieve high levels of customer loyalty.
Labor is very organized and is represented on company boards.
New business formulation has traditionally been weak but has
changed in the past decade.
Most executives have technical or scientific backgrounds.
Have a stubborn desire to achieve technical and quality
excellence.
Invariably compete on the basis of differentiation versus cost.
Unrelated diversification is rare.
Do not hesitate to invest abroad.
Industry is prestigious and attracts outstanding people.
The unique strength of the German economy is its capacity to
upgrade its advantage by increasing the quality of human and
technical resources.
Germany Share of Total World Exports
Bisquettes of Coal, Coke 70.4%
Potassium Sulfate 59.4%
Reciprocating Pumps 58.1%
High Pressure Steel Conduit 55.4%
Fresh Milk and Cream 54.5%
Rotary Printing Presses 51.1%
Iron, High Carbon Steel Coil 49.8%
Synthetic Luminophores 47.1%
Spinning, Reeling Machines 42.7%
Clothes Dryers 41.3%
Aircraft over 15,000 kg 38.1%

Jukeboxes 36.5%
Polyvinyl Chloride Plates 35.9%
Rubber, Plastics Machines 35.5%
Combine Harvester-Threshers 35.3%
Packaging, Bottling Equip. 34.1%
Sewing Machine Needles 33.2%

Seventeen industries where Germany has 33% or
more of the worlds export market.
German Companies
BASF AG - Chemicals (1861)
Bayer AG - Chemicals (1863)
Bayerische Motoren Werke AG - Autos, Motorcycles (1913)
Bertelsmann AG - Publishing (1835)
Daimler-Benz AG - Autos and Aerospace (1882)
Henkel KGaA - Detergents and Chemicals (1876)
Hoechst AG - Chemicals (1863)
Friedrich Krupp GmbH - Steel, Engineering, Trading (1587)
Mannesmann AG - Steel Tubes, Auto Parts, Etc. (1885)
Robert Bosch GmbH - Electronic Auto Equipment (1886)
Siemens AG - Electrical and Electronics (1847)
Volkswagen AG - Automobiles (1937)

Firm Strategy, Structure and Rivalry
Italy
Joined the ranks of advanced nations in the past two decades.
Overall growth in world export share was second only to
Japan.
Illustrates the power of a growing alignment between national
circumstances and the shifting demands of modern global
competition.
Benefited from a shift from standardized, mass-produced
products toward more customized, higher-style, higher-
quality goods.
In many cases style was combined with investment in state-
of-the-art production equipment.
Achieved advantage based on segmentation, differentiation
and process innovation.
The worlds leading exporter in textile/apparel, household goods
and personal products and third in food and beverages.
Are generally not successful where standardization, high-volume
mass production, or heavy investments in fundamental research
are involved.
Companies tend to be highly specialized and compete through
constant model changes.
Companies tend to be medium to small that compete primarily
through export with limited direct foreign investment.
Large private firms tend to dominate the home market.
Successful industries are highly clustered including geography.
Remains a study in contrasts--industry successes and failures.
Clearly contradicts its image as a country.


Companies are often managed by a commanding leader
involved
in all activities.
Below the leader is often fluid, relatively unstructured
(chaotic?)
operation involving an interpersonal competition that would be
rare in Japan.
Managers are resourceful improvisers and able to adjust to
changes, to circumvent constraints and to adapt to new rules.
Most companies are privately owned and owners, managers and
workers are closely attached to an industry.
Deal with customers on a family-like and personal basis.
Business is important and a magnet for talented individuals.
Entreprenuership thrives in Italy--they are risk takers who are
individualistic and desire independence.
These factors lead to a long-term orientation and a commitment
to sustained investment.

Italy Share of Total World Exports
Meal and Pellets of Wheat 69.5%
Worked Building Stone 62.2%
Aperitifs 58.1%
Glazed Ceramic Sets 56.6%
Precious Metal Jewelry 49.6%
Fresh Stone Fruit 45.5%
Rubber and Plastic Footwear 41.9%
Fabrics of Combed Wool 41.8%
Domestic Washing Machines 38.2%
Steel High Pressure Conduits 35.9%
Sweaters of Synthetic Fibers 34.0%
Handbags 33.7%
Woolen Sweaters 33.1%
Leather Footwear 32.8%
Fourteen industries with one third of worlds export market.
Italian Companies
Fiat SpA - Autos and Farm Equipment (1899)
Olivetti - computers and office equipment (1908)
IRI Holding Co. (state owned) - 541 companies 5% of GNP
Ente Nazionale Idrocarburi - Petroleum & Petrochemical (1953)
Perelli SpA - Power Transmission, T/C Cables, Tires (1872)
Benetton - clothes manufacturer (1955)
Luxotica - frame manufacturers (NY Stock Exchange)
Gewiss - electrical fittings
Marposs - precision measuring equipment
Safilo - frame manufacturers
Persol - frame manufacturers
Iris - ceramics
Small Businesses in Italy
Exemplify flexibility and thrive in niche markets.
Provide more than 2/3 of private-sector industrial
employment.
Escape many of Italys oppressive labor laws.
Exports increased 20% during a down economy.
99% of Italys small businesses are owned by one or two
families.
To survive Asian competition they concentrate on a higher
level of specialization and devote more time to quality and
innovation versus price.
Many companies were founded following the end of WWII.
(Less than 100 employees)
Firm Strategy, Structure and Rivalry
Japan
Not far behind Germany in becoming a world economic
power.
Lacked Germanys historical position.
Achieved competitive advantage in some industries and failed
in others.
The role of the government and management practices does
not explain the success of Japanese industries.
Has an extraordinarily high share of world exports in many
industries with a complete absence of a natural resource
intensive industry.
There is a unique ability in Japan for the diamond to
function as a system.
Possesses a large pool of literate, educated and increasingly
skilled human resources.
Created and upgraded needed factors that far exceeded that of all
other nations.
Benefit from a large pool of trained engineers.
A technical orientation is pervasive and many managers have
engineering backgrounds.
Japanese companies are hierarchical and disciplined.
Cooperation and subordination are the norm with a unique
ability to coordinate across functions.
Relationships between labor and management are respectful and
strikes are rare.
Many of the talented people flow to industry.
An international outlook promoted by the amount of domestic
rivalry is the single biggest explanation for the success of
Japanese industries.
Japanese companies often define their goals in terms of volume
and market share.
Strategies often follow a path of standardization and mass
production with a major emphasis on quality.
Companies relentlessly upgrade their competitive advantage.
Ownership of companies is predominantly held in institutions
and other companies.
Workers define their status on how well the company is doing.
Continual learning is emphasized and accepted.
More willing to form new companies.

Japan Share of World Exports
Motorcycles 82.0%
TV Image and Sound Recorders 80.7%
Dictating Machines 71.7%
Calculating Machines 69.7%
Mounted Optical Elements 67.5%
Photo & Thermocopy Apparatus 65.9%
Still Cameras and Flash Equip. 62.2%
Cash Registers and Accounting
Machines 62.0%
Outboard Marine Piston Engines 61.0%
Electric Gramophones 59.0%




Microphones, Loudspeakers and Amplifiers 55.7%
Motorcycle Parts & Accessories 53.4%
Track-Laying Tractors 51.8%
Pianos & Musical Instruments 51.0%
Self-Propelled Dozers 50.6%
Color TV Receivers 49.5%
Portable Radio Receivers 48.4%
Other Radio Receivers 47.9%
Special-Purpose Vessels 46.8%
Electric Typewriters 45.0%
Steam Boiler Plants & Parts 42.8%
Motor Vehicle Radio Receivers 42.5%
TV Picture Tubes 42.2%

Prepared Sound Recording Equipment. 41.5%
Photo Chemical Products 41.5%
Metalworking Lathes 39.7%
Coarse Ceramic Housewares 39.3%
New Bus or Truck Tires 39.1%
Buses 38.7%
Sewing Machines 38.7%
Iron, Steel Seamless Tubes 38.7%
Self-Propelled Shovels, Excavators 38.4%
Computer Peripheral Units 37.9%
Lorries and Trucks 37.5%
Other Electronic Tubes 36.5%

Metal Cutting Machine Tools 36.5%
Generating Sets with Piston Engine 36.1%
Other Cargo Vessels 35.7%
Iron, Simple Steel Rolled Plate 35.2%
Continuous Synthetic Weaves 34.7%
Clocks, Watch Movements 33.8%
Rolling Mill Parts and Rolls 33.4%
Liquid Dieletic Transformers 33.4%

Forty-three industries with over one third of the
worlds export market share.
Japanese Companies
Honda Motor - Autos and Motorcycles
Sony Crop. - Consumer Electronics
Bridgestone Corp. - Tires
Matsushita Electric - Consumer Electronics
Toyota Motor Corp. - Automobiles
Nissan Motor Corp. - Automobiles
Nomura Securities - Brokerage
Hitachi - Computers and Electronics
NEC - Computers and Electronics
Fujitsu - Computers and Electronics
Mitsui Group - Trading and Holding Co.
Sumitomo Group - Trading and Holding Co.
Mitshubishi Group - Trading and Holding Co.
Study Postscript
1. The second largest economy in the world.
2. Arrogance based on what they had accomplished
including an assumption that the only way their economic
endeavors go is up.
3. A rigidity in approach that takes too long in a fast paced,
global economy.
What happened to Japan since 1990?
Forget the North Pole!
Santas Workshop is in China
Ironic
What makes Christmas festive for Americans is produced
in the worlds officially atheistic country whose human
rights abuses are deplored by officials of the US
government.
What this picture provides is a lesson in globalization and
an example of how trade and tradition have brought
together China and the US in a mutually beneficial
relationship.
Minimal Inflation in the US?
Because of China!
Imports from China
Based on the first eight months of 2001
Artificial Christmas Trees - $78 million
Christmas Tree Ornaments - $535 million
Christmas Lights - $211 million
Stuffed Toys - $755 million
Dolls - $639 million
Electric Trains - $32 million
Puzzles - $21 million
If not available, over half of this type of merchandise in
US stores would disappear.
U.S. Merchandise Trade with China: 1988-2001
Year U.S. Exports U.S. Imports U.S. Trade Balance
1988 5.0 8.5 -3.5
1989 5.8 12.0 -6.2
1990 4.8 15.2 -10.4
1991 6.3 19.0 -12.7
1992 7.5 25.7 -18.2
1993 8.8 31.5 -22.8
1994 9.3 38.8 -29.5
1995 11.7 45.6 -33.8
1996 12.0 51.5 -39.5
1997 12.8 62.6 -49.7
1998 14.3 71.2 -56.9
1999 13.1 81.8 -68.7
2000 15.0 100.0 -83.8
2001 22.0 102.2 -83.1






It is getting worse!
2002 -120 billion

2003 40 170 -130 billion
US exports to the rest of the world went down 10% while
Chinas increased 66%.
Unlike Japan in the past, China has not closed its borders to
US imports.
It is the fastest growing export market for US companies.
Meanwhile a number of unfair trade accusations are being
thrown around.
China Trade Barriers
China remains a difficult market to penetrate, due largely to
Chinese government policies, which attempt to protect and
promote domestic industries.

Goods and services not considered to be high priority, or
which compete directly with domestic Chinese firms, often
face an extensive array of tariff and non-tariff barriers.

China Trade Barriers
Tariffs
Quotas
Non-Tariff Regulations
Distribution rights
Investment restrictions
It is helpful to ask what companies
need to do and where does government
need to play a key role?
Competitiveness of Nations

Serve as a challenger and catalyst to companies to
compete successfully:

Focus on specialized factor creation.
Avoid intervening in capital factor and currency markets.
Enforce strict product, safety and environmental
standards.
Limit cooperation among industry rivals.
Promote goals that lead to sustained investment.
Deregulate competitors.
Enforce domestic antitrust policies.
Reject managed trade.
Role of Government
Singapore
An economic powerhouse.
Three million people on a small island.
Passed the US in average income in 1999.
Worlds best infrastructure!?
Safe, clean (smoggy).
Interesting racial, religious and language mix.
Could go from great to awesome.
Singapore Model
Strong Government (The smartest and most
capable should govern)
Long Term Planning
Foreign Investment
Clean Administration
Education for All
No Welfarism
Family Values
Law and Order
Communal Harmony
Kenya
From whiskey to cooking fat to batteries to clothes,
Kenya is being swamped with counterfeit goods.
Some are made locally but most are imported.
Kenya
Focus on the negative impact of counterfeit goods
in usually on wealthy nations where products are
most often designed and developed.
The effects can be even more devastating in poor
and developing countries where profits of any kind
are harder to come by, smuggling is more easily
accomplished and enforcement is weak or non-
existent.
Kenya
Kenyan manufacturers are estimated to be
losing hundreds of millions of dollars in
revenue.
This also costs the government $16 million in
annual taxes.
Eveready Batteries
Employs 350 people in Kenya.
40% of Eveready batteries sold in Kenya are
counterfeit.
If this continues, the company will terminate its
operation in Kenya.
Kenya
80% of counterfeit goods are estimated to come
from China.
The business community blames much of their
troubles on high costs, such as power and water,
and government corruption.
The government run port of Mombasa is notorious
for bribery and kick-backs.
Kenya
If the business opportunity exists, would you
want to do business in Kenya?
Companies gain an advantage
against competitors by responding
to pressures and challenges.
The Company Agenda
1. Creating pressure within the company for innovation.

2. Seeking out the best, most successful competitors

3. View as a positive factor the presence of domestic
competition.

4. Staying alert to customer, market and competitor trends.

5. Emphasizing the home base as the place to strengthen
competitiveness.

6. Selectively pursuing international advantage opportunities.

7. As a company, playing a role in strengthening the national
competitive diamond.




:



Todays competitive realities demand leadership.

Leaders believe in change.

They energize their people to innovate
continuously.

They recognize the need for pressure and
challenges to accomplish this.
Conclusions
Kenichi Ohmae: The Borderless World
The key global economic entity
is the true multinational company.
Not Everyone Agrees
Ohmae Contentions
Four factors are usurping economic power
once held by nations:

1. Capital.
2. Corporations.
3. Consumers.
4. Communication.



Although political leaders will resist
acknowledging the demise of the nation-
state, only those who can accept it and
promote region-states within and across
their borders will be able to provide the
best quality of life for their constituents.
Kenichi Ohmae
Putting Global Logic First
Global Competitiveness Ranking
Criteria for the Growth Competitive Index:
1. Quality of national business environment.
2. The set of institutions, market structures and economic
policies supportive of high level of prosperity.
3. Company operations and strategy ranking.
4. Ability to sustain economic growth.
5. Prevalence of corruption and other irregular practices.

Michael Porter, Institute for Strategy and Competitiveness, Harvard
Business School
World Economic Forum web page.
Global Competitiveness Ranking
2002
1. US (2)
2. Finland (1)
3. UK (7)
4. Germany (4)
5. Switzerland (5)
6. Sweden (6)
7. Netherlands (3)
8. Denmark (8)
9. Singapore (10)
10. Canada (11)
11. Japan (15)
12. Austria (13)
13. Belgium (14)
14. Australia (9)
15. France (12)
16. Taiwan (21)
17. Iceland (16)
18. Israel (17)
19. Hong Kong (18)
20. Ireland (22)

21. Norway (19)
22. New Zealand (20)
23. Korea (26)
24. Italy (24)
25. Spain (23)
26. Malaysia (37)
27. Slovenia (32)
28. Hungary (27)
29. South Africa (25)
30. Estonia (28)
Global Competitiveness Ranking
33. Brazil (30)
37. India (36)
38. China (47)
48. Poland (42)
55. Mexico (52)
61. Philippines (53)
58. Russia (58)
60. Vietnam (62)
79. Bolivia (75)
80. Haiti
2004 Ranking
Country 2004 rank 2004 score 2003 rank
Finland 1 5.95 1
United States 2 5.82 2
Sweden 3 5.72 3
Taiwan 4 5.69 5
Denmark 5 5.66 4
Norway 6 5.56 9
Singapore 7 5.56 6
Switzerland 8 5.49 7
Japan 9 5.48 11
Iceland 10 5.44 8
United Kingdom 11 5.30 15
Netherlands 12 5.30 12
Germany 13 5.28 13
Australia 14 5.25 10
Canada 15 5.23 16
New Zealand 18 5.18 14
France 27 4.92 26
Korea 29 4.90 18
China 46 4.29 44
Italy 47 4.27 41
Mexico 48 4.17 47
India 55 4.07 56
Brazil 57 4.05 54
Poland 60 3.98 45
Indonesia 69 3.72 72
Russian Federation 70 3.68 70
Philippines 76 3.51 66
Vietnam 77 3.47 60
Kenya 78 3.45 83
Chad 104 2.50 101

Country 2004 rank 2004 score 2003 rank
1998 Rankings
1. Singapore 2.16
2. Hong Kong 1.91
3. US 1.41
4. UK 1.29
5. Canada 1.27
6. Taiwan 1.19
7. Netherlands 1.13
8. Switzerland 1.10
9. Norway 1.09
10. Luxembourg 1.05
11. Ireland 1.05
12. Japan .97
13. New Zealand .84
14. Australia .79
15. Finland .70
16. Denmark .61
17. Malaysia .59
18. Chile .57
19. Korea .39
20. Austria .37
Source: World Economic Forum
Major Points
It is no longer possible for a country to insulate itself from the
rest of the world.
The possible decline of the industrialized world is merely the
narrowing of the gap between it and third world countries.
The accelerated pace of change is what disturbs the
pessimists, because they can see it happening.
It took Britain 60 years to double its output, the US 50 years
but developing countries are doubling output every 12 years.
China has actually doubled its GDP in seven years.
In many respects the developing world is unknown economic
and financial territory.
Conclusions
The diamond of national advantage makes sense as a
means of understanding global economic success.
Domestic success does prepare companies to compete
globally.
Major European and an increasing number of Asian
countries are capable of competing on a global basis.
The global marketplace is only going to get tougher
based on more, tougher competitors.
The diamond can help to anticipate new competitors.