Innovative report on national competitiveness released: Two rankings with low cost and differentiation strategy

(Table 1) National Competitiveness Ranking Based on Low Cost Strategy

(Table 2) National Competitiveness Ranking Based on Differentiation Strategy

The results of the IPS National Competitiveness Report were released on October 28, 2021. This report was conducted by three Swiss organizations: IPS (Insti

EUNPYEONG-GU, SEOUL, KOREA, November 4, 2021 / — The results of the IPS National Competitiveness Report were released on October 28, 2021. This report was conducted by three Swiss organizations: IPS (Institute for Industrial Policy Studies) Switzerland, a research institute in Geneva, UNITAR (UN Institute for Training and Research) in Geneva, and Taylor Institute at Franklin University Switzerland in Lugano.

– Three Models in National Competitiveness Studies

Currently, there are three institutions that announce their results on national competitiveness in Switzerland every year. IMD (The International Institute for Management Development) and WEF (The World Economic Forum) show only one ranking, while IPS Switzerland has two rankings based on cost leadership and differentiation strategies.IMD is a Swiss business school that categorizes national competitiveness as a good business environment of a country for global companies to invest in. In the IMD 2021 report, Malaysia, which has a good investment environment, ranked 25th out of 64 countries, a position higher than Japan’s 31st. On the other hand, WEF is a Swiss non-profit corporation which measures national competitiveness as the productivity of industries owned by individual countries. In the WEF 2019 report which is the most recent report for national rankings so far, Japan, which has high productivity, was ranked 6th out of 141 survey countries, much higher than Malaysia’s 27th.The IPS report presents a different approach. Unlike IMD and WEF, which evaluate only the resource conditions of each country without considering its national strategy, IPS divides the strategic options into two nationwide strategies: low cost and differentiation. This can offer markedly different outcomes. The U.S. ranks only 13th if it uses a low-cost strategy, but rises to 8th with a differentiation strategy. By contrast, China ranks 4th if it uses a low-cost strategy, yet falls to 15th if it uses a differentiation strategy. The reason for such a difference is that the differentiation strategy is suitable for countries that can produce high-quality products while the low-cost strategy is suitable for countries with abundant resources.

Four types of countries are identified in this presentation. Type 1, such as Australia and Canada, has both abundant resources and high-quality production capacity. They are high in both low-cost and differentiation rankings. Type 2, such as France and Korea, is a high-quality production country. They are poorly ranked with low cost strategy, but move up high with differentiation. Type 3, such as Saudi Arabia and Russia, relies on abundant resources. They are high in the low-cost ranking, but low in the differentiation ranking. Type 4, such as Kenya and Oman, does not have either abundant resources or high-quality production capacity. They are low in both rankings.◇ The IPS Methodology and Its Strategic Implications to Switzerland

To determine national competitiveness, IPS ranking uses Dong-sung Cho’s “9-Factor Model” which consists of four physical factors, four human factors, and opportunity conditions. The physical factors consist of production conditions, management conditions, related industries, and demand conditions, and the human factors. consist of workers, politicians and administrators, entrepreneurs, and professionals. By analyzing the elements, governments of the 62 countries can develop specific national strategies to enhance their respective rankings.

For example, Switzerland falls to 12th place when it uses a low-cost strategy, but rises to 4th place when it adopts a differentiation strategy. Such a dramatic change can be explained by the fact that Switzerland is already an advanced economy that can produce high-quality products. But Switzerland has a chance for further improvement in national competitiveness.

Looking at Switzerland's physical factors in the model, demand conditions (3rd), related industries (3rd), and business context (6th) are at the top, and factor conditions (39th) are at the intermediate level. Among the human factors, policymakers and administrators (3rd), entrepreneurs (8th) and professionals (4th) remain at the top, and workers (41st) remain at the bottom.

It would appear to be natural for Switzerland to improve the factors which are ranked low, such as factor conditions and workers. But such an effort would only enhance Swiss ranking with a low-cost strategy, which may not be an ideal strategy. IPS model suggests Switzerland to improve demand conditions among the physical factors, and professionals among the human factors. IPS model further suggests such subfactors as the market size and quality to improve demand conditions, and personal competence and social context to improve professionals.

Vice President Christoph A. von Arb of Franklin University Switzerland emphasized in particular the effective strategy of enhancing national competitiveness through university research. He stated “Swiss universities are known for their excellence in fundamental research including public/private partnership projects. However, when focusing on “Science to Market” efforts, the rankings were pretty low… strategy matters.”

Professor Emeritus Hwy-chang Moon of Seoul National University, the leading researcher for the IPS project which uses his co-authored “Double Diamond Model” for global context, explained that Switzerland must undertake two approaches to preserve its high ranking with a differentiation strategy. Firstly, Switzerland needs to enable top-class entrepreneurs and professionals to work efficiently. Secondly, it needs to connect the nation’s portfolio of related industries and global market for sustainable development.”

– Future Directions of IPS Research

Carlo Giardinetti, Dean of Franklin University Switzerland and Co-Director of the Taylor Institute, joins the IPS project as co-researcher. He mentioned that the national competitiveness conference reports the most important issues in each year and this year’s report included the Covid-19 and the US-China relations. Mr. Jonas Haertle, UNITAR’s Chief of Office of the Executive Director, also joins the IPS project as co-researcher. He stated “We will include Environment, Society, and Governance (ESG) in the 2022 report. Eventually, we may cover the 17 issues of Sustainable Development Goals (SDG) in subsequent reports.”

World Scientific Publishing will soon publish this IPS Report 2021 as a book entitled, “The Competitiveness of Nations, First Volume: Navigating the US-China Trade War and the COVID-19 Global Pandemic.”

Yong-Ju Choi

Source: EIN Presswire