GCSA QUESTION NO. 2
Q.2 What are the various frameworks available for assessing competitiveness? Discuss these frameworks given by world economic forum and Michael Porter.
Ans: The 10-P framework for globalization symbolizes the aspirations and needs of employees and organizations in the new competitive settings. It comes a long way from the initial impetus provided to the subject by Michael Porter in his book Competitive Strategy (1980), and goes beyond his purely industrial organization perspective. The 10-P framework explores a fine ‘fit’ between the soft and hard strategic choices. It seeks a self-motivated network of stakeholders who are able to self actualize a high sense of satisfaction, self-worth, liberty and freedom in business organizational settings.
True to the vision of a world-class organization, the central fulcrum in the framework is a people- orientation – both inside and outside the corporation. This approach presents a humane perspective to issues at hand and differentiates between a ‘satisfying’ approach and an ‘excellent’ approach. It realizes and reflects that modern economies and corporations thrive mainly on innovation in all respects of value-augmentation-creative thinking at the design stage, ensuring production at highest efficiency and minimum costs, and satisfying the customer in a most effective manner.
The rest of the 9-Ps are levered in a highly interactive mode with People and amongst themselves. A change in any of the Ps affects performance of the other levers and therefore the final outcome for the organization. The 9-Ps is: Purpose, Perspective, Positioning, Plans (and policies), Partnerships, Products, Productivity, Politics, and Performance (and profits).
Organization is people: An organization is created by the people; it exists for the people, and continuously draws sanction from the people. From this humane perspective, the primary objective of an organization can only be to add value to the society by serving it with value-augmented products.
The people-focus implies that the primary purpose of an organization can never be to provide employment at the expense of customers or society in general – a drill routinely exercised in Third World countries, and especially in India by many public sector and government organizations during the height of regulated economic regimentation. Similarly, retrenchment of people (hire and fire) cannot be accepted as a non-holds-barred practice for maximizing organizational profits! Retrenchment is a myopic and non-creative response to the problem of cutting costs and improving productivity.
Organizational purpose as used in strategy-making sense is interchangeable with mission, vision, core competence, strategic intent, and basic values. It is important not merely to produce and sell products, but to produce and sell quality products, without fail. Not only from the production side, but also from the distribution side, we must constantly review whether our customers are satisfied with our products and whether customers are satisfied with our service. Organizational purpose must be explicitly stated. An organization must enjoy social sanction by serving socially useful purpose. Purposeless organizations are liable to drift and become marginal in the course of time. A sense of purpose is important for other organizational reasons, including facilitating inter- personal processes and formalization of relationships (the other characteristic of an organization). Globalization connotes dynamic human will for achieving larger social and human purposes.
Strategic management begins with a statement of clear perspective. Top-management perspective is not a bunch of hunches. Organizational perspective must be well-researched. In facing global competitive challenges, it is important that the firm possesses a global perspective, even though it might be competing and managing locally.
Failure to develop an in-depth perspective results in missed opportunities. Polemical debates arise from lack of appreciation of multiple perspectives. Some of the techniques for improving the perspective horizon and thereby quality of decisions is: scenario-building, process consultation, in-house training programmes, job rotation, and cross- functional teams.
An important dimension in achieving world-class competitiveness relates to the positioning of the firm. This dimension has high interface with organizational purpose, planning and perspective, resulting in definitional confusion. Positioning of the firm is distinct from positioning of products in marketing. The term has remained mostly confined to abstract strategic management literature despite its obvious criticality to practice. An important dimension in strategy is to understand ‘where am I’, ‘why am I here’, ‘where do I want to be’, and ‘how do I reach there’. In other words, the strategic manager has to ascertain the existing position and future positioning of the firm.
Positioning means the place in the industry which the firm would like to occupy in relation to its competitors from the perspective of the consumers. Does the firm compete on lowest-cost mass- production, high-technology basis? Does it differentiate itself from others on the basis of superior and value-augmented products, or on high-ethic practices, employee policies, etc. which are unique in the industry?
An important technique for ascertaining positioning choices is by mapping the strategic groups in the industry. In this technique, clusters of competitors are identified based on their key strategic choices with regard to broad but critical dimensions of the industry structure.
The partnership approach suggests a sense of belief and trust in other person’s capabilities and skills. It opens the doors for people to look beyond the usual routine responses, and create an environment where people voluntarily come up with innovative solutions for seemingly intractable problems. Partnership is a ‘perspective’ as well as a ‘position’. Partnership has softer (intangible) and harder (tangible) dimensions.
For world-class performance, thus, an interactive, mutually reinforcing, and politically strong relationship between government, industry, and firms is necessary. To implement this strategy, a fresh perspective of treating each stakeholder as a partner has to be developed at all levels. The diverse groups are held together by shared values. The partnership approach precludes any superior-subordinate relationship. This is true at both the levels: employee-employee, and firm- firm. Government, industry, and firms are partners on one plane.
Global competitiveness is largely an expression of firm’s relative productive efficiency. A country’s prosperity is indicated by the amount of value-added goods that are produced/made available for consumption. Labour productivity is generally the accepted measure of value- addition with the assumption that the same individual would have different capacities in different technological environments and organizational contexts. A key managerial decision that vitally affects the firm’s overall productivity pertains to capital intensity of the project in terms of investments in land, building and machinery. This decision also affects leverage position of firms.
A product is a package of information which the customer interprets in his mind while going through the process of consumption. Therefore, the concept of any product must start with the customer in mind, and end with his total satisfaction. In this definition all products are ultimately service converted into information. Beyond quality, products must offer customers a satisfaction level where they become the best salesmen for the company forever.
- Plans (and Policies):
The thrust of the 10-P framework is to integrate people’s personal growth and development with organizational objectives through excellent all-round quality. The premise is that the tasks are executed with finesse by satisfied and motivated people. To ensure that people remain aligned with the common sense of purpose and do not drift, the organization must have clear, documented statements of objectives and broad plans. A firm’s plan’ must contain a clear mission statement on the way it proposes to serve the customer.
The first task for the firms is to break open the rigidity of the work culture system which, over time has acquired characteristic air-tight compartmentalization of jobs. In pursuing globalization, functional distinctions evaporate. The firm has to acquire an integrated outlook in its business operations. Strategic manufacturing advantages such as high quality products, costs, productivity, and technology absorption become important and enduring competitive resources. Development of these resources calls for long-term investments in highly skilled and motivated multi-functional personnel backed up by committed professionals.
Organizational politics is a reality; it provides dynamism to individuals, groups and total organization. The orthodox organizational behaviour school holds that politics is an attempt to bypass the official channels or to influence outcomes for personal gains (impliedly, at the cost of organizational efficiency). Hence, this school holds that, politics being a negative power-bearing agent should be discouraged. This cannot be true in a larger perspective. Political behaviour, in the positive sense of the word, is a highly democratic and peaceful form of conflict resolution process especially useful in high-uncertainty environments.
Improving performance outcomes is the core of all strategic management theories. Achievement of goals and objectives is the basis of all strategic planning. It is important to realize that different stakeholders will possess different measures of performance.
In one respect performance is the dependent variable whose outcome rests on the interface of all the rest of 9 P’s. But, performance in business settings is never an isolated outcome. It gets affected and in turn affects all other variables.
World class companies organize themselves and perform in a manner that accumulation of wealth is an automatic consequence of policies and plans. For world class performance, an organization has to be clear about its strategic objectives. Some important yardsticks with which performance can be objectively measured are:
- Market share
- Time taken to develop and introduce new products
- Technological competitiveness
- Employee motivation and skills
- Throughput value addition
All the ten Ps are not only dynamic, inter-related, but also overlapping. The task of the strategic manager is to strike a fit between the various soft and hard components appropriate to the organizational values and need of the times.
World economic forum has been studying the concept of competitiveness defined as the set of institutions, policies, and factors that determine the level of productivity of a country, in an effort to understand and measure the drivers of economic prosperity. The goal of this work is to provide diagnostic tools that indicate the areas of strength upon which economies can build as well as the challenges that must be overcome in order to increase national competitiveness. Over the years the forum has adapted and updated its approach as the research and thinking on the topic has evolved. Integrating the latest concepts into the forum’s work has ensured that it remains highly relevant in the ever-changing global economic context. The concept of sustainability, along with a sense of urgency about its achievement, has recently captured the attention of policymakers, business leaders, and the public at large. Sustainable development can be broadly: defined as development that satisfies the needs of the present without compromising the ability of future generations to meet their own needs. A commonly used convention stipulates that being sustainable requires the ability to meet society’s economic, social, and environmental needs. World economic forum has developed global competitiveness index and sustainable competitiveness index for assessing competitiveness of the country.