International competitiveness

From CEOpedia | Management online

International competitiveness - is the ability of companies to manufacture and sell products and services that can be better in terms of quality or cheaper than those offered by foreign companies. According to Donatella Depperu, International competitiveness can be defined as a firm's capability to achieve higher performance than its competitors in foreign markets and preserve the conditions that sustain its higher performance also in the future"[1]. A company is considered competitive when it can increase its profits, market share and also maintain its profits over time. To reduce competitive strength, a company must increase its market share. This can be done by lowering prices and incurring losses. The whole economy can be considered competitive if it can grow faster than other countries and is doing particularly well[2].

The competitiveness of the company and the competitiveness of the country

When competing with different companies, you can always specify winners and losers. Therefore, this competition is usually oligopolistic. It is different when countries compete. One country's success on the international stage does not mean that it is at the expense of other countries. Higher exports also mean higher imports. Due to the fact that countries produce different products, they compete with each other in some dishes and not in others[3].

Indicators of international competitiveness

These indicators are very often used during macroeconomic analysis of countries. They are influenced by many factors. These are qualitative factors and factors that are not easy to classify. Beneficial effects on trade results and the country's competitiveness can be[4]:

High performance rates can also increase competitiveness. They are very sought after. These types of factors may exist but do not have to take into account structural sales growth based on results. The basic criteria that should be met by competitiveness measures are[5]:

  • covering all sectors exposed to competition
  • cover all markets open to competition
  • be built from data that is comparable internationally

OECD's is constantly developing relative competitiveness indicators. It does so based on unit labor costs in production, consumption indices and unit labor costs in production. Most often they are published in the main economic indicators. The OECD also develops indicators for effective exchange rates in the form of charts. In connection with the launch of the OECD global model, other measures of the competitiveness of imports and exports were also calculated. All these Mira come from a common analytical framework[6].

Examples of International competitiveness

  • Developing a strong brand presence: Companies that have a strong brand presence in the international market are usually more competitive than those without. For instance, Apple has established itself as a leader in the tech industry due to its innovative products and marketing strategies, making it one of the most successful and competitive companies in the world.
  • Innovative products: Companies that consistently come up with new and innovative products that meet the needs of their customers are more likely to be competitive. For example, Tesla has developed a range of electric cars that are both stylish and energy-efficient, which has made them a leader in the electric car market.
  • Adopting new technologies: Companies that incorporate the use of new technologies into their production processes are more likely to be competitive. For example, Amazon has taken advantage of automation and AI to streamline their inventory management, resulting in faster delivery times and lower costs.
  • Cost-efficient operations: Companies that are able to keep their costs low while still providing quality products and services are more likely to be competitive. For example, Walmart has been able to keep its prices low by using efficient supply chain management and negotiating better terms with suppliers.

Advantages of International competitiveness

International competitiveness has many advantages that can contribute to a company's growth and success. These advantages include:

  • Increased sales: Companies that are competitive in the international market can often benefit from increased sales due to better access to foreign markets. This can lead to more revenue and higher profits.
  • Cost savings: Companies that are competitive in the international market can often save money on costs related to production, shipping and marketing. This can lead to lower overhead costs and increased savings.
  • Improved reputation: Companies that are competitive in the international market can often benefit from an improved reputation. This can lead to more customers, better relationships with suppliers, and greater access to business opportunities.
  • Better brand recognition: Companies that are competitive in the international market can often benefit from better brand recognition. This can lead to higher demand for the company's products and services, as well as an improved overall market presence.

Limitations of International competitiveness

  • Exchange Rate Risk: Exchange rate risk refers to the risk that companies face when dealing with foreign currencies. Changes in exchange rates can cause fluctuations in profits, which can lead to decreased international competitiveness.
  • Political Risk: Political risk refers to the risk of changes in government policies and regulations that can lead to disruptions in international trade. This includes the potential for changes in trade tariffs, currency exchange regulations, and other restrictions that can make it difficult for companies to compete in global markets.
  • Difficulty to Adapt: Companies may find it difficult to adapt to cultural and economic differences in foreign markets. This can lead to increased costs and decreased efficiency, which can reduce international competitiveness.
  • Cost of Entry: The cost of entering a foreign market can be high, making it difficult for companies to compete. This includes the cost of setting up operations in a foreign country, as well as the cost of complying with local regulations and laws.
  • Language Barriers: Language barriers can make it difficult for companies to communicate and do business with foreign customers. This can lead to misunderstandings and delays, which can reduce international competitiveness.
  • Protectionism: Protectionism refers to the practice of governments protecting domestic industries from foreign competition. This can make it difficult for companies to compete in foreign markets, leading to decreased international competitiveness.

Other approaches related to International competitiveness

One of the approaches related to International competitiveness is diversification of production and product portfolio. This approach consists of diversifying the production in order to obtain a wide range of products, both in terms of quality and price, to meet the different needs of foreign markets.

  • Improving business processes - this approach consists of improving the efficiency of business processes to reduce costs and increase productivity.
  • Investing in R&D - investing in research and development helps companies gain a competitive advantage by developing new products or improving existing ones.
  • Developing a strong brand - creating a strong brand is essential in order to stand out from competitors and attract customers.
  • Establishing strategic partnerships - this approach consists of forming strategic partnerships with other companies in order to gain access to new markets and resources.
  • Utilizing digital technologies - digital technologies such as artificial intelligence, big data and cloud computing can help companies increase efficiency and gain a competitive advantage.

In conclusion, International competitiveness is the ability of companies to manufacture and sell products and services that can be better in terms of quality or cheaper than those offered by foreign companies. Other approaches related to International competitiveness include diversification of production and product portfolio, improving business processes, investing in R&D, developing a strong brand, establishing strategic partnerships, and utilizing digital technologies.


International competitiveness — recommended articles
Importance of international business — Barriers to exit — Bargaining power of suppliers — Competitive environment — Competitive rivalry — Types of innovation — Monopoly — Importance of international marketing — Export incentives

References

Footnotes

  1. ↑ Depperu D.(2005)
  2. ↑ Haque I. U.(1995)
  3. ↑ Haque I. U.(1995)
  4. ↑ Durand M.(1987)
  5. ↑ Durand M.(1987)
  6. ↑ Durand M.(1987)

Author: Agnieszka Kurbiel

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