The Rupp Report: Who Is Competitive?
Jürg Rupp, Executive Editor
Competition is on everybody’s mind, and everybody must be competitive. But what is competition? And what does it mean to be competitive? And who needs competitiveness to survive? Moreover, what are the ingredients of competitiveness? And who is authorized to make a firm statement about all this?
World Competitiveness Yearbook
An institution that is certainly qualified to make a valid judgment about competitiveness is the International Institute for Management Development (IMD) in Switzerland. The institute describes itself so: “The IMD World Competitiveness Center is a part of IMD, a top-ranked business school. We are the experts in developing global leaders through high-impact executive education. Why IMD? We are 100 percent focused on real-world executive development. We offer Swiss excellence with a global perspective. And we have a flexible, customized and effective approach.”
First published in 1989, the World Competitiveness Yearbook is an annual report on the competitiveness of nations. The yearbook ranks 60 world economies based on an “x-ray" of 338 criteria. Two-thirds of the data is based on national and international statistics. But how is IMD getting the results?
The World Competitiveness Yearbook reports on how nations are able to create and maintain an environment that fosters competitiveness among businesses. As IMD explains: “We assume that wealth creation takes place primarily at enterprise level ... [T]his field of research is called ‘competitiveness of enterprises.’”
An important part of the survey is to understand that “enterprises operate in a national environment, which enhances or hinders their ability to compete domestically or internationally — this field of research is called: ‘competitiveness of nations’ and is covered in our research. The methodology divides the national environment into four main factors:
- Economic Performance
- Government Efficiency
- Business Efficiency
These factors are broken down into sub-factors, taking into consideration the 338 criteria. As IMD reports, “Criteria can be hard data, which analyzes competitiveness as it can be measured (e.g. GDP) or soft data, which analyzes competitiveness as it can be perceived (e.g. Availability of competent managers). Hard criteria represent a weight of 2/3 in the overall ranking, whereas the survey data represent a weight of 1/3.”
IMD mentions that “some criteria are for background information only,” and adds, “Finally, aggregating the results of the 20 sub-factors makes the total consolidation, which leads to the overall ranking of the World Competitiveness Yearbook.”
… And The Winners Are …
Arturo Bris, Ph.D., director of the IMD World Competitiveness Center, commented on the results as follows: “The overall competitiveness story for 2014 is one of continued success in the US, partial recovery in Europe, and struggles for some large emerging markets. There is no single recipe for a country to climb the competitiveness rankings, and much depends on the local context.”
The United States is again in the number-one place, followed by Switzerland, again number-two. The number-one spot in 2014 for the U.S. is “reflecting the resilience of its economy, better employment numbers, and its dominance in technology and infrastructure,” IMD says. Singapore rose from fifth place to third, while Hong Kong dropped from third place to fourth. The 10 top countries are:
|Country||Rank 2014||Rank 2013|
As one can see, there are no big changes among the top ten. “Small economies such as Switzerland (2), Singapore (3) and Hong Kong (4) continue to prosper thanks to exports, business efficiency and innovation,” IMD mentions. “Europe fares better than last year, thanks to its gradual economic recovery. Among Europe's peripheral economies, Ireland (15), Spain (39) and Portugal (43) all rise, while Italy (46) and Greece (57) fall.
“Japan (21) continues to climb in the rankings, helped by a weaker currency that has improved its competitiveness abroad. In Asia, both Malaysia (12) and Indonesia (37) make gains, while Thailand (29) falls amid political uncertainty.
“Most big emerging markets slide in the rankings as economic growth and foreign investment slow and infrastructure remains inadequate. China (23) falls, partly owing to concerns about its business environment, while India (44) and Brazil (54) suffer from inefficient labor markets and ineffective business management. Turkey (40), Mexico (41), the Philippines (42) and Peru (50) also fall.”
The Image: A Matter Of Perception
Another interesting part of the survey is perception. “Seven of the top 10 countries in the overall ranking for 2014 are also in the top 10 for having an image abroad that encourages business development,” IMD states. “In general there is a strong correlation between a country's overall competitiveness ranking and its international image as a place to do business.” For example, “executives in Singapore are most bullish on their country's overseas image, while Ireland, Chile, Qatar and South Korea are all far higher on this criterion than in the overall ranking.
“By contrast, executives in the US, France, Taiwan and Poland are far gloomier about their countries' international images. The US results may reflect international conflicts and domestic political gridlock, while perceptions of France continue to be colored by slow reforms and the country's negative attitudes toward globalization.”
Communication: A Key To Success
This motto could — and probably should — be the start and the reason for many textile machinery producers to think about their policy of communicating to the outside world. To that point, Bris made an interesting comment: “While economic performance changes from year to year, perceptions are longer-term and shift more gradually. They can also lead to a virtuous circle of better image and better economic performance. So how executives feel their country is being perceived is a potentially useful guide to future competitiveness developments there.” Period.
June 3, 2014