In business administration , competitiveness means that companies can sell their goods or services at a profit on the national or international markets that are relevant to them. Price factors as well as development , location , research , service and quality play a role here.
In macroeconomics, international competitiveness is the aggregation of the competitiveness of domestic companies. As an economic policy buzzword , it refers to the ranking of entire economies, mainly with regard to the economic, geographical and institutional framework conditions that favor companies.
In business administration
On the concept of competition
When competition is the rivalry of market participants to resources , customers, paragraphs , market share , etc. By the individual provider customers the best and most affordable terms offered, creates competition, whether it be price, quality, service or design competition. Internal self-propulsion and / or external competitive pressure lead to constant development and realization of competitive advantages over the competition, i.e. to competitiveness.
A company is considered to be price-competitive if it can sell its products or articles on markets at prices that cover the costs incurred and generate an appropriate return on the capital employed in the income statement. Price competitiveness is particularly important in those markets in which standardized goods are traded. Because of their regularly high number of items, trading companies can promote their price competitiveness primarily through differentiated trading margins ( mixed calculation ).
Non-price parameters such as quality, service, design and reliability of delivery are essential for the sale of the products or articles. They are all the more important, the greater the possibilities for variation in product manufacture and design. The level of awareness also plays a major role. That is why marketing and trade marketing occupy an important position in today's age and are also an important means in non-price competition.
From a microeconomic point of view
When we talk about microeconomics , we generally refer to the study of competitiveness at company level. Companies are considered to be competitive if they can generate long-term profits on the national and / or international markets and at the same time can assert themselves against other companies in the same market sector. Today's markets often have a lot of competitive pressure, so companies have to measure themselves against various sizes, be it design, prices, level of awareness, location, etc. These are common means of measuring competitiveness. A company that cannot assert itself in the market and does not have a specific position is endangering its very existence. Competition in a market-based economy decides on existence or decline.
The trade , namely the retail trade , knows numerous competitive characteristics. The typical double involvement of each trading company in interformal and intraformal competition (Schenk) means that competitiveness, especially through competing companies of another type of company or company type, can have a stronger influence on competitiveness than competing companies of the same type of company. Also, for each company of a trading group, for the individual branches of a branch company and for the individual member companies of a composite group of trade in the various sites very different degrees of competitiveness be connected.
From a meso-economic perspective
Membership in association groups has not only strengthened the competitiveness of small and medium-sized enterprises, but in many cases made it possible for them to survive in price and performance competition. The trade associations bring with them several competitive impulses: intra-group competition, inter-group competition, horizontal and vertical competition stimulation, and ultimately stimulation of competition on both a microeconomic and macroeconomic level.
International competitiveness in macroeconomics
Whether it makes sense to look at competitiveness at the macroeconomic level is controversial. There are essentially three very different views on this: one sees international competitiveness as an insubstantial catchphrase, another sees the consideration of export opportunities as meaningful content, and a third sees meaningful content when considering national framework conditions.
International competitiveness as an insubstantial catchphrase
According to this view, only companies, not economies, can compete. An economy cannot disappear from the world market, go bankrupt or lose its full marketability. Adjustment mechanisms regulate the competitiveness of entire economies, as each country has a certain comparative advantage . Trade is therefore not a zero-sum game in which one country wins and another loses, but leads to higher productivity and thus higher prosperity in all countries involved . According to this view, the image of economies that are in competition with one another is dangerous because it can encourage politicians to take protectionist measures and thus to eliminate the advantages of world trade.
Some economists do not fully agree with this point of view. It is true that every country that allows international trade must inevitably have a comparative cost advantage in some area and thus be and remain part of the international division of labor. Nevertheless, economies of scale can mean that more advantageous international specializations are gained or lost. Examples are:
- In the Meiji period , Japan had an educational tariff policy in which a single branch of industry was protected until it became internationally competitive. Then the educational tariff was lifted and another branch of industry was protected until it became internationally competitive. As a result, Japan had been able to create a substantial industrial base with the shrinking of the other economic sectors and thus achieved comparative cost advantages in a sector that expected high productivity growth and thus high wage increases.
- The exploitation of natural gas deposits led to the Dutch disease in the Netherlands in the 1970s , as current account surpluses led to an appreciation of the currency. As a result, imports became cheaper and exports more expensive, so that the industrial sector shrank. The shrinking of the industrial sector was offset by the growth of the raw materials sector. The natural gas reserves were finally exhausted, so that the raw materials sector then had to shrink. Theoretically, the shrinkage of the raw materials sector should lead to a devaluation of the currency and the regaining of comparative cost advantages in the industrial sector. Politicians and some economists such as Paul Krugman fear, however, that an automatic regaining of market share is the less likely the longer the shrinking of the industrial sector has persisted (partly due to the negative economies of scale of a shrunk industrial sector). The short-term happiness of the exploitation of natural resources can lead to a permanent loss of market share and a reduction in the average wage that can be achieved.
- If a country pursues a more contractionary monetary policy than the other countries, this leads to an appreciation of the currency and to a loss of price competitiveness (increase in exports, cheaper imports). After h. M. in economics, the commodity-producing sector should fall just as sharply as the rest of the economy due to the contractionary monetary policy. After the end of the contractive monetary policy, the trading goods-producing sector will also recover on its own. A large minority of economists, on the other hand, warned that in the event of a longer-term shrinkage of the trading goods-producing sector, a negative economies of scale would emerge, which would continue to have an effect even after the end of the contractionary monetary policy and would result in full recovery of international market shares prevented. This was e.g. B. observed in the first term of the former British Prime Minister Margaret Thatcher .
Consideration of export opportunities
This view is based on the "ability to sell", ie the ability to sell products in international competition (see also export world champions ). The view suggests that a company's opportunity to sell goods abroad also depends on macroeconomic factors.
A country's price competitiveness is mainly influenced by two factors:
- the exchange rate (a popular beggar-thy-neighbor policy is therefore the competitive devaluation of one's own currency) and
- the amount of wage and price increases relative to productivity growth ( unit labor costs )
Problem: In contrast to the theory of the Heckscher-Ohlin theorem , in reality a country is already involved in the international exchange of goods. The prices of goods have already adjusted themselves through arbitrage processes in a world market equilibrium. The assumption speaks for an appropriateness of the goods prices. Declining price competitiveness can only be inferred from indicators, such as the change in the world market share of sectors measured against an imaginary potential, or the Revealed Comparative Advantage index. Against this method, however, one can argue that in a dynamic economic process it is normal for individual sectors to shrink and others to expand.
Exchange rate developments
A devaluation of the nominal exchange rate of a currency leads to a relative cheaper export and a relative increase in the price of imports. An appreciation of the nominal exchange rate has the opposite effect. A devaluation thus leads to an increase in price competitiveness, an appreciation to a reduction in price competitiveness.
The Bundesbank Act of 1957 gave the Deutsche Bundesbank price level stability as the most important goal, however, participation in the Bretton Woods system from 1949 to 1973 meant that the Deutsche Bundesbank often had to buy foreign currency to support the fixed exchange rates , which led to an undervaluation of the DM led. The chronic undervaluation of the D-Mark up until 1973 made a major contribution to the rise of the German automotive industry. After the end of the Bretton Woods system, there was a strong tendency towards appreciation of the DM from 1973 and thus a deterioration in price competitiveness. The German manufacturers responded by increasing quality, but growth slowed. Overall, it can be said that the revaluation or devaluation of the DM with a time lag of around one year led to a decrease or increase in German exports.
In the system of fixed exchange rates , a policy of wage restraint leads to an increase in price competitiveness and to current account surpluses. It is the same in the case of a monetary union , e.g. B. the euro. Chronic current account surpluses can be interpreted as location strength or location weakness (see current account # current account surplus ). Chronic current account deficits can trigger a severe economic crisis via the money supply price mechanism .
In the system of flexible exchange rates , wage restraint only leads to an improvement in international price competitiveness in the long term if a current account deficit is compensated . However , if wage restraint leads to a current account surplus through the improvement of international price competitiveness , the domestic currency appreciates ( exchange rate mechanism ), exports become more expensive and consequently price competitiveness falls again. The attempt to generate current account surpluses through wage restraint (higher price competitiveness) is countered by exchange rate revaluations (falling price competitiveness) (provided that a revaluation is not prevented by state foreign exchange market interventions). After the end of the Bretton Woods system in the early 1970s, a regime of flexible exchange rates was introduced worldwide. It showed that the cost advantages of the wage development in Germany, which was below average by international comparison, had been consumed by the appreciation of the DM exchange rate.
According to Wolfgang Oest, a policy of wage restraint should be justified with internal economic arguments and not with external economic arguments. Gerhard Rübel sees an advantage insofar as the citizens benefit from the appreciation of the currency due to correspondingly falling import prices, despite the nominal wage not rising. Peter Bofinger argues that the German wage restraint between 1999 and 2007 meant that real wages even fell slightly after adjusting for inflation. This in turn meant that domestic demand only rose by 0.6% per year. A growth dynamic came only from exports and there only because other countries did not pursue the same strategy; wage restraint in other countries would have stagnated domestic demand there too, which would have made German exports much more difficult.
Consideration of national framework conditions
According to this view, international competitiveness is the ability to achieve a high national income and a high standard of living. In particular, productivity growth and gross domestic product are used as indicators.
- Local site conditions: the quality of the infrastructure and the productivity of the employees (training and technology standard, wage level, diligence, precision, intuition)
- Demand conditions on the home market: the high price and quality demands of local customers force the industry to be innovative and of high quality
- the quality of the value chain: competitive supplier industry and the proximity to related branches of industry, which leads to an exchange of qualified employees, patents and materials
- Corporate management and competition: quality of management style and organizational structure, strong competition already on the home market
According to the model, the state can improve competitiveness by optimizing infrastructure, education and by promoting innovation and competition.
There are various attempts to determine international competitiveness by weighting different composite indicators:
- Global Competitiveness Report , ranking of the economies with the "highest growth opportunities", compiled by the WEF
- World Competitiveness Yearbook , worldwide ranking of the “most competitive economies”, compiled by the Swiss International Institute for Management Development (IMD) .
Keyword in economic policy
The catchphrase of competitiveness has appeared in economic policy for years. In March 2000, the Lisbon European Council put it on the agenda when, within the framework of the so-called Lisbon Strategy, it called for the European Union to be the most competitive and dynamic knowledge economy in the world. Each member state was asked to implement targeted policies for this purpose. In Luxembourg, for example, the Tripartite decided at the beginning of 2003 to set up an Observatoire de la Compétitivité to monitor the related tasks .
The term “competitiveness” obviously comes from business administration, where it clearly relates to the internal and external relationships of a company . In particular, it means in this area the ability of a company to increase its market share in a competitive environment. This meaning of the term cannot be applied to national economies and, as an unquestioned slogan, can even lead to a wrong picture of international economic relations and, if implemented in politics, can lead to great damage. When used in economic policy, the term can therefore only be redefined with great care.
The Luxembourg government, for example, started from the following definition: The competitiveness of an economy is its ability to generate income in the long term, as well as a high level of employment and social cohesion , in international competition.
In this area, the well-known benchmarking studies such as the World Competitiveness Yearbook from the Institute for Management Development (IMD) , Lausanne or the Global Competitiveness Report from the World Economic Forum (WEF) provide signs of international competitiveness . Their results often appear to be very disparate; For example, Luxembourg ranks 9th out of 60 countries examined in the IMD and 21st out of 102 places in the WEF.
In the crisis of the world economy , the competitiveness of the entire EU is coming back into focus. Since the countries of the euro zone represent a single currency area, no single member country has the chance to pursue an independent currency policy and monetary policy . If this loss of sovereignty and loss of control is not counteracted, this can result in competitive disadvantages for all members of the EU.
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