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Running a magazine concentrating on issues of small and medium enterprises and managing with limited resources is a like living life on the edge. In this rush of meeting deadlines,...

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Focus

The Missing Pieces: What is Competitiveness ?

Jagat Shah
Apr 2011

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Over this past year I have had the pleasure of meeting hundreds of Indian business people. Over the past decade I have been fortunate to meet thousands of business people around the world. Many of the businesses I have met have been successful, some wildly so, but many of them eventually fail. This is the cold reality of capitalism.

There are businesses that thrive in uncertain economic times and depressed macroeconomic conditions, while other businesses routinely fail in the most structurally sound economies. Pundits often wonder how this can be the case.

This is so because competitiveness is not about the macro-economy; and competitiveness is not about interest rates, inflation, or foreign exchange. Although a sound national platform is certainly helpful to the companies within it, nations do not compete: firms compete. The differences between the successes and failures fall into three categories.

First, there are the lucky ones. A few “dot-commers”, the people who invented the spinning toothbrush, and the man that found an oil well in his backyard are all happy examples. Far be it from me to scoff at luck. I do, however, advice against it as a long-term strategy.

The second way to make a fortune is through market distortion. This technique is not limited to De Beers and OPEC, or even to Microsoft and Cable & Wireless. This is also the technique that powerful Groups employ in Mexico, coffee producers employ in Brazil and several so called “Indian corporate” used to employ in the not so recent past.

Historically, market distortion has not just been for the globally powerful, but for anyone who competes by seeking special treatment from their government, or who seeks to control a majority share of a scarce resource in an economy. Historically, many successful companies in small developing economies have gotten that way through market distortion. What OPEC once accomplished internationally, many countries' biggest banana, sugar, or coffee producers accomplished within their own nations.

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1 Comments >>

Julie Desai

13 Apr 2011 (02:29:14)

Great Read. Interesting analysis of the our economy.

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