When a businessman was asked what the term «competitiveness» meant, his reply was simple but accurate: it's the difference between being in or out of the market. In the past, a large array of regulations and economies with much more state intervention meant that not very competitive firms could survive, even with brilliant results. This is no longer possible in market economies that are increasingly more open to international competition and the effort to remain competitive is undoubtedly the main thing that keeps business managers awake at night.
How can a firm manage to keep ahead of the competition? To start with, by optimizing costs, investment and production processes, as well as having suitable financing and human resource policies. But that's not enough. Nowadays, innovation is increasingly vital, both via research and development to generate new goods and services as well as by promoting new management or business focuses. Apple or Google would now be the paradigms of innovative firms and bear out the fact that, to remain at the top, you have no choice but to lead in terms of innovation, so as not to be devoured by your rivals.
But you don't have to be one of the technological elite to be the best in terms of competitiveness. Export capacity is perhaps the most visible sign of a company's competitive strength. And it's not easy. In the United States, scarcely 4% of its five and a half million firms are capable of exporting, while in Germany this figure rises to 12% and in Spain it's around 6%. These are delicate comparisons as the figures are affected by an economy's size and openness. However, exporting firms differ in that they are larger than average, are more capital-intensive, have higher productivity and pay better wages. These characteristics can also be found in firms that are perhaps less oriented towards foreign markets or in service companies, but whose competitiveness still stands out.
Can we extend this idea of corporate competitiveness to countries? Nobel prizewinner Paul Krugman believes we can't, and that the growing obsession of advanced countries with international competitiveness is misguided because a country can't evaluate itself based simply on its global market share and because, if it does, this can lead to flawed or even dangerous policies. But in practice the preoccupation with international competitiveness is more than present on finance ministers' agendas. Moreover, analyses regularly appear on the competitive capacity of economies, such as those produced by the World Economic Forum, the Institute for Management Development and the European Commission, which grab the headlines and are a kind of assessment of government management.
However, these rankings go way beyond the recording of a country's exports and global market share, analyzing a whole range of elements that underpin a nation's competitive capacity: the quality of its institutions, health, education, macroeconomic stability, capacity to innovate, the quality of its infrastructures and the efficiency of its financial sector, etc. Ultimately, if a country gets good marks in the chosen parameters, then a breeding ground is very likely to have formed within this country that encourages the emergence of firms of excellence that, whether or not they export, will boost the income, wealth and prosperity of everyone.
