prices set in the marketplace. The marketplace establishes an economic framework within which firms compete on the basis of a number of factors: price, quality, delivery, after-sales service etc. Competitiveness is a measure of the ability to succeed in this context. This article presents several different approaches to mcasuring competitiveness, and analyzes many of the factors influencing its enhancement.
TJlE CONCEPT OF COMPETITJWNESS
The World Competitiveness Report, prepared by the Geneva-based World Economic Forum and the International Management Development Institutc in Lausanne, defines competitiveness as "...the ability to design, produce and market goods and services, the price and non-price characteristics of which form a more attractive package than those of c~mpetitors."~
Until relatively recently competitiveness could be viewed primarily from a domestic perspective, since the majority of firms competed only in a domestic marketplace. Manufactured goods tended to be large and bulky, making it difficult t o conduct significant international trade. Of course, considerable international commerce did takc placc, but it was primarily in commodities - agricultural products and natural resources.
This is no longer the case. The nature of production and distribution in the world economy has changed dramatically in the past 50 years or so. The advent of technologies (such as microelectronics) and thc introduction of new materials (such as plastics) resulted in the miniaturization of many goods, Icading to the development of manufactured products that arc much more casily DAVID BARROWS AND JOHN A. COTSOMITIS
transported. It is now possible - and indeed, common to ship significant quantities of automobiles from Japan to North America, an undertaking that would have been unthinkable even 30 years ago. With technological breakthroughs in communications and transportation, therc has also been a significant increase in the exchange of tradeable services in a wide variety of fields, including construction, engineering, architecture, legal and accounting services and tourism.
As a result of the significant increase in international trade of manufactured goods and services, many economists and business strategists have concluded that competitiveness must now be defined in a broader, international, context. Competitors are no longer within the same community or nation state. Firms must think of competition as truly global in terms of both gaining export markets and defending against competitors in domestic markets. Goals of Competitiveness
From a broader societal perspective, it is not useful to view global competitiveness as an end in itself. Rather, an internationally competitive economy is a means to an end - the requirement for enhanced social well-being. Wealth creation is necessary in order to fund social services and produce a high and rising standard of living. It also appears to be a necessity for society to ultimately achieve its higher-order goals, including personal freedom, security and a better quality of life. Therefore, competitiveness must be viewed in a broader societal context that goes beyond materialism.
Competitiveness Through Productivity Enhancement
Some definitions of competitiveness are based upon driving down costs to the lowest common denominator by hollowing out corporations, outsourcing jobs, shifting operations to lower-cost locales and reducing the wages, benefits and social entitlements of workers. A more appropriate definition of competitiveness, however, involves increased productive capacity achieved by innovation, superior technology, continuous skill-enhancing training and a concern with social equity and environmental preservation. The latter approach can better lead to the creation of a value-increasing society.