Competitiveness

Definition

Competitiveness refers to the ability of a country, region, or industry to produce goods and services that meet the test of international markets while maintaining or expanding the real incomes of its citizens. This concept emphasizes not just price, but also the quality and innovation of products, and how well resources are utilized. Strong competitiveness is often linked to effective industrial policies that foster growth and development.

5 Must Know Facts For Your Next Test

1. Competitiveness is crucial for economic development as it allows countries to attract foreign investment, create jobs, and improve living standards.
2. Factors affecting competitiveness include infrastructure, education, technological innovation, and the regulatory environment.
3. Governments can enhance competitiveness through industrial policies that support key industries, promote research and development, and improve workforce skills.
4. High competitiveness is often associated with higher productivity levels, leading to increased output and efficiency in both public and private sectors.
5. Competitiveness can vary significantly across different sectors; some industries may thrive in a global market while others may struggle due to various challenges.

Review Questions

• How does competitiveness relate to a country's ability to innovate and adapt in the global market?
  • Competitiveness is closely tied to a country's capacity for innovation and adaptability. When a nation fosters an environment that encourages research and development, it enables businesses to create better products and improve processes. This innovative spirit can lead to higher quality goods at competitive prices, allowing the country to effectively compete in global markets. Ultimately, a nation’s competitiveness hinges on its ability to continuously evolve and respond to changing market demands.
• Evaluate the role of government policies in enhancing national competitiveness and provide examples.
  • Government policies play a significant role in enhancing national competitiveness by creating favorable conditions for businesses. For example, investment in infrastructure such as transportation and communication can reduce costs for companies, while education policies can ensure a skilled workforce. Additionally, tax incentives for research and development encourage firms to innovate. Countries like South Korea have successfully implemented such policies, leading to rapid economic growth and improved global standing.
• Synthesize the impact of global competition on local industries' competitiveness in developing countries.
  • Global competition poses both challenges and opportunities for local industries in developing countries. On one hand, it pressures these industries to improve efficiency, innovate, and upgrade their products to survive against international competitors. On the other hand, exposure to global markets can lead to increased investment and technology transfer, fostering growth. However, without supportive industrial policies or infrastructure improvements, many local industries may struggle to compete effectively, highlighting the need for strategic governmental intervention.

Related terms

Comparative Advantage: The economic principle that a country should specialize in the production of goods and services that it can produce more efficiently than others.

Innovation: The process of translating an idea or invention into a good or service that creates value or for which customers will pay.

Economic Growth: An increase in the production of economic goods and services, compared from one period of time to another, often measured by GDP.