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  • 1CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    New Zealand Competitiveness:The Next Agenda

    Professor Michael E. PorterHarvard Business School

    Catching the Knowledge WaveAuckland, New Zealand

    August 3th, 2001

    This presentation draws on ideas from Professor Porters articles and books, in particular, The Competitive Advantage of Nations (The Free Press,1990), The Microeconomic Foundations of Economic Development, in The Global Competitiveness Report 1998, (World Economic Forum,1998), Clusters and the New Competitive Agenda for Companies and Governments in On Competition (Harvard Business School Press, 1998)and ongoing statistical study of clusters, Competing for Prosperity: The Microeconomic Foundations of Development, forthcoming, and What isStrategy? (Harvard Business Review, Nov/Dec 1996). No part of this publication may be reproduced, stored in a retrieval system, or transmittedin any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter.

  • 2CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    -3

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    1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

    New Zealands Macroeconomic PerformanceReal GDP Growth, year-by-year

    Source: EIU

    Real GDPgrowth rate in

    %

    Visit Visit

  • 3CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    New Zealand 2001

    There is a strong sense in New Zealand today that the nation isnot advancing

    Some believe that the country is moving backwards

  • 4CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    -3%

    -2%

    -1%

    0%

    1%

    2%

    3%

    Labor ProductivityCapital ProductivityTotal Factor Productivity

    New Zealand Productivity Growth(Index 1972 = 100)

    Source: IMF (quoted from Diewert-Lawrance, 1999)

    Pre-reformPeriod

    1973 - 1984

    Post Macro-reform Period1985 - 1991

    Post CompetitiveAdvantage of NZ

    1991 - 1998

  • 5CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    -1%

    0%

    1%

    2%

    3%

    4%

    5%

    6%

    1995 1996 1997 1998 1999 2000 (March)

    Source: IMF

    Change inReal GDP /

    Hours worked

    New Zealand Labor Productivity Growth, 1995 -2000

  • 6CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    -15%

    -10%

    -5%

    0%

    5%

    10%

    15%

    1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

    MalaysiaTaiwanSingaporeIndonesiaHong KongS KoreaThailandAustraliaNEW ZEALAND

    Source: EIU

    Real GDPgrowth rate

    Comparative Real Growth RatesSelected Asian Countries

  • 7CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    Auckland Health SoftwareAuckland Health Software

    Active New Zealand Cluster Development Initiatives

    Wellington Film and TV Software Creative Content Seismic Engineering Natural Hazards

    Wellington Film and TV Software Creative Content Seismic Engineering Natural Hazards

    Waitakere Marine Wine Tourism Film

    Waitakere Marine Wine Tourism Film

    Manukau Distribution Tourism Arts and Culture

    Manukau Distribution Tourism Arts and Culture

    Taranaki Engineering Horticulture

    Taranaki Engineering Horticulture

    Rotorua Wellness, Spa, Health Forestry Engineering

    Rotorua Wellness, Spa, Health Forestry Engineering

    Nelson Arts/Crafts Seafood

    Nelson Arts/Crafts Seafood

    Dunedin Engineering Marine Multi-media Biotech Education Film

    Dunedin Engineering Marine Multi-media Biotech Education Film

    Hawkes Bay Forestry, wood

    processing and furniture Hi Tech Engineering Food Processing Wine Retirement

    Hawkes Bay Forestry, wood

    processing and furniture Hi Tech Engineering Food Processing Wine Retirement

    Northland Oysters Tourism Forestry

    Northland Oysters Tourism Forestry

    Invercargill Apparel Classic Cars Crops

    Invercargill Apparel Classic Cars Crops

    Christchurch Electronics Software Furniture

    Christchurch Electronics Software Furniture

    North Shore ITNorth Shore IT

    Horowhenua Apparel Organics Retirement

    Horowhenua Apparel Organics Retirement

    Manawatu Defence Call Centre Food IT Sports

    Manawatu Defence Call Centre Food IT Sports

    Source: Industry New Zealand

  • 8CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    New Zealands average

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    -15% -10% -5% 0% 5% 10%

    New Zealands Export StructureManufacturing Export Specialization: 1994 to 1998

    Share oftotal New

    Zealand exports,1998

    Export growth,1994 - 1998Note: Size of bubble is US-$ volume of exports in 1998

    Source: ITC 2001

    Technology intensivemanufacturing

    Human capital intensivemanufacturing

    Natural-resourceintensive manufacturing Labor intensive

    manufacturing

    Primary products

  • 9CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    Embracing CompetitionNew Zealands Relative Position

    Competitive DisadvantagesRelative to GDP per Capita

    Competitive AdvantagesRelative to GDP per Capita

    Country Ranking Country Ranking

    Note: Rank by countries; overall NZ ranks 19 (17 on Business Environment)Source: Global Competitiveness Report 2000

    Absence of Distortive 4Government Subsidies

    Hidden Trade Barrier Liberalization 5

    Tariff Liberalization 7

    Effectiveness of Antitrust Policy 10

    Extent of Locally Based Competitors 31

    Intensity of Local Competition 18

  • 10CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    Improvements in New Zealands business environment havebeen more than matched by its international competitors

    The countrys dependency on natural-resource exports createschallenges

    The economy is dominated by small and medium sizedcompanies with limited global presence

    Clusters are discussed and a significant number of clusterinitiatives has been initiated but there have been limitedcommitment and results

    New Zealand faces stiff competition from other Asian countriesin manufacturing

    Strategic Issues

  • 11CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    Government policies are in some cases working at crosspurposes

    Important elements of an action plan for New Zealand havebeen developed but there is no overarching strategy to integratethem e.g. attract foreign direct investment Improve human resources Science parks

    A lack of clear vision for the country is mentioned by many NewZealanders

    Strategic Issues

  • 12CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    12345678910111213141516171819202122232425

    12345678910111213141516171819202122232425

    New Zealands Relative PositionGCR Ranking Over Time

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    ..New Zealand (1998)................

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    Rank Current CompetitivenessIndex

    Company Strategy &Operations Index

    National BusinessEnvironment IndexNational BusinessEnvironment Index

    New Zealand (2000)

    New Zealand (1998)

    New Zealand (2000)

    New Zealand (1998)

    New Zealand (2000)New Zealand (1998)

  • 13CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    Note: *Germany (west) : 1990 - 1998Source: US Bureau of Labor Statistics, EIU

    Comparative Labor Productivity GrowthManufacturing Sector, 1990 to 1999

    0%

    1%

    2%

    3%

    4%

    5%

    Swed

    enSin

    gapo

    reUn

    ited S

    tates

    Franc

    e

    Japa

    nBe

    lgium

    Germ

    any*

    Nethe

    rland

    s

    Italy UK

    Cana

    daNE

    W ZE

    ALAN

    DNo

    rway

    Output per Hour,CAGR, 1990 to 1999

  • 14CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

    Share ofNew

    ZealandExports

    (Percent)

    New Zealand Trade, 1988-1997Percent of Total Country Exports By Natural Resource Intensity

    Natural Resource Intensive

    Non-Natural Resource Intensive

    Source: UN Trade Statistics (Rev. 2), Institute for Strategy and Competitiveness, Harvard Business School.

  • 15CAON New Zealand Presentation 08-04-01 CK Copyright 2001 Professor Michael E. Porter

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    Irelan

    dSw

    eden

    Switz

    erlan

    d

    USFin

    land

    Germ

    a