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  • This presentation draws on ideas from Professor Porters books and articles, in particular, Competitive Strategy (The Free Press, 1980); Competitive

    Advantage (The Free Press, 1985); What is Strategy? (Harvard Business Review, Nov/Dec 1996); On Competition (Harvard Business Review, 2008);

    and Creating Shared Value (Harvard Business Review, Jan 2011). No part of this publication may be reproduced, stored in a retrieval system, or

    transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of Michael E. Porter. For

    further materials, see the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu, and FSG website, www.fsg.org.

    Competitiveness of Nations and Regions:

    The New Learning

    Professor Michael E. Porter

    Harvard Business School

    New Delhi,

    May 25th, 2017

    http://www.isc.hbs.edu/http://www.fsg.org/

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    Armenia

    Benin

    Bhutan

    Bolivia

    Burkina Faso

    Burundi

    Cambodia

    CameroonCentral African Republic(-3.8%, $505)

    ChadComoros

    Congo (Brazzaville)

    Congo (D.R.)

    Cte d'IvoireDjibouti

    El Salvador

    Eritrea

    EthiopiaGambia

    Georgia

    Ghana

    Guatemala

    Guinea

    Guinea-Bissau

    Guyana

    Haiti

    Honduras

    India

    Kenya

    Kyrgyz Republic

    Laos

    Lesotho

    Liberia

    Madagascar

    Malawi

    Mali

    Mauritania

    Moldova

    Morocco

    Mozambique

    Nepal

    Niger

    Nigeria

    Pakistan

    Papua New Guinea

    Philippines

    Rwanda

    Samoa

    So Tom and

    Senegal

    Sierra Leone

    Solomon Islands

    Sudan

    Swaziland

    TajikistanTanzania

    Uganda

    Ukraine

    Uzbekistan

    Vanuatu

    Vietnam

    Zambia

    $0

    $1,000

    $2,000

    $3,000

    $4,000

    $5,000

    $6,000

    $7,000

    $8,000

    $9,000

    -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8%

    PPP-Adjusted Real GDP per Capita, 2016

    ($USD at 2005 prices)

    Growth in Real GDP per Capita (PPP $US at 2005 prices), CAGR, 2006-2016

    Bangladesh

    Average Prosperity Growth: +2.9%

    Prosperity PerformanceLow and Lower Middle Income Countries

    Source: EIU (2015), authors calculations.

    Note: Low and Lower Middle Countries according to World Bank Income Groups based on GNI per capita.

    Average Real GDP per

    Capita: $3,671

    High but Declining

    Low and Declining

    High and Improving

    Low but Improving

    2

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    Competitiveness depends on the long-run productivity of a location

    as a place for firms to do business

    - Productivity of existing firms and workers

    - High participation of citizens in the workforce

    Competitiveness is not:

    - Low wages

    - A weak currency

    A nation or region is competitive to the extent that firms operating there

    are able to compete successfully in the national and global economy

    while maintaining and improving wages and living standards for the

    average citizen

    What is Competitiveness?

    3

    Successful economic development requires improving competitiveness

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    The Dual Challenges of Development

    There is a powerful connection between economic

    and social development

    Improving competitiveness requires improving

    economic and social conditions simultaneously

    Economic

    Development

    Social

    Development

    4

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter5

    India in 2017 India has made significant economic progress over

    the last few years, despite a challenging global context

    Robust growth of GDP, prosperity, and productivity

    Rising FDI inflows and exports

    Falling poverty

    Policy choices have begun to address some of Indias

    deep-seated structural challenges

    Sustainability of macroeconomic policies

    Effectiveness of public programs

    Corruption

    Upgrading specific elements of the business

    environment such as infrastructure, skills, business

    regulations

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter6

    The Path Ahead

    India has a promising future, but multiple

    weaknesses and distortions remain that will

    require time and determined action to overcome E.g. high informality, bureaucratic complexity, limited

    access to capital, public education and infrastructure

    deficits

    Reaching Indias full potential, both domestically

    and in the global economy, requires:

    a shared understanding of competitiveness

    a coherent strategy

    excellence in implementation

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    Endowments

    What Determines Competitiveness?

    Endowments, including natural resources, geographical location,

    population, and land area, create a foundation for prosperity, but

    true prosperity arises from productivity in the use of endowments

    7

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    Endowments

    Macroeconomic Competitiveness

    Human Development

    and Effective

    Public Institutions

    Sound Monetary

    and Fiscal Policies

    Macroeconomic competitiveness sets the economy-wide

    context for productivity to emerge, but is not sufficient to

    ensure productivity

    What Determines Competitiveness?

    8

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    Macroeconomic Competitiveness

    Sound Monetary

    and Fiscal Policies

    Endowments

    Human Development

    and Effective

    Public Institutions Fiscal Policy:

    Public spending aligned

    with revenues over time

    Monetary Policy:

    Low levels of inflation

    Economic

    Stabilization: Avoiding

    structural imbalances

    and cyclical

    overheating

    Sound Monetary

    and Fiscal Policies

    What Determines Competitiveness?

    9

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    Human Development:

    Basic education, health

    care, equal opportunity

    Rule of Law:

    Property rights, personal

    security, and due process

    Government Institutions:

    Stable and effective public

    and governmental

    organizations and

    processes

    Human Development

    and Effective

    Public InstitutionsMacroeconomic Competitiveness

    Endowments

    Sound Monetary

    and Fiscal Policies

    Human Development

    and Effective

    Public Institutions

    What Determines Competitiveness?

    10

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    How Do We Measure Development

    11

    Economic

    Development

    GDP per Capita

    Social

    Progress

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter12

    Social Progress Index Framework

    Nutrition and Basic

    Medical Care

    Water and Sanitation

    Shelter

    Personal Safety

    Personal Rights

    Personal Freedom

    and Choice

    Inclusion

    Access to Advanced

    Education

    Basic Human Needs Foundations of Wellbeing Opportunity

    Social Progress Index

    Access to Basic

    Knowledge

    Access to Information

    and Communications

    Health and Wellness

    Environmental Quality

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    Social Progress 2005-2016

    2005 2016

    13

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    Macroeconomic Competitiveness

    Microeconomic Competitiveness

    Sophistication

    of Company

    Operations and

    Strategy

    Quality of the

    Business

    Environment

    State of Cluster

    Development

    Endowments

    Human Development

    and Effective

    Public Institutions

    Sound Monetary

    and Fiscal Policies

    Productivity ultimately depends on improving the

    microeconomic capability of the economy

    Many things matter; there is no silver bullet

    14

    What Determines Competitiveness?

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    The internal skills,

    capabilities, and

    management

    practices that enable

    companies to

    achieve higher levels

    of productivity and

    innovationMacroeconomic Competitiveness

    Microeconomic Competitiveness

    Sophistication

    of Company

    Operations and

    Strategy

    Quality of the

    National

    Business

    Environment

    State of Cluster

    Development

    Endowments

    Human Development

    and Effective

    Public Institutions

    Sound Monetary

    and Fiscal Policies

    What Determines Competitiveness?

    15

  • 20170525India Competitiveness Copyright 2017 Professor Michael E. Porter

    The quality of the

    business

    environment that

    supports company

    productivity,

    innovation, and

    growth

    Macroeconomic Competitiveness

    Microeconomic Competitiveness

    Sophistication

    of Company

    Operatio