8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
1/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
Abstract
Growth is now more distributed and broad-based with the emergence of
multiple centers of growth spearheaded by countries such as India and
China. As emerging economies continue to grow, they must be involved inthe process of global governance. People in India and China are looking for
a better life and mobility and higher incomes, and no one can deny them
those aspirations. In the unpredictable changes of global shifts that are
constants most organization are seeking to improve existing goods and
services through continuous improvement and innovation breakthrough
strategies.
Recent Trends of Worldwide Economy
The movement of the Worldwide Economy from a Tradition Economy to a
Global Economy has come through the technological advancements
strengthened by modern technological discoveries starting from the
Industrial Revolution in England. However, due to rapid globalization, the
importance of national economies along with rules and regulations are
decreasing. Mergers between multinational corporations are in vogue as
every organization wants to exercise total control over the World Market.
The developed nations control the World Economy aided by their superior
technological advancements. Countries that foremost in World Economy
that reflected in their higher status in the United Nations Organization, are
USA, Japan, China, U.K., Germany, France, and Canada.
Inreasing in globalized world economy, all companies are focusing on
deriving the highest profits from the investments. To that end these arebecoming multinational, having realized that affordable products can be
circulated in the market of developed nations by outsourcing the
production to the underdeveloped and developing countries.
Several international regulators such as World Trade Organization (WTO),
International Monetary Fund (IMF), and World Bank, however are aimed at
keeping all profit-focused companies under a check.
Bach. of Town and Regional Planning (hons.), Semester July November2008
(1)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
2/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
The World Wide Economy though highly influenced by the developed
countries shows signs of turning into a fair ground through the outsourcing
of jobs to developing and underdeveloped nations, by most multinational
companies based in the developed nations. This points towards a future
balanced World Economy.
Global Economy
The term Global Economy refers to an integrated world economy with
unrestricted and free movement of goods, services and labor
transnational. The concept of a global economy cannot be understood in
isolation. Globalization need to be defined first as the integration of
production and consumption in all markets across the world.
Global economy is a characterized as a world economy with unified market
for all goods produced in the entire world. Domestic producers have the
opportunity to expand and raise capacity according to global demands and
its also provides opportunity to domestic consumers to choose from a
vast array of imported goods. A global economy aims to rationalize prices
of all products globally.
Reduction in level of tariff and quotas under new WTO (World Trade
Organization) restrictions, free flow of goods between the developed and
the developing countries has become a distinct possibility. Globalization
has boosted productivity and capacity of these companies to astronomical
high because of the stiff competition at the international level.
Improvement in technology in the developed countries such as United
States of America and Japan has permeated to those of the developing
economies of Asia, Africa and Latin America. This has enable the people of
the developing countries acquire requisite technical skills and knowledge
for operating sophisticated equipments that percolate throughout the
economy and improves the general productivity of the labor in these
countries by increasing the income levels.
While a global economy or globalization has the distinct advantage of
raising world productivity and incomes and bringing about an
improvement in the standards of living for all people at a global level, ithas the dangerous side effect of growth with inequality. This has been
Bach. of Town and Regional Planning (hons.), Semester July November2008
(2)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
3/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
evidenced in the less developed economies of India, China and Brazil
where the benefits of globalization have not percolated to the lowest
levels.
A Global Economy also leads to a shifting of jobs from the developed
countries to the Third World Countries as wage rates are much lower here.
This allows companies of the advanced nation to grow exponentially. For
example, we might find computer chips produced in China be exported to
USA for designing which may be subsequently used in Japanese computers
supplied across the world. This process is called outsourcing and leads to
exploitation of workers in Third World economies where income
inequalities already exist.Nonetheless, a global economy may be beneficial for the world at large.
This may result in the economies of the world fighting issues such as
global warming, climate change and environmental degradation
collectively and effectively.
The global economy of today revolves around the issues of more trade
liberalization, competition as a model of efficiency and the search for an
intermediate between laissez-faire and too much state intervention whichwould help in achieving high rates of growth but not with sacrificing equity.
Global economics or the global economy can be defined as the
homogenization of the world economy into single large economy with the
beginning of globalization. Globalization and the mechanisms of global
economics are thus closely interconnected. The essential feature of
globalization has been the widespread diffusion of technology and
technological developments across all the countries of the world. As a
study of the global economy, global economics concentrates itself on the
factors of global supply and demand transcending mere national
considerations.
Globalization is argued to bring about better productivity and higher
amounts of produced outputs for all commodities across the world
because of widespread diffusion of advanced technologies. Countries
specializing in their areas of comparative advantage can also increase the
Bach. of Town and Regional Planning (hons.), Semester July November2008
(3)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
4/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
world outputs of commodities. But the benefits of the process has not
percolated down to the lowest level of society as the divide between the
rich and poor is ever increasing in countries. Globalization has also thrown
out many domestic producers of specific commodities with rising income
inequality, being unable to cope with stiff competition meted out by low
cost goods from abroad.
Global Economic Analysis is a macro-level study of all the economies of
the world taken as a whole. Globalization has helped the world economy
become more integrated and homogenized with the free movement of
goods and services. Its objective is to unify prices of commodities and
wages worldwide. Diffusion of technical knowledge and information is alsoa positive effect of globalization.
Global economy is growing as a whole with a healthy growth rates
hovering around 2% annually. The USA being the largest economy in the
world continues to be the leader in terms of technological innovations, low
unemployment rates, high per capita GDP and also few numbers below the
poverty line. Political stability as a key economic indicator has also
ensured that stock indices are at healthy levels in the developing
countries.
The indicator for the global economy means, economic variables or
parameters that may determine global economic behavior over a period of
time reflecting the movement of the global economy as a whole. Global
economic indicators can be summarily comprised Real GDP growth rate,
Real GDP per capita, Exports Imports, Inflation rates, Unemployment,
People below poverty line and Outstanding external debt (if any as a
percentage of GDP).
The global economy gave business the ability to market products and
services all over the globe. It has also allowed them to develop
partnerships and alliances throughout the world, which has become
essential for success in todays business. Prior to Globalization, the United
States dominated the global economy. In past decades, however, the U.S.
share of the global economy has shrunk to approximately 20%. This trend
Bach. of Town and Regional Planning (hons.), Semester July November2008
(4)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
5/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
is expected to continue as the economies of many newly industrialized
countries continue to grow at a faster rate, this is called the balancing of
the equilibrium.
World Economy
The terms of world economy can be evaluated in a various way depending
on the model used and this valuation can be represented in various ways.
It is inseparable from the geography and ecology of Earth, and therefore of
somewhat of a misnomer, since while definition and representations of theworld economy vary widely, they must at a minimum exclude any
consideration of resource or value based outside of the Earth.
World economy valuations, models, representations, definitions, and use
and exchange in the planet Earth, can be vary widely beyond the
minimum standard of concerning value in production.
Bach. of Town and Regional Planning (hons.), Semester July November2008
(5)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
6/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
Limit questions of the world economy exclusively to human economic
activity and world economy is typically judged in monetary terms, even in
cases which there is no efficient market to help valuate certain goods or
services or lack of independent research or government cooperation
makes establishing figures difficult. Typical examples are illegal drugs
(medicine purpose and etc) and other black market goods, which by any
standard are a part of the world economy, but for which there is by
definition no legal market of any kind.
However, even in cases in which there is a clear and efficient market to
establish a monetary value, economists do not typically use the current or
official exchange rate to translate the monetary units of this market into asingle unit for the world economy, since exchange rates typically do not
closely reflect world-wide value, for example in cases where the volume or
price of transactions is closely regulated by the government. Rather,
market valuations in a local currency are typically translated to a single
monetary unit using the idea of purchasing power. This is the method used
below, which is used for estimating worldwide economic activity in terms
of real US dollars. However, the world economy can be evaluated and
expressed in many more ways. It is unclear, for example, how many of theworld's 6.6 billion people have most of their economic activity reflected in
these valuations.
World Economy in 2008
World economy is predicted to continue growing in 2008 with rate of
growth is expected to be lower than the 2007. World growth rate for 2008
have been projected around 4.8%, whereas the ongoing growth rate for
end 2007 is 5.2%. Central Banks of different countries are expected to
stay away from monetary restriction to face inflation that been expected
to contribute significantly to the growth of the 2008 world economy. Infact, the world economy is said to be driven by emerging economies like
Bach. of Town and Regional Planning (hons.), Semester July November2008
(6)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
7/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
China and India, rather than by economies of USA, European Countries
and Japan.
The US economy is experiencing low growth rates. By the end of 2007, the
US economy is expected to register a growth rate of only 1.9 %, one of the
lowest growth rates the United States of America has seen in recent years.
Although economists do not perceive the risk of an immediate recession in
the US economy, however, lack of growth in industrial production, decline
in the real estate sector, slow growth of employment and insufficient
business credit are factors that would weigh heavily on the growth of the
US economy in 2008. Economists have projected a 3% growth for the US
economy in 2008.
The Chinese economy is forecasted to grow at 10.9 % in 2008 which, in
spite of a slowdown from 2007, would still be substantial. Chinas global
trade surplus is predicted to reach the 300 billion dollars mark next year
which is a growth of 20%. Inflation of 4.5% is forecasted for the Chinese
economy in 2008.
A growth of above 8% has been forecasted for the Indian economy in2008. According to Indian Finance Minister Mr. P. Chidambaram, Indian
exports would reach the $200 billion mark in 2008. The growth of the
service sector which contributes more than 50% to Indias GDP, the
potential of the Indian Stock market and the appreciating Indian Rupee are
expected to be major factors in Indias economic growth in 2008.
World Economy Indicator
World economic indicators are specific index and measures that indicatenot only the overall health of the global economy, but also provide some
Bach. of Town and Regional Planning (hons.), Semester July November2008
(7)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
8/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
insight into its future. Economic indicators can be found in many different
forms. Economic statistics can also be use to illustrates the trends in
economic activities. The most commonly used world economic indicators
are rates of inflation, the unemployment rate, the real Growth Domestic
Product (GDP) growth rate, GDP-Per Capita, GDP-Purchasing Power Parity,
amounts of foreign direct investment, populations living below the poverty
line, and current account balances.
The utility of economic indicators can be defined by relating it to the
economic activities of the world. An indicator is said to be procyclic if it
moves in the direction of the economic movement (or cycle) of a country
and the movement of the economic indicators is directly comparative tothe trend of economic performance. When economies show a growing
trend, the value of the procyclic economic indicators will increase. GDP is
an ideal example of this type of world economic indicator.
Countercyclic economic indicators are inversely related to economic
performance. The rate of unemployment is an example of a countercyclic
type of economic indicator. The rate of unemployment will increase if the
economy slows down.
Another type of world economic indicator is known as an acyclic economic
indicator that is not directly related to the economic health of the country.
However, this indicator is not a good method by which an economys
health may be measured.
Statistics such as GDP figures, unemployment rates, current account
balances, stock market values are economic indicators used on a monthly,
quarterly or even on an immediate basis. Rates of unemployment are
usually released every month, whereas the GDP figures are made
available only on a quarterly basis.
Economic indicators depend on the accuracy of the forthcoming changes
in economic activities prediction. The world best economic indicators are
those that foreshadow economic changes that are going to take place in
Bach. of Town and Regional Planning (hons.), Semester July November2008
(8)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
9/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
near future. Lagging world economic indicators, only respond to the
changes if the economy a few quarters later such as unemployment rate.
Unlike the leading and lagging economic indicators, a third category of
indicators is the coincident economic indicators these indicators move in
the same pace with the changes in an economy.
World Economy Statistical Indicator
1. Economy
a. Gross World Product (purchasing power parity exchanges rate):
$59.38 trillion (2005 est.), $51.48 trillion (2004) and $49 trillion
(2002);
b. Gross World Product (IMF 179 countries): market change rates -
$43.92 trillion (2005 est.), $40.12 trillion (2004) and $32.37 trillion
(2002);
c. GDP (real growth rate): 4.3% (2005 est.), 3.8% (2003), 2.7%(2001);
d. GDP (per capita): purchasing power parity - $9,300 (2005 est.),
$8,200(2003) and $7,900 (2002);
e. GDP (composition by sector): agriculture 4%, industry 32%, and
services 64% (2004 est.);
f. Inflation rate (consumer price): developed countries 1% to 4%
typically, developing countries 5% to 60% typically, national
inflation rates vary widely in individual cases;
g. Derivatives outstanding notional amount: $273 trillion (end of June
2004), $84 trillion (end of June 1998);
h. Global debt issuance: $5.187 trillion (2004), $4.938 trillion (2003),
$3.938 trillion (2002); and
i. Global equity issuance: $505 billion (2004, $388 billion (2003), $319
billion (2002).
2. Employment
a. Unemployment rate: 30% combined unemployment and
underemployment in many non-industrialized countries; developed
countries typically 4% - 12% unemployment.
3. Industries
Bach. of Town and Regional Planning (hons.), Semester July November2008
(9)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
10/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
a. Dominated by the onrush technology, especially in computers,
robotics, telecommunications and medicines and medical
equipement; most of these advances take place in OECD nations;
only a small portion of non-OECD countries have succeed in rapidly
adjusting to these technological forces; they accelerated
deployment of a new industrial technology is complicating already
grim environmental problems; and
b. Industrial production growth rate: 3% (2002 est.)
4. Energy
a. Yearly electrical (production): 15,850,000 GWh (2003st.),
14,850,000 GWh (2001 est.);b. Yearly electrical (consumption): 14,280,000 Gwh (2003 est.),
13,930,000 GWh (2001 est.)
c. Oil (production): 79.65 million bbl/day (2003 est.), 75.46 million
barrel/day (12,000,000 m/d) (2001);
d. Oil (consumption): 80.1 million bbl/day (2003 est.), 76.21 million
barrel/day (12,120,000 m/d) (2001);
e. Oil (proved reserves): 1.025 trillion barrel (163 km) (2001 est.);
f. Natural gas (production): 2,569 km (2001 est.);g. Natural gas (consumption): 2,556 km (2001 est.);
h. Natural gas (proved reserves): 161,200 km (1 January 2002)
5. Cross-border
a. Yearly exports: $6.6 trillion (f.o.b., 2002 est.);
b. Exports (commodities) : the whole range of industrial and
agricultural goods and services;
c. Exports (partners) : US 17.4%, Germany 7.6%, UK 5.4%, France
5.1%, Japan 4.8%, China 4% (2002);
d. Yearly imports: $6.6 trillion (f.o.b., 2002 est.);
e. Imports (commodities) : the whole range of industrial and
agricultural goods and services
f. Imports (partners) : US 11.2%, Germany 9.2%, China 7%, Japan
6.8%, France 4.7%, UK 4% (2002)
g. Debt (external): $2 trillion for less developed countries (2002 est.)
Bach. of Town and Regional Planning (hons.), Semester July November2008
(10)
http://wiki/2002http://wiki/20028/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
11/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
6. Communication
a. Telephones (main lines in use): 843,923,500(2003), 1,263,367,600
(2005)
b. Telephones (mobile cellular): 2,168,433,600 (2005)
c. Internet Service Providers (ISPs): 10,350 (2000 est.)
d. Internet users: 1,311,050,595 (January 18, 2008 est.),
1,091,730,861 (December 30, 2006 est.), 604,111,719 (2002 est.)
Absolute Advantages of World Economy
A country is said to have an absolute advantage over another country in
the production of a good or services if it can produce that good and
service using fewer real resources. Equivalently, using the same inputs,
the country can produce more output. The concept of absolute advantage
can also be applied to other economic entities, such as regions, cities or
firms but we will focus attention on countries, specifically in relation to
their production decisions and international trade flows. The fallacy of
equating absolute advantages with cost advantages is a never ending
source of confusion. Deviations between the two are caused by the fact
real resources may receive different remunerations in different countries.
To vividly illustrate the principle of absolute advantage, suppose that there
are two countries, producing two goods, using labor as the only input.
Goods can be traded without costs and workers are immobile between the
two countries, but mobile between the two sectors within a country. All
workers in a country are equally productive. As a case study, the two
countries represent Japan that producing cars and USA that producing
food. Production technology in Japan differs from that in the USA. Japan
requires three units of labor to produce one unit of food, whereas the USArequires only two units of labor. Similarly, Japan needs six units of labor to
produce one car, whereas the USA needs eight units of labor. Since Japan
is more efficient in the production of cars and the USA is more efficient in
the production of food, Japan has an absolute advantage in the production
of cars and the USA has an absolute advantage in the production of food.
Absence of absolute advantage is the examples discuss a situation where
one country has an absolute advantage in the production of one good and
the other country in the production of another good. The developing
Bach. of Town and Regional Planning (hons.), Semester July November2008
(11)
http://wiki/Internethttp://wiki/Internet8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
12/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
countries may lack the technology to gain an absolute advantage in the
production of any good, such that they cannot possibly compete on the
global market and benefit from free trade. According to Ricardian model
(comparative advantage) Technologically disadvantages countries can
compete on the global market by paying lower wages and it turns out that
absolute advantages is neither a necessary nor a sufficient condition for
exporting a certain good and gain from international trade.
In reality goods are produced using several factors of production
simultaneously, such as capital, land, and various types of labor. Usually,
goods then cannot be ranked according to absolute advantage as their
production in one country requires more of one input and simultaneously
less of another input than in another country. These issues are analyzed in
the Heckscher-Ohlin (factor abundance) theory of international trade.
Many countries engage in intra-industry trade, the exchange of similar
types of goods (e.g. simultaneously exporting and importing car parts).
This type of trade is becoming ever more important. It can be based on
market power and economies of scale, as analyzed in new trade theory.
Absolute advantages reflected by differences in technology are important
for explaining current international trade flows and differences between
countries in terms of income levels and wage rates. Daniel Trefler (1995)
systematically analyzes these issues by combining the Heckscher-Ohlin
model with technology differences, while taking into consideration the
empirically observed home country bias (a consumer preference for
domestically produced goods over otherwise identical imports).
This combination explains about 93% of international trade flows. It also
shows that technology differences are largely responsible for the
deviations in income levels (and wage rates). Absolute advantage does
retain relevance for understanding the modern world economy.
Bach. of Town and Regional Planning (hons.), Semester July November2008
(12)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
13/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
The World Top Ten Economies
Key factors determine a countrys economic ranking including the business
environment, infrastructure, tax rates, and the general ease of operations
within that country. The worlds top ten economies can be determined by
examining factors such as growth prospects, business environments,
infrastructure, educational levels of the citizens, and governmental
policies and institutions.
The most authoritative ranking is the Global Competitiveness Report. It is
produced in conjunction with the World Economic Forum, and captures
both the perceptions of thousands of business leaders and statistical
analysis by academics at universities and think tanks worldwide. Indeed, it
includes the WEFs Global Competitiveness Index, developed by Professor
Martin at Columbia University, and the Business Competitiveness Index,
developed by Professor Porter at the Harvard Business School.
According to the Global Competitiveness Index 2007 2008, the top ten
economies of the world are United States, Switzerland, Denmark, Sweden,
Germany, Finland, Singapore, Japan, United Kingdom and Netherlands
Bach. of Town and Regional Planning (hons.), Semester July November2008
(13)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
14/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
The World Largest Economies
Emerging economies are smaller than the developed countries, but they
are growing faster and opening up, leading to greater investment
opportunities than ever before.
There are two methods of GDP calculation which are nominal GDP
attempts to compare countries using current exchange rates to give an
assessment of their clout within the global market and Purchasing Power
Parity (PPP) GDP. It is a better measurement of the internal size of each
market.
The list of the Top 10 GDP by PPP.
Ranking
CountryApproximate GDP- PurchasingPower Parity
1United States ofAmerica
$13,860,000,000,000
2 China $7,043,000,000,000
3 Japan $4,305,000,000,000
4 India $2,965,000,000,000
5 Germany $2,833,000,000,000
6 United Kingdom $2,147,000,000,000
7 Russia $2,076,000,000,000
8 France $2,067,000,000,000
9 Brazil $1,838,000,000,000
10 Italy $1,800,000,000,000Source: www.economywatch.com
Bach. of Town and Regional Planning (hons.), Semester July November2008
(14)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
15/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
A map from the CIA World Factbook will help to illustrate the differences betweencalculating world GDP figures on a PPP or nominal basis.
Source: www.economywatch.com
Economy of Malaysia
Malaysia economy is growing and relatively with open economy. Economy
of Malaysia was the 29th largest economy in the world in 2007 by
purchasing power parity with GDP for 2007 was estimated to be $357.9billion with growth rate of 5% - 7% seince 2007. with GDP per capita
standing at US$14,400, from time to time, it has been considered a newly
industrialized country. Income distribution in 2007 are 5.8 million
households and 8.6% of the number have an monthly income below RM
1,000, 29.4% have income between RM 1,001 to RM2,000, while 19.8%
earned between RM2,001 and RM3,000. 12.9% of the households earned
between RM3,001 and RM4,000 and 8.6% between RM4,001 and RM5,000.
Finally, around 15.8% of the households have an income of between
RM5,001 and RM10,000 and 4.9% have an income of RM10,000 and
above.
As one of three countries that control the Strait of Malacca, international
trade plays a large role in its economy. At one time, Malaysia was the
largest producer of tin, rubber and palm oil in the world.Manufacturing has
a large influence in the country's economy.
Bach. of Town and Regional Planning (hons.), Semester July November2008
(15)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
16/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
Malaysia percentage of Agriculture in total GDP has decline. The
percentage share of agriculture has declined to 9.5% in 2004 from 20% in
1984. The percentage share of industry in total GDP has increased. The
percentage share of industry has reached to 50.4% in 2004 from 38.5% in
1984. Manufacturing production has experienced a moderate growth in
the second half of the year 2004. Manufacturing production moderated in
2004 reflecting a slowdown in external demand particularly from US and
China. The service sector accounted for 41.5% of GDP in the year 1984 fell
to 40.1% in 2004.
Source: www.economywatch.com
Advantages of Firms in Global Industries
An industry is a group of competitors producing goods or services that
compete products where the sources of competitive advantage are similar.
In competitive strategy, firms seek to define and establish an approach to
competing in their industry that is both profitable and sustainable.
The competitive strategy underlie two central concerns which is, industry
structure in which the firms compete and strategy in positioning within an
industry. Not all industries offer equal opportunities for sustained
profitability because industries differ widely in nature of competition and
some of the industries positions are more profitable than other industries.
Industries attractiveness and competitive position can be shaped by a
firm. A successful firm will respond to their environment and attempt to
influence it in their favor. Indeed, it is changes in industry structure, or the
Bach. of Town and Regional Planning (hons.), Semester July November2008
(16)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
17/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
emergence of new bases for competitive advantage, that underlie
substantial shifts in competitive position.
The nature of competition is embodied in five competitive factors which
are, the threat of new entrants, the threat of substitute products or
services, the bargaining power of suppliers, the bargaining power of
buyers and the rivalry among the existing competitors. The five
competitive forces determine industry profitable because they shape the
prices firm can charge, the cost they can bear, and the investments
required to compete in the industry.
Firms create competitive advantage by perceiving or discovering newbetter ways to compete in an industry and bringing them to market, which
is ultimately an act of innovation that include improvements in technology
and better methods or ways of doing things.
The most typical causes of innovations that shift competitive advantages
are:
a. New technologies. Changes in technological can create new
possibilities for the design of a product. Industries that are born when
technological changes makes a new product feasible;
b. New or shifting buyer needs. A competitive advantage is often created
or shifts when buyers develop new needs or priorities change
significantly;
c. The emergence of a new industry segment. The opportunity for
creating advantages arises when a new distinct segment of an industry
emerges or a new way is conceived to regroup existing segments;
d. Shifting input costs or availability. A firm gains competitive advantage
by optimizing based on the new conditions while competitors are
saddled with assets and approaches tailored to the old ones; and
e. Changes in government regulations. Adjustments in the nature of
government regulation, in areas such as products standards,
environmental controls, restrictions on entry and trade barriers, are
another common stimulus to innovation which results in competitive
advantage.
Bach. of Town and Regional Planning (hons.), Semester July November2008
(17)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
18/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
The sustainability of competitive advantage depends on three conditions.
Firstly, the particular source of the advantage. There is a hierarchy of
sources of competitive advantage in terms of sustainability. Lower-order
advantages such as labor costs or raw materials are relatively easy to
imitate while high-order advantages such as propriety process technology,
product differentiation based on unique products or services, brand
reputation based on cumulative marketing efforts and customers
relationship are more durable and marked by number of characteristic.
Secondly, higher-order advantages usually depend on a history of
sustained and cumulative investments in physical facilities and specialized
and often risky learning, research and development, or marketing. Thirdly
and the most important, reason competitive advantages is sustained isconstant improvement and upgrading. In order to sustain advantage a firm
must become a moving target, creating new advantages at least as fast as
competitors can replicate old ones.
Sustaining advantages requires changes. It demands that a company
exploit, rather than ignore industry trends and demands that a company
invests to close off the avenues along which competitors could attack. To
sustain its position, a firm may have to destroy old advantages to createnew, higher-order ones. Change is extraordinarily painful and difficult for
any successful organization is the reason why few firms sustain their
position.
Challenges in Facing Construction Industry
Faizul Hj Abdullah in his article Globalisation: Rethinking the Construction
Industry to Adopt Changing Trends, has enlighten that the main critical
Bach. of Town and Regional Planning (hons.), Semester July November2008
(18)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
19/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
challenges facing the construction industry are their abilities to have
innovative design capability, be information technology focused and
strongly self-financing.
Innovative design capability is required together with improved efficiency,
effectiveness, productivity and competitiveness. Specific benefits of
construction innovation can include better environmental protection or
sustainability, improved safety and health and improved quality at lower
cost. Companies that adopt innovation may see higher profits, increased
market share, access to new markets and hence improved
competitiveness.
To prevent construction companies from really venturing and exploring in
determining new core competencies, through innovation, which hopefully
could provide spin-off benefits to the overall construction business, they
are barriers that are characterized by several distinct factors and among
other, which are:
a. Fragmentation. The characteristic of the construction industry itself
prohibited contractors from being innovative in their design capabilities
because the industry generally is highly fragmented and too local;
b. Limited resources. Pursuing innovation often requires substantial
amounts of resources, which is a function of time, money, personnel
and equipment. Whether innovation is pursued purposely through R&D
or on a pilot application basis, some amount of resources investment is
required; and
c. Liability. To fear of defects and health, safety or environmental hazards
is often great enough to defer construction companies from adopting
new materials and technologies.
These are few dominant factors that prohibit construction companies from
taking up the options to further explore innovative design.
Bach. of Town and Regional Planning (hons.), Semester July November2008
(19)
8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
20/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
Sources and Refferences
Adam Smiths (1995), World Economy Absolute Advantages, New
York: Free Press
Define Global Economy, Economy Watch,
http://www.economywatch.com/world_economy/world-economic-
indicators/global-economy/define-global-economy, Retrieved 3rd
September 2008
Economic Structure Of Malaysia, Economy Watch,
http://www.economywatch.com/world_economy/economic-structure-of-
malaysia, Retrieved 3rd September 2008
Economy of Malaysia, Wikipedia Free Encylopedia,
http://en.wikipedia.org/wiki/Economy_of_Malaysia, Retrieved 3rd September
2008
Faizul Hj Abdullah, Globalisation:Rethinking the Construction
Industry to Adopt Changing Trends, Univerity Technology MARA
Global Economic Analysis, Economy Watch,
http://www.economywatch.com/world_economy/world-economic-
indicators/global-economy/global-economic-analysis, Retrieved 3rd
September 2008
Global Economic Indicators, Economy Watch,http://www.economywatch.com/world_economy/world-economic-
indicators/global-economy/global-economic-indicators, Retrieved 3rd
September 2008
Global Economics, Economy Watch,
http://www.economywatch.com/world_economy/world-economic-
indicators/global-economy/global-economics, Retrieved 3rd September
2008
Bach. of Town and Regional Planning (hons.), Semester July November2008
(20)
http://www.economywatch.com/world_economy/world-economic-indicators/global-economy/define-global-economyhttp://www.economywatch.com/world_economy/world-economic-indicators/global-economy/define-global-economyhttp://www.economywatch.com/world_economy/economic-structure-of-malaysiahttp://www.economywatch.com/world_economy/economic-structure-of-malaysiahttp://en.wikipedia.org/wiki/Economy_of_Malaysiahttp://www.economywatch.com/world_economy/world-economic-indicators/global-economy/global-economichttp://www.economywatch.com/world_economy/world-economic-indicators/global-economy/global-economichttp://www.economywatch.com/world_economy/world-economic-indicators/global-economy/define-global-economyhttp://www.economywatch.com/world_economy/world-economic-indicators/global-economy/define-global-economyhttp://www.economywatch.com/world_economy/economic-structure-of-malaysiahttp://www.economywatch.com/world_economy/economic-structure-of-malaysiahttp://en.wikipedia.org/wiki/Economy_of_Malaysiahttp://www.economywatch.com/world_economy/world-economic-indicators/global-economy/global-economichttp://www.economywatch.com/world_economy/world-economic-indicators/global-economy/global-economic8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
21/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
Global Economy, Economy Watch,
http://www.economywatch.com/world_economy/world-economic-
indicators/global-economy/, Retrieved 3rd September 2008
Malaysia Economy, Economy Watch,
http://www.economywatch.com/world_economy/malaysia-
economy,Retrieved 3rd September 2008
Michael Porter (1990), The Competetive Advantages of Nations
Recent Trends of World Wide Economy, Economy Watch,http://www.economywatch.com/recent-trends-of-worldwide-
economy/,Retrieved 3rd September 2008
The Global Economy, Wikipedia Free Encylopedia,
http://en.wikipedia.org/wiki/The_Global_Economy, Retrieved 26th August
2008.
The Worlds Top Ten Economies, Economy Watch,http://www.economywatch.com/economies-in-top/ , Retrieved 3rd
September 2008
Top World Economies, Economy Watch,
http://www.economywatch.com/top-world-economies /,Retrieved 3rd
September 2008
World Economic Indicators, Economy Watch,
http://www.economywatch.com/world_economy/, Retrieved 3rd September
2008
World Economy in 2008, Economy Watch,
http://www.economywatch.com/world_economy_in_2008/, Retrieved 3rd
September 2008
Bach. of Town and Regional Planning (hons.), Semester July November2008
(21)
http://en.wikipedia.org/wiki/The_Global_Economyhttp://www.economywatch.com/economies-in-top/http://en.wikipedia.org/wiki/The_Global_Economyhttp://www.economywatch.com/economies-in-top/8/14/2019 The Responsiveness of a Firm in Sustaining the World Economy
22/22
TRP 511: Project ManagementAida Fazihrah Binti Nazri
World Economy, Economy Watch,
http://www.economywatch.com/world_economy/, Retrieved 3rd September
2008
World Economy, Wikipedia Free Encylopedia,
http://en.wikipedia.org/wiki/World_economy, Retrieved 26th August 2008.
http://en.wikipedia.org/wiki/World_economyhttp://en.wikipedia.org/wiki/World_economyTop Related