Presented by Dr. Amit Kapoor

1. INSTITUTE FOR COMPETITIVENESS -RESEARCH

2. Cloud Power
Opportunit
y
BRICS India
Threat

3. Cloud Power
Opportunit
y
BRICS India
Threat

4. Microeconomics of Competitiveness and Macroeconomics of Competitiveness
MIcroeconomics of Competitiveness MAcroeconomics of Competitiveness
Aggregate
Individuals
s

5. Natural Endowments Population and GDP’s of the world
12.6% of the Land area,
17% of the
Population, 2.6% of the Russia
GDP
7% of the Land area,
5% of the
Population, 23% of the
GDP
USA
China
2.3% of the Land area,
17.8% of the India
7.2 % of the Land area,
Population, 2.6% of the
6.5% of the Land area, 19.2% of the Population,
GDP
2.8% of the 10.4% of the GDP
Population, 3.5% of the
GDP
0.93% of the Land area,
Brazil 0.72% of the Population,
0.58% of the GDP
South Africa

6. GDP over the years
8000
Billions
7000
6000
GDP at Current Prices
5000
4000
3000
2000
1000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Brazil China India Russian Federation South Africa

7. Area in 2011
Area in 2010, square Km
18
Millions
16.37687
16
14
12
10 9.32748
8.45942
8
6
4
2.97319
2 1.21447
0
Brazil China India Russian Federation South Africa

8. Population over the years
1.6
Billions
1.4
1.2
Population in Billions
1
0.8
0.6
0.4
0.2
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2011
Brazil China India Russian Federation South Africa

9. Primary Secondary and Tertiary Sector
100.00
90.00
80.00 43.19
55.14
70.00 59.28
66.63 66.69
70.87
60.00
50.00
40.00
46.72
30.00 27.12
36.68
20.00 28.07 30.83
26.32
17.74
10.00
10.10
0.00 5.30 4.04
2.81 2.48
World Brazil China India Russian South Africa
Federation
Agriculture (Value Added % of GDP) Industry (Value Added % of GDP)
Services (Value Added % of GDP)

10. Manufacturing Value Added as a percentage of GDP, 2010
South Africa 14.66
Russian Federation 16.43
India 14.54
China 29.62
Brazil 16.23
World 16.71
0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00

11. Structural transformation in the World Economy
Structure of the World Economy in 1991 Structure of the World Economy in 2010
5% 3%
27%
34%
61%
70%
Agriculture Industry Services Agriculture Industry Services
Source: WDI and Institute for Competitiveness Analysis

12. Imports and Exports as a Percentage of world Imports and Exports
20.00
18.00
16.00
9.03
14.00
12.00
10.00
8.00
6.00
10.34
4.00
1.61
2.27
2.00 1.24
2.63 0.61
1.32 1.44
0.00 0.53
Brazil Russia India China South Africa
Share in world total exports (2010) Share in world total imports (2010)
Source: WTO and Institute for Competitiveness Analysis

13. Projections according to IMF
Contribution to global growth (2006-20, %)
0 5 10 15 20 25 30
4.5
4.2
China 26.7
Increase in a country‟s real GDP, at constant 2005 PPP US$
4 3.8 United States 15.9
3.5 India 12.2
3.5 3.4
3.3
Brazil 2.4
3 Russia 2.3
Indonesia 2.3
2.5
South Korea 2.1
2 UK 1.9
Germany 1.9
1.5
France 1.5
1 Mexico 1.4
Canada 1.3
0.5
Turkey 1.3
0 Japan 1.1
1971-1980 1981-1990 1991-2000 2001-2005 2006-2020
Source: IMF and Economist Intelligence Unit for 1970-2005:
Economist Intelligence Unit forecasts for 2006-20

14. GDP over the years
0.58 %
100% in 2010
90%
2.65%
in 2010
80%
70%
2.64%
in 2010
60%
50%
40% 10.43%
in 2010
30%
20%
3.53 %
10%
in 2010
0%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Brazil China India Russian Federation South Africa
Source: WDI and Institute for Competitiveness Analysis

15. FDI Investments
200
Billions
Foreign direct investment, net inflows (BoP, current US$)
150
100
50
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-50
Brazil China India Russian Federation South Africa
Source: WDI and Institute for Competitiveness Analysis

16. FDI Inflows and Outflows
5 7
4
6
3
5
FDI inflows as a % of GDP
FDI inflows as a % of GDP
2
4
1
3
0
2
-1
1
-2
-3 0
-4 -1
World Brazil World Brazil
China India China India
Russian Federation South Africa Russian Federation South Africa
Source: WDI and Institute for Competitiveness Analysis

17. Confidence Index and sought out by many Investors
(1) 1 China 1.93
(3) 2 United States + 1.67
(2) 3 India - 1.64
(6) 4 Brazil + 1.53
(10) 5 Germany + 1.43
( ) 6 Poland + 1.35
(11) 7 Australia + 1.33
(19) 8 Mexico + 1.32
(14) 9 Canada + 1.32
(4) 10 United Kingdom - 1.32
(8) United Arab -
11 1.29
Emirates
(12) 12 Vietnam 1.29 + Moved Up
(13) 13 France 1.29 Maintained
(5) 14 Hong Kong - 1.28 - Moved Down
(17) 15 Other Gulf Not among top
+ 1.26 20 in 2007 Index
states
Low Confidence High Confidence
Values Calculated on a 0 to 3
Scale
Source: A.T. Kearney 2010 Confidence Index, WDI and Institute for Competitiveness Analysis

18. Infrastructure development
90.0
84.5 Percentage of People with Access to Electricity
80.0
(2009)
70.0 66.4 South Africa 75
62.3
60.0
Percentage of Paved Roads
55.1
50.0 45.5 India 66.3
40.0
30.0 China 99.4
20.0
Brazil 98.3
10.0
4.3
0.0
World 74.1
0.0 20.0 40.0 60.0 80.0 100.0 120.0
Source: WDI and Institute for Competitiveness Analysis

19. Total Reserves
3500
Total Reserves in Current Billion US Dollars
Billions
3000
2500
2000
1500
1000
500
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Brazil China
Brazil China India
India Russian Federation
Russian Federation South Africa Rest of the world
South Africa
Note: Total reserves comprise holdings of monetary gold, special drawing rights, reserves of IMF members held by the IMF, and holdings of
foreign exchange under the control of monetary authorities. The gold component of these reserves is valued at year-end (December 31) London
prices. Figures taken are in current U.S. dollars.
Source: IMF, WDI and Institute for Competitiveness Analysis

20. Literacy and Sanitation: Critical Areas
100 100.0 99.1 100
90 90.0
Literacy rates as a percentage of total Population
Access to Improved Sanitation Facilities as a
80 80.0 76.5
percentage of Population
70 70.0
60.0 58
60 54
50.0
50
40.0
40
30.0
30
20.0
20
10.0
10
0.0
0 European World China India United
1990 2000 2010 Union States
World China India
Note figures for chart 2 are for 2008.
Source: WDI and Institute for Competitiveness Analysis

21. Geopolitical Hotspots
China
Kashmir Conflict Tibet Conflict
Cross-strait
India relations
Offshore Oil reserves
Source: Deutche, Institute for Competitiveness Analysis

22. Macroeconomic and Social Issues- China and India
EU 27 30
China 41
India 36
• High Commodity prices/high
dependence on Energy Imports USA 40
• Investor Sentiments
• Protectionist Trends in 0 10 20 30 40 50
developed markets (and home) 80 75.62
• Huge Income disparities bear 70
the risk of social tensions 60
50
41.64
40 36.31
30
20 15.92
10
0
Poverty headcount below Poverty headcount below
Ch…a day
1.25 $ 2 $ a day
Source: Eurostat, Institute for Competitiveness Analysis

23. China and India : A List of superlatives
India China
• India is the largest • China is the largest
consumer of Gold. consumer of Energy
• India is the biggest and rare earth metals.
producer of • China is the largest
Tea, Coffee, Jute and exporter of the world
Cotton. today.
• India is the largest • China launched the
producer of sponge Iron “world’s largest
and expected to housing investment
become the second program and Macau
largest producer of has become the
steel. world’s top gambling
• India is the second destination.
largest producer of • China is the largest
wheat and largest food producer in the
producer of pulses but world in 2010.
needs to import pulses • Biggest consumer of
due to growing grain, meat, coal and
domestic demand. Institute for Competitiveness Analysis
Sources : Various sources,
steel.

24. Cost Advantage and Growth drivers of Indian IT Industry
Cost Advantage to the India IT services as
compared to EU Growth Drivers of Indian IT Industry
• The cost of an engineer in India is only • Increasing global spending on IT and
about 20-40% in comparison to EU. Technology.
• India’s offshore billing is at around 20-35$ • Global services providers expanded their
per hour which is 50-70% lower than the base in India to provide onshore-offshore
EU. services at a low cost. They have a huge
• India has the largest number of quality Indian employees strength (Accenture-
certifications in the field of IT today. 40000+, IBM-1,30,000, HP-
• BPO sector employs around 768,000 15000+, CapGemini- 26000+)
people at the end of 2010. • Emergence of the Global Delivery model by
• Knowledge Services Exports or KPO the Indian IT firms and Indian companies
(Next generation services in India) grew at have expanded globally through opening
rate of 19.4% per annum and reach $ 1 offices and M&A.
billion in 2010. • Dedicated software technology parks and
• The contribution of India IT sector to GDP SEZs in India.
grows from 1.2% in 1977-78 to 6.1% in • High connectivity by rail, road and air in
2009-10. major cities where IT companies have
• India’s IT/ITeS exports has grown at a established.
compounded annual growth rate of 23.1% • Government Policy supports to IT.
between 2005-06 and 2009-10. The • Huge talent pool with more than .37 million
software and IT services sector (excluding graduates and post graduates available to
hardware) posted revenuesfor Competitiveness Analysis
Sources : Various sources, Institute of 63.7 billion start career in IT.
$.

25. Cost Advantage and Growth drivers of Indian IT Industry
Future Opportunities
State Number of SEZ Companies
• India is expected to become the hub of engineering HP, Amazon,
process outsourcing (EPO) and market size will touch 30 Verizon, Convergys,
billion $ by 2015. Andhra Pradesh 59
EXL, TCS, Wipro,
• Bechtel, General Motors, Ford, John Deere, Caterpillar, Infosys
Silicon Automation Systems and John Brown Engineering
are among the global leaders that have established their Cognizant,
engineering services divisions in India. Convergys, EXL,
Maharashtra 51
• The KPO industry is now growing rapidly, with several KPIT, Msource,
companies establishing third-party operations for Siemens, Accenture
functions such as data analytics and data modeling. Infosys, Wipro,
According to CRISIL, India’s KPO export market Tamil Nadu 38 Accenture,
constitutes around 8 per cent of the country’s ITeS Cognizant
revenues and employs nearly 3 per cent of its workforce. Infosys, TCS,
Growth drivers include the high productivity of India’s Karnataka 37 Wipro, HP,
human resources and outsourcing of knowledge SIEMENS, Compaq
processes by SMEs.
IBM, Genpact,
• Outsourcing of legal and intellectual property research is
Oracle, American
presently at an early stage of development in the country. Delhi and NCR 28
Express, Convergys,
However, this space holds tremendous growth potential.
HP
India offers impressive opportunities to scale up, with a
IBM, Cognizant,
large pool of legal professionals (with more than 1million West-Bengal 19
TCS, Infosys
lawyers and 70,000 law graduates qualifying every year)
and significant cost arbitrage. In addition, Indian lawyers Gujarat 15 TCS, Infosys, Wipro
bill at one-tenth of their counterparts in the US (US$ 40 to
US$ 60 per hour in India, compared with US$ 350 per
hourSources US).
in the : Various sources, Institute for Competitiveness Analysis

26. State of Education
Enrollment in Higher Education to grow at
Faculty in Millions in India 2008 5.6% CAGR
20.0
18.0
18.0 17.0
0.06 0.16 16.1
16.0 15.3
0.34 Veterinary Sciences 14.4
0.02 13.7
0.35 Agriculture 14.0 13.0
0.34 12.3
0.8 Education 11.6
12.0 11.0
4.98 Law
1.99 Medicine 10.0
2.26 Law 8.0
Engineering
6.0
Management
Science 4.0
Arts 2.0
0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2018
Source: Marketing Whitebook 2011-12, Businessworld.

27. Degree graduates breakup and manpower requirements in India
Other Business
0.5
Services
BA Public Admin &
2.5
defence
B.Sc
Agriculture 32
B.Com
Manufacturing 13
Open
Universities Healthcare 1.5
3.40%
20.80% 26% Polytechnic
Courses Transportation and
0.30% 2
Medicine and Storage
1.10% Pharma Hospitality 3
1.60% B.Ed
21.60%
1.70% Communication 2
10.20% M.Sc
2.10%
4.80% M.Com Banking and Insurance 3
5.40%
Ph.D and higher IT/BPO 3
MA Community Services 6
Others Wholesale and Retail 6
Construction 17
0 10 20 30 40
Manpower Intake from 2011-16 (Millions)
Source: IGNOU and CII

28. Global Players Operation in India and IT service expors
Global Players Revenues (In 2009-10) 30
HP $126 billion 25.8
25
IT Service Exports in US $ billion
Oracle 27881.71 million Rs
20
17.5
16.67
15.95
Cognizant $4.6 billion 14.15 15.12
15 14
13.3
13.4
11.6
Accenture $21.6 billion 10.4 11.2
10 9.4
8.8
6
Dell $61.5 billion*
5
1.7 1.8 2.1
Lenovo $21594 million*
0
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
WNS $154.2 million*
Project Oriented Outsourcing Support & Training
* Revenues are for 2010-11
Source: Company reports Institute for Competitiveness Analysis Figures for 2011-12 are projected

29. IT Enabled Service Sector : Exports Driven
18
16.5
16
14.8
14
12.4
12 11.7
10.93
10
8.4 Domestic Market
8 Exports
6.3
6
4.6
4
3.0
2.6
2.3
2 1.6 1.9
0.9 1.1
0.5
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Source: Company reports Institute for Competitiveness Analysis and NASSCOM Strategic Review 2010 The IT–BPO sector in India

30. IT Enabled Service Sector : Exports Driven
At Present , India's BPO industry is Manufacturing 45
Business Domains in which BPO service are offered
facing a stiff competition from
countries like Automobiles 45
Mexico, Philippines, Malaysia, China,
Infrastructure 45
Canada and Ireland
Attrition Rates have Increased to
FMCG 45
55% from about 40% from
December 2010-April 2011 IT Sectors 55
Reasons:1. Campus recruitments Retail 55
2. Ample employment
Financial Services 60
opportunities
3. Part time Jobs
Pharmaceuticals 60
0 20 40 60 80
Source: Deccan Herald, Business Standard, Assocham Study on BPO and Institute for Competitiveness Analysis

31. Number of Engineering Education Institutions in India
Employbility - Diploma Holders
after Degree Completion
0.6
0.5
0.4
0.3
0.2
0.1
0
< 12 Months 12-20 Months > 21 Months
Employbility - Engineering
Graduates after Degree Completion
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Source: Handbook of skill scenario in India, 3rd global summit < 12 Months 12-20 Months >21 Months
Source : ENGINEERING EDUCATION IN INDIA, 2007 IIT Bombay

32. IT companies in India
35,000.00
Rolta India
1.58
Ltd
Tech 30,000.00
8.43
Mahindra
Patni
3.69 25,000.00
Computers
Operating Income Year on year
Oracle Fin 15.04
20,000.00
Mphasis 7.39
15,000.00
HCL Techno 26.44
Wipro 78.03 10,000.00
TCS 198.07
5,000.00
Infosys 128.31
0.00
0.00 50.00 100.00 150.00 200.00 250.00 Mar ' 07 Mar ' 08 Mar ' 09 Mar ' 10 Mar ' 11
Thousands Infosys TCS Wipro Oracle Fin Tech Mahindra
Market Cap in Rs Crore
Institute for competitiveness Analysis

33. IT Offshoring Structure in India
India Offshoring Industry Structure (2009) India Offshoring Industry Structure (2020)
Automative Automative
Telecom Telecom
3%1%2% Consumer Consumer
11% 16%
4% Electronics 17% Electronics
5% Semi-conductors Semi-conductors
1%
8% Aerospace 3% Aerospace
4% 13%
Construction Construction
7% 32% 5%
Computing Systems Computing Systems
5% 5%
Infrastructure 11% Infrastructure
8%
19% Energy Energy
4% 8% 10%
Medical Devices Medical Devices
Industrial Automation Industrial Automation
Source : NASSCOM

34. Labor Productivity in India
Labor Productivity ( Services in US $)
4000
3500
3000
2500
2000
1500
1000
500
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Institute for competitiveness Analysis

35. ICT service exports, service exports
Services exports in Gross US$ current terms ICT Services' exports in Gross US$ current
terms
34% 33%
45% 43%
7%
14% 15% 2%
4%
3%
European Union China India United States Rest of the world European Union China India
60
ICT Exports as a percentage
of Total service Exports
50
40
30
20
10
0
2005 2006 2007 2008 2009
European Union World China India United States
Source: WDI and Institute for Competitiveness Analysis

36. High Technology and Low Technology futures
The Competitive
Economy
Hi Tech Low Tech

37. Apple Economy
Purchas Cost of Goods
ed Inputs sold
Direct
Labor
Value Gross
SG&A Profit SG&A
Sales Added
(Value
Price
Capture
R&D R&D
d)
Deprecia Depreciation
tion
Net Net Profit
Profit
G
Gross Cost
r
o
s
Retail $30 Dist. s
$45 Retail Margin
Margin
$ 224 Wholesaler Price to Apple USA Japan Kore Total
Price
$299 a
m
a
Wholesale $80 Apple Gross Distribution $75 $74
r $ 144 cost of all Inputs
Price $299 margin g and Retail
i
n Apple $80 $80
Cost of Gross margin for $ 83 cost of goods Cost of 444
$28
Inputs 7 Key inputs $33 f for 7 Key Inputs still to be Seven $7 $26 $1 $34
$144 o analyzed Identified
$78 still to be
r Inputs
Cost of sales for Gross margin for $4 other cost analyzed cost
11 key inputs 7 Key inputs $33 Portal player Chip for 6 Key
7 Portal Player $1 $1
$102 Inputs
suppliers
K
Source: Institute for Competitiveness Analysis
e

38. Apple Economy
Component Supplier Company Manufacturing Estimated Cost as % of Gross Profit Estimated
HQ Location Location Factory Price all iPod Parts Rate Value Capture
Hard Drive Toshiba Japan China $73.39 51% 26.5% $19.45
Display Module Toshiba- Japan Japan $20.39 14% 28.7% $5.85
Matsushita
Video/ Multimedia Broadcom US Taiwan/Singapo $8.36 6% 52.5% $4.39
Processor re
Portal Player CPU Portal US US or Taiwan $4.94 3% 44.8% $2.21
Player
Insertion, test and Inventec Taiwan China $3.70 3% 3.0% $0.11
assembly
Battery Pack Unknown $2.89 2% $0.00
Display Driver Renesas Japan Japan $2.88 2% 24.0% $0.69
Mobile SDRAM Samsung Korea Korea $2.37 2% 28.2% $0.67
Memory- 32 MB
Back Enclosure Unknown $2.30 2% 26.5%
Mainboard PCB Unknown $1.90 1% 28.7%
Subtotal of 10 most $123.12 85% $33.37
expensive inputs
All other inputs $21.28 15%
Total all iPod inputs $144.40 100%
Source: IFC Analysis
Source: Case study on Apple ipod Ecosystem by University of Berkeley

39. Population : Complex Perspectives
Total Urban Population 2010 Total Urban Population 2010 - 2050
300 6000
274
250 5000 4888
200 3958
Population in Millions
178 4000
Population in Millions
150 136
3000
100 84
2000
62 58 1614
1354 1417
50 34 38 1215
32 27
1000
0
City City City City City
population population population population population 0
(< .5 (.5-1 (1-5 (5-10 (> 10 PRC India Asia
millions) millions) millions) millions) millions) 2010
China
India
Source: United Nations, World Urbanization Prospects, The 2009 Revision,
Asia 2050, Asian Development Bank

40. Urban Perspectives
182 80%
Central asia 74%
96
70% 67%
64% 65%
520
South east asia
252 60% 55%
52%
50%
% Urban Population
50%
1261 42%
South Asia 41%
496
40%
30%
1284 30%
Northeast Asia
805
20%
3247
total urban population (mn) 10%
1649
0%
0 500 1000 1500 2000 2500 3000 3500
2050 2010
Source: US. Bureau of Labor Statistics, Boston Consulting group , IFC Analysis

41. Demographic Shifts for India
1400 1400
1200 1200
1000 1000
Population in Millions
Population in Millions
800 800
600 600
400 400
200 200
0 0
0-14 15-24 25-49 50-59 60+ Years All ages 0-14 15-24 25-49 50-59 60+ All ages
Years Years Years Years Years Years Years Years Years
Year 2000 Year 2000
Year 2020
Year 2020

42. Health Expenditure Per Capita in Current US $
1000
3000
4000
5000
6000
7000
8000
9000
2000
0
India
1995
1996
1997
European Union
1998
1999
2000
2001
World
2002
2003
United States
2004
2005
2006
2007
Source: WDI and Institute for Competitiveness Analysis
2008
China
2009
Health Expenditure and Life Expectancy
2010
Life Expectancy at Birth In number of Years
10
20
30
40
50
60
70
80
90
0
1990
India
1991
1992
1993
1994
European Union 1995
1996
1997
1998
World
1999
2000
United States
2001
2002
2003
2004
2005
China
2006
2007
2008
2009
2009

43. Trade in the World Economy
80 India - EU trade
Billions
Transactions in Billions of Euros
70.0 70
Trade to GDP ratio (2007-
58.7
60.0 51.4 60
47.5 50
50.0
40.0 40
09)
28.9 27.6 30
30.0 24.8
20
20.0
10
10.0 0
0.0 2005 2006 2007 2008 2009 2010
EU 27 Brazil China Russian India USA
Federation EU imports from India EU exports to India
EU trade with India
14 000 12 849 Trade in the world
Trade Per capita (US$, 2007-
12 000 10 016
10 000
8 000
5 064 16%
6 000
4 000
09)
1 969 1 921
2 000 522
0 13%
55%
2%
14%
Source: WDI, WTO and Institute for Competitiveness Analysis European Union China India

44. Trade in the World Economy
10000
9000 8697
8275
8000
7000
World 3.0
6000
5000
4000
World 1.0 World 2.0
3000
Yes Yes 2000
1413 1457
1220 1168
964 944
World 0.0 1000
Market Market 255 155
Regulation Integration 0
No No European China India United World
Union States
Imports (Billions of Euro) Exports (Billions of Euro)
Source: World 3.0, fig 1.2, pp. 18, by Pankaj Ghemawat
Source: WDI, WTO and IFC analysis

45. Barriers to Entry or Areas of Progress
Source: Photo 1. Great Wall of China, accessed from www.crestock.com
Photo 2. Researchers/ People carrying nose cone of a rocket to Thumba, www. Skyscrapercity.com

46. Trade Projections by WTO And ADB
Sectoral Distribution of FDI Projects, 2009-10
According to a press release of WTO on 600
7 April 2011 following the 554
14.5% surge in the volume of exports in 2010 world
trade growth should settle to a more modest 6.5% 500
expansion in 2011. 449
392
400
Trade openness of the region, measured by the 361
trade-to-GDP ratio, is projected to increase for 338
Asian Developing regions sharply from 39.4% in
2010 to 74.4% in 2030 . Among the 12 300 2009
economies, Hong Kong, China Malaysia Singapore 254
2010
and the Philippines are notable for maintaining very
high trade/GDP ratios for a long period of time 200
(Krugman 1995). By the end of the projection
period, Thailand and Viet Nam too are likely to join
this group of “super trading economies”.
100
People’s republic of China’s trade/ GDP ratio is
projected to grow from 41.7% in 2010 to 81.9% in
2030.
0
Primary Manufacturing Services
Source: Asian Trade Flows: Trends, Patterns, and
Projections
Prema-chandra Athukorala No. 241 | January 2011

47. Competitiveness and World Economy
Context for Firm
Strategy and
Rivalry
• Local rules and incentives that encourage
investment and productivity e.g.
- salaries,
Factor - incentives for capital investments, Demand
Conditions - intellectual property protection Conditions
• Vigorous local competition i.e.,
- Openness to foreign and local
competition;
Access to high quality business inputs - Sophistication of company operations Sophisticated and demanding local
i.e., customers and needs e.g.,
- Natural endowments, - Strict quality, safety, and environmental
- Human resources, standards
- Capital availability, – Consumer protection laws
- Physical infrastructure, Related and – Government procurement of
- Administrative infrastructure, Supporting advanced technology
- Information infrastructure, Industries – Early demand for products and
- Scientific and technological infrastructure Services.
Local availability of suppliers and supporting
industries
Presence of clusters instead of isolated firms
• Many things matter for competitiveness
• Successful economic development is a process of improving the business environment to enable increasingly
sophisticated ways of competing
Source: The Competitive Advantage of Nations, Michael. E. Porter

48. Stages of the Economy – Indian Context
Factor-driven economies: Factor-driven economies focus on
low-cost basic factor conditions, such as low-skilled
Stage 1 labour, natural resources and geographic location. Factor-
driven economies need to focus on input costs, macro, political
and legal stability, efficient basic infrastructure and lowering the
regulatory cost of doing business.
Investment-driven economies: Investment-driven economies
would have the ability to produce standard products and
services of high quality using efficient methods but at lower
Stage 2 wages than advanced economies. Investment-driven
economies need to focus on building efficiencies, enhancing
local competition, market openness, incentives and rules for
encouraging productivity.
Innovation-driven economies: Innovation driven economies
would focus on innovative products and services at the global
Stage 3 technology frontier. Innovation driven economies would need to
focus on advanced skills, advanced infrastructure, incentives
and rules encouraging innovation.

49. Competitiveness and World Economy
Regional
Local / State National Global
(e.g., Scandinavia, Western
Europe)
• Separate local value chains • Integrated global value chain
Firm Infrastructure
(e.g. Financing, Planning, Investor Relations)
Human Resource Management
(e.g. Recruiting, Training, Compensation System)
Support
Activities Technology Development
(e.g. Product Design, Testing, Process Design, Material Research, Market Research)
M
Procurement Value
a
(e.g. Components, Machinery, Advertising, Services) `
r What
Inbound g buyers are
Outbound Marketing After-Sales
Logistics Operations i willing to
Logistics & Sales Service
(e.g. n pay
(e.g. Incoming (e.g. Order (e.g. Sales (e.g.
Assembly, Com
Material Processing, Wa Force, Promotion, Installation, Cus
ponent
Storage, Data rehousing, Rep tomer
Fabrication, Br
Collection, Ser ort Preparation) Advertising, Prop Support, Compl
anch
vice, Custome osal Writing, Web aint
Operations)
r Access) site) Resolution, Re
pair)
Primary Activities
• Geographic scope of competition is determined by the ability to leverage activities in the value chain across borders Industries differ greatly in the
scope of competition
Source: The Competitive Advantage of Nations, Michael. E. Porter

50. Country Equivalents
Source: Economist Intelligence Unit, National Statistics

51. Country Equivalents
Source: Economist Intelligence Unit, National Statistics

52. Country Equivalents - Brazil
Source: Economist Intelligence Unit, National Statistics

53. Consumption in India : Fuelled by new models
2010 2020
United States 169
GDP 850 billion Pounds GDP 1920 billion Pounds
ATM Machines per 100,000 adults in 2009
Private Consumption 490 Billion Private Consumption 490 Billion
Pounds Pounds India 4
Non Retail 590
Retail 270 Non Retail 225 Retail 270 Billion Pounds
Billion Pounds Billion Pounds Billion Pounds (50-55%)
(55%) (45%) (55%)
World 32
Urban 120 Rural 150 Billion Urban 280 Rural 245
Billion Pounds Pounds Billion Pounds Billion Pounds
(45%) (55%) (50-55%) (45- 50%)
Organized Retail 13 Billion Pounds Organized Retail 125 Billion Pounds European Union 77
(5%) 24%
Source: WDI, Marketing Whitebook 2011, Businessworld and Institute for Competitiveness 0 50 100 150 200