Chapter One: Introduction
1.1 Background of the Study
Increasing global competition is changing the environment facing most companies today. As trade barriers fall and transaction costs decline, new global competitors are entering previously more isolated domestic markets. In response to this intensified competitive pressure, local companies are pushed to enhance performance by innovating and adopting process and product improvements. This domestic sector dynamic leads to higher productivity, which, in turn, can create sustainable competitive advantages for companies, as well as being the most important driver of job creation and per-capita income growth for the economy (Baily et al., 2005). Higher productivity is the synonym of improved competitiveness. Enterprises are competitive when their productivity of labor and all production factors grow consistently, which situation allows them to reduce the unit costs of their output, etc., but also affect other enterprises at the national and international levels. Higher productivity provides funding for an organization’s expansion plans. In the short term, citizens benefit from the better and cheaper products available on the market, and in the medium term from growing employment. Another effect is constant growth in wages in real terms. As a result, a country’s living standard goes up when its productivity growth (in macro-terms) is sustained. Therefore, an enterprise plays the primary role in generating revenues and employment, and contributes to a lasting and balanced economic and social development (Wysokińska, 2003).
Increasing global competition is changing the environment facing most companies today. As trade barriers fall and transaction costs decline, new global competitors are entering previously more isolated domestic markets. In response to this intensified competitive pressure, local companies are pushed to enhance performance by innovating and adopting process and product improvements. This domestic sector dynamic leads to higher productivity, which, in turn, can create sustainable competitive advantages for companies, as well as being the most important driver of job creation and per-capita income growth for the economy (Baily et al, 2005). According to the OECD’s definition, competitiveness denotes the ability of firms, industries, regions, nations or transnational groups to confront international competition and to secure the sustainability of a relatively high rate of return on the factors of production, and of a relatively high level of employment. Competitiveness is the ability to generate sustainable and relatively higher revenues from the factors of production and high employment as a result of exposure to international competition (Wysokińska, 2003). Simply put, productivity is efficiency in production: how much output is obtained from a given set of inputs. As such, it is typically expressed as an output–input ratio. Single-factor productivity measures reflect units of output produced per unit of a particular input (Syverson, 2011). Productivity measures attempt to highlight improvements in the physical use of resources, that is, to motivate and evaluate attempts to produce more outputs with fewer inputs while maintaining quality (Banker and et al, 1989). Productivity growth depends on a number of factors, among which innovations and investments in the ICT sector and on development of human capital are the most important (Wysokińska, 2003).
1.3 Rational of the Study
Success in any competitive context depends on offering superior customer value (i.e. value advantage) or operating with lower relative costs (i.e. cost advantage) or, ideally, both (Porter 1985, Christopher 1998). The survival of any business depends on its ability to compete effectively, Madu (2000). The competitive advantages occur when a firm uses its resources and capabilities to develop organizational competences that, in turn, create value for...
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