Question

Determinants of national competitive advantage create the national environment in which companies are born and learn how to compete.

Assuming that you are strategy and policy expert for your own country:( Bahrain, Lebanon, Oman, Jordan, Kuwait, Egypt, Saudi Arabia, and Sudan)you are:

Required:

1. To critically analyze and discuss FOUR different policies with each of the four determinants of national competitive advantage that will attract Multinational Corporations (MNCs) and protect domestic firms in your country. (1000 words)

2. To suggest and critically discussFOURstrategies that can enhance the capacity of firms in your country to   create more employment (500 words)

Answer 1

1) Firm strategy, structure and rivalry: Competition needs to be encouraged for better performance of domestic firms, however monopoly should strictly be controlled and also the structure and strategy of the MNCs should not be such as to threaten the existence of domestic companies in the same sector. For eg, the telecom sector in Oman is monopolised by Omantel an enterprise with 51% government ownership down from 70%. Encouraging advent of MNCs into the sector would prove useful in the current scenario as the presence of a government entity could ensure balance and control over MNCs as also ensure improved services and competitive pricing for the users.

2) Factor conditions : Presence of skilled labour, capital, infrastructure and advanced technology in adequate supply is a major factor in itself for attracting MNCs who also bring in further inputs in the form of foreign investment and transfer of technology as also improving GDP by providing employment. We need to ensure that the domestic companies get preference for utilising the national resources over the MNCs, hence protecting their interests.

3) Demand conditions : MNCs are attracted to markets exhibiting surplus demand for any product that they manufacture apart from other factors which make setting up an organisation in a foreign country viable for them. Hence, creating conditions conducive to increasing demand for products through adequate flow of information via various channels of broadcasting can be highly advantageous. These companies are already facing saturation in their home markets in more developed economies. This will pressurise the domestic players to be more competitive to hold on to their market share inspite of entry of MNCs. The domestic firms can be protected by protecting certain segments to which they are provided exclusive access.

4) Related and supporting industries: This is a very important factor for attracting MNCs to set up operations in any country. For the set-up, survival and growth of any organisation the inputs become a major factor. Availability of raw materials and human resources required are important considerations along with infrastructure such as transport, telecom, a thriving economy and finance as these form the backbone for the success of any organisation in the long run. This can prove to be a major blessing for domestic companies if the MNCs are forced to use all inputs from domestic suppliers only. The domestic suppliers, at the same time should be encouraged to provide costeffective inputs in an efficient manner.

2a) Encourage the setup of manufacturing units especially for products for which raw materials are abundantly available in the country. this shall have a two fold effect by generating employment in two sectors.

b) To utilise natural resources of the country to maximum advantage be it agriculture or mining of minerals and metals as these are labour intensive sectors and can provide extensive employment.

c) To encourage entreneurship as opposed to taking up jobs especially among the educated youth which results in natural creation of jobs as well as enhancing GDP.

d) To provide education which nurtures world class citizens making it possible to invite MNCs to set-up their outsourcing units for business processing as well as technical support.