Globalization, Alliances and Networking: A Strategy for Competitiveness and Productivity

Globalization, alliances and networking: A strategy for competitiveness and productivity

Joseph Prokopenko

1. Productivity, competitiveness and development

For many years productivity has been a key issue for national development strategies because of its impact on economic and social development. It is important as a source of income and as an integrative objective encompassing improved labour/management cooperation and worker participation, it is the criteria for enterprise competitiveness and a long-term strategy for governments, employers and employees to alleviating poverty and promoting human rights and economic democracy. It is a well-known fact that the most productive companies and government productivity-oriented policies are closely linked to the promotion of a better quality of working life, participation, market economic principles, individual initiative and creativity, and human-oriented management styles and practices.

Productivity objectives, accepted by all parties concerned, become the important instrument of just distribution of wealth, sound industrial relations and democratic workers' participation. Thus, productivity is a good tool to balance economic, social, technical and environmental objectives.

Productivity and poverty alleviation. There is strong macro-economic and statistical evidence that the more effective (productive and competitive) the national economy, the higher the personal income of workers and the lower the rate of inflation in the long-term. It also means more national income for social distribution for those who are young, old, handicapped or unemployed. Better productivity also provides more profit to invest in promoting economic growth in underdeveloped regions. Therefore high productivity, packaged with effective distributional social policy, is the best available means to alleviate poverty.

Productivity and promotion of employment. Long-term international statistical trends show that there is a strong correlation between national productivity and the level of unemployment. The more productive an economy, the more competitive it is in the foreign market and the lower the unemployment rate. The more productive an enterprise, the more income it can save for new investments and therefore create new jobs. It is ignorant to believe that productivity leads to unemployment, particularly in the long-term. Short-term negative effects of productivity on unemployment could be met by sound economic and social policies. Therefore, productivity is the best indicator of where to invest and the sources of funds for the creation of new jobs.

Productivity and human rights, democracy and tripartism. Human rights can be based on effective economic and social development. Economic democracy, for example, can be exercised through entrepreneurship, self-employment and small enterprise development which would provide equal opportunities for everyone to set-up their own firms or businesses or start an individual activity. These numerous undertakings could only survive on the basis of higher productivity and a conducive political and economic environment to exercise such economic democracy.

The most important objective of tripartism is a more effective and peaceful organization of economic and social activities, sound industrial relations as well as participation and gainsharing between major economic agents. Therefore, productivity improvement could be the common objective for all three parties - employers, workers and governments.

2. Productivity factors at the macro-level

It has become more and more evident that productivity improvement is the result not only of micro-measures within the enterprise, but also of macro-level and global efforts and changes in the quality of government policies and strategies, the social and business environment and public administration.

A few important trends have been identified in the business environment which, in my view, will lead to dramatic changes in present and future productivity strategies and approaches. These trends are the following:

 economic globalization and integration;

 the impact of technological developments;

 structural adjustment and privatization;

 the growing demand for sustainable development;

 emerging new work systems;

 the move from traditional personnel practices to international HRM;

 changes in leadership styles: from bureaucracy to entrepreneurship.

However, before we discuss some of these trends, let us briefly look at the links between productivity and competitiveness in development strategies.

2.1 Competitiveness: the new benchmark for economic strategy

Competitiveness is a hot issue for many countries and companies. The OECD defines competitiveness as "The degree to which a country can, under free and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long-term".(1) This could only be achieved under increased productivity.

Competitiveness factors and conditions

The World Competitiveness Report suggests eight major factors which influence the competitiveness of companies and nations:(2)

Domestic economy. The more competition there is in the domestic economy the more productive and competitive the domestic firms are likely to be abroad and the higher value-added productivity and country prosperity.

Internationalization. Openness for international economic activities increases a country's economic performance. Export-led competitiveness is often associated with growth-orientation in the domestic economy. Higher integration with the international economy results in more productive resource allocation and higher living standards.

Government. Direct state intervention in business activities are minimized. Government policies concentrate on creating a competitive environment for enterprises and on providing macro-economic and social conditions that are predictable and thus minimizing the external risks for economic activities. It is flexible in adapting its economic policies to a changing international environment.

Finance. A well-developed, internationally-integrated financial sector in a country supports