Mgmt 510 International Management

Doha, 2011

Content of this course• Economics and Sustainability

• Clusters• Sustainable Development

• Economic Development• Regional Competitiveness• Inbound FDI

• Global Business Strategy• FDI Decision-Making• Foreign Market Entry Processes and

Criteria

Determinants of Competitiveness

Porter, 2009

Why do clusters matter?• Clusters increase productivity and

operational efficiency• Clusters stimulate and enable innovations• Clusters facilitate commercialization and

new business formation

• Clusters reflect influence of linkages and spill-overs across firms and associated institutions in competition

State of Cluster

Development

Why do clusters matter?

Macroeconomic environment• Creates the potential for high productivity,

but is not sufficient

Productivity – the key outcome• Depends on improving microeconomic

capability of the economy and the sophistication of local competition

State of Cluster

Development

Reinert, 2005 6

Why do clusters matter?

• Concentrated communication made possible by a cluster increases learning and innovation• Contributes to the dynamic, technological

efficiency of firms in the cluster• Trust increases over time which facilitates

contracting and exchange among firms• Common business culture develops which

reduces uncertainty

State of Cluster

Development

Why do clusters matter?

Industries participating in clusters have:• Higher employment and wage growth.• Greater number of establishments.• Higher number of patents.

Industry and cluster growth increases with:• The strength of related clusters in the region.• The strength of similar clusters in adjacent regions.

Presence of strong clusters in a region:• Enhances growth opportunities for other industries and

clusters.

Delgado, Porter & Stern, 2011

State of Cluster

Development

Life Sciences in Massachusetts

9

Determinants of Cluster Competitiveness

Porter Diamond

Determinants of Cluster Competitiveness

Access to high quality business inputs• Natural endowments• Human resources• Capital availability• Physical infrastructure• Administrative & information infrastructure• Scientific and technological infrastructure

Factor Conditions

• Stresses three factors• Demand composition

• Sophisticated, demanding, and anticipatory home demand contributes to firms’ success

• Demand size and pattern of growth• Large, rapidly-growing, and early home demand are

positive aspects of the home base• Degree of internationalization

• The more home demand is synchronized with international demand trends, the more it contributes to firms’ competitiveness

Demand Conditions

Determinants of Cluster Competitiveness

• Supplying industries in the home base has several advantages in downstream industries• Efficient, early, rapid, and sometimes

preferential access to the most cost-effective inputs

• Ongoing coordination• Innovation and upgrading

• A competitive domestic supplier industry is better than relying on well-qualified foreign suppliers

Related and Supporting Industries

Determinants of Cluster Competitiveness

• Countries differ in managerial systems and philosophies as well as capital markets

• Institutional environments that allow firms to take a long-term view contribute positively to competitiveness

• Presence of a large number of competing firms or rivals in the domestic industry• Competition among firms is necessary for allocative

efficiency in a market system, but domestic rivalry contributes to dynamic, technological efficiency

Firm Strategy, Structure and

Rivalry

Determinants of Cluster Competitiveness

Vigorous local competition• Openness to foreign competition• Competition laws

Local rules and incentives that encourage investment and productivity• Examples: salaries, incentives for capital

investments, intellectual property protection, corporate governance standards

Firm Strategy, Structure and

Rivalry

Determinants of Cluster Competitiveness

Interactions—all related to rivalry• Domestic rivals

• Contribute to the creation of factors, especially specialized, advanced factors

• Enhance presence of specialized and sophisticated suppliers

• Produce differentiated products • Enlarges home demand and makes it more

sophisticated

Determinants of Cluster Competitiveness

Leading Footwear Clusters

Cluster based economic development• Collaborative programs by companies,

public sector entities and other related institutions

Collaboration to upgrade • Company operations and strategies• Business environment conditions• Strength of networks, spill-over linkages

Clusters and Competitiveness

Clusters and CompetitivenessInstitute for Strategy and Competitiveness• Cluster Mapping Project

Global Competitiveness Report/WEF• How does Qatar fair?

Qatar- Global Trade

- 60% of GDP, oil and gas- 10% of GDP, manufacturing, mostly

related to downstream O&G operations

- Significant investments in “knowledge economy”- Education City

Clusters and Competitiveness

Qatar – Knowledge Economy Index 2009

Clusters and Competitiveness

Rank Country KEI

Economic Incentive Regime Innovation Education ICT 

1 2 Denmark 9.52 9.61 9.49 9.78 9.21

9 -3 United States 9.02 9.04 9.47 8.74 8.83

12 3 Germany 8.96 9.06 8.94 8.36 9.47

44 5 Qatar 6.73 7.05 6.45 5.37 8.06

45 5United Arab Emirates 6.73 6.75 6.69 4.9 8.59

49 -6 Bahrain 6.04 6.75 4.29 5.82 7.3

66 0 Oman 5.36 7.15 4.94 4.47 4.9

68 13 Saudi Arabia 5.31 5.94 3.97 4.89 6.43

81 13 China 4.47 3.9 5.44 4.2 4.33

99 -3 Morocco 3.54 4.12 3.72 1.95 4.37

109 -2 India 3.09 3.5 4.15 2.21 2.49

131 -6 Nepal 1.74 2.11 2.27 1.79 0.8

Qatar- Global Investment

- Qatar Investment Authority (“Sovereign Wealth Fund”)

- Invests domestically and internationally to minimize exposure to energy price volatility.

- Example investments:- US$65B, domestic infrastructure; US$60B,

national development (03/11) – “World Cup related”

- US$700M, CityCenterDC, 10 acre project (04/11)- US$1B, Morocco infrastructure (11/11)- US$2.3B, purchased Harrods

Clusters and Competitiveness

Qatar- Global Engagement

- WTO “Doha Round” – launched 11/01- Al-Jazeera- US military base- Doha Masters (golf) host- First annual The Hague International Model United

Nations- 2006 Asian Games host- 2011 Asian Cup (football) host- Contributed fighter jets and Special Forces to

Libyan rebellion- World Cup 2022 host

Clusters and Competitiveness

Qatar- World Cup 2022 Bid

- 12 new stadiums- Lusail Iconic Stadium – skinned with solar panels- 2 15,000 seat, 8 10,000 seat, 12 5,000 seat

stadiums will be given away- “…environmental protection plan foresees the

generation of excess renewable energy sources which would contribute to a carbon-neutral event and be used to offset all unavoidable emissions.”

- “…the activities would firstly concentrate on water and waste management…”

Clusters and Competitiveness

Jennifer Blanke, World Economic Forum

Clusters and Competitiveness

Clusters, Competitiveness and Sustainability3 Major Challenges for Clusters:• Globalization

• New competitors v. new Customers• Climate Change

• Potential economic costs v. New business opportunities

• Social Equity• Productivity v. Income inequality

Clusters, Competitiveness and SustainabilityCluster Life Cycles• Long term viability linked to:

• Maintaining innovation cycle• Leading or quickly reacting to

disruptive market and technology shifts

• Connecting to global networks

Clusters, Competitiveness and SustainabilitySustainable Industry Clusters:• Knowledge-intensive subset of existing

industry clusters• Energy• Building• Food

• Discover new ways to accomplish existing functions• Create energy• Build a structure• Grow food

Martin, 2009

Clusters, Competitiveness and SustainabilitySustainable Industry Clusters:• Green Building Cluster, Oregon

• Demand conditions – sophisticated and anticipatory customers

• Factor conditions – natural endowments, intellectual capital

• Competitive rivalry – development, architecture, construction

• Supportive policies - renewable energy portfolio, business energy tax credit

Martin, 2009

Clusters, Competitiveness and SustainabilitySustainable Industry Clusters:• Green Building Cluster, Oregon

• Major regional players• Development - Gerding-Edlen• Architecture – SERA, ZGF• Construction – Howard S Wright, others• Government – BETC, REP, Cities• Universities – energy, construction materials• Technology - SoloPower

• Major global players• Construction – Skanska• Technology – SolarWorld Martin, 2009

Clusters, Competitiveness and SustainabilitySustainable Industry Clusters:• Green Building Cluster, Qatar???

• Major regional players• Development – Qatari Diar Real Estate Investment

Company, Barwa Real Estate Company• Government - Qatar Sustainability Assessment Systems,

Qatari General Electricity and Water (“KAHRAMAA”)• Architecture – QPM Qatar Project Management• Construction – ???

• Major global players• Architecture – Green Building Services, Interface

Engineering• Universities – U of Pennsylvania (Technical Training)

Making the pitch• Day 2 – Pitch concept• Day 3 – 2 minute pitch focused on cluster assessment• Day 4 – 5 minute pitch focused on Day 3 + “Fit-1” (Solar

PV Mfg and Qatar)• Day 5 – 7 minute pitch focused on Days 2 and 3 + “Fit-2”

(The Company + Qatar Industrial Policy)• Day 6 – 10 minute pitch focused on Days 2, 3 and 4 +

“Fit-3” (The Company + Qatar Market)

Making the pitch

• Pitch concept – what is the angle you will take?• Financing• Education• Labor force• Market opportunity• Government support• Etc.

Making the pitch

• Getting to the 10 minute pitch• Build a logic to your presentation• Integrate key frameworks with research• “SELL” the company on Qatar as a beachhead for

solar PV manufacturing in the Middle East