Proceedings of the International Conference on Industrial Engineering and Operations Management

Dubai, UAE, March 10-12, 2020

Competitiveness In Global Transformation :

A Systematic Review
Nurhadi Wibowo, Rahmat Nurcahyo*
Industrial Engineering Department
Faculty of Engineering, Universitas Indonesia
Kampus UI Depok, 16424, Indonesia
[email protected]
*Corresponding author: [email protected]

Abstract

Industrialization and globalization affect the world's view of carrying out the economy. The company
cannot conduct business as usual because of the openness of international markets and information.
Increasing population, cultural change, economic movements throughout the world are the effects of both
of these. Rapid changes to consumer needs and product diversity make market conditions more competitive.
Every country in the world competes to become the most competitive economy by increasing its
competitiveness to survive in the era of globalization so that, national competitiveness becomes an
important point for all countries in the world. The purpose of this paper is to identify gaps from previous
studies for contributing new research ideas. This paper adopts a systematic literature review method to find
out the state of the art based on general characteristics (conceptual and measurement), solution methodology
and strategic level. This paper contributes to give a new idea in competitiveness research, which categories
that are useful for solving competitiveness problems at each level, including International, National and
Firm

Keywords
International Competitiveness, National Competitiveness, Firm Competitiveness, Strategy, Globalization

1. Introduction
Industrialization is a process that produces products using mechanical and chemical-mechanical expertise
with specific resources (Biernacki, 2001). Industrialization is also marked by the increasing use of technology and
changes in the way of the view of the company accompanied by an increase in population, urbanization, cultural
differences, and shifts in power between countries. Therefore, industrialization is essential in human welfare (O'Brien,
2001)
At present, in every country dealing with the so-called globalization era. Globalization is changing the way
companies do their business as usual because of the openness of international markets, openness of information, the
use of low resource costs in developing countries and efficient supply chain systems. This incident makes
Globalization affect all lines of life such as economic, social and political throughout the world (Chatha & Butt, 2015;
Kuivanen, 2008; Manyika, 2012; Scapolo, Geyer, Boden, Dory, & Ducatel, 2003)
The manufacturing industry faces market uncertainty, product diversity and changing customer needs very
quickly when market conditions become very competitive (Chatha & Butt, 2015; Manyika, 2012). At the same time,
environmental issues become very important to consider (Chatha & Butt, 2015; Garetti & Taisch, 2012; Kuivanen,
2008; Qiu, 2009; Scapolo et al., 2003). The changes that almost occurred in all these lines have made every country
in the world compete to become the most competitive economy by increasing national competitiveness to build global
competitiveness and be able to survive in the era of globalization (Fahy, 2002; Setyawan, 2011). National
competitiveness is one of the critical points for the government and industry of a country, also expressed by (Dong-
sung & Hwy-Chang, 2013).

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Achieving the goal of becoming a country that has competitiveness, attention needs to be paid to the
performance of the domestic industry related to various factors, including non-financial and financial factors to be
able to determine the sustainability of an industry and the competitiveness of the industry so that industry players can
be properly directed in determining a decision (Bouranta & Psomas, 2017; Phusavat & Kanchana, 2007). The purpose
of this paper is to identify gaps from previous studies for contributing new research ideas. This study uses a systematic
literature review method to find out the state of the art research based on general characteristics (conceptual and
measurement), solution methodology and strategic level

2. Literature Review
The concept of competitiveness begins with trade theory, which states that wealth is set by endowments
(Smith, 1937). Ricardo proposed in The Principles of Political Economy and Taxation with his method called
comparative advantage which states that even if a country does not have an advantage in producing commodities when
compared to other countries, but mutually beneficial trade can still take place, as long as the price ratio between
countries is still different when compared to no trade (Dong-sung & Hwy-Chang, 2013). Thereafter (Porter, 1990)
first introduced the concept of competitive advantage, which states that the success of an industry in the competition
is determined by differences in national values, culture, economic structure, institutions and history. The development
of the era to bring the concept of competitive advantage into The Theory of Systemic Competitiveness which arose as
a challenge to the neo-liberal view of competitiveness focused on isolated companies and macroeconomic
determinants (Esser, Hillebrand, Messner, & Meyer-Stamer, 1996)

2.1 International – Level competitiveness

The term international competitiveness according to (Capobianco-Uriarte, Casado-Belmonte, Marín-Carrillo,
& Terán-Yépez, 2019) was first introduced in the HMS treasury report in 1983 which was defined as "International
competitiveness means the ability of the producers to compete successfully in competing for world markets and with
imports in its own domestic market”. Competitiveness is generally measured by the shares which a country attains in
its markets, due to its being made for its size and stage of development. Competitiveness, in this very general sense,
comes to being synonymous with overall performance.
In line with changing times, the definition of international competitiveness develops from the initial
definition, where several factors are added including Public Function (Competitiveness, 1985), government roles
(Fagerberg, 1988; Krugman, 1994), sustainability (Mulatu, 2016) to the concepts issued by the world competitiveness
center in (Capobianco-Uriarte et al., 2019) which states that the competitiveness of a country depends on the way of
good governance based on competence and resources. Sustainable development is needed to supporting the new
perspective, where current competitiveness must pay attention to the sustainability of competitiveness in the future
which must include growth in quality of life, resource management, social equality, human development and welfare
(Capobianco-Uriarte et al., 2019)

2.2 National – Level Competitiveness

(Porter, 1990) Started the concept of competitive advantage of the nation by conducting studies in ten
countries that have advanced industries including (Germany, Italy, Japan, Singapore, South Korea, Switzerland,
England, Denmark, USA, and Switzerland). The study was conducted in more than a hundred industries and found
success, which in turn made Porter study the competitiveness of micro industries into the macro competitiveness of
the nation. The concept of competitive advantage for nation porters is better known as the Diamond Framework which
uses approaches including (1) Factor Conditions namely where the role of the state in mastering human resources,
infrastructure, knowledge and capital resources and also natural resources, (2) Demand Conditions refer to conditions
of domestic demand from an industry where if demand from consumers increases will make the industry develop
which makes industry investment increase, the industry can adopt technological changes more quickly and can also
make national products of international quality so that international markets can be achieved, (3) Related and
supporting industries, which are industries depend on other industries alliance to get added value for consumers and
become more competitive, (4) Firm, strategy, structure, rivalry is about how the country creates, manages and
organizes industries in increasing competitiveness. The four factors are described in the form of diamonds which
according to Porter affect the domestic industrial environment in operating and competing to increase competitive
advantage Diamond Framework model can be seen in figure 1
Diamond Framework has limitations in its application to developing countries such as Korea, as stated by
(Cho, 1994). (Cho, 1994) Initiated a nine factor model that emphasizes two categories to explain the concept of
national competitiveness, namely the physical category and the human category. Physical categories include natural

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resource factors (resource endowment), business environment (business environment), related supporting industries,
and demand conditions, where the combination will determine its competitiveness at the international level.
Meanwhile, the human category includes factors of workers, politicians, and bureaucracy, employers as well as
professional managers and technology engineers. The eight factors that fall into these two categories, they are called
internal factors. An external factor to complement the nine-factor model is a chance. The differences between the
nine-factor models and Porter's diamond models are in the division of factors, and in addition to new factors. The
diamond model includes both natural resources and labour in factor conditions, but the nine-factor model places
natural resources under-endowed resources, while labour is included within the category of workers (Dong-sung &
Hwy-Chang, 2013). The Nine Factor Model can be seen in Figure 2
National competitiveness report already exists since 1989, called the International Institute for Management
Development (IMD) and The World Economic Forum (WEF) in 1995. They are the two most popular institutions
publishing national competitiveness reports. Both of institutional reports have different views and models for defining
competitiveness. IMD implies that GDP and productivity are proxies for competitiveness, but the IMD argues that
competitiveness cannot be reduced to the mere notions of GDP and productivity. In contrast, the WEF accepts GDP
and productivity as proxies for competitiveness (Cho & Moon, 2005). While both institutions have a different
definition of competitiveness, but they have an identical factor in defining competitiveness. First of all, the IMD has
chosen two factors, domestic economy, and internationalization and then added six others – government, management,
finance, infrastructure, science, technology, and people. However, there are conceptual redundancies between the first
two factors and the other six because the latter six factors can be classified as either domestic or international variables.
In the WEF report, the first two factors are altered slightly: the domestic economy becomes civil institutions and
internationalization becomes openness, while the other six factors remain the same. Although they are now using
different models, both the IMD and WEF reports used to have eight variables that were almost identical, but they
produced quite different results. Differences between both can be seen in table 1 and table 2

Table 1 Original Models of the Two Reports (1996- Table 2 Revised Models of the Two Reports
2000)

All this time, measuring the competitiveness of the nation is using IMD and WEF. (Garelli, 2006) proposed
the competitiveness cube. The Cube theory defines four competitiveness forces: aggressiveness vs. attractiveness,
assets vs. processes, globality vs. proximity, and social responsibility vs. risk-taking. He argues that competitiveness
is how a nation manages the totality of its resources and competencies to increase the prosperity of its people. As well
as the Michael Porter’s Diamond Theory, Garelli said that his theory underlines that the management of
competitiveness should be both systemic and systematic: systemic means that the interaction between the factors of
competitiveness is just as important as the analysis of the factors themselves (for example, when focusing on
developing infrastructure, it is not just about building airports, railroads, railways, ports, etc. it is also about connecting
all these facilities into one integrated value-added logistical system based on the most modern technologies);
systematic means that a competitiveness strategy needs to be coherent over time. Business is pretty adaptive to the
most adverse conditions provided that the rules are clearly defined and predictable. The competitiveness Cube theory
can be seen in figure 3

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2.3 Firm-Level Competitiveness

(Chikán, 2008) argues that there is no national competitiveness in the economy if there is no competitiveness
in the company/organization. The development of the national competitiveness economy is very dependent on the
influence of the competitiveness of companies/organizations. To be able to achieve organizational competitiveness,
there have been many studies on management strategies, one of the goals in its application is competitiveness. (Ajitabh
& Momaya, 2004) In their study modelling strategies in increasing company competitiveness. The model provides an
essential view of strategy, human resources, and operations when the view of resources is only focused on assets and
capabilities. Some generic types of strategies that are often used in competitiveness improvement studies include: (1)
(Porter, 1980) introducing the concept of strategy to enhance the competitiveness of companies commonly called
Porter's Generic Strategy which include: Overall Cost Leadership, Differentiation, Focus, (2 ) (Wheelen, Hunger,
Hoffman, & Bamford, 2018) which divides generic strategies into three types namely growth strategy, stability
strategy and retrenchment strategy, (3) (David & David, 2017) grouping strategies into four types namely integration
strategy, strategy intensive, diversified strategy, and defensive strategy. The choice of this type of strategy is based on
strengths, weaknesses, opportunities, and threats both from the outside environment and from the environment in a
business. (4) (Bowman & Asch, 1996) It is another suitable way to analyze a company's competitive position in
comparison to the offerings of competitors. As with Porter's Generic Strategies, Bowman considers competitive
advantage concerning cost advantage or differentiation advantage.

Figure 1. Diamond Framework (Porter, 1990) Figure 2. Nine-Factor Model (Cho, 1994)

Figure 3. Cube Model (Garelli, 2006)

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Figure 4. Competitiveness Theory (Own Elaboration)

3. Discussion
The SCOPUS database was considered for the study. More than 10,000 Related article results that used the
keyword "competitiveness" during the period 1999-2019. Article subject area limits to economic, business, and
management results of 6,062 appearings. The title of the article containing words with the subject of “International
Competitiveness,” “National Competitiveness,” and “Industry Competitiveness” was added to the search filter and
result of 86 article paper. The title and abstract of the paper are read and analyze in-depth, especially papers with case
studies. In the analysis of the paper, a snowball method was also used to link the paper with the developed
competitiveness theory and model, which eventually resulted in 18 papers. The next step is to analyze the content of
the article by reviewing the context, objectives, methods, results and conclusions. The final step is to analyze and
categorize that paper based on general characteristics (conceptual and measurement), solution methodology and
strategic level.

3.1 International Level of Competitiveness

(Carraresi & Banterle, 2008) Assessed trade indices and ran cluster analysis to study the competitiveness of
the food and agriculture industries of the European Union (EU) market. Meanwhile, (Momaya, 2011) measure
competitiveness using three frameworks (diamond, human-factors, and APP). Another case of international level
competitiveness applied by (Arslan & Tathdil, 2012) that using multidimensional scaling method to measure
competitiveness for eleven countries and scrutinized the competitiveness indices from WEF’s Global Competitiveness
Yearbook, IMD’s World Competitiveness Report and IFC’s Ease of Doing Business Report concerning these eleven
countries. Research for illustrated the factors of competitiveness that impact the innovative capacity of ASEAN
countries explained by (Wonglimpiyarat, 2013) make an idea of NIS and PDM by considering different variables from
various studies and proposed a common framework to discuss NISs using Porter’s Diamond model. (Olczyk, 2016)
identify the growth pattern in the international competitiveness literature, its core publications and key research
domains based on bibliometric data from the years 1945–2015, which give us a background for conducting practical
analyses of international competitiveness, especially ones using synthetic indices.

3.2 National Level of Competitiveness

(Weihrich, 1999) doing analysis advantages and disadvantages from competitiveness in Germany using
TOWS. The purpose of this paper is proper identification and optimal utilization for a country's factor endowments,
thereby promoting the nation's continued global success. Meanwhile, Porter's Diamond Model approach to use for
analyzing the computer industry in Taiwan (Bridwell & Kuo, 2005). Another paper doing examines for perspective
competitiveness of nations in Turkey, and this paper identifies those attributes a country should focus on in seeking
to improve its position relative to other countries, i.e., to transition from its current cluster to the next using Artificial
Neural Network (ANN) (Önsel et al., 2008). The strategic studies are conducted by (Castro-Gonzales, Espina, &
Tinoco-Egas, 2017) using PLS-SEM as the methodology to increase the competitiveness of Ecuador (ECU), Colombia
(COL), and Peru (PER). (Hanafi, Wibisono, Mangkusubroto, Siallagan, & Badriyah, 2019) reveal the complexity of

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smelter industries in Indonesia. The paper also addresses the causes of problems and the interaction of variables using
a causal loop diagram. System Dynamic approach is using in this paper.

3.3 Firm-Level Competitiveness

Comparing the automotive industry of China, India, and South Korea using a double diamond model
demonstrated by (Sardy & Fetscherin, 2009). The competitiveness index of the Chinese automobile industry was
found to be better in both domestic and international conditions as compared to that of South Korea and India. (Sun,
Fan, Zhou, & Shi, 2010) analyzed the regional real estate industry competitiveness by taking Beijing and Tianjin, two
cities of China. The diamond model was utilized for analyzing competitiveness. The empirical evidence supports that
related industries followed by the demand factors have a significant influence on the competitiveness of the real estate
industry. Another technique studied by (Vidal‐Salazar, Ferrón‐Vílchez, & Cordón‐Pozo, 2012) that analyzed the
effectiveness of coaching for training and personal development, in enhancing business competitiveness. Similarly,
(Gronhaug & Stone, 2012) found the influence of the process of learning on firm competitiveness. (Sigalas, Pekka
Economou, & B. Georgopoulos, 2013) using OLS to develop a measure of competitive advantage by identifying a
stipulative definition, composing an operational definition and constructing a measurement variable meanwhile
(Cetindamar & Kilitcioglu, 2013) developed a comprehensive generic measurement model for firm competitiveness.
Growth, exports, profits, and customers and society together were used as outcome indicators. The comparative
industry competitiveness using Porter Diamond Analysis in context within Indian MSMEs has been analyzed by
(Kharub & Sharma, 2017). (Bhawsar & Chattopadhyay, 2018) Demonstrates the comparative competitiveness
performance of four select industry clusters from India and using AHP for measuring comparative industry clusters.

Table 3. Competitiveness Research GAP

No. Researcher Methodology Case Study Level

1 (Carraresi & Banterle, Cluster analysis to study Food and Agriculture International
2008) the competitiveness EU market
2 (Momaya, 2011) Measuring Nano Technology International
competitiveness using Industry
the Porter Diamond
Model, Human Factor,
Asset-Process
Performance
3 (Arslan & Tathdil, 2012) Measuring 11 countries Indice from IMD, WEF International
competitiveness using and IFC business report
multidimensional scaling
4 (Wonglimpiyarat, 2013) Using the National ASEAN International
Intelligence Service
(NIS) and the Porter
Diamond Model (PDM)
as a framework
5 (Olczyk, 2016) Practical analysis N/A International
international
competitiveness using
bibliometric data
6 (Weihrich, 1999) Using TOWS for Germany National
advantage and
disadvantage analysis
7 (Bridwell & Kuo, 2005) Porter Diamond Model Taiwan Computer National
Approach Industry
8 (Önsel et al., 2008) Current cluster and Turkey National
Artificial Neural
Network (ANN) to
examine competitiveness
perspective

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9 (Castro-Gonzales et al., PLS-SEM for strategies Ecuador, Columbia, National

2017) studies competitiveness Peru
10 (Hanafi et al., 2019) System dynamic for Indonesia smelter National
reveal industries Industries
complexity
11 (Sardy & Fetscherin, Double Diamond Model China, South Korea and Firm
2009) to compare the India automotive
automotive industry industry
12 (Sun et al., 2010) Analysis using Diamond Real Estate industry in Firm
Framework Model China
13 (Vidal‐Salazar et al., Analysis of coaching 40 Small Companies in Firm
2012) effectiveness for North Africa
enhancing business
competitiveness
14 (Gronhaug & Stone, Found learning process N/A Firm
2012) firm competitiveness
15 (Cetindamar & Develop a Well known European Firm
Kilitcioglu, 2013) comprehensive Foundation for Quality
measurement for firm Management Excellence
competitiveness Award in Turkey
16 (Sigalas et al., 2013) Develop a measurement N/A Firm
using OLS for firm
competitiveness
17 (Kharub & Sharma, Diamond model to Indian MSMEs Firm
2017) knowing various
determinant
18 (Bhawsar & Using AHP for Indian cluster Industry Firm
Chattopadhyay, 2018) comparative competitive
performance

4. Future Research
Competitiveness can be viewed from many perspectives. Interpreted from the perspective of economic,
political and business strategy concepts of companies or industries. Competitiveness is defined as the ability of a
sector, industry, or company to compete successfully to achieve sustainable growth in a global environment as long
as the cost of the balance is lower than the revenue from the resources used.
Previous studies are used qualitatively and combining it with quantitative methods, but only a few use simulation
methods as models to analyze competitiveness problems. The object in most studies has only one object that is not
comparing to other objects. There is only an international level case that makes competitiveness comparison between
countries. Otherwise, there are none of the International industry comparisons between countries, also competitiveness
comparison between companies in one country.

5. Conclusion
The prime objective of achieving competitiveness is to strengthen a nation's economy and to make it
prosperous the notion of competitiveness is kept on varying, while the basic purpose of studying it remains more or
less unchanged. Starting from the results of the review above, the concept of competitiveness can be used as a policy
strategy in building the strength of the national economy through the integration of macroeconomic policies that are
very instrumental in strengthening national competitiveness. Problem-solving which is widely used in previous
research on competitiveness is more focused on the framework and analysis approach. Research using heuristic
methods that can be used to describe factors that are related and influence each other has not been done substantial,
with heuristic methods that discuss innovation, technology, global value chains or other interrelated things it can be
as a new research idea # 1. New research idea # 2 is to use a simulation method, where this method can emulate the
actual state of the system and can improvise without disrupting the existing system. New research idea # 3 is
combining the heuristic with the simulation method, where the heuristic method determines the model factor so that
it can be identified properly. The model factor can be used for simulation to get a detailed model that can describe
what conditions are best to make space for determining better strategies and policies.

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6. Acknowledgements
We gratefully thanks to Beasiswa Saintek – Kemenristek for the extraordinary support for this paper.

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Proceedings of the International Conference on Industrial Engineering and Operations Management
Dubai, UAE, March 10-12, 2020

Biographies

Nurhadi Wibowo is an Engineer in Agency for the Assessment and Application Technology (BPPT). He earned
Bachelor in Industrial Engineering Department, Trisakti University Jakarta, Indonesia and he obtained his Master's
Degree in Industrial Engineering Department, Universitas Indonesia, Depok, Indonesia. Now he is carrying out his
Doctoral study assignments in the Industrial Engineering Department, Universitas Indonesia. Nurhadi has completed
research projects in the mineral extractive industry and Indonesia government concerned in strategic and optimization.

Rahmat Nurcahyo is a senior lecturer in Management System in the Industrial Engineering Department, Universitas
Indonesia, Depok, Indonesia. He earned Bachelor in Mechanical Engineering Department, Universitas Indonesia,
Depok, Indonesia and Masters in University of New South Wales, Australia. Then he obtained his Doctoral degree in
Universitas Indonesia. He has published journal and conference papers. Rahmat has completed research projects with
Pertamina, PZ Cusson, Indonesia government. His research interests include management systems and business
management.

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