Welcome Rakan Sarawak November 2002

Rangkaian Khidmat Awam Negeri Sarawak

A MONTHLY SUPPLEMENT OF RAKAN SARAWAK BULLETIN

(People, events, activities and programmes which make for a total quality-managed Sarawak Civil Service)

ISSN 1394-5726

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Pushing for Competitive Advantage in a Globalised Economy (Part 2)
By Dusit Jaul, Project Coordinator, INTAN Malaysia Sarawak

Managing the challenges of heightened international economic competition is not going to be an easy task. In a volatile economic situation of today, a greater part of our effort and expertise might have to be devoted towards managing uncertainty. In their article, Strategy Under Uncertainty, Hugh Courtney, Jane Kirkland and Patrick Viguerie remind us that managing uncertainty requires a new way of thinking. For according to them, "Underestimating uncertainty can lead to strategies that neither defend against the threats nor take advantage of the opportunities that higher levels of uncertainty may provide." 3

As this paper is about achieving competitive advantage in a globalised economy that are times distraught with uncertainty, it is worthy upon us to go a little bit further into this subject of uncertainty. It has a lot of bearing and implications as to the types of strategy of strategies adopted by nation states. According to Hugh Courtney, Jane Kirkland and Patrick Viguerie in a similar paper referred to above, uncertainty can be minimised if only we are observant enough and care to do some analytical works. By being observant for example, it is possible to identify clear trend. For being analytical, factors that are currently unknown can be known (knowable). After the best analysis had been done, according to them, there are only four levels of uncertainty left as follows:

Clear enough future.
Alternate future.
A range of futures.
True ambiguity.

What do we do in the face of uncertainty? For example, with the implementation of AFTA and WTO regulations in 2003, how certain are we that our nascent automobile industry is able to compete openly in the regional and world market? Again according to Courtney, Kirkland and Viguerie, moves undertaken should fall into two categories i.e.:

Strategies postures (shaping, adopting, or reversing the right to play)
Portfolio of actions (big bets, options, and no regret moves)

The two categories of strategy formulation referred to above are reflected in the diagrams as shown below:

The Three Strategic Postures

Shape the future
Play a leadership role in establishing how the industry operates, for example:
- setting standards
- creating demand

Adapt to the future
Win through speed, agility, and flexibility flexibility in recognizing and capturing opportunities in existing markets.

Reserve the right to play
Invest sufficiently to stay in the game but avoid premature commitments.

Source: Harvard Business Review On Managing Uncertainty

What's in a Portfolio Action ?

These building block are distinguished by three payoff profiles – that is the amount of investment required up front and the conditions under which the investments wield yield a positive return.

No-regrets moves
Strategic decisions that have positive payoffs in any scenario.

Options
Decision that yield a significant positive payoff in some outcomes and a (small) negative effect in others.

Big bets
Focused strategies with positive payoffs in one or more scenarios but a negative effect in others.

Source: Harvard Business Review On Managing Uncertainty
³ Harvard Business Review On Managing Uncertainty, Harvard Business Review Paperback Series, 1990.

Attributes of A Competitive Nation

Since we have embraced international trade as one of our economic impetus, the future of our company is very much dependent on the international competitiveness of our products. David Yoffie and Benjamin Gomes offer suggestions as to what are the attributes that should be developed is a nation state is to possess competitive advantage. This is one piece of useful advice that we should not ignore. Neither it is to be taken for granted. According to them, four attributes were particularly important:

factor conditions
demand conditions
the industrial structure (that determined the nature of domestic rivalry) combined with the cultural context (that determined corporate and personal goal).
the vigour of related and supporting industry

The above attributes are shown as in the diagram below:

The Determinant of National Competitive Advantage

Source: David B. Yoffie and Benjamin Gomes: International Trade And Competition, Cases And Notes in Strategy And Management

The third and final part of this article will be published next issue...