SWOT Analysis of Competitive Strategy of Georgia

Ketevan Krialashvili Ivane Djavakhishvili State University, Economic and Business Faculty, Specialty – International Economics Relations, Master’s degree

Competitiveness is inextricably linked to globalization, because it is assessed for nations (as well as for firms) in a global context.

According to Claros (WEF, 2005) “competitiveness” can be defined as a collection of factors, policies, and institutions which determine the level of productivity of a country. Productivity consequentially influences a country’s ability to grow over time. Thus, competitiveness can be considered to be the likelihood of a country to sustain economic growth. In today’s world, a country’s level of competitiveness has emerged as an important policy tool for researchers. However, despite the close relationship between the globalization and the competitiveness of nation states, few studies have linked these two subjects from a global perspective.
We believe that awareness of these challenges can be useful in mapping effective strategies that ensure that the predicted gains from tomorrow’s economy come to fruition. We are avid proponents of both globalization and competitiveness and recognize their critical importance for the changing global political economy. However, our intent is to propose effective and sustainable ways of defining the implications of globalization on national competitiveness.
As long as globalization implied a high increase in competition between countries or nation-states, we need to know how they compete, how they define their own national development strategies, and how this competition affects and modifies the world economic system itself.
National competitiveness is basically relevant for economically strong industrialized countries and is less applicable for developing economies. The contention is that driving forces of globalization (FDIs, transnational companies and Breton Woods Institutes) have different implications on national competitiveness according to internal capacities and external opportunities. In this paper attention is concentrated on defining the aspects of Georgia’s competitiveness, evaluating the country’s economic performance, and suggesting practical recommendations for reforms and development. The study applies to the category of comparative analysis, benchmarking analysis and strategic analysis through environmental scanning (SWOT Analysis, PEST Analysis) and defining the aspect of regional competitiveness based on Porter’s “Diamond Model”.
This paper provides an assessment of the impact that the process of globalization has on a Georgia’s level of competitiveness. On the basis of this analysis we have achieved the main goal—the main driving force of national competitiveness in the era of globalization is a synergetic partnership among government, business sector and higher education/research institutions, based on knowledge economy and innovation policy. Therefore, it is crucial for the government to create the environment for knowledge commercialization and innovation technology, which facilitates the trans-nationalization of national business and brings national income.
The study has also investigated modern approaches to competitiveness and sustainable economic development in understanding the relationship between government, higher education institutions and business, in order to evaluate Georgia’s capacity and capability to foster the development of National Innovation System.
The analysis we have made, shows that all actors — public authorities, universities and businesses — must accept their share of the responsibility for raising the levels and efficiency of investment in human capital. Incentives are needed to boost investment in training within individual companies and across sectors in order to support employers in providing suitable access to learning.
The study clarifies the role of research and higher educational institutions in national competitiveness. Attention has been concentrated on modern benchmarking standards to cultivate innovation through quality education connected with research. If Georgia is to develop its capacity for innovation and competitiveness in information-based economy, the country must be prepared to renew its national commitment to quality education at every level and to reinforce the values of life-long learning.
The study has also clarified the framework for the European Neighborhood Policy prospects in the context of Lisbon Strategy for Growth and Employment and European Union-Georgia Action Plan through analyzing country’s development potential in terms of education, research and cluster development.
Within the framework of this study, major attention was focused on clusters with strong potential for generating employment, exports, and investment in Georgia, and conduct cluster selection driven by comparative and competitive advantages.
Several potential clusters have been examined on the basis of SWOT Analysis to identify the strengths, weaknesses, opportunities and threats for future cluster development possibilities. These clusters were identified on the basis that they were thought to hold competitive promise or that they were historically important to the Georgian economy. Understanding the different elements of clusters and their respective performance is an important step in identifying where clusters might be strong or weak and where subsequent intervention might be appropriate. This involves qualitative analysis, which concentrates on discussions with focus groups over the existing circumstances and innovative actions.
It was necessary to develop a set of assessment criteria to determine whether the clusters are good candidates for having a major positive short-term impact on the Georgian economy and for continued work with the cluster competitiveness initiative:
n Factor Conditions – Strong basic research infrastructure in universities; Availability of skilled workforce and job creation potential. Is a skilled labor force available in certain geographical location to drive the industry? Intellectual capital, ingenuity, creativity and technical capabilities are key drivers of innovation.
n Demand Conditions – Sophisticated and demanding customers;
n Related and Supported Industries – Presence of capable local suppliers and related companies. High networking level can seriously boost economic activity, fostering innovation and enabling the establishment of strategic alliances;
n Growth Potential – Does the cluster offer a clear promise for future growth, leading to expanded and new investments in productive Georgia enterprises?;
n Institutional Infrastructure – The strength of government regulation, as well as public-private relationships between companies, institutions and government within the region and beyond; It includes legal regulations and policies supporting this kind of activity and quality of services that public administration provides to the market. These may include anti-trust law, regulations regarding conditions of entering the market, local officials’ willingness to support the branch etc.
n Technical Infrastructure – The availability of space for doing business, transport and telecommunication accessibility, electricity supply and the presence of basic urban infrastructure;
n Historical Background and other Specific Factors – a wide range of ethnic, cultural and historical factors as well strong background of experience is an advantage.
Given that clusters are a powerful tool for upgrading the efficiency of their constituents, we argue that the existence of a cluster may allow domestic firms to benefit more from spillovers from MNEs and, thus, to get better results in terms of increased productivity. The strong linkages and externalities in a cluster foster the rapid diffusion of know-how and skills; clustering, hence, enhances absorptive capacity. The existence and depth of the host cluster is a variable that must be considered when assessing the impact of the investment. In other words, national competitive strategy must become more selective and more targeted. Instead of focusing on short-term objectives, such as the number of jobs created, or the total value of the investment attracted, policy should consist in exploiting and creating synergies between the ownership advantages of the MNE and the competitive advantage of the location.
For a cluster to succeed, the government must influence the business environment throughout the diamond. The theoretical framework outlined above implies that there is no one-size-fits-all policy. Different policies are necessary under different circumstances. This paper has tried to develop certain guidelines for cluster practitioners, which need to be adapted to the particular case.
It is obvious that good will, or even an initiative demonstrated by government, academia and business sector separately, is not enough to ensure the progress. What is more, if all actors do not use their potential, positive solutions are even less likely to happen. Thorough knowledge about the condition of local economy, which can be obtained through analyzing each of its segments, must become a vital element of the national development policy.
In responses to globalization, Georgia needs to:
· Strengthen public administration systems;
· Adhere to openness and adaptability;
· Adopt a proactive approach to globalization;
· Address human capacity needs;
· Address institutional capacity needs;
· Adopt flexible approaches and methods of administration;
· Strengthen the voice of national governments in international bodies;
· Adopt and practice participative governance;
· Embrace the application of information technology to the practice of public administration;
· Develop social capital.
Thus the study has also investigated modern approaches to competitiveness and sustainable economic development in understanding the relationship between government, higher education institutions and business, in order to evaluate Georgia’s capacity and capability to foster the development of National and Regional Innovation Systems.
The analysis we have made, shows that all actors — public authorities, universities and businesses — must accept their share of the responsibility for raising the levels and efficiency of investment in human capital. Incentives are needed to boost investment in training within individual companies and across sectors in order to support employers in providing suitable access to learning.
Among the actions to be undertaken within the framework of this strategy we provide the following recommendations for the Government of Georgia:
· Set up a public management institution, involving all stakeholders (government, universities, think-tanks, research institutions, business associations etc), to work out recommendations for a national innovation system;
· Sharpen understanding of the innovation process, learn and apply best international experience to develop innovative infrastructure and promote innovations in Georgia.
· Develop a Research and Innovation policy directly relevant to the sustainable and equitable economic development policy objectives of Georgia;
· Prepare governmental program to promote innovation and competitiveness;
· Draft, debate and adopt a legislation on innovation policy and competitiveness of Georgia, which should promote the innovation infrastructure and realization of the National innovation system, with clear definitions and unequivocal interpretation, innovation activities, taxation and other incentives;
· Amend the law on state procurement to encourage purchases of innovative products and services, and reduce corruption.
· Further reform efforts through amending the Law on Education to increase the role of universities to encourage research activities;
· Equip Georgia with the highly educated, creative and mobile workforce it needs, so that enough young people are graduating with the appropriate skills to obtain jobs in dynamic, high-value and niche sectors;
· Reinforce participation of Georgian scientists/students/academics in international and exchange programs;
· Improve the attractiveness to researchers through urgently addressing the problem of funding for universities;
· Combat the “brain-drain” process, as too many young scientists continue to leave the country;
· Encourage life-long and life-wide learning opportunities as well as further the reform efforts in the field of education, science and training to promote sustainable development of human resources and human capital;
· Develop special programmes of education for public servants (primarily for civic integration)
· Reform science management system through appropriate regulatory framework, financing model and governance based on scientific excellence, capacity-building and joint initiatives;
· Foster the development of clusters through defining actionable strategies for increasing cluster competitiveness and accelerating growth;
· Strengthen administrative structures and procedures to ensure strategic planning of environment issues and coordination between relevant actors;
· Establish centers for production excellence to accelerate knowledge sharing and commercialization, including a network of shared facilities and consortia for manufacturing excellence;
· Gather Georgia’s top minds on innovation and Catalyze Next Generation Innovators;
· Strengthen Georgia’s Manufacturing Capacity and energize the entrepreneurial Economy
It is obvious that good will, or even an initiative demonstrated by government, academia and business sector separately, is not enough to ensure the progress. What is more, if all actors do not use their potential, positive solutions are even less likely to happen. Thorough knowledge about the condition of local economy, which can be obtained through analyzing each of its segments, must become a vital element of the national development policy.
In a market economy, the state can support growth by creating conditions that enhance the competitiveness of the economy. This framework may, therefore, be viewed as one of elements improving Georgia’s competitiveness, which should promote the formation of the basis of government’s strategic priorities.
Based on the latest knowledge and experience from abroad we are convinced, that the long-term competitiveness of Georgia can only be achieved by the implementation of the essential structural reforms creating conditions for the realization of National and Regional Innovation Systems.
k_krialashvili@yahoo.com
995 55 61 50 31