The word ‘competitive advantage’ is often mentioned in the microeconomic
perspective as how firms position themselves in the industry. There are two basic types of
competitive advantage: lower cost and differentiation,
18which firms usually pursue as a strategy in order to compete with each other. Low-cost is
the ability of a firm to produce a given output using fewer inputs than competitors require;
therefore, firms can sell the comparable products but at the cheaper prices.19 On the other
hand, differentiation is the ability of a firm to achieve higher revenues per unit than
competitors.20 This firm can provide unique and superior value to the buyer in terms of
product quality, special features, or services;21 therefore, the firm is able to charge higher
prices. That is, either type of competitive advantage renders the firms with the higher
productivity.22 If a nation’s firms have the competitive advantage over the foreign firms
(firms located outside the country), it means in overall, the nation has a higher competitive
position than other nations.
In macroeconomic perspective, the World Economic Forum and Michael Porter
define competitiveness as the level of productivity of an economy which can be determined
by the set of institutions, policies and factors.23 The level of productivity establishes the
sustainable level of prosperity that the economy can earn. That is, the productivity
determines the rates of return obtained by investments in an economy. A higher
competitive economy would reap the higher rates of return and possibly grow faster in
intermediate and long-run.24
The nation’s productivity is a combination set of the nation’s firms’ productivity. In
order for a nation’s firms to pursue a proper strategy and gain a higher productivity and
therefore, the competitive advantage for a particular industry or segment, the firms’
environment or the country’s circumstances should be favorable and support them.25 In
analyzing a country’s attributes, to check whether a nation is supportive for its local firms
The word ‘competitive advantage’ is often mentioned in the microeconomicperspective as how firms position themselves in the industry. There are two basic types ofcompetitive advantage: lower cost and differentiation,18which firms usually pursue as a strategy in order to compete with each other. Low-cost isthe ability of a firm to produce a given output using fewer inputs than competitors require;therefore, firms can sell the comparable products but at the cheaper prices.19 On the otherhand, differentiation is the ability of a firm to achieve higher revenues per unit thancompetitors.20 This firm can provide unique and superior value to the buyer in terms ofproduct quality, special features, or services;21 therefore, the firm is able to charge higherprices. That is, either type of competitive advantage renders the firms with the higherproductivity.22 If a nation’s firms have the competitive advantage over the foreign firms(firms located outside the country), it means in overall, the nation has a higher competitiveposition than other nations. In macroeconomic perspective, the World Economic Forum and Michael Porterdefine competitiveness as the level of productivity of an economy which can be determinedby the set of institutions, policies and factors.23 The level of productivity establishes thesustainable level of prosperity that the economy can earn. That is, the productivitydetermines the rates of return obtained by investments in an economy. A higher
competitive economy would reap the higher rates of return and possibly grow faster in
intermediate and long-run.24
The nation’s productivity is a combination set of the nation’s firms’ productivity. In
order for a nation’s firms to pursue a proper strategy and gain a higher productivity and
therefore, the competitive advantage for a particular industry or segment, the firms’
environment or the country’s circumstances should be favorable and support them.25 In
analyzing a country’s attributes, to check whether a nation is supportive for its local firms
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