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01/24/2006.

THE COMPETITIVE IMPERATIVE

Competitive and responsible citizens make a competitive nation.

Today we live in the most competitive era of the world’s history. Competition becomes the buzzword. In the business world, the success of a company is measured by how competitive the company in the market is. This is also true in sport, politics, and in the context of nations as well. On the latter, the trend is clear: a more intense competition among nations. Various global regulations, from free trade to financial liberalization, that have been intensively promoted during the last two decades are all aimed at enhancing competition among nations. Competition is believed will promote a higher economic growth which in turn induces a better standard of living.

Many studies have been conducted to explain the effect of competition on the economic growth. One theoretical approach is to consider firms as entities operating under profit-maximizing behavior and examine the effect of competition on their investments in technology. More investment in technology means that the firms are more likely to produce innovative products or technology. So the thesis is: a more intense competition will induce innovation; innovation creates efficiency; and efficiency promotes higher economic grow. This goes back to the idea of Schumpeter who wrote in 1942 that the possibility of future monopoly rents, acquired through innovation, is required to motivate firms to innovate.[i] Another theoretical approach is to examine the effects of competition on the efficiency of firms managed by agents under imperfect contracts. The thesis is: Less competition creates inefficiency.  This idea is motivated by the insights of Adam Smith who asserted that monopoly, not due to innovation, is a great enemy to good management and Harvey Liebenstein who postulated that intense competition would reduce X-inefficiency, the gap between actual and potential productivity.[ii] 

On the empirical ground, important evidence is reported in The Global Competitiveness Report 2000, an annual study of competitiveness in 58 countries. The data in the report are drawn from a survey of more than 4,000 corporate and other leaders, including a representative sample from each country. For all three years in which the analysis has been conducted, the effectiveness of competition, which is proxied by the antitrust policy, proves to be one of the variables with the strongest positive association with the variation in GDP per capita across countries.[iii]  As The Report showed productivity is improved following regulatory reforms such as the implementation of anti-trust policy. This indicates that the imperfect competition found in regulated sectors tends to be accompanied by inefficiency use of resources such as labor and capital. 

The economic activities that produce competitive societies are socially embedded in complex organizational contexts which are called firms. In other words, competitive firms will produce a competitive nation. As Michael Porter, the world expert on the subject of competition, argues that it is firms, not nations, that compete in the global market.[iv]  Firms, especially transnational corporations (TNCs) are the key actors that compete unrelentingly with each other to win markets for their products.  This competition forces TNCs to invest constantly in the development of new products or better production technologies.  And it is this unrelenting competition that has transformed the global economy.

Japan is a good example. Odagiri, the author of Growth Through Competition, Competition Through Growth: Strategic Management and the Economy in Japan wrote that the core of Japanese management is a growth pursuit by internal investments (as opposed to acquisitions), and the intensive competition within and among Japanese firms. Odagiri also observed that competition is at the center of the Japanese economy and management style to the same, if not a greater, degree as in the West. This competition is enhanced by the growth preference of the Japanese management style and it also, in turn, makes growth possible.[v]

But firms are a combination of men, machine and management which center on men. It is the men (people), not machines that really matter. This implies something fundamental: competitive firms are created by competitive individuals. Microsoft is created by the competitive Bill Gates and Paul Allen. So is Apple by Steve Jobs. And those competitive individuals are those who are likely to be found in a competitive environment or those who are trained to be competitive.

Competitive individuals give birth to a competitive nation.

ENHANCING THE SPIRIT OF COMPETITION

Whether we realize it or not, from workplaces and schools to sport stadiums, competition is essentially a part of our lives. Individuals spend most of their time competing with each other for power, rank, privilege, reward, award and etc. Everyone is trying to climb her/his way to the top either through formal or non-formal competition. But what does competition really mean? Or, what does it imply?

Any competition at least must have competitors (players). If there is no competitor, there is no competition and the game is over.  The presence of competitors suggests a number of essential implications. The first is respect.  Competition teaches the competitors to respect for themselves and their opponents because without opponent there is no game, and so a competitor is indebted to his opponents as they are to him.

The second essence is responsibility and integrity.  Competition teaches those who are competing to take responsibility for their actions. Any action they make in the competition results in consequences which either bring them victories or defeats. Competition also teaches those who are competing to have integrity, honesty, and respect for rules. Integrity includes the commitment to uphold high standards of fair play and to practice good judgment in caring for the safety of others as well as themselves. And lastly, competition teaches players to have a sportsmanship character, a character that is widely seen in sports. Sports activities find their origin in the basic human need for the spirit to play and to have fun. Winning and losing are merely outcomes of this play spirit.

In any competition, there are winners and there are losers. Loss is perceived as delayed winning, not an insult, because loss or failure is natural process. Therefore, in any competition, the arts of accepting a loss and acknowledging the winner’s strength are an integral part of competition. The losing player then quietly and persistently prepares himself for the next round of competition or for other competitions.

In reality, such attitude is still far from becoming our way of life. During the New Order regime, there was a strong tendency to play monopolistically. A synergic cooperation was a strange vocabulary and competitors tend to be perceived as enemies, instead of partners, that have to be destroyed.  A loss was often responded by establishing an alternative winner. For example, at the aftermath of the election of organizations’ leaders, conflicts were frequently taken place.  The losing candidates and their supporters often provoked chaotic scenarios in order to disrupt the activities of the new leaders. As a result, destructive actions that brought loss to many often occurred. Unfortunately, such practices are still flourishing today.

A remarkable example of sportsmanship was shown during the Olympic game 2001 in Salt Lake City, Utah. As soon as the medals were placed around the necks of the six skaters, the gold medal recipients from Russia stepped down to the second place podium, exchanged their medals for the silver ones, and had the Canadian pair step up to the top podium with their new gold medals. A French judge had been put under pressure to vote for the Russians, who slipped during their routine while a Canadian pair, Jamie Sale and David Pelletier, were virtually flawless.  Later, A Russian sport official, Alimzan Tokhtakhounov was accused of plotting to persuade a French judge to vote for Russian ice skaters and a Russian judge to vote in turn for the French ice dancing team.[vi]

“It was the only fair thing to do,” the Russians said later. “It was obvious to everyone except the judges that the Canadians out skated us. They had a more difficult program than we did and they performed it flawlessly. We came off of the ice knowing that we had won second place.” It is a truly example of sportsmanship.

Also, in competition there exists a set of rules as well as a set of information that accessible to all players. If only one player has the privilege to access certain information which is vital to the competition, the competition becomes a soap opera. The winner has already been determined before the game even begun. On the other hand, if all information is available and there is no protection of copyrights and patent, there will be a huge disincentive to compete. This explains why the protection of copyrights is essential to competition.

This suggests that the winning factor in competition is neither authority nor coercion, but strategy or innovation. All needed is the art to compete with competitors by utilizing available information about the strength and the weaknesses of the opponents and to compete with itself (self-competition) by developing its own strength through innovation and invention. A self-competition is a competition against oneself. It simply means: try to do better today than we did yesterday because we constantly try to perform at a personal best. It applies to individuals as well as to firms. 

As it turns out, a self-competition is really crucial in determining a success or failure in competition with others.  Leonard A. Lauder, the CEO of Estee Lauder gave an example of how self-competition had brought his company to success. In his keynote address at Wharton's CMO summit in the fall 2002, Lauder told the story how his family-owned business grew into a $4.6 billion multinational company. The secret to the success, as Lauder recounted, was by constantly looking for new markets and by competing with itself with new brands and distribution channels. Estee Lauder’s revenues in 2002 were $4.7 billion, up 6% from the year earlier, continuing more than 50 years of uninterrupted sales growth. The company sells products in more than 130 countries and territories through approximately 13,500 outlets.[vii]

Another example is from the richest man on earth, Bill Gates. In an online discussion in 1996, one discussant asked Bill Gates, the founder of Microsoft, Inc. the following question, “Would you still enjoy showing up for work if competition for your company was scarce?” Gates replied, “Even if there weren't great companies to match wits with, the thrill of self-competition would keep me coming to the office.”[viii]

Interesting example is also shown by the success story of Japanese firms in the 70s and 80s. Their successes were not their ability to outperform foreign firms in the international markets. Rather, it was due their ability to compete in the home market as Sakakibara and Porter find that, “Contrary to some popular views, our results suggest that Japanese competitiveness is associated with home market competition, not collusion, cartels, or government intervention that stabilizes it.”[ix]

Building a winning nation is not different from building a well-discipline nation. It is begun from a small entity, individual, and progresses to a broader one: family, society and nation. In other words, the spirit of competition must be begun from small things by implementing the character values of competition. And this will positively affect the attainment of more creative, innovative, hard-working, discipline and responsible individuals.

The spirit of competition is best summarized by the Samsung company philosophy written in its annual report 1996:

“A young child wins a schoolyard race and dreams of becoming a champion. She works hard and advances from local and regional contests to national competitions, challenging athletes who share the same dream. At each level, the competition gets tougher, requiring new skills and greater discipline. Until one day, after years of sacrifice, she lines up against the world’s best, and awaits the sound of the starter’s pistol to fulfill her destiny.”

Winning individuals give birth to a winning nation.  

In building winning individuals—thus a winning nation, three essential factors are involved. They are: knowledge, attitude and commitment.

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