1. Competitiveness: Overview of Industries and Classifications

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# 1. Competitiveness: Overview of Industries and Classifications
### Thierry Warin, PhD, HEC Montreal, Harvard University & Cirano

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## Objectives of session 1

- Introduction to the analysis of the industry in an international context and a complex and global environment
- Industrial analysis: its history, its context
- Why focus on industrial analysis?
- Development of industry (Porter's five forces)
- Overview of different types of industries
- Competitive Advantages of Nations

---

## Why focus on industrial analysis?

- New reality of globalization
- The economy and the issue of political borders
- Industries
- The Mega Cities
- Industrial clusters
- Global value chains

---

## Why privilege a data science analysis?

[http://blog.businessdecision.com/bigdata/2016/08/data-science-prete-rencontrer-business/](http://blog.businessdecision.com/bigdata/2016/08/data-science-prete-rencontrer-business/)

[http://blog.businessdecision.com/bigdata/2016/08/data-science-prete-rencontrer-business/?utm_campaign=shareaholic&utm_medium=email_this&utm_source=email](http://blog.businessdecision.com/bigdata/2016/08/data-science-prete-rencontrer-business/?utm_campaign=shareaholic&utm_medium=email_this&utm_source=email)

---

## New reality of globalization

[![Image](session1_resources/marinetraffic.png)](http://www.marinetraffic.com/en/)

---

## New reality of globalization

### Exports of goods and services (2010 constant US$)

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---

## New reality of globalization

### Imports of goods and services (2010 constant US$)

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---

## New reality of globalization

### Transport and communication costs relative to 1930

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---

## New reality of globalization

[![Image](session1_resources/hans_rosling.png)](http://www.gapminder.org/videos/200-years-that-changed-the-world-bbc/)

---

## Globalization (KOF)

**It is a process that ...**

- Reduces the importance of national barriers
- Integrates national economies, cultures, technologies and governance
- Produces complex relationships of mutual interdependencies

---

## Major developments in transportation

**Introduction of containers in the 1950s:**

- Inter-modular transport: multimodal platforms
- Increased security of transport
- Reduced costs and time

**In the late 1990s**

- 90% of world trade is in containers

---

## Major developments in governance

- Bilateral and multilateral agreements have reduced tariff and non-tariff barriers to international trade

---

## Major developments in governance

### Tariff rate, applied, simple mean, all products (%)

---

## Dimensions of globalization

### KOF Index of Globalization

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---

## Dimensions of globalization

![Image](session1_resources/image16.png)

---

## Theory of Comparative Advantages

Definition: Heckscher-Ohlin-Samuelson

> One country specializes in the export of the product which uses intensively the relatively abundant production factor

---

## Theory of Comparative Advantages

- Adam Smith (1776): zero-sum game
- David Ricardo (1817): mobility of products, not factors
- Heckscher-Ohlin (20th century): relative advantages due to diff(f(K,L))
- Leamer (20th century): partial specialization, mobility of K, L and f(K,L)

---

## Ghemawat's CAGE model (2001)

[![Image](session1_resources/ghemawat.png)](http://www.ghemawat.com)

---

## Ghemawat's CAGE model (2001)

![Image](session1_resources/ghemawat1.png)

---

## Ghemawat's CAGE model (2001)

![Image](session1_resources/image1.png)

---

## Competitive... advantages

L, K, K^nowledge^: 3 examples of comparative advantages

---

## Knowledge pipelines: industrial clusters, global value chains

- [Industrial cluster on www.mondo.international](http://mondointl.cirano.qc.ca/international-cluster-portal/)

---

## Porter (1985): Definition of a value chain

![Image](session1_resources/value_porter.png)

---

## Share of total trade through value chains

### Trade (% of GDP)

---

## Conclusion

- Developed countries are more **globalized** than developing countries
- China and a handful of East Asian countries have **quickly become part of the global economy** by becoming the manufacturing center of the world.

---

## Conclusion

New comparative advantages:

- industrial clusters
- eco-systems
- global value chains

---

## Conclusion

- The question of Competitive Advantage rather than the Comparative Advantage of Nations
- Michael Porter and his Institute on Strategy and Competitiveness at Harvard Business School