Study: The Czech Republic to Experience a Slight Fall in the Global Competitiveness Index in the Next Five Years

"At present, the share of technologies and their impact on the increase of companies' competitive advantage has been declining"

- Bronislav Pánek,
Deloitte Lead Partner for the Manufacturing and Consumer Industry in Central Europe

Prague/Washington 28 February 2013 – According to the latest Deloitte study, the 2013 Global Manufacturing Competitiveness Index, China ranks once again as the most competitive manufacturing nation in the world both today, and five years from now. Germany and the United States round out the top three competitive manufacturing nations, but, according to the survey, both will have fallen five years from now. The two other developed nations currently in the top 10 are also expected to be less competitive in five years: Canada will slide from seventh to eighth place and Japan will drop out of the top 10 entirely, falling to 12th place. The Czech Republic will also experience a slight fall, sliding from 19th to 22nd place.

The report confirms that the landscape for competitive manufacturing is in the midst of a massive power shift – based on an in-depth analysis of survey responses from more than 550 chief executive officers (CEOs) and senior leaders at manufacturing companies around the world.

"At present, the share of technologies and their impact on the increase of companies' competitive advantage has been declining. In fact, modern and progressive technologies are available to each entrepreneur that has sufficient capital for their funding. The major difference in companies' competitiveness lies in the ability – at all levels – to attract, encourage, utilise and keep talented workers who will provide the maximum productivity at minimum costs and in the expected quality," said Bronislav Pánek, Deloitte Lead Partner for the Manufacturing and Consumer Industry in Central Europe.

According to the study, the rise of developing manufacturing markets on the Index is expected: Brazil will move from its current eighth place to third place and India will jump from fourth position to second place. China will continue to claim the leadership position in the Index.

The study finds that Germany's slide in the competitiveness index holds true for several other European nations, including the United Kingdom, France, Italy, Belgium, the Netherlands, Portugal, Poland and the Czech Republic, which are all expected to experience a dramatic decrease in their ability to compete. Poland, for example, drops from 14th to 18th place in the Index, while the United Kingdom drops from 15th to 19th place.

"America and Europe have continued to watch emerging markets mature and become formidable competitors over the past decade," said Craig Giffi, Deloitte Global Leader for the Consumer and Industrial Products Industry.

Talent leads the way

The study found that access to talented workers is the top indicator of a country's competitiveness – followed by the country's trade, financial and tax system, and then, for instance, the cost of labour and materials.

"Nothing was more important to CEOs than the quality, availability and productivity of a nation's workforce to help them drive their innovation agendas. Enhancing and growing an effective talent base remains core to competitiveness among traditional manufacturing leaders – and increasingly among emerging market challengers as well," added Craig Giffi.

"The legal, tax and regulatory framework for business is also an important factor driving competitiveness. Directors and senior managers in manufacturing companies believe that the stability and comprehensibility of the legal and tax system is a major competitive advantage enjoyed by developed countries. Unfortunately, in view of the frequent and chaotic changes in the Czech legal system, the Czech Republic cannot be viewed as being too competitive in this respect," added Aleš Kubáč, an attorney-at-law at Deloitte Legal.

Drivers of Global Manufacturing Competitiveness

 
Source: Deloitte and U.S. Council on Competitiveness – 2013 Global Manufacturing Competitiveness Index.

The study describes several schisms in competitiveness between established manufacturing players and their emerging counterparts, most notably:

• Traditional manufacturing stalwarts are perceived to have an advantage with respect to talent-driven innovation. More than 85 percent of global executives "strongly agree" or "agree" that the availability of quality skilled talent needed for advanced manufacturing in the United States, Germany and Japan makes those nations highly competitive – while just 58 percent say the same about China and only 40 percent say it about India.
   
• Established manufacturing nations scored far better than emerging manufacturing nations when it came to local economic, trade, financial and tax systems. More than seven in 10 global business leaders "strongly agree" or "agree" that Germany and the United States have an extreme competitiveness advantage based on this criterion, but only 43 percent say the same about India..
   
• Superior healthcare systems will likely give established manufacturing nations a distinct advantage over emerging players, thanks to their access to quality care and regulatory policies for public health. More than seven in 10 business leaders believe that the healthcare systems in the United States, Germany and Japan make them extremely competitive, but no more than three in 10 say that about China, India and Brazil..
   
• When looking at labour costs and availability, stalwart manufacturing nations find themselves squarely on the defensive. Almost nine in 10 global executives believe China and India are extremely competitive with regard to the local cost and availability of labour, but fewer than four in 10 believe the same about the United States, Germany and Japan.
   
• The newest of the emerging economies have a long way to go when it comes to supplier networks. Fewer than five in 10 executives "strongly agree" or "agree" that India and Brazil are extremely competitive in their supply networks, compared to the eight in 10 or more who say the same thing about the United States, Germany and Japan.
   
• Emerging manufacturing nations will likely struggle to be competitive with regard to their legal systems. Fewer than four in 10 global business leaders "strongly agree" or "agree" that China, India and Brazil are extremely competitive with regard to their legal systems, compared to the more than eight in 10 who feel that way about the United States, Germany and Japan.
   
• Newer manufacturing players face an uphill battle when it comes to physical infrastructure competitiveness. Fewer than a quarter of business executives "strongly agree" or "agree" that India's infrastructure makes it extremely competitive, but almost nine in 10 say the United States, Germany and Japan have a strong advantage thanks to their infrastructure.

2013 Global Manufacturing Competitiveness Index

 
Source: Deloitte and U.S. Council on Competitiveness – 2013 Global Manufacturing Competitiveness Index.

About the Study

The 2013 Global Manufacturing Competitiveness Index is an initiative led by the U.S. Council on Competitiveness and Deloitte designed to determine how CEOs and senior executives view the competitiveness of the manufacturing industry in different countries around the world. A global CEO survey, which generated responses from 552 CEOs and senior executives, offers perspectives on the most important factors that drive manufacturing industry competitiveness. The global survey results also helped to create a Global Manufacturing Competitiveness Index ranking the relative manufacturing industry competiveness of countries and reflect how executives perceive this may change over the next five years. The in-depth study seeks to define excellence in manufacturing and draw out the implications for manufacturers in terms of the competencies required to develop and sustain an edge in a new competitive landscape. Participants were also asked to provide their views of the global economic conditions and government actions that can bolster competitiveness in the manufacturing industry.

To learn more, visit www.deloitte.com/globalcompetitiveness

About the U.S. Council on Competitiveness

The Council on Competitiveness is a leadership organisation comprised of CEOs, university presidents and labour leaders committed to ensuring that the United States remains the world leader. The Council has one goal: to strengthen America's competitive advantage by acting as a catalyst for innovative public policy solutions. For more information, please visit www.compete.org.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/cz/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte's approximately 195,000 professionals are committed to becoming the standard of excellence.

© 2013 Deloitte Czech Republic