The Harvard AMP course Business, Government, and the International Economy (BGIE) is about the key economic, political, and social factors that affect the business environment. In other words, the institutional foundations of capitalism. BGIE examines management and leadership on a national scale.It has been very interesting to study the decisions countries make and their widespread implications and fundamental importance for business and society. Often, these decisions have huge implications for every firm doing business in a country.
After fours weeks of BGIE, we have studied Singapore, India, China, the U.S., Australia, Mexico and most recently South Africa. In the typical Harvard Business School case method, there was robust discussion, skillfully facilitated by Professor Richard Vietor. As a South African financial services leader, it was an amazing experience to have the opportunity to discuss South Africa with eighty leaders from many countries across the world. After one-and-half hours, the class concluded that South Africa was “stuck in the middle.” What does this mean?
In Competitive Strategy, published over two decades ago, Michael Porter built a framework for business strategy around three generic approaches: overall cost leadership, differentiation and focus. He warned firms against being “stuck in the middle.” Such firms lack a clear strategy and share these characteristics:
- Lack adequate market share;
- Lack adequate capital investment;
- Lack adequate knowledge necessary for differentiation;
- Lack resolve to play the low-cost game; and
- Lack the necessary organizational focus.
To survive and prosper, firms “stuck in the middle” must reduce costs, develop products for particular target markets or achieve some form of distinctiveness. The class agreed Michael Porter’s framework broadly applies to countries and hence the conclusion that South Africa was “stuck in the middle.” This conclusion was based on the fact that South Africa hasn’t yet found its distinctive competence despite various development strategies such as Growth, Employment and Redistribution (1996 – 2002), Accelerated and Shared Growth Initiative of South Africa (2002 – 2008), New Growth Plan (2010) and most recently the National Development Plan.
The class ended with a very positive response towards South Africa and a recommendation that to get unstuck, South Africa must find its distinctive competence. For example, it is clear that China and India have both differentiated through low-cost on goods and services respectively. Will South Africa find its distinctive competence through the National Development Plan?