Case Study of Apple

3. List the factors that drive productivity and competitiveness of the firm and country which can be extracted from this case.

1. Openness to Regional and International Trade 

Market openness serves as the main drivers towards the productivity growth and competitiveness in China particularly in attracting Foreign Direct Investment (FDI). The most important element is the business ability to sell its products and services to both local and foreign markets. Trade barriers such as tariffs are typically viewed as disincentives by other nations. Elsewhere, FDI brought better technologies and more sophisticated managed practices and also opened new and larger markets. A related channel that yielded new technologies was importing equipment goods that embodied productivity. The access to international markets also created opportunities that spurred Chinese entrepreneurs to start new business, invest in modern equipment and produce at a more productive scale.

1. Infrastructure Development

The case study proved that infrastructure development contributes positively to the productivity and competitiveness growth in China. In this context, China’s aggressive investment on infrastructure has proven the best solution to sustain growth and ensure productivity and competitiveness growth. The contribution of investment to growth reflects the investment-led growth strategy implemented by China. Nevertheless, the investment in human capital especially in the area of health and education is most crucial to ensure productivity growth and competitiveness of China. The results in case of China suggest that it is necessary to design an economic policy that improves the human capital formation as well as physical infrastructure for sustainable economic growth.

1. Market size

With more than 1.3 billion people and a GDP growth rate exceeding 9% annually, the size of the market affects productivity since large markets allow firms to exploit economies of scale. Traditionally, the markets available to company have  been constrained by national borders. In the era of globalization, international markets can to a certain extent substitute for domestic markets, especially for small countries. The case of China illustrates the importance of the market size for competitiveness. Although the reduction of trade barriers and the harmonization of standards due to China accession to WTO have contributed to raising exports of the country, many barriers to a true single market, in particular in services, remain in place and lead to important border effects. Therefore, the case study proved that the size of the national domestic and foreign market as one of the drivers that lead towards productivity growth and competitiveness.