An investigation into national competitive advantage of Zambia in select industries using Porter’s model and its variants

Overview:

The dissertation examines Zambia’s national competitive advantages in select industries by applying Michael Porter’s home diamond model and its variants. The research focuses on identifying factors that drive or hinder Zambia’s economic growth and competitiveness while exploring strategies to overcome existing challenges. The study’s overarching goal is to support Zambia’s vision of becoming a middle-income prosperous nation by 2030. The study begins with an analysis of Zambia’s economic history and key sectors, identifying structural gaps and inefficiencies. It uses Porter’s home diamond conceptual framework, which outlines determinants critical to national competitiveness, that includes four major ones namely factor conditions, demand conditions, related and support industries and firm strategy, structure and rivalry. These are augmented by two additional influencing determinants that are government policies and chance factors.

Key themes and concepts:

1. Porter’s diamond model framework for National competitiveness:

Porter identifies four major determinants essential for competitiveness:

§ Factor conditions: inputs required for production such as labor, capital and infrastructure. Porter bifurcates this into basic factors which are natural resources, unskilled labor, location and climate and advanced factors like sophisticated infrastructure and testing laboratories, centers of excellence in academia, skilled workforce and cutting-edge technologies.

§ Demand conditions: strong home market demand shapes industries. High local demand can lead to innovation market sophistication.

§ Related and Support industries: Industries thrive when complementary and supporting sectors – such as suppliers and value chain partners exist locally, promoting efficiency and innovation.

§ Firm strategy, structure and rivalry: Domestic competition encourages firms to innovate and improve productivity which in turn strengthens national competitiveness.

Porter’s model is dynamic, meaning the determinants are interrelated and must interact effectively for sustained success. Additionally, the role of government policies and chance events (like geopolitical shifts) can shape these determinants.

Additionally, the study incorporated Porter’s four stages of growth for a nation. Michael Porter’s Four Stages of Growth describes a nation’s progression in developing competitive advantage. In the Factor-Driven Stage, a country relies on basic resources like labor and raw materials. In the Investment-Driven Stage, investment in infrastructure and education leads to industrialization. The Innovation-Driven Stage focuses on technology, research, and skilled labor, with an emphasis on innovation. Finally, the Wealth-Driven Stage represents a highly advanced economy, where competitiveness is driven by innovation, high-value industries, and global leadership. Porter’s model highlights how nations evolve from basic factors to sophisticated, knowledge-based economies.

2. Zambia’s economic context and performance

Zambia is a landlocked developing country in Sub Saharan Africa, rich in resources like copper and emeralds. However, its economy has been impacted by fluctuating GDP growth, excessive debt, infrastructure gaps and a failure to diversify beyond the copper dependence.

The study analyzed various stakeholders in Key industries

2.1 Mining and Precious stones (Copper and Emerald):

§ Copper remains Zambia’s dominant export contributing to more than 70% of the export revenues. However, the sector faces challenges like low investment in infrastructure, policy inconsistencies, lack of value-added exports and global price volatility.

§ Zambia contributes to 40% of global emerald supply, with significant untapped potential in gemstone mining. Limited technological and financial investments hinder the sector’s growth especially because the sector has very limited large players and is more represented by artisanal small ones.

2.2 Agriculture

§ Agriculture accounts for 6% of GDP and employs 22% of the workforce. However, the sector is dominated by subsistence farming with reliance on rain-fed agriculture leading to vulnerability to climate change and low productivity.

2.3 Tourism

§ Zambia’s rich and pristine natural resources, including the Victoria falls and vast wildlife reserves, position it as a potential global tourism hub. Yet underdeveloped infrastructure, marketing challenges, and insufficient training for staff have limited growth in this sector.

2.4 Manufacturing

§ The manufacturing sector contributes just 8% to GDP and is undermined by policy incoherence, high operating costs, limited value addition, lack of competent personnel, and weak links to other sectors like agriculture and mining. The steel industry which was one of the identified industries was vastly underrepresented within Zambia and was heavily reliant on imports.

3. Challenges identified

The study identified major challenges that inhibited national growth and poor competitive advantage given the potential resources Zambia has. Some of them are:

1. Overdependency on Copper

§ Zambia is heavily reliant on copper exports, leaving the economy vulnerable to global price fluctuations and exchange rate volatility.

2. Debt and Infrastructure deficits

§ Debt totaling $32.3 billion has constrained government spending on infrastructure and innovation. Poor transportation and energy infrastructure further impede competitiveness.

3. Lack of Institutional development

§ Insufficient partnerships between academia and industries have hindered skills and innovation.

§ FDI is under leveraged for knowledge and technology transfer.

4. Policy Weaknesses

§ Regulatory bottlenecks, lack of long-term strategic planning, tax issues pose significant challenges.

5. Weak integration of Industries

§ Zambia lacks strong industrial clusters, which are critical for building synergies among firms and related industries to drive innovation and productivity. In particular, are the poor coordination and intervention of industry associations that focus mainly on policy advocacy matters and tax concessions than on competence development and collective efficiency amongst members.

4. Prescriptions for addressing challenges

Strategies the study concluded in providing for enhancing national competitive advantage of Zambia in regional and international markets were:

Government role

§ While Porter had indicated that the government must not play a major role in shaping up industry competitiveness, it is the considered opinion of the researcher that for developing nations, the role of government plays a significant part in developing long term coherent policies to support priority sectors like tourism, mining and agriculture.

§ Invest in specialized infrastructure such renewable energy, transport networks, state of the art testing laboratories, and creating schools of excellence in specific areas of engineering and management.

Cluster development

§ Identify and promoted regional geographic clusters (e.g. mining and manufacturing hubs) to foster innovation and collaboration.

Advanced factor conditions:

§ Improve education systems to produce highly skilled labor. Foster partnerships between businesses and universities promote research and innovation. A specific focus on a quadruple helix system incorporating Government, Industry, Institution and the society is imminent for national growth.

Support Industries:

§ Develop supporting sectors like Information Technology, ICT and logistics that can sustain a thriving industrial eco system.

Diversification beyond copper:

§ Beyond emphasizing Copper production, value addition in terms of finished products from copper, agricultural value addition, gemstone processing and renewable energy is needed to reduce dependency on reliance on mining exports.

Patriotic feelings:

§ Government and Industry need to focus on emphasizing quality and competence development to enhance patriotic feelings amongst the citizens to buy more of domestic manufacture. Efforts like “Proudly Zambian” campaign must be critically leveraged but must be consonant with high quality products.

Research significance:

This dissertation provides a holistic view of Zambia’s industrial and competitive landscape. Applying Porters framework in a developing country context highlights Zambia’s strengths and opportunities while accounting for structural challenges in governance, infrastructure and integration across sectors.

The study’s findings offer valuable recommendations for policy makers, industry associations and leaders and academia. By recognizing the need for institutional cooperation, innovation and targeted investments, Zambia can pursue sustainable growth in its quest to achieve its Vision 2030 goals.

Key Terminology:

Clusters: Geographic concentration of related industries that compete and collaborate

Advanced factor conditions: specialized production resources created through infrastructure, education and R&D investments

Competitive advantage of nations (CAN): A framework for analyzing how nations achieve productivity and prosperity in certain industries.