Exports Competitiveness

Export diversification

Diversification shows the degree to which an industry achieves expansive and far-reaching export competitiveness. Industries with a relatively high degree of diversification evidently possess the necessary capabilities to produce a variety of products that are demanded in a variety of markets. In this sense, the industry shows the ability to accommodate different customer needs, values, and cultures. Diversification deals with both product diversification and market diversification. An industry’s level of diversification from both perspectives reveals the degree to which an industry’s competitiveness is comprehensive. Product diversification is the level of product variety in the export basket of the industry, while market diversification deals with the number of foreign markets to which the industry exports. In other words, it reveals whether the industry possesses the necessary capabilities to produce a variety of products that are demanded in a variety of markets.

The best performing industries in terms of export diversity are those that produce and sell a great number of competitive products on a wide range of foreign markets. The leading industries identified by the diversification analysis are Manufacture of Prepared Meals and Animal Feed, Manufacture of Agrochemical Products, Manufacture of Furniture, etc. the least diversified industries are Manufacture and distribution of gas, steam and air conditioning, Mining of coal and lignite, Manufacture of bakery and farinaceous products and Mining of metal ores. They did not exhibit capacity to diversify they export both in terms of product and foreign market destinations. Industries are scattered by the number of the markets where they exhibited competitive advantage (on the vertical y-axis), and by the share of competitive’ products exports in the total value of the industry’s exports (horizontal x-axis). The vertical and horizontal lines intersecting the figure indicate the averages corresponding to each indicator. In this way, industries are classified into four quadrants by the number of markets where their market share was improved, and by the level of the product’s participation in such improvement.

Graph – Export diversification of industries (2009-2013)

Export dynamics

Analysis of export dynamics reveals if an industry possess the potential to improve its export position. According to Porter (1990), competitive advantage is the ability of an industry to innovate and upgrade in order to maintain its competitive export position. An industry must continually transform its “given” capabilities into advantages in order to remain competitive. Analysis of export dynamics reveals existence of industries’ competitive advantage through evaluation of export trends in a certain period and indicates if an industry’s export position has improved or deteriorated by evaluating export trends over time. As in the exports volume, export dynamics are evaluated from two perspectives. On the one hand, we compare industry growth rates within Serbia, identifying those industries with the highest rate of export growth in the economy. On the other hand, we compare export growth rates globally, distinguishing between industries with the capacity for further improvement of their position in foreign markets.

The most dynamic industries were able to grow faster than competitors from other countries, which enabled them to obtain a larger piece of market cake. The most dynamic industries were able to grow faster than competitors from other countries, which enabled them to obtain a larger piece of market cake. The leading industry is Manufacture of Electrical Equipment, which exhibited the highest competitiveness effect (20% of total industries). That industry is followed by Manufacture of coke and refined petroleum products, Mining of metal ores, etc. Industry that achieved by far the largest loss in competitiveness is Manufacture of Iron and Steel.

Graph below depicts the dispersion of industries according to their export growth rate and the contribution of CE to the export growth of industries. The higher the contribution of CE to the export growth rate, the greater the improvement of an industry’s competitiveness and therefore, the better is that industry’s export position. The yellow vertical line represents the growth rate of the total volume of world trade. Industries to the right of that line are exhibiting higher growth than the global trade trend, while the opposite is the case with industries lying to the left.

Graph – Export growth rates vs. Contribution of CE to export growth (2009-2013)