Abstract

The Business Model Canvas also called the Pignut and Osterwalder business model consists of nine essential parts: Customer Segments, Value Proposition, Revenue Streams, Channels, Customer Relationships, Key Activities, Key Resources, Key Partners, and Cost Structure. The Business Model Canvas is a strategic management template that helps businesses to describe, design and analyse their business models. Alex Osterwalder modelled this strategic toll who is a Swiss business management theorist and entrepreneur. He designed this model as a part of his PhD research. In Osterwalder’s model his PhD supervisor Yves Pigneur has co-authored the model. This model was published in a book called Business Model Generation.

During the model development of Osterwalder and Pigneur by an amazing crowd of 470 practitioners from 45 countries contributed their thoughts and experiences. That is an inspiring collaboration. The model is in the form of a visual chart with various elements that describe the value proposition of an organisation, its infrastructure, market and finances. The objective of the model is to assist firms to align their activities through the illustration of potential trade-offs.

This article explains the basics of the Business Model Canvas. The model comprises nine building blocks. They are explained as follows:

Value proposition of the business: Apple’s value proposition lies deeply in design, branding, and innovation. Banking on creativity, the brand sets its products and services apart using aesthetics, advanced technology, and user experience. Value proposition refers to the product or service the firm intends to offer to its customers to satisfy their needs. It is unique to an organisation as it helps to differentiate the product apart from its competitors. The description may be qualitative, outlining the intended outcome and customer experience, or quantitative, describing the efficiency and price. Nike bases its value proposition on the practice of sport as a generator of confidence and success, will and effort, going against what is established, and bringing inspiration and innovation to every athlete in the world.

The business proposition (value proposition) is at the centre of the Business Model Canvas because it is the core offering that answers why customers would choose one company over another, thus serving as the heart of the business model that the other components revolve around. It directly connects the value created to the specific problems or needs of the customer segment, making it the fundamental reason for the business’s existence and the driver for all other strategic decisions.

Infrastructure: Number ofIndian organizations stand out for their strong infrastructure in word. Larsen & Toubro (L&T) is a major player known for its diverse portfolio and engineering expertise. Hindustan Construction Company (HCC) is recognized for its experience in large-scale civil engineering projects. Additionally, GMR Infrastructure and Reliance Infrastructure are also prominent in the infrastructure and real estate sectors. It’s shown on the left of the canvas.

In a value chain model, infrastructure refers to the all-encompassing systems, processes, and resources that support the entire organization and its operations, rather than specific activities like production or marketing. It includes elements like strategic management, finance, accounting, legal, and quality management, which are crucial for the overall functioning and success of the business.  Value chain consists of all processes of the business adding value to the final product/service.

The organisation’s infrastructure comprises the key activities that generate the value proposition, the key resources it used to create value for its customers, its alliances or key partner networks and the things that motivate them to be part of the business model. These describe how the company delivers the value proposition.

Channels

In a business context, channels are the ways a company communicates with, delivers value to, and interacts with its customers to fulfil its business proposition. They are the pathways through which a business reaches its target audience, provides its products or services, and builds relationships. Channels outline the ways a business communicates with and reaches its customers to deliver its value proposition. Hindustan Unilever (HUL) employs a multi-channel approach to reach consumers, including traditional retail, modern trade, e-commerce, and specialized channels like health and wellness stores. They also utilize direct selling and direct-to-consumer strategies, particularly in rural areas through initiatives like Project Shakti. HUL leverages a vast network of distributors and stockists to ensure product availability across various locations. 

Customers

On the right side of the canvas, the model analyses three aspects of the customers of the business. They include customer segments break the total market down to help identify and describe its target customers more specifically, channels of delivery connect a customer segment to the value proposition and the type of relationship between the business and its customers. For example, transactional, long-term, self-service, co-creation, etc. Considered together, these describe how the customer expects to access the value proposition. Airbnb has two main customer segments – travellers seeking accommodation and property owners renting out their spaces. Uber  connects drivers and riders. Spotify targets music lovers, artists, and advertisers. 

Revenue streams

It describes how the company makes money from its target market. For example, businesses can generate revenue through the sale of a physical product, selling a continuous service in the form of subscriptions, renting, or leasing an asset such as a car, licensing or charging fees to advertise products. For example, Tata Motors generates revenue from multiple streams including commercial vehicles, passenger vehicles, electric vehicles, and the Jaguar Land Rover (JLR) segment. They also have revenue from vehicle financing and related services. Tata Motors sells a wide range of vehicles, including passenger cars, trucks, buses, and defence vehicles. These vehicles are sold in over 170 countries worldwide, making Tata Motors one of the most globally diversified automotive companies.

Key Activities

Key activities are the essential things a business needs to do to bring its customers value. Key activities are arrived at more through acumen and enumerating the steps needed to deliver value, than by doing business research. There are 3 categories of key activities; production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality. Problem-solving: finding new solutions to individual problems faced by customers. Platform/ network: Creating and maintaining platforms. ITC’s key activities span across diverse business segments including cigarettes, FMCG, hotels, paperboards, packaging, and agribusiness. Within these, they focus on strategic analysis, supply chain management, and input tax credit management. Furthermore, ITC actively engages in social responsibility initiatives, such as watershed development, afforestation, and sustainable agriculture. 

Key Resources

Identifies the most important assets required to make a business model work.  These resources enable a company to create and offer value, reach customers, maintain relationships, and generate revenue. Key resources can be physical, financial, intellectual, or human.  In Philips India’s Business Model Canvas, key resources can be broadly categorized into physical, intellectual, human, and financial resources. These resources are essential for the company’s operations and achieving its goals in the healthcare and home care sectors.  The physical resources of Philips India’ include  manufacturing facilities, production equipment, distribution networks, and any physical infrastructure necessary for delivering products and services. The intellectual resources include Philips’ patents, trademarks, and proprietary technologies, including AI algorithms used in diagnostic imaging and digital health solutions. Philips India relies on its skilled workforce, including engineers, researchers, and healthcare professionals, who possess the expertise to design, develop, and deliver innovative solutions. 

Key Partners

They represent the external entities with whom a business collaborates to create and deliver value. These partnerships can include suppliers, strategic alliances, joint ventures, or buyer-supplier relationships. For example, P&G’s global reach is heavily reliant on strategic partnerships. A key example is their collaboration with Walmart, focused on optimizing supply chain efficiencies through data analytics and shared information systems. This partnership has led to reduced inventory levels and improved product availability for both companies. P&G partners with EY to enhance manufacturing performance and supply chain operations. This includes leveraging EY’s global experience and P&G’s certified consultants, along with tools like Supply Network Operations (SNO) and the Run-to-Target (RTT) Transformation Accelerator. The company collaborates with GLAAD to promote LGBTQ+ inclusivity in advertising and marketing, ensuring authentic and accurate representation. This partnership involves evaluating and improving representation from pre-production to post-production and beyond. It has a long-standing partnership with WWF, focusing on environmental conservation and sustainability initiatives. 

Cost Structure

The Cost Structure block on the Business Model Canvas outlines all the costs associated with operating a business. It details the most significant expenses incurred in creating and delivering value, maintaining customer relationships, and generating revenue. Understanding the cost structure is crucial for optimizing operations, reducing inefficiencies, and ensuring profitability. Bata, as a large retailer, would also have significant costs associated with its supply chain, including sourcing, logistics, and distribution. Manufacturing cost includes the cost of raw materials, labor for production, factory overhead (rent, utilities), and machinery maintenance. Since Bata has its own manufacturing facilities, these costs are crucial. Retail operation cost covers the costs of running physical stores, including rent, utilities, store staff salaries, visual merchandising, and point-of-sale systems. Bata spends significantly on marketing to promote its brand and products. This includes advertising campaigns, promotional events, and digital marketing efforts.  Bata is synonymous with the school going children for the leather and canvas shoes in India. Bata is known for school shoes around the world. For generations, Bata has been part of their childhood memories, helping millions of students step confidently into their future. With a portfolio of over 20 brands.

Conclusion

The Business Model Canvas is used by both startups and existing businesses, including large corporations. With a little adaptation of the ideas, non-profits and social enterprises can also use the canvas. The canvas is easy to draw on a whiteboard or a big piece of paper and you can use sticky notes to add ideas or details to each block. Whether someone is launching a startup or reinventing an existing business, this model provides a clear framework for mapping out who their customers are, what they value, and how their  organization can deliver that value while generating sustainable revenue. By breaking down the complex world of business strategy into nine essential building blocks, the authors offer a practical toolkit that has revolutionized how companies think about their fundamental operations.

References

1. https://scholar.google.co.in/citations?view_op=view_citation&hl=en&user=4GAKY4sAAAAJ&citation_for_view=4GAKY4sAAAAJ:vV6vV6tmYwMC
2. https://www.strategyzer.com/library/the-business-model-canvas
3. https://hbr.org/2013/05/a-better-way-to-think-about-yo
4. https://www.itcstrategies.com/
5. https://www.intracen.org/our-work/topics/business-environment/trade-development-strategies
6. https://www.business-standard.com/companies/news/hul-kirana-distribution-samadhan-strategy-124123100260_1.html
7. https://vace.uky.edu/sites/vace/files/downloads/9_business_model_generation.pdf
8. https://www.philips.com/a-w/about/our-strategy.htm
9. https://iide.co/case-studies/the-business-model-of-philips/
10. https://supplychaindigital.com/digital-supply-chain/hindustan-unilever-wins-digital-supply-chain-at-p-sc-awards

Expanding abroad allows domestic businesses to get out of a saturated market. It gives an organization access to new customers and in a market where its competitors do not operate. One of the reasons why businesses expand globally is to be able to provide a reliable service to their international clients. The Expansion through Internationalization is the strategy followed by an organization when it aims to expand beyond the national border.  

Companies habitually overestimate the attractiveness of foreign markets; they get dazzled by the sheer size of untapped markets, they lose sight of the difficulties while pioneering new, often very different territories. The problem is rooted in the analytic tools the most prominent being country portfolio analysis that managers use to judge international investments. By focusing on national wealth, consumer income, and people’s propensity to consume, managers emphasize potential sales, ignoring the costs and risks of doing business in a new market. Most of these costs and risks result from the barriers created by distance. Here “distance,” however, does not refer only to geography.

Pankaj Ghemawat is an international strategy guru who developed the CAGE framework to offer businesses a way to evaluate countries in terms of the “distance” between them. Pankaj Ghemawat’s “Distance Still Matters,” article in Harvard Business Review became world-famous. He explains distance is not only the physical geographic distance between countries but also the cultural, administrative, geographic and economic dissimilarities between them. The CAGE framework offers a broader view of distance and provides another way of thinking about location and the opportunities and affiliated risks associated with global arbitrage (taking advantage of price in two or more markets). 

Ghemawat provides an example of a North American fast-food company. In which he explains that on the basis for fast-food company to grow is per capita income. Countries like Germany and Japan would be the most attractive markets for the expansion for the North American fast-food company. However, when he plots the CAGE analysis using the CAGE framework, he shows that Mexico ranks as the second most attractive market for international expansion for the fast-food company, far ahead of Germany and Japan.

Another example provided by Ghemwat is of Dell Computers and its efforts to compete effectively in China. The vehicles it used to enter China were just as important in its strategy as its choice of geographic arena. For Dell’s corporate clients in China, the CAGE framework would likely have revealed relatively little distance on all four dimensions: Cultural, Administration, Geographical, Economical parameters. The fact that many personal computer components have been sourced from China by the mega computer manufacturing companies; however, for the consumer segment, the distance was rather great. For example, Chinese consumers don’t’ regularly buy over the Internet, which is the primary way Dell sells its products in the United States. One possible outcome could have been for Dell to avoid the Chinese consumer market altogether. However, Dell opted to choose a strategic alliance with distributors whose knowledge base and capabilities allowed Dell to bridge the CAGE gap in Chinese market

The impacts of the distances and differences figured out by the CAGE Framework between the countries have been demonstrated in a quantitative manner via gravity models. It is an excellent analytical tool for the various companies and organizations that develop international strategies with an intention of the global expansion of their businesses.

One most important parameter in CAGE framework explains that when looking to expand business into a foreign market, the cultural differences between the two countries are hard to change whereas differences due to the legal and economic structures can be changed easily.

Cultural Distance

It includes languages, different ethnicities, different religions, and different social norms.

Language

International business activities are always accompanied by language-related barriers as companies are confronted with multiple local languages and a multinational workforce. To increase the efficiency of corporate communication, documentation and cross-national teamwork, an increasing number of companies have implemented common language policies in both their headquarters and their foreign subsidiaries and made English their official corporate language.

Language differences present a common stumbling block in international business communication. It has been observed that whenever one party is using a second language or a translator, the potential for misunderstandings increases. Even if you’re bilingual, slang, jokes and figures of speech can cause problems. Try speaking slowly and clearly in these circumstances. If you’re giving an oral presentation, a clear hand out in simple language helps avoid misunderstandings. For example, BMW is easy to pronounce in English but say it like the Germans do – ‘bey-em-vey’. The ‘w’ is pronounced as ‘v’.

Ethnicities

Meaning traditions and mannerisms in ethnic groups.  For example, in Japan and the U.K. people tend to avoid the outward show of feelings, while the United States, France and Italy accept a stronger show of emotions, even in business. Some cultures have strict dress codes for business. For example, in Muslim countries, women must avoid sleeveless tops, short skirts and low necklines. In Japan, conservative business suits in dark colors are essential to make the best impression.

The advice is, when new to a culture, observe what others wear for business. Start out with conservative outfits in neutral colors until you learn what’s respectful and appropriate,

You can unknowingly cause offence when meeting foreign clients one-on-one. In Japan, you should bow rather than shake hands unless the other party offers a hand first. The exchange of business cards is a requirement in many cultures.

In Arab countries, you should accept the card with your right hand, while in China and Japan you should use both hands. In China, you can show respect by taking a Chinese name. In Brazil, business acquaintances stand close to build trust, so backing away may be construed as a rebuff.

Gift-giving etiquette is a complex subject that can be difficult to master. In China, gifts are the norm and expected, while in other countries, the wrong gifts are insulting. Avoid bringing bad luck in China – don’t give a clock or a gift with blue, white or black wrapping paper. Keep offering your gift, because Chinese recipients usually refuse three times before accepting.

If you comply with a request for a bribe in any country, corruption charges are a likely complication. It’s illegal for US nationals to bribe foreign officials, although sometimes gifts legal in the host country are allowed.

Following local customs builds better relationships at business meetings. For example, Canadians are clock-watchers and expect everyone to arrive on time. In Japanese meetings, often only the most senior person for each side talks, while others typically remain silent.

In China, business dinners often include many toasts, so pace you’re drinking accordingly. To maintain the respect of Asian contacts, avoid etiquette mistakes that cause you to lose face.

Religion

Religious observance is widespread and continues to influence managerial behaviour in many parts of the world. However, its role in international business negotiations has not received much scholarly attention. Lot of research proves that some of the key ways in which religious belief shapes negotiation behaviour.

Administrative Distance

It includes political environment, money (Currency value) political relationship (either friendly or hostile relation) government policies and institutional weaknesses.

Political Environment 

The political environment can be studied in terms of the central government, the citizens of a country, rules, and regulations or international relations. Examples of political factors related to the central government of a country are levels of bureaucracy, corruption, and government stability.

Political risk in international business results from various factors that can negatively affect a company’s income or complicate its business strategy. These factors include macroeconomic issues such as high interest rates and social issues such as civil unrest. Since the past year Lebanon is protesting also known locally as the October Revolution, for a series of civil protests taking place in Lebanon. Trade between India and Lebanon during Jan-June 2019 stands at $ 181.00 million, with Indian exports to Lebanon being $ 171.00 million and Indian imports from Lebanon amounting to $ 10.00 million which is now hampered because of Pandemic and unrest in Lebanon.

Currency Value

The balance of trade is the value of a country’s exports minus its imports. It’s the biggest component of the balance of payments that measures all international transactions. It’s easy to measure since all goods and many services pass through the customs office. India imports goods from China priced in Yuan and imports goods from U.S priced in Dollars. Both currency price changes less frequently.

Political Relationship

India’s closest friends in world include the Russian Federation, Israel, Afghanistan, France, Bhutan, Bangladesh, and the United States. India is labelled globally for many things; a regional power, a nuclear power, a nascent global power, and a potential superpower, among others. With a growing international influence, by playing influential roles in various global matters, India has always held its head high when it comes to maintaining peaceful bilateral relationships with various countries, excepting its neighbouring countries in the subcontinent. Given the current scenario of the country’s relationships, it can be imagined that the farther away a country is, the more likely it is to have a strong relationship with India.

Geographical Distance

It includes parameters such as physical remoteness, lack of common border, lack of sea or river access, size of country, time zone, weak transportation reach or communication reach, differences in climate.

Physical Remoteness

All the great empires in the world have been based around trade routes, and these are almost always maritime transports (near the sea). There are notable exceptions; the medieval Mongol empire led by Genghis Khan was based on the Silk Road from China to the west. Many of the world’s poorest countries are severely hindered because they are landlocked; they are situated either in high mountain ranges; or lack passable rivers, long coastlines, or good natural harbours.

Climate

One of the most important factors in development is geography, where the country is in the world, and climate. It’s no coincidence that the poorest countries are in the tropics, where it is hot, the land is less fertile, and water is scarcer, where diseases flourish. Conversely, Europe and North America profit from huge tracts of very fertile land, a temperate climate, and good rainfall. In extremes of climate, either hot or cold, too much energy goes into the simple business of survival for there to be much waste of energy for development.

Lack of common borders

China has three of the world’s busiest ports, and so does the US. With ports you can raise money through tolls and shipping services. If you have no access to the coast, not only do you miss out on these services, you have to transport everything by land, which is much more expensive. And what if your neighbours don’t like you? Ice-bound on its northern coastlines, Russians have quarrelled for centuries over access to a warm water port, the Crimean War being the most serious one. Countries like Afghanistan, Rwanda, Malawi, or Bolivia are all hindered by access to ports. Other countries, like Ethiopia or Lesotho, are not only landlocked, but mountainous as well, making trade even more expensive.

Economic Distance

It consists of parameters such as consumer income, natural resources, financial resources, human resources, infrastructure, intermediate inputs, information or knowledge.    

Consumer Income  

Money per capita can refer to income per capita, money supply per capita, gross domestic product (GDP) per capita, or even net worth per capita. Countries like USA, Luxembourg, Switzerland, Germany, and Australia are always an attraction in International Business. There is plentiful evidence that tradable goods are more expensive in countries with high per capita incomes.

Natural Resources

Natural resources have made countries richer. It takes infrastructure to capitalise on these, but some places have a distinct advantage over others. Oil is the most obvious. Nobody is any doubt about how Saudi Arabia or UAE make their money. Among other advantages, gold and diamonds have helped South Africa build the most successful economy on the continent. These are all non-renewable resources; once they’re gone, they’re gone, but while stocks last there is wealth to be made.

Besides these there are renewable resources; forests, fish, stocks that, if correctly managed, will refresh themselves. Much South American development has been based on the Amazon rainforest in natural rubber and then timber.

Finally, there is what is sometimes called ‘flow resources’. These are renewables that need no management, wind, tide and solar resources. The Earth Policy Institute describes the American Great Plains as ‘the Saudi Arabia of wind energy’, while sunshine-rich places like California, Sicily and Portugal are able to invest in solar power. No natural resource is a license to print money, and there are plenty of poor countries who are rich in resources, but then the fact is that have not been able to manage it.

I want to illustrate my point here with one of relevant examples how corporate invest for growing in new markets, found on Internet: when McDonald’s tried to enter the Russian market, it found an institutional void: a lack of local suppliers to provide the food products it needs. Rather than abandoning market entry, McDonald’s decided to adapt its business model. Instead of outsourcing supply-chain operations like it does in the United States, McDonald’s worked with a joint-venture partner to fill the voids. It imported cattle from Holland and russet potatoes from the United States, brought in agricultural specialists from Canada and Europe to improve Russian farmers’ management practices, and lent money to farmers so that they could invest in better seeds and equipment. As a result of establishing its own supply-chain and management systems, McDonald’s controlled 80% of the Russian fast-food market by 2010. The process, however, took fifteen years and $250 million in developing its Russian market.

Human Resources

Globalization forces companies to go international and enter new markets. All the corporate values and strategies change after internationalization. Human resource management (HRM), as a part of key business functional dimensions, faces a high level of development as well. Globalization has had far-reaching effects in business but also in strategic HRM planning. The signing of trade agreements, growth of new markets such as with India and Malaysia is because of young, trained and English speaking labour.

An example of dealing with an institutional void and changing the institutional context is by the “Big Four” audit firms (i.e., Ernst & Young, KPMG, Deloitte Touché Tohmatsu, and PricewaterhouseCoopers) when they entered Brazil. At the time, Brazil had a untried audit services market. When the four firms set up branches in Brazil, they raised financial reporting and auditing standards across the country, thus bringing a dramatic improvement to the local market. The Big Four invested in training and development the accountants in Brazil.   

Labour law

The legal system in labour law practiced in a country has a great effect on the types of compensation; union issues, how people are hired, fired, and laid off and safety issues. Rules on discrimination, for example, are set by the country. In China, for example, it is acceptable to ask someone their age, marital status, and other questions that would be considered illegal in the United States. In another legal example, in Costa Rica, known as a thirteenth month salary is required to be paid in December. In Costa Rica, All rank-and-file employees who have worked for at least one (1) month during the calendar year, are entitled to receive 13th month pay regardless of the nature of their employment and irrespective of the methods by which their wages are paid. This perilous labour law distracts many firms from starting business in Costa Rica.

Infrastructure

Infrastructure matters to trade mainly because it decreases the cost of trade and ensure the ease of doing business in host economies. Lower trade costs raise the potential for increased export markets. Firms can choose the strategy of staying away from a market with infrastructural voids. For example, Home Depot Inc. the largest home improvement retailer in the United States, supplying tools, construction products, and services requires institutions like reliable transportation networks to minimize inventory costs and the practice of employee stock ownership which motivates workers to provide great service. The Home Depot has decided to avoid countries with weak logistics systems and poorly developed capital markets because the company would not be able to attain the low cost–great service combination that is its hallmark.

The Global Competitiveness Report began as a research project by Professor Klaus Schwab. He is a German engineer and economist, best known as the founder and executive chairman of the World Economic Forum.  In 1979 he designed a report to measure and analyse competitiveness of 16 European countries. The study was based on Schwab’s innovative concept of competitiveness, which extended beyond the traditional notion of labor and capital productivity. That year, of the 200 indicators selected for the Forum’s first competitiveness index, 50 were derived from a survey.

The survey was mailed out in English, French, and German to potential respondents throughout Europe, mainly Chief Executive or Chief Planning Officers of European companies; Managing Directors of subsidiaries of US companies operating in these 16 countries, leading representatives of industrial and employers’ associations, labor unions, economic and social institutes; university faculties of economics or business administration; and the economic media. Median values were calculated for each question and by country. In parallel, Forum researchers visited statistical offices and ministries in order to gather relevant quantitative data. The report was finalized in November 1979. The report was the first attempt to support policymakers and business leaders in their efforts to formulate improved economic policies and institutional reforms.

Thirty five years down, in 2004, WEF (World Economic Forum) started regular practice of ranking the economies to reignite economic growth. The Global Competitiveness Report is a tool to help governments, the private sector and civil society work together to boost future prosperity. Comparative analysis between countries allows leaders to measure areas that need strengthening and build a coordinated response. It also helps identify best practice in various nations in the world. The Index measures how productively a country uses available resources.

At present the Global Competitiveness Report has grown to cover over 140 economies to assess the key drivers of development. The methodology behind the analysis has been improved over the years in order to reflect the newest thinking in matters of economic growth. In parallel to this development of the index, the original survey has evolved and is today known as the Executive Opinion Survey (the Survey). Over the years, it has undergone a number of revisions and audits, which have enabled an improved administration process and methodology. The Survey has grown in scope, too. It now includes over 140 questions distributed in 14 sections.

The 12 pillars of competitiveness are grouped under three sub-indexes according to three main development phases: basic requirements, efficiency enhancers and innovation and sophistication factors. Depending on each country’s stage of development, weightage is added to the sub-indexes. Here are the 12 pillars of competitiveness that WEF uses to rank nations according to productivity and prosperity.

Pillar one is Institutions: The way institutions are managed, has a direct link to a nation’s level of competence. Efficient management of both private and government institutions is the basis of business environment. Good business practices combined with ethics and corporate governance guarantee success. Physical security and independent judiciary provide the fundamental protection of intellectual property rights (IPR).

Pillar two is Infrastructure: Infrastructure includes connectivity like road, rail, ports, electricity and telecommunications. These are fundamental to economic development and growth. Because of connectivity an economy opens to outside world, trade and commerce will flourish. Quality and quantity of infrastructure decides a nation’s level of productivity.

Pillar three is Macroeconomic Environment: Macroeconomic stabilization is a condition in which a complex framework for monetary and fiscal institutions and policies is established to reduce volatility and encourage welfare-enhancing growth. Inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment are some vital macroeconomic indicators of a nation.

Pillar four is Health and Primary Education: Education is fundamental to development and growth. The human mind can achieve advancements in healthcare, agricultural innovations to efficient public administration and private sector growth. Education helps to unleash progress of human. Health of people also makes an important contribution to economic progress; healthy populations live longer, are more productive, and save more. Clean environment, peace of mind, non corrupt government administration is some factors to provide good health for its people.

Pillar five is Higher Education and Training: High education and technical skills are crucial for the growth of an economy. Progressive nations therefore invest more in higher education and skill development. Higher educational facilities and on-the-job training can only assure growth as a nation moves up the ladder. Human capacity development is enhanced through quality education at many levels, including primary, secondary, technical and vocational, and higher education.  As the world is growing more complex, higher education is an increasingly more critical pillar for human capacity development.

Pillar six is Goods Market Efficiency: A successful economy has to market its products and services worldwide. Growth depends on open markets and liberal marketing policies. Domestic and foreign competitiveness demands good marketing efficiency. It ensures the planned economic growth in the developing economy where the scarcity of goods, services, ideas and excessive unemployment, thereby marketing efforts are needed for mobilization of economic resources for additional production of ideas, goods and services resulting in greater employment.

Pillar seven is Labour Market Efficiency: Productivity depends on the quality of labour. Trained, organized and sincere workers are extremely important for organizational growth.  A nation with a large scale of unemployment will never progress. The business environment has to assure promotion and development to the workers. Nations which promote gender parity have grown faster. Job market needs to be efficient and flexible.  Skilled labour is always in demand.

Pillar eight is Financial Market Development: The financial system comprises all financial markets, instruments and institutions. The financial system is particularly important in reallocating capital and thus providing the basis for the continuous restructuring of the economy that is needed to support growth. In countries with a highly developed financial system, we observe that, a greater share of investment is allocated to relatively fast growing sectors. The banking system has to support business by channelling the resources saved by its people. Efficiency, stability, reliability and credibility of the financial system are crucial for the economy. Transparency and efficiency help in financial market development.

Pillar nine is Technological Readiness: Technology transfer and development is vital to the process of transforming economies to enable inclusive growth within the framework of sustainable development and poverty eradication. The definition of technology readiness is the set of capacities to plan for, catalyse, sustain, and monitor and report on technology transfer and development in ways that are fully integrated with national development priorities. In today’s world, technological readiness can only ensure quality and quantity of production and service.

Pillar ten is Market Size: Large markets without entry barriers allow faster growth. Both domestic and foreign markets are considered for the market size. Market sizing gives the business a sense of market trends. It gives clue on the necessary drivers of demand, as market movements often continue in one direction or another for a period of time. What’s more, those trends often indicate whether substitutions are available and whether that could potentially affect market size.

Pillar eleven is Business Sophistication: The eleventh pillar of GCI is sophistication in business practices that improve efficiency of production of goods and services. Sophistication is a key factor for innovation-driven economy and concerns the quality of a country’s overall business networks, as well as the quality of operations and strategy of individual firms. This pillar indicates local supplier’s quantity and quality, business cluster development, nature of competitive advantage, value chain width, control of international distribution etc.

Pillar twelve is Innovation: High competitiveness needs technological innovation. Advanced countries invest more in developing technologies. But other nations too can improve their productivity by making incremental improvements. Fundamentally, there are only two ways of increasing the output of the economy: (1) increase the number of inputs that go into the productive process, or (2) think of new ways in which you can get more output from the same number of inputs. Innovation drives the economic growth faster in people management, money management, processes management, materials management practically every aspect off business.

India’s ranking:

The most recent 2017-2018 edition of Global Competitiveness Report assesses 137 economies. This graph provides the latest reported value for – India Competitiveness Rank – plus previous releases, historical high and low, short-term forecast and long-term prediction, economic calendar, survey consensus and news. The actual data, historical chart and calendar of releases were last updated in May 2018.

Globally, Switzerland ranks at top for past six years. In 2018 at number two stands United States, at third position Netherlands, fourth Germany and fifth United Kingdom.

India has a long way to go.