The interrelations between competitiveness and responsibility

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Competitiveness and responsibility become two of the main topics on the public agenda of nowadays, no matter the level - firm, industry, national or international. As a result, they even generated the emerging of a new concept - responsible competitiveness, which defines (at firm/corporate level) and characterizes (at national/regional level) a new perspective on understanding and doing business. Without neglecting or minimize all the other reasons, we think this is happening also because competitiveness and responsibility can form together some kind of a mechanism which is able to function and develop by itself naturally, once it reaches a specific level of - financial and ethical - performance (level which is impossible to predict exactly in terms of time period and money figures, and different from case to case, from industry to industry, from culture to culture etc.).

Competitiveness, which is inextricably related to the concept (and reality) of competition, was and remained a desired target for firms and countries as well (because all of them wish to outperform others and enjoy such advantage over time). Nevertheless, the term itself gets a different definition from any author/scholar or authority/organism that uses it. From the "classical" approaches of Michael Porter (Porter, 1990) or Paul Krugman (Krugman, 1994) to the more recent ones, emphasized by Mark Gehlar et al. (Gehlar et al., 2006), and Sule Onsel Sahin et al. (Sahin et al., 2006) competitiveness remained an "obsession", especially under the pressure of global competition. The main idea about what competitiveness means remained the same; what has changed over time were the ways to achieve it, the sources of sustainable competitiveness into a perpetually and rapidly changing business environment.

The literature on competitiveness supplies a wide variety of definitions of the term. The National Competitiveness Council (2003) has defined competitiveness as "the ability to achieve success in markets leading to better standards of living for all. It stems from a number of factors, notably firm level competitiveness and a supportive business environment that encourages innovation and investment, which combined lead to strong productivity growth, real income gains and sustainable development". Into the IDM World Competitiveness Yearbook 2006, Stephane Garelli captured two very different definitions for the concept of competitiveness (Garelli, 2006): on one hand, he says that competitiveness analyses how nations and enterprises manage the totality of their competencies to achieve prosperity or profit; on the other hand, he defines the competitiveness of nations to be a field of economic theory, which analyses the facts and policies that shape the ability of a nation to create and maintain an environment that sustains more value creation for its enterprises and more prosperity for its people. The author's assumption is that economic value is only created by enterprises; nations can establish an environment that hinders or supports the activities of enterprises but a nation does not directly generate economic added value. Anyway, there is no single "recipe" for competitiveness.

As regard responsibility, the second term of our "equation", it is strongly related to at least two different other: business ethics and corporate social responsibility. The theoretical framework related to those terms is also a working progress, as long as opinions are still very different: Milton Friedman's basic position (a classical author in this field) is that the only social responsibility of business is to increase profits, as long as the company stays within the rules of law" (Baron, 2007).

Ethics should be an integral part of business to ensure sustainable economic success (Yanus and Latiff, 2007). In Christoph Luetge's opinion, business ethics is an investment (Luetge, 2005). A manager unable to employ ethics for the company's success is a bad manager. In addition, Charles W.L. Hill thinks that business ethics are the accepted principles of right or wrong governing the conduct of businesspeople, and an ethical strategy is a strategy, or a course of action that does not violate these accepted principles (Hill, 2007).

We can even talk about the ethical organization, which "is characterized by a conception of ethical values and integrity as a driving force of the enterprise. Ethical values shape the search for opportunities, the design of organizational system, and the decision-making process used by individuals and groups. They provide a common frame of reference that serves as unifying force across different functions, lines of business, and employees groups. Organizational ethics helps to define what a company is and what it stands for" (Dess et al., 2007).

On the other hand, Corporate Social Responsibility (CSR) "describes business practices that adhere to ethical values that comply with legal requirements, that demonstrate respect for individuals, and that promote the betterment of the community at large and the environment. It involves operating a business in a manner that meets or exceeds the ethical, legal and public expectations that society has of business" (Greenberg and Baron, 2008). As Archie Carroll putted it more than a decade ago, "for the better part of 30 years now, corporate executives have struggled with the issue of the firm's responsibility to its society. (…) new governmental bodies established that national public policy now officially recognized the environment, employees and consumers to be significant and legitimate stakeholders of business. (…) CSR, to be accepted as legitimate, had to address the entire spectrum of obligations business has to society, including the most fundamental - economic" (Carroll, 1991).

The result of integrating ethics and, beyond it, responsibility (used in this context as a more integrative term), into the common discussion framework about competitiveness is the emerging of a new concept and practice: responsible competitiveness. Therefore, a relatively different approach on competitiveness (associated with an ethical dimension) is developed, when Simon Zadek, Chief Executive at AccountAbility, London, UK talks, at a relatively different level, about responsible competitiveness. He emphasizes that "the challenge and vision of responsible competitiveness is to embed social and environmental goals and outcomes in the very heart of competitiveness": "As Oded Grajew, former Special Advisor to the President of Brazil, and Founder and President of Instituto Ethos argued, <<the responsible competitiveness of nations is essential to achieve sustainable development in today's globalized world.>>". The discourse is completed by citing Turner, who said (in 2001, apud Zadek) that "whether competitiveness is a matter for companies or nations is the tip of the iceberg of an extensive debate about the nature, source and agencies of competitiveness (Turner 2001). Businesses do compete of course, but so do nations and regions through differences for example in their cultures and institutional arrangements". The result of this arguing is a framework for responsible competitiveness, framework which has two basic dimensions - single businesses and society as a whole - each of them grouping few characteristic behavioural stages regarding the interrelations between competitiveness and responsibility in terms of business ethics and corporate social responsibility (Zadek, 2006).

So, under these circumstances, in order to attain and maintain competitiveness, any kind of entity must be responsible as well. We think there are two main important ways for it: by behave more and more responsibly - and let business ethics and corporate social responsibility to be the "common way of doing business" - and by integrate less and less corruption - as lack of business ethics - into the usual behaviour.

National Performance and Firm Global Performance - the two main important level of analysis

The main idea of this discourse is that "you can't create international competitiveness either through government or business actions alone. There is a connection between the business community acting collectively and public policies and regulations, which can build international competitiveness, based on an improved environment for corporate responsibility" (Zadek apud Cowe, 2005).

In order to evaluate National Performance (NP) we integrate in our discussion framework three main dimensions: Global Competitiveness Index (GCI), Responsible Competitiveness Index (RCI) and Corruption perception Index (CPI):

Global Competitiveness Index GCI - it is the main competitiveness indicator used by the World Economic Forum, and developed by Professor Xavier Sala-i-Martin, at Columbia University. This index, which followed two other measures of national competitiveness (Growth Competitiveness Index and Business Competitiveness Index) responds to the more advances in economic research and the rising importance of the international dimension, as well as the increasing diversity of countries covered by the report. With the formulation of this index, the Global Economic Forum takes into account that the nature of international competitiveness is subject to continuous changes. The fast development of information and communication technology and the associated decline in communication costs have led to a sharp increase in the speed of economic integration in the world. Firms are increasingly forced to base their decisions and strategies on a global perspective.

Responsible Competitiveness Index RCI - as Toby Webb emphasized when this index was launched, in 2003, "the index is designed to allow governments, companies and civil society groups to compare the competitiveness of various countries with regard to both economic and social factors. (…It…) is actually comprised of two differing, complex indexes: the data from the first, a "national corporate responsibility index", which attempts to rate how some 51 countries work on corporate responsibility at a macro level, is merged with World Economic Forum financial statistics and data. Thus, the full responsible competitiveness index aims to contain both corporate responsibility analysis and national economic data in one tool. This is to be used, said Dr. Zadek, to judge current national performance and make economic forecasts for the future which factor in social and environmental risks to economies" (Webb, 2003).

Corruption Perception Index CPI - it is probably the most well known and quoted corruption measurement in the world, which has been published annually since 1995. "The goal of the CPI is to provide data on extensive perceptions of corruption within countries. The CPI is a composite index, making use of surveys of business people and assessments by country analysts. It consists of credible sources using diverse sampling frames and different methodologies. These perceptions enhance our understanding of real levels of corruption from one country to another" (Lambsdorff, 2007). The main reason why we include corruption (which could be defined as lack of ethics) into this framework of national performance is that it has been recently seen as a major impediment to national economic growth, with dramatic consequences in the developing world.

The Firm Global Performance (FGP) is a concept that we try to develop and use considering the new directions emphasizing that "good corporate citizenship and good business go hand in hand". There is a lot of literature that relate some how profitability (competitiveness according to our present conceptual framework) to business ethics and corporate social responsibility (responsibility in our terms of discussion):

"Despite the fact that different researchers measure social responsibility and financial performance in different ways, it was found that these variables were positively correlated with one another. (…) the idea is straightforward: companies that are successful financially invest in social causes because they can afford to do so and socially responsible companies tend to perform well financially" (Greenberg and Baron, 2008) - the so called virtuous circle;

"A business with strong corporate social responsibility will often be more successful in generating Economic Value Added, for reasons rooted in business strategy. (…) The finding that Corporate Social Responsibility is not necessarily a cost of doing business was revealed by the significant overlaps between stakeholder and environmental management concerns and what modern resource-based business strategy sees as the source of business competitive success" (Pearce, 2003);

"Waddock and Graves (1997) have used a time lag method and concluded that there is a positive interaction between corporate social performance and financial performance through time. But the model used by McWilliams and Siegel (2000) found that good management theory was no longer supported when a research and development variable was introduced" (D'Arcimoles and Trebucq).

It is generally accepted that a firm can be defined as a combination of tangible and intangible assets in order to perform a specific activity with a view to cover a real or a potential demand on the market and to obtain a net income from it. But the transition to the knowledge-based society of the globalized economic world made possible and generated a big shift regarding the value of the firm and the foundations of competitiveness: "The defining trend is the shift from tangible to intangible factors of corporate value and competitive advantage and this, in turn, has led to the emergence of a discrete intangible economy in its own right … (So) … assets such as information systems, clientele and reputation, brands, competencies and knowledge, training, belonging to networks, etc. represent an increasing share of company value and have become the most critical factors in the competitiveness of many organizations (Hope and Hope, 1998)" (European Observatory on Intangible Assets). It doesn't mean that the tangible assets have now no value at all, because no economy and no firm could operate without them; it only means that the structure of the assets of the firm has been changed, and it is necessary to define in each case the optimum combination of those two kinds of assets in the search of global competitiveness.

More and more, firms are judged by their ability to develop responsible business through business ethics. A Responsible Business Enterprise "is characterized by responsible business conduct at all four levels of its identity as an enterprise: (1) compliance with the law, (2) risk management, (3) reputation enhancement, (4) value added to the community. Responsible business conduct includes the choices and actions of owners, managers, employees, and agents that are (a) within their authority, (b) well informed, (c) intended to pursue the enterprise purpose and meet reasonable stakeholder expectations, and (d) sustainable over time. Responsible business conduct allows an enterprise to improve its business performance, make profits, and contribute to the economic progress of its community" (Business Ethics: A Manual for Managing a Responsible Business Enterprise in Emerging Market Economies, US Department of Commerce, 2004).

The concept and practice of the triple bottom line is another almost unanimously recognized measure for the global performance of the firm. It was firstly launched and promoted by John Elkington - into his 1998 year's book Canibals With Forks. The Triple Bottom of 21st Century Business. The author argues, first of all, that firms need to adjust in order to survive into an environment which is permanently and radically changed by the globalization and the (more and more intense) civic activism. By this concept, largely accepted and used today, the author "expresses his conviction that businesses do not follow just one goal - to add (economic) value - but they have also to follow other social and ecological responsibilities; by doing this, <<the accounting>> of tomorrow's operations will contain, together with the well known calculus of strictly economical efficiency, a balance sheet of the firm's activities effects on the environment and another one regarding the consequences of this activity over the social environment" (Craciun, 2005).

On the other hand, "it is increasingly common to talk about the triple bottom line at the level of the economy than the firm, whether in the context of the development of African or Latin American economies, strategies for Asian countries to compete with China, or the European Union's development strategy (…) Advocates of corporate social responsibility argue that it should contribute to the quantity and quality of macro-economic competitiveness and development. But demonstrating this relationship at the macro-economic level is a challenge. (…) countries could make corporate social responsibility work at the national level, (because) <<governments are beginning to view corporate social responsibility and codes of conduct as a cost-effective means to enhance sustainable development strategies, and as a component of their national competitiveness strategies to compete for the right type of foreign direct investment inflows and to position their exports globally>>" (Cowe, 2005).

Business ethics, as well as corporate social responsibility - terms that define the responsible business - can be considered as parts of the global dimension of development known as sustainable development and defined as a "development that meets the needs of the present without compromising the ability of future generations to meet their own needs". Its main objective is to improve the quality of life and to spread the progress globally. In conclusion, at firm's level, the sustainable development goal - imposed by the challenge of competitiveness - is achieved if the firm realizes a triple performance: economic, social and ecological, by unifying Profit, People and Planet.


By this study we would like to try to identify a link between Growth Competitiveness Index, Responsible Competitiveness Index and Corruption perception Index.

In order to emphasize the bonds and the correlations between the GCI (Global Competitiveness Index), RCI (Responsible Competitiveness Index) and CPI (Corruption Perception Index) we appeal to the CORREL - correlation index calculation, R2 and to the correlogram representation with the highlight tendency that manifests between the correlated elements.

The correlation index - CORREL:


n - number of the elements/index/variable

x, y - elements/indexes/variables to be considered


Cy/x is positive and tends to 1, there is a strong direct connection between variables

Cy/x is close to zero, may it come from 1 or -1, the connection between variables is weak

Cy/x is negative and tends to -1 there is a strong inverted connection between variables

Case study

The case study intends to capture the actual correlations between the three variables by appending to the specific values that different countries achieved for the year 2007. Its sources were the studies published by: the World Economic Forum - for Growth Competitiveness Index, AccountAbility - for Responsible Competitiveness Index and Transparency International - for Corruption Perception Index.

Correlation between Global Competitiveness Index and Responsible Competitiveness Index 2007

The correlation index value of 0.90 and the R2 value of 0.81 show a direct and strong connection between the two variables. This means that the most responsible nations are the most competitive nation - it's the case of the northern countries, Australia or Switzerland - and the most "irresponsible" countries are the most uncompetitive - like Chad, Mozambique or Ethiopia.

Figure 1. Correlation between Global Competitiveness Index and Responsible Competitiveness Index 2007

The 2004 Executive Opinion Survey evaluates the views of business leaders on environmental and social responsibility issues, and demonstrates both the importance of governmental leadership in providing an effective regulatory climate, and the key role of business leadership in addressing environmental and social issues proactively.

Correlation between Responsible Competitiveness Index and Corruption Perception Index 2007

The correlation index estimated to distinguish the connection between RCI and CPI is 0.93 and R2 is 0.88 with a very strong and direct connection, which shows that the responsible countries are more uncorrupted countries, and the irresponsible are the most corrupted countries. From the first group, as will expected, take part Denmark (place 2,1), Sweden (place 1,2), Finland (3,1), Iceland, United Kingdom. From de last group take part Cambodia, Venezuela, Chad.

Figure 2. Correlation between Responsible Competitiveness Index and Corruption Perception Index 2007

The very strong correlation between RCI and CPI is explained by the fact that CPI is found in RCI's composition, being one of the 7 factors of Social Enablers sub-index.

Taking into consideration that CPI is a component index of the RCI at national level and considering the fact that on a company level there has not been developed a classification of the most corrupted companies, we can state that on a micro-economical level the companies with the most ethical behaviour are also the least corrupted ones. In other words, the lack of corruption in a company is due to a high level of ethic behaviour.

Correlation between Global Competitiveness Index and Corruption perception Index 2007

The correlation index value of 0.87 and the R2 value of 0.75 show a direct and strong connection between the GCI and CPI. It means that the most competitive nations are the most uncorrupted nation, on one hand, and the most uncompetitive countries are the most corrupted countries on the other hand.

Figure 3. Correlation between Global Competitiveness Index and Corruption Perception Index 2007

As we can observe by analyzing the three charts above there is a stronger concentration of countries in the second half of the classification - with smaller values - than in the first half, which means that many countries have index values below average (GCI average = 4, RCI average = 56.14, CPI average = 4.01).

In this context, we have to emphasize what Daniel Kaufmann (2004) said that ethics and corruption represents a challenge not only for many emerging economies, but also for many countries of the rich world. The rich countries represent key determinants of country's competitiveness, shaping its investment climate. Instead, the complex reality is one where many powerful firms play a role in shaping laws and policies of the state and the business environment itself. The evidence suggests strongly that governance and corruption continues to be a major constraint to development, to the investment climate, and to competitiveness in much of the emerging world.

The interrelation between national performance and firms' global performance

To point out the interrelation between variables such as GCI, RCI and CPI - which make up, in our opinion, national performance (NP), and firms' global performance (FGP), we appeal to graphic representation considering the theoretical situations that may occur.

Because of the mutual determinations that exist between NP and FGP we can not say that one clearly determines the other. Each one acts, by modifying - increasing or decreasing, like a boomerang, causing effects to the other one. In this context, the placement on axes shows not the dependency but interdependency or double relation between those two.

We developed this argument by looking at two different cases: (1) the direct relation between a firm's global performance and the national performance, (2) the indirect relation between a firm's global performance and the national performance. In each case, we examine the hypothetical interrelation between variables in order to explain why increasing/decreasing of one drives to increasing/decreasing of another.

The cases described below are hypothetical and represent the opinion of some companies; they are not a result of any statistical tests or analyses.

There can be distinguished 2 cases, first one in which the two - NP and FGP - are in direct relation and the second one in which they are in indirect relation.


Case I: The direct relation between firm's global performance and national performance

I. a. FGP and NP are increasing

Figure 4. FGP and NP increase

Case I.a. refers to the ideal situation based on continuous increase of firm's variables and macro economical performance indexes. When the firms are preoccupied by increasing profit rate, social responsibility, increasing firm's value, sustained by an increase in macro economical performance, the firm's global performance is continuously growing.

The chart shows the continuous ascending trend of function in time. There are, in this case, no disturbance factors that could derail the firm from its track.

In this ideal situation we can find firms which operate in countries that occupy top positions in world classifications for years, such as firms from northern countries.

I.b. FGP and NP are decreasing

Figure 5. FGP and NP decrease

Case I.b. refers to the situation in which the two variables decrease. After reaching a certain level of global performance, the firm can be confronted with a continuous decline if the endogenous and exogenous variables have the same descending trend.

From this category can take part firms that operate in countries like those that recently adhered to EU and which have made every effort to increase national performance before that, but were confronted with a series of problems that leaded to, among others, their bankruptcy afterwards.

Case II: The indirect relation between firm's global performance and national performance

II.a. FGP increases and NP decreases

In this situation the variation interval intervenes, meaning that the dilemma of which one is outmatch by the other occurs.

In analyzing the function, the variation difference will consist in the distance between different time values of FGP and NP, thus having two possibilities:

1. ΔNP > ΔFGP (NP decrease is bigger than FGP increase);

2. ΔNP < ΔFGP (NP decrease is smaller than FGP increase);

1. ΔNP > ΔFGP (NP decrease is bigger than FGP increase);

Figure 6. FGP increases and NP decreases, ΔNP > ΔFGP

Between NPi and NPi+n firm's global performance traces a sinusoid by moving the point of maximum through intervals from FGPi to FGPi+n. However, we can see that firm's global performance is influenced by macroeconomic unstable environment because the NPi - NPi+n interval is bigger than FGPi - GPIi+n interval. We can also observe in this case that NP's decrease from moment i to moment i+n is bigger than FGP's increase from moment i to moment i+n.

This highlights the fact that firm's performance increase is outmatch by the national performance decrease, and for a firm to obtain a certain global performance, operating in an unstable macroeconomic environment, it requires a considerable amount of time.

In this context the firm manages through own performances to increase their global performance. More than that, multinational companies which really want to have performance will have to diminish the impact that unstable or continuously degrading macroeconomic environment has over them.

2. ΔNP < ΔFGP (NP decrease is smaller than FGP increase);

Figure 7. FGP increases and NP decreases, ΔNP < ΔFGP

It is easy to see in this case that NP's decrease from moment i to moment i+n is smaller than FGP's increase from moment i to moment i+n. This emphasizes that the increase of firm's performance outrun the decrease of national performance ΔNP < ΔFGP.

II.b. FGP increases and NP decreases

In analyzing the function, the variation difference will consist in the distance between different time values of FGP and NP, thus also having two possibilities:

1. ΔNP > ΔFGP (NP increase is bigger than FGP decrease);

2. ΔNP < ΔFGP (NP increase is smaller than FGP decrease);

ΔNP > ΔFGP (NP increase is bigger than FGP decrease);

Figure 8. FGP decreases and NP increases, ΔNP > ΔFGP

In this situation NP's increase from moment i to moment i+n is bigger than FGP's decrease from moment i to moment i+n. This emphasizes that the firm's global performance decreases less than national performance increases ΔNP > ΔFGP. From the similar situation at II.a the major difference consists in the fact that in this case i+n is situated to the right side of the chart, while in the other case it is situated more to the left.

2. ΔNP < ΔFGP (NP increase is smaller than FGP decrease);

Figure 9. FGP increases and NP decreases, ΔNP < ΔFGP

As it is shown in the chart, NP's increase from moment i to moment i+n is smaller than FGP's decrease from moment i to moment i+n. This emphasizes that the decrease of firm's performance outruns national performance decrease ΔNP < ΔFGP.

Even if national performance increases, the firm does not succeed to maintain itself to a specific level but on the contrary, the firm's global performance decreases. The modulation points represent the very duality between the two performances - national and firm's.


This work is an overview on a relational triptych - competitiveness, responsibility, business ethics (lack of corruption) from a macro-economical and micro-economical point of view, both theoretical and practical. By this paper we aimed to emphasize that the growing of competitiveness at any level may be possible through more responsibility (business ethics) on one hand and less corruption (as lack of business ethics) on the other. The paper develops a new conceptual framework that integrates two "obsessions" of nowadays (competitiveness and responsibility) into the concept of global performance - national and firm related.

The objective of the paper was to identify the double-way relationships between competitiveness and the responsible behaviour. In order to do this, we used correlation indexes CORREL and R2 and the graphic representation able to illustrate the above-mentioned interrelations. By applying these research methods, we observed that there is a strong and direct correlation between GCI, RCI and CPI - at national level, and six possible different situations that reflect the interrelations between NP and FGP.

By analyzing the classifications of the companies - Top 100 Most „Accountable" Companies and Top 40 Most Competitive Companies - we can observe that is impossible to verify the hypotheses at national level. At a national level the most competitive companies are the most responsible ones, but we can not say that the most responsible companies are also the most competitive ones. According to Gary A. Williams, the Top 40 list is a tool CEOs and shareholders alike can use to identify which companies will remain stable and competitive in sometimes volatile markets. In other words, Top 40 Most Competitive Companies Report identifies the best performing companies or specific business segments through a patented method that blends financial and market data (Williams, 2007). Therefore, we can conclude that the same relations and correlations between variables on a macro-economical level are practically very weak or do not even exist on a micro-economical level. We can also draw the conclusion that competitiveness in some companies is not based on an ethical behaviour, but on the contrary.

On the other hand, we can identify an interrelationship between the variables we considered for the NP and the ones for the FGP. Therefore the most responsible 100 companies are also the biggest 100 companies in the world, considering the revenues: BP, Royal Dutch Shell, Chevron, DaimlerChrysler, Total, General Electric, General Motors, Toyota Motor, Volkswagen, Societe Generale. These companies originate in countries that are in the top 20 being analyzed on a macro-economical level in all of the 3 tops: USA, Japan, France, Germany, UK, Canada, Sweden.

Finally, we have to agree that: (1) "many companies have already done much to improve the social and environmental consequences of their activities, yet these efforts have not been nearly as productive as they could be - for two reasons. Firstly, they pit business against society, when clearly there two are interdependent. Second, they pressure companies to think of corporate social responsibility in generic ways instead of in the way most appropriate to each firm's strategy" (Porter and Kramer, 2006); (2) "to promote corporate social responsibility on the basis of the pure economic logic of the market and to use it solely as an instrument for improving economic competitiveness is not a sufficient strategy to address the unsustainable and irresponsible growth strategies of today's business" (Zsolnai, 2006); the main idea Zsolnai emphasizes - not only here, but in a lot of different scientific papers, is that only genuine business ethics is able to help managers to avoid the paradox of business ethics, which means that "if the aim of top executives is merely to use ethics to achieve greater efficiency their efforts will ultimately fail".

The practical implications of the paper consist in offering some guidelines / starting points for firms in their search for global competitiveness through responsible / ethical conduct. The paper may be continued with specific behavioural models of MNEs in different host countries - integrating different approaches of business ethics. The results of this study are also premises for future research, both theoretical and practical. They reveal the importance of Corporate Social Responsibility and genuine business ethics and the fact that the companies will become more competitive based on these factors.