ON THE RIGHT: Vital for businesses to succeed
Barbados is competitive both regionally and globally, ranking ahead of its peers in key areas such as the strength of its institutions and the quality of its health care and primary and higher education.
In addition, despite some declines in tourism post-crisis, the island has maintained market share in most of its key foreign exchange earning sectors, while seeing improved price competitiveness of its internationally traded goods and services over the past decade.
As a small economy, Barbados is a price taker, selling at prices that are targeted at the prices charged by competitors selling goods and services of comparable quality. To remain competitive, Barbadian producers keep their prices in line with the competition and aim to reduce costs and increase productivity, product quality and product differentiation, branding and customer loyalty.
Price competitiveness is essential for any small, internationally engaged firm; the small firm must achieve profitability by selling its product at a price which matches that of its international competitors, if it is to remain viable.
The small producer attains viability by paying scrupulous attention to product and service quality, continuously improving levels of productivity, and enhancing its products and services so as to make them stand out from the competition.
Sophisticated marketing, including the penetration of new markets and niches, and the use of information and communications technologies, are additional tools in the small firm’s armoury.
Government plays an important role in strengthening the ability of Caribbean firms to penetrate international goods and service markets, through business facilitation, providing adequate infrastructure, promotion of diversification of export products, productivity enhancements and institutional reform and development.
The viability of the foreign exchange earning sectors is the manifestation of the competitiveness of the Barbadian economy. Viability is ensured by selling at prices comparable to competitors that sell products and services of equivalent quality. Over time, Barbadian producers retain competitiveness by ensuring that they increase productivity and raise product quality so that their prices do not run ahead of the competition.
Barbados has competitive strengths in the markets where it earns most foreign exchange, that is, tourism, international business and financial services and agro-processing. Barbados is competitive with its Caribbean neighbours, and with emerging economies globally. The country has institutions, infrastructure, health and primary and higher level education levels, labour market efficiency, financial market development, technological readiness, business sophistication and innovation which exceed those of its regional peers. Nevertheless, there is room for improvement, and inefficient government bureaucracy, difficulties in accessing financing, and a poor work ethic represent constraints to growth for the private sector.
Barbados has been able to maintain its market share relative to the Caribbean in its key foreign exchange earning sectors, while overall productivity has increased in line with unit labour costs. The island’s external price competitiveness, based on appropriate measures, has been improving in recent times. The focus for improving external competitiveness will continue to be increased productivity, improved product quality, product enrichment, and the development of new products and services.
• Information sourced from working paper authored by Dr DeLisle Worrell and Shane Lowe (2014).