Final answer:
Global competition, driven by globalization and technology, has increased pressures on firms to enhance productivity. The productivity equation, which measures output per input, shows how some companies have adapted by doing more with less, gaining a competitive edge. Technology, particularly automation, has been a key driver in this change.
Step-by-step explanation:
The question How has global competition affected productivity? explores the impact of increased global competition on business efficiency and output. Globalization and advancements in information and communication technology have significantly raised competitive pressures among firms worldwide. This is because companies are not only competing with local peers but also with those in different countries facilitated by the ease of market entry and global reach. Companies have had to improve their productivity in order to maintain or gain market share in this more competitive environment.
The productivity equation, which measures the output per unit of input (for example, the number of workers needed to produce a product), is a useful tool in analyzing productivity changes. For example, if Country A needs fewer workers to produce the same unit of a product than it did five years ago or fewer than Country B, it implies an improvement in productivity, likely due to better technology, processes, or worker skills. The ability to produce more with less directly correlates with a competitive advantage in the global market.
Advancements in technology, such as automation, have flattened the world in terms of opportunity by allowing companies to do more with fewer resources. Companies can benefit from economies of scale and reach a global customer base with fewer barriers. Conversely, companies that fail to adapt to these changes may fall behind, further demonstrating the effect of global competition on productivity.