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Critically Evaluating the Global Bay Area for Competitive Advantages

Select a topic in the file of microeconomics related to Global Area of Competitive Advantage. Present a research paper comprising of detailed literature review and research methods and results of the study on the selected topic.

Answer

Introduction 

Southern China’s ambitious plan to build a world-class city cluster across the Guangdong-Hong Kong-Macau region will without doubt create a region with economic heft that is comparable to other similar bay areas such as the San Francisco Bay Area in the United States. China’s shift from an agricultural based economy to a manufacturing based economy in the past decades can briefly be described as being phenomenal. However, the nation is at the midst of yet another critical transformation that it will see it become a service driven economy, particularly in Shenzhen that is home to some of the leading high-tech innovation centers (Zygiaris, 2013).  The success of San Francisco Bay Area has been attributed to high-tech start-ups such as Uber, Twitter, Google and Airbnb. Therefore, what lessons can the Great Bay Area borrow from the San Francisco Bay Area in terms of policies that promotes entrepreneurship?. All these literature review focuses on analyzing and critically evaluating the Global Bay Area for the competitive advantages of the business organization and how it could be developed (Riddle, 2018).

Wong (2017) also affirms that firms can be able to take advantage of Hong Kong's one country, two systems that make it part of China but with its own set of legal and financial rules and regulations. For instance, they can use Hong Kong status as the key gateway between China and the rest of the world and as an international financial center for asset financing, risk management, and insurance. Besides, the one country, two systems ensures that the region has an efficient supply with highly effective pool talent that is highly fluent in both Mandarin and English. Furthermore, Wong (2017) acknowledges that the cross-border transfer of individuals, capital, services, and goods will be fundamental for the initiative successful development. The fact that the cities involved in the initiative all fall under different administrative, custom, and legal systems explicitly indicates that the cross-border transfer will largely depend on cross-institutional efforts and cooperation. Therefore, the author recommends that the respective local governments should be at the forefront ensuring regulatory harmonization of the economic, legal, and transport policies. 

One aspect that has played an influential role of the accomplishment of start-ups in the Francisco Bay area is the fact that Start-ups or entrepreneurs have rapid access to venture capital that on average takes at least 11 months to complete the initial phase of venture finance. Hence, one critical aspect that greatly determines whether the Great Bay Area will be a success revolves around the start-up policies. Shenzhen, on the other end, has invested significantly in research and development setting the pace for the right ecosystem. This has been manifested by the evolution of the Shenzhen special economic zone from what was basically a fishing factory to a high-tech hub that employs over 12 million people and 3 million business including Huawei and Tencent. 

Literature Review

McNeill (2017) acknowledges that start-ups are the driving force of the Silicon Valley, San Francisco Bay Area. One factor that has played a contributory role of the success of start-ups in the Francisco Bay area is the fact that Start-ups or entrepreneurs have quick access to venture capital that on average takes at least 11 months to complete the initial phase of venture finance. 

Great Bay Area will be a success revolves around the start-up policies across the 11 major cities 

The critical aspect that greatly determines whether the Great Bay Area will be a success revolves around the start-up policies across the 11 major cities that will find the Great Bay Area.   Tsang, Xinqi, and Liu (2018) publication entitled "As Shenzhen and Guangzhou power ahead, will Hong Kong be able to leapfrog the competition”, provides a clear picture of the start-up policies across the 11 cities that constitute the GBA initiative. The authors note that the inaccessibility to funding is largely holding Hong Kong back as a favorable economy for start-ups. Hong Kong lacks a viable fund provision to stimulate investments in technology start-ups as well as innovations (Riddle, 2018).

Administrative and economic systems 

One country, two systems refers to the constitutional provision that allowed for distinct regions such as Hong Kong and Macau to retain their administrative and economic systems while the other regions of China continue with socialism. As a former colony of the British empire, China had to accept terms and conditions that were enclosed in the Sino-British declaration including the adoption of the city's mini-constitution and the retention of the capitalist system as well as the Hong Kong dollar. Thus, the legal system, as well as the legislative system of Hong Kong immensely, differs with that of the other 9 cities involved in the Great Bay Area.  While there are concerns that the one country, two systems scheme may hinder the Great Bay Area efforts to create an international economic hub. Guo, He, and Li (2016) acknowledges that the system is integral to the success of the project.  He further goes ahead to point out that the system must be seen from the dimension of national rejuvenation, adding that the Great Bay Area will facilitate the easy transfer of people, particularly the young that are productive, by requiring few legal formalities for them to settle on the mainland as well as reducing the roaming charges of across the Great Bay Area by a significant margin promoting the interconnectivity of startups throughout the Great Bay Area (Jiang.,  Holburn, and Beamish, 2018).

Position the economic hub 

Incorporating the one country, two system scheme will also be the most ideal system for ensuring the prosperity and long-term stability of the two cities. Besides, for the Great Bay Area initiative to be successful, it must strictly adhere to the commerce regulations that govern the different cities. Subsequently, this will position the economic hub, particularly for investors from capitalist economies that may have an interest in the entire project (Hers, Witteman, Rougoor, and van Buiren, 2018). Besides, the incorporation of the one country, two system concepts will also play a critical role in the strengthening the planning and coordination required to in the formulation of the area to integrate the benefits the different cities as well as the push for the regional development.

Benefits usually make entrepreneurship more effective 

Guo, He, and Li (2016)affirm regional integration at the micro and macro levels is the ultimate solution for entrepreneurship. On the macro level, regional integration ensures that economic growth is sustained throughout the society and the nation. On a metro level, regional integration promotes the integration of these immigrants into the market. Essentially, this means that regional integration is an effective approach to ensuring that immigrant from Hong Kong attain the recognition that they require in other locations within the Great Bay Area. Besides, there are numerous benefits that usually makes entrepreneurship to be attractive for those that have relocated towards the mainland, particularly for those that seek to ensure that they have increased mobility. Hence, immigrants to the mainland find it easier choosing the entrepreneurial path as this may be the most effective way of ensuring that they move up the social hierarchy, and as such, establish themselves within the key labor market. 

Bilingual competency of Hong Kong 

The other crucial pull factor from Hong Kong that will play a critical role in the success of the organization is the bilingual competency of Hong Kong residents. In mainland China, Mandarin is the most widely spoken language.  This keeps the business more effective and allows the organization to develop a core competency in the developed business organization. On the contrary, residents of Hong Kong can be able to effectively communicate in both Mandarin and English thereby placing them at an advantage as compared to their counterparts from the mainland. This will strengthen the value chain activities and also keep the effective business communication in the process. Zhu and Zhong, (2018) assert that the Great Bay Area initiative will seek to attract multinational firms to keep up with the rapid pace of globalization such that services from the hub become available throughout the globe. Subsequently, the availability of native Mandarin speakers that can be able to fluently converse in English will ensure that start-ups from Anglo speaking nations are well accumulated in the hub thereby promoting entrepreneurship and the participation of the youth in the initiative. Guo et al., (2016) further note that other than the free flow of talent within the Great Bay Area will be instrumental in ensuring that people, particularly the young, find employment and lifestyles that best suits them.  

While a lot has been highlighted about the benefits that are expected form the cooperation between the areas of the Great Bay Area, it is only fair that the challenges also be highlighted. Chandra and Wong (2016) mention three main challenges facing the implementation of the Grey Bay Area. One of the factors that may impede the implementation of the Grey Bay Area initiative pertains to the decline in the competitiveness due to reduced competition among the cities. Essentially, the GBA initiative envisages a hub that will have a given economic activity, and as such, this overspecialization may result in extreme dependence among the GBA cities (Chandra and Wong, 2016). Besides, the other potential hurdle to the implementation of the Great Bay Area initiative is the fear of change. The fear of change is likely to occur if one of the cites within the GBA does not want to implement their designated economic activity thereby resulting in a conflict that may derail the entire imitative. Other than the economic gains that will accompany GBA, the free flow of talent within the area along with cooperation that would replace the inner-city completion is expected to be the key benefits of the entire initiative. The cooperation of the inner cities will be crucial in the reduction of pollution and the provision of educational opportunities. Notably, the Great Bay Area is designed while taking into consideration the clusters of excellence that thrive and produce efficiency. For example, Hong Kong is well-known as a global financial hub, and as such, it is expected to offer financial services to the other 10 cities. In addition, Guangzhou is famous for being a leading retailing and leisure destination.  Hence, this will offer an ideal relaxation spot for professionals from the other cities during their holiday offs. The benefit of improved regional ties has been ranked as the most popular in a survey that was conducted across the 11 cities involved in the Great Bay Area. Regional integration will also play a role in the promoting start-up culture and youth empowerment within the Great Bay Area (Malecki, 2018). Regional integration will also play a substantial role in the supporting start-up culture and youth empowerment within the Great Bay Area. For example, in cities where labor market regulations are strict such as Hong Kong, the young can easily relocate to areas where the rules and regulations are not stringent. Opportunities are mainly fastened on the appeal of the given market. Thus, when the opportunity has been identified, resources ought to be mobilized for the sole purpose of capitalizing the opportunity. Consequently, regional integration ensures that young entrepreneurs are given the choice of selecting the most appropriate markets where there are opportunities that promote their innovation or ideas. Therefore, immigrants to the mainland are likely to find it easier selecting the entrepreneurial path as this could be the most effective approach of ensuring that they move up the social hierarchy, and as such, establish themselves within the key labor market.

Evaluation

To evaluate the issue at hand, previous case studies were applied. In this case, the  China Merchants Group, an avid supporter of the initiative, holds the view that the Great Bay Area project will ensure better access to business opportunities, resources along with a wider talent pool. The Hong Kong-based conglomerate states that the inherent strength of the Great Bay Area revolves around the fact that it is one of the most economically liberal and oriented regions in the globe. The company believes the main factor of the initial success will be how the entire process would be founded on the strengths of all the eleven cities. Furthermore, the group notes that Shenzhen will be of particular significance due to the advances that have been achieved in the information technology sector as well as the enhancement of the export-oriented infrastructure. 

One recommendation that the group makes is that the respective state governments ought to help in the coordination of GBA development by ensuring that competition is kept at minimal and that the project builds on existing strengths. For instance, other cities should not try to introduce services that are proficiently offered by other members involved in the Great Bay Area. Hence, this means that Hong Kong must stick and try to enhance the financial services while Shenzhen improves on its information technology. Consequently, these services become complementary thereby ensuring the success of each of the members.

It will be entirely up to the local governments along with the private sector to ensure the establishment of ground rules that will convert the initiative into a reality. One way that this will be achieved will be through the establishment of pilot programs whose primary aim is to promote better movement of goods and services throughout the region. The group further recommends that officials ought to shift their attention towards the opening up of the economy of the region. The group proposes that the adoption of international standards across various industries as well as the enhancement of the region’s capability to attract and retain talent from across the world will be critical (Namada, 2018).

Regional integration will also play a role in the promoting start-up culture and youth empowerment within the Great Bay Area. For instance, in cities where labor market regulations are intense such as Hong Kong, the young can easily relocate to areas where the rules and regulations are not stringent.  The entrepreneurial process largely comprises of two fundamental components including resources and opportunities. If the company wants to sustain its business in an industry then it will have to deploy its resources as per the gathered opportunities. The company also needs to assess the hierarchy model theory to evaluate what best possible outcomes could be made to strengthen the business outcomes. The company could also use the leadership theory, stakeholders theory to evaluate the changes which the company needs to undertake. It will help in the re-engineering of its process which will help the company to customize its offered products and services as per the clients need and demand. It will help the company to create product differentiation strategy in the market. As a push factor to the mainland, opportunities allow capitalizing on the market through the provision of goods and services that are needed in the market. Opportunities are mainly anchored on the attractiveness of the given market. Thus, when the opportunity has been identified, resources ought to be mobilized for the sole purpose of capitalizing the opportunity (Scott, 2006). Consequently, regional integration ensures that young entrepreneurs are given the choice of selecting the most appropriate markets where there are opportunities that promote their innovation or ideas. As noted previously, mainland cities such as Guangzhou provides incentives e.g. ventures loan that may assist entrepreneurs to effectively establish themselves (Foss, Foss, and Klein, 2018).

Finding

The data from Shenzhen, on the other end, that has been invested significantly in research and development setting the pace for the right ecosystem was collected through observation. In this case, previous case studies as conducted show that this area has for the longest time exhibited evolution tendencies. This has been manifested by the evolution of the Shenzhen special economic zone from what was basically a fishing factory to a high-tech hub that employs over 12 million people and 3 million business including Huawei and Tencent (Leavy, et al. 2018). Ballús-Armet, Shaheen, S. A., Clonts, and Weinzimmer (2014) assert that the success of Shenzhen can aptly be attributed to favorable policies that promote entrepreneurship.  He further affirms that it only took a decade for Shenzhen to switch from the production of electronics and garments to one of the world’s information technology hub. To further illustrate the important role that start-ups and entrepreneurship play, the economic output of Shenzhen surpassed that of Hong Kong to hit 2.2 trillion against a backdrop of 9% growth (Yu, et al. 2018).  The script is not different from Guangzhou, which has established it is own ‘Silicon Valley' at the doorstep of Hong Kong and Shenzhen thereby showing g the emphasis it places on the culture of entrepreneurship (Song, Zhang-Zhang, Tian, Rohlfer, and Sharkasi, 2018). Culture and regional innovation performance: an exploration in China. Chinese Management Studies). Notably, the economic output of Guangzhou also surpassed that of Hong Kong recording an all-time high growth rate of 7% (Elston, and Weidinger, 2018). 

Ultimately, the group also recommends the enactment of measures that promote innovation and technology development throughout the Grey Bay Area. According to the group, it is the sole responsibility of local governments to ensure that they provide additional incentives and funding in this area while ensuring that start-ups do not become over-reliant on these offers.  The group vision is that the Great Bay Area will become a technology-oriented and innovative ecosystem that is firmly anchored on research and development (Si, et al, 2018.). Zheng and Zhao (2017) affirm that the concept of competitive advantage has broader definitions right from the firm level to the sectoral level and ultimately to the national level. Competitive advantage occurs when a given firm or sector is unique and challenging to replicate. It is considered that if the company wants to compete in the market then it needs to focus on developing a competitive advantage in product differentiation and cost leadership strategy. However, this advantage is hard to copy for others in the market and keep the business distinguish from those of other rivals in the market. The company could use the place as a competitive advantage. As per the perception of (Danso et al. 2018), it is divulged that if the company has its own business set up near to the market then it will help it to strengthen the trust and loyalty support of clients in the market. Nonetheless, it also helps the company to strengthen its business in the long run.  Having a place in the market helps in reducing the cost and attracting more clients in the market. It also results in creating a competitive advantage in cost leadership due to the less cost of business. Industry clusters, on the other end, refers to a group of interlinked companies or industries that share similar industries and institutions in given locations.  

Research Methods

There are several research methods have been used to gather the imperative data for this research. This research is based on the primary and secondary sources of the data. The primary sources of the data includes observation, interview and data collected by using the questionnaire and meeting with the concerned person are totally avoided to strengthen the quality of the research. All the data collected for this research is quantitative and qualitative data on the selected topic in this research.  All the qualitative and quantitative data have been gathered by using the secondary sources of the data which focuses on using the journal articles, books, documents, and other methods. Nonetheless, the deductive approach has been used to evaluate the gathered data and prepare the best possible outcomes for the research.  It is analyzed that all the gathered data in this research is supported and evidenced by the secondary sources such as journal articles, books, documents, and other methods.

Conclusion

The Great Bay Area is designed while taking into account clusters of excellence that thrive and produce efficiency. For instance, Hong Kong is widely renowned as a global financial hub, and as such, it is expected to offer financial services to the other 10 cities. Additionally, Guangzhou is famous for being a leading retailing and leisure destination (Namada, 2018). Hence, this will offer an ideal relaxation spot for professionals from the other cities during their holiday offs. Basically, this shows the clusters of industries along the Great Bay Area are all interconnected. McNeill (2017) alludes that the cluster of industries is important in ensuring that entrepreneurs or start-ups are easily accommodated within the industry they fall. This ensures that economies of scale are fully utilized.

Delta region is widely renowned for being the nation's top economic driving forces. The initiative to integrate the cities across the Pearl River Delta region will be instrumental in ensuring China transits to a consumption-based economy by 2030. Of particular importance will be the initiative's capability to promote start-ups as well as the culture of entrepreneurship among the youth.  This will only be achieved if the Great Bay Area initiative is able to maintain its status as the global powerhouse of innovation. Fortunately, the region's networks of established manufacturing supply chains along with a talented workforce and a consumer market that is sophisticated shows that the region is staying at the forefront of the ambitious plan.

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