The document discusses how innovation is shifting from rich Western nations to emerging markets like China and India. It notes that emerging markets are producing dramatically cheaper versions of existing products through "frugal innovation" and are climbing up the value chain by developing new products and services. As emerging markets continue innovating, the competitive advantage of rich nations is at risk as they face price wars and losing market share to companies from places like China and India.

1. Competitiveness 1980s – Japan overtook USA in car manufacturing – not with subsidies or cheap labour – but with innovation – lean manufacturing ( Toyota Production System - any part of production that didn’t have intrinsic value for the end customer is wasteful – lots of middle - management redundancies) worlds centre of economic gravity – shifting towards emerging markets – societies and economies going through rapid economic growth and industrialisation – up to 40 in 2010 led by China / India. ASEAN – China FTA is the largest regional emerging market. Jan 2010. They are no longer content with being source of cheap hands and low cost brains – innovate on their own terms – in healthcare, cars, telecoms. Cutting costs by up to 90%. Redesigning business processes. READ ECONOMIST APR 17 TH 2010 SPECIAL REPORT ON INNOVATION IN EMERGING MARKETS