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Manufacturing Strategies
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WINNING STRATEGIES FOR THE NEW MILLENNIUM

Traditional recipes for success are not adequate to compete in the new millennium. How are market leaders—those commanding the largest share of their target markets—meeting the challenges of the 21st cen­tury? Our research shows that top executives are shifting their focus from cost to growth. Market leaders are making more than just ad hoc, incremental improvements. For most leaders, reengineering has peaked. Leaders are now racing to build flexibility and rapid-response capa­bilities into their organizations. They are redesigning their business processes, realigning their organizations, and leveraging technology to develop innovative, integrated solutions. Top performers are chang­ing corporate cultures that impede fast response and harnessing their knowledge assets to do it.

 

Our Vision in Manufacturing study serves as a blueprint for manu­facturing success in the 21st century. It shows that the world's manu­facturing leaders are cultivating competitive advantage on multiple dimensions. The market leaders are taking aggressive steps in five stra­tegic areas to

      confront the realities of globalization

      craft a new agenda for product innovation

      resolve the customer paradox

      integrate the global supply chain

      align the organization to compete in the 21st century.

Confronting the Realities of Globalization

Leading manufacturers view globalization as a strategic imperative for growth. The question challenging manufacturing executives in the Vi­sion in Manufacturing study is not, "Do I go global?" but "Which mar­kets should I enter, how should I enter them, and what capabilities en­sure success?" Even companies that merely want to defend their home turf must be as alert to international competition as any global company.

 

The reverberations of the Asian economic crisis demonstrate the growing interconnectedness among manufacturers, their customers, and suppliers in an increasingly "borderless" world. The recent turmoil in Asia will undoubtedly cause some manufacturers to face slower sales and perhaps added import competition. Nonetheless, our study shows that leading manufacturers are not reversing their commitment to Asia.

 

Manufacturers may alter their production or procurement strate­gies in Asia, but they expect the long-term benefits of expanding in the region to outweigh any short-term risks. Moreover, many companies that manufacture or source in the region are capitalizing on lower prices and labor costs, while others are snapping up attractive assets. The crisis may also result in the emergence of a group of stronger, more focused Asian manufacturers that will become formidable competitors on the world stage.

 

The study reveals that early entry into emerging markets is prefer­able to a "wait and see" approach. Market leaders are not hesitating to expand their global reach, particularly in emerging markets. China is the destination of choice, with nearly half of the market leaders targeting the world's fastest-growing consumer market, one that is expected to sur­pass the U.S. by 2015. Refer to figure 1 for an overview of the top global destinations expected to be targeted within the next three years.

The primary vehicles for "going global" vary by target market. Executives are employing low-risk strategies in higher-risk markets. They are forging joint ventures and alliances to penetrate emerging markets where regulatory issues and restricted market access often deter entry. Market leaders are fortifying their positions in North America and Western Europe by expanding existing facilities. Executives in North America and Europe will use mergers and acquisitions (M&A) as a key strategy for global growth. The increasing importance of econo­mies of scale in R&D, marketing, and sales will continue to fuel the wave of consolidations sweeping the industrialized regions.

Do manufacturers possess the capabilities to operating effectively in target markets? Despite the universal interest in globalization, nearly 75 percent of executives do not feel they are at or approaching world-class levels in global capabilities. Most are global pioneers. Not sur­prisingly, the strongest capabilities are in sales and distribution in in­ternational markets. Refer to figure 2 for an overview of the perceived effectiveness of global capabilities based on the study.

The study shows that global sales and distribution capabilities, while important, are not sufficient for sustained competitive advantage in the 21st century. Market leaders have stronger global capabilities across the board. They are moving beyond merely selling and marketing their prod­ucts around the world to creating global networks of research, manufac­turing, and distribution. Leaders are putting their "stake in the ground" in target markets by strengthening their manufacturing and assembly operations abroad and integrating foreign nationals into management.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 11


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