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How does globalisation impact manufacturing? |
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There has been much discussion on globalisation from various points of view.
It is in a manufacturers interest to gain all the volumes available for their products to optimise their productive base and maximise sales.
Gaining volume allows a number of significant benefits:
Economies of scale affecting:
Purchasing power, to drive down bought component unit costs.
Automation, or flow line opportunities, on production lines.
Budgets for selling marketing
and promotion.
Personnel economies, (you can afford the best people).
Not pursuing volumes available in export markets leaves the risk open, that competitors will gain the above benefits. With these benefits they attain a unit cost advantage which will eventually
push other manufacturers out of the larger more generic market sectors leaving them only able to work in niches (small specialist sectors).
This suggests it is a commercial imperative to grab all volumes available in overseas export markets, if only to keep your competitors out.
A niche strategy will often become unsustainable over the longer term where global markets are available because if the niche is available world wide, only a manufacturer with viable global
distribution will be able to access the volumes available in that niche.
Companies without that market reach, without effective routes to the global market who are perhaps restricted to local market sales will generate reduced resources to invest in their future and
fall behind.
Taking a quick look at the global economy using available published information.
From a data set from 1997 I can summarise that:
There are about 220 different countries in the world.
There are about 5,857,113,517 people in the world (about 6 billion).
The total GDP (Gross domestic product) from these 220 countries was valued at $23,563,588,333,805 using US$ at 1990 conversion rates.
Average GDP per person in the world is therefore $4,023
This quickly identifies significant differences between countries because of the 220 listed in this data, only 29 (or 13%) have a GDP/Person greater than the world average:
|
Country |
pop.1997 |
gdp.1997 |
GDP/ea |
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Norway |
4,410,000 |
$150,289,950,000 |
$34,079 |
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Switzerland |
7,090,000 |
$229,052,692,200 |
$32,306 |
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Denmark |
5,280,000 |
$158,474,713,200 |
$30,014 |
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Finland |
5,140,000 |
$143,985,876,800 |
$28,013 |
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Sweden |
8,850,000 |
$241,043,792,700 |
$27,237 |
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Iceland |
270,000 |
$7,155,428,600 |
$26,502 |
|
Japan |
126,240,000 |
$3,345,389,875,000 |
$26,500 |
|
United States |
267,636,000 |
$6,728,800,000,000 |
$25,142 |
|
Germany |
82,070,000 |
$1,864,207,464,300 |
$22,715 |
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Austria |
8,070,000 |
$183,280,562,900 |
$22,711 |
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France |
58,610,000 |
$1,311,644,904,800 |
$22,379 |
|
Netherlands |
15,600,000 |
$334,669,668,800 |
$21,453 |
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Canada |
30,290,000 |
$649,725,745,600 |
$21,450 |
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Belgium |
10,190,000 |
$217,367,885,600 |
$21,331 |
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Italy |
58,520,000 |
$1,181,954,761,700 |
$20,197 |
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Australia |
18,530,000 |
$358,226,050,000 |
$19,332 |
|
Ireland |
3,610,000 |
$69,492,808,500 |
$19,250 |
|
UK |
59,000,000 |
$1,111,011,444,000 |
$18,831 |
|
Singapore |
3,740,000 |
$65,146,482,800 |
$17,419 |
|
Hong Kong |
6,502,100 |
$107,319,828,500 |
$16,505 |
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Spain |
39,320,000 |
$555,989,404,500 |
$14,140 |
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New Zealand |
3,760,000 |
$52,404,660,000 |
$13,937 |
|
Israel |
5,830,000 |
$74,639,420,700 |
$12,803 |
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Taiwan |
21,699,776 |
$271,739,339,800 |
$12,523 |
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Korea, South |
45,990,000 |
$410,999,491,400 |
$8,937 |
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Malta |
370,000 |
$3,205,189,200 |
$8,663 |
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Portugal |
9,940,000 |
$80,209,049,500 |
$8,069 |
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Oman |
2,400,000 |
$15,332,119,600 |
$6,388 |
|
Argentina |
35,670,000 |
$214,214,811,600 |
$6,005 |
These simplistic stats tell only a cursory story.
In many cases the reason a country is high in the list may be due to Oil income (Norway, Oman), as Oil revenue is usually controlled by
government or corporations, the gdp / person measure is less meaningful and certainly less indicative for example, than one might think, of disposable income per person.
Different industrial
balances will also affect the markets in each country for manufacturers, these GDP figures do not indicate the split between service and industry or agriculture for example which is likely to have a
large impact on market size for manufacturers selling to particular sectors.
There are many aspects to look at when examining the impact of globalisation or even export markets on manufacturing.
I feel that the push for volume, cost and competitive advantage may be arguably the most significant driver forcing manufacturing industry to push for exports and the greater gobalisation of world
markets.
I will examine this and other influences further in later articles.
Check back for further articles in later editions.
Author Mark Abraham (mark@sticky-marketing.net) 19th October 2001
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