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Manufacturing CEO's Revisiting Their Strategy

Manufacturing Growth resized 600

In a survey of 1,258 manufacturing CEO's, 71 percent expect to change course this year and 13 percent  expect to make fundamental alterations. Concerns about economic growth are a big driver: 67 percent of those who are a planning strategic changes are taking a potentially slow economy into account. But it’s by no means the only factor. Customer demand is just as important, with 68 percent of industrial manufacturing CEOs citing it as a reason to shift direction. 



How are industrial manufacturing CEOs staying ahead as the competition gets tougher? 

Keeping Costs Under Control: Most are keeping a tight rein on costs: 78 percent have implemented a cost-reduction initiative over the past 12 months, and 70 percent expect to trim the fat in the next 12 months. Many industrial manufacturing companies are running much more efficient operations than they did just a few years ago. That’s partly due to innovation. And industrial manufacturing CEOs are keeping up the pressure: 68 percent say they are focusing more heavily on innovations designed to reduce the cost of existing processes.

Making It Happen: Industrial manufacturing CEOs are now focusing on the upside rather than the downside. They are refashioning their business models to cope with a world where the risks and opportunities are increasingly interconnected, but the sources of growth are often local.

  • Reconfiguring operations to meet local market needs: Building the right portfolio mix—the right infrastructure, operating model, strategic alliances, products, and services for the right markets.

  • Defending against micro risks and macro disruptions: Managing the consequences of local risks that may become global disruptions—such as the political upheavals, nuclear disaster, massive floods, and unfolding sovereign debt crisis that occurred in 2011.

  • Getting the right talent: Putting the right employees in the right places and managing serious short-term problems (like the shortage of technically skilled people in mature markets and trained managers in emerging markets).

Balancing Global Capabilities And Local Opportunities: A sensible strategy for globalization today means more than building cheaply in one location and selling in another. CEOs are investing to create fully-fledged operations in their priority markets to build deeper relationships with their customers, innovate anew, take advantage of local talent and brands, reduce risk, access capital, strengthen supply chains, and achieve other business objectives simultaneously, depending on each market’s advantages.

Tone From The Top: It’s critical to get growth markets right, and the commitment needs to come from the top. When asked how they would prefer to spend their time, nearly three-fifths of industrial manufacturing CEOs said they would like to devote more hours to developing operations outside their home markets.

Accessing China’s Raw Materials: What are industrial manufacturing CEOs looking to do in these markets? While finding new customers heads their agendas, that’s not their only goal. Those aiming to expand in China are more than twice as likely as the overall sample to say they are planning to access raw materials or components. This may be partly because China has imposed trade barriers on some metals to protect its domestic industries. According to the British Geological Survey, China is the leading producer of 27 of the 52 critical minerals and metals. While there are other countries in which some of these metals are produced, there are a few strategically important metals, such as rare earth elements, which are almost exclusively mined in China.

  • For forward-looking industrial manufacturing CEOs, another big reason to be in China is to understand their future competition. Last year, China surpassed the U.S. in manufacturing volume for the first time ever, producing $2 trillion in goods. In its 12th Five-Year Plan (2011-2015), the Chinese government highlighted energy-saving and environmental protection and high-end equipment manufacturing as two of the country’s seven strategic emerging industries.

Delivering Custom And Sustainable Products: Industrial manufacturing CEOs are turning away from simply selling the same products abroad and at home, especially when it comes to the biggest market of them all—China. A full 63 percent of those who see it as a key market say that their company is modifying its products and services to meet local needs in China, compared to 46 percent of CEOs overall.

Far fewer industrial manufacturing CEOs say their company is designing products specifically for local emerging markets: only 18 percent do this in China and 13 percent in Brazil, for example. It’s challenging—especially for smaller companies—to achieve economies of scale on machinery and equipment that’s developed for just one market. When it comes to the U.S., though, 45 percent of industrial manufacturing CEOs say their company is designing products specifically to meet local requirements. That may reflect tougher health and safety or environmental standards in the US.

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