Failure of manufacturing companies to meet global competitive pressures
To discover information on competitive pressures forcing manufacturing companies to bring new products to market or materially improve old products, with particular emphasis on development capability not being able to meet these pressures.
Global competitive pressures
- According to the Federal Reserve, manufacturing output in the United States declined in 2019. The Final Products market saw a 1.6% decline in production across the year, while manufacturing as a whole saw a 0.8% decline.
- Tariffs are a primary cause of products losing competitive edge in the global market. For example, tariffs on electric boats made in the United States are currently making American boats less competitive with those produced in Canada, Mexico, and the EU.
- Global competition is the 3rd highest concern among companies with between $100 million and $999 million in annual revenue, behind material costs and price reduction pressures. For companies with over $1 billion in annual revenue, it's the 5th highest concern, behind market volatility, material costs, price reduction pressures, and environmental regulations.
Reaction to changes
- Globally, the biggest factor determining whether a company will grow profitably is the time from product approval to market availability. However, 45% of manufacturers have not set specific goals for reducing their product development times.
- Research suggests that manufacturers are more able to quickly respond to change when their corporate administrators enact consistent standards across all plants, and slower to respond when plants are isolated from one another.
- Less than half of U.S. manufacturers believe their product development agility is stronger than their competitors'. On the other hand, more than half believe the speed of their corporate decision-making is faster than their competitors'.
Price reduction pressures
- Another pressure common in global manufacturing is the "productivity vise." This vicious cycle occurs when increased efficiency leaves a firm with unused capacity, leading it to lower prices to fill the capacity, which requires further increases in efficiency to remain profitable.
- High prices for raw materials combined with pressure to keep prices low are a common cause of bankruptcies for manufacturers, since passing price increases to the consumer is not always an option.
- Companies such as Standen's Ltd are responding to price reduction pressures by redesigning their product lines to remove expensive raw materials.
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