Excerpt
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Literature Review
Manufacturing Sector in Australia
Johnson, (2009) stated that back in 1960 Australia manufacturing contributed around
25% to the GDP, which got reduced to around 6.8% in the most recent years (2015). The
manufacturing in Australia is mostly centered on a few prominent sectors, like food and
beverages, petrochemicals, machines and tools, metal products, textile clothing, and
footwear (Johnson, 2009). In the most recent years, it can be seen that most of the
products manufactured in Australia are exported to the foreign countries. Different
industries such as food processing, textile, motor vehicles and automotive industry,
chemical industry a few prominent industries, fall under the purview of the
manufacturing sector in Australia (Shann, 2016).
The recent statement of the International Monetary Fund chief Christine Lagarde about
the world economic scenario indicates that the largest export market of Australia, namely,
China will continue to show a downward trend in the economy (Lagarde, 2016). In the
current year, the Chinese economy is assumed to grow at 6.9 % in the current year 2016
although the other developing economies, such as India and western countries, such as
Europe and America are showing a bit recovered growth rate (Investment Research
Group (IRG) Limited, IRG, 2015). It indicates that the Australia needs to rediscover its
manufacturing strategy which should be aligned to the markets in these countries.
The current study finds its objectives in the research, which explores any significant
correlation between the manufacturing practices and export performance of
manufacturing in Australia.
Concept of Manufacturing Strategy
According to Bryson, Clark, & Vanchan, (2015) manufacturing is the production of items
for the further sale or uses with the help of mechanized or manual processes. The
definition of manufacturing is based on the mechanized or manual processes, which are
employed in a small, medium, enterprise or large scale industrial production activity for
the transformation of raw materials into finished goods (Bryson, Clark, & Vanchan,
2015).
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The product can be categorized as something, which could be offered for sale in a market
to fulfill or satisfy any want or need. The need is an essential aspect of the development
of any product. Manufacturing is employed to make a range of goods which are sold and
used in different markets having demand for these products. The products could be
finished or semi-finished. An end customer can use the finished products whereas semi-
finished could be used as raw material or input by industry to make final products. In
different types of economies such as capitalist & mixed economies, the manufacturing
industry faces different kinds of and varying degrees of government regulations. Like in a
mixed economy the manufacturing sector remains under less rigid government
regulations.
Manufacturing involves the production of different kinds of products such as food and
beverages, textile and clothing, chemical and petrochemicals, machines and tools and
some of the highly mechanized devices or products which are in use in different sectors
and industries of the world market. Manufacturing has a great connection with the
engineering and industrial technology and design. In various areas, the `manufacturing'
as a term has been modified according to the respective requirements of the industry, but
the essence of manufacturing remains same, which is the phase -wise development of a
product from a raw material to a finished product.
There are several aspects of the manufacturing process, which are considered in the
modern era to ensure the fulfillment of all necessary prerequisites that are essential for
the development and Total Quality Management of a product. The manufacturing is
considered as an ever developing process, which needs specific methods and
technological skills for the development of the product.
LinkbetweenExportPerformanceandManufacturingStrategiesatCorporate
Level
In the manufacturing strategy, the economic aspect of a whole process of conversion of
raw material to end product is the most important facet. It not only enhances the
competitiveness of a product manufacturing process, but it also affects the investment
decisions of manufacturer and investors of a company. Since the time of industrial
revolution in Europe, the manufacturing scenario has been completely transformed with
the advent of emerging Technologies.
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The manufacturing strategy is directly related to the competing strategy of a company.
Skinner (1969) argued that companies should focus on its manufacturing strategy as a
direct influence on the competitive performance of the products of the company. The
skinner's statement highlighted the importance of manufacturing strategy as a part of a
competitive strategy of a company. The author in the study stated that adopting strategies
that helps a firm in minimizing production cost, both fixed and variable tends to have a
higher competitive advantage as compared to its competitors.
In support of the above view, Author stated that companies operating at a global level
need to minimize their cost of operation with an aim to maximize profit and establish a
global brand image. The author in the study also emphasizes the importance of
complying with government rules and regulations related to the environment while
showing active participation in environment conservation.
While supporting the above view, Author states that organizations are now focusing
more on the environment aspect to establish their brand image globally, and it has shown
a positive impact on the sales at international level by increasing export. Anderson et al
(1989) stated that the manufacturing capabilities could be helpful in achieving the
corporate objectives of a company. Swami Dass and Newell (1987) linked the
operational strategy to the business performance of a company. Williams et al (1995) also
linked the manufacturing strategy to the competitive ability of the firm. They argued that
in the changing environment, the operational strategy could be used to implement and
enhance performance related to competitive strategy and it can be leveraged to make
prospects of marketing performance better for a firm.
The author in a study argued that only focusing on the manufacturing strategy is not
sufficient and effective in a long run. An organization to increase export not only have to
focus on the implementation of manufacturing strategy but also need to pay equal
attention to the formulation of manufacturing strategy in a way that it could be linked to
other corporate level strategies.
The author suggests that for increasing its performance, an organization must focus on
the cost leadership strategy which is a part of pricing strategy along with focusing on
manufacturing strategy. Organizations operating at a global level faces fierce competition
and thus it is inevitable for them to adopt suitable pricing strategy. The results of the
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study conducted by Author shows that best practice adopted by an organization for
production and pricing along with social and environment welfare as well as capability
learning are positively linked with firm performances. The study also shows that firm's
flexibility to adapt to changing environment is negatively related to internal fit.
Sousa, Martinez-Lopez, Coelho, (2008) suggested that it is, therefore, imperative that
the marketing strategy of the firm should be backed by the manufacturing and operational
strategy there must be necessary modifications in the manufacturing strategy of the
firm to avoid any pitfalls in the marketing and export aspects.
Navarro, Losada, Rosa and Diez (2009) argued that `exporting products' has attained a
status of a survival strategy for almost all growing firms all over the world. It is because
by adopting export strategy they succeed in attaining long-term survival in the face of
most gruesome competition posed by the domestic and international firms, operating in
the same industry. Leonidou Katsikeas (1996) stated that the role of export in
businesses in the contemporary world has become more vibrant, and it is a necessary
prerequisite for a long-term survival of a company. There are various external factors that
are faced by an exporting firm while exporting a product to international market, which
makes them vulnerable to the intense competition. Some such factors are changing
dynamics of the business and the government policies which differ from country to
country.
The globalization has opened up new vistas for the firms all over the world to look into
all possible markets locally as well as internationally. One important aspect of planning
the manufacturing strategy is that the `forward and backward linkages' are needed to be
well planned before investing in any particular business. Globalization has presented
some new opportunities for the businesses in respect to cheap labor skilled manpower,
thereby proposing great solutions to the problem of optimization of cost for a firm. The
value inherent in the planning of manufacturing strategy can be considered at a level,
where the overall planning of the government regarding the exports takes place.
A good manufacturing strategy, backed by favorable regulatory environment has become
the basis to enhance the number and level of industries in any specific country. It has also
become a way to enhance the productivity of the various processes involved in the
functioning of business. The manufacturing strategy is intricately related to the export
Excerpt out of 9 pages
- Quote paper
- Ravi Upret (Author), 2015, The Relationship Between Manufacturing Strategy and Export Performance in Australia, Munich, GRIN Verlag, https://www.grin.com/document/318980
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