thumbnail group

Connect With Us:

Advanced Manufacturing Media eNewsletters

ME Channels / Viewpoints Blog
Share this

Viewpoints: How to SWOT Southeast Asia



Competition from third-world, low-wage countries and regions, such as China, India, and Southeast Asia, has changed the manufacturing landscape in North America. Eventually, the advantages enjoyed by these countries will erode. Currencies will be allowed to adjust. Chinese students will learn to prefer liberal arts to engineering and manufacturing, as have students in Japan over the past twenty years. Granted, the transition will take longer for China and India, due to earnings differences and population sizes, but the change will come. Additionally, US students will rediscover the value of obtaining trade skills that provide a foundation for a successful career. The big question for today's US shop is: How do we survive, compete, and profit in the meantime?

Over the past five years, foreign competition has absorbed most of the manufacturing growth that would have otherwise occurred in North America. As measured by the Federal Reserve's Manufacturing Industrial Production Index, US manufacturing grew only 2% from May 2000 to May 2005. While the market for manufactured products has continued to expand, imports robbed US manufacturers of the resulting growth. When combined with the overall 5-10-year economic cycle, this trend resulted in a manufacturing recession from 2000 to 2003.

One of the most effective tools in strategic planning is SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. With this tool, a shop can ascertain its position relative to competitors. SWOT analysis helps identify the actions, including sales and marketing actions, most likely to ensure a positive future. In the brief analysis below, I compare a typical North American shop to a typical Chinese shop. You can use this model to perform a SWOT analysis versus your Asian or North American competitors.

There are many areas where US shops hold the upper hand. A local presence means easier visits, lower freight costs, and the credibility and visibility that come with close working relationships. Language barriers are nonexistent, as are forced conversions from other measuring systems or standards. Additionally, a US shop is subject to enforceable confidentiality and product-liability laws.

A variety of neutral factors benefit neither US nor foreign manufacturers. These include machine prices, interest rates and, often, material costs.

Labor rates and total compensation are an advantage for foreign manufacturers. The US also faces a shortage of skilled labor, especially trainees, and stricter government regulations. For the average US shop, these areas constitute weaknesses.

Through analysis of these areas, and the market as a whole, we can find niches where the typical US manufacturer would be likely to succeed. For instance, the quick turnaround associated with a local presence makes US manufacturers attractive both to rapidly growing markets and those dealing with prototypes. Superior quality standards and protection of intellectual property combine to create an advantage, especially in the medical, defense, and aerospace industries. These represent opportunities.

Lastly, it's important to recognize potential threats. For example, if the revaluation of Chinese currency does not occur, Chinese manufacturers will retain their cost advantage relative to their US competition. Decrease labor cost in your parts by giving employees the highest possible levels of training, and automating where it provides an advantage.

In addition to serving markets identified as opportunities, increase personal face time with customers and facilitate a relationship through visits to each other's facilities. Understand and react to their needs, and educate them on what your processes can achieve. Shrink your turnaround time and guarantee on-time delivery. Specialize in a few product niches, and become the world's best at them.

By SWOT analysis, you can begin to identify ideal workpieces for your shop to pursue. Look for parts that contain intellectual property or are too valuable to risk sending overseas. Find products that are subject to frequent engineering changes or have short life cycles. Parts machined from US-sourced raw materials are less likely to be sent abroad, as are components run in small batches or requiring high quality. Discover and pursue work where you hold a clear advantage.

While the actions I've described here can benefit your shop, it's vital that you develop your own plan. Complete a SWOT analysis versus one of your North American competitors. When you are comfortable with the process, customize my SWOT analysis so that it applies to your company and the issues you face with overseas competitors. (A SWOT analysis is best presented in a SWOT matrix rather than in the format of this article. The detailed SWOT matrix described above is at http://www.charmillesus.com/newsroom/SWOT.cfm.) From these results, develop strategies and tactics to maximize your advantages. Once you have done all of this, implement your plans.

SWOT analysis helps identify the actions, including sales and marketing actions, most likely to ensure a positive future.

 

This article was first published in the January 2006 edition of Manufacturing Engineering magazine. 


Published Date : 1/1/2006

Advanced Manufacturing Media - SME
U.S. Office  |  One SME Drive, Dearborn, MI 48128  |  Customer Care: 800.733.4763  |  313.425.3000
Canadian Office  |  7100 Woodbine Avenue, Suite 312, Markham, ON, L3R 5J2  888.322.7333
Tooling U  |   3615 Superior Avenue East, Building 44, 6th Floor, Cleveland, OH 44114  |  866.706.8665