ohallen:
Growth is critical to any business because without it costs overrun the bottom line, the key is to make sure it is either strategic and contributes to the overall bottom line
Lodown:
I've tried to track down a source for my comment about Australia's manufacturing competitiveness without any luck, so take that statement with a grain of salt. Had I been listening more closely to the radio show, I would have been better prepared, but I was casually listening to the discussion until the mention of Australia compared to the USA was made at the end.
There are a number of perennial myths that are regularly trotted out about the dim prospects of doing business in Australia. They revolve around size and economy of scale. Then there is the one about high Australian labour costs. Then there is the one about lack of growth and small markets. All of them are poppycock.
Did you know that the world leader in tobacco processing equipment is a privately owned company operating out of a Victorian country town? Did you know that the most sophisticated tool and cutter grinders are designed and made in melbourne, not to mention a host of other special purpose machinery? Guess which country makes the worlds most sophisticated mining equipment? What do you think happened when Kodak got out of the 35mm film market? Thats right, it guaranteed profits in perpetuity for its competitors.Laminating machines? Yep. Automatic tyre changing machines for huge mining trucks the list goes on.
A friend of mine makes very sophisticated tools, some of which you can see on the shelves at Bunnings, but a lot more goes into the aerospace and similar industries. His big break came when a certain now defunct public company announced it was getting out of the tool business because there was no money in it, leaving him as sole australian manufacturer. His clientele is now worldwide.
So rule number one: If someone is making a lot of money, they aren't going to trumpet it from the rooftops, they are going to moan about labour costs and taxes with the rest of them.
As for economy of scale, this is BS. The entire focus of manufacturing technology for the last Forty years has been to remove economies of scale and achieve an economic order quantity of 1. This is what the quality movement and just in time (kanban) manufacturing is all about. CNC machines can make a gearbox housing one minute and an axle the next there is little or no special purpose tooling. Furthermore Australian firms excell in quick change tooling because our markets are quite small by American standards and that has resulted in us getting series production work that is too small for Europe and America to bother with. These are called "niche markets" - like NZ manufacturing replica aircraft and engines.
As for labour costs, the competitive companies ive seen give the lie to that. Of course if we are talking totally unskilled mindless labouring its true, but you need to account for skills and efficiency first and then I don't believe the difference is signifigant.
Last but not least is the "growth" argument. It is axiomatic in business that a legacy manufacturing operation can be very profitable because all your competitors have given the game away, allowing you to charge what you like.
There are scads of these legacy businesses. Would it surprise you to know that shoe polish tins are used as containers in parts of Africa? Guess where key components are made? Tinned butter for tropical countries? Yep. Buggies for horse drawn transport... The list is endless.
Of course what is endless is the supply of stupid managers who don't understand where the real value of their product resides - witness Qantas.