The surprising strategy to surviving economic recession

Some manufacturing firms that survived the global financial crisis have one unusual secret to their success: stop manufacturing. Though just one of the strategies that helped keep some New Zealand manufacturing firms economically buoyant, it was among the most surprising results of the PhD thesis of Victoria University of Wellington’s Simon Collins.

A media release from Victoria says Collins dedicated his PhD to investigating the factors that increased resilience in New Zealand manufacturing firms to help them withstand the worst of the global financial crisis nearly 10 years ago.

After conducting in-depth interviews with 17 manufacturing firms, he identified four resilience-building strategies that separated those that continued to perform well during the recession, and those that did not.

“One of the biggest surprises was that some of the resilient firms stopped being manufacturers. They outsourced manufacturing and instead focused on developing and designing great products, and then taking ownership of distributing and retailing those products themselves. By delivering their products straight to their customers they captured some of the margin that would usually go to a third party,” Collins says.

This tactic was part of a wider survival strategy to maximise efficiencies, which saw resilient manufacturing firms aiming to be more efficient at every stage of the manufacturing process. This improved margins, and as a result, muted the negative effects of lower sales and the unfavourable exchange rate.

The research identified three other resilience-building strategies: • Innovating platforms – developing the next generation of products to stimulate new sales. • Actively collaborating – working closely and consistently with other firms and individuals to help develop technology and products. • Cataloguing specialist knowledge and skills – building libraries, creating databases of skills and lodging patents to identify, protect and then capitalise on areas of expertise. The research captures the response of firms from some stellar performers to a couple that subsequently went under.