The sur­pris­ing strat­egy to sur­viv­ing eco­nomic re­ces­sion

NZ Business - - INBOX -

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.

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