Emerging Market Manufacturers Show Greater Interest in Resource Conservation

February 1, 2011. Over these next two years, manufacturing firms will be focused on increasing competitive advantage while the global recovery trends upwards. Improving resource efficiency to reduce input costs, leveraging the growth of contract logistics to reduce supply chain costs and finding innovative methods of attracting, training and retaining workforce talent are the three key areas that manufacturers need to address in order to drive business growth. The ways in which emerging market and mature market manufacturers go about doing so differ widely, as shown by M-Brain (formerly GIA)’s industry poll.

Demand for technologies aimed at bringing about resource efficiency will be on the rise in 2011-12 as businesses focus on reducing their carbon footprint. Key strategies involve using new materials, conserving existing resources and reducing waste and pollution, all of which will help to reduce overall input costs and increase competitiveness.

In an industry poll amongst 95 manufacturing companies by M-Brain (formerly Global Intelligence Alliance) in late 2010, North American/European respondents said they see reducing carbon footprint, recovery in US/European markets and growing interest in safety and standards as the top three areas of growth over the next two years. In contrast, emerging market manufacturers from Asia and Latin America said that conservation of resources is their top area of growth. (Respondents included manufacturers of steel, testing and measurement equipment and agriculture and construction products).

Chart 1_Emerging Growth Opportunities (2011-2012)_web

European businesses in particular are bullish in the area of improving resource efficiency, with almost 70% of Europe-based companies citing this as a top priority. Core environmental industries in the EU, in the fields of pollution management and control, waste collection and treatment, renewable energy and recycling have a combined turnover of over 300 billion euro and have global market shares of 30%-40%. This sector is growing at over 8% per annum and is offering many new green jobs. A resource efficient Europe is a key component of the EU’s growth strategy, which is centred around being a smart, sustainable and inclusive economy under the Europe 2020 programme.

Recovery at home key focus for American and European manufacturers

Over 60% of North American companies (compared with 43% of European based companies) cited this as a key opportunity area for 2011-2012. According to the latest IMF update of the World Economic Outlook, GDP growth in the US in 2011 is expected to be 3%, followed by 2.7% in 2012, whereas the Euro zone is forecast to grow at a more tepid rates of 1.5% and 1.7% respectively.

Government and banking leaders at the recent annual meeting of the World Economic Forum in 2011, warned that growth in the US/Europe could no longer rely on public sector stimulus and policy makers are urging the private sector ““ which is seen to be sitting on large profits ““ to start spending and investing. While governments in developed countries, especially in Europe, focus on fiscal debt restructuring, the impetus for investing in innovation, creating jobs at home and increasing export competitiveness needs to come from the corporate sector.

Meanwhile emerging and developing economies are projected to continue on a strong recovery path, with China and India leading the way at 9.6% and 8.4% GDP growth for 2011. As a result, businesses in Asia Pacific and Latin America are less concerned with growth in the developed world and believe that conserving existing resources is the biggest opportunity area for them in 2011, in line with the overall global trend towards higher resource efficiency.

Chart 2_Top Challenges Threats (2011-2012)_web

Skills a key source of worry

Slightly over 50% of European manufacturers believe that the lack of skilled manpower is a key challenge, while most North American businesses (nearly 60%) cited the retirement of skilled workers to be a key detriment to business growth. Businesses in Latin America and Asia-Pacific cite lack of creativity among workforce and lack of skilled manpower (62% for each) as the top two challenges.

According to leading workforce solutions provider, Manpower Inc’s most recent Talent Shortage Survey, covering 35,000 employers across 36 countries, over 30% of businesses surveyed are struggling to fill key jobs critical for organisational success. Similar concerns are highlighted in a recent study by the American Society for Training and Development which states that by 2015, 60% of the new jobs created in the US will require critical STEM skills (science, technology, engineering and math) which only 20% of the workforce will possess. Talent is indeed becoming a scarce resource and companies need to become more agile in attracting, retaining and developing their employees.

Contract logistics drives growth for emerging market manufacturers

On average, 46% of all the manufacturing companies in the poll believe that growth in contract logistics will drive growth in their business of up to 10%.

About half the European and North American based manufacturers polled were more conservative regarding the impact of contract logistics and predict that consequent benefits will be less than 10% business growth.

Firms in Asia-Pacific and Latin America are more bullish, with nearly 60% predicting that the upturn in the contract logistics industry can lead to an incremental growth in their businesses by at least 10%.

Chart 3_Impact of growth in contract logistics on Manufacturers (2011-2012)_Web

In summary, the world’s global manufacturer plan to drive business growth further over the next two years by improving resource efficiency, leveraging contract logistics and attracting, training and retaining workforce talent.

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