World Economy

Canadian Manufacturers Need Clear Strategy

Canadian Manufacturers Need Clear StrategyCanadian Manufacturers Need Clear Strategy

Canada is in (technical) recession again, and not just because of the crash in oil prices. In fact, part of Canada’s broader, slow-growth problem comes from weakness in the manufacturing sector.

Compared with 2000, manufacturing output is down 11%. Employment in manufacturing has declined almost 24%. But is Canadian manufacturing down for the count, or can new strategies for competitive advantage re-energize manufacturing sector, Paul Boothe wrote for Globe online.

Let’s begin by looking at the causes of the manufacturing decline. Manufacturing has been buffeted by both cyclical events and longer-term trends. The 2009 financial meltdown and deep recession hit the biggest customer hard. The US path to recovery has been a long one, although recent signs are encouraging. The length and depth of the recession led not only to declines in sales, but also to the loss of a number of manufacturing firms.

Longer-term trends are also at play. With many of its manufactured goods sold in the United States, “we are missing out on the rise of emerging markets, where the number of new businesses and consumers is growing rapidly”. With manufacturing productivity outpacing sales globally, firms are experiencing a worldwide decline in employment, even as sales grow.

So how can Canadian manufacturers succeed in the future? At Ivey’s Lawrence Center, “our research has focused on the strategies of successful Canadian manufacturers to better understand their approach. Interviews with senior executives have led us to develop a framework to understand their strategies focused on three elements: markets, products and technologies. The interviews have also revealed some interesting facts.”

 Gov’t Support Needed

First, executives are unanimous that the primary responsibility for growing Canadian manufacturing rests with the private sector, with governments playing a supporting role.

Second, Canadian manufacturing must focus on producing high-value-added, high-quality goods and related services that take advantage of the excellent technology and skills and the reputation for quality. Finally, talent is the most important resource.

Canadian manufacturers are employing a diverse set of strategies to gain competitive advantage. For example, firms like Siemens Canada have developed innovative software using the “Internet of Things” to speed time to market for new products and optimize product design and production processes simultaneously. Others are building on their experience and reputation to develop innovative products and applications.

How should governments support the manufacturing sector as it seeks global competitive advantage? Canada’s fiscal regime for manufacturing is best in class. Canadian universities and colleges are producing talented workers and are valuable partners in business research and development.

While these strengths provide a solid foundation, Canadian government needs to open the doors to foreign markets with more trade agreements and trade missions. They need to speed the transportation of manufactured goods with new and better infrastructure. Efforts to make regulations effective and efficient should be accelerated. Finally, government needs to raise their game in attracting investment to meet the competition from Mexico and other best-practice jurisdictions.

“Canadian firms need clear strategies to gain competitive advantage. Those strategies need to be built on our strengths in technology and innovation, our talented people and our reputation for quality. Governments need to support firms that want to grow and compete in global markets and attract new investment to Canada.”