Strategies in an Era of Global Competition

Topics: Tariff, Free trade, Manufacturing Pages: 28 (9501 words) Published: May 1, 2013
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Strategies in an era of global competition
Deakin University, Geelong, Victoria, Australia
Keywords Tariffs, Subcontracting, Case studies, Globalization Abstract The Australian government welcomed globalisation and led the way with tariff reductions, claiming that many local manufacturers were inefficient and inward looking as a result of over protection. This paper reports on a series of interviews conducted in companies belonging to the (small) electrical appliances and household kitchenware industries, which both face fierce competition from imported goods. The objectives were to find out what business and manufacturing strategies have sustained them in the new trade environment. Six distinct strategies were identified, although a mix is common. There has been a real push to increase productivity, but it is not enough on its own to enable a firm to defend its domestic market against cheap imports. The main impact of globalisation has been a move to replace local sources of production with others located offshore. Typically, these are independent suppliers in China operating under contract manufacturing agreements.

Strategies in an era of global competition 997

Geoff Buxey

Introduction For most of the twentieth century, Australian industry sheltered behind high duties and quotas on imports, although at the outset countries such as the USA and Sweden had greater levels of protectionism. A selection of representative average tariff rates for manufactured goods, expressed as a percentage of landed cost, displays the trend (Little et al., 1970) (see Table I). Australia's tariff barriers were amongst the highest of any industrialised nation, with the exception of New Zealand. Successive governments used such measures to encourage foreign investment in local production facilities, and, at the same time, generate more immigration. While this worked, economists and policy makers began to criticise excessive feather bedding of manufacturing, and blamed it for poor economic performance (Michaely, 1977; Anderson and Garnaut, 1987; Carter, 1992). For example, in 1910 Australia had the world's highest living standard, as measured by gross domestic product (GDP) per capita, but has since dropped steadily down this league table. By 1992, it was ranked twentieth on a list of selected countries, below Hong Kong and Singapore (IBIS Business Information, 1993). Also, its balance of payments on current account has been (increasingly) negative for the past 20 odd years, and by 1990 this figure, as a percentage of GDP, was the worst out of 20 Organization for Economic Cooperation and Development (OECD) members (The Economist, 1996a). The alternative proposed is a ``guns and butter'' strategy, that is build up industries with competitive advantage and export potential and import goods when the reverse holds true. Tariffs should be abolished to facilitate world trade. Taking note, the Australian government of the mid-1980s called for a ``level playing field'', and began progressively dismantling import barriers ahead of

International Journal of Operations & Production Management, Vol. 20 No. 9, 2000, pp. 997-1016. # MCB University Press, 0144-3577

IJOPM 20,9


its trading partners, with a target of zero tariffs by the year 2010. The idea was to persuade others to follow suit and thereby increase our export opportunities (Colebatch, 1996a), particularly for the important agricultural sector (Feil, 1999a, 1999b). According to Colebatch (1999), ten years of rapid tariff cuts have left Australia with the most open market for imports within the OECD. However, New Zealand aside, the rest have remained more or less unchanged. By 1996, Australia's average manufacturing tariff was down to 4.8 percent, below 5.4 percent for the USA and 7.7 percent for the European Union. Furthermore, the most significant differences were in...
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