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Global Manufacturing Outlook Summary

Core Content

The Global Manufacturing Outlook report, conducted by Forbes Insights in early 2016 and supported by KPMG International, provides insights into how industrial manufacturers are positioning themselves for growth in a competitive and evolving market. The report highlights that the manufacturing industry is undergoing significant transformation, driven by the need for innovation, strategic expansion, and a shift in growth priorities.

Main Points

• Growth is a top priority: Manufacturers are increasingly focused on driving growth, with 74% indicating that growth will be a high priority over the next two years, and 31% expecting it to be an extremely high priority within the next 12 to 24 months.

• Aggressive strategies: Over 1-in-6 manufacturers are adopting very aggressive growth strategies, particularly in Asia, where 41% of Japanese respondents and 39% of Chinese respondents reported a very aggressive approach.

• Preference for organic growth: While M&A is still a strategy for some, the majority of manufacturers (61%) prefer organic growth over M&A (40%). However, Asian manufacturers show a stronger inclination towards M&A, with 56% of Chinese and 53% of Japanese respondents favoring it.

• Focus on technology and innovation: The report emphasizes the importance of leveraging technology to create new value for customers. Manufacturers are investing in R&D and digital transformation to enhance their offerings and competitiveness.

• Geographic expansion: Many manufacturers are entering new geographic markets to drive growth. Over 92% plan to expand into new regions, with a notable shift from cost-cutting to market expansion and value creation.

• Strategic alignment: Leading manufacturers are reassessing their business models to be more demand-driven, responsive, and agile. They are also aligning their strategies with the needs of global markets and forming partnerships to enhance their capabilities.

Key Takeaways

• Market competition will intensify: With limited baseline growth in most markets, manufacturers must either innovate to grow the market or compete aggressively for market share. This will lead to a clear distinction between winners and losers.

• Asia is a key growth region: Asian manufacturers, especially in China and Japan, are more aggressive in pursuing growth and are leading in both M&A and innovation strategies.

• Digital transformation is critical: The concept of 'digital industrial' is reshaping the industry, with companies like GE leveraging data from their products to deliver more value to customers and improve internal operations.

• Strategic partnerships are essential: In order to enter new markets and sectors, manufacturers are forming joint ventures and partnerships, particularly with local players in Asia.

• Balancing risk and opportunity: Manufacturers are adjusting their product and service portfolios to align with customer demand and market trends, while managing risk through diversification and innovation.

Supporting Data

• Survey methodology: The report is based on a survey of 360 senior executives from six industry sectors (Aerospace & Defense, Automotive, Conglomerates, Medical Devices, Engineering and Industrial Products, and Metals), with respondents evenly distributed across the Americas, Europe, and Asia.

• Growth strategies:

  • 87% of manufacturers have entered new geographic markets in the past 2 years.
  • 92% plan to do so in the next 2 years.
  • 56% of manufacturers have significant plans to enter new geographic markets.
  • 34% of manufacturers consider gaining access to new markets as the primary driver of their international investment strategy.

• Product and service changes:

  • Nearly half of manufacturers plan to change the range of services they offer.
  • Around two-fifths plan to change their product portfolio.
  • US manufacturers are more likely to change services, while German manufacturers focus on products.

Quotes from Industry Leaders

• Doug Gates: "Anyone waiting for a slow-down in the level of competition coming from Asia will be disappointed. Asian manufacturers clearly expect to step up their efforts to capture new market share and grow their bottom line."

• Tom Mayor: "Manufacturers must start thinking about how they can add new pools of value to their customers and then leverage all of the technologies at their disposal to rapidly deliver on that value."

• Khozema Shipchandler (GE Digital): "Digital industrial is really about using the information from our products to create real value for our customers."

• Kim Metcalf-Kupres (Johnson Controls): "China is an incredibly important part of that strategy. Whether or not you are investing in China, the reality is that you will certainly be competing with China."

• Jun Okamoto (KPMG Japan Strategy Group): "We believe that success is something that can be achieved with strong management capability focused on capturing untapped business segments and growing such segments at a faster rate than would have been possible through inorganic growth."

Conclusion

The report underscores the need for manufacturers to adopt a proactive and strategic approach to growth. This includes embracing digital transformation, expanding into new geographic markets, and rethinking product and service offerings. While organic growth remains a preferred strategy, the increasing role of M&A and cross-sector collaboration highlights the evolving landscape of industrial manufacturing. The key to success lies in innovation, agility, and a clear vision for the future.