BCG_-_The_Shifting_Economics_of_Global_Manufacturi

TheShiftingEconomicsofGlobalManufacturingHowCostCompetitivenessisCHangingworldwideTheBostonConsultingGroup(BCG)isaglobalmanagementconsultingfirmandtheworld’sleadingadvisoronbusinessstrategy.Wepartnerwithclientsfromtheprivate,public,andnot-for-profitsectorsinallregionstoidentifytheirhighest-valueopportunities,addresstheirmostcriticalchallenges,andtransformtheirenterprises.Ourcustomizedapproachcombinesdeepinsightintothedynamicsofcompaniesandmarketswithclosecollaborationatalllevelsoftheclientorganization.Thisensuresthatourclientsachievesustainablecompetitiveadvantage,buildmorecapableorganizations,andsecurelastingresults.Foundedin1963,BCGisaprivatecompanywith81officesin45countries.Formoreinformation,pleasevisitbcg.com.August2014|TheBostonConsultingGroupThEShifTinGEconoMicSofGlobalManufacTurinGHowCosTCompeTiTivenessisCHAnGinGworldwideHarOldl.SirkinMiCHaelZinSerJuSTinr.rOSe2|TheshiftingeconomicsofGlobalmanufacturingconTEnTS3IntroductIon7ForcesthatareredrawIngthecompetItIvenessmap9FourdIvergIngpathsUnderpressurelosinggroundHoldingsteadyrisingglobalstars20adaptIngtorapIdlyshIFtIngcostcompetItIveness22ForFurtherreadIng23notetothereaderTheBostonConsultingGroup|3Forthebetterpartofthreedecades,arough,bifurcatedconcep-tionoftheworldhasdrivencorporatemanufacturinginvestmentandsourcingdecisions.latinamerica,easterneurope,andmostofasiahavebeenviewedaslow-costregions.theu.s.,westerneurope,andJapanhavebeenviewedashavinghighcosts.Butthisworldviewnowappearstobeoutofdate.yearsofsteadychangeinwages,productivity,energycosts,currencyvalues,andotherfactorsarequietlybutdramaticallyredrawingthemapofglobalman-ufacturingcostcompetitiveness.thenewmapincreasinglyresemblesaquilt-workpatternoflow-costeconomies,high-costeconomies,andmanythatfallinbetween,spanningallregions.Insomecases,theshiftsinrelativecostsarestartling.whowouldhavethoughtadecadeagothatBrazilwouldnowbeoneofthehighest-costcountriesformanufacturing—orthatmexicocouldbecheaperthanchina?whilelondonremainsoneofthepriciestplacesintheworldtoliveandvisit,theuKhasbecomethelowest-costman-ufacturerinwesterneurope.costsinrussiaandmuchofeasterneu-ropehaverisentonearparitywiththeu.s.(seeexhibit1.)inTroducTionVolumeofexports(highesttolowest)12011010090800140130Manufacturingcostindex,2014(U.S.=100)CzechRepublic107PolandBrazil1161231011119183109130Switzer-land1258797Mexico9199115UnitedKingdom109123111Italy123124102Japan111AustriaSpainIndonesiaIndiaRussiaBelgiumFranceUnitedStates100ThailandSwedenAustraliaTaiwanCanadaNether-landsSouthKoreaGermany121China96OtherNaturalgasElectricityLabor1Sources:u.S.economicCensus;u.S.BureauoflaborStatistics;u.S.Bureauofeconomicanalysis;internationallabourOrganization;euromonitorinternational;economistintelligenceunit;BCGanalysis.Note:Theindexcoversfourdirectcostsonly.nodifferenceisassumedforothercosts,suchasraw-materialinputsandmachineandtooldepreciation.Coststructureiscalculatedasaweightedaverageacrossallindustries.1adjustedforproductivity.Exhibit1|ComparingtheTop25ExportEconomies4|TheshiftingeconomicsofGlobalmanufacturingtounderstandtheshiftingeconomicsofglobalmanufacturing,theBostonconsultinggroupanalyzedmanufacturingcostsfortheworld’s25leadingexportingeconomiesalongfourkeydimensions:manufacturingwages,laborproductivity,energycosts,andexchangerates.these25economiesaccountfornearly90percentofglobalex-portsofmanufacturedgoods.thenewBcgglobalmanufacturingcost-competitivenessIndexhasrevealedshiftsinrelativecoststhatshoulddrivemanycompaniestorethinkdecades-oldassumptionsaboutsourcingstrategiesandwheretobuildfutureproductioncapacity.toidentifyandcomparetheshiftsinrelativecosts,weanalyzeddatain2004and2014.theevaluationispartofaseriesoffindingsfromourongoingresearchintotheshiftingeconomicsofglobalmanufacturing.1Indevelopingtheindex,weobservedthatcostcompetitivenesshasimprovedforseveralcountriesandbecomerelativelylessattractiveforothers.withintheindex,weidentifiedfourdistinctpatternsofchangeinmanufacturingcostcompetitiveness.(seeexhibit2.)theyincludethefollowing:•UnderPressure.severaleconomiesthattraditionallyhavebeenregardedaslow-costmanufacturingbasesappeartobeunderpressureasaresultofacombinationoffactorsthathavesignifi-cantlyerodedtheircostadvantagessince2004.Forexample,atthefactorygate,china’sestimatedmanufacturing-costadvantageovertheu.s.hasshrunktolessthan5percent.Brazilisnowestimated•Traditionallylow-costcountrieswhosedeterioratingcompetitivenessisdrivenbyawiderangeoffactors•Traditionallyhigh-costcountrieswhosecompetitivenesscontinuestodeteriorate,becauseofweakproductivitygainsandhigherenergycosts•Countriesroughlymaintainingtheirrelativecompetitivenessversusgloballeaders•Improvedcompetitivenesscomparedwiththeothers,becauseofmoderatewagegrowth,sustainedproductivitygains,stableexchangerates,andenergycostadvantagesUnderpressureLosinggroundHoldingsteadyRisingglobalstarsChinaCzechRepublicPolandRussiaBrazilMexicoUnitedStatesIndiaIndonesiaNetherlandsUnitedKingdomBelgiumFranceItalySwedenSwitzerlandAustraliaSource:BCGanalysis.Exhibit2|MostEconomiesintheIndexFallintoO