Competing from a High Cost Economy

The starting point for this chapter is that Australia is a high-cost economy with a fading resources boom and a diminished domestic manufacturing sector. The chapter explores the fresh challenge that these structural developments present to public policy. It argues that this requires a shift from the dominant neo-classical policy paradigm, which has to date provided the intellectual muscle for a transformation of Australia's political economy. The chapter makes the case for policies framed to foster innovation and knowledge as the approach needed for Australia to succeed in an environment characterised by the new international distribution of manufacturing, the impact of new technologies, and the prevalence of global supply chains. To realise innovation-based economic renewal requires capacities for much more targeted interventions that engage business at cluster, sectoral, and/or regional levels. The chapter concludes by considering the obstacles to, and the possibilities for, policy change.

Design-Led Innovation

This chapter focuses on demonstrating the role of Design-Led Innovation (DLI) as an enabler for the success of Small to Medium Enterprises (SMEs) within high growth environments. This chapter is targeted toward businesses that may have been exposed to the concept of design previously at a product level and now seek to better understand its value through implementation at a strategic level offering. The decision to engage in the DLI process is made by firms who want to remain competitive as they struggle to compete in high cost environments, such as the state of the Australian economy at present. The results presented in this chapter outline the challenges in the adoption of the DLI process and the implications it can have. An understanding of the value of DLI in practice—as an enabler of business transformation in Australia—is of benefit to government and the broader design community.

Confronting the Productivity Challenge in the High Cost Economy

This chapter reports research findings into the productivity challenge facing the Australian oil and gas industry. This industry has been experiencing cost overruns indicating a productivity decline that puts future projects and investment at risk. Using world-class survey methodologies developed by the Centre for Business Research at Cambridge University and adapted for the oil and gas industry, an evidence-based view on business decisions and conditions is provided and linked to performance. While many of the productivity challenges facing the Australian oil and gas industry are beyond immediate managerial control, this research shows that key productivity drivers are in the realm of the firm to influence. The research reported in this chapter shows that improvements in innovation, collaboration, and deeper competitive capabilities are the best levers to lift business productivity and to build a growth pathway for the future for this industry.

Putting Clusters to Work

This chapter illustrates the effect of clusters on company performance through rigorous mapping of the patterns and strength of relationships between companies applied in the Aalborg region of Hub North, Denmark. This case study has been selected from similar industry cluster projects undertaken between 1999 and 2013 in Midjutland, Denmark, Dalarna, Sweden, mining regions in Queensland, and the Playford industrial region in South Australia. A conceptual methodology and suite of tools that have translated cluster theory into bottom up business outcomes for companies participating in these cluster projects demonstrates how a deeper understanding of clusters can contribute to the economic development of industrial regions. The methodology and findings described in this chapter pioneer new insights and ways to analyse emerging cluster developments.

The Role of Local and Regional Institutions

This chapter explores the ways in which regions that are remote from the main concentrations of economic wealth and power can achieve development in a high cost environment. The role of effective institutions in creating the conditions for economic development has become a major field of scholarship. Recently, these insights have been applied to the urban and regional scale. This chapter pays particular attention to the role that regional and local institutions play in shaping patterns of economic performance, especially in high cost environments. The chapter examines ways in which this new thinking is informing regional policy. It provides some case studies of regions that have succeeded in the high cost environment of Europe. It concludes by stressing the importance of effective and adept local and regional institutions in ensuring the prosperity of cities and regions.

Foundations for Industrial Rejuvenation

Drawing on a body of research examining the economic and social effects of downturns and major manufacturing plant closures in Australia and South Australia in particular, this chapter investigates how industrial rejuvenation strategies can help to minimise the negative impacts on the workforce and supply chains affected. The chapter identifies key lessons from the national and international literature on industrial rejuvenation and the management of major closures. Industrial rejuvenation is a multi-faceted strategy that seeks to manage pressures and complex change in response to local, national, and global conditions. The chapter focuses on the evidence about the strategic options for industrial rejuvenation available to government in partnership with industry, trade union, and community stakeholders. The chapter concludes by drawing out some broad strategic implications for the design of more integrated rejuvenation and regeneration policies.

Manufacturing in a High Cost Environment

This chapter explores the current state of flux in manufacturing. It examines the forces that drive fragmentation and dispersion of value chains on the one hand and those that drive concentration and integration of value chains on the other. These forces are underpinned by changes in technology, wage costs, business environment, importance of economies of scale for production, need for interaction with customers and input providers, needs for skills in the manufacturing workforce, and the workings of industrial commons and economic complexity. Analysing these changes at the level of the firm, this chapter puts the competitive focus on the creation of value more than on cutting costs (although both are important). The policy environment must provide both carrot and stick to ensure that firms align with these developments. In this dynamic world, an effective policy response requires a shift from any single dominating economic lens (e.g. neo-classical, neo-Keynesian, neo-Schumpeterian, evolutionary) to a situation-specific approach.

Managerial Practices in a High Cost Manufacturing Environment

This chapter explores the management strategies adopted by manufacturing firms operating in high versus low cost economies and investigates the reasons for differences in the management practice choices. The study reported in this chapter identifies a subset of countries that have either high or low labour costs, with USA, Sweden, and Japan being high, and India, China, and Brazil being low labour cost economies. The high labour cost manufacturing firms are found to have better management practices. In this chapter, the authors find that Australia and New Zealand manufacturing firms face relatively high labour cost but lag behind world best practice in management performance. The chapter concludes by highlighting the need for improvement in management capability for Australian and New Zealand manufacturing firms if they are to experience a reinvigoration of productivity, competitiveness, and long-term growth.

Strategic Roadmapping as a Policy Tool for Meso-Level Industrial Transformation

This chapter illustrates the use of strategic roadmapping as a policy tool for regions or industry sectors to formulate a strategy to renew and transform their industrial base when faced with structural decline, diminishing opportunities, and intensifying competitive pressures. This approach is illustrated by the case study of the forest and wood products industry in the Green Triangle region in the southeast of South Australia, both the road maps produced and the staged policy recommendations made for immediate, short, and long-term action. The chapter concludes by summarising the key arguments for the use of strategic roadmapping as policy tool for industrial transformation, and identifying some future avenues for strategic roadmapping in the forest and wood products industry and in manufacturing industry in general.

Supporting Entrepreneurship in High Cost Economies

This chapter sets out the findings of a comprehensive literature review that addressed three objectives: to review internationally recognised and accepted methodologies of entrepreneurial human and firm characteristics data collection and analysis; to formulate the contemporary view and latest research on entrepreneurial characteristics and how these characteristics contribute to a model of entrepreneurial firm behaviour; to examine developments in the literature that explain to what extent human characteristics influence and predict the performance of firms. The implications of this work are that firms with high potential in either innovation or market-based growth opportunities need to have the right environmental settings in terms of social, political, regulatory, economics, and technology for firms with a high success potential to realise this potential. The concept of stage progression and the relationship between the characteristics of the individual, the firm, and the opportunity provide the elements of a framework through which to consider government support programs and interventions.