Emerging markets have a very obvious competitive advantage – which is low cost labor. But this advantage is hedged by other factors that add on to the costs. Especially in countries like India, despite of the obvious advantage of low cost labor, the manufacturing sector has failed to create export quality goods which are cheaper than those created by other Asian emerging countries.
Although India has been showing good growth traction in services sector, the same is not reflected yet in the manufacturing sector. Factors that add on to the costs of the goods prepared in India include operational inefficiencies and costs associated with transportation, tax and corruption. If we are able to handle each of these issues, we would become the largest manufacturing hub of the world in no time.
We have already seen some traction on these issues. With the GST (Goods and Services Tax) act, taxes are expected to come down. Bills like right to information will help in curtailing corruption to some extent. The initiatives like DMIC (Delhi Mumbai Industrial belt) will reduce the transportation costs of goods from the place of manufacturing to the shipping ports. New cities are being planned for facilitating large scale manufacturing. The new e-commerce companies are opening up markets across the globe for cheaper goods.
India is quickly catching up to become the lowest cost manufacturer. As things are moving in favor of the manufacturing sector in India, this is the time for companies to tighten their operations, and get rid of any operational inefficiencies. This is the time for companies to explore expansion plans, and build competencies that will enable them to cash in on new opportunities. This is the time companies should think of going public, explore ways to raise funds and do the right investments.
The ambitious expansion plans should be supported with the right support systems to sustain. Companies should leverage information technology systems to build a culture of taking data driven decisions. They should concentrate of enabling re-usability of systems and processes across the company to ensure optimized and quality productions. They should invest in connecting with their customers across the globe through proper branding and advertising initiatives. They should focus of upgrading the skills of their existing workers, and leverage newer training methods to quickly build huge skilled workforce.
They should enable the world consume more for less!!