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Small industry sector and globalization

by Ritsy de Silva,
Director, Consultancy House, Nugegoda

"Customer is the King" in this era. Nobody can deny this simple truth. It is impossible to draw up a development plan without identifying the strategic importance of the customer. National planners can capitalize growth opportunities by closely monitoring market phenomenon and changes occurred in consumer behaviour, through periodic market surveys. Planning machinery works well with integrated marketing strategies.

Unlike the marketing oriented large private business organizations, most of the small industrialists backed by the national industrial policies never bother to know consumer reactions to their products and the underlying factors of consumer behaviour in their target markets. This is the key area missing in production oriented traditional planning systems.

Unfortunately, underdeveloped economies always have given a priority to subsistence type agricultural activities and small level industries, even in this new millennium. The policy planners in these economies always see the farmer as a typical rustic, clad in loin cloth and digging mud for planting aboriginal crops for his living. It is implicitly expected that the farmer and small industrialist must heed to national planner's advice to achieve the optimum level of production.

The economic theory practised by these planners traditionally assume the farmer and his family members to have a simple plebian taste and traditional future expectations, which does not go beyond the village level. As a result, rural communities engaged in small level industries and agricultural activities center around a "wattle and daub" culture.

The third party involved in this scenario is the national or non-national level planners and bureaucrats. They always depend on donor organizations and state funds for planning and implementation work. Their planning culture virtually gives priority to infrastructure development programmes for the betterment of farmers and small industrialists mentioned above.

Unfortunately, these specialists are never bothered about non-existence of marketing machinery in rural areas and the great paucity of purchasing power in village surrounded geographic markets.

Central planning policies, by practice, in Asia has become a process of "planting yams by mouth". Followed by the "Middle of the road strategy" or doing little of everything, these policies supported to generate an inactive management style for developing agriculture and small sector industries in the past decades.

Many development projects so emerged were directly linked to infrastructure development where contractors, politicians and bureaucrats played the decision making role, in order to use resource in wanton. The objectives and targets in many development plans were rarely met but the fund had been inadvertently wasted for nuts & bolts within the planning process itself.

An ultra new addition to support this framework is called "productivity concept" which became the panacea for small business sector ailments. Individual skill based "production concept" and "product concept" conceived in the 17th century and already rejected by the marketing concept has come forward in disguise and to set the pace between development and globalization! It is worthwhile to mention that the Consumer or the End User has been totally neglected within this project planning scenario and it became a marriage without the bride!!

Combination

According to classical economists, any production is a proportionate combination of four basic factors, called land, labour, capital and the entrepreneurship. Turning these factor inputs into output is what they described as the production process. Having a production unit (a factory) equipped with relevant technology to convert different factor inputs into output was the basic necessity for the hypothetical economic activity explained in classical economic theories. Just like an old rag, the Orthodox Economic Theories have been still used worldwide for planning purpose. This science never encountered with customer satisfying process or customer orientation and the students those who followed the subject were also never got it confused. Being a development of classical economic theory, revamped productivity theory now used by underdeveloped nations has been innovated centuries of years ago to explain the positive relationship between inputs and output. In practice, a productivity equation must remain parallel or relative to a lead-time, in order to explain it beyond a static or hypothetical illustration. But, the original theory has disregarded chronology!

A sheer increase of quantitative productivity does not mean anything to-day, when it cannot ensure a corresponding increase in customer oriented quality and level of customer satisfaction. In this era, customers, competition and change (3Cs) have created a new business world!

Therefore, the traditional definitions used to explain the term "productivity" has made itself a misnomer. Classical or neo-classical economic theories were based on similar paradoxical assumptions and explaining things within certain hypothetical definitions had been a fashion in many disciplines of yesterday!

According to economic theory "... summation of each & every micro level production activity generates a wider flow at national level. Ultimately, it becomes the macro level output..." No concern whatsoever given for customer satisfaction in this classification ... This situation is explicable further with a typical example ..." Supposing a country could produce 5,000,000 bn. inferior quality loaves (enriched and fortified with weevils etc...) in a day, with a network of 500,000 mn. bakeries However, in real terms, it does not mean that the "particular country has achieved the competitive edge in productivity".

Even, having 5,000,000 bn. bakeries, which could produce one loaf, a day of the same quality bread does not sound anything about productivity, economic development, quality or customer satisfaction. Instead, the operation in question would bring about dead losses to the particular country concerned as many customers are not going to be loyal to the particular inferior product if they have an alternative choice. "Customer is the King" in this era. Nobody can deny this simple truth. It is impossible to draw up a development plan without identifying the strategic development of the customer.

National planner can capitalize growth opportunities by closely monitoring market phenomenon and changes occurred in consumer behaviour, through periodic market surveys. Planning machinery works well with integrated marketing strategies. Unlike the marketing oriented large private sector business organizations, most of the small industrialists backed by the national industrial policies never bother to know consumer reactions to their products and the underlying factors of consumer behaviour in their target markets.

This is the key area missing in production oriented traditional planning systems. Many planners operating at national level do not foresee this situation, as they would never regard "customer as the king". Because of this dire misunderstanding, many underdeveloped economies in the world are now trying to achieve a mammoth economic growth through increased micro level productivity programs of above nature. For this purpose, they have diverted their total attention towards small & medium sector industrial growth. In contrary to this policy, developed countries are constantly supporting their large multi-national ventures to enter into tenable global markets for a rapid and sustainable economic development through customer satisfaction process.

It is very easy to bulldoze miniature business units in developing countries through globalization policy, which has received a wider acceptance as "a must". In contrary, increasing the micro level productivity programs with macro level planning culture has been the national strategy to achieve a sustainable growth in many developing countries as they are incapable to compete with the global business, tossing their hats into the same markets.

Access to developing countries through information technology becomes the key competitive edge held by the modern global business. Identification of target expectations, innovating customer needs & wants, setting up customer oriented strategic plans, developing management skills, pumping huge capital investments, inflow of modern technology and ability towards positive factor employment, etc. could be considered as the necessary pre-conditions to achieve a rapid economic growth in the new millennium.

Allocating resources to infrastructure development does not sound anything in the sphere of modern business development stemming up through globalization. In this context, the practical experience in many underdeveloped countries remains somewhat bitter. A higher component around 35% of these massive funds spent on such programs are said to be inadvertently wasted.

Spurt of small industries with low productivity and inferior imitative products would hardly contribute any gain to boost the national economy.

It is the art and science of some bureaucrats in many underdeveloped economies to preach people about the value of productivity and the tactics to be followed to achieve the highest levels of it. There is no indication about "customer satisfaction" or "value for money" in this attempt. Hoodwinking the Government by showing a small carrot of miniature level productivity to prevent the pressure of unemployment, is the tactic adapted by these planners to help squander massive funds that could have been harnessed towards a faster economic development of the particular country.

Ultimately, the same planners could, perhaps, find fault later, with the politicians who did not understand head or tail of the productivity strategies preached and practised. Thus, it is a critical necessity of re-defining productivity, infrastructure development and small industry sector in the light of customer orientation and information.

Investment

Also, it is necessary to re-consider investment funds and social infrastructure focused towards building up small-scale business ventures. Current economic activities should go far beyond the hypothetical production structure taught in classical economics. For example, combination of production factors inside a high-tech production unit, equipped with ultra modern complex technologies ensuring effectiveness and efficiency in production processes for achieving the prime objective of target customer satisfaction surrounded by legal requirement and pre determined quality standard seems to be too much for re-defining orthodox production theories today.

On the other hand, without being traditionally confined to hypothetical static market structure, understanding the power of environmental change derived through gathering momentum of turbulence is not seen to be observed by many contemporary economic theorists and policy planners operating within the framework of isolated tactical solutions aimed at industrial growth. Harrowing historical quantitative data with a view to find some nuts and bolts in it for generating and justifying a book bug hypothesis had been the main function of our national planning policy since liberation.

The gathering momentum of turbulence today has put a visible spanner into small business development. It has generated an inverse relationship within a planing cycle by making the lead time shorter than the tornado of the change occurred. Achieving productivity through small business sector development will be a key problem under this situation. If this situation is an unavoidable feature brought about by the turbulence, how can a small business development plan put into effective action? What proportions of flexibility are we to add to generate "Plastering Economics" or "Plastering Management" which could be assembled into planning processes for designing controllable plans? Could small sector business flourish and sustain a reasonable growth in future? Is it a real situation? or globalization policies practised by the developed countries could capture the growing opportunities in our rural markets? These are the questions emerging before the modern strategic planners. The answer is simple. No planner can fight with the impact of globalization and change it. Better go with the tide!

We can see the beacon light which beckons developing countries towards globalization and customer oriented culture. But the action is very slow. A close vision would show a serious lacking in national planning level which could accommodate enough room for a quicker change. For example, many developing countries prey on "day-to-day plans" at national level because, they are saddled with critical socio-economic problems such as war, natural disaster, political instability, bribery, nepotism, corruption, alarming crime rate, increasing budget gaps, poverty, and the need for relief services. The developed countries those who usher in globalization do not have any of these dire problems and quite capable to develop and to implement vigorous strategic plans outside their countries as well.


How to manage change in your organisation?

by DR. K. KUHATHASAN

In the modern world, change is: Unavoidable, Constant and Accelerating There are two ways of answering the question "Why do organisations change?" On the one hand, most organisations can point to one or two obvious or immediate casual factors. These are referred to as 'triggers.' Quite often triggers are disasters of one form or another, such as financial disasters or environmental disasters. Other triggers include the assumption of a new chief executive opportunities from new technological developments, emergence of threatening competition etc.

A trigger precipitates change, but for most organisations the underlying reasons for the change are immense change to the environment in which the organisation works: economic, technological, political and social.

The rate at which some of these changes to the environment (e.g. technology) can happen is now extremely rapid and is accelerating each year. Change is becoming the norm and stability the exception.

Change in the economic environment

Economic change fall into two main categories:

1. Short-term cyclical changes
2. Longer terms underlying changes


Short-term cyclical changes

These include change in the business cycle, interest rates, exchange rates, inflation, taxes and property values. They are only partially controllable by governments and require quick flexible responses by all organisations affected by the changes.

These cyclical changes usually require a tactical response, not strategic: BUT in extreme cases they can endanger survival and act as a trigger for major structural changes.

However, a more serious problem is that both government leaders and business leaders are often tied up fire-fighting short term cyclical changes and do not consider long term underlying changes in the economy. 

Long term underlying changes

These are more dangerous than short term changes. Long term underlying growth rates in different world regions, globalisation of markets, the need for world class products and services, growth of regional trade blocks, competition from unexpected areas, deindustrialisation of the developed world.

Technological changes

The pace of technological change has been phenomenal and is still speeding up. Recent new inventions include:

* a whole range of electronic products such as Low cost personal computers, fax machines, digital video cameras, palm-top computers, compact discs, mobile phones, etc.

New models and products tend to have shorter and shorter life-cycles because of the increased pace of new invention.

New processes for manufacturing goods or delivering services.

Computer technology has affected the way that goods and services are produced by nearly all organisations, including governments. Cars produced by electronic robots, 24-hour cash machines at banks, collection of road tax by electronic sensing machine on motorways (Singapore).

Computer technology does not just speed up an existing process - it often means that organisational structure has to be radically re-designed. There have also been many radical innovations in systems and procedures available for use in business and government: e.g. 'Just in Time' inventory control principles of Total Quality Management. Business Process Re-engineering etc.

Developments in processing and transmitting information 

The combination of computers and telecommunications has started to create a revolution in the way that information is transferred and processed. These changes have resulted from the rapid development of computer networks, ranging from small local networks in use by a single office through to the 'Internet' which is a worldwide network of computers connected by telephone.

The Internet handles information in two main ways:

1. e-mail: (electronic mail) through which messages and whole documents can be transmitted in privacy to receivers on the other side of the world in a matter of seconds.
2. The World Wide Web: users create 'web pages' which are for public access; these pages enable users to read documents, listen to music, watch videos and 'live' recordings, make purchases, participate in surveys, advertise products, do research, share interests, make cheap telephone calls, download files, etc.

Growing consumer power

A steady, relentless change over the past 50 years has been the growth in consumer awareness and a growing reluctance to accept substandard products and services. This has led private and public sector bodies to continually seek improvements in the quality of what they offer, while controlling costs to create better value (e.g. the development to Total Quality Management) At the same time as the enormous drive for quality and efficiency there has emerged the need for organisations to respect the growing power of the 'Green lobby'. People are now far more aware and concerned about environmental issues: e.g. pollution, artificial additives, safety, unnecessary exploitation of people and animals, etc. 

Social changes

Changes in attitudes, values and beliefs growing global concerns include health and safety, concern for the environment, the role of women, the use of children at work, etc.

Triggers for change

Triggers for change fall into the following main categories:

1. Financial losses
2. Increased competition
3. Recession
4. Technological development
5. Conditions attached to loans
6. Cut-back in resources
7. Need to improve staff utilisation
8. New legislation
9. Appointment of a new Chief Executive Officer
10. Opportunities or events foreseen resulting in proactive change As can be seen, most of these triggers result in reactive change (a response to adverse conditions). Proactive change (change resulting from foresight even through present conditions are good) is far rarer but is the ideal to aim for.

Scan your environment!

Be proactive - don't wait for a trigger to force change on you. Start by scanning the environment to identify the need for change.

1. Shell anticipated the oil crisis of the early 1970s.
2. Singapore government monitored the problems caused by ageing populations and scope on social security payments in various developed countries and took action to avoid the same problems.
3. Hewlett Packard's philosophy is to anticipate what is needed in the future and make sure the product is in place.
4. Glaxo Group changed at its moment of greatest success, not after things had started to change around it.

How do you adapt?

1. Keep close to customers and their needs. Don't ignore customer criticism
2. Expect that the rules of the game will change frequently
3. The job is too big for just top management
4. Use scenario planning... It creates power to respond to any ball that's bowled at you! 5. Use external audits of organisational health. You may be too close to read 'the writing on the wall'.

How IBM has had to adapt because of rapid changes in its business environment.

1. Few large customers
2. Traditional competition
3. Predictable technological change
4. Hardware - dominated
5. Direct sales force
6. One set terms and conditions

Present

1. Millions of smaller customers
2. Thousands of competitors
3. Exploding rate of change
4. Software/systems solutions
5. Business partners/alliances
6. Many ways of doing business.


Bairaha extends Super Mart chain to Ja-Ela

Bairaha Farms, has opened the company's fifth "Super Mart" in Ja-Ela, with a pledge to introduce new innovations that will reinforce links between super marketing and lifestyles.

The new Super Mart will be the prototype for future additions to the chain, which will offer several facilities presently unavailable at local supermarkets, the company said.

"Life in urban and suburban Sri Lanka is becoming very fast-paced, and supermarkets can integrate with lifestyle by enhancing the under-one-roof concept," Bairaha Super-Mart's General Manager Saman Warnasuriya said. "We are looking to be the trendsetter in this approach".

"The Ja-Ela Super Mart, which is conveniently located just outside the town centre, offers extensive parking facilities, and an outdoor play area for children. Adequate space has been set aside for new facilities to be added in the near future," Mr. Warnasuriya said.

Established in October 1975, Bairaha Farms Ltd., is a relative newcomer to supermarketing, an area it ventured into in December 1997. The company is the local market leader for branded broiler chicken products and operates a fully integrated business, from hatcheries, breeder farms and outgrowing to processing, further processing and retailing.


Discover Wales for doing business

by John Hutchinson,
LPS Special Correspondent



Skills workforce: a British Airways technician at the industry-leading avionic equipment repair centre near the Welsh capital of Cardiff prepares radar equipment for an overseas customer.

Few countries have weathered the stormy winds of change more robustly than Wales, a part of the United Kingdom of modest size but of major significance in terms of international commerce.

Indeed, through recent centuries this small nation has played a main part in spurring the development of the modern world. It was in Wales that 18th-century iron founders sparked the fires of an industrial revolution that was to spread worldwide, creating the wealth and influence the UK used to build by the 1900s the biggest and most powerful empire the world has ever seen.

Wales, too, exported the rawmaterials that fast-developing nations required to thrive and prosper. Welsh slate roofed the cities of the world while Welsh coal fuelled the navies, the merchant fleets and the rail systems that revolutionised international trade and relations. Welsh iron and steel formed the machines this new industrialised world demanded.

In recently times the industrial face of Wales has changed again but its role in the global marketplace continues to expand. Gone are the disfiguring mines and ironworks that made the Wales of 90 years ago the world's leading producer of coal and iron ore.

In their place have arrived some of the world's most efficient and effective companies, together moulding Wales into one of the most attractive and productive places in which to create the business of the 21st century.

Today, the country has one of Europe's most developed business and communications networks. This represents billion of dollars worth of foreign direct investment from hundreds of United States, Asian and European companies that have searched successfully for the skills, infrastructure and environment necessary to grow in European and world markets. Perhaps the most striking feature to the overseas business visitor arriving in Wales is its natural environment. The country is characterised by many areas of exceptional natural beauty, many of which are literally within walking distance of main areas of the population and of the industrial and commercial infrastructure.

Above fertile green valleys rise steep hills, crags and mountains, while Wales's rugged 900-kilometre (560-mile) coastline provides some of the most outstanding coastal scenery anywhere in Europe. With its land area of 20,800 square kilometres - some nine per cent of the UK overall - Wales's population of 2.9 million represents just five per cent of the UK total.

All this helps to create a setting in which more than 1,500 companies invested 19 billion US dollars between 1983 and 1999 alone, creating and safeguarding nearly 200,000 skilled jobs and building unique strengths in key business sectors such as electronics, information technology and aerospace.

Of the total, nearly 7.3 billion dollars was invested by established organisations benefiting by expanding, developing and strengthening their businesses. Industry-leading companies such as 3M, Ford, General Electric, Kimberly-Clark, LG and Pirelli have come from around the world to set up shop in Wales, gaining access to the potential of a market of 400 million people within the European Union. Five key factors are attracting business leaders to discover Wales. First are the country's exceptional resources - led by the easy availability of highly skilled, motivated and competitively priced labour.

Compared with other nations in Europe, and further afield, investors in Wales can expect reduced recruitment and training costs, faster set-up times and enhanced productivity. Another driving factor is Welsh innovation. The country is an established European base for electronics and other high-tech industries. Technology-led training and 35 internationally recognised centres of excellence ensure a constant focus on innovation.

Wales also provides vital integrated communication networks. One of the most advanced communications infrastructures in Europe means that investors enjoy close contact with customers and suppliers alike, exploiting the strengths of Wales's telecommunications fibre-optic backbone with its high bandwidth capability. Strongly competitive set-up costs also help attract overseas business people, thanks to a ready supply of land and property compared with many other parts of the rest of Europe. Set-up costs can be cut further in some parts of Wales through financial and other incentives.

Another outstanding factor is less clear-cut but obvious to everyone who works in Wales - the quality of life. Wales is enormously diverse and rich in cultural opportunities. Its bilingual nationality (Welsh is spoken by one in five of its population) sets it part from the rest of the UK, and its people are highly adaptable.


"Khomba Baby" range grows with new cologne and talc

Swadeshi Industrial Works recently launched a baby talc and baby cologne expanding its portfolio of products branded "Khomba Baby" the popular nature-friendly baby products brand.

The new products contain extracts of "Khomba" (Margosa) and Venivel (Coscinium fenestratum) traditional herbal remedies with antiseptic properties, making them unique in the local market, the company said.

"Khomba Baby" is an extension of the mother brand 'Khomba', and is safe, mild and gentle for baby," Swadeshi's Marketing manager Chrishantha Fernando said. "Customers are assured of the highest quality standards and value for money with these products."

Both the talc and cologne have been extensively researched with consumers for quality and acceptance in order to maintain the standards of the Swadeshi brands. The range has also been certified by the Health Ministry and registered under the Cosmetic, Devices and Drugs Act No. 27 of 1980.

"We hope to position these products as the only herbal baby care products in the market," Mr. Fernando added. "We are certain that these products can capture a substantial share of the market". Khomba Baby cologne and talc are available in 55ml and 100g retail packs respectively and are competitively priced.

Launched in 1992, Khomba Baby soap was the first product in the Khomba Baby care ranger and the first herbal baby soap manufactured in Sri Lanka. the soap contains Margosa and Aloe Vera, a natural moisturizer. The mother brand "Khomba" was introduced to the market in 1956 and is the pioneer herbal beauty soap manufactured in Sri Lanka. A wholly Sri Lankan-owned company, Swadeshi Industrial Works was established in 1941 and celebrated 60 years in the personal care business earlier this year. The company has become the market leader in herbal soap manufacture in Sri Lanka. Its products include herbal beauty soap, herbal shampoos, laundry powder and the only herbal carbolic soap in the country.

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