Manufacturing CEOs report aggressive growth strategies: KPMG GMO 2016

May 26, 2016 – With 74 per cent of manufacturing company CEOs responding to KPMG International’s 2016 Global Manufacturing Outlook (GMO) reporting growth as a high priority over the next two years, the competition for market share is fierce. And, many are planning rather aggressive strategies in the pursuit of their growth objectives.

More than half of the manufacturing CEOs responding to the GMO survey categorize their growth strategies as “aggressive” and more than one-in-six say their growth strategy is “very aggressive.”

According to Doug Gates, KPMG’s global chair of Industrial Manufacturing, “There are fierce competitions being fought over every scrap of market share available and we will certainly see winners and losers. Maintaining the status quo will not drive growth. Manufacturers need to do something different in order to win market share in today’s environment.”

This year’s outlook is based on a survey of 360 senior executives conducted in early 2016 by Forbes Insights. Respondents, who represented six industry sectors (aerospace & defence, automotive, conglomerates, medical devices, engineering and industrial products, and metals), represent regions within the Americas, Europe and Asia.

KPMG’s GMO survey finds the responding CEOs plan to achieve their growth objectives through multiple channels. With a preference for organic growth over M&A activity (61 per cent versus 40 per cent respectively), most manufacturing CEOs say they will leverage the opportunities in entering new markets and making changes to current service and product mixes.
 
Entering new markets
Ninety-two per cent of survey respondents say they are stepping up their focus on entering new markets over the next two years. Forty-three per cent say their primary motivation for foreign investment is to capitalize on lower cost manufacturing opportunities and 34 per cent say it is to gain access to new markets.
 
Ironically, while many Western manufacturers are talking about a ‘sell to China’ strategy, it is actually respondents from the emerging markets — India and China in particular — that are most likely to be investing in order to gain access to new markets. Forty-four per cent of respondents from China and 47 per cent of those from India said that gaining access to new markets was the primary reason behind their foreign investments.

Changing and investing in new services and products
Of the respondents indicating plans to change their product range, 56 per cent say they will make “significant investments” to launch one or more new products into the market; 39 per cent say they will invest to launch one or more new services.
 
“Whether investing in incremental improvements for existing products or inventing entirely new products and services, what is clear is that manufacturers recognize an urgent need to increase their investment into innovation and R&D. Over the past three years KPMG has been tracking manufacturers’ investment intentions. The KPMG data shows that, following a drop in R&D in 2014, investment expectations skyrocketed in 2015 and seem set to continue to grow in 2016,” says Gates.
 
More than one-in-five (21 per cent) of survey respondents say they expect to spend more than 10 per cent of revenues on R&D over the next two years. Almost half (say they will spend 6 per cent of revenues or more (in the next two years).

Taking the manufacturing floor high-tech
KPMG finds that respondents are showing progression to an integrated manufacturing strategy and having a digital factory. Twenty-five per cent of those responding to the survey say they have already invested in 3D printing and additive manufacturing technologies. An equal number say they have already invested in artificial intelligence and cognitive computing technologies.
 
KPMG’s GMO survey notes that the use of robotics on the manufacturing floor is also likely to attract significant investment. In fact, almost two-fifths of survey respondents say they will definitely channel significant amounts of their R&D investments towards robotics over the next two years.
 
“Manufacturers are evolving into industry 4.0 and becoming more digital. Investments into new manufacturing technologies are a way to enhance agility, flexibility and speed to market when designing and launching new products and services– critical elements for manufacturing companies to win in the marketplace,” concludes Gates.
 
KPMG is expected to release its 2016 Canadian Manufacturing Outlook this September, providing a more in-depth analysis of the Canadian manufacturing landscape.