October 22, 2024 Expanding Global Frontiers In Manufacturing

Dive into the challenges, cultural impacts, and key strategies for successful market entry in manufacturing.

By Shinichiro (SHIN) Nakamura, President of one to ONE Holdings

Internationalized operations are becoming the norm for many companies. In fact, insights from BCG show that over 90% of North American companies have relocated production and sourcing over the past five years.

Yet, while we live in a globalized world, there are still major barriers manufacturers face when looking to expand to new markets. These include navigating regulations, attracting the right talent, and building relationships with suppliers.

While it’s good to have an overall growth plan for your organization, curating that strategy to the specific trends and conditions of each market is strongly advisable. A ‘one size fits all’ is not the way to go when expanding manufacturing operations to new markets.

Let’s dive into the challenges that come with global expansion and how to navigate these.

Entering New Markets: Challenges to Overcome

While expanding into new regions arguably mitigates a dependency on the ebbs and flow of one market, it’s crucial for manufacturing leaders to understand the risks that inevitably come with expansion.

Right now, there are huge disruptions that are wreaking havoc on supply chains around the world. For example, the ongoing turbulence in the Middle East has resulted in logistics coming to a shrieking halt in the Red Sea—not to mention other ongoing embargos due to the war. Additionally, Russia’s invasion of Ukraine and the increasing tariffs imposed on China by countries like the US significantly affect global supply chains that make market expansions more complex.

Furthermore, entering new markets means readying to adhere to new regulations A useful resource to start with is the OECD’s product market regulation, which outlines how different countries’ standards are performing in comparison with international best practices.

Another vital consideration is cost. Labor, energy, and facilities costs vary from country to country. A BCG report highlighted that wage inflation exceeds productivity gains in most regions—for instance, by 21% and 24% in the US and China, respectively, between 2018 and 2022. Keeping a pulse on different markets’ trends is crucial for gauging the potential financial benefits or pitfalls of entering a new market.

Understanding The Impact Of Culture

Translating success across borders doesn’t mean relying on the same formula everywhere you go. What works in one country or region may not work in another. That’s because of variables such as cultural discrepancies (what do local consumers want and need and how do their preferences change across markets), tailoring output goals to specific regional market demands (manufacturers run the risk of over- or undersupply), and tuning into a particular market’s workforce trends and challenges.

For instance, the US manufacturing industry experienced labor market shortages in 2023 which significantly impacted how organizations attracted and retained talent. Some companies are looking to AI to enhance their hiring strategies and screen candidates—particularly as attracting the right talent is pivotal for current and future viable growth in manufacturing.

Finally, the importance of a robust company culture cannot be overemphasized. Your organization’s mission, vision, and values can serve as an anchor for your workforce, regardless of location or role.

Tips For Navigating Regional Differences

No two regions are made alike, and differences between locations can make or break a manufacturer’s operations.

For example, consider potential suppliers and how they will affect your supply chain efficiency—what kind of tools and systems do they use for ensuring optimal delivery? It’s imperative that manufacturing leaders ensure end-to-end supply chain visibility across all markets they’re operating in, and map these out according to strategic goals. That means maintaining transparency in communications and operations with all suppliers and stakeholders across your organization’s supply chain.

On the note of gauging suppliers, it’s imperative that manufacturers look into strategies around relationship-building with local vendors and suppliers. For instance, tapping into your network—whether personal or professional—is a great starting point for introductions with reputable suppliers in a new market.

Moreover, leaders must establish a governance compliance model for the markets they’re operating in, which teams can easily access and are well-versed in. To help organizations achieve this, manufacturers can collaborate with reputable local auditors in a given territory who are experts in that location’s regulations.

A recent article from Forbes underlines the importance of doing your homework before entering a new market. Manufacturers should, therefore leverage all available resources to ensure that thorough research is conducted around local competition, the market’s buying process, and key customer challenges within the region.

Looking into workforce availability within the new market with a keen eye on the local talent pool is also vital. This will vary dramatically across different regions, and it’s no secret that skills gaps are wreaking havoc on the industry. Augmenting your recruitment process with AI tools to pinpoint the top talent for roles can be game-changing in your hiring strategy.

Keeping these factors in mind, doing thorough market research, and gauging potential risks are the building blocks of successful expansion into new markets. Adapting strategies to the local needs of a given region will ensure greater business resilience and growth potential, which means keeping a pulse on regulations, vetting suppliers, and attracting the best talent to execute your strategy.

Mr. Shin Nakamura is the President of Daiwa Steel Tube Industries Co. Ltd., a manufacturing company specializing in galvanized steel tubes for a wide range of industries. Mr. Nakamura joined Daiwa Steel Tube Industries in 2003 as the third generation business owner and leader (Daiwa was founded by his grandfather Mr. Tomeichi Nakamura).

Mr. Nakamura transformed Daiwa Steel by redeveloping its business infrastructure, implemented new business strategies in the domestic and overseas market and restructure its enterprise system through state of the art ICT, human resource management and leadership/ communication techniques.

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