In 1972, at the age of 17, the newly crowned King of Bhutan declared that happiness was more important than economic growth. As such he developed a concept for happiness; Gross National Happiness (GNH). Instead of doing the predictable accumulation of power and wealth during his reign, the 4th King of Bhutan, HM Jigme Singye Wangchuck made the happiness of the people of Bhutan the guiding goal of development. He decided that gross national happiness was a much better way to measure a country’s real wealth than gross national product. He believed that happiness is an indicator of good development and good society. When the nation transitioned from an absolute monarchy to a democratic nation in 2008 the reigning king (the 5th King of Bhutan) ensured that happiness would remain a priority and he built it into the young country’s constitution. In 1972, channelling growth in GDP towards happiness was considered quite new (if not absurd) but in recent times, GNH has attracted attention. Opinion around the world has started to converge on happiness as a collective goal and a tool to measure happiness has been developed. Additional, research has also indicated considerable benefits to the workplace in that happiness raises productivity by increasing workers' effort.
Wednesday, December 15, 2010
Productivity and Happiness
Nothing contributes more to a society’s well-being than productivity. “Productivity isn’t everything, but in the long run it is almost everything.” Economists have long analysed ways to boost productivity through improved skills and education, changing technologies and uses of capital.
Happiness economics typically looks at how macro-level variables such as economic growth affect happiness (standard of living). However, having analysed Bhutan’s philosophy, the question that should be asked, is how does happiness affect economic growth?
Studies have been undertaken to identity whether a rise in happiness might change behaviour at the micro-level, looking specifically at productivity. These studies have confirmed that happiness has large and positive causal effects on productivity. Positive emotions appear to invigorate human beings, while negative emotions have the opposite effect. Happier workers’ effort levels go up, while their precision is unaltered. At the same time, high level (i.e. death in family) unhappiness reduces productivity to a striking degree.
If happiness in the workplace brings increased returns to productivity, then human resource managers, business managers and policy makers need to consider the implications.
There are numerous organisations which have developed tools to measure employee engagement. It’s time for leaders to distinguish between what they can easily count (“are you being paid enough?”) with what employees most value. The intangibles of mission and meaning and happiness are powerful fuel for employers, so finding appropriate ways to measure, and act on, these vital inputs is critical.
Finally, economists need to take the emotional state of economic agents seriously. A recent 18-month study of two Nobel economists recommended that the largest countries of the world end their obsession with GDP and consider some new intangible metrics. In essence, they suggested that GDP – which focuses exclusively on tangible production and consumption – no longer should be our sole definition of global success especially at a time when 64% of the world’s GDP now comes from the intangible service industry.
Happiness economics typically looks at how macro-level variables such as economic growth affect happiness (standard of living). However, having analysed Bhutan’s philosophy, the question that should be asked, is how does happiness affect economic growth?
Studies have been undertaken to identity whether a rise in happiness might change behaviour at the micro-level, looking specifically at productivity. These studies have confirmed that happiness has large and positive causal effects on productivity. Positive emotions appear to invigorate human beings, while negative emotions have the opposite effect. Happier workers’ effort levels go up, while their precision is unaltered. At the same time, high level (i.e. death in family) unhappiness reduces productivity to a striking degree.
If happiness in the workplace brings increased returns to productivity, then human resource managers, business managers and policy makers need to consider the implications.
There are numerous organisations which have developed tools to measure employee engagement. It’s time for leaders to distinguish between what they can easily count (“are you being paid enough?”) with what employees most value. The intangibles of mission and meaning and happiness are powerful fuel for employers, so finding appropriate ways to measure, and act on, these vital inputs is critical.
Finally, economists need to take the emotional state of economic agents seriously. A recent 18-month study of two Nobel economists recommended that the largest countries of the world end their obsession with GDP and consider some new intangible metrics. In essence, they suggested that GDP – which focuses exclusively on tangible production and consumption – no longer should be our sole definition of global success especially at a time when 64% of the world’s GDP now comes from the intangible service industry.
Gross National Happiness Index
Economic growth is generally the mandate for all governments and economies, under the auspices that greater economic growth results in a higher standard of living. Economic growth is generally measured by a number of indicators, including Gross Domestic Product (GDP). GDP is the term used to indicate the increase of output per capita and reflects the quantity of physical output of a society. GDP is heavily biased towards increased production and consumption, regardless of the necessity or desirability of such outputs.
Economic indicators determine policies, embody values and drive societies in a certain direction. The almost universal use of GDP-based indicators to measure progress has helped justify policies around the world that are based on rapid material progress perhaps at the expense of other more holistic criterion such as environmental preservation, cultures and community cohesion.
With a focus on happiness, and as many contemporary indicators of progress and development do not reflect GNH adequately, the Royal Government of Bhutan directed the Centre for Bhutan Studies (CBS) to develop a GNH index, which is to provide appropriate indicators for Bhutanese development. The government recognised the need for GNH indicators because without some kind of measurement system, GNH cannot guide practical policies and programs, however, with a measurement tool, GNH indicators can become tools of accountability.
The CBS constructed a single number index for Gross National Happiness. The purpose of the GNH index is to reflect GNH values, set benchmarks, and inform and track policies and performances of the country. The index can be broken down into individual component indicators that are useful for different sectors for planning and technical purposes at the ministerial and departmental levels.
The GNH indicators have been designed to include four pillars with nine core dimensions and 72 metrics that are regarded as components of happiness and well-being in Bhutan. The nine dimensions were selected on normative grounds, and are equally weighted, because each dimension is considered to be relatively equal in terms of equal intrinsic importance as a component of gross national happiness.
The nine dimensions are:
1. Psychological Well-being
2. Time Use
3. Community Vitality
4. Culture
5. Health
6. Education
7. Environmental Diversity
8. Living Standard
9. Governance
In Bhutan’s perspective, happiness comprises having sufficient achievements in each of the nine dimensions.
Essentially, by developing an index, Bhutan is measuring those inputs that influence the output (GDP) in a more holistic manner to determine whether they are creating a sustainable success.
As a result, Bhutan, a little, almost-mythical country in the Himalayas, has developed a tool to measure the intangible and is now is revolutionizing how world leaders are looking at the definition of development and success.
Economic indicators determine policies, embody values and drive societies in a certain direction. The almost universal use of GDP-based indicators to measure progress has helped justify policies around the world that are based on rapid material progress perhaps at the expense of other more holistic criterion such as environmental preservation, cultures and community cohesion.
With a focus on happiness, and as many contemporary indicators of progress and development do not reflect GNH adequately, the Royal Government of Bhutan directed the Centre for Bhutan Studies (CBS) to develop a GNH index, which is to provide appropriate indicators for Bhutanese development. The government recognised the need for GNH indicators because without some kind of measurement system, GNH cannot guide practical policies and programs, however, with a measurement tool, GNH indicators can become tools of accountability.
The CBS constructed a single number index for Gross National Happiness. The purpose of the GNH index is to reflect GNH values, set benchmarks, and inform and track policies and performances of the country. The index can be broken down into individual component indicators that are useful for different sectors for planning and technical purposes at the ministerial and departmental levels.
The GNH indicators have been designed to include four pillars with nine core dimensions and 72 metrics that are regarded as components of happiness and well-being in Bhutan. The nine dimensions were selected on normative grounds, and are equally weighted, because each dimension is considered to be relatively equal in terms of equal intrinsic importance as a component of gross national happiness.
The nine dimensions are:
1. Psychological Well-being
2. Time Use
3. Community Vitality
4. Culture
5. Health
6. Education
7. Environmental Diversity
8. Living Standard
9. Governance
In Bhutan’s perspective, happiness comprises having sufficient achievements in each of the nine dimensions.
Essentially, by developing an index, Bhutan is measuring those inputs that influence the output (GDP) in a more holistic manner to determine whether they are creating a sustainable success.
As a result, Bhutan, a little, almost-mythical country in the Himalayas, has developed a tool to measure the intangible and is now is revolutionizing how world leaders are looking at the definition of development and success.
Thursday, November 4, 2010
the importance of demography
Population ageing is sometimes overwhelming, often misunderstood, and, more critically, its importance to our economy and livelihood is ignored.
Demography is the study of human populations and thus population ageing.
For all countries and regions (apart from one) economic growth is the mandate for all governments and economies. It is believed that economic growth increases standards of living. It is the term used to indicate the increase of per capita gross domestic product (GDP) and refers only to the quantity of goods and services produced.
Economics is the branch of social science that deals with the production, distribution and consumption of goods and services and their management through the analysis of the Factors of Production. The factors of production are the four resources which enable production; land, labour, capital and enterprise.
Focussing on the labour component, labour is a measure of the work done by human beings. Labour economics seeks to understand the functioning and dynamics of the market for labour. Such analysts are predominantly concerned with labour in terms of labour force participation and unemployment.
But, given that labour must be produced on a daily basis to achieve economic growth it should also be accepted that labour must be reproduced on an intergenerational basis.
This theory results in a concept known as Total Social Production. Total social production is where neither production nor reproduction can take place in the absence of the other. Therefore economic production and demographic reproduction are mutually interdependent.
Most economic analysts see demographic reproduction as secondary to economic activity. This ignorance has been a significant contributory factor as to why we are experiencing population ageing now. What has been missed by policy makers is the ability to ensure that production and reproduction can co-exist.
To manage the implications of population ageing into the future, the role of demography is paramount and can not be ignored any longer. It is time social policy and economic policy co-existed.
Demography is the study of human populations and thus population ageing.
For all countries and regions (apart from one) economic growth is the mandate for all governments and economies. It is believed that economic growth increases standards of living. It is the term used to indicate the increase of per capita gross domestic product (GDP) and refers only to the quantity of goods and services produced.
Economics is the branch of social science that deals with the production, distribution and consumption of goods and services and their management through the analysis of the Factors of Production. The factors of production are the four resources which enable production; land, labour, capital and enterprise.
Focussing on the labour component, labour is a measure of the work done by human beings. Labour economics seeks to understand the functioning and dynamics of the market for labour. Such analysts are predominantly concerned with labour in terms of labour force participation and unemployment.
But, given that labour must be produced on a daily basis to achieve economic growth it should also be accepted that labour must be reproduced on an intergenerational basis.
This theory results in a concept known as Total Social Production. Total social production is where neither production nor reproduction can take place in the absence of the other. Therefore economic production and demographic reproduction are mutually interdependent.
Most economic analysts see demographic reproduction as secondary to economic activity. This ignorance has been a significant contributory factor as to why we are experiencing population ageing now. What has been missed by policy makers is the ability to ensure that production and reproduction can co-exist.
To manage the implications of population ageing into the future, the role of demography is paramount and can not be ignored any longer. It is time social policy and economic policy co-existed.
I'm back
I’m back. My gorgeous little boy turned one last month and what a year it was. Now that he is healthy and happy, I thought it was time to reconnect with the world again. While I have managed to keep abreast of what has been happening in Tasmania economically, politically and socially, I have to admit being a full time mum has prevented me from digesting and analysing all the relevant information, policies and data sufficiently enough to provide you all with an insightful newsletter, InSummary.
Also last month, I presented to the Tasmanian Council of Professional Services a snap shot of population ageing, Tasmania and the implications for the labour market. During the time that Rory was sleeping, I beavered away; analysing data and policies, developing charts and working out ways to present the information which is sometimes overwhelming and often misunderstood in an informative, educational and challenging way. During this time, I had more energy, felt less tired, was engaged in the workforce again, was highly productive, was happier, and, more than likely, a better mother.
This scenario begged the question, if I could be both a good mum and highly productive in the workforce, why not consider a higher level of engagement in the labour market? Given I have no family in Hobart, I had to find formal care for Rory for the days that I would be working. Not only are most childcare services ‘full’, I discovered that we would not be entitled to any government concessions or rebates due to combined income assessments. In addition, we did not receive the Baby Bonus and are not entitled to any ongoing Family Tax Benefits. So, when I consider the cost of care and that almost half my income would go in taxes (from which I do not benefit), the next question is why would I, a highly educated, skilled, productive person, return to the workforce when there is no foreseeable financial gain? Any benefits would be purely self-fulfilling.
I know I am not alone.
With population ageing, shrinking workforces and skill shortages this is a ludicrous scenario.
Also last month, I presented to the Tasmanian Council of Professional Services a snap shot of population ageing, Tasmania and the implications for the labour market. During the time that Rory was sleeping, I beavered away; analysing data and policies, developing charts and working out ways to present the information which is sometimes overwhelming and often misunderstood in an informative, educational and challenging way. During this time, I had more energy, felt less tired, was engaged in the workforce again, was highly productive, was happier, and, more than likely, a better mother.
This scenario begged the question, if I could be both a good mum and highly productive in the workforce, why not consider a higher level of engagement in the labour market? Given I have no family in Hobart, I had to find formal care for Rory for the days that I would be working. Not only are most childcare services ‘full’, I discovered that we would not be entitled to any government concessions or rebates due to combined income assessments. In addition, we did not receive the Baby Bonus and are not entitled to any ongoing Family Tax Benefits. So, when I consider the cost of care and that almost half my income would go in taxes (from which I do not benefit), the next question is why would I, a highly educated, skilled, productive person, return to the workforce when there is no foreseeable financial gain? Any benefits would be purely self-fulfilling.
I know I am not alone.
With population ageing, shrinking workforces and skill shortages this is a ludicrous scenario.
Friday, July 2, 2010
tasmanianjobs.com announcement
advertising with tasmanianjobs.com is now FREE
What: All employment vacancies
All education and training courses
How: Login as an advertiser at http://www.tasmanianjobs.com/ (or register as an advertiser at http://www.tasmanianjobs.com/advertise/register/)
Follow the prompts to advertise
Why: Instantly connect with over 3500 registered jobseekers
http://www.tasmanianjobs.com/
NB : any design, management or administration of advertising campaigns will continue to incur management fees as agreed prior to advertising.
Should you be interested in sponsoring, contributing to or advertising in the regular InSummary newsletter or quarterly job seeker newsletter, please contact me.
What: All employment vacancies
All education and training courses
How: Login as an advertiser at http://www.tasmanianjobs.com/ (or register as an advertiser at http://www.tasmanianjobs.com/advertise/register/)
Follow the prompts to advertise
Why: Instantly connect with over 3500 registered jobseekers
http://www.tasmanianjobs.com/
NB : any design, management or administration of advertising campaigns will continue to incur management fees as agreed prior to advertising.
Should you be interested in sponsoring, contributing to or advertising in the regular InSummary newsletter or quarterly job seeker newsletter, please contact me.
Thursday, June 10, 2010
Studying interstate and the impact on skill shortages
We know, and accept, that Tasmania is the oldest state in Australia, that we are ageing at a faster rate than any other state and that there are more people exiting the workforce than entering it. We know, and accept, that the ageing of the state is due to longer life expectancies, migration and, until recently, loss of people in the working age groups and thus reproductive age groups. Tasmania recently surpassed the Northern Territory for the highest birth rate and we are now producing children at a greater rate than the replacement rate (2.1 births per woman). This could be due to a number of reasons, all of which we are unable to detail here. However, one reason may be that, encouragingly, Tasmania is closing the gap on interstate migration losses to other states.
In 2002/03, Tasmania reverted from ongoing annual net losses in interstate migration, to a gain. Since then, apart from 2006/07, Tasmania has been welcoming more people to our state than fare welling. However, hidden in these numbers has been that we had continued to lose more people than we gained in the working age groups. This loss has now been contained to the 15 to 29 year old age group for the past three years.
Interstate movements are recorded and reported by Medicare, therefore we can not ascertain the specific reasons for this age group leaving the state. However, anecdotal evidence and a process of elimination would indicate the following reasons could be significant contributors:
• Employment opportunities
• Travel
• ‘greener pastures’
• Relocating with family/friends
• Study
Many post-school and tertiary education courses are not provided in Tasmania, in particular allied health professions. Below is a true example of a young Tasmanian’s experience in having to study interstate.
Case Study: Anna completed year 12 in Hobart in 1996. With a desire to become a physiotherapist, but realising she could not study in Tasmania, Anna was successful in being awarded a $20,000 per year scholarship by the Department of Health and Human Services (DHSS) to study interstate. Anna was accepted to the University of NSW. Wanting to live and work in Tasmania when she completed her studies, Anna would contact the DHHS seeking placements in Tasmania for all of her rounds. She was advised that this was not possible as they had an existing arrangement with the University of Adelaide. Upon completion of her qualification, Anna still wished to return to Tasmania and applied for positions in Hobart, Launceston and the North West. Following up with the DHHS after being unsuccessful, she was advised that while her grades were good, they were not as good as other applicants. Anna worked interstate as a physio for a number of years before recently returning to Hobart, with her husband, but is no longer working as a Physiotherapist.
Conclusion: Given the age structure of our population and the rate of ageing, demand for occupations in the allied health professions will increase significantly, in a short time period. Regardless of whether or not our young people receive a scholarship to study interstate, we should be ensuring that there is a process in place to provide placement training and employment opportunities to Tasmanians wishing to return home.
Importantly, any strategy should not be limited to those in the allied health professions, but any occupation where education and/or training is not provided here.
In 2002/03, Tasmania reverted from ongoing annual net losses in interstate migration, to a gain. Since then, apart from 2006/07, Tasmania has been welcoming more people to our state than fare welling. However, hidden in these numbers has been that we had continued to lose more people than we gained in the working age groups. This loss has now been contained to the 15 to 29 year old age group for the past three years.
Interstate movements are recorded and reported by Medicare, therefore we can not ascertain the specific reasons for this age group leaving the state. However, anecdotal evidence and a process of elimination would indicate the following reasons could be significant contributors:
• Employment opportunities
• Travel
• ‘greener pastures’
• Relocating with family/friends
• Study
Many post-school and tertiary education courses are not provided in Tasmania, in particular allied health professions. Below is a true example of a young Tasmanian’s experience in having to study interstate.
Case Study: Anna completed year 12 in Hobart in 1996. With a desire to become a physiotherapist, but realising she could not study in Tasmania, Anna was successful in being awarded a $20,000 per year scholarship by the Department of Health and Human Services (DHSS) to study interstate. Anna was accepted to the University of NSW. Wanting to live and work in Tasmania when she completed her studies, Anna would contact the DHHS seeking placements in Tasmania for all of her rounds. She was advised that this was not possible as they had an existing arrangement with the University of Adelaide. Upon completion of her qualification, Anna still wished to return to Tasmania and applied for positions in Hobart, Launceston and the North West. Following up with the DHHS after being unsuccessful, she was advised that while her grades were good, they were not as good as other applicants. Anna worked interstate as a physio for a number of years before recently returning to Hobart, with her husband, but is no longer working as a Physiotherapist.
Conclusion: Given the age structure of our population and the rate of ageing, demand for occupations in the allied health professions will increase significantly, in a short time period. Regardless of whether or not our young people receive a scholarship to study interstate, we should be ensuring that there is a process in place to provide placement training and employment opportunities to Tasmanians wishing to return home.
Importantly, any strategy should not be limited to those in the allied health professions, but any occupation where education and/or training is not provided here.
Skill shortages on a personal note
I have been making a noise about skill shortages in Tasmania since 2004, but now it has gotten personal. My son Rory was born with a cleft palate and conductive hearing loss. At six months he was supposed to have surgery to repair the cleft and insert grommets to (hopefully) fix his hearing, not only did we ‘slip through the cracks’ once, but we had the surgery cancelled 20 minutes before scheduled due to staff shortages and not enough skilled nursing staff to provide the level of care he would need post-op. Further investigation revealed that the Royal Hobart Hospital is incredibly short of paediatric intensifists with almost 100% turnover. Since Rory was born he has seen, many ongoing, a paediatrician, sonographer, audiologist, plastic surgeon, ear nose and throat surgeon, osteopath, physiotherapist, speech pathologist, orthotist, radiographer, GP and clinic health nurse. The majority of these occupations are not educated in Tasmania and I am indescribably thankful that these wonderfully professional people have all chosen to live and work in Tasmania. Rory has since had his surgery, and four weeks in things are looking up.
Wednesday, April 14, 2010
Industry Life Cycles
Much like product life cycles, industries experience a similar cycle of life, capturing the way many industries evolve through their formative eras, growth and patterns of maturity. Just as a product is developed, introduced to the market, adopted, grows, matures, and eventually experiences decline, so too do industries. The stages are the same for all industries, yet industries cycle through the stages in various lengths of time. Even within the same industry, various organisations may be at different life cycle stages. Strategies of an organisation as well as of competitors vary depending on the stage of the life cycle. Some industries need to make strategic decisions during the maturity phase to extend the life, and even find new uses for declining products, thus extending the life cycle.
The growth of an industry's sales over time is used to chart the life cycle (see right).
The distinct stages of an industry life cycle are: introduction, growth, maturity, and decline.
Important to note is that the life cycle model assumes that an industry is clearly distinguishable, however in many instances emerging industries are hard to define, and often appear as segments of established industries.
Overview:
Industries begin in a period of fragmentation as companies experiment with different approaches. With time, a scalable approach emerges as a dominant model, often because it yields greater efficiencies than available alternatives. As the dominant model develops, an industry goes through a shakeout as unaligned organisations are forced to exit. Eventually, organisations find it difficult to improve their productivity on the dominant model at high rates, volume growth hits a point of diminishing returns, and the industry enters maturity. Ultimately, as volumes drop because of saturated demand, exhausted supply or uncompetitive environments, the industry moves into decline.
Each of the phases carries implications for how organisations organise, compete and exploit technical progress. The emergence of a dominant model is critically important to industry evolution because these models generate opportunities to achieve economies of scale and scope. Industries eventually enter a mature phase in which volume growth slows down because organisations hit the limits of technical opportunity in the dominant model. Organisations often shed activities that could be subcontracted efficiently, and pared down product lines to enhance efficiency incrementally. An industry moves into decline when aggregate sales volume drops. Avoiding a war of attrition becomes a major strategic imperative. Inefficient organisations may diversify out of the industry and may seek to consolidate.
Introduction
In the introduction stage of the life cycle, an industry is in its infancy. A new, unique product or service offering may have been developed and patented, thus beginning a new industry. At this stage, an organisation may be alone in the industry. It may be a small entrepreneurial company or a proven company which used research and development funds and expertise to develop something new. Significant financial investment is undertaken at this stage of the life cycle, often without financial reward. Organisations attempt to establish a niche for dominance within an industry during this phase by establishing early perceptions of product or service quality, technological superiority, or advantageous relationships with vendors within the supply chain to develop a competitive advantage.
Growth
During the growth phase more organisations identify opportunities within the industry. The industry experiences more product standardisation at this stage, which may encourage economies of scale and facilitate development for production efficiency. The key issue in this stage is market rivalry. Because there is industry-wide acceptance of the product, more new entrants join the industry and more intense competition results. The duration of the growth stage, as all the other stages, depends on the particular industry. During the growth stage, the life cycle curve is very steep, indicating fast growth, however financial investment remains a significant requirement to facilitate this growth through such activities as marketing, property, plant and equipment investment and ongoing product development (R+D).
Maturity
As the industry approaches maturity and demand for the product or service lessens, the industry life cycle curve becomes noticeably flatter, indicating slowing growth, however profit margins may continue to increase. In mature industries, there are usually fewer organisations, and those that survive will be larger and more dominant. Organisations may compete on quality to separate their product from other lower-cost offerings, or conversely the organisation may try a low-cost/low-price strategy to increase the volume of sales and make profits from inventory turnover.
Decline
Declines are almost inevitable in an industry. If product innovation has not kept pace with other competitors, or if new innovations or technological changes have caused the industry to become obsolete, sales suffer and the life cycle experiences a decline. In this phase, sales are decreasing at an accelerating rate, causing the plotted curve to trend downward. There is usually another, larger shake-out in the industry as competitors who did not leave during the maturity stage now exit the industry. Yet some organisations will remain to compete in the smaller market. Mergers and consolidations will also be the norm as organisations try other strategies to continue to be competitive or grow through acquisition and/or diversification.
Prolonging the life cycle
The life of an industry or organisation can be prolonged through strategic efforts to maximize profits through increasing efficiencies. Management efficiency can help to prolong the maturity stage of the life cycle. Production improvements, like just-in-time methods and lean manufacturing, can result in extra profits. Technology, automation, and linking suppliers and customers in a tight supply chain are also methods to improve efficiency. Alternatively, the strategy may be to differentiate the product or service offering based on quality. Research indicates that those industries and organisations that survive longer are those that are the most strategic, forward thinking and innovative for the duration of the life cycle, often with ongoing and superior commitments to research and development, post entry into the market. In addition, it is those organisations that innovate and develop an industry (early entrants) that tend to survive longer than later entrants to the market. However, it is also important to note that it is the structure of demand which is just as important to industry success as innovation and technological capability.
Conclusion
Many of the large organisations that have closed their doors, or scaled down operations, in Tasmania in recent years have been in the traditional, predominantly manufacturing, industry sectors and generally owned by national or multinational companies. While regarded as ‘institutions’ of the regions in which they were located, it is this length of time of establishment which has contributed to the ultimate closing of the plants in Tasmania. Each has been in the maturity phase of the industry life cycle, and essentially the strategic approach by management has been to increase efficiencies and prolong the industry/organisation by reducing costs and consolidation.
Examples of the issues faced by these companies have included:
• Inability to maximize economies of scale
• Decentralised industry/organisation
• Increased operating costs
• Increasingly uncompetitive due to labour costs and geographical location
• Declining demand
• Lack of ongoing investment in research and development, skills and plant and equipment
• Requirement to innovate and differentiate product offering
• Ageing infrastructure
• Lack of skill base
Wish list for the new Government
Based on the discussions above and to ensure ongoing economic growth and employment opportunities for Tasmanians, the following is a wish list for our newly elected government to consider.
• Cease propping up businesses in the maturity/decline phases of the industry life cycle
• Proactively encourage investment in industries that take advantage of Tasmania’s competitive and comparative advantages
• Support the investment in research and development for Tasmanian based companies in priority industry sectors
• Provide a competitive business environment
• Assist industries/organisations strategic development and capability to adapt in the face of change
• Work with industry, employers and unions to ensure that workers are undertaking ongoing skill and workforce development to enable transfer between industry sectors
• Provide post year 10 education and training aligned with industry needs that will enable Tasmanians to secure employment into the future.
The growth of an industry's sales over time is used to chart the life cycle (see right).
The distinct stages of an industry life cycle are: introduction, growth, maturity, and decline.
Important to note is that the life cycle model assumes that an industry is clearly distinguishable, however in many instances emerging industries are hard to define, and often appear as segments of established industries.
Overview:
Industries begin in a period of fragmentation as companies experiment with different approaches. With time, a scalable approach emerges as a dominant model, often because it yields greater efficiencies than available alternatives. As the dominant model develops, an industry goes through a shakeout as unaligned organisations are forced to exit. Eventually, organisations find it difficult to improve their productivity on the dominant model at high rates, volume growth hits a point of diminishing returns, and the industry enters maturity. Ultimately, as volumes drop because of saturated demand, exhausted supply or uncompetitive environments, the industry moves into decline.
Each of the phases carries implications for how organisations organise, compete and exploit technical progress. The emergence of a dominant model is critically important to industry evolution because these models generate opportunities to achieve economies of scale and scope. Industries eventually enter a mature phase in which volume growth slows down because organisations hit the limits of technical opportunity in the dominant model. Organisations often shed activities that could be subcontracted efficiently, and pared down product lines to enhance efficiency incrementally. An industry moves into decline when aggregate sales volume drops. Avoiding a war of attrition becomes a major strategic imperative. Inefficient organisations may diversify out of the industry and may seek to consolidate.
Introduction
In the introduction stage of the life cycle, an industry is in its infancy. A new, unique product or service offering may have been developed and patented, thus beginning a new industry. At this stage, an organisation may be alone in the industry. It may be a small entrepreneurial company or a proven company which used research and development funds and expertise to develop something new. Significant financial investment is undertaken at this stage of the life cycle, often without financial reward. Organisations attempt to establish a niche for dominance within an industry during this phase by establishing early perceptions of product or service quality, technological superiority, or advantageous relationships with vendors within the supply chain to develop a competitive advantage.
Growth
During the growth phase more organisations identify opportunities within the industry. The industry experiences more product standardisation at this stage, which may encourage economies of scale and facilitate development for production efficiency. The key issue in this stage is market rivalry. Because there is industry-wide acceptance of the product, more new entrants join the industry and more intense competition results. The duration of the growth stage, as all the other stages, depends on the particular industry. During the growth stage, the life cycle curve is very steep, indicating fast growth, however financial investment remains a significant requirement to facilitate this growth through such activities as marketing, property, plant and equipment investment and ongoing product development (R+D).
Maturity
As the industry approaches maturity and demand for the product or service lessens, the industry life cycle curve becomes noticeably flatter, indicating slowing growth, however profit margins may continue to increase. In mature industries, there are usually fewer organisations, and those that survive will be larger and more dominant. Organisations may compete on quality to separate their product from other lower-cost offerings, or conversely the organisation may try a low-cost/low-price strategy to increase the volume of sales and make profits from inventory turnover.
Decline
Declines are almost inevitable in an industry. If product innovation has not kept pace with other competitors, or if new innovations or technological changes have caused the industry to become obsolete, sales suffer and the life cycle experiences a decline. In this phase, sales are decreasing at an accelerating rate, causing the plotted curve to trend downward. There is usually another, larger shake-out in the industry as competitors who did not leave during the maturity stage now exit the industry. Yet some organisations will remain to compete in the smaller market. Mergers and consolidations will also be the norm as organisations try other strategies to continue to be competitive or grow through acquisition and/or diversification.
Prolonging the life cycle
The life of an industry or organisation can be prolonged through strategic efforts to maximize profits through increasing efficiencies. Management efficiency can help to prolong the maturity stage of the life cycle. Production improvements, like just-in-time methods and lean manufacturing, can result in extra profits. Technology, automation, and linking suppliers and customers in a tight supply chain are also methods to improve efficiency. Alternatively, the strategy may be to differentiate the product or service offering based on quality. Research indicates that those industries and organisations that survive longer are those that are the most strategic, forward thinking and innovative for the duration of the life cycle, often with ongoing and superior commitments to research and development, post entry into the market. In addition, it is those organisations that innovate and develop an industry (early entrants) that tend to survive longer than later entrants to the market. However, it is also important to note that it is the structure of demand which is just as important to industry success as innovation and technological capability.
Conclusion
Many of the large organisations that have closed their doors, or scaled down operations, in Tasmania in recent years have been in the traditional, predominantly manufacturing, industry sectors and generally owned by national or multinational companies. While regarded as ‘institutions’ of the regions in which they were located, it is this length of time of establishment which has contributed to the ultimate closing of the plants in Tasmania. Each has been in the maturity phase of the industry life cycle, and essentially the strategic approach by management has been to increase efficiencies and prolong the industry/organisation by reducing costs and consolidation.
Examples of the issues faced by these companies have included:
• Inability to maximize economies of scale
• Decentralised industry/organisation
• Increased operating costs
• Increasingly uncompetitive due to labour costs and geographical location
• Declining demand
• Lack of ongoing investment in research and development, skills and plant and equipment
• Requirement to innovate and differentiate product offering
• Ageing infrastructure
• Lack of skill base
Wish list for the new Government
Based on the discussions above and to ensure ongoing economic growth and employment opportunities for Tasmanians, the following is a wish list for our newly elected government to consider.
• Cease propping up businesses in the maturity/decline phases of the industry life cycle
• Proactively encourage investment in industries that take advantage of Tasmania’s competitive and comparative advantages
• Support the investment in research and development for Tasmanian based companies in priority industry sectors
• Provide a competitive business environment
• Assist industries/organisations strategic development and capability to adapt in the face of change
• Work with industry, employers and unions to ensure that workers are undertaking ongoing skill and workforce development to enable transfer between industry sectors
• Provide post year 10 education and training aligned with industry needs that will enable Tasmanians to secure employment into the future.
Subscribe to:
Posts (Atom)
