Georgia Tech's Biannual Survey Unveils Worries
Human resources are worrisome as well. "My sense from the survey is that Georgia's manufacturers are weathering the downturn in the economy," says Philip Shapira, a professor in the Georgia Tech School of Public Policy. "They are changing their priorities and becoming more interested in marketing and product development. I think that is a good sign."
The 2002 survey looked at strategies, use of information technology, company performance and innovation, along with other factors affecting industry.
In the area of business assistance, 70 percent used some sort of assistance, and those that did were better off than those that did not. Researchers also found that average wages were $10,000 higher at innovative manufacturing firms, and return on sales was almost a full percentage point higher.
Researchers defined innovative companies as those that are developing new products or processes, improving products or processes, or changing organizationally. "Innovation isn't restricted to companies considered to be high technology," says Shapira.
However, the majority of Georgia manufacturers are competing based on cost rather than innovation, and that's a bad sign. Companies competing on low cost are vulnerable to competition from international producers with even lower costs. "What was disturbing in this survey is that even more of our manufacturers competed on low price than had taken this approach in the last survey when we were in a growth economy," says Jan Youtie, a researcher at the Economic Development Institute. "So when faced with a stressful economic situation, rather than innovating their way out, they are trying to get out of it by dropping their prices. That's not a good long-term strategy for global competition."
In the survey, manufacturers' reasons for not innovating included cost, lack of available financing, uncertainty regarding benefits, organizational rigidity, lack of market information, lack of in-house systems and disinterest from current customers.
Other results from the study included:
- Manufacturers' priorities shifted from information technology hardware and software to marketing and product development. More than 60 percent of Georgia manufacturers reported doing some type of product development, whether it was developing new-to-the-industry products, offering value-added support services or linking with innovative, out-of-state companies.
- Concerns about information technology hardware and software declined from 1999 levels. The survey showed that virtually all manufacturers use e-mail, and the majority use their company's Web sites, shared databases and high-speed Internet connections. More than a third of manufacturers reported that customer requirements drive information technology adoption, and information technology use rose with facility employment size.
- About half of Georgia manufacturers underwent major changes in strategy or structure in the last 2 years. About a quarter reported changes in organizational structure. Other top changes included marketing concepts and methods, corporate strategies, internal or external training, ownership and management techniques.
- Nearly half of responding manufacturers had at least 20 percent of employees using computers or other programmable machine controllers at least once a week as part of their jobs. One out of five respondents reported that a majority of its employees used computers or programmable controllers weekly. Firms with more than 20 percent of employees using computers had higher than average sales revenues, returns on pretax sales and productivity than those with a lower percentage of (or no) computer users.