Global Competitiveness For U.S. Manufacturers Lies In Exporting According To Penn State Researchers

UNIVERSITY PARK, PA (July 15, 2004)—Smaller U.S. manufacturers can help offset the economic impacts of overseas competition by focusing on becoming more efficient product exporters according to one of several studies recently conducted by researchers at Penn State University on behalf of the National Institute of Standards and Technology (NIST).

NIST, which is part of the U.S. Department of Commerce, provided initial support of $400,000 to Penn State’s Smeal College of Business last fall for four studies on the performance of manufacturing firms with less than 500 employees, of which there are more than 350,000 in the nation. The findings will be used to help manufacturers compete in a sector that has lost more than 3 million jobs since 1998.

Even though small- and medium-sized enterprises (SMEs) currently constitute 97 percent of all U.S. exporting companies, they export products to relatively few markets such as Canada and Mexico. This suggests great potential for entry into additional foreign markets according to the report compiled by Gerald Susman, the Robert and Judith Klein Professor of Management and director of Smeal’s Center for the Management of Technological and Organizational Change; David Wilson, professor emeritus of marketing; and Anthony Warren, director of Smeal’s Farrell Center for Corporate Innovation and Entrepreneurship.

The report, which is based on interviews with more than 20 manufacturing firms from 10 states, notes that by competing with foreign firms on their own turf and overcoming obstacles such as training and intellectual property concerns, U.S. firms can create additional revenue-growth opportunities.

The authors write: “The barriers to becoming (an exporter) can be overcome simply by making the commitment to export, by entering a series of markets one at a time with limited risk, learning by doing, and taking advantage of the resources and advice that federal, state, and local agencies are willing to provide at minimal or no charge … Patience in entering new markets is essential. It may take three to five years to break even in some markets.”

Additional NIST studies evaluated issues such as:

Future Domestic Manufacturing Opportunities
E. Amine Lehtihet, professor of industrial engineering; Wilson; and Susman identified the external drivers that could have the greatest influence on manufacturing in the future: globalization, ecological awareness, demographic changes, and technological innovation. They also outlined the steps manufacturers are taking in response such as shedding physical assets, bundling of goods and services, focusing on flexibility and mass customization, and developing e-collaboration strategies.

Innovation Practices
Warren, Susman, and Lehtihet evaluated innovation in the manufacturing sector, identifying it as a key for sustainable competitiveness. According to the researchers, success in innovation depends on factors such as the ability and desire to focus on core knowledge and markets with the intent to dominate a niche, avoidance of diversification, and clearly defined intellectual property and R&D; strategies.

Supply Chain Decisions
Irene Petrick, assistant professor of information sciences and technology; Susan Purdum, administrative director of Smeal’s Center for Supply Chain Research; and Richard Young, professor of supply chain management at Penn State Lehigh Valley, investigated the impact of supply chain decisions on manufacturers. Because of increasing global price competitiveness, the researchers suggest that U.S. manufacturers servicing the automotive industry would be best served by diversifying into other sectors, medical device manufacturers should seek ways to partner with each other, and all manufacturers should find ways to effectively partner to diversify product offerings and compete as networked suppliers. Additionally, because of China's continued reliance on importing specialized building materials hardware, manufacturers in this area should focus on bolstering exports.

About the National Institute of Standards and Technology
Founded in 1901, NIST ( www.nist.gov ) is a non-regulatory federal agency within the U.S. Commerce Department. Its mission is to develop and promote measurement, standards, and technology to enhance productivity, facilitate trade, and improve the quality of life through four cooperative programs: the NIST Laboratories, the Baldrige National Quality Program, the Manufacturing Extension Partnership, and the Advanced Technology Program.