One of the key drivers of Twentieth Century industrialisation was the motor industry. Today it’s an industry plagued by over production, distorted by government subsidies and increasingly dominated by a small group of major players.
In Australia, the Productivity Commission examined how the motor industry was evolving and its preliminary report (PDF) is a good snapshot of the current state of play in the global automobile sector.
Chronic worldwide overcapacity is what stands out most starkly in the report with most of the world’s manufacturers operating at less than the 80% production break even point that’s assumed in the industry.
Australia is a good example of how the motor industry was held as being essential to a country’s development. Like most of the world, the early Twentieth Century saw dozens of small automobile manufacturers pop up in the backyards of enthusiastic tinkerers – it’s like the surge in smartphone apps today.
Eventually only a handful survived the industry shakeout following the Great Depression and by the end of World War II the industry was largely dominated by US, British and European manufacturers, today that consolidation has increased with East Asian producers replacing the UK carmakers.
The lessons of World War II
One of the lessons from World War II was that having a strong domestic manufacturing industry was a nation’s strategic advantage. So governments around the world protected and subsidised their automobile industries along with other factories.
For Australia, bringing in the required labour to run those manufacturing industries was a seen as a key to the nation’s post World War II growth and it was one of the contributors to the country’s ethnic diversity that started to flower in the late 1970s.
Today the echoes of those policies remain with governments around the world still subsidising their motor industries despite the economic and strategic military benefits of automobile manufacturing being dubious at best.
Australia’s failure
In Australia the modest incentives provided by governments hasn’t been enough to keep local car plants operating, which was the reason for the Productivity Commission’s report into the future of the industry.
The report’s message is stark for Australia, as a high cost nation that hasn’t invested in skills or capital equipment there’s little reason for the world to buy Australian technology as there’s little being built that the world wants or needs.
With the nation’s advantages in agriculture and mining – not to mention solar power – Australia should be leading in technologies that exploit these advantages but instead the nation is a net technology importer in all three of those sectors.
To be fair to Australian industrialists, they responded rationally to government policies that favour property and share speculation over productive investment. Coupled with the drive to create duopolies in almost every sector of the Aussie economy, it didn’t make sense to invest when they could exploit domestic markets rather than invest in new technologies.
Becoming high cost economies
For nations moving up the value chain such as China, Thailand and Brazil; Australia’s failure to develop high tech manufacturing and inability in adapting to being a high cost economy is a powerful lesson in the importance of framing sensible long term economic policies.
The Australian Productivity Commission report illustrates how the motor industry does have a role in helping countries move into being industrial powerhouses, but once a nation becomes a high cost economy it takes more than dumb subsidies to maintain a competitive advantage.
Germany and the US illustrate this, and the fact both countries’ motor industries are running at greater than 80% capacity shows how their automotive sectors are evolving. It’s no co-incidence that electric car manufacturer Tesla Motor’s plant in Fremont, California was a former GM-Toyota joint venture factory.
As motor vehicles become increasingly clever so too are their manufacturers; unless car builders and governments are prepared to invest in the brains of their workers and modern technology then they have little future in the 21st Century.
For nations, the question is whether the Twentieth Century model of building a car industry is relevant in this century. It may well be that other industries will drive the successful economies of the next hundred years.
Australia is a country that has lost out in many areas and will continue to do so due to 3 main reasons-innovation, technical skills and education (all way behind). Manufacturing isn’t the only industry that has faced challenges due to these 3 reasons; retail and other sectors too. Add the niche strategy that Australia has used for decades via agriculture, mining, etc and that would be the 4th failure-putting all its eggs into 1 basket for decades instead of using the diversification strategy.
Let’s start with the tertiary education sector which few years back was Australia’s 3rd largest export sector (now 4th). How does it survive? Foreign students especially from China and India though lately South Americans, North Americans and Europeans too. How many Australians have a university qualification? Australia population represents 0.3% of the world population and just 25% of that have a university qualification. How many have a Masters qualification? Not many. Some to most firms in Australia consider Masters overqualified. Well, sad news for 90 to 99% of the businesses in Australia that represent small to medium sized ones – rest of the world have people who have either 2 Master qualifications or PhDs and professional certifications. Unless, good at entrepreneurship, not needed to study. Sadly, for Australia, that has gone behind especially when it’s niche strategy also got busted because Australia has been behind with innovations and technologies since World War 2. Also, how many foreign exchange students from Australia land in Asia? Not many compared to ones from US, Canada, UK, etc. So, those countries are learning about Asian cultures where as most Australian foreign students land in US, UK, etc (psychically close countries instead of the psychically distant countries as well). US, UK universities are still the best in the world and most are cheaper than the Australian ones nowadays as Australia’s become expensive for that so the universities that are on the same level as Australia are now the challengers. Which are those countries? Canada, Germany, Japan, Singapore, China (mainland and HK), etc. Addition to those, there are the blended learning (online) and MOOCs that are challenging the educational landscape, starting from primary education right unto tertiary one.
Where is Australia for innovations and technologies? The country doesn’t encourage much of both including funding which is the reason why Australian startups end up in USA. Australia gets 75% of its GDP through services as it’s a developed nation though it has come out with some innovations but not that many compared to the rest of the world even with the basic innovations. Others have gone for coopetition like Apple,Samsung,Google,etc;Netflix and Amazon;Tesla and various automobile firms and so many others where rivals don’t just work together but innovate as well. Australia has zilch there. Then there is the blue ocean strategy as well where not only low cost innovations occur but a whole new market segment comes up. Rest of the world so many while Australia hardly any. . Even New Zealand is above Australia when it comes to innovation.
Taking marketing technology/digital marketing as the industry, here are some weaknesses including reasons why Australia has failed (they’re all genuine articles that have come up in the last few weeks to couple of months):
In Australia, what would be the reality for Marketing Technology or Digital Marketing? The answer to that question could be seen from a number of genuine sources including articles ranging from the last few weeks to about a year, some of which are (same for other sectors too and not just marketers as shown under 7th and other points):
1) Marketer study warns of skills shortages in digital marketing in Australia
2) Two-thirds of Aus marketers ‘aren’t effective at digital’
3) Aussie brands failing to embrace digital real-time customer service
4) Lack of skills a threat to projects
5) Is Australia That Far Behind in the Digital Market?
6) Big data policies lacking in Australian and New Zealand organisations: survey
7) Australian firms lagging behind
8 ) Australian retailers are digital-relationship laggards: Capgemini & Sydney University study reveals
9) Australian SMEs not meeting consumers on social media: statistics from Yellow Pages report
10) PayPal: Only 14 Percent of Australian SMEs Are Taking Advantage of Online
11) Latest ABS statistics: many Australian businesses still not engaging online
12) Australian businesses struggling with cross-channel marketing
13) Australian manufacturers are failing to invest in productivity raising IT: study
14) Average of 44 small businesses closing their doors each day, according to Australian Bureau of Statistics data
15) Experts say Australian business being left behind
16) Small Business Left Behind As Australian Business Confidence Lifts: NAB
17) Australian small businesses are late to the online marketing party
18) Too little, too late: Is Australia losing the online retail game?
Some of the reasons for the above could be seen from the following:
1) Can Australia’s education system meet demand for digital marketers? (Even top universities of Australia are way behind compared to counterparts from US, UK, Canada, etc where students can take subjects from different schools like Arts, Engineering, Business, etc. Additionally, some Australian universities still teach traditional subjects at universities [The two university comparison examples can be University of Sydney via Commerce degree and WUSTL of US both via Marketing major]).
2) Aussie women lag behind men in numeracy skills
3) Aussies spend big on technology, but don’t know how to use it
4) Small Business Nation 2013 – Around 90 to 99% of the businesses in Australia are small to medium sized ones though most are neither innovative nor have much of technology (not tech savvy)
5) Australia is Well Behind Other OECD Countries in Pre-School Education
6) University rankings show Asian rise and Australian slip
7) Australian students slipping behind in maths, reading: OECD report
8 ) If Australia Could Get Over Its ‘Fear of Failure’ Tech Startup Firms Could Contribute $109B to Economy by 2033, Create 540,000 New Jobs – Google Study
9) Australia is no innovation leader: GE (connected to Australia lifts ranking in Global Innovation Index, but still lags behind New Zealand).
10) Australia at risk of squandering expat expertise as brain drain hits reverse
11) Is Australia Less Tech-Savvy than We Thought?
(More of the marketing weaknesses in last 1 year and a bit on the logistics and supply chain in relation to Australia can be found under http://loveroftechnologyandbusiness.blogspot.com.au/2013/12/reality-of-australian-marketers-and.html . It also has the components or landscapes of Marketing Technology and Digital Marketing). As mentioned under that, Brand valuation could be seen via BrandZ of WPP as well as Interbrand of Omnicom and brandirectory.com that is part of Brand Finance. The top brand from Australia would be Woolworths ranked in the 100s way behind the ones from US, UK, Canada, India, China, etc. Woolworths and Coles duopoly in the supermarket sector though IGA, Aldi and Costco are 3 other players there ( https://theconversation.com/factcheck-is-our-grocery-market-one-of-the-most-concentrated-in-the-world-16520). Zara as well as others are knocking DJ and Myer ( http://www.fool.com.au/2013/08/14/clothing-retailers-be-afraid-very-afraid/ ). All of them have failed with innovation and technology (just like most Australian industrial sector) which can be seen under http://www.afr.com/p/australian_retailers_stumped_by_meuCL7di6LxiZG4VotdITL .
US at least did something with 3D and 4D printing-part of disruptive innovation that could challenge emerging and developing nations;what has Australia come out with.US manufacturing also fell into recession 30 years back but came out 10 years later with innovation-Intel is 1 proof of that and that video is ‘Made in USA’ under America Revealed under PBS.org. Innovation took over 30 years back from customer centric approach started by P&G,IBM,etc that went on to Google,FB,etc and that’s world’s top firms and ones that survive depend on innovation and technologies. Also, if going to say robotics, well most jobs that exist today won’t exist in 10 years time thanks to technologies-need to adapt and change. China, Japan, etc have robot chefs. Self service revolution has existed for more than a century-ATMs, kiosks at airports, etc as well as retail sector are proof of that+3D and 4D printing +blended learning that has gone online as well as MOOCs which includes Coursera and Udacity are changing educational landscape from primary to tertiary education [US,UK and Australian top unis have their courses there and it can be done for free without certificates but if want certificates, they are cheaper than traditional education though not all courses are under the MOOCs] and so on including hybrid trade shows. DVD rentals are backward technologies that rest of the world came up with a decade or 2 ago as there are Netflix, Hulu,etc.Australia’s way behind in technology and innovations-both marketing and supply chain + also transportation as it’s got on to mobile payments which rest of the developed world have been on for about a decade-some of the emerging nations have been on it for 5 to 10 years also.