A successful conference on successful competition
A conference entitled "Surviving the change: competing successfully in a liberalised environment" was held last week. This was organised by Economic Management Consultancy Services Ltd in collaboration with The Malta Business Weekly. The conference highlighted the need for change in an economic scenario whereby trade barriers are falling down rapidly. Franco Aloisio attended the conference and reports
Technology, product design, manufacturing, marketing, distribution and service. This is the value chain through which goods and services are conceived and worked out. Every aspect of the value chain has to be managed properly in view of market changes, which are taking place constantly. The major change which the local value chain is facing is that of liberalisation.
How do local firms compete successfully within such a scenario? What are the changes that have to take place within the value chain in order to cope with the dismantling of trade barriers, the lifting of levies and the removal of monopolies?
These and other questions were addressed during a one-day conference held last week at the Corinthia San Gorg. The conference "Surviving the Change: Competing Successfully in a Liberalised Environment" had an excellent panel of speakers who conveyed one basic message: Local firms have to identify their core business competence, specialise, become more efficient and start exporting.
This message was further developed towards the end of the conference when the managing directors of two companies which are actively exporting their products abroad explained the secret of their success. John Magro of Magro Bros (Foods) Ltd and Joe Borg of FX Borg Furniture Ltd delivered presentations on how they managed to restructure and penetrate foreign markets.
They explained how their companies penetrated foreign markets by redesigning their products to suit the needs of the new markets. The companies identified those products which could be marketed successfully abroad and slowly started exporting. This painstaking process was possible only after testing the ground abroad and broadening the number of foreign markets for export. The conference was characterised by several interventions from the participants, and the increased interaction between speakers and the participants was made possible also through the clever and entertaining chairmanship of Prof. Peter McKiernan, who also delivered a speech in the morning session.
Dr John C. Grech - Managing continuity and change for successful business development
Dr Grech, chairman and managing director of EMCS, said the corporate environment of today is everywhere characterised by vast and constant change. This is due to the tremendous changes which are occurring in public policy in various parts of the world particularly in Europe as well as the extensive market and technology induced changes that are occurring globally.
He said the challenges the Maltese corporate sector is today facing are nothing but a symptom of much more widespread developments. It is therefore incorrect for us in Malta to think that we are the only ones facing the need to restructure our economic activities. At national, sectoral and corporate levels restructuring is the order of the day across various parts of the world. Dr Grech said corporations have different capabilities that can be mobilised to cope with and manage change. However corporations are well advised to seek to address the issue of managing change systematically. Strategies have to be oriented at tackling the core issues as well as to reposition companies in the corporate environment.
Dr Grech said a company can easily break down its approach to change by focusing on its suppliers, the intermediaries involved, its own core competencies and the customers it serves. A breakdown of focus in this manner will assist a company to identify the action required in every instance in order to follow the correct strategy in its constant effort to compete.
He stressed that core competencies condition both the creativity and the innovative capability as well as the operational and productive abilities of a firm. It therefore relates to thinking, innovation and development as well as systems, organisation, skills, coordination and direction of a corporation.
The combination of these elements spells the individuality and uniqueness of a corporation and its distinctive value generating capability. Continuity must be ensured in uniqueness but a great deal can be done to improve
efficiency and reduce costs like reengineering of systems, upgrading of standards, training of staff, change in employee attitudes and benchmarking for improved performance.
Dr Grech added that while a corporation needs to preserve and enhance the unique dimension of its core competencies it needs to constantly review the way it operates, the value it gen-erates, and the way it packages the value generated.
On the different companies and the way they adapt to change, Dr Grech said that there are four types of firms:
Losers - These are companies that have a low set of core competencies and a low aptitude to change. These companies are doomed to failure in a fast changing environment. They must evaluate the option of either closing down or remaining in business in the short term until it lasts but with minimum success.
Dependent / Struggler - These companies have a low set of core competencies but their aptitude to change is high.
They are however quite typically dependent on outside elements particularly alliance formation for their chance to succeed.
Rigid / Stable - This is the kind of company that has a high set of core competencies but a low aptitude to change. This kind of company quite typically survives on its ability to generate substantial value within the value chain.
Versatile / High Flyer - This is typically a company that enjoys both a high set of core competencies and a high aptitude to change. It is a natural winner and the kind of company that is likely to respond best to the opportunities that today's global economy presents.
Dr Federico Provinciali - Sector restructuring: How to prepare for competing in a liberalised environment
The partner of the Italian consulting firm CAST Srl. Federico Provinciali spoke on sector restructuring. He said that a company's competitiveness is affected by a number of elements such as the labour market, cultural values, raw materials, supporting industries and the legal and institutional framework. Provinciali said any company is able to achieve a competitive level as a consequence of a unique set if elements surrounding it.
He said competitiveness is achieved at the company and sectoral level and requires the efforts of the entrepreneur, the government and institutions. At the company level, there are various factors which combine in a recipe which provides the highest possible added value to the client while exploiting as much as possible the surrounding conditions.
At the sectoral level, competitiveness is achieved by taking care of creating the best possible surrounding conditions for any company working within the sector in the region. The government and institutions should help promote business development but providing the right parameters for such growth. The government should create the right conditions to unleash entrepreneurship and should not control or subsidise.
Dr Provinciali explained that sector restructuring becomes evident when a revolution in that sector takes place. Causalities are unavoidable during revolutionary processes. However, survivors will be in better shape.
Stafano Mallia, Dr Federico Provinciali - Repositioning the Maltese furniture industry
Stafano Mallia, EMCS partner and Dr Provinciali gave a presentation on the methodology used in a recent study on the furniture industry. The study was carried out by EMCS and CAST on behalf of the Institute for the Promotion of Small Enterprises (IPSE).
According to the study, only 8 per cent of locally manufacture furniture goods are exported. In all, there are 800 furniture firms. On the other hand, 10 per cent of furniture is imported as a result of the higher cost of imported furniture due to import levies.
Mr Mallia said the local furniture sector was oblivious to foreign competition because of the protectionist environment which was created with the introduction of levies 10 years ago.
The study analysed the furniture sector in the light of the fact that the domestic market is not growing and that the gap between foreign furniture companies and local firms is increasing. Moreover levies on imported furniture will be lifted in the coming two years. Mr Mallia explained that due to the short time-frame for the removal of the levies, the furniture sector has to immediately identify its core competencies and start competing successfully.
Joe Vella Bonnici - Beating foreign competition at home and beyond
Joe Vella Bonnici, Chief Executive Officer of IPSE, said the challenge of the restructuring process is to encourage and support domestic-oriented enterprises which need to evolve from stand-alone, relatively static manufacturing units operating in a confined market, to "value creating" units within a whole system (or value chain) which is dynamic and sensitive to changing consumer tastes and needs, and which ultimately has to be export-oriented.
He said restructuring implies that enterprises need to understand the changing general business environment in which they will be operating, and adapt accordingly (reposition), look at the internal ways in which they work so as to become fit to achieve the desired business objectives
seek to complement their strengths and capabilities by building linkages with other enterprises, so as to enhance their competitiveness along the "value chain".
Mr Vella Bonnici said the challenges of restructuring are not insurmountable. The experience of a good number of local enterprises which have, or are, restructuring and which are already competing on the international markets, show us that it can be done. This process has to be seen as a national learning exercise. Even in those instances where individual enterprises may have to close down, the lessons gained should serve us well for future business initiatives.
In this period of fast and significant change, local enterprises can remain passive or react by taking a defensive attitude, spending a lot of energy and resources to protect limited markets which can only lead to minimal gain and continued uncertainty as to their sustainability, said Mr Vella Bonnici.
Alternatively, enterprises may find courage, seek to broaden their perspectives, focus on their core competencies and go for the opportunities that are being generated by the emerging business scenarios, said Mr Vella Bonnici.
Dr Bill Donaldson - Strategic marketing relationship: co-operating to compete
The director of marketing at the University of Strathclyde Graduate School of Business, Dr Bill Donaldson, presented preliminary results of a research project that sought to increase understanding of how suppliers create customer value in a relationship, what skills and abilities are needed and how management of the firm can improve the business they do with their customers. In-depth interviews within supplier firms, principally with sales managers and salespeople and with those responsible for buying in the customer firms were held. So far, this research has been solely conducted in the UK.
Customer value is a critical issue in contemporary firms. There is wide agreement that there is no reason for a firm to exist unless it can deliver value to its customers, which is superior to that of its competitors. Proponents of the relationship approach in contemporary business suggest that customer value can be increased by means of a close relationship between suppliers and their customers. It is therefore extremely important for businesses to understand what customer value is and how it is created and delivered within business relationships.
Prof. Peter McKiernan - Competitive positioning in the EU market
Peter McKiernan, professor of management and international consultant, discussed in a very entertaining way how Malta can position itself competitively in the EU market. He said the first step is for the local firms to carry out an internal audit, and examine the future possibilities with regards to business expansion.
He said that the EU applicant countries, including Malta, have a GDP per far below the GDP per capita of the EU 15 member states, which stands at $22,400.
"Hence Malta and the other applicant countries have to undergo considerable change in order to achieve the levels of the EU member states," said Prof. McKiernan.
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