As part of its assistance to manufacturing enterprises in sectors affected by either the liberalisation of the market or the EU's acquis communautaire, IPSE commissioned the Sectoral Analysis Report on
practical recommendations detailing actions that could be taken by the industry, IPSE and other institutional partners to gain competitive advantage.
The report was not intended to provide individual enterprises with the solutions, strategies and actions that they need to take in their particular situation. The enterprise's business planning process remains the best means there is for this purpose.
The report is intended to lay out the broader picture which should facilitate the business planning process of the individual enterprise. This line of thought has been confirmed by the report, which makes it clear that there is no blueprint for what the restructuring process should entail at the single enterprise level.
What emerge from the report are the main strategic options available to enterprises operating within the industry.
The specific strategies selected will depend on the enterprise's examination of its strengths, capabilities and resources and the determination of the market segment to which these can be applied most profitably.
The report emphasises that there can be no quick fix to the challenges facing the Maltese furniture industry. A lot of urgent, coordinated effort by all those involved is necessary if the industry is to succeed and grow in a liberalised market environment.
Who's affected
The extent of the challenge the future poses varies from one enterprise to another. The key factor is not size, but is dependent on the nature of the enterprise's operations. The report identifies four main strategic groupings operating within the industry, segmented along two variables: the level of operational competence (how well the enterprise manages and carries out its operations) and degree of specialisation (how effectively the enterprise has identified and is concentrating on specific segments it can excel in).
The first group, plankton, included those enterprises that are very local in their operation - also referred to as "proximity enterprises". Enterprises in this group are unspecialised: they produce more or less whatever the customer demands. They are also low on operational competence, not because the quality of work is poor but because, given the wide product range, they are not able to apply thoroughly efficient production management practices.
The biggest challenge for enterprises in the plankton group is to "get fit", to ensure adequate control over their operations and cost structure and to continue to relate closely with their customer base.
While the report indicates that the market will in all probability shrink even for these enterprises, the chances that they will survive the restructuring process is quite good, provided they take the required corrective action. The group can even grow, provided that the enterprises learn to work better together, either through networking between themselves or with the larger players in the industry. This will give them the scope and scale necessary to compete on the international market.
The second group - the sharks - includes enterprises that are ready to export, and are doing so already. Regretfully, this is still a very small group of enterprises which have achieved both a high degree of operational competence and a clear focus on a specific market segment - a high degree of specialisation.
The strategic challenge for these enterprises is to further exploit their current position and to push further for export. It is vital for these enterprises to continuously strive to improve and upgrade their skills and operations to keep in touch with developments in the international market.
Group three - the whales - includes enterprises that have achieved a relatively high level of operational competence but which are still bogged down with a broad product range.
These tend to be the larger manufacturers, and are among the enterprises most at risk. The strategy for these enterprises is to specialise by narrowing down their product range and focusing on a specific market segment they have the competencies to service effectively and efficiently, and to improve operational competence, upgrading skills and operations. The last group - the soles - includes enterprises that appear to be the most vulnerable in the industry. They have a limited operational competence, and a more limited product range than the whales. They are often further burdened by high financial costs and underutilised machinery.
Three general options are open to this group. Enterprises may either decide to downsize and get closer to their customer base, that is, become plankton or proximity enterprises.
They may decide to specialise along the value chain and to concentrate on the particular processes they can excel at, becoming sub-suppliers to larger manufacturers. Or finally, they may decide to focus on a specific product range and essentially become sharks.
To use the insights provided by the report, each enterprise will need to look at its own operations and market, and decide where in this classification it falls. It should also look at the skills it can rely upon, and at where it wants to go. Then it can decide on which of the general strategic options it will follow.
The options provided by the report remain generic, however. Each enterprise following the general options outlined by the report, will have to formulate its own specific strategy, identifying the particular and possibly unique steps it will have to take to achieve success.
The Sectoral Analysis Report on the Maltese Furniture Sector is available from IPSE Ltd, Small Enterprise Centre, Marsa at a nominal fee of Lm10.
