Cover Story: Made in New Zealand. Innovation Nation. Myth or Reality? despite Capricious Currencies, Low-Wage Competition and Financial Crises, New Zealand's Manufacturing Is Earning Its Role as a Mainstay of Our Economy. Can Its Trademark Innovation Also Put Some Serious Grunt Behind Our GDP Growth? Vicki Jayne Checks out the Manufacturing Challenge

Article excerpt

Byline: Vicki Jayne

Stories of NZ enterprise success

This is the second article in a major new eight-part NZ Management series: Stories of NZ enterprise success. Leading New Zealand business journalist Vicki Jayne conducts a sector-by-sector review of the underlying drivers of success in key parts of New Zealand's economy. Next month: The primary sector.

It accounts for nearly half our exports and around 12 percent of our GDP but New Zealand's manufacturing sector is no place for the faint hearted. An ability to make stuff -- even good and useful stuff -- barely gets you to the start line when investment capital is in short supply. Scaling up to compete globally is a whole other level of challenge.

Entrepreneurial flair is paramount -- but it ain't enough, notes business leader Sir Ken Stevens.

"It's not just about coming up with a better mousetrap but better marketing, branding, R&D -- the whole ball of cheese. There's a lot of competition out there."

As founder and chair of baggage-handling equipment specialist Glidepath, he's had decades of experience competing globally, chairs Export NZ and is a board member and trustee of the Asia New Zealand Foundation. And he reckons it's tougher than ever.

"Markets are depressed. There are some glimmers of optimism in the software industry but manufacturing is dead -- and that's the case even in China, comparatively speaking. So that's a challenge."

Kiwi companies are up against countries with bigger populations, deeper pockets and centuries of tough trading knowhow -- and that's before they start to deal with depressed markets and margin-decimating currency fluctuations.

But it's not all bad. Against the odds, local manufacturers are adapting, evolving, building market share in global niches and growing exciting new business opportunities.

As Deloitte/Management magazine's Top 200 data reveals, our more established manufacturers are global players whose product expertise ranges from food and fertiliser to resins and rubber. While it's a sector still playing to traditional strengths in land-based industries -- food, drink, wool, wood -- it also embraces high-tech, value-add offerings from frequency control solutions (Rakon) to health products (Fisher & Paykel Healthcare). Some Kiwi manufacturers are dominant players in their global niche.

And coming up fast behind the more established players are a bunch of rapid growth operators whose expertise ranges from radio equipment and electromagnets to plastic containers. But is that all enough to put "a bit of welly" behind this country's languishing GDP growth? Is the sector functioning in top gear or could it do better? What are some of the secrets to manufacturing success?

Fleeing the fortress

Innovation often born from necessity was a trademark of early manufacturing in New Zealand. People like Henry Shacklock (stoves) and Thomas Edmond (baking powder) shifted the market game with new inventions. Factories were mostly small, though Chelsea Sugar -- established in 1884 and still thriving in the same site on Auckland's North Shore -- employed more than 200 workers.

By the mid-1900s, import substitution ruled and a fortress New Zealand mentality helped featherbed local manufacturing by whacking hefty tariffs on imported goods. But when protectionist policies were lopped from geopolitical lexicons in the last two decades of the 1900s, the sector took a major hit.

Under a regime of economic liberalism, New Zealand rapidly opened its doors to offshore competition -- and factories started closing. Some regions were particularly hard hit -- Wairarapa lost 25 percent of its manufacturing capacity, Central Otago 35 percent.

A wide range of cheap imported goods appeared; jobs disappeared. Big chunks of our manufacturing capacity moved offshore to take advantage of cheaper labour in places like Fiji, Vietnam and China. …