Organisational Strategy and Leadership Environment

Question: Discuss about the Organisational Strategy and Leadership Environment. Answer: Introduction The aim of this report is to assess the external environmental factors affecting the manufacturing industry in Australia. The profitability of Australian industry has been changing over time (Valadkhani and Smyth 2016). The 509 industry classes have been aggregated as 19 industry divisions (Media.ibisworld.com.au 2015). The report firstly discusses the profitability of industry and the factors driving the profitability structure. It is observed that administration and support services are the most profitable industry in Australia. All the industries are of equal industry and there is no such thing as a bad industry (Media.ibisworld.com.au 2015). There are some industries that experience rapid growth while the others are experiencing slow growth. Further, the factor changes in the future and the effect of such changes in the industry profitability are also discussed. The PESTLE framework is adopted to study the external factors in detail. Overview of Manufacturing Industry The importance of manufacturing industry in Australia has been declining as the output and contribution has decreased to less than half in the recent decades. The GDP share of the manufacturing industry in 2013-14 was 6.5% (Aph.gov.au 2016). Further, the decline in manufacturing industry has been constantly falling with no signs of abating. The manufacturing industry is a major contributor towards employment as over a million people are employed. Manufacturing also contributes to technological innovation. The value generated by the Australian manufacturing industry is $96.8 billion annually that represents 8.7% of the overall GDP (Aph.gov.au 2016). The manufacturing industry is linked to other industries such as agriculture, mining, and services. The manufacturing industry has an indirect multiplier effect as the chain of activities resulting from it affects operations, logistics and distribution. The hottest destination of manufacturing activity is conducted in New South Wales and Victoria in comparison with Queensland, Western Australia, South Australia and Northern Territory (Aph.gov.au 2016). According to Pickering (2014), manufacturing industry needs to shift from heavy industrial towards technologically advanced production. The Australian manufacturing industry has lost 200,000 jobs as the economy has transitioned from manufacturing to services (Pickering 2014). Even though manufacturing industry has been declining, it continues to be a source of economic prosperity in Australia. The manufacturing industry requires both concerted action and market-based competition from industry leaders, governments, and health sectors. However, there is a strong need for changing and addressing the real economic forces to protect the manufacturing industry (Smith 2014). Profitability of the Manufacturing Industry The profitability of the manufacturing industry has been low since 2001-02 in comparison with other businesses (Aph.gov.au 2016). The other businesses have increased an increase in gross operating profit margin from 10.9 to 12.7 percent between 2001- 2014 (Aph.gov.au 2016). However, for the same period there has been a decline in manufacturing business from 9.5 to 7.8 percent (Aph.gov.au 2016). Therefore, there has been a gap created in profitability of manufacturing and other businesses. The performance of manufacturing index as obtained through survey of firms indicates a contracting or declining activity as the value was less than 50 in the last 10 years (Aph.gov.au 2016). The manufacturing industry has contracted continually over the last four years, though the rate of contraction slowed somewhat in 201314 (Aph.gov.au 2016). Factors Driving Profit Structure The Australian manufacturing industry is suffering from a long-standing malaise. The current situation of the industry brings the following factors into focus- The high Australian dollar value makes it difficult for the Australian manufacturers or producers to compete in the global market. Therefore, the imports are cheaper than making exports. However, with the recent decline in the dollar amount, the productivity damage has already been done. The overvaluation of Australian dollar has made it harder for trade exposed activities to minimize the gap through mining. This has also resulted in a loss of jobs thereby intensifying import competition (Green 2015). All economies experience a change in technology and consumer demand. Therefore, the share of profit and output has declined in the manufacturing industry. There has been deterioration in the Australias productivity levels since 1990s (Green 2015). This deterioration not only affects the current and future issues, but also adds to the competitiveness levels. As Australia is a high cost economy, there is a need for a shift to mass protection that would be more flexible in the value chains and global markets. The term is also known as smart specialisation (Green 2015). The long-term decline in the Australia manufacturing industry is because of the long-standing policy indifference. This is leading to hostility from several economic agencies such as the reserve Bank, the Treasury and the Productivity Commission. Further, Australia is also committed to a neoliberal ideology of producing only the things that have innate or natural advantage over other nations. The Australian government provided manufacturing assistance worth $6.9 billion in 2004-05 (Green 2015). The industry policy is moving towards a more market-driven assistance. Therefore, the Australian government abandoned systematic industry policy leading to cat and mouse games between MNCs and Federal governments. The waste generated from manufacturing activities is increasingly giving rise to pollutants. Recycling is one the core activities carried in the manufacturing sector. The laws and regulations are restricting the manufacturing industries to limit production due to high amount of waste generation (Abs.gov.au 2016). Since the 1940s, the manufacturing industry has been a major employer. The slowing of growth due to rise in oil prices has also changed the sectors of Australian economy. At the same time new social reforms, wage rises, and a devaluation of the dollar saw a great increase in the rate of inflation. These changes affected all sectors of the Australian economy, particularly manufacturing, which had to face increasing competition from the newly industrialised countries of Asia (Abs.gov.au 2016). During the period 1985-86 to 1995-96 overall employment in manufacturing industries continued to decline (Abs.gov.au 2016). The number of workers employed decreased by 1.5% (Abs.gov.au 2016). Factor Changes in Future and its Effect on Profitability As analysed, Australian manufacturing industry share has been declining that raises a major concern if it has a future. In a rapidly changing world, several attempts are made to make the present better and making the future transformative and agile (Strezov, Evans and Evans 2013). The PESTLE analysis framework is used to analyse the macro-environment and its effects in the future of Australia manufacturing industry. Political factors are the ones that determine the influence of government on a certain industry or economy. It involves tax policies, trade tariffs and various other forces that governs the business environment. Australia has a sector-neutral industry policy. There are no manufacturing portfolio except for Victoria that has a specific minister for manufacturing. Therefore, the government plays a crucial role in enhancing the manufacturing industry in Australia as the GDP needs to be balanced. Australia must remove tariff barriers that are acting as a hindrance in the export of production (Mazzarol 2014). The Commonwealth Government must play a crucial role in managing the overall economy, keeping inflation and unemployment low. Budget decisions can also lessen the economic aspects in the manufacturing industry of Australia. The government must make sustainable fiscal policies so that the investment in the manufacturing industry can be increased (Ncoa.gov.au 2016). The economic forces determine the economys performance such as economic growth patterns, inflation rate, currency trends and others that have long-term impacts. The greatest fear among the Aussie manufacturers is the rising Aussie dollar. It has been rising continuously and the sector shall continue to be at a risk if it continues to surge. The trade exposed manufacturers shall find a low Australian dollar beneficial. There is an expected global decline in the manufacturing sector in the coming years. The middle class markets are emerging that are leading to rising economic power of women. Further, the labour substituting technologies such as additive manufacturing are lowering the demand growth (Murphy 2016). It is expected that the minimum wages in the manufacturing sector shall rise up to $760 by 2020 that makes the sector less vulnerable (Tradingeconomics.com 2016). The social factors scrutinize the determinants such as population, cultural trends and lifestyle of the people. These are inculcated in the industries to address the socio-cultural forces. The consumers are shifting towards corporate social responsibility. The people are shifting towards clean, lean and green sustainability. The key skills possessed by Australians such as innovation, skills and knowledge are increasing the productivity and prosperity. The Australian manufacturing industry is partnering in global supply chains to meet the increasing demand of middle class for high value-added products. The manufacturing industry has begun to address individual customer needs and mass customization. This is changing the scenario of the manufacturing industry and leading towards a better future of the industry. The manufacturing sector is also providing training opportunities to the people such as apprenticeships that would further lead to innovation (Shahiduzzaman and Alam 2014). The technological forces affects the industry as it mainly involves innovation i technology, automation of processes and research and development. With the advancement in technologies, a stronger innovation culture is being developed. The increase in communication, digital computing and information technology is changing the manufacturing industry scenario. The manufacturing industry is taking technological challenges to raw materials and supply chains. Sustainable manufacturing is providing new technologies and methods to manufacture lightweight structure and less waste. The Australian manufacturers are seeking to sell solutions rather than tangible products. With innovative thinking, investment in un-tried technologies is being made which expands the scope of enhancement of the manufacturing industry. These technologies are necessitating a shift of the industries towards biotechnology and nanotechnology that shall benefit the manufacturing sector for good (Torugsa, ODonohue and Hec ker 2011). Certain laws affect a countrys industrial patterns such as safety standards, consumer laws, industrial laws and others that influence the pattern. Several laws govern the manufacturing industry scenario in Australia. The Environment Protection (Site Contamination) Amendment Act 2007 protects the manufacturers from site contamination (Sa.gov.au 2016). Other dangerous substances are also prohibited from exposure under Dangerous Substances Act 1979 that includes activities such as handling, conveyance, quality and disposal of hazardous substances (Sa.gov.au 2016). The environmental factors are not limited to climate change, geographical location or environmental offsets and influence the entire surrounding environment. Manufacturing accounts for a substantial use of Australias energy use and greenhouse gas emissions. The manufacturing industry is moving towards a cleaner energy future and low carbon scheme that is challenging the energy-intensive sector. However, a wide range of incentives for adopting such practices are provided to the manufacturers that shall help in creating a low carbon economy. Further, as the natural resources are being consumed increasingly, the manufacturers are attempting to achieve resource efficiency that should solve the issue of resource scarcity. Industrial ecology shall help in creating zero waste manufacturing processes that would form an important part of the environmental system. Conclusion Conclusively, the manufacturing industry is not doing very well currently. However, the upcoming changes shall change the future scenario of manufacturing industry. It is observed that administration and support services are the most profitable industry in Australia. The manufacturing industry has an indirect multiplier effect as the chain of activities resulting from it affects operations, logistics and distribution. Even though manufacturing industry has been declining, it continues to be a source of economic prosperity in Australia. The high Australian dollar value makes it difficult for the Australian manufacturers or producers to compete in the global market. Australia is a high cost economy, there is a need for a shift to mass protection that would be more flexible in the value chains and global markets. The industry policy is moving towards a more market-driven assistance. References Abs.gov.au, 2016.4102.0 - Australian Social Trends, 1997. [online] Abs.gov.au. Available at: https://www.abs.gov.au/AUSSTATS/abs@.nsf/2f762f95845417aeca25706c00834efa/828adb6574d4875bca2570ec001b1f52!OpenDocument [Accessed 18 Dec. 2016]. Abs.gov.au, 2016.4655.0 - Australian Environmental-Economic Accounts, 2016. [online] Abs.gov.au. 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