Manufacturing Strategies: Innovation vs. Low-Price

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Some interesting research out of Georgia Tech compares the return on sales for manufactures competing on price, and those competing on innovation.

The 2005 Georgia Manufacturing Survey shows that companies basing their competitive strategies on the development of innovative products or processes enjoy higher returns on sales, pay better wages and have less to fear from outsourcing than do manufacturers relying on other competitive strategies.

Georgia manufacturers that rely on innovation for their competitive edge reported returns on sales 50 percent higher than companies that compete by providing low cost products – a gap that grew substantially since the last survey in 2002. Innovative companies paid workers a third more than the average Georgia manufacturer and were 40 percent less likely to lose work to outsourcing than were companies competing on low cost.

I assume that a similar trend is prevalent in other states. The business lesson? Don't waste time whining about outsourcing and begging the government for help – that is the lazy way out. Focus your efforts on innovation, so that you can continue to charge a premium.