Manufacturing in a High Cost Environment

Abstract

This chapter draws on an overview of contemporary literature to distil the best ways for manufacturing firms to adapt to and succeed in high cost environments. Parts of global value chains will move back to sophisticated, economically complex, high operating cost environments like the US and the European Manufacturing Belt. However, the firms that participate in these value chains will look different. The forces that impact the structure and location of manufacturing activities will also impact the individual firm, and this chapter discusses how this will result in successful firms becoming so called “Hidden Champions.” A successful transformation into tomorrow's Hidden Champion will result in fewer employees with higher capability, producing a higher level of output of which a very high share will be produced and delivered digitally. These firms will participate in smaller, more concentrated value chains serving a global market but operating both competitively and collaboratively in agglomerations like clusters. These agglomerations will be located in jurisdictions with high economic complexity and with a deep and broad industrial commons and with a supportive policy regime.