Restructuring in manufacturing: case studies in Chile, Mexico and Venezuela

Abstract

Abstract This paper presents the results of an investigation of manufacturing firm strategies and changes in these strategies as a result of trade liberalization, globalization and transformations in the economic environment in which companies operate. The research concluded that these changes have brought about substantial changes in firms' behaviour. However, in spite of the importance of the influence of the economic environment on firms, the research also led to the conclusion that there is a margin for company strategy.Innovative firms have adopted flexible behaviour and are upgrading their production and marketing capabilities. They have introduced significant changes in vertical integration, input procurement, technological innovations, incentive pay systems and management techniques, training and subcontracting distribution and retailing. The transformation that has taken place at the core of the manufacturing business was one of the most interesting findings of the research. At least for the most innovative consumer-goods manufacturing firms, this core has shifted from being mainly concerned with production to combining manufacturing goods with distributing these goods, and often other domestic and imported goods as well, thereby providing such firms with a greater chance of simultaneously increasing their profits and defending their market share. Finally, the investigation also showed that uncertainty surrounding economic policy leads to a substantial decrease in investment by firms. Such uncertainty explains why more firms do not change, or why they often do not change faster. Uncertainty about what they should do, as well as in respect to the sustainability of the economic policy has a twofold negative effect on entrepreneurs' decisions to transform their firms.This suggests that there is a role for policy in terms of programmes that seek to encourage firms to upgrade. At the same time, it must be stressed that the most important role for policy is that of creating a stable economic environment in which firms can plan long-term investment.