THOUGHTS

Exploring Critical Challenges Facing the Swiss Manufacturing Industry

Oct 3, 2019

As the center of gravity of manufacturing has gradually migrated to Asia over the past decade, it has become acceptable in more developed nations to assume that the manufacturing industry can no longer play a substantial role in the expansion and continued sustainability of their economies. Switzerland is known for setting itself apart internationally by being a highly competitive and attractive market to do business. The Swiss manufacturing industry has come under increased pressure over the past couple of years. The global financial crisis and the subsequent strength of the Swiss franc posed several manufacturing industries challenges. In view of these manufacturing industry challenges, the questions to find answers to here is how long Swiss manufacturing companies can remain competitive and how they are going to do so.

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Manufacturing industry

Manufacturing industry challenges in Switzerland

Economic volatility

The Swiss economy is characterized by rising volatility and increased uncertainty since the global financial crisis almost a decade ago. Subsequently, there was increased pressure on margins of companies in the manufacturing industry due to the strengthening of the Swiss franc. This situation was stabilized to a considerable degree when the swiss national bank implemented the EUR/CHR exchange rate floor. However, the increasing pressure has resulted in several companies in the Swiss manufacturing sector making additional operational adjustments. Manufacturing companies exporting primarily to Europe are most likely to shift their focus outside traditional markets to growth regions.

New growth markets

During recent years, strong economic growth has occurred in emerging markets rather than developed markets. In this scenario, the key challenges for Swiss manufacturing industry companies will be to expand their operation further into new growth markets and at the same time compete effectively with existing players in these markets.

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Rising global competition

Amidst rising global competition, innovation, the need to introduce new and innovative products are becoming paramount for companies in the manufacturing industry. While targeting new growth markets, manufacturers must ensure that their products are tailored to suit local needs. Product innovations are essential in developed markets to survive despite the rising competitive pressure. The challenge here for companies in the Swiss manufacturing industry will be to reinvent themselves amid these tensions, especially because new products from emerging markets are increasingly being imported to developed countries and has become a source of competition for manufacturers in domestic markets.

Shortage of resources

Another critical challenge for Swiss manufacturing companies involves issues such as shortage of resources, which is prominent in the case of talent and energy. Firstly, the Swiss manufacturing industry has long experienced a shortage of labor and this needs to be addressed immediately in order to remain globally competitive. Secondly, Switzerland’s energy policy provides for the phase-out of nuclear power and promotes renewable energy sources. This entails both risks and opportunities for the Swiss manufacturing industry. The challenges here would be to restructure the energy industry as an opportunity while staying prepared for contingencies such as electricity prices or uncertainties in terms of supply securities.

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