From a Manufacturing Business to Sustainable Industrialization
Manufacturing business –
A manufacturing business is created when raw materials, labor, machines, and energy are brought together and organized to repeatedly produce quantities of a good that a customer finds desirable and is willing to purchase. Think about any product manufacturing company existing today. No matter its size, years in business, location, or number of employees, it was first started by a single entrepreneur or group of entrepreneurs. At some point in this company’s history, an individual or group of individuals recognized a market need, felt they had the ideas and skills to address the need, and decided to take the risk to build a business that could fulfill that need. The motivations to get started may have been planned and deliberate, or they may have been opportunistic.
For example, Kofi is a successful carpenter and wood sculptor working for a home construction company. He decides to make a new set of cabinets for his kitchen during his spare time in the evenings and on weekends. His neighbors see his work, are very impressed, and decide that they want to remodel their kitchens with Kofi’s cabinets as well. Kofi builds their cabinets. The neighbors each post photos of their new cabinets on social media. The photos are a hit and receive lots of “likes" and "follows.” Because of the photos, many of Kofi’s neighbors’ relatives across town, across the state, and across the country all decide that they also want a set of Kofi’s cabinets. Kofi buys extra drills and power saws, places a bulk order for wood, and hires two of his wood finishing colleagues from the construction company to help build the frames and stain the doors. What started out as a side hobby project turns into a revenue generating enterprise. Kofi’s Cabinet Works Limited is born. Demand continues to grow and other kitchen remodelers around the country want his work. Kofi now needs to go from building seven cabinet sets per week to 75 sets per week. Kofi decides to invest in the equipment needed to automatically cut the special wood joints for the drawers, and a computer numerical control (CNC) lathe to high-speed cut his unique and complex design patterns for the cabinet doors. The addition of this equipment and the employees needed to operate it gives the company the production capacity to efficiently meet its customers' demands. Kofi’s Cabinet Works is now a cabinet manufacturer.
Industry –
Multiple customers for a product create a market for the product. Great business is all about the customer, the customer, and the customer. A business without customers is just a hobby. The multiple businesses in pursuit of these customers are competitors. If the product offerings are similar or undifferentiated between multiple businesses offering the product–like crude oil, wheat, rice, or steel–the product is considered to be a commodity. Commodity products compete with each other primarily on the basis of price. The producer’s profit margins are squeezed and the best deal typically wins. Adding unique designs, branding, business models, and distribution channels help enable price premiums and move a product from a low-margin commodity category to a higher margin differentiated offering.
An industry is created when multiple manufacturing or non-manufacturing businesses each produce and offer entries in a particular sector of products and services and vie for acceptance by customers and the marketplace. As the market opportunity is proven to be sufficient, multiple competitors are attracted. Many customers result in the development of many competitors, and many competitors help to create an industry. Again, it all comes back to the customer.
Entrepreneurs who see and seize on business opportunities in the marketplace become competitors and are drivers of industry development. Local government policy and support, infrastructure availability, the skill level of human capital, and other external factors also play a role in the development of an industry. The businesses that have grown out of the combined impact of customer demands, market opportunities, and external support factors are why many cities, states, and even countries are known primarily for their local industries.
Examples –
Chicago meatpackers: The US city of Chicago was once famous for its leadership role in the meatpacking industry, earning this distinction after the American Civil War (1865). As income levels in major cities increased, the market demand for meat began to rise. This created increased opportunities for innovation and new business in commercial butchering. The railway system and networks that linked Chicago to many of the rural cities throughout the Midwest, where cattle and pigs were raised, allowed for easy transport of this livestock. Chicago’s infrastructure advantage enabled the commercial butchering and meatpacking industries to develop and flourish.1 Chicago has since diversified its local economy toward other industries, including other forms of transportation networks, manufacturing, financial services, commodities brokerage, insurance, software, and information technology. In this list of local industries, we can also include Chicago’s many entertainment venues and professional sports franchises, including the 2016 Major League Baseball World Champion Chicago Cubs!
North Carolina furniture: For approximately one hundred years, the US state of North Carolina and the city of High Point was known as the furniture manufacturing capital of the world. Immigrants with artisan skills in woodworking had settled in the region since the seventeenth century. The state was also home to vast reserves of hardwood forests. Entrepreneurs combined these advantages in skilled labor and natural resources with capital to develop a local furniture industry. The proximity to rail and highway infrastructure also made High Point a strong location for a major annual furniture trade fair. While global competition has reduced the region’s role as a major furniture manufacturer, the twice-a-year High Point Market furniture fair continues to draw more than 75,000 people from around the world.2
Silicon Valley technology: Silicon Valley’s leadership in the computer hardware, software technology, and internet industries primarily grew out of the region’s advantage from having multiple engineering-focused universities in the area, including University of California at Berkeley, Stanford University, and California Institute of Technology. What catapulted the region’s notoriety for technology innovation was the 1960s race between the US and Soviet Union to be the first on the moon. Semiconductor manufacturers leveraged the local high-tech talent and the nation’s moonshot goal towards the development of the technology industry. The Cold War competition between the US and Soviet Union not only resulted in the creation of several commercially viable technologies, but it also launched a culture of innovation, risk taking, and entrepreneurship. Learnings from the successes and failures from one venture or industry were shared and applied to other ventures. Besides semiconductors, the successful development of other technology-based industries such as social media and ride sharing is partially due to the Silicon Valley culture and professional ecosystem.3
The Motor City: In the late 1800s, the US city of Detroit was primarily known for making cooking stoves, small machinery, and cigars. These skills in basic manufacturing, plus Detroit’s proximity to large reserves of copper, coal, and iron mining, made the region ripe for the development of the motor vehicle industry. By the early 1900s, after the invention of the internal combustion engine, entrepreneurs had launched more than one hundred twenty-five auto companies that were operating in Detroit. An automobile industry had been born. While the number of automakers declined as the industry matured, the number of vehicles produced and sold continued to rise.
These examples of industry by region are numerous: the US state of Texas is known for the barbecue industry; Orlando, Florida is known for The Walt Disney Company and the amusement park industry; and Hollywood, Mumbai, and Lagos are each globally known for the motion picture industry in the US, India, and Nigeria, respectively. Entrepreneurs use market opportunity and local advantages to launch companies that serve a need. When the market need is confirmed, competitors follow suit. Once there are several competitors serving a proven market, an industry is born.
"Businesses that grow by development and improvement do not die.” Henry Ford, 1923
Industrialization –
Industrialization