Enterprise upgrading

While trade liberalization offers great opportunities to manufacturers, these opportunities can only be exploited successfully if they are capable of dealing with global competition, a great diversity of markets and rapid changes in technologies and consumer preferences.

Adapting to today’s continuously evolving business environment is often difficult for manufacturing enterprises in developing countries and economies in transition. In the past, these manufacturers catered for less demanding customers in less dynamic economies, which had a long history of protectionism. This has had the effect of creating industrial structures that are not only inadequate but also ill adapted to rapid change. Manufacturing in these countries must shift from mass production of standardized goods in integrated plants to production based on high human capital intensity, flexibility and sourcing from suppliers all over the world.

Building up a strong position in export markets is not just a question of being able to offer a low-cost product, but also of the ability of enterprises to enter new market niches with innovative products that meet international standards. This requires new managerial and other skills, the acquisition and/or adaptation of new technologies, and the ability to form strategic partnerships. Enterprise or industry level efforts in these areas must be complemented by improvements in the business environment (policies, regulations, support institutions, physical infrastructure).