Manufacturing industry is the backbone of every country’s economy and employs people both skilled and un skilled and provides much needed employment and growth.
At same time its challenging to be successful in manufacturing industry as the product life line can get over fast or become saturated which ensures there is no growth in company’s top line and bottom line.
The rising cost of raw materials, cost of logistics, cost of man power, cost of running the business keeps increasing, whereas the product margins may not rise to cover up the expenses.
Majorly companies in manufacturing hold on to one product and with success and revenue being generated from it, the company finds it hard to undergo diversification as the current product is generating revenues, but what they fail to see is how long will this product be acceptable and what will happen tomorrow when there is decline in the demand.
For e.g. a local natural drink manufacturer who produces natural drink with his one concentrate being successful will ensure he holds on to it, a natural drink maker makes ginger drink or cocum drink or uses natural drinks with good packaging and bottling. Though he gets good demand in local market it gives him confidence that his product is successful.
He forgets that his plant has reached 100% utilization or product capacity, instead of increasing the plant he is happy with demand, but this situation doesn’t stay long as the product has reached full capacity hence he cannot cater to the demand.
Not having gone through product diversification the company stares at losses as the operating cost keeps increasing.