AGMA PACIFIC ENGINEERING COMPANY PROFILE

MANUFACTURING INDUSTRY

CORE ELEMENTS vs. DEVELOPMENT PHASES

TECHNOLOGICAL CLUSTER PAGE 1 OF 4

 AGMA PACIFIC ENGINEERING COMPANY PROFILE

CHAPTER 1: MANUFACTURING INDUSTRY CORE ELEMENTS

The Industry is essentially the combination of products and markets (and customers) served
by firms. Some conglomerates are multi-product and multi-market, so their different SBU
(strategic business units) define the industries that they are in -- GE's SBU include medical
systems, capital (investments), even armaments, etc.

RAW MATERIAL + ENERGY + LABOR + TECHNOLOGY = PRODUCT

GEOGRAPHIC AREA + CUSTOMERS (requirements) = MARKET (quality level)

1.1. INDUSTRIAL DEVELOPMENT PHASES

1st phase: start up phase – booming of the industry

2nd phase: development phase - consolidation of the industry

3rd phase: maturity phase – strengthening in the world market

In the following paragraphs, I have analyzed the role of the different “core elements” and their
relative importance according with each development phases.

1.2. THE RAW MATERIAL

1st phase: Raw material cost can count as a real ADVANTAGE

The manufacturing industry suffered for the lack of quality raw material; as a matter
of facts quality has been always “THE” weak point of Asian industries along with
their poor knowledge about production process. These two factors contributed to
push Asian manufacturers in falling into low quality segments market in regard of its
products (exception of Malaysia). In the other hands, low quality become
synonymous of low price and low price has always represented the first diktat in the
retail industry, despite the high risks for product’s rejection. Just few companies,
mainly export oriented, could afford good quality raw material that was mostly
imported from overseas and, because of that, representing an additional production
cost. The majority of Asian Governments guaranteed duty tax exemption and
strong incentives to support these companies economical grows even if, later on,
this policy became invalid due to WTO several calls for unfair competitiveness.

 The differentiation between export and non export oriented companies within the same
industry sector can be considered as the 1st “Darwin effect” in the manufacturing industry.

TECHNOLOGICAL CLUSTER PAGE 2 OF 4

 AGMA PACIFIC ENGINEERING COMPANY PROFILE

2nd & 3rd phase: Raw material cost is NOT considered as an ADVANTAGE anymore.

Starting with the consolidation of the industries the Government policy has
focused in strengthening the raw material production in order to guarantee
quality (or consistency in quality) and the price has raised sensitively since
2000 year

1.3. THE ENERGY

1st phase: Energy cost can be seen as a real ADVANTAGE.

Electricity was the only available energy during the start up of the manufacturing
industry. Because of that, the Governments decided to keep its price as low as
possible to support the economical grow. In the other hands, since the beginning,
the limited availability of energy appeared to be a serious constraint for the
manufacturing industry development.

2nd & 3rd phases: Energy cost is NOT considered as an ADVANTAGE anymore.

Starting with the consolidation of the industries the Government policy has
focused in enlarging and diversifying energy production to better sustain the
industrial development. The manufacturing industry starts looking to
different technologies in order to improve energy saving and achieve cost
reductions; as for instance, many industries are switching from electricity to
gas fired (LPG/city gas) equipments.

1.4. THE LABOUR

1st phase: Labor cost can be seen as a real ADVANTAGE.

Due to the great availability of labor force (with a large majority of non- skilled
workers), this element doesn’t have a strong impact in the cost composition
especially if we consider that labor rights are yet granted to the workers. This
situation will surely have a change in the next 5 – 10 years, as the organizations for
human rights have already started in making pressure on Asian Governments.

2nd phase: Labor cost is still considered as an ADVANTAGE.

In the other hands, the unskilled labor in company’s management is representing a

serious problem because of its negative affects on production efficiency in
manufacturing process.

3rd phase: Labor cost is still considered an ADVANTAGE but NOT as much as BEFORE.

TECHNOLOGICAL CLUSTER PAGE 3 OF 4

 AGMA PACIFIC ENGINEERING COMPANY PROFILE

 Skilled or unskilled managers make the real difference in company’s growth; it can be
considered as the 2nd “Darwin effect” in the manufacturing industry.

1.5. THE TECHNOLOGY

As regard the production process know how and the technology level of manufacturing
equipments, the 3rd phase in the following chart can be taken as a picture of the industry Asian
trend in the near future.

1st phase: Low cost technology represented a real ADVANTAGE in the start up phase

2nd phase: Low cost technology is still considered an ADVANTAGE but NOT as much as
BEFORE. Higher technology required to improve competitiveness & to achieve cost
reductions.

3rd phase: Low cost technology is NOT considered as an ADVANTAGE. Higher technology level,
becomes a must to have in order to strengthen company’s position in the world
market. All efforts and investment to restructure the industries have set its sights on
participating in exporters of technology and equipment serving to correct the
identified weakness.

 Within the same sector, company’s decision to invest in low or high technology represents
the 3rd “Darwin effect” in the manufacturing industry.

1.6. SUMMARY CHART

RAW MATERIAL ENERGY LABOR TECHNOLOGY

1st Ph. Advantage low price Advantage low price Advantage low price Advantage low price

2nd Ph. NO NO Advantage  Advantage 

3rd Ph. NO NO Advantage  NO

TECHNOLOGICAL CLUSTER PAGE 4 OF 4