Posted: February 16th, 2020
Services And Manufacturing Assignment
Q6: Manufacturing – The Chicken or The Egg?
The age-old question of “which came first, the chicken or the egg?” is particularly applicable to the relationship between services and manufacturing. In a recent McKinsey & Company report, entitled “Manufacturing the Future”, the authors note that on average 19 cents of every dollar spent on manufacturing goes to services (James Manyika et al.
“Manufacturing the Future” 1, McKinsey & Company, November 2012). These services include everything from advertising to daycare for the employees’ children. Thus, growth in the manufacturing sector requires growth in the service sector.
In the Gulf Cooperation Council (GCC) Countries, where petroleum production is nearly 90% of the total goods exported value, diversification agendas are being adopted to achieve growth in both manufacturing and service sectors (ICAEW, “Economic Insight: Middle East Q2 2014”2, May 2014). One reason behind the desire to increase manufacturing is a statistic noted by the World Economic Forum indicating that manufactured product, export data explains 70% of the income variation seen across 128 countries—the higher the percentage of GDP that is attributable to manufacturing value-added, the higher the incomes (Peter Bosch et al., “The Future of Manufacturing: Opportunities to drive economic growth” 3, World Economic Forum Report, April 2012).
Other regions also recognize the fundamental relationship between manufacturing, services, and economic growth. Specifically, The Economist recently published an article arguing that Africa will rise out of poverty only if it develops its manufacturing sector (The Economist, “An awakening giant”4, 8 February 2014). This theme is an echo of a statement made by Rick Rowden in a January 2013 article in Foreign Policy: “Despite the important gains in services industries and per capita incomes, Africa is still not rising, and services alone will not create enough jobs to absorb the millions of unemployed youth in Africa’s growing urban areas” (Rick Rowden, “The Myth of Africa’s Rise”5, Foreign Policy, 4 January 2013).
Despite the widely recognized need for greater development of manufacturing in Africa and the GCC, achieving such development can be difficult without the required services already in place. Manufacturing requires a vast infrastructure to carry raw materials into factories and transport the finished goods to customers. The transformation from raw materials to finished goods also requires consistent sources of electricity, clean water, telecommunications, and a diverse labor pool. In countries where these services are lacking, manufacturing may need to be the chicken that delivers the egg.
Questions:
- What is the relationship between services and manufacturing?
- What policies can governments adopt to promote the growth of manufacturing?
- What evidence exists to support the argument that manufacturing promotes economic growth? Get Operations Get research paper samples and course-specific study resources under homework for you course hero writing service – Manage ment Assignment: I need help writing a research paper. today
