research analysis.

1. THE RELATIVE COMPETITIVENESS AND
PERFORMANCE OF SMALL
MANUFACTURING FIRMS IN SCOTLAND
AND THE MID-WEST OF IRELAND: AN
ANALYSIS OF MATCHED PAIRS
B Y : N U R U L J A N N A H
M E B 1 5 8 6

2. THE CONTENTS
• The Market
• Transport Costs
• Extent of Competition
• Product price and quality
• The Design
• Quality of Inputs
• Building and Machinery
• Labour
• The foreign dimension in small manufacturing
companies
• The Growth Strategies
• Policy Implications

3. MARKETS
Three features of relative isolation:
i. The spatial structure of the market
ii. The cost of transporting goods
iii. Comparative customer liaison

4. • Irish firms display a greater dependency upon local and regional market than Scottish
(dependent upon extra-regional sales).
• Industries which are less tied to local and regional market achieved faster employment
growth.
• Less competitive nature:
o The growth in industrial markets is upon the demand from the MNEs
o The final demand markets are protected from external penetration.
o Consumer resistance to building a brand image.
THREE SPATIAL SCALES:
Irish Scottish
Local (within 20 miles) 37% output sold 23% output sold
Regional (within 40
miles)
One half of the outputs 41% of the outputs
Exports 20% 13%

5. TRANSPORT COSTS
• The transport costs expressed as a
percentage of the ex-factory value of
good.
• There is no systematic inter-regional
differential in transportation cost for
both region.
• The transportation costs do not
contribute to any way to explain the
greater orientation of the business to
local and regional markets.

6. • The Scottish companies were in competition with at least three
times the number of firms recognized by their Irish counterparts in
every industries.
• The differential is accounted for by the more localized nature of
Irish firms’ markets and the degree to which they are more
sheltered from English competition.
• Both local firms and from English are more likely to ignore the
Irish markets because of its small size, relative remoteness and
the extra paperwork involves in exporting.
• Even though Irish do consistently ranked quality as the first
criterion but 5 out of 6 proprietors ranked reliability of the
products as second and price as third while only in 2
industries(food and knitwear) did Scottish owners ranked delivery
as second and price as third.
EXTENT OF COMPETITION

7. PRODUCT PRICE AND QUALITY
There are 110 evaluations of Irish products were made
by Scottish firms and 99 evaluations of Scottish
products were made by Irish firms.
The products were classified as of acceptable quality if
the proprietor stated that the products would pass
inspection at his factory and let out to customers.
Price quotations are regarded as equal if the price
specified is within 5% of the matched firm’s ex-
factory price.
The firms may be competitive on quality and price, on
quality or price alone or uncompetitive on both.

8. THE FINDINGS…
Scottish firms Irish firms
Competitive on price
and quality
59% 11%
Competitive on quality 28% 39%
Competitive on price in
the matched pair.
69% firms are price
competitive in Ireland
22% firms are price
competitive in
Scotland
Uncompetitive on price
and quality
3% 39%

9. THE COMMENTS ABOUT THE PRODUCTS
Irish products judged by
Scottish
Scottish products
judged by Irish
Plastic mould-making Competitive on quality Mixed reaction
Precision engineered Mixed reaction Although the quality was
good but some sample
do have some critical
comments.
Knitwear There is quality variation The firms were
impressed by the
products.
Clothing Generally acceptable Satisfied
Food (packaging) Criticized on the design and
quality of the print.
Acceptable quality
Cosmetics The products were praised
for the quality. ( the quality of
the bottles and the design of
the packaging were made
outside of Ireland)
Criticized for not having
a clear image, no original
thought behind them,
and they were not well
package.

10. BUILDING AND MACHINERY
The quality of premises in the Mid-West is
relatively good but the rents per square foot
is high. There is a greater variation in the
suitability and quality of premises in
Scotland but the rates are
Irish firms had a higher proportion of
equipment less than 5 years old en all
sectors (except knitwear and food).
Scottish firms had more computerized
equipment than Irish firms. (The pressure of
competition in Scotland has been a major
factor to invest in CNC-computer-

11. The differences with respect to grants (to equip
firms with machine) :
The charge out rate for machine time in Ireland
(45% or 60% of the capital) is higher than in
Scotland (15% of the capital).
are available throughout Ireland compared to only certain
Assisted Area in Scotland. The machines are more up to
date in Ireland than in Scotland.
The scale of assistance

12. LABOUR
• The cost of labour.
 The cost of labour in terms of the wage rates per hour is higher in Ireland compared to
Scotland.
 The higher labour cost and the lower net output per person implies the greater wage
cost per unit output in Ireland. This contribute to the lack of price competitiveness of
Irish products in Scotland.
• The proportions of person designated as
skills in factories is higher in Scotland
compared to Ireland.
• The rate of labour turnover in Ireland (4.5%)
is lower than in Scotland (6.5%).

13. • The Irish managers on average were less critical of
products shown to them. They had less technical
knowledge of the products, less aware of the needs
of the market and not as well informed the key
criteria for specific industry segments.

14. THE FOREIGN DIMENSION IN SMALL FIRM
COMPETITIVENESS
The influence of overseas in the high
quality of Irish firms is either indirectly
(training and work experience abroad,
being trained in MNE branch) or directly
(company being owned and run by
foreign proprietor).
However, as compared to Scotland, many
successful firms acquiring the training
and work experience with British
companies.

15. THE GROWTH STRATEGIES
Both region (Irish and Scottish firms) were using the similar growth
strategies:
 Increasing the sales to existing customers.
 Winning new customers.
 Extending the market geographically.
 Penetrating export markets (knitwear firms)
 Broadening the product range.

16. POLICY IMPLICATIONS
It is hard for the small manufacturing firm to attain price
competitive. They could by the dramatic cut of the exchange
rate but it leads to side effects (the domestic inflation, the
problem in the balance of payment).
The only realistic policies:
To restructure production towards products with a greater
design or price premium based upon quality or both.
To move towards the manufacture of products for which the
price is less important.
To raise productivity on the shop floor.
To moderate the growth of wage costs.
To take measure to enhance building in of quality.
To improve design quality.
To develop marketing expertise.

17. Some advisory systems to address related
issues of production of small firms:
The need for advise concerning efficiency with
emphasis upon the approximate mix of machinery
skills, plant lay out and so on.
Advice on the development of quality control
system with a particular emphasis on building in
quality and avoiding rejects.
Introduction to more flexible regional incentive
systems.