Escape from being stuck in the middle. (CEO Journal).

I have had it with all this wailing and gnashing of teeth. Yes, I know that globalization has had a major negative impact on the North American metalcasting industry. I'm also familiar with the decades long trend in North America away from a manufacturing intensive economy to a service based economy, and how the emergence of China as a manufacturing powerhouse has accelerated that trend in our industry and others. Finally, I know how current political events can impact the economy, and that management by sitting on one's hands" amidst geopolitical uncertainty seems like--but really isn't--the prudent approach.

Every foundry CEO out there knows these things too. Is low-priced competition a new thing? Certainly not. Are mass foundry closings something the industry has never experienced before? We've been reading about the industry's boom and bust cycles and its shake outs for decades. Is this really the end of the world for us in North America's metalcasting industry? It may be the end of the world as we knew it (not for the first or last time), but it is certainly not the end of our world.

Instead of looking for company or protective trade barriers while wallowing in self pity, CEOs should be implementing plans to ensure their company's future. They can do this by being preoccupied by two key questions.

First, are things fundamentally different this time around? The answer to this question is an emphatic no. While the stakes may be higher, the industry's fundamental economics and the nature of the trends at work are nothing new. Second, what does your company need to do to succeed and thrive in the post globalization metalcasting industry?

Sustainable Business Strategy

This brings us to the concept of sustainable business strategy. What your company needs to do to succeed and thrive in the post globalization metalcasting industry is to re-position itself firmly on the path to either global cost leadership or to dominating a truly unique market niche (i.e., differentiation). In an industry now devoid of 'strategic slack" (companies with a legitimate chance to succeed even without a winnable business strategy), these are your business' only two viable options. Your company needs to begin moving resolutely in one of these directions right away.

As author Michael Porter tells us in his book Competitive Strategy, "The firm that fails to develop its strategy in one of these directions--a firm that is "stuck in the middle--is in an extremely poor strategic situation and is almost guaranteed low profitability. It either loses the high-volume customers who demand the lowest prices or must bid away its profits to get this business away from lower cost firms. Yet it also loses higher margin business--the cream--to the firms that are focused on high margin niches."

Global cost leaders can challenge the world for business and win as often as any of their legitimate competitors, and they will earn higher profits than those competitors that feign cost leadership (i.e., those who compete on price rather than seeking true cost leadership). Similarly, businesses that are truly differentiated can fend off the world because they are perceived as having a unique product and/or service offering by carefully selected customer markets. They are more likely to earn superior margins and are also virtually "import proof."

Implementing A Plan

Several of today's foundries are obsessed with the question of what must be done to ensure survival, success and above-average profitability in the post globalization metalcasting industry. In other words, their management teams are engaged in an ongoing but clearly purposeful and directed dialog concerning the state of their companies' strategic positions, market conditions, high margin niches, customers, and company strengths and weaknesses.

One foundry has strengthened certain manufacturing capabilities and refocused its marketing and sales approach to make it more compatible with the higher margin, import proof niche that they wish to target. As a result, it is winning key customers from vulnerable competitors at a rapid clip. Another is focusing on an acquisition to strengthen its hand as a differentiated, higher margin, import proof, niche player, and is phasing out one of its operations that is clearly stuck in the middle. Both of these foundries are moving full speed ahead--strategically and investment-wise--to make sure they are positioned on a winning strategic path.

Every foundry CEO needs to be engaged in this very same exercise right now.