Spain’s Industrial Future: Adapting to Global Competition
Looking Forward: Spain cannot base its future solely on tourism and services. To build a future as a producer of goods, it must develop more flexible production models, strongly support R&D as a competitive advantage over countries that produce cheaply, and adopt a long-term “just-in-time” planning approach. Since the mid-1980s, Spanish companies have adapted to the more competitive environment brought about by European integration. Spain must compete with advanced countries. In this context, analyzing the factors that can lead to success is far more crucial than interpreting the current situation. The notion that technology differentiates countries has been rejected in recent years, as technology and machinery are accessible to all. Spanish companies face a major challenge in surviving a global market where differentiation is essential. The question is how to develop this diversity. It cannot rely solely on quality or low labor costs, as in recent decades. It must be continuously reinvented and consolidated within organizations. Focusing on products where cost is the only differentiator is risky and only feasible with a high sales volume, which is currently difficult due to excess supply. The importance of product specialization for organizations cannot be overstated. Many companies are defining organizational structures focused on their flagship products—so-called Centers of Excellence. They are moving away from less efficient functional organizations towards structures focused on innovative and differentiated products, with all functions integrated and focused solely on the product, enabling cost reduction initiatives, including specific actions on the supply chain.
Managing the supply chain is complex due to the large number of references and the increasing need for integration, driven by the growing focus on industrial processes and final assembly component supply. Adapting processes and the purchasing organization to the challenges of globalization and the new competitive landscape, with a focus on reducing purchasing costs, is another necessary objective. This includes:
- Improving the segmentation of product families and planning specific strategies for each, including opportunities in low-cost countries.
- Involving suppliers from the initial development phase.
- Establishing advanced supplier management with new relationship models.
The line between design and production is blurring. Design must be more flexible and cost-oriented, integrating product design and the manufacturing process. The business organization must facilitate this, avoiding silos where engineering and production are separated and only interact when addressing failures. Building flexible and integrated program teams is essential to achieve this objective. This requires factories oriented towards these programs, which has a higher structural cost. In the long run, efficiency outweighs the drawbacks.
Industrial Sectors in Spain and Future Prospects
The secondary sector is identified with industry. To carry out its activities, industry needs raw materials and energy sources. Raw materials are products found in nature that are processed by industry. Industrialized countries consume more raw materials, while less industrialized countries consume less. In Spain, industrial production varies across sectors:
- Mature industries: Low technological intensity and low demand.
- Dynamic sectors: Medium technology with good market expectations.
- Tech sectors: Including information technology, automation, biotechnology, with growing demand.
After joining the EU, Spanish industry faced a crisis. Since 1990, wage moderation and hiring flexibility made Spanish industry more productive. The Spanish economy grew, with investments in EU countries, Portugal, North Africa, and Latin America. In 2007, the US financial crisis impacted the global economy, causing a slowdown in employment, among other things. Today, Spanish industry has undergone changes due to the Third Industrial Revolution:
Changes in Industrial Production
Primarily in areas identified with high technology:
- Telematics
- Computers for storing and processing information quickly
- Automation (robotics) using processed information in different forms of work
- Precision instruments using extensive information in advanced equipment and systems
Changes in Industrial Structure
- Changes in the production system and new technologies promote production decentralization.
- Changes in firm size: Changes in production systems favor smaller average industry size.
- Changes in industrial employment: Increased proportion of professionals and skilled technicians.
- Industry tertiarization: Computerization and automation reduce productive work, replacing labor with computers.
Changes in Industrial Location
New technologies allow companies to reduce costs by relocating to places offering higher benefits and encourage the concentration of high-tech industries in core areas.
Changes in Industrial Policy
- Reduced state intervention and growing openness to the outside.
- Promotion of endogenous industrialization.
- Growing concern for environmental issues.
Faced with the European and global economy, Spanish industry has structural problems affecting competitiveness: A small number of medium-sized enterprises dominate small and medium businesses, with the advantage of better adapting to market demands but lacking economies of scale. Productivity is lower, and R&D investment is inadequate. This has consequences for the incorporation of new EU states. These countries are closer to major industrial hubs in Europe and have a similar production structure to Spain. Foreign capital investment has introduced high-technology companies, increasing their industrial potential within the EU.
The Automobile Sector
One of the hardest hit in Spanish industry, despite maintaining good export momentum. Spain should focus its industrial structure on higher quality and productivity to compete with new EU countries. The current industrial fabric is integrated into economic globalization, with our industrial zones as points in a worldwide production network. This network is characterized by the concentration of capital and decision-making in a few powerful multinational companies. Many decisions are made outside Spain, explaining why, despite being an industrial power, it has a limited role in the global economy. The pursuit of lower labor costs and better fiscal conditions drives relocation. Its consequences are increasing unemployment and job losses in the secondary sector, which increasingly tends towards tertiary activities.