Employees

The world is growing smaller. As shifts in technologies and trade policies continue to reinforce globalization, businesses are competing in an increasingly cut-throat global marketplace. With competition in the manufacturing sector becoming all-the-more difficult and margins constantly shrinking, the world’s leading companies have been shifting their resources and emphasis to high-value services, such as design and marketing.

Apple Inc. (NASDAQ:AAPL), for example, does not produce their computers but instead focuses on designing and marketing them. Rare among consumer goods companies, Apple still owns most of its retail outlets, including their iconic website and Apple stores. The best high technology companies are learning to produce more value with each worker. Apple Inc. (NASDAQ:AAPL) has a market cap of over 500 billion dollars and revenue of approximately 140 billion dollars per year, while employing only 60,000 people. This amounts to about USD 2.34 million per employee.

Wal-Mart Stores, Inc. (NYSE:WMT) on the other hand has revenue of some 455 billion dollars but a market cap of only 225 billion dollars, despite employing some 2.1 million people. Revenue per employee is a mere USD 212,000. This trend isn’t isolated either.

Another example, Facebook Inc (NASDAQ:FB) had some 3.71 billion dollars in revenue in 2011 with only 3200 employees, or nearly 1.2 million dollars in revenue per employee. In 2004 International Business Machines Corp. (NYSE:IBM) decided to sell its legendary hardware business to Lenovo in order to focus on high-value added services. IBM’s stock value would rise from USD 85 to nearly USD 200 in 2012.

Meanwhile Toyota Motor Corporation (NYSE:TM), one of the most innovative and efficient manufacturer’s in the world, recorded revenues of approximately USD 245 billion with nearly 320,000 employees, or revenues of USD 765,000 per employee. The numbers get far worse for less innovative manufacturers, such as Panasonic, which employs some 330,000 people but has revenues of only USD 99 billion. This amounts to revenues of a mere USD 300,000 per employee.

Who will benefit from this increasing trend? Investors in the right high-tech firms, of course, but they will not be the only ones. While start-ups and established companies are repositioning themselves and using fewer workers, they are placing increasing emphasis on hiring talented, creative and innovation employees. When and where possible, companies are replacing people with machines, but for the highest-value added inputs, such as design and marketing, this is not possible.

Workers who can add value stand to benefit tremendously. As businesses shift towards high-value added production and services, workers who key into these trends will reap the benefits. For example, a top computer engineering graduate can expect to earn USD 70,000 or more upon graduation. In fact, some companies are even poaching computer engineers while they are still in undergraduate school.

The trends are obvious for investors and potential employees alike. Focusing on increasing the value of output per employee is essential. Producing goods and services that machines cannot, such as consulting advice and elegant designs, will result in revenue growth and higher profit margins. On the other hand, trying to stick with assembly and production will result in lower profit margins and lower revenue per employee. Those looking to stay ahead of the curve will keep these general trends in mind, whether choosing a stock to invest in or a college degree to earn.