Emerging Business Emerging Business Clusters in Russian Toys Clusters in Russian Toys
Delhi December 1, 2010
Clusters in Russian Toys Clusters in Russian Toys & Baby& Baby--Goods IndustryGoods Industry
M.Y. ShereshevaM.Y. ShereshevaNational Research University National Research University ––
Higher School of EconomicsHigher School of Economics
The main goal: to enhance joint research projectsin the field of interfirm networks and relationships http://noe.virtass.ru
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Administrative supportJoint fund risingExchanging opinionsCoordination of research aimsJoint elaboration of methodology, etc.
Joint conferences & seminarsJoint courses & programsJoint publications & case writingJoint learning (LLL)Collaboration with business
Joint field researchCases and databasesCross-Cultural comparisonsCreating new knowledgeNew generation of researchers
Subject Area Methodology Data Results
Relationships within clusters of enterprises
Secondary data analysis Branch statistics Recommendations for companiesand local administrations
Research project “Business clusters in Russia”
Laet
clusters of enterprisesin Russia
What are the motives and goals of enterprises to interact?
Semi-structured interviews with top managers
Field dataand local administrations
Publications
The first stage of the empirical study draws on the case method Empirical material obtained in the form of in-depth interviews as well as by means of observation and analyzing documentsOn the next stage data will be collected in form of in-depth interviews as well as in form of survey using structured questionnaireAs a result of gathered data analysis a “map” of Russian clusters will be drawn and probably some “growth axes” in Russia will be revealed
IMP approach
Industrial Marketing Industrial Marketing and Purchasing Group (IMP)
founded in 1976
an international network of scholars consistently developing the interaction approach
Interaction approach:the market can be described as networks of multidimensional exchange relationships between business actors (Håkansson, Snehota, 1995; Gadde, Huemer, Håkansson, 2003) a single company and its successes and failures are a single company and its successes and failures are affected by the actions of those around itto be an effective competitor in global economy requires more cooperation and networking between firms, which will lead to establishing or maintaining a marketing competitive advantage (Morgan, Hunt, 1994)collaborative relationship management is of crucial importance (Ford et al., 2003; Håkansson, Ford, 2002; Gemünden, Ritter, Walter, 1997; Ritter, Ford, 2004)
Cluster as a network of relationshipsM.Porter (1990): "geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities and embedded on a specific territory“complementarities and embedded on a specific territory“
an inter-firm network located in a specific region
business cluster as a specific type of inter-organizational network, a kind of “bargaining configuration” (Ruigrok, van Tulder, 1995) of quasi-integrated actors and therefore as a system of close long-term relationships causing synergy
Companies are not the only actors in a cluster
Specialized Resources
Technologies Key products
Geographic concentration of interconnected businesses and associated institutions in a particular field
The cluster members are companies having complementary or similar resources & activities, research community, financialinstitutions, institutions for collaboration, government
Specialized Services
End customers
Emergent process vs. the result of an explicit engineering activity“The first involves emergent processes, developing from changes in the environment and a common interest and similar views among potential members. In the second, the process appears to be engineered -a triggering entity actively recruits potential members In the second, the process appears to be engineered -a triggering entity actively recruits potential members to join in the consortium” (Doz, Olk, Ring, 2000)
it makes little sense to speed up clustering if there are no economic motives or goals for the firms to interacton the other hand, if potential cluster members have clear motives to elaborate a network of relationships, then cluster may be successful
District SpecializationShi Ling, Luo Cun Zheng Leather productsHua Du, Fan Yu JewelryHua Du, Shi Qu Cars, MotorcyclesZeng Cheng Jeans
China: Guang Dong clusters
Zeng Cheng JeansGuan Yao ToysZhang Chai, Xi Hao TextileLe Cong Long Jiang, Hou Jie, Da Yong FurnitureCheng Cun BonsaiPing Zhou Zheng, He Shan ShoesShi Wan Nan Zhuang CeramicsHu Men, Kai Ping Shi, Sha Xi ClothesShi Long Electronics
Guan Yao toys clusterGuan Yao: a leading center of toys production in China
Ads & PR
Rubber wheels
Remote control
Metal body
Gears
Raw materials
Delivery
27 specialized manufacturing companies Hua Xuan (130 mln. toy cars per year)
Toy cars with remote control Hua Xuan
Gears
Batteries
Advanced training centers
Design schools
R & D Center: new technologies
Exhibitions
Branded retail stores
Export
China: 75% of the toys world market
Russia?
ELEVE TIME ZOES
Russian FederationELEVE TIME ZOESA very diverse climate, ranging from sub-tropical at the Black Sea to extremely continental in Siberia142 million citizens, 21 republics, 49 regions, 10 autonomous districts…Dozens of peoples and languagesA huge quilt of mores, religions, buying habits, per-capita ibution infrastructures, etc. incomes, distribution infrastructures, etc.
"Russia is a riddle wrapped in a mystery inside an enigma"Sir Winston Churchill
Russia: Market environmentPeriod of active growthFragmented competitionLow transparency of legal systemWeak enforcement of contracts
Invest SystemsMarketBrandsProducts
Time toTime to
contractsShortage of suppliers Lack of information on potential partnersHigh propensity to opportunistic behaviorShortage of skilled HR recourses
ProductsInnovations
GainMarket shareBrand positionsCritic massAdvantages
Russian government and industry organizations have now turnedto the concept as a means to improve the competitiveness of oneor several specific business sectors and to stimulate regionaleconomic growthRecent development in Russia shows great interest of regionaladministrations in cluster policyFederal government tends to pay the main attention to building
Cluster policy in Russia
16
Federal government tends to pay the main attention to buildinghuge state-private holdings, in case of support clusters - to pickup “champions”The Ministry of Industry and Trade of the Russian Federationlists 25 cluster initiatives in automotive industry, shipbuilding,aircraft building, engineering & electronic (in 21 regions ofRussia). UNIDO program in Russia also aims to support clusterin automotive indusrtry. Only 2 regions declared cluster initiativein ICT (Dubna & Nizhny Novgorod).
Data collected in May-August 2009 by means of in-depth interviews (60):
top managers - 32local authorities, research & educational
Empirical data from Russia:HSE research 2009
17
local authorities, research & educationalinstitutions, etc - 28
Geography: Central Federal District, Ural FederalDistrict, Privolzhsky Federal DistrictResults compared with EU data
Golovanova et al, 2010.Russin Journal of Management,. Vol. 8. o. 1.
Most Russian companies demonstrated no incentivesto cooperative behaviourCompanies in ICT sector are more inclined to buildsustainable relationships than those in traditionalbranches of Russian economy
Empirical data from Russia:HSE results 2009
18
branches of Russian economyThere is every indication of benefits gained bycollaborating companies – in spite of the fact that topmanagers asess potential benefits of cooperativebehaviour as quite lowLocal authorities are highly sceptical concerningcluster initiatives (some asked “What is cluster?)
Collaboration wih competitors
67
35
42
40
33
40
42
25
25
30
42
30
8
20
25
35Joint proposals to improve economic pokice of Russian Government
Joint use of R & D results
Joint exploitation of material assets (buildings, transport infrastrusture etc)
Joint programs of education and / or advanced training
19
8
40
33
10
17
10
33
10
25
25
0
35
33
35
42
40
0 20 40 60 80 100
Joint business projects
Exchange of best managerial practices
Exchange of marketing information
Exchange of technological information
Use in ICT Use in traditional brances
Ready to use in ICT Ready to use in traditional brances
Pilot study conducted by means of in-depth interviewswith top managers in Russian toys & baby-goodsIndustry. Geography: Central Federal District, UralFederal District, Privolzhsky Federal District. Sector:Toys & Baby-Goods Industry.
Empirical data from Russia:LaET research 2010
20
Toys & Baby-Goods Industry.A convenience sampling approach: small and mediumproducers from different segments of the Russian toys& baby-goods industry as well as the main specializedretailers and wholesalers working on the market andsome industry associations leaders. In total, twelve in-depth interviews were conducted
Empirical data from Russia:LaET research 2010
Company Location Sphere of activityDistributor 1 St.Petersburg Remote control cars and battery operated railways
Distributor 2 Moscow Metal toy carsDistributor 3 St.Petersburg Wide range of goods
Producer 1 Moscow Wooden board games
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Producer 1 Moscow Wooden board games Producer 2 Moscow Toys facilitating mental developmentProducer 3 Moscow Children’s garmentsProducer 4 Moscow Creative sets Producer 5 Smolensk Toys Retailer 1 Togliatti Cash & carry chain Retailer 2 Moscow Specialized toys & baby-goods retail chainWholesaler 1 Moscow Balloons & toysWholesaler 2 Moscow Wide range of goods
In the Russian toys & baby-goods sector relationship issues areincreasingly becoming more importantIncentives to collaborate appeared to be quite strong. All the respondents pointed out the decrease of actors’ number in their supply chains. Most of them are sure that such development leads to improving mutual relationships between
Empirical data from Russia:LaET results 2009
22
development leads to improving mutual relationships between Russian toys & baby-goods supply chain members and thus delivering appropriate value to customers. In the industry one can now observe a lot of mutually oriented interactions between two reciprocally committed parties tending to become multilateral. At the same time, the flow of information in the supply chain is far from easy. Many respondents underline the fact that they often regard the information from their partners as something needed additional analysis and examination.
Our study registered intensive mutual relationships in Moscow region supported by the Russian ational Toy Association (RNTA) and guided step by step towards system of explicit and implicit contracts between local actors dealing with toys production as well as related and supporting industries.
Empirical data from Russia:LaET results 2009
23
well as related and supporting industries. RNTA and Association of Children’s Goods Industry (ACGI) are public non-commercial organizations which unite the professional industrial communities of manufacturers, retailers, and distributors in the Russian children goods market. Actually RNTA and ACGI make up the second level of Moscow toys cluster structure
Emerging Toys Cluster in Moscow Region
Components Production
Equipment Production
Raw Materials
Toy Producers (divided by kinds of raw materials
used):1. Plush & Fabric toys (30).2. Plastic toys (25).3. Paper & Cardboard toys (25).4. Wooden toys, papier-mâché toys (22).5. Rubber toys (6).6. Metal toys (3).
Market and Nonmarket Support Services:Development support Design & packageCertification servicesWarehousing logisticsTransport logisticsCustoms logisticsMarketing & PR
Research institutionsSpecialized mass media (13)
Industry and Professional Associations:• RNTA (1)• ACGI (1)
6. Metal toys (3).7. Ceramic, Porcelain & Faience toys (3).8. New Synthetic toys (3).
Specialized mass media (13)Exhibitions & fairs supporting services (8) Tech consultingFinancial consultingLaw consulting
Specialised education:• College of games and toys (1)• Industrial handicraft Colleges (5)Higher edication:• No (0)Museums:• State toys museum (1)• Private toys museum (1)• Doll's and puppets (3)
Firm-level competitiveness:•Market knowledge•Innovation•Factor availability• National brand
State Government Strustures:• Moscow Local Department of SME Problems• Moscow Local Department of Production • Chamber of Commerce and Industry
Selling & Export Agents:150 firms
From static to dynamic clusterStatic cluster Dynamic clusterIsolated firms and lack of competitionLack of advanced suppliersBasic human capitalLack of trust and networksFew supporting institutions
Local rivalry and international competitionSpecialised, local suppliersAdvanced training andscientific infrastructureHighly developed social capital
Due to specific features of general business environment process of clustering is contradictory, and this is common to all clusters in RussiaToys custer in Moscow region is a static cluster (The Cluster Initiative Greenbook by Örjan Sölvell, Göran Lindqvist, & Christian Ketels)H1: The main trend will be from static to dynamic clusterFurther research is needed understanding the formal and informal connections of cluster members
Few supporting institutions Highly developed social capitalAdvanced institutions for collaboration and CIs
Thank you for your attention!Thank you for your attention!
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Marina Sheresheva