CLUSTERING AND COMPETITIVE ADVANTAGE

Clustering and the Maritime industry Increasing competitive advantage through cluster activities

Aims

* Understand the concept of Clustering and the differences with networks * Identify different cluster formations – in relation to the maritime industry * Appreciate the barriers to clustering * Recognise the benefits of cluster activities in relation to competitive advantage in the Tourism Industry

Clustering

* Clustering has long been seen as an activity based tool for the economic enhancement of a specific geographical location (Robins 2011; Krugman 1991; Martin and Sunley 2003; Novelli, Schmitz et al. 2006).

What is Clustering?

* Clusters are geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition (Porter 1998).

What is Clustering? * Clusters extend vertically to customers and horizontally to manufacturers of complementary products and to companies in industries related by skills, technologies, or common inputs (Reid, N. 2009). * Clusters can form diagonally to include governmental and other institutions -­‐ such as universities, think tanks, vocational training providers, and trade associations -­‐ that provide specialised training, education, information, research, and technical support (Porter 1998).

Why do Clusters Occur?

* Clustering occurs in order to maximise profits, increase competitive advantage and make best use of natural physical and built environments including labour and skill sets. * Geographically concentrated networks and value chains of suppliers and/or knowledge institutes collaborate with the aim of developing innovations (Hospers and Beugelsdijk 2002).

Benefit or Disadvantage?...

“Clustering as a tool for economic advancement has been seized upon by international, national and regional policy makers including the OECD, World Bank and National Governments”

Why Clusters in the Maritime Industry? * Clustering in the maritime industry already has the geographical benefit of positioning along a harbour, marina, port, or even just the coastline, and is often seen as an ideal natural cluster formation for facilitating cluster activities (Michael 2003).

Why the Maritime Industry? * CAMIS is a project that aims to increase cooperation between the North of France and the South of England * Collaborative working * Skill consistency * Knowledge transfer of best practice * Common goals * Adherence to EU policy * Formulation of an integrated strategy for the marine sector

What did we look at?

* Business clusters within the marine and maritime sector in: * Off-­‐shore renewable energy * Marine operations * Marine environment * Marina tourism

How did we do this? * Identified where the businesses were located geographically * Looked for cluster activities within the data * Carried out research to identify clusters

What did we find?

* Numerous methods exist for the identification of companies suitable for establishing a cluster-­‐based economic development strategy. Although clusters are essentially a naturally occurring business focussed phenomenon there are good economic reasons for identifying and strengthening the ties in order to help sustain and develop them. * What are the main theories?.................

Porter’s Cluster Map

Porter 1998

What contributes to a cluster? * Companies may relocate to benefit from a customer base * Natural geographical features may encourage clustering * Transport and logistics can feature in cluster manifestations * Desire to access supply chains * Need for technical knowledge and networking * Innovation

Porter’s Diamond Cluster

Porter 1998

Factor Conditions * These factors can be grouped into human resources (qualification level, cost of labor, commitment etc.), material resources (natural resources, vegetation, space etc.), knowledge resources, capital resources, and infrastructure. They also include factors like quality of research from universities, deregulation of labor markets, or liquidity of national stock markets * Porter points out that these factors are not necessarily nature-­‐made or inherited. They may develop and change. Political initiatives, technological progress or socio-­‐cultural changes, for instance, may shape national factor conditions

Demand Conditions * Describes the state of demand for products and services in a country/region * Characterised by: * Mixture – mix of customer needs * Scope – and growth rate * Mechanisms – for transmitting to home/foreign markets

* Porter states a larger success rate if home demand conditions are understood

Related and Supporting Industries

* A successful leader company can benefit supporting and related industries – success breeds success! * Value chain activities * Knowledge transfer * Best practice in business operations

Firm Strategy, Structure, & Rivalry * Cultural aspects play an important role.

* In different nations, factors like management structures, working morale, or interactions between companies are shaped differently. This will provide advantages and disadvantages for particular industries.

* Porter argues that domestic rivalry and the search for competitive advantage within a nation can help provide organisations with bases for achieving such advantage on a more global scale.

What did we find?

* Four main types of cluster * Innovation and technology * Single project based * Research centre based

* Branded clusters * Local Authority/3rd sector clusters * Naturally occurring

Findings so far * Clusters need.... * Trust * Leadership * Purpose

* All three are equally important, and for a cluster to be sustainable, all three must remain stable – a cluster without one of the above, or a cluster that loses one of the above, will struggle to survive. * Vertical clustering is more prevalent than horizontal clustering – due to issues of trust and competitiveness * Clusters also need funding or support in some form....

How do they work?

Innovation and Technology Clusters

* Come together for a specific project and disband once the project has reached completion or the need to cluster no longer exists. * Usually funded or grant led * One main company/research centre leads * Based on knowledge transfer * Limited benefits apart from the technology * Can have issues of trust

How do they work?

Branded Clusters

* Branded to give a sense of belonging and identity and usually include the town/county name – Cornwall Marine Network, Maritime Plymouth, Cowes Marine Cluster….. * The management, purpose and sustainability differs according to the location and needs of the region. * Usually generic in composition – based around networking

How do they work?

Policy Driven Clusters

* Driven by either local authorities or regional development initiatives * Aims to bring policy makers together with industry and the 3rd sector * Centres on environmental issues, conservation, and sustainability

How do they work?

Naturally Occurring Clusters

* Difficult to locate as they do not publicise their existence and tend to be unaware of their ‘cluster status’. * Usually the most sustainable because the conditions for clustering were naturally occurring * Work by sharing best practice, customer base, geographical/social/economic landscape, transport and logistics….. * Important to identify if an increase in growth potential is required

What did we find? * Branded and Policy Driven Clusters * Mainly in the SW – blue * Policy driven -­‐ green

What did we find? * Technology Clusters * Industry led – Green * Research Centre led -­‐ Blue

Tourism Clusters Marinas and their potential for clustering

Value added * The South of England's marine leisure industry gives 61.8% of the total UK value added (BMF key performance indicators 2010) * This is split equally between SE and SW

* According to the BMF participation rates of

young people are dropping – From 15% in 2002 to 7.2% in 2010 There are many openings for increasing opportunities through clustering

Marina Tourism

* Marinas are natural clusters due to their location but cluster activities may not always be apparent * What is a marina? * * * *

Parking for boats?

Beautiful place to work Centre of industrial activity Leisure and entertainment

commercial

leisure

Marine services g Marine engineerin Trade platform Boat building

sailing retail food

Tourism Cluster Boat Builder

Leisure facilities

Marina

Marine Supplies

Contained

Marina

Marine Engineer

Marina

Marine Engineer

Marina

Strategically Located

Marina

Marina Clusters Communication, cooperation and clustering = economic growth Business Units

Local Marine Company's

Marina Marina Members

Local Authority

Marina Clusters Marina Marina

Marina

Marina

Marina

* Knowledge Transfer * Best Practice * Cross-­‐border collaboration * Cluster activities

Marina Member Cluster Potential

Marina B

Marina A

Yacht Club

Marina C

Contained Cluster

Strategic Cluster

Benefits of Clustering Why should companies cluster?

Cluster Benefits

* Why should companies cluster?...............

Benefits of Clustering

* Efficiency * Cost reduction * Knowledge transfer * Increased customer base * Supply chain access * Skilled labour * Increased sustainability

* New technology * Innovation

Experimenting with familiar models-­‐ what could the MP network deliver for you?

What you know about your business

What other people know about you/your business

Private (known to self not to others)

Hidden (known to no-­‐one)

Common Knowledge (known to self and others)

Blindspot (known to others not you)

This is known as a Johari Window

Using the MP network well, this could become …..

Private view smaller

What you know about your business

What other people know about you/your business

Hidden

Areas of your known expertise. Potential collaboration opportunities, shared services, equipment and learning/knowledge, bid expertise etc.

Much Reduced Blindspot

Small ‘Blindspot’-­‐ less chance of you missing a business opportunity. Reduced ‘Hidden’ section your business is better known.

Expanded ‘Common Knowledge’ section builds your business.

What is a successful cluster?

* A successful cluster is one that benefits all members individually, and as a group * Clustering can give you an ‘edge’ over non-­‐cluster members * Clustering can save time, money, and resources * BUT....you have to want this and be prepared to work at achieving it

Barriers to Clustering Why doesn’t it always work?

Why clusters don’t always work

* What are the barriers to clustering?......

What are the main barriers to clustering? * Competitive advantage!!! * Lack of fundamental cluster essentials * Trust * Leadership * Purpose

* Money * Time * Knowledge

Orders for this particular product are intermittent and can be large. The boat company want to be able to produce the product locally but cannot employ the staff needed as the cost would be uneconomical.

Marine fabricator and welder D

Contract the work out to a few local companies . The work load is spread as well as the risk. The orders will be completed on time and the economic growth of the area sustained.

Marine fabricator and welder A

Boat building company One mould, varying need

Marine fabricator and welder C

Marine fabricator and welder B

Apparent unwillingness by companies to commit to sharing a ‘job’. Fierce competition between local competitors and the perception that competitive advantage would be lost

External Barriers

* Policy change * Political interference * Unstable markets * Funding cuts * Global warming * Tariffs

Bognor Tourism Cluster

* The on-­‐going recession coupled with repeated wet summers has meant that the already suffering home tourism market has been brought to its knees * Arun District Council have decided to look at the idea of a town tourism cluster in Bognor Regis to try and revitalise the industry and the local area in general. * You have been asked to explore the options and to come up with a list of potential benefits and strategies to overcome the barriers

Group work

* Think about what your role is – what could you as an organisation contribute? * What would be the benefits to – * Your organisation * The town in general

* What barriers do you perceive * How can they be overcome

A Bognor Regis Cluster

* What are your reccomendations?

References * Hospers, G.-­‐J. and S. Beugelsdijk (2002). "Regional Cluster Policies: Learning

by Comparing?" Kyklos 55: 381-­‐402. * Martin, R. and P. Sunley (2003). "Deconstructing clusters: chaotic concept or policy panacea?" Journal of Economic Geography 3: 5-­‐35. * Michael, E. J. (2003). "Tourism micro-­‐clusters." Tourism Economics 9: 133-­‐145. * Porter, M. E. (1998). "Clusters and the New Economics of Competitiveness."

Harvard Business Review December: 77-­‐90. * Reid, N., M. Carroll, et al. (2007). "Critical steps in the cluster building process." Economic Development Journal 6(4): 44-­‐52. * Robins (2011) Clustering and the Economic Impacts on Marinas. Report for INTERREG IVa CAMIS * Wijnolst, N. (2006). Dynamic European Maritime Clusters. Dutch Maritime Network series. N. Wijnolst. Delft, Maritimt Forum, Norway and Dutch Maritime Network in cooperation with European Network of Maritime Clusters. 30.