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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1. Integration

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2. Research 3. Knowledge diffusion

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etwork of Excellence

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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

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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

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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

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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

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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

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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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e-mail: msheresheva@hse.ru

Marina Sheresheva