cluster based strategy in china

Prepared by: Mr. Amir Ikram 2

OUTLINE (草稿 ) Clustering (as defined by business literatures)

History of cluster

Implications of clustering in China

SMEs Definition in China

Relationship between clustering and SMEs

Advantages of clustering for SMEs

Problems and difficulties

Zhejiang-model


CLUSTERINGA variety of different definitions of industrial clusters are depicted in the literature of business economics and innovation studies. The literature broadly explains cluster in a geographical sense

各种产业集群的不同定义的描绘在商业经济和创新研究的文献。文献中广泛地介绍群集地理概念


HISTORY OF INDUSTRY CLUSTER

The history of industrial cluster dates back to the classical economic analysis of Alfred Marshall in “Principles of Economics”. Marshall (1920) points out that localization economies creates due to presence of pooling of labor, availability of industry specific goods at lower cost and technological spillover.

However it was popularized by Michael Porter in ’The Competitive Advantage of Nations (1990)’; thus industry cluster is sometimes referred to as Porterian Cluster.


IMPLICATIONS OF CLUSTERING IN CHINA The cluster-based business model makes use of

more entrepreneurs and labor and less capital. This may explain why clusters have emerged as the organizational choice of Chinese firms over time (Long and Zhang, 2011) .

Furthermore, Long and Zhang (2011) has provided empirical evidence that clustering has indeed helped Chinese firms overcome financial constraints and further improve their productivity and export performance; thus providing regional competitive advantage.


CHINA’S RAPID GROWTH & CLUSTERING

China's rapid industrialization is characterized by the following patterns:

a) industries have become more spatially concentrated;

b) regions have become increasingly specialized; and c) firms have become more interconnected

In addition, the number of firms is growing faster in clustered areas than non-clustered ones. Together these patterns suggest that China's industrialization process is largely cluster-based

(Long & Zhang, 2011)


RELATIONSHIP BETWEEN CLUSTERING AND SMES

Today, there are thousands of industrial clusters, mainly comprising SMEs. Statistical data from the Ministry of Information Industry reveal that only some 160 cities out of about 280 produce industrial clusters, of which the major constituents are SMEs [今天，有成千上万的产业集群，主要包括中小企业。从工业和信息化部的统计数据显示，只有约160个城市出约 280产生的产业集群，其中的主要成分是中小型企业。 ]

The number of SME firms is growing faster in clustered areas than in non-clustered regions; this pattern resembles the East Asian cluster-based industrialization led by SMEs but differs from the U.S. experience, where industrial districts were dominated by large firms [企业数量的增长速度和企业规模都不显著更大的集群地区比非聚集区 ;这种模式类似于东亚基于集群的产业为首的中小企业，但不同于美国的经验，在工业区是由占主导地位大型企业 ] (Long & Zhang, 2011).


RELATIONSHIP BETWEEN CLUSTERING AND SMES

Large-firms generally exhibit less inter-firm connections as they are more concerned with beating the competition; conversely SMEs relies on “if you can’t beat the competition, then join them” [大公司通常表现出较少的企业间的连接，因为他们更关心的是打败竞争对手，相反中小企业依靠“如果你不能打败竞争对手，就加入他们” ](Long & Zhang, 2011).

SMEs suffer from a lack of resources. One way to overcome these problems is to develop “clusters”, which provide a platform for SMEs in a region to share innovation facilities and new ideas and production resources through closer business networks [中小企业苦于缺乏创新设施和资源。克服这些问题的方法之一是制定“集群”，这对中小型企业提供一个平台，在一个区域，通过更紧密的业务网络，以交流创新设施和新的思路和生产资源 ](Chen & Cao, 2006)


ADVANTAGES OF CLUSTERING FOR SMES

Clustering plays a critical role in accelerating innovation and competitive advantage in SMEs:

a) The inflow and outflow of technical personnel lead to rapid technical diffusion. When people change from one enterprise to another, this leads first to imitation and thence to innovation.

b) SME clusters also lead to economies of scale, so necessary for innovation.

c) The free flow of information in a cluster supports innovation by encouraging "intellectual overflow" among employees of different organizations communicating informally in many ways.

(Chen & Cao, 2006)


PROBLEMS AND DIFFICULTIES

Low innovation capability

Excessive imitation and inadequate innovation lead to low technology content and value addition.

Lack of quality consciousness

In America, more than 50 per cent of technology innovations come from SMEs, but in China’s SME clusters, 82 per cent of SMEs have no technical inventions or patents at all. This reduce the probability of improving production quality.

Lack of trust

If there is lack of trust, it might hamper innovation.

(Chen & Cao, 2006)


Zhejiang Province is known as a home of many industrial clusters; it has been attracting greater attention from business researchers and policy makers.

It presents distinct sort of supply chain management: tight linkages between the industrial clusters and specialized markets ; more efficient and effective. (它提出了不同的类型的供应链管理：产业集群与专业市场之间的紧密联系 ;更加高效和有效 )

The role of specialized markets is still crucial nowadays as a powerful channel for the distribution of consumer goods as well as a means of coordination of fragmented productions in China and abroad. (专业市场中的作用仍然是至关重要时下作为一个强大的渠道消费品的分配以及协调在中国和国外零散制作的一种手段。 )

ZHEJIANG-MODEL; LINKAGES BETWEEN THE INDUSTRIAL CLUSTERS

AND SPECIALIZED MARKETS(Bellandi & Lombardi, 2012; Fliesher, Hud & MCG, 2010)


Statistical data (2006) from Zhejiang reveals there were 519 SME clusters in the manufacturing and the agricultural sectors; one of the largest SMEs clusters in the region.

Main part of the SME cluster in Zhejiang is still labor-intensive (such as spinning, garments and machinery). This is truly reflective of the nature of SME clusters.

Facing severe competition, more firms have begun to upgrade their product quality. By the year 2007, nearly half of the sampled firms in Zhejiang province had established registered trademarks and nearly 20 percent had become ISO certified.

ZHEJIANG-MODEL; LINKAGES BETWEEN THE INDUSTRIAL CLUSTERS

AND SPECIALIZED MARKETS(Bellandi & Lombardi, 2012; Fliesher, Hud & MCG, 2010)

cluster based strategy in china

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