Thursday, January 17, 2013

Two North-Italian Clusters

Two North-Italian Clusters

by Alfa Diallo

The text describes two North-Italian Clusters’ (chair cluster of Manzano, and the wine cluster of Conegliano- Valdobbiadene) most important characteristics. The hypothesis is that now days in a cluster’s effectiveness innovation and integration are the most important factors. The cases seem to prove this hypothesis.  

What is common in chairs and wines? First this question looks really difficult because with standard logic it is quite impossible to figure out the connection. One can assume that it is much more comfortable to drink wine if one sits in a chair. It is a possible solution too, that if someone drinks too much wine it can be really difficult for him to succeed in sitting down in a chair at first time.

I can imagine an infinite number of creative solutions to my question but this time I will speak about a special connection which relationship is not a real linkage only the creation of my imagination. In this blog post I will examine the role and effectiveness of two very famous North-Italian clusters, and by doing this comparison, I am trying to identify some general conclusions about the characteristics of the clusters. The two protagonists this time will be the chair cluster of Manzano and the wine cluster of Conegliano and Valdobbiadene.
Before I start my examination it is really important to define what a cluster is, and describe in a few words, that why are they important in the modern business system. Because of the globalization most business theorist thinks that in most of the markets a new competition type has risen, because instead of competition between firms the dominant effect now is the competition between networks. As these forces became more dominant, many types of networks got popular. One type of these networks are clusters in which firms and other institutes that work in the same field and geographically concentrated mutually cooperate in some of their operating activities. Now I will present two real example of this type of connection.

The first cluster I will describe more, in detail will be the chair cluster of Monzano. The tradition of chair making is really old in North- Italy so there are many firms that are specialised on producing chairs. The problem is that most of the production firms of the regions were small or medium sized companies so alone it was nearly impossible for them to face the rising rate of competition. That is why the cluster of Monzano was formed involving the small and middle sized firms of the region and some big firms too. The core competence of the cluster that it has a high reputation in the Italian market, and being a member is a guarantee for the consumers that the purchased product has a high quality.

The cluster is not highly integrated because mostly it is only a horizontal type of cooperation because the activity of the firms in the cluster is quite the same. This is the reason why most of the common activity in this cluster are centralised around the production, so it is about how to organize the production process the most efficient way. One channel of this is the joint acquisition of raw materials and long term contracts with the suppliers at a cluster level. Of course there are other joint activities like marketing and research and development but these factors are less important. There are some non-market members of the cluster like the University of Udine and the University of Trieste that insure the supply of trained workforce.

The second cluster to examine is the wine cluster in Conegliano and Valdobbiadene. The structure of the industry is much similar than it was by the case of chairs. There are many small and middle sized firms that traditionally operate in the industry, and at the market of wine reputation is as important as on the market of chairs. So the conclusion in this case is quite the same. In order to survive the firms had move into a closer cooperation so they formed a cluster.

But the similarities end here. The wine cluster is much more integrated, than the chair cluster because we can identify horizontal and vertical cooperation too within its members. The focus of the cooperation is different too, because there main activity is based on research and development with the first research centre of wine industry in Italy. The other activities of the cluster are highly integrated too, because they use common marketing campaigns or make wine fests together.

So we saw two similar industries with two different types of clusters. But why is this so important? As we look at the recent trends of the clusters we can see, that both were hit by the recession, but the recovery paths are quite different. The chair cluster faced a huge setback at productivity and many problems emerged. The smaller firms stated that the bigger firms have too much power in the decision making of the cluster, because there is not enough interdependence between the firms. The way out looks to be some kind of common research and development activity, and much more integrated all day operation. On the other hand the wine cluster only faced a small setback and the estimations show that they will produce five times as much wine as now until 2035.

The main message of my text is that close networks really matter in modern business life so in clusters we should focus on the “double I rule”, because integration and innovation matters the most. And what is common in wines and chairs? I think it is still hard to say.


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