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Exams never end The success of the industrial clusters has been built on their ability to stubbornly wedge themselves into foreign markets, and the amount of international exchange Italy does with certain products (tiles, sports footwear, eye glasses, wool fabrics, etc.) reflects the presence of consistent competitive advantage. Various sources, however, do sustain that this competitive differential may no longer be enough in the coming years as the geography of international business changes at a rapid pace, and manufacturing constantly moves in its effort to lower costs. The new logic of internationalization is able to put the staying power of the Italian industrial clusters to the test. Fortunately, the redistribution of production shares among the world’s different areas is slower than forecasts built on simple differentials of hourly labor costs had lead us to believe. In any case, if adopted, manufacturing’s delocalization processes will undermine some supporting structures of the clusters, thereby reducing their “social value” which is largely made up of the professionalism of their work forces. Because of this, the transfer of manufacturing to other countries is viewed with apprehension by the directors of the clusters’ policies. The true protagonists of the internationalization processes, however, are not the clusters themselves, but the companies that make them up, and the choices these make eschew the preventive measures local agents try to coordinate. This is a charming theme in that it is tied to a critical passage against which the industrial clusters will have to measure themselves, even if in front of a wide range of cases. In some cases the “value chain” is still solidly anchored in the cluster; in others the companies transferred a part of their production processes to countries with lower costs some time ago. Generally speaking no “implosions” have occurred. In the clusters where a part of the executive production processes have been transferred abroad, the delocalization processes haven’t changed enough to justify moving the business base and the companies have continued using versatility’s levers of rapid response time, something that is not possible when production cycle processes are transferred abroad. All of the clusters, nevertheless, are opening up and growing the nature and intensity of their relations with foreign operators. This, for the moment, has been more a source of new opportunities than a cause of social problems. One way to organize the productive cycles so as not to diverge too much from traditional ways but that is more in touch with and geared toward the outside, has encouraged our clusters to focus on better processes (planning, design, production of prototypes, marketing) and, in the middle term, should contribute to sustaining the critical mass. In perspective, internationalization is taking shape as an unavoidable challenge; it may constitute an auspicious event, but it does not have to necessarily be taken on all at once and in excessive amounts. The chorus of invitations to internationalize recall the recommendations made during the ‘60’s and ‘70’s regarding economies of scale and mature markets. Today it is clear that the Italian industrial clusters have brilliantly passed the feared exam on the competitors from emerging nations. Before, our business people didn’t let themselves be contaminated by the somewhat worrisome forecasts, and it has lead us to believe that the challenge of internationalization can also be faced without getting excessively emotional. The clusters are quite prepared to pass this new, if difficult exam as well. The wind of globalization on the districts High quality and low prices, though essential for survival, are no longer enough to guarantee market share, growth or stability. Increased competition and pace, both results of globalization, are forcing firms to search for added value beyond “hard” factors like quality, price or technology which, though essential for survival, today no longer guarantee success. Companies are finding that added competitive advantage lies even more in their “soft” variables, like human resources, communication processes, service. The impact of globalization on all areas of business has complicated the environment these variables operate in. Domestic markets which used to be protected are now challenged by foreign competitors, and even the simplest exporting enterprise feels the pressure to change or get out. Organizations are now having to look far beyond their national borders for better suppliers and new markets, and inside their own walls for innovative ways to add value to their products and prevail in an ever tougher, ever more competitive multicultural business environment. It must be stated that the internationalization of business is not something that has yet to happen, nor is it a road that organizations can choose to follow. In her book Managing Cultural Differences, Lisa Hoecklin confirms that “The distinctions between domestic and international markets are rapidly dissolving all over the world. Nearly every uni-national business is seeing, or will soon see, the invasion of its markets by foreign players”. These firms may still consider themselves purely domestic operations, but they are still directly living the impact of internationalization. She goes on to assert that “the old definitions of international business are now defunct; terms such as “export” and “import”, “national” and “international” are now in many cases irrelevant”. What used to be familiar and automatic, what we used to take for granted as the unwritten rules of doing business, is proving to be no longer valid. We have to take the tired saying “think globally, act locally” and learn how to put it into practice The goal is to be global but at the same time intimately know and service your customers and suppliers. This simple recipe is the key that permits us to produce culturally appropriate products that are distributed via appropriate distribution channels, use culturally appropriate management techniques and market in culturally appropriate ways. To effectively implement these culturally appropriate strategies, international business people have to start developing cross-cultural skills, and more precisely, a talent for clear and inoffensive intercultural communication. Whether an organization travels abroad or hosts foreign individuals or delegations on its home territory, the outcome of the visit will depend on how well the individuals involved understood each other. International business by definition requires communication between people from different cultures, and it is through this inter-cultural communication that the relationships which are so fundamental to successful international endeavors are built. The rules of doing business have changed, and likewise the rules of relationship building and effective communication. That doesn’t just mean speaking the language well (some of the worst misunderstandings are between the British and the Americans) and knowing basic etiquette, but also includes awareness of how your foreign counterpart communicates intentions, divulges and extricates information, and conducts meetings and negotiations. An ignorance of the cultural “grammar” with which to correctly interpret such fundamentals can prove the biggest threat to successful multicultural relationships by alienating customers, destroying workforce cohesiveness, and degrading efficiency and effectiveness. For firms to be successful, they must become “insiders” in the markets or nations they operate in. They need a sense of localized customer focus and competitiveness that deals with regional or local conditions, as well as culture, behavior and values. Whether the objective is to defend existing markets or conquer new ones, knowing your clients, knowing how they do business, and thus knowing how to effectively communicate with them are essential not only to avoiding misunderstandings, offenses, delays and mismatched partnerships, but also to reducing cycle-time, improving quality and promoting the smooth-running processes. In response to such international business demands and the growing awareness of the power of the “culture factor”, many companies are developing initiatives to train their international representatives in intercultural competence and global management whereby they learn, amongst other things, to integrate cultural awareness into their competitive strategies. Based on the principles of awareness and clear communication, cross-cultural training helps individuals and organizations put into context the behaviors, attitudes, communication patterns and beliefs they find so strange in their foreign counterparts and guides them in developing the tools they need to deal effectively with them. Certainly familiarity with a country and its people can be gained through attentive observation of and participation in its customs, ways of dressing, laws, institutions, food and drink, gestures, forms of greeting and etiquette. However, familiarity is not sufficient for us to understand the meaning of such elements in a foreign context. Insight into the hidden values they represent is necessary for a deeper understanding of what steers people’s actions, decisions, feelings, thought processes, beliefs, and judgments, and through that understanding strategies can be developed to build cross-cultural bridges. Bridges that serve not only to avoid misunderstanding and offenses, but also to create added-value through more varied input. Cross-cultural awareness training can provide the structure necessary for interpreting the fundamentals of all cultures (orientations to time, interpersonal relationships, communication, flexibility, competition, etc.) and how these values are manifest in specific environments (specific countries, the office), so that individuals and organizations can enhance their creativity and innovation, productivity, problem solving, negotiating, motivation, communication, customer responsiveness, planning, organizing, and so on. Over the years astute international business people have learnt the rudiments of their field: always accept an Italian’s invitation for a coffee; never show the sole of your shoe to a Arab; don’t take a Britt’s lack of expression as disinterest or a sign that he’s hiding something; be sure to provide plenty of details when solving problems with a German; never look a Japanese superior in the eye. Like high quality and low price, these basics permit the establishment of relationships but they are not enough to cultivate their growth. Globalization has forced us to go beyond these basics so that we may know and serve our customer, supplier, partner better and create competitive advantage. Cultural awareness can give us the added value that sets an organization apart from the rest. And besides, respecting another culture and its etiquette and customs isn’t simply good manners. Its good business. Anne Hamro Cluster profiles Santa Croce sull’Arno (FI) The cluster of Santa Croce sull’Arno includes the towns of Bientina, Castelfranco di Sotto, Fucecchio, Montopoli Val d’Arno, San Miniato, Santa Croce sull’Arno and Santa Maria a Monte. It stretches out over an area of 330.44 sqK with a residential population of 93,605. The active population of 43,421 includes the employed, unemployed and youth in search of their first job. The cluster’s production specialties lie in the industries of leather hides, goods and footwear, which make up 81.86% of all manufacturing jobs. The cluster alone produces over 90% of the Italian production of Vero Cuoio Italiano (True Italian Leather) for shoe soles and 70% for EEU countries. As of 30 June 1995, 8,045 companies were located in the cluster, of which 1,749 (21.7%) belong to the leather tanning, footwear and leather goods industries. Breaking down the sector even more reveals that there are 837 leather hide companies (47.8%), 714 footwear companies (40.8%) and 161 leather goods companies (9.2%). A comparison of the numerical data of the companies with that of the residential population shows that there are 8.6 companies for every 100 residents. More specifically, in taking the data in reference to single towns and the leading industry, leather hides, goods and footwear, the relationship between the companies in this sector and the number of residents becomes clear: in Santa Croce 39 for every 1,000 residents, in San Miniato 12, in Castelfranco di Sotto 20, in Santa Maria a Monte 16, in Fucecchio 16.5, in Montopoli 19.3 and in Bientina 10.9. The number of local units present as of 31/12/95 is 9,285, of which 1,947 (20.9%) belong to the leather hides, goods and footwear industry. Of these, 975 are leather hide companies (50%), 173 are leather goods (8.9%) and 755 are footwear (38.8%). On a regional level, leather-related production largely characterizes the towns of Santa Croce and San Miniato where local units of this type represent respectively 92% and 66.5% of sector total. Footwear represents the productive peculiarity of Caltelfranco di Sotto(where this segment’s local units represent 62.8% of the sector total), Santa Maria a Monte (84%), Montopoli (79.4%) and Bientina (73%). The town of Fucecchio, on the other hand, is characterized by more balanced production: local leather hide units make up 28.3% of the total, with leather goods at 28.1% and footwear at 43.1%. Looking at the data related to the number of employees of the industry’s local units, it is clear that the small company, if not the microcompany, predominates. There are a good 1,334 local units belonging to the leather hides, goods and footwear sector which have from 0 to 9 employees; the largest class (from 10 to 49 employees) with 547 units, represents 28.1% of the total, whereas there are only 21 companies (equal to 1.1%) consisting of over 50 employees. As of 30/12/95, there are 33.730 employees, of whom 15,688 (46.5%) work in the tanning, footwear and leather goods sector. When taking a closer look at this sector as well it is evident that the number of those employed (8,219) in tanning in this district represents 52.4% of the sector’s total, those in footwear total 43.1% (6,756), while those employed in the production of leather goods amount to 3.7%. In the face of an increase in the number of employees recorded in respect to the previous semester (+1,955 units of the general total), the leading sector of leather hides, goods and footwear has contributed 75.4% of this positive data. In particular, and in respect to the 1,425 additional units recorded by this sector, the leather hides segment has seen an increase of 10.5% in employment, leather goods has seen an increase of 14.9% and footwear 7%. Relations with foreign markets (America and European Union countries) are facilitated by both the presence of a network inserted into the international guidelines and the proximity of, on the one side of Pisa International Airport, and on the other by the Port of Livorno (Leghorn). Particular attention has been paid for some time now to environmental problems. As for water waste, the area is equipped with the proper purifiers. Regarding atmospheric pollution, centralized monitors have been installed for assessing the situation and, therefore, coming up with average-time plans for intervention. As regards drainage of the tanning muds produced by the purifiers, plans are underway (which have even obtained EEU financing), with an investment of tens of billions of liras, for their transformation and re-utilization. Courses Export consortia Competition has taken on global dimensions: new producers appear on the world scene while market opportunities are enormously multiplied at the same time. In such a context it is often difficult for a small to mid-sized company to affirm and consolidate its presence abroad by itself. The constitution of export consortia, a widely adopted solution in many industrial clusters, represents a valid tool for reaching this objective: the more than 350 Italian consortia, which bring together over 8,000 companies, today comprise nearly 9% of our export. A new course, organized by SDA Bocconi, is directed at the heads of the export consortia, and is planned for the 13 and 14 of November 1997. The goal of the course is to furnish tools and models for analyzing and solving the consortia’s’ strategic management problems, both in the start up phase and in consolidated situations. For information contact Prof. Donatella Depperu and Prof. Federico Visconti - tel (02) 5836-6851. Book Reviews The industrial clusters are at the center of renewed interest. As opposed to the past, this is no longer restricted to the usual circle of employees made up of university “districtologists” and readers of Censis’ annual reports. The most original phenomenon of our economic development is finally boasting a growing number of suitors, even in areas that up to a short while ago demonstrated reluctance in extending lines of credit to those industrial organizations that did not present themselves in the “Ford mold”. In books, at congresses and in the media that deals with economic problems, a Copernican revolution is unfolding: we realize that the distinctive course of Italian economics (at the moment one of the few on which our image can be sustained at an international level) is made up of the territorial systems of small and medium companies that often operate in traditional-type sectors. Developing countries such as China or India observe with curiosity the peculiarity of this completely Italian way of producing goods of high cultural content (tradition, esthetics, design, etc.), as do industrialized nations (G7) also; the former because of the industrial clusters’ ability to mobilize resources and encourage entrepreneurship; the latter for the socio-economic balance that they are able to express. Marco Fortis’ book (Catholic University of Milano and Montedison Research Office) inserts itself into this new cultural current as it presents an original, wide view of the role portrayed in Italy’s economic situation by traditional industries and, in particular, by the industrial clusters. The study is based on the analysis of the dynamics of Italian export manufacturing as regards those sectors which most shape the Italian lifestyle (fashion, furniture, etc.). This data is then compared to that of other industrialized nations with the results emphasizing the relevancy, in our case, of the business trends of this association of traditional industries: the per capita export of typical Italian products beats that of Japanese electronics. The book continues with a careful reconstruction of the provincial data that relates to the export and consumption of electrical energy, from which a neat picture emerges of the strong overlapping of this “macro-sector” and of the industrial clusters throughout the country. Fortis’ reflections efficiently relate a series of aspects that until today had only been examined independently: Italy’s success in traditional industries, the diffusion of industrial clusters and some features of Italian culture and life: the passion for beautiful things, esthetic sense, culinary tradition. The book reserves a few of the last pages for a few of the activities and plans of the Industrial Clusters Club, and it must be highlighted that, for once, its the Montedison Research Center (Centro Studi Montedison) that is telling this.
Marco Fortis Another interesting example of the changes taking place in the vision of organizations traditionally believed to not be too concerned about small business and local needs comes from the book L’Italia che Produce, edited by Confindustria in collaboration with Mondimpresa and Unioncamere on the occasion of Europartenariat Italia ‘96. It is a bilingual guide (Italian and English) about the character and potential of the national productive system and the tools for successfully accessing opportunities in the Italian Market. The key used by the authors for presenting Italian production to potential foreign partners consists exclusively of the description of the solidity, structure and functioning of small and mid-sized businesses, and particularly those organized in industrial clusters. In the premise, Prime Minister Romano Prodi underlines how “our industrialized clusters’ small and mid-sized businesses have managed to unify three things that aren’t easy to make run together: economic efficiency and innovation, growing employment, and social cohesion”. The elements of the clusters’ success, whose history by Mario Baldassarri can be read in the introduction, can go back to the “3F rule”: flexibility (productive), fantasy (imagination - in innovation), faith (in the business opportunities and abilities to straddle distant markets). These factors today allow small and medium-sized Italian companies to successfully face those challenges brought on by market globalization, thus strengthening their accentuated vocation for export through a growing variety of collaborative business and/or technical/manufacturing agreements with other countries. The book concludes with a thorough summary for foreign investors which describes the general legal landscape in which Italian companies operate.
Mondimpresa - Unioncamere -
Confindustria Renewed interest in the patrimony of Italian industrial clusters is also evidenced through ever more specific efforts to translate their real value into numbers. In its 1995 Annual Report, ISTAT included a chapter on Local Work Systems (SLL) in Italy. The topic had received only scarce attention in the previous report, but in 1995 ISTAT went deeper, identifying a group of 279 local manufacturing systems amongst whom were no fewer than 199 industrial clusters. All together the clusters employ more than 2 million people equaling 42.5% of total manufacturing employment; the majority of which is concentrated in the central north regions. In the south, where this model of industrialization co-exists with that based on large factories, the industrial clusters identified total a mere 15: in reality this is also a result of the appraisal process followed which, having identified “threshold” values corresponding to the national average, always ends up undervaluing the situation in the south. In fact when using the average sums recorded in the south as a reference, the amount of clusters would be nearly four times above that recorded. This aspect is highlighted in the 1996 Report on companies and local economies (Rapporto 1996 sull’impresa e le economie locali), edited by Unioncamere in collaboration with the Istituto Tagliacarne. Amongst other things, the book supplies the list of 199 industrial districts identified by ISTAT, ordering them according to an “economic strength” indicator based on data regarding employment and available revenue. The report, aside from providing a wide view of the present short-term European and Italian trends, also presents the results of a survey on strategic behaviors and expectations of smaller companies, including those from the distribution sector. Istat The numerous challenges that the industrial clusters themselves facing today (market globalization, growing international competition, etc.) have mainly resulted in economic relations becoming far more complex. The need to maintain the competitive positions they have achieved is pushing organizations to reinforce their relations with each other through the effective use of advanced services. This is the central theme of the C.R.E.S.C.ITA. project (Costante Ricerca dell’Eccellenza dei Servizi per la Competitività dell’Italia - or GROWTH - Constant Search of Excellence in Services for Italian Competitiveness) set up by Monitor Company, whom we wrote about in our last issue (La competizione e i servizi; Distretti Italiani, #4, October 1996). The first results of this work which proposes to identify a series of “custom tailored” initiatives which Italian service companies can develop to contribute to the improvement of the main productive clusters competitiveness were presented at the Centro Studi San Salvador of Telecom Italia last October 7. The project mainly focused on advanced telecommunication services, transport, finance and training and included among its partners Telecom, SDA Bocconi, Cariplo and Ferrovie dello Stato (State railways). A field analysis lead to the identification of four clusters considered “representative” of the different Italian competitive models (textiles-clothing, pharmaceuticals, home appliances, tourism) and to the indication of possible areas of intervention, to be handled by special inter-company work groups. The project is on-going and it is still early to evaluate how far it has come. However, as far as clusters go, an early goal has still be reached. The competitiveness of our clusters was put to the close scrutiny of a corporate consulting firm which utilized its tricks of the trade: market shares, product systems, value chains, and strategies, and its conclusions invite more determined exploration of “the other side of the moon”, that is, the microeconomic base of industrial cluster success. Telecom Italia - Centro Studi
San Salvador The validity of an Italian way of working is also at the center of a book that celebrates, without rhetoric, GEA’s thirty years operation as one of our country’s most important management consulting firms. The focus on our industrial system’s specificities, aside from requiring a great interpretive effort, constitutes a fascinating challenge. Up until the advent of the “Japanese phenomenon”, organizational culture borrowed practically everything from the Anglo-Saxon model, which was often taken as dogma. In reality, just as the bumble bee - in spite of the laws of physics - can fly; in the same way Italian companies manage to get around the dictates of the dominating “organizational culture” and show just the same their remarkable competitive skills. The secret lies in an exceptional ability to integrate economic, social and knowledge factors - largely characteristic of the cultural context in which the company operates - which are at the service of company: the industrial clusters make up the most important example of this. If such potential is not adequately understood and assimilated, if organizations are unaware of their own strengths and limits, these can be translated into risk factors for the company thereby blocking the managerial change process which is fundamental for successfully facing the recent changes in competition. Therefore, the job of companies like GEA, as widely documented by the writing compiled in the book, is and has been that of acting as intermediaries between different “organizational cultures”, identifying amongst possible techniques, organizational concepts and methods that fill management magazines (business process re-engineering, total quality, benchmarking, etc.) those most applicable to specific contexts, often very different from one another, in which Italian companies find themselves working. Gea Consulenti Associati The last recommendation regards two important contributions to the discussion on the characters, changes and potentials of the Italian model of development. The first consists of the publication of the acts, reviewed and expanded, of the study seminar on The industrial clusters toward the year 2000, organized by Pisa’s S. Anna High School and the Industrial Association of Prato, held in Prato in July 1993. The book analyzes the structural changes of the industrial clusters from the point of view of the cluster company, as well as that of the whole system. In particular it offers tastes of critical reflections on the limits and possibilities of strategic re-adaptation of local systems to the new set-ups brought on by international competition through a view of the prevailing strategies adopted by local companies (internationalization, network creation, diversification, etc.). The second contribution is the result of the conference on Local systems of small business and job creation, organized by the LEED program of OECD, which took place in Paris in June of 1995. Interest in local systems of small business, intended both as a changing phenomenon and a possible reference objective for bottom-up policies regarding the job market, is at the center of the books entries. “Think globally; act locally” is how one could summarize the spirit of the entrepreneurial choices and economic policies that are proposed in the text, which also makes use of case studies amongst which, naturally, Italy is cited. Riccardo Varaldo, Luca
Ferrucci, a cura di: Oecd Events and News New Members The agro-alimentary districts of San Benedetto del Tronto and that of Fermo footwear represented by the Ascoli Piceno Chamber of Commerce
Publications T. Bursi, G. Nardin, G. Pappalardo Banca popolare Montebelluna Conferences
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