Internationalization Initiatives within cluster: both means and end

1. Internationalization initiatives within
Clusters: both means and end
Albert Solé
13th TCI Global Conference
Competitiveness, Innovative clusters and Prosperity
DELHI, INDIA
December 1st 2010

2. The company in a nutshell
 Cluster Development is a team of 12+ highly specialized
consultants with an accrued experience on clustering (strategic
analysis, process facilitation, training and cluster management)
 Leading supplier of cluster consulting services in Spain, with around
30 cluster / regional competitiveness and innovation projects per year.
Currently undertaking international projects and exploring alliances
 Our services portfolio includes Regional Innovation Plans and
Regional Mappings, but our core product continues to be the
successful Strategic Development of a cluster
 Our methodology is all-inclusive and process-based, always with an
ultimate purpose in mind: facilitating a sound strategic discussion
geared towards innovative action and industry change. We let
competitive strategy lead the way
 Our clients range from public officials (RDA’s) to associations or the
cluster itself
What we do
Where
Who
How
For whom

3. IMPROVED
COMPETITIVENESS
CLUSTER
BUSINESS
STRATEGY
Innovative business
segmentation
(Strategy Vs Statistics)
Winning formula to
sustain competitive
advantage
BUSINESS
SEGMENTS
Utlimate GOAL
Process tool to engage in group strategic
discussions and to execute action initiatives
that are aligned with the strategic vision
Key concepts

4. Internationalization and clusters: Two approaches
Internationalization as the
‘means’ to strengthen cluster
strategies
Access to global markets as the
natural goal of any cluster
 to compete globally, clusters engage in
Internationalization initiatives to sustain the
implementation of winning strategies
 How? Improving the overall value chain
through action initiatives in the international
arena
 SME access to foreign markets has
often been seen as the ultimate goal
within clustering efforts
 Companies are more prone to
collaborate abroad than in local markets
to improve competitiveness in a global context
… always with an ultimate goal in mind:
A B

5. Some cases for both
Internationalization as the ‘means’ to
strengthen cluster strategies
Access to global markets as the
natural goal of any cluster
A B
Increase sales by accessing new
markets
1 International Public Procurement
2 Cluster-to-market initiatives
3
Commercial extension in strategic
markets
Increase competitiveness of value chain
4 Delocalization of certain value chain phases
5 Joint productive expansion abroad
Product Innovation
6 Access to sophisticated demand
7 R&D project partnerships with technology
savvy companies
8 First hand knowledge on consumption habits
Secure raw materials / inputs
9 Guarantee access to raw materials

6. Diagnostic of
capacities
-
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
Occasional
Exports
Experimental
export
Regular
exports
Commercial
extension
Productive or
service FDI
 Accidental
exports
 company
receives int’l
orders with no
proactive sales
Degree of internationalization +
 no control over
final price
(company does not
reach end user),
only with
distributors and
intermediaries
 some degree of
production capacity
is ‘reserved’ for an
stable int’l client
portfolio
 creation of Exports
department
 manages some
MK variables,
promotion to
retailers
 certain
investment in
material are human
resources
 Price control to
retailer but local
distribution
 first stages of the
multinational
company
 management
allocates
considerable
resources
Challengestoovercome
Review
organizational
model
Market
diversification
Formulation of
expansion
strategy
Search for local
distributors
Foreign
investment
Typical internationalization process of a business

7. National public sectors and multilateral agents play a pivotal role to spur
innovation-driven collaboration through public procurement, particularly in
economic fields such as health, eco-innovation, and energy efficiency
International Public Procurement1
The role of a cluster in public
procurement
 To facilitate the creation of consortia,
capitalizing on cluster neutrality, brand
and size.
 To help anchor companies find cluster
SME partners for hand key projects (BOT,
PPP, DBFO, BOO…)
 To promote the internationalization of
knowledge-based services companies
(engineering, consulting services, training… )
(1) Engineering,
Procurement
and
Construction.
MAIN CONTRACTOR
(EPC(1), EP, …)
Manufact.
installers
Finance
partner
Engineerin
g and
know-how
Client
(EPC(1), EP, …)
Components
civil

8. Traditional sectoral approach
The cluster facilitates the comercializatión under an umbrella brand, the
institutional support and the foresight of strategic markets
Cluster-to-market initiatives2
Multiectoral or sectoral commercial
mission to markets that are
intuitively considered interesting
Institutional relations
Attending international fairs of the
sector that companies belong to
Vs.
Commercial mission of the cluster
companies alone
The institutional aid opens the door
to b2b opportunities (eg TURMED)
Attending fairs from client sectors
(eg. Water treatment)
The approach follows the cluster
strategy. The Cluster puts together a
combined service-product offering

9. Firms with a complementary
offering of products or services
Commercial extension in strategic markets3
Public
support
Examples
Participants
La totalidad del cluster o el cluster
como institución
Temporary co-financing of a country
manager and its operative expenses
The public sector funds a permanent
antena or extension in strategic
markets
Offices in outbound
markets of soft and
hard medical tourists
Representation at the
Israeli embassies in
strategic water
markets
Export groups based abroad
(GED) with a huge multiplier
effect
Collaborating GROUPS of
companies The cluster as a BRAND
Integrating a complementary offer of services and products

10. Diagnostic of
capacities
-
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
Occasional
Exports
Experimental
export
Regular
exports
Commercial
extension
Productive or
service FDI
 Accidental
exports
 company
receives int’l
orders with no
proactive sales
Degree of internationalization +
 no control over
final price
(company does not
reach end user),
only with
distributors and
intermediaries
 some degree of
production capacity
is ‘reserved’ for an
stable int’l client
portfolio
 creation of Exports
department
 manages some
MK variables,
promotion to
retailers
 certain
investment in
material are human
resources
 Price control to
retailer but local
distribution
 first stages of the
multinational
company
 management
allocates
considerable
resources
Challengestoovercome
Market
diversification
Foreign
investment
How the cluster can facilitate international initiatives
Joint access
to markets
Joint
productive
implantation
abroad
Joint
participation
in fairs from
client sectors
Back up for
export groups
at home and
abroad
Shared export
structures
CLUSTER STRATEGIES FOR THE FUTURE
The cluster must impulse the allocation of resources towards those international
initiatives that are more STRATEGIC. Collaborative, Collective and for the whole cluster

11. Delocalization of certain value chain phases4
Example of the Fine Chemicals Cluster in Catalonia
Benchmarking the Catalan cluster (> 1,000 M€), with its main international
competitor, the Indian cluster.
Production costs
Research costs
R+Dq Prod. Q R+Df Prod. F MKT
10-40 invest.
3-5 w DMF / Yr
1-2 facilities - - -
70-200 invest.
10-15 new
DMF / Yr
5-7 facilities
First approved
ANDA
1-3 facilities
Average company at the CATALAN CLUSTER
Average company at the INDIAN CLUSTER
KEY
SUCCESS
FACTORS
35-150 M$
50-150 M$
 Production costs in India = 25%
Facility set up cost in India = 30-50 % less
Cost for one reseracher in India = 20% that of Spain

12. Joint productive expansion abroad5
The example of Farm Equipment cluster in Catalonia
Companies strategically decide to study implantation in Slovakia and Poland,
where production costs are 15-20% lower and the market grows steadily, not
stagnant farm incomes as in Western Europe. Establishing there will help them
develop suitable products, since the average farm in these countries is 10 times
that of Spain

13. Access sophisticated demand markets6
Accessing markets with a high degree of sophistication, pressures our innovation
capacity both product and process-wise
The Prous Science case:
Established in 1960, supplier of
value added publications de alto
for the biomedical international
community
Establishes itself in the Japanese
market, one of the most
requiring markets in the field
Nowadays it is one of the only
non/american companies sitting
on the board of the Federal Food
and Drug Administration
Prous Science
Kabushiki Kaisha
Why did they do it?
- Because once they manage to penetrate that market, they will be
prepared to access virtualy any market
Within clusters product innovation can be achieved by being present
in sophisticated markets or advanced clusters (eg design antennas for
furniture clusters in Italy… and other fashion-related clusters)

14. R&D project partnerships with technology savvy companies8
In the case of the EU, triple-helix innovative projects applied to market are
promote and encouraged through collaboration between companies in different
member countries.
European Technology platforms
Networked and Electronic Media
Mobile and Wireless
Communications
Networked European Software
and Services Initiative
Intergral Satcom Initiative
Joint Technology Initiatives (2007)
Fuel Cells and Hydrogen
Aeronautics and Air Transport
Innovative Medicines Initiative (IMI)
Nanoelectronics Technology 2020 (ENIAC)
Embedded Computing Systems (ARTEMIS)
Energy Efficient Buildings (EN DESARROLLO)
…and Regions of Knowledge
(3 or more European clusters develop a joint action plan in research)

15. First hand knowledge on consumption habits8
The situation
 UK fish processors have decreasing margins due to a very strong
consolidated distribution and fierce int'l competition in frozen, they MUST
move towards prepared fresh food to sustain competitiveness
What to do?
 Must gain expertise in the 'convenience‘ segment, but to do this gradually
first they have to learn by reaching consumers themselves
 They are small so they decide to do it together with the support of the
development agency, which will work on a regional brand
Where to?
 In the UK? They risk retaliation from their existing customers
Internationalization is the answer: collaboratively set up a retail shop in
PARIS to gain knowledge on consumers behavior
 The support of the development agency Yorkshire Forward was essential
to guarantee financial and strategic support to companies that were used
to compete aggressively with each other

16. Secure access to raw materials / inputs9
 Some companies of the Leather tanning Cluster in Vic
(Catalonia) relocate to Brazil because it combines access to raw
materials + large domestic market. Companies that have not
secured raw materials locally or internationally or have
maintained the whole productive cycle go downhill
 Fish processors in the Humber Seafood Cluster jointly ensure the
supply from Iceland, due to the depletion of marine stocks in its
fishing zone
 The Cluster of Marble in Carrara (Italy) did not vanish when the
local marble resources ran out. Capitalizing on their excellent
know-how in handling and marketing, they secured raw materials
in Brazil, South Africa and India, overcoming the disadvantage of
transport costs and the lack of local sourcing

17. The example of SOLAR POWER CLUSTERS FRANCE - SPAIN (SOLARTYS-DERBI)
After matching the respective value chains and identifying market oportunities de cada
actions in third countries are defined, taking advantge of each cluster’s assets
Intercluster Collaboration Initiatives can facilitate many of the
initiatives we’ve seen before
Complementaiety in
product offering
Architectural integration
Vs
Conventioanl panels
Know-how in installation
Small roof projects
Vs
Big projects
Opp’s in new markets
French-
speaking
markets inthe
Mediterranean
Opp’s in the development
of R&D projects
R&D centers,
other infraestr.
Joint research
projects
AlignmentwithSOLARTYSstrategy
ComplementaritieswithDERBI
WIN-WIN
INITIATIVES
AND SPIRIT

18. www.cluster-
development.com
EsadeCreapolis
Avenida de la Torre Blanca, 57
Sant Cugat del Vallès 08173
Barcelona, Spain
+34 93 587 86 36
International contact
Albert Solé – albertsole@cluster-development.com
Eduard Ribas – eribas@cluster-development.com
Business dynamics change, new
successful strategies emerge… the way we
work with clusters must evolve too