TCI2013 The Athletic and Outdoor Cluster in Portland

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By Joe Cortright, Impresa, USA, presented at the 16th TCI Global Conference, Kolding 2013.

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TCI2013 The Athletic and Outdoor Cluster in Portland

  1. 1. The Athletic and Outdoor cluster in Portland Joe Cortright Business Summit: Stretegic Innovation Partnerships 4 September
  2. 2. Oregon’s Athletic & Outdoor Cluster September 2013 Project funded by Portland Development Commission, Oregon Business Development Department, Oregon Business Council Joe Cortright, Impresa, Inc.
  3. 3. Roadmap Definition Metrics Value Chain Industry Structure & Rivalry Evolution Implications
  4. 4. Definition Athletic & Outdoor Cluster Firms that design, produce and market apparel, footwear and related equipment for sports, recreational and casual use
  5. 5. Core NAICS Codes for Athletic & Outdoor Cluster NAICS Code Sector Name 315 Apparel Manufacturing 3162 Footwear Manufacturing 33992 Sporting and Athletic Goods Manufacturing 42391 Sporting and Recreational Goods and Supplies Merchant Wholesalers 4243 Apparel, Piece Goods and Notions Merchant Wholesalers 5414 Specialized Design Services 3322 Cutlery and Handtool Manufacturing 33699 Motorcycle, Bicycle, and Parts Manufacturing Note: Not an exclusive list of firms that are included in the cluster; firms in other NAICS categories, for example, professional services, are part of the cluster, but not the “core.”
  6. 6. Footwear
  7. 7. Apparel
  8. 8. Gear and Tools Most US Knives are designed or manufactured in Portland Leatherman, Gerber, Kershaw and Others
  9. 9. Related Industries
  10. 10. Supporting Industries Marketing/Advertising/ Branding IP Attorneys IT Logistics/Inventory Management Packaging Design Marketing Distribution Product Design Sustainability Industry analysts
  11. 11. Orientation
  12. 12. Methodology Statistical Analysis Focus Groups and Interviews On-Line Survey
  13. 13. Survey Methodology Online business survey 80 responses Response rate: 21.7% Response rate, core firms: 19.6% Response rate, service firms: 29.3% Questions Firm history: founding & entrepreneurial background Geography of business partners Interactions with local customers/users 14
  14. 14. Key Metrics 14,000 Employees 700 firms with a payroll 3,200 “non-employer” firms Average wage: $82,700
  15. 15. High Wages $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 1st Qtr Metro AverageIndustry Average
  16. 16. Industry Characteristics •Non-Durable •Fashion and Performance •Globalized, Outsourced Manufacturing •Some Technical Differentiation •High Marketing Component •Dominant Brands, Niche Players
  17. 17. A Global Marketplace Sales by Market Area Company U.S. Rest of World Nike 34.1% 65.9% Adidas 23.3% 76.7% Columbia 55.2% 44.8% LaCrosse 94.8% 5.2% Note: For Adidas U.S. data covers is N. America. Source: Company Annual Reports
  18. 18. Advertising Expense Company Amount Percent of Sales Nike 2,351.0 12.3% Adidas 2,000.6 13.2% Columbia 65.2 4.9% LaCrosse 3.1 2.2% Nike: includes endorsement contracts. Amounts for Adidas converted from Euros to Dollars at 1.40 dollars/euro
  19. 19. Patent Analysis Patents by Firm Market Share of Patents in Key Classifications Time Series data on patents Relative contribution to Oregon patenting
  20. 20. Footwear Patents Footwear Patents (Class 36), by State, 1990 to 2010 1 Oregon 274 2 California 239 3 Massachusetts 182 4 Washington 72 5 Florida 54 6 Michigan 54 7 North Carolina 49 8 New York 48 9 Ohio 44 10 Vermont 44
  21. 21. Athletic & Outdoor Cluster Characteristics and Value Chain
  22. 22. Athletic & Outdoor value chain Source: adidas 2009 Annual Report, page 88
  23. 23. Portland: high value functions Source: adidas 2009 Annual Report, page 88 Portland specializes in these steps in the value chain
  24. 24. Interactions with local customers 29 completely unimportant somewhat unimportan t neither unimportant nor important somewhat important extremely important Valid N Material development 17.7% 9.7% 17.7% 33.9% 21.0% 62 Material improvement 12.9% 11.3% 19.4% 37.1% 19.4% 62 Visual design & styling 4.8% 3.2% 12.7% 25.4% 54.0% 63 Feedback on product concept & prototype 7.9% 4.8% 11.1% 25.4% 50.8% 63 Testing products 7.9% 7.9% 11.1% 25.4% 47.6% 63 Brand image 4.8% 3.2% 14.3% 27.0% 50.8% 63 Suggestions & ideas for new applications 8.1% 4.8% 17.7% 38.7% 30.6% 62 How important are each of the following interactions with local users/consumers to your company`s development of products (Please choose one rating in each row)?
  25. 25. Trade Flows Donguan Los Angeles Memphis Container to LA Rail to Memphis Portland
  26. 26. Athletic & Outdoor Value Chain Function Location Wage Production China $2 to $3/hour Distribution Midwest $12-14/hour Design, Finance Marketing, Mgt. Portland $40/hour
  27. 27. Firm Structure, Strategy and Rivalry
  28. 28. Portland’s Big Three Firm Portland Worldwide Nike 5,700 34,300 Columbia 1,500 3,100 Adidas 800 38,982
  29. 29. Rivals
  30. 30. Interfirm Labor Mobility Workers at incumbent firms, 2008 8,490 Workers moving to other Oregon firms 1,767 (20.8%) To other Athletic & Outdoor cluster firms 295 To other incumbents 133 To startups 162
  31. 31. Competitive Advantage Design with fashion and performance Highly talented workers The local innovative milieu Worker/Users Active Living “The Hybrid Lifestyle”
  32. 32. Self-Reinforcing Lifestyle Talent Culture Cluster
  33. 33. U. S. Competitor Regions Principal Athletic & Outdoor Competitor Regions, Employment and Location Quotients, 2008 NAICS 315 3162 4243 43434 Industry Apparel Footwear Apparel Wholesaling. Footware Wholesaling Portland 500 (0.32) 345 (2.77) 6,017 (5.17) 5,246 (24.87) Los Angeles 63,010 (7.31) 786 (1.14) 23,309 (3.6) 3,557 (3.04) New York 28,634 (2.32) Boston 1,551 (0.42) 929 (3.13) 3,916 (1.41) 866 (4.99) Seattle 1,621 (0.63) 503 (1.44) San Francisco 3,148 (1.02) 2,051 (0.89) 419 (1) Boulder 71 (0.63) 866 (1.44) Memphis 295 (0.32) 1,851 (2.69)
  34. 34. Evolution
  35. 35. Physical Activity Compared to the average for the US, Portlanders are: Twice as likely to go camping 60% more likely to go hiking or backpacking 40% more likely to golf or hunt Region ranks last in theme park attendance Oregonians rank lowest in sedentary life styles and 2nd highest of vigorous physical activity
  36. 36. How it started • In the late 60s the jogging craze takes off in many towns led by Eugene Oregon • A guy starts selling Japanese running shoes out of the back of his station wagon
  37. 37. Emergence of firms in Portland, Oregon Source: Portland Athletic & Outdoor Industry Research Project 42 Nike Inc. Columbia Sportswear adidas America Sports Inc. Moved to PDX: Yakima Racks (2004) Keen (2006) Icebreaker, Li Ning (2007)
  38. 38. 1980s: Nike`s trans- formation into a global brand 1990s: Competitors move to PDX, esp. adidas America 2000s: Expansion & diversification of industry through spinoffs & new firms moving to region Three Phases Source: Portland Athletic & Outdoor Industry Research Project 43 Nike Inc.
  39. 39. Athletic and Outdoor Cluster
  40. 40. Micro-foundations of Clusters •Labor Market Pooling •Supplier Specialization •Knowledge Spillovers •Entrepreneurship •Path Dependence and Lock-In •Culture •Local Demand
  41. 41. Creation •Labor Market Pooling •Supplier Specialization •Knowledge Spillovers •Entrepreneurship •Path Dependence and Lock-In •Culture •Local Demand
  42. 42. Growth •Labor Market Pooling •Supplier Specialization •Knowledge Spillovers •Entrepreneurship •Path Dependence and Lock-In •Culture •Local Demand
  43. 43. Today’s Competitiveness •Labor Market Pooling •Supplier Specialization •Knowledge Spillovers •Entrepreneurship •Path Dependence and Lock-In •Culture •Local Demand
  44. 44. Implications
  45. 45. Co-Evolution of industry and attitudes Phase I: growth of recreation and fitness as a socially valued and acceptable idea Phase II: growing informality in social and business relations (jeans, ties) Phase III: creation of new forms of recreation (windsurf, kiteboard, cyclocross, dragon-boat, etc. Phase IV: Hybrid lifestyle, blurring boundaries between work and social life.
  46. 46. Path dependence and selection Social interaction—the big sort More fun to be in a place where others share your values Externalities in consumption—need people with similar interests to maximize utility associated with consumption Cities are selection environments for new lifestyles
  47. 47. Example: Bike Culture(s) Spandex Fixies Cyclocross City Bikes Art Bikes
  48. 48. Bike Gallery Manifesto Live to Bike Eat to Live Work to Eat Bike to Work
  49. 49. Compensation is multi-faceted; more than money Direct compensation Future value (skills, reputation and contacts acquired) “Know how” and “know who” Consumption externalities
  50. 50. Cluster Drivers Duranton & Puga: Functional Specialization Von Hippel: User-Innovation Porter: Local Demand Saxenian: Business Culture Schoales: Alpha Cluster
  51. 51. Implications Economic & social innovation are complements Changes in values and lifestyles create market niches Portland’s culture is ahead of the curve in generating social innovations, and giving local firms insight into future market niches

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