Emerging business clusters in Russian toys & baby-goods industry

2. Emerging BusinessEmerging Business
Clusters in Russian ToysClusters in Russian Toys
Delhi December 1, 2010
Clusters in Russian ToysClusters in Russian Toys
& Baby& Baby--Goods IndustryGoods Industry
M.Y. ShereshevaM.Y. Sheresheva
National Research UniversityNational Research University ––
Higher School of EconomicsHigher School of Economics

4. The main goal: to enhance joint research projectsin the field of interfirm
networks and relationships http://noe.virtass.ru
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1. Integration
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2. Research 3. Knowledge diffusion
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etwork of Excellence
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Administrative support
Joint fund rising
Exchanging opinions
Coordination of research aims
Joint elaboration of methodology, etc.
Joint conferences & seminars
Joint courses & programs
Joint publications & case writing
Joint learning (LLL)
Collaboration with business
Joint field research
Cases and databases
Cross-Cultural comparisons
Creating new knowledge
New generation of researchers

5. Subject
Area
Methodology Data Results
Relationships within
clusters of enterprises
Secondary data analysis Branch statistics Recommendations for companies
and local administrations
Research project “Business clusters in Russia”
Laet
clusters of enterprises
in Russia
What are the motives and goals
of enterprises to interact?
Semi-structured interviews
with top managers
Field data
and local administrations
Publications
The first stage of the empirical study draws on the case method
Empirical material obtained in the form of in-depth interviews as well as by
means of observation and analyzing documents
On the next stage data will be collected in form of in-depth interviews as well as
in form of survey using structured questionnaire
As a result of gathered data analysis a “map” of Russian clusters will be drawn
and probably some “growth axes” in Russia will be revealed

6. IMP approach
Industrial MarketingIndustrial Marketing
and Purchasing
Group (IMP)
founded in 1976
an international network of
scholars consistently developing
the interaction approach

7. Interaction approach:
the market can be described as networks of
multidimensional exchange relationships between
business actors (Håkansson, Snehota, 1995; Gadde,
Huemer, Håkansson, 2003)
a single company and its successes and failures area single company and its successes and failures are
affected by the actions of those around it
to be an effective competitor in global economy requires
more cooperation and networking between firms, which
will lead to establishing or maintaining a marketing
competitive advantage (Morgan, Hunt, 1994)
collaborative relationship management is of crucial
importance (Ford et al., 2003; Håkansson, Ford, 2002;
Gemünden, Ritter, Walter, 1997; Ritter, Ford, 2004)

8. Cluster as a network of relationships
M.Porter (1990): "geographically proximate group of
interconnected companies and associated institutions in
a particular field, linked by commonalities and
complementarities and embedded on a specific territory“complementarities and embedded on a specific territory“
an inter-firm network located in a specific region
business cluster as a specific type of inter-
organizational network, a kind of “bargaining
configuration” (Ruigrok, van Tulder, 1995) of quasi-
integrated actors and therefore as a system of close long-
term relationships causing synergy
Companies are not the only actors in a cluster

9. Specialized Resources
Technologies Key products
Geographic concentration of interconnected businesses
and associated institutions in a particular field
The cluster members are companies having complementary or
similar resources & activities, research community, financial
institutions, institutions for collaboration, government
Specialized Services
End customers

10. Emergent process vs. the result of
an explicit engineering activity
“The first involves emergent processes, developing
from changes in the environment and a common
interest and similar views among potential members.
In the second, the process appears to be engineered -
a triggering entity actively recruits potential members
In the second, the process appears to be engineered -
a triggering entity actively recruits potential members
to join in the consortium” (Doz, Olk, Ring, 2000)
it makes little sense to speed up clustering if there are
no economic motives or goals for the firms to interact
on the other hand, if potential cluster members have
clear motives to elaborate a network of relationships,
then cluster may be successful

11. District Specialization
Shi Ling, Luo Cun Zheng Leather products
Hua Du, Fan Yu Jewelry
Hua Du, Shi Qu Cars, Motorcycles
Zeng Cheng Jeans
China: Guang Dong clusters
Zeng Cheng Jeans
Guan Yao Toys
Zhang Chai, Xi Hao Textile
Le Cong Long Jiang, Hou Jie, Da Yong Furniture
Cheng Cun Bonsai
Ping Zhou Zheng, He Shan Shoes
Shi Wan Nan Zhuang Ceramics
Hu Men, Kai Ping Shi, Sha Xi Clothes
Shi Long Electronics

12. Guan Yao toys cluster
Guan Yao: a leading center of toys production in China
Ads &
PR
Rubber wheels
Remote control
Metal body
Gears
Raw
materials
Delivery
27 specialized
manufacturing companies
Hua Xuan (130 mln. toy
cars per year)
Toy cars with remote
control Hua Xuan
Gears
Batteries
Advanced training centers
Design schools
R & D
Center: new
technologies
Exhibitions
Branded
retail stores
E
x
p
o
r
t

13. China: 75% of
the toys world
market
Russia?

14. ELEVE TIME ZOES
Russian Federation
ELEVE TIME ZOES
A very diverse climate, ranging from sub-tropical at
the Black Sea to extremely continental in Siberia142
million citizens, 21 republics, 49 regions, 10
autonomous districts…
Dozens of peoples and languages
A huge quilt of mores, religions, buying habits, per-
capita ibution infrastructures, etc. incomes,
distribution infrastructures, etc.
"Russia is a riddle wrapped in a mystery inside an enigma"
Sir Winston Churchill

15. Russia: Market environment
Period of active growth
Fragmented competition
Low transparency of legal
system
Weak enforcement of
contracts
Invest
Systems
Market
Brands
Products
Time toTime to
contracts
Shortage of suppliers
Lack of information on
potential partners
High propensity to
opportunistic behavior
Shortage of skilled HR
recourses
Products
Innovations
Gain
Market share
Brand positions
Critic mass
Advantages

16. Russian government and industry organizations have now turned
to the concept as a means to improve the competitiveness of one
or several specific business sectors and to stimulate regional
economic growth
Recent development in Russia shows great interest of regional
administrations in cluster policy
Federal government tends to pay the main attention to building
Cluster policy in Russia
16
Federal government tends to pay the main attention to building
huge state-private holdings, in case of support clusters - to pick
up “champions”
The Ministry of Industry and Trade of the Russian Federation
lists 25 cluster initiatives in automotive industry, shipbuilding,
aircraft building, engineering & electronic (in 21 regions of
Russia). UNIDO program in Russia also aims to support cluster
in automotive indusrtry. Only 2 regions declared cluster initiative
in ICT (Dubna & Nizhny Novgorod).

17. Data collected in May-August 2009 by means of in-
depth interviews (60):
top managers - 32
local authorities, research & educational
Empirical data from Russia:
HSE research 2009
17
local authorities, research & educational
institutions, etc - 28
Geography: Central Federal District, Ural Federal
District, Privolzhsky Federal District
Results compared with EU data
Golovanova et al, 2010.
Russin Journal of Management,. Vol. 8. o. 1.

18. Most Russian companies demonstrated no incentives
to cooperative behaviour
Companies in ICT sector are more inclined to build
sustainable relationships than those in traditional
branches of Russian economy
Empirical data from Russia:
HSE results 2009
18
branches of Russian economy
There is every indication of benefits gained by
collaborating companies – in spite of the fact that top
managers asess potential benefits of cooperative
behaviour as quite low
Local authorities are highly sceptical concerning
cluster initiatives (some asked “What is cluster?)

19. Collaboration wih competitors
67
35
42
40
33
40
42
25
25
30
42
30
8
20
25
35Joint proposals to improve economic
pokice of Russian Government
Joint use of R & D results
Joint exploitation of material assets
(buildings, transport infrastrusture etc)
Joint programs of education and / or
advanced training
19
8
40
33
10
17
10
33
10
25
25
0
35
33
35
42
40
0 20 40 60 80 100
Joint business projects
Exchange of best managerial practices
Exchange of marketing information
Exchange of technological
information
Use in ICT
Use in traditional brances
Ready to use in ICT Ready to use in traditional brances

20. Pilot study conducted by means of in-depth interviews
with top managers in Russian toys & baby-goods
Industry. Geography: Central Federal District, Ural
Federal District, Privolzhsky Federal District. Sector:
Toys & Baby-Goods Industry.
Empirical data from Russia:
LaET research 2010
20
Toys & Baby-Goods Industry.
A convenience sampling approach: small and medium
producers from different segments of the Russian toys
& baby-goods industry as well as the main specialized
retailers and wholesalers working on the market and
some industry associations leaders. In total, twelve in-
depth interviews were conducted

21. Empirical data from Russia:
LaET research 2010
Company Location Sphere of activity
Distributor 1 St.Petersburg Remote control cars and battery operated railways
Distributor 2 Moscow Metal toy cars
Distributor 3 St.Petersburg Wide range of goods
Producer 1 Moscow Wooden board games
21
Producer 1 Moscow Wooden board games
Producer 2 Moscow Toys facilitating mental development
Producer 3 Moscow Children’s garments
Producer 4 Moscow Creative sets
Producer 5 Smolensk Toys
Retailer 1 Togliatti Cash & carry chain
Retailer 2 Moscow Specialized toys & baby-goods retail chain
Wholesaler 1 Moscow Balloons & toys
Wholesaler 2 Moscow Wide range of goods

22. In the Russian toys & baby-goods sector relationship issues are
increasingly becoming more important
Incentives to collaborate appeared to be quite strong.
All the respondents pointed out the decrease of actors’ number
in their supply chains. Most of them are sure that such
development leads to improving mutual relationships between
Empirical data from Russia:
LaET results 2009
22
development leads to improving mutual relationships between
Russian toys & baby-goods supply chain members and thus
delivering appropriate value to customers.
In the industry one can now observe a lot of mutually oriented
interactions between two reciprocally committed parties
tending to become multilateral.
At the same time, the flow of information in the supply chain is
far from easy. Many respondents underline the fact that they
often regard the information from their partners as something
needed additional analysis and examination.

23. Our study registered intensive mutual relationships in
Moscow region supported by the Russian ational
Toy Association (RNTA) and guided step by step
towards system of explicit and implicit contracts
between local actors dealing with toys production as
well as related and supporting industries.
Empirical data from Russia:
LaET results 2009
23
well as related and supporting industries.
RNTA and Association of Children’s Goods Industry
(ACGI) are public non-commercial organizations
which unite the professional industrial communities of
manufacturers, retailers, and distributors in the
Russian children goods market.
Actually RNTA and ACGI make up the second level
of Moscow toys cluster structure

24. Emerging Toys Cluster in Moscow Region
Components
Production
Equipment
Production
Raw
Materials
Toy Producers
(divided by kinds of raw materials
used):
1. Plush & Fabric toys (30).
2. Plastic toys (25).
3. Paper & Cardboard toys (25).
4. Wooden toys, papier-mâché toys
(22).
5. Rubber toys (6).
6. Metal toys (3).
Market and Nonmarket
Support Services:
Development support
Design & package
Certification services
Warehousing logistics
Transport logistics
Customs logistics
Marketing & PR
Research institutions
Specialized mass media (13)
Industry and
Professional
Associations:
• RNTA (1)
• ACGI (1)
6. Metal toys (3).
7. Ceramic, Porcelain & Faience toys
(3).
8. New Synthetic toys (3).
Specialized mass media (13)
Exhibitions & fairs supporting
services (8)
Tech consulting
Financial consulting
Law consulting
Specialised education:
• College of games and toys
(1)
• Industrial handicraft
Colleges (5)
Higher edication:
• No (0)
Museums:
• State toys museum (1)
• Private toys museum (1)
• Doll's and puppets (3)
Firm-level competitiveness:
•Market knowledge
•Innovation
•Factor availability
• National brand
State Government
Strustures:
• Moscow Local
Department of SME
Problems
• Moscow Local
Department of
Production
• Chamber of
Commerce and
Industry
Selling & Export Agents:
150 firms

25. From static to dynamic cluster
Static cluster Dynamic cluster
Isolated firms and lack of
competition
Lack of advanced suppliers
Basic human capital
Lack of trust and networks
Few supporting institutions
Local rivalry and international
competition
Specialised, local suppliers
Advanced training and
scientific infrastructure
Highly developed social capital
Due to specific features of general business environment process of
clustering is contradictory, and this is common to all clusters in Russia
Toys custer in Moscow region is a static cluster (The Cluster Initiative
Greenbook by Örjan Sölvell, Göran Lindqvist, & Christian Ketels)
H1: The main trend will be from static to dynamic cluster
Further research is needed understanding the formal and informal
connections of cluster members
Few supporting institutions Highly developed social capital
Advanced institutions for
collaboration and CIs

26. Thank you for your attention!Thank you for your attention!
Web: http://www.hse.ru/
Web: http://noe.virtass.ru
Web: http://lsf.hse.ru/
e-mail: msheresheva@hse.ru
Marina Sheresheva