Local Competitive Advantage in Kundasale

1. Local Competitive Advantage in Kundasale

2. Structure of this presentation • What is “local competitive advantage”? • What is the diagnostic of Kundasale? • What are the proposals to promote competitiveness and growth in Kundasale?

3. 1.What is “local competitive advantage”?

4. Local competitive advantage: The success of companies depends on: • their own effort • strong interaction with other companies (suppliers, customers, other companies) • strong interaction with supporting institutions (training, technology, information, finance, etc.) • many of them are in close proximity • it is easier to work with companies and institutions nearby • intense, constructive interaction between local companies and institutions improves competitiveness

5. Understanding local competitiveness:Michael Porter‘s „Diamond“ Main companies and rivalry * A local context that encourages appropriate forms of investment and sustained upgrading * Vigorous competition among locally based rivals Supporting institutions Demand conditions * A core group of sophisticated and demanding local customers * Unusual local demand in specia- lized segments that can be served globally * Customers whose needs anticipate those elsewhere Factor (input) conditions * training * technology * finance * infrastructure Related and supporting industries * A critical mass of capable local suppliers * Clusters instead of isolated industries

6. What is LOCA? • An initiative • to conduct a quick diagnostic of a local economy (in this case: Kundasale) • to formulate practical proposals how to improve the competitiveness of companies • to launch practical activities which quickly improve the competitiveness of companies

7. 2.What is the diagnostic of Kundasale?

8. General observations:Strong points and opportunities • Located close to major market = Kandy • Manpower with traditional skills • Good competitiveness of a small number of local companies • certified to ISO 9000 or preparing for certification • Many untapped business opportunities • Availability of supporting industries (transport, communication etc.) • Availability of supporting institutions and business development services

9. General observations:Weaknesses • The majority of companies • uses poor, very outdated technology, and do not even use it efficiently • are not very competent in management, accounting etc. • overestimate their product quality • are production-oriented instead of market- and customer-oriented • know little about the preferences of consumers • are not really competitive!

10. Where companies want to be Where most companies in Kundasale are The main problem of most companies in Kundesale High efficiency = low cost Medium efficiency = high cost Low efficiency = very high cost Low quality Medium quality High quality

11. 3.What are the proposals to promote competitiveness and growth in Kundasale?

12. Wood products industry • Challenges: • not very efficient (e.g. much waste of materials) • inefficient government regulations • cutting • transport

13. Wood products industryProposal #1: Non-product output • Purpose: improve efficiency of production process • Proposal • ESSP offers to make specialist on production process improvements (reduction of non-product output and wastage) available • if the wood nucleus explicitly states its willingness to accept this offer

14. Wood products industryProposal #2: Regulations • ESSP documents problems with regulations • ESSP produces a brief document describing the inefficiency of existing regulations • ESSP facilitates a workshop with businesses and regulatory bodies to brainstorm on options for more efficient regulation • ESSP makes proposal for more efficient regulation to national government

15. Mushroom producers • Challenges: • market access • pests and diseases • not enough seeds

16. Mushroom producersProposal #1: Market access • Association collects recipes • Association prepares a collection of 15 recipes • Association has recipes printed: • leaflets in A8 format (7.4 x 5.2 cm) • 1 Recipe included in each package

17. Mushroom producersProposal #2: Market access • There is a market opportunity for dried mushrooms • ESSP can facilitate access to mushroom drying companies • Association may request such facilitation from ESSP • address Mr. Kumaragamage or Mr. Attayanake before end of January 2003

18. Mushroom producersProposal #3: Pests and diseases • ESSP offers to organise visit to a mushroom producer with outstanding performance • address Mr. Kumaragamage or Mr. Attayanake before end of January 2003 • After this visit, ESSP offers to facilitate training course on pest management

19. Mushroom producersProposal #4: Not enough seeds • This is a business opportunity! • there is demand for larger quantities of seeds • there is demand for more varied seeds • Why isn’t there a business-minded person who takes up this opportunity?

20. Brassware industry • Challenges: • not very efficient (e.g. high energy cost) • access to market

21. Brassware industryProposal #1: Efficiency • SEEDS and ESSP are willing to organise a meeting with brassware producers to define specific demands • Possible options: • accountancy / bookkeeping / cost calculation training • process efficiency / non-product output training • address Mr. Rupasinghe (SEEDS) or Mr. Rattanayake (ESSP)

22. Brassware industryProposal #2: Efficiency • ESSP offers to organise visit of Kalapurea brassware producers to Udunwera brassware producers • to get first-hand information on new production process: seamless products • address Mr. Rattanayake (ESSP)

23. Brassware industryProposal #3: Market access • ESSP offers to facilitate contact between brassware producers and tourist guides, hotels and tour operators to have tourists visit production sites • which are an attraction for foreign tourists (very traditional production method) • where tourists can buy products • Brassware companies in Kundasale should contact ESSP to make appointment to co-ordinate this

24. Lime producers • Challenges: • not very efficient, very traditional technology • access to market

25. Lime producersProposal #1: Efficiency • ESSP offers to make lime production specialist available to group of companies • Group of at least 8 companies should express interest with ESSP by 03 January 2003 • address Mr. Rattanayake

26. Women entrepreneurs • Challenges: • improve skills • improve market access

27. Women entrepreneursProposal #1: Skills • A Nucleus for Beauty Culture will start working in January 2003 • Opportunities: • find sponsors for fact-finding trips abroad, e.g. India • A Nucleus for Cutfoliage & Plant Nursery started already

28. Supporting institutions • Challenges: • banks are not very responsive to the demand of small business • many institutions are not business- and customer-oriented

29. Supporting institutionsProposal #1: Banks • CCICP, Women’s Chamber organise quarterly forum with entrepreneurs and financial service providers, sponsored by banks • to inform entrepreneurs about available financial services • CCICP, Women’s Chamber organise information seminars on new financial instruments as they become available (e.g. factoring)

30. Supporting institutionsAnnouncement #1 • In January, there will be an Open Day at the Faculty of Engineering and the Engineering Design Centre • to inform about the services offered by the Faculty and the EDC • to strengthen the ties with the private sector • Observe announcement of date in the media!

31. Supporting institutionsAnnouncement #2 • In the first quarter of 2003, ESSP will launch a Central Regional Business Development Service Registry • watch out for the announcements for the launch event!

32. Thank your for your attention!

33. This presentation was elaborated by • Dr J Meyer-Stamer (PACA/LOCA consultant) • Ms S Lehmann (ESSP) • Mr D Rattanayake (ESSP) • Mr J Rupasinghe (SEEDS) • Ms S Randeni (CPWCIC) • Mr S Hingulwala (CICCP)