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An Intermediary – Basic Concepts of a Cluster or Network

An Intermediary – Basic Concepts of a Cluster or Network. There is no uniform definition for each of the following concepts a Cluster a Business Cluster Porter´s Diamond Framework a Micro-Cluster (in Tourism) Clustering Horizontal, Vertical, Diagonal a Network

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An Intermediary – Basic Concepts of a Cluster or Network

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  1. An Intermediary –Basic Concepts of a Cluster or Network • There is no uniform definition for each of the following concepts • a Cluster • a Business Cluster • Porter´s Diamond Framework • a Micro-Cluster (in Tourism) • Clustering • Horizontal, Vertical, Diagonal • a Network • Global, National, Regional, Local • Theme-based • Networking • Horizontal, Vertical, Diagonal Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  2. An Intermediary – Developing Cluster Concept “ Generally, the more industries are located in a given area  the greater the external economies become possible.” • Mountjoy 1966- • The principals of cluster analysis have their origin in traditional location theories established in 1960s • Michael Porter revised the cluster concept, also known as a competitive cluster, industry cluster or Porter's cluster, in 1990. Source: Ewen M., Micro Clusters www.Wikipedia.com Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  3. An Intermediary – Developing Cluster Concept • Clusters are geographic concentrations of interconnected companies and institutions in a particular field linked by commonalities and complementarities (Porter 1998) • Clusters are geographically bounded concentration of interdependent businesses with active channels for business transactions, dialogue and communications and that collectively shares common opportunities and threats (Rosenfeld 1998) Source: Ewen M., Micro Clusters www.Wikipedia.com Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  4. An Intermediary –Clusters and Global Competitiveness • Michael Porter claims that clusters have the potential to affect competition in three ways: 1. by increasing the productivity with which companies can compete, nationally and globally in the cluster 2. by driving innovation in the field 3. by stimulating new businesses in the field • Clusters are internationally/globally competetive • The companies which belong to clusters have been proven to be globally competetive • Globally competetive clusters have evolved during tens of years and they ´ve existed before they were even named ”clusters” Source: www.wikipedia.com and Mäkinen H. Klusteri vai verkosto? Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  5. An Intermediary in a Network - Clustering • A Tourism Cluster is • A Structurewhich consists of companies/actors joint linkages and interdependencies in the value chain in producing products, services and innovations • A Tourism Clustering is • The Processused by the companies/actors in the cluster to extract greater commercial benefits in operating with different ways to utlise the synergies Source: Ewen M., Micro Clusters www.Wikipedia.com Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  6. An Intermediary –Different Clusters 1. Geographical Cluster • a Cluster of businesses operating together within the same geographical area 2. Sectoral Clusters • a Cluster of businesses operating together within the same commercial sector e.g. tourism 3. Horizontal Cluster • interconnections between businesses in sharing resources e.g. knowledge management 4. Vertical Cluster - i.e. a supply chain cluster Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007 Source: www.Wikipedia.com

  7. An Intermediary –Cluster or Network –The Umbrella Concept The Cluster concept can be considered the upper “Umbrella” concept • A cluster can consist of numerous networks which are different from each other according to formality, type, size, age, tightness etc. A CLUSTER Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007 Source: Mäkinen H. Klusteri vai verkosto?

  8. An Intermediary on the Borderline Producers of Knowledge = Educational and Research Institutes Substance = The Information flows of The Basic Knowlidge Relevant to Business Small Companies Big Companies Medium Companies An Intermediary on a Borderline: knowledge, information, know-how Strong Interaction and Willingness to Develop Technology The Structure of the Region = The Control Mechanisms Dynamic Components = Unification of Strategies Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  9. Consumer Individual Local, Regional, National and International Levels Tourism Network “To Destination” Consumer Business Company Consumer Group Consumer Intermediator Consumer Travel tourism Company Intermediary Travel Agency National and International Levels Regional Level contract Destination Accommodation Company or Chain contract Travel Producer DMC = Destination Management Company Service Producer Regional Level Reindeer Farm Husky Farm Samish Village Subcontractors Local Level Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  10. Horizontal Network in Tourism Operating: • in the same Business field • on the same geographical area • Same and different size organizations • chains, networks, co-operative associations • Making agreements, settling unified procedures between companies operating in the same stage of the value chain DMC = Destination Management Company Service Producer Reindeer Farm Husky Farm Samish Village Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  11. Horizontal Network in Tourism • Most common and easily recognised type of cluster formation • Occurs in: • similar or alike companies from the stage in the value chain for the same industry locating in a same geographical area • companies are competitors, selling products and services using similar productive resources • Their pools are: • the potential customer availability • labour supply • shared information and infrastructure • reducing costs in concentation Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007 Source: Ewen M:, Micro Clusters

  12. Horizontal Network in Tourism • Can lead to competition problems, if the co-operation causes negative influence to • pricing (too low prices) • production (stuck with the same content) • innovation (how to ensure, if the volumes are high?) • product selection and –quality (through monopol) • Significant economical benefits could be reached in terms of: • diving risks through co-operation • save costs • combine know-how • benefitting faster from innovations Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  13. Vertical Network in Tourism • Operating • usually within the same industry supply chain • co-operation not necessarily permanent • situated in the same/different geographical area • targeted markets and areas also define this • is the product/service sold outside (outbound Tourism) or inside (inbound Tourism)‏ Intermediator Travel Agency National and International Level Regional Level contract Destination accommodation Company or chain Source: Boxberg, Komppula. Matkailutuotteen markkinointi- ja jakelukanavat. 2001 Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  14. Vertical Network in Tourism • The close proximity between companies • minimizes logistics and distributional costs • may help to concentrate labour supply • workforce skills • market information • If vertical agreements are made between competing companies, they have to be evaluated according to the principals of horizontal agreements • For example it is forbidden to make contracts that aim in restricting competition by • Rising the prices • Limiting the production • Dividing the customers Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007 Source: Ewen M:, Micro Clusters

  15. Diagonal Network in Tourism - entitles networks consisting players of several types and sizes - each player involved brings added value to the product or activity National and International Level Intermediator Travel Agency contract Destination accommodation Company or chain Regional Level Regional Level DMC = Destination Management Company Service Producer Reindeer Farm Local Level Subcontractor Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  16. Diagonal Network in Tourism • Clustering in which there is increasing concentration of complementary (or symbiotic) companies • Each company adds value to the activities of others even though their products may be quite distinct and clearly belong to other industry classifications • Occurs when where companies working together create a bundle of separate products and services that the consumer effecively purchases as a single item Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007 Source: Ewen M:, Micro Clusters

  17. The Optimal Toursim Network Horizontal Network Optimal Cluster • The optimal outcome for an industry • based network: • a variety of companies operating across all three dimensions • to maximaze the gains in their location in co-operation Diagonal Network Vertical Network Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007 Source: Ewen M:, Micro Clusters

  18. car Intermediation – Dynamic Packaging flight hotel • common packaging in eBusiness • combines various travel products and services • package is tailor made, built according to customer wishes • more flexible on it’s refund, change and cancellation conditions • calculation methods in purchase are various: may be used with tourism producer prices, allotments and special agreements (codes) excursion Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  19. car flight Intermediation – Dynamic Packaging hotel • Producer Price: • price which can be used in package building; demands certain conditions • conditions are defined by producers and their agreements in product network • for example minimum or maximum duration of stay in the destination • Intermediary’s role as a producer has • grown through dynamic packaging • package tour –product • package tour -legislation excursion Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  20. Intermediation in Lapland –Accommodation chain • a powerful developer of the business in Finnish Lapland • Chaining process has created: • Many diverse ways of co-operation • Vertical, Diagonal and Horizontal with the national producers and services: www.lappiin.fi • Horizontal with the regional and local players: • Combining products/suppliers within the region • Improved the visibility and recognition internationally • Foreign co-operation partners Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

  21. Intermediation and distribution channels Source: Finnish Tourism Board CUSTOMERS ABROAD INTERMERIARIES ABROAD INTERNET, RESERVATION SYSTEMS TOUR OPERATOR ABROAD A is independent with Internet. B, C, D work together using traditional way DMC OR INCOMING AGENT AT DESTINATION E works alone in tra- ditional channel. F sells directly abroad. G, H have co- operation and sell directly to Tour Operator abroad REGIONAL TOURISM BUSINESS COMPANIES Intermediaries. RAMK Hanni-Vaara & Tekoniemi-Selkälä 2007

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