Download Study of Enterprise Development Strategy with Industrial Clusters

Study of Enterprise Development Strategy with Industrial Clusters
Based on Circular Economy Theory∗
WANG Haidong, LI Cuixia
College of Economics and Management, Northeast Agricultural University, P.R. China, 150030
[email protected]
Abstract: Based on the circular economic theory, for the development problems about industrial
clusters of small and medium-sized enterprises, the author puts forward the measures that industrial
clusters of SME should take circular economy road, and think that is the inevitable choice to achieve
sustainable development for them. This paper studies the strengths, weaknesses, opportunities and
threats of the development of SMEs industrial clusters by the SWOT analysis, and finally puts forward
the development strategy on SMEs industrial cluster based on theory of circular economy.
Keywords: Circular Economy, Small and Medium-sized Enterprises, Industrial Cluster, Development
Strategy
1 Introduction
At present, there are a large number of small and medium-sized enterprises industrial clusters, such as
the footwear industrial cluster in Jinjiang, Fujian province, the cashmere industrial clusters in Qinghe,
Hebei province, the fur industry clusters in Xinji, Hebei province, non-woven industrial clusters in Peng,
Hubei province etc., and particularly "massive economy" in the areas of Zhejiang Province and
Guangdong "professional town economy", which are the best performance significantly. These regional
SME industrial clusters have become the driven power for regional economy, which lead local economic
growth, absorb a large number of rural surplus labor forces and speed up urbanization, industrialization
and economic development in the region of the dual structure of the catheter, thereby promoting regional
social and economic harmony.
Industrial clusters make enormous contribution to local GDP, but they also consume a large amount of
resources and environmental pollution seriously. Therefore, following the requirements of the mode of
economic growth, it is necessary to explore the development strategy on SMEs industrial clusters and
take the eco-industrial cluster development from the perspective of circular economy [1]. The
government established the scientific concept of development as the guiding ideology of economic
development in China's "Eleventh Five-Year", and made every effort to minimize the resource
consumption and environmental damage. This concentration will make new requirements for
development of the SMEs industrial clusters, that is to explore new mechanism for resource-saving and
pollution control to promote sustainable economic development based on the characteristics of industrial
clusters, from a circular economic point.
2 The Problem of Resources and Environment in SMEs Industrial Clusters
Development
2.1 Constraints of resource bottleneck for development of small and medium-sized enterprises
industrial clusters
Natural resources are relatively cheap in China, and pollution control costs are also not completely
∗
This paper is a result of phased research which funded by the Project of Outstanding
teachers in Heilongjiang province, “Research on the scale and effectiveness of dairy in
Heilongjiang Province”, Scientific and Technological Project of Harbin(2007AA9CT121).
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calculated into the product cost. Development of industrial clusters obtained natural resources without
consideration. In recent years, local industrial clusters in China experienced a large-scale resources and
energy crisis, such as Zhejiang, which was the one of the most active regions in China for the SMEs
industrial clusters development, but because of the plunder of water, electricity, coal, oil and other basic
resources, it has a shortage of resources in large-scale crisis. The lacks of water, electricity, and even
migrant workers have resulted in export orders could not be completed, and many foreign capitals have
already been forced to leave the relocation [2].
The problems of paper industry cluster are particularly serious in China, water used for the paper
industry that accounted as much as 47 percent water in Shandong province, but Shandong Province is
the most serious shortage of water resources, per capita is only 1 / 6 of the country's; At the same time,
with the rapid growth of paper industry in Shandong, as the paper-making raw material resources: the
supply of wheat straw is also very tight, many companies have to go to the Jiangsu, Anhui, Henan,
Hebei Province, even to the northeast to reed purchase. The development of Shandong‘s paper industry
clusters has been seriously affected. This situation not only happens in Zhejiang, Shandong, but also in
Shanghai, Jiangsu, Guangdong and other better development provinces, and in variety industries as well.
These situations are beginning to affect economic development and social stability seriously [3].
2.2 The environmental pollution problems caused by development of the SMEs industrial clusters
The majority of small and medium-sized enterprises industrial clusters are spontaneously formed, which
are relatively low starting point, enterprise awareness of business owners are mostly relatively weak,
without environmental protection. Enterprises continuously pursue the individual cost-effective as the
first goal, and ignore the overall environmental protection. Most of small and medium-sized enterprises
industrial clusters operates extensive mode of production with poor management and production
processes, as well as with cluster restrictions on foreign exchange of information, lack of high-tech
talent and so on. These finally resulted in serious pollution in the cluster focus regions. In the small and
medium-sized industries clusters, especially the leather, paper, chemical, and pharmaceutical industries
clusters lead to environmental pollution seriously. For example the paper industry in Shandong Province,
China's Bohai Sea Region, which is the first for emissions from industrial wastewater and chemical
oxygen demand of the industry .A number of small and medium-sized leather enterprises in Zhejiang
Province, owing to softening in the leather processing, chemical residue without any treatment directly
discharge into the drains, which made the serious pollution of underground water, and a devastating
damage. Another example is the IT industrial cluster in Guangdong province, due to the relatively
backward technology and equipment; it made the "e-waste" and other new types of environmental
pollution, which are serious problems [4].
3 The SWOT Analysis on Development of Small and Medium-sized Enterprises
Industrial Clusters based on the Concept of Circular Economy
3.1 Strengths
3.1.1 Environmental advantages
The environmental advantages are the most characteristic and the biggest advantages based on concept
of circular economy to develop small and medium-sized enterprises industrial clusters. In recent years
even in the future, environmental and ecosystem protection will be obtained our great importances,
which are the necessary conditions to achieve sustainable development. Emission production is main
channels for total emission of pollutants in China. The industrial "three wastes" is most important reason
for deterioration of the ecological environment; therefore, the reduction of industrial development is the
basic content of environmental protection, as well as main purpose of circular economic development [5].
Therefore, following the path of circular economy, the development of small and medium-sized
industrial clusters has natural advantages.
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3.1.2 Scale economy advantage
In these cluster model, the leading industry are often surrounded by internal business making a variety
of products for common output, and the division of labor between manufacturers is close and mutual
collaboration . Through the flexibility professional labor division, we can improve the work efficiency,
and thus bring scope economy. In such a mode, specialized production includes the following three
aspects: First, according to Adam Smith's view, the scope of market determines the professional level of
production. In competitive industry clusters, as a result of a competition between horizontal parallel, a
large number of specialized small and medium enterprises will be able to achieve the scale of production,
through their division of labor and cooperation, thereby reducing unit production costs [6]. Secondly,
with the expansion of clusters production scale, the reduction of fixed costs can focus on geographical
location, reduce the consumption of energy and raw materials and shorten the transport distance from
raw materials to products, thereby saving production and transportation costs. Third, along with the
cluster development .the local labor market not only attracts the free local labor force and professional
expertise to master the technical and management personnel, but also save the training of human capital
costs and management costs. In this way, it saves business group internal cost, and achieves scale
economy which cannot be gained by a single enterprise.
3.1.3 External economies advantages
External economy is made by Marshall, he thought that the clustering of similar businesses can increase
the number of the same departments of small and medium enterprises, and expand the overall size,
thereby enabling access to internal economies of scale to achieve co-operation. The specialized labor
division of SMEs in the relevant departments and trading in the process of working closely make
external economies of scope available. Followed this thought, after the establishment of small and
medium-sized industrial clusters, it not only make individual enterprises reduce production costs, but
also many services will be complementary and finally formation of scale and concentration of the
demand and supply, which will create a new group market to provide shared services and services
supporting the scale and scope of the external economy. At the same time, from the cluster function of
information gathered, group companies can also share the core industries, including product supply and
demand, cost, price, technology, quality, style and other market information. In addition, the groups can
share and enjoy sales network, scope and external economies, through various channels to achieve
clusters external economic effects.
3.1.4 Regional brand advantages
Through the establishment of a regional brand and improving marketing, enterprises in clusters can gain
the vertical integration profit: through the whole regional marketing, they create a market advantage.
Contrast with the effect of a single enterprise or brand, a regional brand image is more direct and
influential, because it is the aggregation and extraction of many corporate brands [7]. Through the
implementation of cleaner production, green purchasing from enterprises to enterprises, enterprises to
governmental, the industrial clusters improve the health level of green products, meet the consumer
needs and give the products and enterprises different image, to update the brand image of new cluster, at
the same time, enhance the competitiveness of the clusters.
3.2 Weaknesses
3.2.1 SMEs in their own disadvantage
Small and medium enterprises have serious problems with their own, such as family management,
non-scientific decision-making, and financial non-transparent and shoddy products, labor disputes,
which have a serious impact on the growth of their own. For small and medium-sized enterprises, it is
difficult to introduce modern management system; however, it is the most fundamental protection.
3.2.2 Weak independent innovation capacity of SMEs
The establishment and development of industrial cluster based on the concept of circular economy need
to pay a strong technical support. After the reform and opening, because scientific and cultural
knowledge of small and medium-sized operators and employees is generally low, and management
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innovation, market innovation, scientific and technological innovation ability is generally weak, and
awareness to establish a good cooperative relationship with scientific research institutions is not strong,
in addition, on the weakness of intermediary organizations, the exchange of information and technology
are imperfect, and we can not fully promote collaborative innovation between enterprises, and the lack
of intellectual property protection measures. So, technologies of SMEs are used for introduction or
imitate, not have the ability to adapt to the market design, only as a production and processing base.
Because of a serious shortage of independent innovation, optimization and upgrading of industries are
subject to greater constraints; their growth is greatly restricted [8].
3.2.3 Financing difficulties for small and medium-sized enterprise
The problem of financing for small and medium enterprises is well known. Historically, credit system
loans large enterprises asset-backed businesses, so many small and medium enterprises can not access
to capital needed for development. Small and medium enterprises based on circular economy have a
certain technology, but technology and progress will require the support of funds, the problem of
financing has seriously constrained the development of small and medium-sized industrial clusters.
、
3.3 Opportunities
3.3.1 State support the path of sustainable development environment
Sustainable development views includes the concept of circular economy, it is a part of the sustainable
development concept. Against this background, the policy of the country will support vigorously the
development of circular economy. Small and medium-sized industrial clusters are an essential
component of the economy to develop the national cycle.
3.3.2 The historic opportunity for industrial upgrading in China
After three decades extensive development, China has achieved economic growth, but at the same time,
accompanied by a low utilization rate of resources, environmental pollution problems and so on. The
main problem for China's industrial structure is that the supply structure don not adapt changes of
demand structure, and industry international competitiveness is weak, level of technology is low. For the
development of small and medium-sized industrial clusters, such a historical period has provided a
broad space for their development.
3.3.3 Support of the relevant theory at home and abroad
Circular economic theory, theory of small and medium-sized industrial clusters, all of which have given
rise to concern by including industrial economics, technology economics, management, economic
geography and other subjects, become the forefront of a wide range of research issues. Recycling
economy, SMEs industrial clusters are studied by various subjects from different angles, different
paradigm. A large number of theoretical and practical researches will provide strong technical support
for small and medium-sized industrial clusters to follow the path of development of circular economy.
3.4 Threats
3.4.1 Inadequate awareness
Most of industrial clusters in China are derived from industrialization of rural and community economic
development, the environmental awareness of these industrial clusters owner is very weak, they pursue
immediate economic interests as the goal, ignoring the environmental protection. While others are
planned by the government-led, as a result of the Government's own "short-sighted" act, neglecting the
environmental protection, and turn a blind eye to the phenomenon, "low scientific and technological
content, serious waste of resources, more environmental pollution "of industry clusters. Some people
think that recycling economy is the "Park to goods", which is not necessarily in line with China's
national conditions, even if current environmental pollution and wastage of resources are very serious,
business owners are not willing to be trying to circular economy.
3.4.2 Technology and equipment are backward
Here, technology and equipment are ones referred to environmental protection and pollution treatment.
As the sense is weak, very few groups of enterprises will increase in the purchase of advanced
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environmental protection technology and equipment decontamination, and even many companies
completely do not have such equipment and technology. For example, situations of waste dump without
any handling everywhere abound in some clusters in Zhejiang Province. It seriously damages the local
environment, and even threat to the life and health of residents. Behind the existing technology and
equipment, it also increased indirectly more cost and difficulties for the recycling economy development
of industrial clusters.
3.4.3 System is not matching
There are many parts to constraint the development of circular economy in our country’s current
economic system. Certain tax inhibited the development of circular economy, because the development
of circular economy usually requires paying a higher proportion of value-added tax. The business that
use cycle resources have lower cost of raw materials, value-added part is a higher proportion of it, then
value-added tax is paid according to the proportion of value-added; the resource tax is generally low in
China, resulting in low resource prices, and even it is not to spend money, then any resources will be
available. At present, economic mechanism and policy system have not yet been formed for the
development of circular economy industrial clusters in our country. In many areas, the indicators of
government officials assessment is local-based GDP growth, and obviously, development of industrial
clusters play important role in the promotion of the economy [9]. Therefore, many local governments not
only turn a blind eye to the problem of resources and environment caused by industrial clusters, but also
encourage wild-type group for the collection growth.
4 Development Strategies on SMEs Industrial Clusters based on the Theory of
Circular Economy
4.1Enhance the awareness of development of circular economy
To achieve those small and medium-sized industrial clusters follow the path of development of circular
economy, we shall do as follow: first of all, to convey the propaganda for ecological awareness ,
introduce ecological values, and set crisis awareness of whole society on the natural resources,
ecological environment, enhance sense of urgency for reservation of natural resources. To preach the
theory of universal type, a large number of statistical data, and against the success of two typical
examples, so that the public is fully aware that the environment is also a resource, ecological
environment and natural resources is an important capital for economic and social development, and it is
the destruction of productive forces to waste of natural resources and vice versa.
4.2 Establish a comprehensive system of laws and regulations
The law and institutionalization for Ecological development of clusters ensure strategies and policies to
implement effectively and smoothly, so that eco-development of clusters gets legal security. Any
behavior that does not comply with the act of eco-development will be taken the necessary
administrative and economic means. To start from the source, radically treat defects, as "while the
development side of governance" or "after the first development of governance", which bring seriously
damage to the ecological environment.
4.3 Improve development environment
Linking to the industrial cluster development and the overall economic and social planning, urban (town)
planning, conservation-minded society and environment-friendly society, we should consider
construction and layout, make strategy and implementation plan to improve eco-efficiency and the
development of circular economy for different types of industries and industrial development phase.
Speed up the city (town) industrial groups and the construction of industrial concentration; focus on
enhancing the integration of various industrial parks, to raise the level of industrial clustering.
Strengthening transport, electricity, water supply and drainage and other infrastructure, and creating the
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conditions for production accumulation, and guide enterprises in a relatively concentrated geographic
space. Actively guide and plan reasonable direction of land-use planning to encourage enterprises to
intensive land, to construct multi-storey factory building, giving priority to meet growing business needs
of small-scale sites, in order to provide space for the development of SMEs.
4.4 Establish environmental assessment system
Carrying out the policy of "prevention first" principle of environmental protection, we must prevent
major economic development activities and decision-making mistakes in planning and environmental
damage at a high level. A single environmental program assessment isn’t sufficient to protect the
environment, which was difficult to use resources sustainably. So, we should carry out environmental
assessment on major economic development activities and development planning to achieve controlling
pollution and ecological damage from the source. Coordinating the relationship between economic
development, social progress and environmental protection, this will promote more reasonable layout of
production factors and configuration of the productive forces.
4.5 Enhance the capacity of independent innovation
In different stages of development of industrial clusters, to break technology bottleneck for economic
development speedily, gradually establish technological innovation system of circular economy that is to
enterprises mainly, the government supports, and research and develop technologies of circular economy.
To speed up construction of the common technology-oriented service centers for small and
medium-sized, which is in line with local economic actives, positively develop information, technology
promotion and technical training and other services for circular economy. Supporting and encouraging
the enterprises and institutions of higher learning, scientific research institutions to join, such as creation
of key technologies, extension of industrial chain and related industries, breakthrough of key technology,
to enhance the level of recycling economy with high technology and advanced applicable technologies.
5 Conclusion
This article holds that the circular economy is inevitable choice to achieve sustainable development of
small and medium-sized industrial clusters. Through the SWOT analysis, the author shows some
strengths, weaknesses, opportunities and challenges in the development of China's small and
medium-sized industrial clusters. To develop small and medium-sized industrial clusters based on
circular economy, we should develop five strategies including enhancing the awareness of development
of circular economy, establishing a comprehensive system of laws and regulations, improving
development environment, establishing environmental assessment system and enhancing the capacity of
independent innovation.
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Author in brief and Contact information
WANG Haidong (1980-06-12), master, mainly engaged in industrial economics
E-mail: [email protected]
Tel.13796755099
LI Cuixia (1969-02), professor, doctoral tutor, mainly engaged in macroeconomic theory, policy and
industrial organization and structure
E-mail:[email protected]
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