Download Research on Regional Cluster Marketing of SME

Research on Regional Cluster Marketing of SME*
XIONG Kai
Business School Jianghan University, P.R. China, 430056
[email protected]
Abstract: SMEs (Small and Medium-sized Enterprise) play an essential role in the economy of all
countries around the world. Compared with the large organizations, SMEs face marketing problems and
need making decision for marketing. To overcome the disadvantages of SMEs in marketing, they should
form enterprise cluster to participate market competition and regional marketing. Compared with a
single small and medium-sized enterprise, the advantage of cluster marketing is obvious because
regional cluster can make use of its integration effects of marketing resources based on satisfying the
need of targeted market. The subjects of cluster marketing include the government of region, the
industry associations established by enterprises of cluster, as well as many affiliated enterprises within
cluster, and different subject plays a different role during the process of cluster marketing. From angle of
marketing, the core of cluster marketing is co-opetition.
Keywords: cluster marketing, SME, enterprise cluster, regional marketing
1 Introduction
In western country, the first scholar to study on region marketing is Philip Kotler, a US marketing master,
who really utilizes marketing theory into directing regional development practice. Kotler suggests
regarding the region as an enterprise, the perspective of regional development as a product which could
be operated, and by being introduced marketing theories and method of business, the region could be
impelled to a way of healthy and sustainable developmental. In 1993, Kotler published the book
Marketing Places [1], which discussed how US improves investing environment and tourist environment
to attract more investor and visitors. In 1997, extending the idea and technique of regional marketing
into the country level, Kotler, Somkid Jatusripitak and Suvit Maesincee printed the book The Marketing
of Nations[2], in which they brings forward that a country should be treated and operated as a special
enterprise, and may accumulate national wealth by way of strategic marketing management. In 1999, in
the book Marketing Europe Place, Kotler discussed how European nations attract investment and
enhance competence. In 2001, Kotler suggested marketing a country as a region or an entity or a product
and seeking for strategic methods to create national wealth in his book Marketing Country. In 2001,
Kotler published his book Marketing Asia Places again [3], in which he discussed issues about how Asian
countries or areas carry through regional marketing all over the world to gain the market opportunities
and competence advantage. According to the experience of many rapid developed areas, Kotler 2003
thought that every area need integrate all the resource by marketing measures and form a unique style
and ideology in order to satisfy the needs and expectation of investors, new enterprises and visitors
under the condition of economy globalization. From viewpoint of Kotler, “promoting regional
development by marketing has already been a dominant economic activity.”
In China, Wei Shouhua & Shao Dongtao (2002) defined the conception of regional cluster marketing,
analyzed the necessary to develop cluster marketing, and put forward the ways to improve regional
marketing mode[4]. Tao Jinguo (2003) studied on the regional marketing based on the cluster of SME,
analyzed the relationship between the cluster of SME and regional marketing, and put forward that the
key to implement regional cluster marketing is to build regional brand, as well as to form an integrated
advantages of regional resources[5]. Lan Wenqiao (2006) deeply analyzed the motivation of regional
marketing based on SME cluster, and put forward several marketing strategies from angel of 4Ps [6].
From angle of game theory, Hang Changxue & Li Shuling (2007) analyzed the mechanism and the
（ ）
*
This paper was supported by a grant from the Research Program of Humanities and Social Sciences of Hubei
Provincial Education Department (No. 2009b427).
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strategic choices of SME to develop regional marketing [7]. Although most scholars studied on aspects of
the conception, relationship, mechanism and advantages, few focus on the subjects and core problem of
regional cluster marketing from marketing aspect, which is expounded in this paper.
2 Background of Regional Cluster Marketing and Its Advantages
SMEs play an essential role in the economy of all countries around the world. According to the
information supplied by OECD (Organization for Economic Cooperation and Development), SMEs in
United States take up 98.3% of the total enterprises with employees taking up 70% of the total; in Japan,
the proportion of SME is 99.5% while employees account for 79%. According to Interim Provisions on
SME Standard, there are more than 3.6 million SMEs which have registered in China’s national industry
and business administrative department in 2003, and 27.9 million private business units taking up 99.6%
of national total enterprises. SMEs have become an important department which greatly influences the
economic development of China.
Compared with the large organizations, SMEs face marketing problems and need making decision for
marketing. Many scholars have carried out researches on the unique features of SMEs which are greatly
different from traditional marketing of large organizations. Such features usually attribute to the
characteristic of SME. Gilmore et al. (2001) summarize marketing limitations of SME as follows:
limited resources (such as financial, time and marketing knowledge), shortage of exclusive marketing
techniques, and limitation in market influence. Besides that, managers’ operating mode determines the
informality of SME’s marketing behavior. Most of their decisions are made by themselves, which are
the response for present opportunities and circumstances. As a result, their marketing activities often
show contingency and chaotic disorder (Scase and Goffee, 1980). Those limitations influence and even
determine the marketing characteristics of SME, which is contingent, informal, loose, unorganized,
spontaneous and react-patterned. Those marketing characteristics are disadvantageous to sustainable
development of SMEs. To overcome such disadvantages, SME should form enterprise cluster to
participate market competition and regional marketing, which is an ideal way to realize marketing aim.
According to Williamson’s intermediate organization theory (Williamson, 1975, 1978), enterprise
cluster is an intermediate organization pattern between enterprise and market, which overcomes various
problems of large corporations, such as excessive organization structure, slow information delivery,
overhigh management cost, slow response to market demand, thus enhances production efficiency and
responsive ability of enterprises in the cluster. Because of the effect of cluster enterprise, advantages of
low production cost, product diversity, regional marketing and competitiveness can be brought into full
display. Once enterprise cluster has taken shape, it can enhance competition ability of whole region
through promoting productivity, stimulating enterprise innovation, boosting growth of enterprise and
building regional brand (Wei Houkai, 2003)[8]. With the development of enterprise cluster in region, how
to conduct marketing activities targeting the whole cluster has become an urgent and realistic challenge.
As a special industry phenomenon of region, the marketing activity of enterprise cluster is highly related
to the whole marketing activity of region inevitably. Regional marketing refers to the process of pushing
the region as a whole to market and participating competition based on the whole image of the region in
order to realize the regional aim (Tao Jinguo, 2003). Although the marketing activities of enterprise
cluster can not be separated from the overall regional marketing activities, as an industry economy unit,
the marketing activities of cluster is different from the regional overall marketing activities. The cluster
marketing of region is an effective method according to the limitation of the SME’ marketing, which
refers to the process of cluster’s participating competition and marketing activity as a whole so as to
realize the overall objective of the cluster not the one of each single enterprise.
Compared with a single small and medium-sized enterprise, the advantage of cluster marketing is
obvious because regional cluster can make use of its integration effects of marketing resources based on
satisfying the need of targeted market. Tao Jinguo (2003) thought that the advantage of cluster
marketing mainly reflects in four aspects: the first is the advantages of product and market. The internal
mechanism of cluster enhances enterprise’s rapid-reaction capability for market, which reflects in
aspects of innovation, improving product quality and building regional brand. The second is the price
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advantage, which shows in aspects of resource sharing, cost sharing, lower transaction costs, increased
specialization and improving the overall efficiency and maintenance of flexible production. The third is
channel advantage. The enterprise within the cluster strengthens the market-to-end understanding and
satisfaction of the market, which also leads to the prosperity of the market of related product and service.
The last is promotion advantage. The development of cluster stimulates the development of public
relation and advertisers, which make enterprises, government implement co-marketing activities to
reduce the marketing costs, strengthen the communication between enterprise and market and expand
the living space of the cluster.
3 The Subjects of SME’s Cluster Marketing
The subjects of cluster marketing include the government of region, the industry associations established
by enterprises of cluster, as well as many affiliated enterprises within cluster (see table 1). Speaking
totally, the marketing activities of regional cluster are not separated from participation of public and
private sectors, among which the government plays an important role during the cluster marketing.
Many industry clusters of the world and the region are all not separated from governments’ help,
especially the support of local government. The main reason is that the characteristics of nonrivalrous
and nonexcludability of public goods make the supply of public goods from private market often
inadequate (Pindyck, R, Rubinfeld, D.L., 2000). For private organization, the marketing of public goods
has the externality; such case also exists for the regional cluster marketing. A good regional cluster
image can attract investment and market, which makes related enterprises and individuals benefited.
Thus, as the subject of the market competition, the enterprise often cares more for its marketing income,
and do not focus its efforts to build regional image and other large numbers of public activities, which is
called “free-rider” phenomenon. From the regional overall interests, local government organizations
generally take on the responsibility to organize and coordinate marketing clusters, which reflects in
many aspects such as the provision of infrastructure supporting cluster, guiding and promoting cluster to
hold common marketing activities, for example, building professional market, developing public
relationship, holding a variety of trade fairs and so on, especially in aspect of building brand and image
of regional cluster. However, more attention should be paid to the government's role change from direct
participation to indirect participation because on one hand the over-involvement of government
probably has a negative impact on free competition in the market. On the other hand, the government’s
marketing knowledge and marketing capabilities often restrict the effectiveness of marketing activities.
Therefore, the roles of non-profit organizations, such as the industry association within cluster, should
also be emphasized in the same time during the activities of cluster marketing. The non-profit
organizations often play a role of filling the “blank” of government function, which reflects in
participation of public goods’ supply, supporting and supplementing regional marketing function of
government, and promoting the realization of total aim of cluster marketing. In addition, cluster
marketing also is not separated from the single enterprise of cluster because enterprise is the subject of
market. In one hand, single enterprise is the main beneficiary during the marketing activities of regional
cluster; on the other hand, cluster marketing is not separated from the response and cooperation among
enterprises.
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4 The Core of Regional Cluster Marketing
Co-opetition, also called as cooperation and competition or com-operation, is a phenomenon of
competitive cooperation or cooperative competition among corporations, which is the result of the
interaction between the company's survival developing process and market improvement. With the
development of the market, competition among corporations may gradually change from confrontational
competition to tolerant one, and at last, to cooperative one (Wang Tao, 2002) [9]. Cooperation in
co-opetition refers to transforming seeking coexistence of differentiation into looking for the possibility
of cooperation among competitors and establishing some kind of partnership with them when
corporations look at and deal with competitive relations. While in co-opetition, competition is a form of
higher level and more efficiency, not covered by cooperation. In order to seize resources or customers,
corporations still will carry out competitions.
Co-opetition emphasizes promoting competitive ability through cooperation, and increasing cooperative
efficiency through competition. Between enterprises, whether to cooperate is a problem of strategy and
decision, while whether to compete is a problem of the companies' survival and development. So,
competition and cooperation are both the ways to win more business and obtain competitive advantages.
Generally speaking, competition is regarded as the ability of winning the market share at the cost of
competitors. Through intense competition, corporations win customers and profits from their
competitors, and also market advantages. This is a rat-race, taking itself as a closed entity, and it is
always regarded as an obstacle for the establishment of a more effective business relation within areas,
which is a way for the outstanding and strong organizations of large size to obtain more profit or even
monopolize the supplies or need of some kind of production or service by controlling the action of other
SMEs .This competition seriously affects the economic development of the whole area. Some scholars
use arms race motivation system model, which has something to do with the growth and decline of
ability among different countries or regions, to analyze the result caused by the pure completion or
cooperation among our domestic products with same quality. They found that pure competition may
result in serious economic depression in some areas, and pure cooperation may also lead to regional
economic stagnation or slow development. While adopting cooperative completion can achieve a
win-win result (Long Yong etc, 2003).Practice has proved that co-opetition can realize a win-win
situation among competitive mains. It is the best strategy for regional economic development.
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As for SMEs, the core problem of implementing cluster marketing within region is the co-opetitional
strategy among cluster corporations. From the view of marketing, this co-opetitional strategy
emphasizes that cluster enterprises should implement effective cooperative marketing strategy as well as
highlight marketing competition among enterprises. In the course of cluster marketing, SMEs realize
allied forces through cooperation, meanwhile, share information and attend joint actions
by common work to get more business. Therefore, through cooperative marketing, SMEs can bring the
advantages into full play, such as products integration which an individual company may lack, regional
brands, market share, joint channels, and the lowest cost, etc. However, when carrying out it,
there are also some problems, mainly manifested in the following aspects. Firstly, successful cooperative
marketing requires a long-term common promise, which is to put private and individual interest aside.
This is not easy for the SMEs in the clusters. Secondly, each member of the regional cluster will have a
say in the overall management of marketing system, which will make the decision-making process of
marketing slow and complicated. Thirdly, each member of the cluster has its different marketing plan,
even the conflictive one, which increases the difficulty to implement marketing plan. Lastly, each
enterprise within cluster has its aim that can realize through cooperation, while the aim probably
deviates the overall aim of cluster marketing (Dieke, 2000). Therefore, to succeed in regional cluster
marketing, cluster should determine specific overall aim according to the common expectation of each
enterprise, make each member of the cluster ensure that it will get profit through marketing cooperation,
and make the activity of each cluster member consistent with the overall aim of regional cluster
(Okoroafo, 1989).
However, although cluster marketing of region emphasizes cooperative marketing, it also does not
negate marketing competition among enterprise. Actually, as for SME of the region, the competition of
co-opetition manifests in two forms. One is an external competition among clusters. As for the region,
cluster changes competition form of SME, that is to say, each SME involves in external competition
through the overall form of cluster. The other is an internal one among enterprises within the cluster.
Though each SME of the cluster has dependence on the overall cluster marketing, each member’s caring
about its own benefit and the geographical proximity make the understanding of competition among
member of the cluster more direct and profound. It is obvious that the competition of the cluster always
exists in two forms, and the healthy competition among enterprise can prompt enterprise to innovate
continuously and improve its marketing ability, which makes the overall competitive ability of cluster
increase.
5 Conclusion
SMEs play an essential role in the economy of all countries around the world. However, compared with
the large enterprises, SMEs face marketing problems and need making decision for marketing. Practices
prove that only through forming enterprise cluster, can SMEs avoid their disadvantages and bring their
advantages into play. Compared with a single small and medium-sized enterprise, the advantage of
cluster marketing is obvious because regional cluster can make use of its integration effects of marketing
resources based on satisfying the need of targeted market. The subjects of SMEs’ cluster marketing
include the government of region, the industry associations established by enterprises of cluster, as well
as many affiliated enterprises within cluster. Speaking totally, the marketing activities of regional cluster
are not separated from the participation of public and private sectors, among which the government
plays an important role during the cluster marketing. The non-profit organizations often play a role of
filling the “blank” of government function, while single enterprise of SME cluster plays a market
subject role during cluster marketing. From the essence of marketing, the core of regional cluster
marketing is the co-opetition.
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