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Carpi cluster Profile

Description

The cluster of Carpi (located within a small area in the provinces of Modena and Reggio
Emilia) hosts 2,068 firms (1994) and 11,491 employees, about 50% of which are
employed in small firms with no more than 9 employees. Both in terms of number of
firms and of employees, Carpi's cluster represents one of the most important areas in
Italy for this sector: in fact, about 21% of the Italian firms in this sector are located here.

The total annual sales for the cluster are about 2,028 billion of Italian lira, of which 36%
generated from export.

Presently the cluster is characterized by a rapid internationalization of production. The


cost advantage of industrializing countries has made not only large, but also medium and
small firms, decentralize production abroad. The import of finished and semi-finished
goods is increasing, but, at the same time the market reach of the firms is expanding.
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Product Market Scope

Knitwear represents now about 60% of the products of Carpi's final firms. This
specialization is higher for the local subcontractors: knitwear accounts for 88% of their
total production. As far the subcontractors are concerned, their prevailing knitwear
production is related to the decentralization strategy of the final firms: while the ready-
made articles need simple production processes and the firms prefer to decentralize to
subcontractors external to the district, looking for low labor costs, the knitwear requires
more sophisticated processes for which the final firms cooperate with local
subcontractors.

Recently the product range has been widening with an increasing presence of clothing.

64% of the cluster sales is realized on the national market, confirming the importance of
the domestic market for Carpi's textile-clothing sector. Even if the propensity to export
has been significantly increasing since the 1992 devaluation of the lira, it remains lower
than the national average for this sector.

The most important market of the cluster is the European Union, to which 82% of
exports is directed. The most important competitors for the Italian producers are located
in countries with low labor costs. The main distribution channels are: wholesale (54% of
total turnover), retail (25%) and large scale retail (16.2%).
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Performance

The cluster enjoyed considerable growth during the 1960s and 1970s thanks to the rapid
growth in demand and the beginning of the fashion phenomenon, that offered more
chances to small firms; it required smaller production runs and continuous changes in
product characteristics and in production plans.

The productive system grew out of an agricultural environment, in which families where
used to mixing agricultural activities with traditional industrial activities. The textile
know-how was transmitted by several large firms in the area which subsequently closed.

The rapid growth of the system, based on small and micro firms, generated an
improvement in well being in the area, but it soon led to structural adjustment and
competition.

The structural changes that the cluster underwent in the last two decades may be
distinguished in two different phases. The first one displayed its effects at the end of the
1970s and during the first half of the 1980s. In this period the district showed
performances above the national average, the employment in the textile-clothing sector
was constant while it increased in the service sector. These good performances were
mostly the result of the diffusion of a new type of production organization: the so-called
'Pronto moda' (ready-to-wear fashion) which was characterized by the very rapid
production and supply of articles during the sales period. The firm producing in 'Pronto
moda' increased rapidly and at the end of the 1980s were accounting for about one-third
of the cluster production. This type of production was the response by the SMEs to the
rapid evolution of fashion. A second relevant change in the area of Carpi was the
diversification and the expansion of new trademarks, in particular casual and sports
clothing, launched by the local medium- and large-scale firms. These firms were
involved in re-organization processes, through acquisitions and firm expansion, that
made the cluster industrial concentration increase. Through the phenomenon of the
creation of trademarks was particularly important: an increasing number of firms
developed a more active approach to the market, based not only on the responsiveness to
market requests, but also on the targeting of products for specific groups of consumers,
specific needs and tastes, and trying to reinforce the firms identity for customers. This
was a crucial step in transforming the cluster from a concentration of producers-
executors into firms able to design strategies of market penetration and growth.

The second phase started in the later part of the 1980s and in the 1990s and it is
characterized by trends that distinguish Carpi from other Italian districts. In the early
1990s, a serious crisis affected the 'Pronto moda' system, the number of these type of
firms decreased as well as the production that now represents only 15,2% of the cluster
(from 27% in 1990). This crisis was mainly due to the contraction of national demand
and to the changing consumers' habits, penalizing this mode of production with high
costs and low quality. Consumers were not affected so much by fashion trends, but
became more attentive to quality and continuity in their own dressing styles. In the same
period number of medium-large firms , that during the 1980s reported good
performances, decreased both because of their acquisition as they were acquired by other
industrial groups from outside the cluster and also because others, due to the crisis of the
early 1990s, closed or reduced their activity. At present, the cluster is still based on small
and medium firms because the phenomena which have which and the process that in
these years has characterized other Italian districts, (such as hierarchisation, enforcement
of leadership, financial and productive concentration) have influenced only slightly the
Carpi economy.

The decline in the domestic market was compensated, during the 1990s, by the increase
in exports: the export share of finished products shifted from 22% in 1990 to 36% in
1994, thus showing an important improvement in the cluster internationalization. This
process can be considered not only as a result of export activity but also as a
consequence of the internationalization of the productive organization: the most
significant rate of growth is recorded in the decentralization of productive phases to
foreign countries, both as import-export of semi-finished articles and, sometimes, as
direct investment abroad.
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Organisation

Although the district has undergone deep changes, mainly in the 1980s and 1990s, some
identifying characteristics remain. In particular, over the years the Carpi firms have
maintained the following traits:

a strong specialization in the textile-clothing sector;


specialized production in knitwear;
small firm size;
an important degree of decentralization outside the district;
a prevailing orientation to the national market.

Since the 1960s, firms have displayed a strong specialization in the textile-clothing
sectors, employing about 60-70% of the total employees on the local level. Thanks to
this characteristic Carpi has one of the highest sectoral concentrations of employees in
Italy and an industrialization index considerably higher than Italy as a whole, and the
Emilia-Romagna region.

One of the most important characteristic of the Carpi economy is the wide recourse to
decentralization outside the district: approximately 10,000 employees are involved in the
district production process in other Italian regions or abroad. Areas of destination of the
decentralization are the bordering regions and, recently, the south of Italy. Beginning in
the 1990s, the exchange with foreign countries has been increasing, with a consequent
reduction in orders to other Italian regions. Marketing and design are the activities based
almost exclusively in the cluster, while the majority of production phases, in particular
those which are labor-intensive, are decentralized.

In the early 80s, the emergence of the quality factor, made larger firms re-organize
themselves and start recovering the capacity of controlling the market by: a)
personalizing products through trademarks and publicity; b) testing the market; c) re-
organizing distribution channels and improving service. At the same time, the new
flexible technologies, even if not oriented to completely integrated production, allowed
firms to manage flexibility and quality control much more effectively than in the past.
These structural phenomena changed the competitive environment: Firms had to develop
marketing functions, autonomous design activity and new productive and organizational
efficiency; subcontracting networks also gradually changed their nature, moving towards
stable relationships in order to facilitate quality control, reliability and responsibility. Of
course, the market maintained a share of unpredictable demand; this gave many small
firms, those ones unable to reorganize for quality, an opportunity to survive. As a In the
cluster small and medium-sized firms prevail, even if with significant differences
between final firms and subcontractors. In the district as a whole, 88% of the firms
employ fewer than 9 employees and only 0,8% have more than 50 workers. As a result,
medium-sized (more than 20, but fewer than 100 employees) final firms have increased
their presence in the area. On the contrary, local subcontractors are mainly small in size:
about 70% have fewer than 10 employees and they are of smaller dimensions than the
national average for this sector. The small dimension of the subcontractors may be
explained by the low degree of vertical integration of these firms, which are usually
specialized in only one phase of the industrial process and on short series production.
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Support System

The focal point for the cluster is CITER, a center created by the Emilia Romagna
Region to help Carpi firms in all matters concerning their development. The center is
specialized in the textile-clothing industry and offers information services, specific
training programs, assistance to SMEs in technology transfer, in internationalization
processes and in implementing quality control systems.

One of the principal goals of CITER is to gather, analyze and filter information
regarding textile production, fashion trends and markets for firms in the clothing
industry. Furthermore, the center is aware that local SMEs need access to the necessary
instruments to take advantage of information and thus it facilitates the circulation of
relevant information through seminars and publications, organizes training courses and
trade shows regarding fashion trends, offers consulting services and the use of CAD
systems. CITER also works to bring together firms and organizations in cooperative
projects within Italy and Europe and in stimulating relationships between Italian firms
and those from Eastern Europe and Latin America. For an in-depth account of CITER,
please refer to the document Citer.pdf (PDF/52KB/17pages)

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Governance

Carpi belongs to an old tradition of coordination characterizing the region Emilia


Romagna. Thanks to the agreement among the regional institutions, in 1974 a regional
development board (ERVET) was founded to provide firms with services which were
not yet offered by the private sector in strategic areas (i.e. quality improvement and
control, technology transfer, information, training, etc.) through a system of regional
service centers.

These centers have a strong sectoral specialization and are closely connected to the local
districts. In Carpi, one of these centers, CITER, was set up in 1980 as part of the ERVET
regional development system. Local institutions were strongly involved in the center
foundation and the cooperation among them, as in ERVET creation, key to the center
success. In addition to ERVET, supporters of CITER include the main local employers
associations, the local branch of the chamber of commerce, several local banks and 500
firms.

Now, seventeen years from its creation, CITER is considered one of the most successful
examples of how a specific service center can strengthen and extend a cluster of SMEs.
At the same time its history reflects the effectiveness of the model of industrial policy
designed and adopted by the local institutions to stimulate the local textile-clothing
cluster.
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Contact: Fabio RUSSO Document #331102, expires Monday, May 13, 2002