Sunteți pe pagina 1din 13

International Journal of Arts & Sciences,

CD-ROM. ISSN: 1944-6934 :: 4(09):401–412 (2011)


Copyright c 2011 by InternationalJournal.org

STRENGTHENING THE COMPETITIVENESS OF SMALL AND


MEDIUM ENTERPRISES BY USING THE CLUSTER-BASED
APPROACH: A CASE STUDY OF THE RATCHABURI ORCHID
CLUSTER IN THAILAND

Boon-Anan Phinaitrup

National Institution of Development Administration, Thailand

The objective of the research of strengthening the competitiveness of Small and Medium
Enterprises by using cluster-based approach: A case study of Ratchaburi orchid cluster is to
study the approach of competitiveness enhancement and sustainable growth of SMEs. The
qualitative research is applied through the in-depth interview for Ratchaburi orchid cluster.
The study reveals that Ratchaburi orchid cluster is the cluster originated from the initiative of
entrepreneurs who are good quality orchid farmers. They reform production system by
forming alliances among upstream, midstream, and downstream companies. They build up a
good horizontal network of supporting agencies such as research institutes. The cluster
formation creates horizontal and vertical alliances so that the farmers easily access
information, all of them are collectively motivated to produce good quality orchids, develop
innovation, and generate specific advantages for their sustainable development.

Keywords: SME, Cluster-based approach, Ratchaburi orchid cluster, Thailand.

PROBLEM STATEMENTS

In small and medium enterprises (SMEs), many companies work independently and do not care
about each other. This creates a loose relationship to strengthen business. In addition,
socioeconomic for the past forty years has drastically changed and this has had an effect to
business and had made many business face increased competition. This has also caused
companies to adapt themselves to changes in business circumstances. Therefore, it is necessary
to enhance the competitiveness of SMEs so that they can exist in a volatile market (JICA, 2004).
The cluster-based approach policy has become a vital method for SMEs ‘s development
(Phanbuke, 2008), and many countries are enhancing their competitive strength through the
application of the cluster-based approach as a development tool. Thailand is no exception.
For the past several years, there have been evidence-based concerning the strengthening of
the competitiveness of SMEs through the application of the cluster-based approach. The cluster
was used as a tool to create competitive advantages, particularly regarding SME businesses.
These statements are supported by many researchers. For example, Marshall (1920) has stated
that business would do better through closed location and having interaction and participating
activities together which is called the cluster-based approach. Schmitz (1995a, b) has pointed out
that businesses can gain benefit from the interaction among SME business and benefit from
closed location which created the mutual work. Jacobson and Mottair (1999) also commented
that the cluster-based approach is a method for economic development because it requires
clustering members to exchange information: informal interactions become more frequent than

401
402 Boon-anan Phinaitrup

formal interactions and the knowledge is distributed within the cluster. Baptista (1996) has
suggested that the process of the cluster-based approach can bring innovation to businesses and
create an advantage in achieving more growth. Further, Arthur (1990) has stated that strong
cluster members tend to attract more businesses to work mutually and to depend on each other in
order to increase productivity.
From the above-mentioned research articles, it can be seen that most of them head in the
same direction that clusters generate benefits from closer business relationships and consumer
care, and consumers gain benefits from clusters, as business groups cooperate in production
since they are located close together and it is relatively easy to depend on each other. The
application of the cluster has effects on competition, i.e. the productivity of a firm is increased,
innovation is driven, and new businesses based on the cluster model are built.
Because of the reasons given above, the researcher is interested in the application of the
cluster-based approach in the enhancement of the competitiveness of Thailand’s SME industry in
order to achieve the target of high productivity so that Thailand SMEs can compete both in local
and world markets. The objectives in this research, then, is to evaluate the application of the
cluster-based approach as a tool for SME business as a driver for strengthening
competitiveness.

METHODS

This research focused on the case study of Ratchaburi orchid cluster in Thailand because it has
implemented the cluster-based approach since 2002 and has successfully created a competitive
advantages from laying the foundation of the cluster-based approach and has become a model for
other clusters. The case study was carried out over a period of eight months (October 2009 –
May 2010) and is centered around in-depth interviews conducted with government officers, the
cluster coordinator, cluster members/entrepreneurs, the company committee, researchers from
universities and the college. In all, in-depth interviews were conducted with 15 members. The
interviewees were guided for each interview with the aid of an interview schedule. There was a
degree of flexibility within the structure provided, as several of the interviewees discussed issues
not specifically noted in the schedule, yet these were relevant to the topic. It was believed that
semi-structured interviews would allow for the exploration of the subjective meaning
encountered during the interview process (Banister & Burman, 1994). Moreover, there had to be
considerable flexibility in the timing of the interviews, as they had to fit the respondents’
eagerness and willingness to participate. Respondents were selected based on their availability
and willingness to take part in the study. The primary aim was to obtain a broad cross-section of
perspectives in greater detail than would be possible through a close-ended questionnaire.
The research avoided using a tape-recorder, focusing rather on comprehensive note taking.
Aspects of the research topic might have been threatening to the interests of the respondents, as
several of the questions focused on the cluster concepts at Ratchaburi orchid cluster. Grinnell
(1988) asserts that occasionally respondents will object to having their comments recorded. The
interviewer thus followed Grinnell’s suggestion of recording summaries from time to time
throughout the interviews. Using the hand-written recording method proved to be a valid one,
since respondents appeared to be comfortable with the structure of the interview, as the office
door was closed and confidentially was explained and guaranteed by the interviewer.

LITERATURE ON CLUSTER-BASED APPROACH

In recent years numerous studies have been published regarding the cluster-based approach in
many countries including Thailand. In 2002, the Thai government even invited Michael E. Porter
Strengthening the Competitiveness of Small and Medium Enterprises by Using the Cluster-Based Approach.... 403

to be a distinguished guest speaker to disuses the possible competitive advantage of his model in
Thailand if Thailand would like to compete with other nations. From that time on, many Thai
scholars have been alerted to his ideas and many businessmen have attempted to utilize these
ideas in the country. It also caused me to be interested in the topic. Therefore, I would like to
show the literature which can present as a study of cluster-based approach as a tool for
competition.
Most of the studies in the first group are based on the cluster-based approach toward
competition (Porter, 1990; Marshall, 1990; Phanbuka, 2008; Swann, 1998; Pandit et al,
2001;Okay, 1985). Michael E. Porter (1990) who introduced the cluster-based approach as a new
method to create competitive advantage and to compete in the international market. Porter (1990)
presented the competitiveness theory based on the cluster approach, called the Diamond Model
to create a pleasant business climate for success. The Diamond Model consisted of 4
determinants: factor conditions, demand condition, related and supporting industries, and firm
strategy and structure, rivalry and competition. The factor conditions include human resources,
capital resources, physical resources, infrastructure, and natural resources, factors which can be
exploited by companies. Factor conditions can be seen as advantageous factors found with a
country that are subsequently build upon by companies to more advanced than competitors.
Factors not normally seen as advantageous, such as workforce shortage, can also be seen as
potentially strengthening competitiveness, because they may heighten a company’s focus on
automation and zero defects. Demand conditions – if the local market for a product is larger and
more demanding at home than in foreign markets, local firms potentially place more emphasis on
improvements than foreign companies. This will potentially increase the global competitiveness
of local exporting companies. A more demanding home market can thus be seen as a driver of
growth, innovation, and quality improvements. Related and supporting industries – when local
supporting industries and suppliers are competitive, home country companies will potentially
become more cost efficient and receive more innovative parts and products. This will potential
lead to greater competitiveness for national firms. For instance, the Italian shoe industry benefits
from a highly competent pool of related businesses and industries, which has strengthened the
competitiveness of the Italian shoe industry world-wide. Firm strategy, structure, and rivalry –
the structure and management systems of companies in different countries can potentially affect
competitiveness. The conditions in each country determine how companies are established, are
organized and managed, and determine the characteristics of domestic competition. In addition,
cultural aspects play an important role. In different nations, factors such as management
structures, working morale, or interactions between companies are shaped differently, providing
advantages and disadvantages for particular industries.
By using Porter’s diamond, businesspeople may analyze which competitive factors exist in
their company’s home country, and which of these factors may be exploited to gain global
competitive advantages. Therefore, businesspeople in Thailand can also use Porter’s Diamond
model during a phase of national and internationalization, when they may use the model to
analyze whether or not the home market factors support the process of internationalization and
whether or not the conditions found in the home country are able to create competitive
advantages on a global scale. Finally, business people may use this model to assess. Thailand in
terms of possible investment, and to assess most likely to be able to sustain growth and
development.
The above model is acknowledged and held up to scrutiny by many researchers. For
example, Marshall’s (1920) study of clusters indicated that a cluster will grow because people
who participate in its operation can learn from each other; these things will happen due to
physical condition in locating close together. Swann (1998) cited in Kuah, 2002) studied 650
companies in the American computer industry and found that more than half of the American
computer companies were located in 3 major states, i.e. California, Massachusetts, and New
York. The cluster played an important role in the creation of a competitive advantage. Up to now
404 Boon-anan Phinaitrup

Silicon Valley in California and Route 128 in Massachusetts have been clusters on the economy
map. Additionally, Oakey (1985) has noted that the cluster in the high technology industry in
Silican Glen (Scotland) and in southeastern region, i.e. Cambridgeshire – Hertfordshire and
Berkshire – the main clusters in technology in Cambridge are playing crucial roles. In building
their business under the concept of the cluster-based approach. He demonstrated that among
SME companies in the high technology industry in Scotland, there are four more companies
every month. Growth has continued like this for 20 consecutive years (Segal Quince & Partner,
1985).
Moreover, Pandit et al, (2001) found a positive impact of the cluster on the financial
industry in the United Kingdom. This impact resulted from the cooperation of financial
companies located close together. Their average growth rate rapidly increased. The specification
of service areas had an effect on the growth of financial service in the traditional cluster of
London; however this effect might have resulted from the saturation of the cluster (Kuah, 2002).
From the above paragraphs, it showed that the attempt to apply the cluster concept directly
and an adjustment in each country is bound to succeed (Shotton, 1998; Tambunan, 2005)
because it showed that the cluster-based approach worked very well. A number of articles have
addressed the issue of the applicability of the cluster concept. The application of the cluster
concept offers 3 good effects. First, the productivity of the business organization is increased;
second the business direction is driven by innovation; and third, new business models with the
application of the cluster are created (Tayler & McRae-Williams, 2005; Rosenfield, 1997).

FINDINGS

Findings from this stage were focused on the following areas: 1) how Ratchburi orchid club
began and 2) how they collaborate by implementing cluster-based approach.
The Beginning of the Ratchaburi Orchid Club
Before orchid group gathered together as an orchid club, there were many problems such as
many practical problems with the Plant Varieties Protection Act, so that a capable orchid breeder
could not commercially market new varieties and recently there has been no innovative Thai
orchid to attract the interest of foreign buyers. Additionally, there is no central market for
bidding on orchids so that the market mechanism has been distorted. Flight and freight space are
not dufficient for export, and freight charge is also high; in addition, lack of a depot equipped
with cold storage while the orchids are waiting for transport at the airport has caused
deterioration in the quality of products at the destination. Entrepreneurs do not have sufficient
market information on customers’ requirements. Thailand brands have not been developed
enough to receive quality accreditation and to maintain a position as a leading exporter of
tropical orchids.
From the above problems, it is clear that Ratchaburi orchid farmers had to get together
quickly in order to survive; they organized themselves and called themselves the “Ratchaburi
Orchid Club” in order to help each other. Members of the orchid club expressed their thoughts
and listened to experts about the cluster approach. A further examination of the discussion
revealed that the club talked about enhancing the competitiveness of Thai orchid, how it worked,
and the tone of some of the respondents was suggested to cluster approach to manage. The
chairman of the Ratchaburi orchid club attended a training course offered by the cluster
development agent, and later attended the National Economic and Society Conference and
listened to guest speakers on the topic of the cluster approach. These activities represented
important cooperation between the Ratchaburi orchid cluster and the public sector. At this point,
the idea of the Ratchaburi orchid club was sparked to cluster together in order collectively to
create a competitive advantage and the Ratchaburi orchid club was the backbone of the network.
The chairman brainstormed with club members and found that there were more opportunities to
Strengthening the Competitiveness of Small and Medium Enterprises by Using the Cluster-Based Approach.... 405

conduct the orchid business by implementing a cluster-based approach. They analyzed their
strengths and weakness. The strengths were that Thailand has rich biodiversity, and plenty of
varieties of wild orchids are available and useful for breeding new varieties, Thailand has
suitable climate, and orchids can be cultivated at low cost without the requirement of high
technology. Further, farmers have high levels of skills and knowledge of breeding and the entire
process of orchid cultivation, and these skills and this knowledge are continuingly developed.
The tissue culture technology of Thailand is recognized by countries internationally and is
available at low cost. There are many opportunities to expand in both the domestic and
international markets because Thai orchids are beautiful and accepted by the world market,
provided that appropriate public relations efforts are made, the management system is improved,
and obstacles in orchid shipment are cleared.
The weaknesses are that each farmer works on his or her own farm; they don’t work
dependently. Each farmer thinks that he or she knows ho to grow orchids better than others – it is
their secret and they cannot tell anyone, according to them. This kind of situation creates a
situation of little or no interaction, no cooperation, no trust, no and participation in mutual
activities, which causes them to be unable to compete in the market. As a result, in order to
survive, grow, and compete with others, each orchid farmer must work with others in order to
build trust and to work in mutual dependence. Later on, they became called the “Ratchaburi
orchid cluster.”

Collaborative network through the cluster-based approach

The study participants regarded the cluster-based approach as a tool to increase opportunity for
competitiveness. Among all of the people that are orchid breeders in the study, the growers of
cut-flower orchids, the growers of pot flowers, producers of pots, sieves, trays, coir, owners of
manufacturing saran, producers and suppliers of chemical products, fertilizers, insecticides,
fungicides, pesticides, plant supplementary food, faculty from universities and colleges,
government agencies and wholesale marketers are in the production system forming alliances
upstream, midstream, and downstream. They have built up a good horizontal network of support,
creating competitive advantages. The cluster generates benefits from closer business
relationships and consumer care, and consumers gain benefits from clusters, with business
groups cooperating in production since the firms are located close together and are mutually
dependent on each other.
Porter’s competitiveness theory, based on the cluster approach called the Diamond model is
the approach which has implications for orchid breeders, the growers of cut-flower orchids, and
the growers of potted flowers in terms of increasing business opportunities. It is based on the
principles of the Diamond model. In addition, there is also evidence that government agencies,
owners of manufacturing saran, producers and suppliers of chemical products and fertilizers, and
faculty from universities and colleges were involved with the Diamond model concept, which
created a pleasant business climate for the success of the industry. The following paragraphs will
explain the relationship.
The Rachaburi orchid cluster consists of orchid breeders, growers of cut-flower orchids, the
growers of potted flowers. There is a total of ten members. Each member has a greenhouse of
about 10 acres in neighborhood areas. There is on-the-premise a learning center, where parent
breeding stocks are kept for good quality orchids. The Ratchaburi orchid cluster has 6 meetings a
year; four meetings are organized in meeting rooms while the other two meetings are on-site
meetings at the orchid gardens of the members. The members will have a chance to observe the
orchid cultivation of other persons so that they can employ good working practices to improve
their own gardens. The objective of this activity is to exchange a wealth of knowledge and to
develop mutual trust among the members. Aside from on-site meetings, the members also have a
406 Boon-anan Phinaitrup

chance to visit the orchid gardens of the successful farmers outside the cluster, such as farmers in
Phetchaburi, Nakhon Ratchasima, Chiang Mai, etc. In addition, the cluster is building up
cooperation with Thai orchid importers in the United States. The importers will keep a handle on
marketing and sell good-quality orchids at high prices while the cluster members will produce
good-quality orchids. The exported orchids are Dendrobium Bom, Dendrobium (White)#5,
Saengtien Dendrobium, Saengtien Pink Dendrobium, Sugar Pink, Si-Da Dendrobium Burana
Jade, all colors of Vanda, Mokara Red and Purple, and Mokara Pannee.
Members of the Ratchaburi orchid cluster will buy coconut trays made from coir for
growing their orchids from Pantip Thananan’s factory. The materials for growing orchids from
this factory have good quality because they will last long, and are a good value for the money;
the orchid growers always communicate with the factory in order to improve the quality of
materials for growing orchids. The factory has 40 workers and provides a delivery service to
customers, which makes it very convenient for customers. Besides the coconut tray, there are
other products supporting orchid cultivation, such as materials for the nursery, nursery bed for
growing orchids in the size of three and a half inches, two and a half inches, and one a half
inches. One orchid tray can be used for three years at most; therefore, many orchid gardens will
order trays for stock.
Sawit Srisanpang has been an entrepreneur in a column foundry for an orchid greenhouse
since 1994. He has good experience in building greenhouses. The builders of Srisanpang’s
factory are well experienced. The construction of a greenhouse requires experience in
calculation, measurement, landscape, and layout. Lodging can also be built. The critical part of a
greenhouse is a roof that can endure all situations. Srisanpang has enjoyed a good reputation in
the column foundry for orchid greenhouses. He partners with his friends and provides high
quality and affordable prices. They also offer services after building the greenhouse. All
operations are carefully planned in order to build quality greenhouses and they work closely with
Ratchaburi orchid cluster.
Surachai Sopitiporn is an entrepreneur in the orchid fertilizer business. He also is a volunteer
teacher for the new generation in the use of fertilizer for orchid gardens and is cultivating a new
generation of orchid farmers. He produces his fertilizers by importing fertilizer materials and
blending different kinds of fertilizer materials to sell as mixed fertilizer. He sells directly to
farmers and has impressed them with the extent of knowledge, which is not limited only to
orchids. He suggests that farmers not repeat the use of chemical products more than 2 times in
order to prevent resistance to chemical action. He is a trusted person and respected for his
professional ethics and social responsibility. He has worked closely with the Ratchaburi orchid
cluster in order to improve the quality of orchids and with his help over the past years, the
orchids exhibit much improvement. For example, 4-5flowers in 1 inflorescence of orchid from
base to tip can bloom, which has never happened before. There is less disease and fewer insects
spread in the farmer. With his knowledge and suggestions on how to nurse the orchids, 12
flowers can bloom in one inflorescence of orchid, quality is improving and meets international
standards, and the Ratchaburi orchid cluster can now compete with other nations such as
Singapore.
After the Ratchaburi orchid cluster was established, the cluster faced some problems,
especially regarding a shortage of people that have knowledge about the orchids, which require
meticulous care. The orchid is easily perishable and has problems with disease, insects, snails,
fungus, and weeds, which have effects on production. Therefore, many people lack the
knowledge and skill necessary for the quality management of orchid growth. With these
problems, the Ratchaburi orchid cluster has cooperated with some colleges in order to produce
students that would like to major in orchids and become young entrepreneurs in orchid farming.
They believed that it can reduce some of these problems and would cluster together and gained
mutual benefit. The cluster has launched jointly developed the curriculum of orchid at the level
of a high vocational certificate. Then, the cluster later on cooperated closely with the Phetchaburi
Strengthening the Competitiveness of Small and Medium Enterprises by Using the Cluster-Based Approach.... 407

College of Agriculture and Technology, which provided 80 acres for a prototype project of
orchid cultivation and practical training for agricultural students majoring in orchids, and
training projects for young entrepreneurs. These students were provided with the theories, the
foundation, and basic knowledge about how to grow and take care of orchids including breeding,
growing, and nursing with quality.
A group of laboratories for seed propagation and tissue culture propagation also has played
an important role. In the private sector, there are professional laboratories such as Bangkok
Flowers Centre Co., Ld. That render the service of orchid seed propagation and orchid tissue
culture propagation. In the government sector, the laboratory of Kasetsart University,
Kamphaeng Saen Campus, is an agency offering technical support to develop a new variety of
orchid.
The government agencies supporting the Ratchburi orchid cluster are as follows. The Office
of the National Economic and Social Development Board is a policy developing agency for the
enhancement of the competitiveness of the Thai orchid industry through the application of the
cluster-based approach. The Ministry of Agriculture and Cooperative is supporting and
promoting research and knowledge in plant pathology and is an accreditation organization for
Good Agricultural Practice (GAP) and promotes product quality improvement and supports, the
formation of clusters, strengthening clusters through knowledge distribution. The Ministry of
Commerce provides information and suggestions on export trade to the cluster. The supporting
agencies for infrastructure consist of Kasetsart University, Kamphaen Saen Campus, Ratchaburi
College of Agriculture and Technology, Phetchaburi College of Agriculture and Technology,
King Mongkut’s Institute of Technology Ladkabang, and the National Electronics and Computer
Technology Center Thailand. The agency involved in logistic development and laboratories for
orchid sciences is the Institute for Management Education for Thailand Foundation (IMET).
The last factor that needs to be mentioned in concerning the cluster-based approach is the
exporter. Ekkachai Rojtinnakorn who is in the downstream from the orchid cluster system and
who plays an important role in importing good quality orchids from the Ratchaburi orchid cluster
into the United States market. The operation after cutting the flowers is a crucial task in order to
retain the quality of the orchids until they reach their destination, e.g. the USA. The cutting of
the flowers will take 1-3 hours and after that the orchids will be segregated by size, color, and
quality of inflorescence. The selected orchids will then be tied as a bouquet and dipped into a
chemical solution to eradicate snails and insects. Then the bouquet will be packed into a box
prepared by an exporter, and shipped to the exporter’s packing house. One truck can many
orchid boxes from the garden to the packing house. The transportation of 1-3 hours before the
orchids arrive at the packing house has an effect on the quality of the products. In the past, a
truck with a temperature-controlled storage room was not used; however, nowadays the exporter
provides a cooling truck for transportation.
When the orchids are shipped to the packing house of the exporter, they will be segregated
according to size and quality. The quality will be evaluated according to the shape of the
bouquet, the size of the flowers, and the beauty of the bloom. Later a “pulsing” treatment will
carried out with a solution of 2-20% sucrose to keep the flowers fresh until they are in the hands
of consumers. The solution is placed in a small tube inserted at the stalk base. Fumigation is
another important process to eradicate insects that might remain in orchids before packing. The
orchids packed in boxes must be dried without mist; otherwise, their petals will fall off before
arrival at the destination.
Each paragraph has showed how individuals have worked together and helped each other
such as orchid breeders, the growers of cut-flower orchids, the growers of potted flowers,
producers of pots, owners of manufacturing saran, producers and suppliers of chemical products,
faculty from universities and colleges, and government agencies and wholesale marketer in order
to build a good horizontal network of support, then creating competitive advantages.
408 Boon-anan Phinaitrup

DISCUSSION

This case study “Strengthening the competitiveness of Small and Medium Enterprises by using
the cluster-based approach: A case study of Ratchaburi orchid cluster” confirms the view that the
cluster-based approach has been implemented successfully by the Ratchaburi orchid cluster. The
cluster members have envisaged the benefits of the cluster-based approach and have adopted it
for survival. Its goal is to produce good quality orchids in order to be able to enter the
international market.
As the readers see from the findings, the Ratchaburi orchid cluster has employed the concept
of the cluster-based approach because they saw that it was useful and enabled them to compete in
the international market. The cluster is volunteered to participate the cluster and agree to produce
quality orchids by having a 10-20% orchid area for quality orchids. It was also a way to build a
partnership with others such as Thananan who supported the coconut tray, Srisanpang who is
building an orchid greenhouse, Sopitiporn who is an entrepreneur in orchid fertilizer, and
Ekkachai who is an exporter in the USA. These people have worked closely, have cooperated,
and have exchanged information which has helped the Ratchaburi orchid cluster to survive,
grow, and compete in the international market. Knowledge has a vital role to play in helping the
cluster integral part of members’ experience, in supporting, nurturing, and encouraging their
cluster to innovate the orchid. As a result, knowledge in the cluster is created, exchanged, and
used for sustained competitive advantage. Then, the cluster can now produce quality orchids to
meet customer ‘s demand both locally and globally.
In addition, the cluster saw the importance of cooperating with organizations in the public
and private sectors, such as Agriculture College and University, banks, and government agencies
which are supporting and related industries. In order to produce good quality orchids, they need
to control the quality from the beginning until the end.
The cluster also showed that they have trust in each other and hold similar beliefs which is
vitally important for a close, connected and good relationship. It is challenging to have an
enriching friendship or even a comfortable acquaintance with one another to make the cluster
work well. Participation is also part of the cluster. It requires contribution to the process. As well
as learning through their knowledge and practice, different stakeholders hold different values,
attitudes, and beliefs; however, they need to understand these values, attitudes, and beliefs, and
take them into consideration when sharing ideas with others. In addition, they share experience,
help each other try to motivate each other in order to solve many problems that they face and try
to inspire each other too and that results in creating innovation and specialty in orchids. If
anyone would like to know about orchids, they must think of the Ratchaburi orchid cluster. This
discussion is organized in two parts. The first part is a discussion of the competitiveness of the
Ratchaburi orchid cluster with the use of the Diamond model. The second part concerns the
change of the Ratchaburi orchid cluster after adopting this approach. First, an analysis of the
competitiveness of the Ratchaburi orchid cluster with the use of the Diamond model is presented
below.
Under the umbrella of Ratchaburi orchid cluster, groups of business and associated
institutes, i.e. Ratchaburi orchid farmer’s group, orchid greenhouse constructors, saran
manufacturers, producers of containers and materials for growing orchids, producers, and
suppliers of chemical products, producers of bio-substances, groups of laboratories for seed
propagation and tissue culture propagation, government agencies playing a supporting role and
the market of the Ratchaburi orchid cluster, gather together and cooperate in their work. These
elements drive the success of the industry, and in this way the Ratchaburi orchid cluster can
strengthen its competitiveness. Since all of the elements can be found in the Diamond model, the
analysis of the competitiveness of the Ratchaburi orchid cluster will be based on this model. The
details are: (see Figure 1).
Strengthening the Competitiveness of Small and Medium Enterprises by Using the Cluster-Based Approach.... 409

Figure 1. The analysis of competitiveness of Ratchaburi orchid cluster with the use of Diamond Model. (Source:
The researcher’s analysis )

1. Firm strategy, structure, and rivalry refers to management of company such as what
objectives are for company, how company establishes, organizes, manages, how
company interact to each other, provide advantages and disadvantages for company.
It consists of positive and negative elements. There are four positive elements. Firstly,
410 Boon-anan Phinaitrup

the target of cluster is met in the production of the good quality of the orchids of the
cluster. Secondly, quality orchids are developed to create the desired brand of the
cluster in Thailand. Thirdly, the farmers’ capability in breeding through the
suggestions of orchid users and cluster members is improving in order to meet the
market requirement. Forth, there are more market opportunities for good quality
orchids at the international level since cluster members have tried to share and
communicate to each other so the knowledge of quality orchid can be controlled.
There are four negative elements. Firstly, there is a lack of a regional central
wholesale market and distribution center of flowering plants in Thailand. Secondly,
there is no compelling market for good quality orchids in Thailand. Thirdly, there are
problems with the Plant Varieties Protection Act which protects only the plant orchid,
not the flower of orchid. Forth, high logistics costs in Thailand.
2. Factor conditions refer to human resource, capital resource, physical resources,
infrastructure, and natural resources. It consists of positive and negative elements.
There are six positive elements. Firstly, the farmers’ need in farm quality
management and business quality management. Secondly, the farmers have sufficient
land and suitable climate in cultivation of good quality orchid. Thirdly, farmers breed
orchids according to market requirement. Forth, there are available plan in
development of quality labor/new generation of entrepreneurs, skillfulness in
breeding and growing orchids. Sixth, there are researches in reduction of chemicals
and increase of the use of bio-substance. The negative elements are the rules and
regulations in plant variety protections being an obstacle to business development.
3. Demand conditions refers to the demanding home and global market can be a wheel
to create growth, innovation and quality improvement. It consists of positive and
negative elements. There are two positive elements. Firstly, there are a greater
demand for good quality orchids in foreign countries. Secondly, farmers can breed
quality orchid according to market requirements in foreign countries which provide
satisfaction for consumers. The negative element is lack of market research on the
local demand for good quality orchids in Thailand.
4. Related and supporting industries refer to supporting industries that can create
competitiveness for the company. It consist of positive and negative elements. There
are two positive elements. Firstly, there is a relationship among industrial networks
and the concerned parties in the cluster. Secondly, the government recognizes the
strengths and progress of the Ratchaburi orchid cluster. The negative elements are an
unclear set of regulations and lack of cluster support.

Aside from the analysis based on the Diamond model, there have been observable changes in the
Ratchaburi orchid cluster after the cluster-based approach had been applied for eight years.
These changes can be classified into 2 levels, i.e. changes at the individual level and changes at
the cluster level.
The changes at the individual level include the following items: 1) farmer members are
continuously trained in the production system of good quality orchids until they become skillful;
2) farmer members accept change and attentively listen to opinions as well as criticisms from
related people and then apply them to the development of greater farming skill; 3) the quality of
life of farmers is better from growing good quality orchids and their income is higher; 4) farmers
set targets for growing good quality orchids at the international level. The changes at cluster
level include the following items: 1) the Ratchaburi orchid cluster has gained public recognition,
especially at the global level; 2) other groups wants to learn from what the cluster has
Strengthening the Competitiveness of Small and Medium Enterprises by Using the Cluster-Based Approach.... 411

experienced ; 3) the relationships among group members in the cluster have markedly improved
because they live in mutual understanding and mutual trust; 3) knowledge exchange and
cooperation in the cluster are increasing; 4) the orchid cluster constantly receives support from
the government sector, private organizations, foundation, and educational institutions in research
and development of quality product system; 5) the cluster sets a clear target in growing good
quality orchids and provides a constructive road map for success; 6) the cluster continuously
encourages and implements innovation to improve the production of good quality orchids.

IMPLICATIONS THE CLUSTER-BASED APPROACH FOR KNOWLEDGE


MANAGEMENT IN BUSINESS

The study demonstrated that the cluster-based approach is one of the suitable approaches to
helping orchid farmers in Thailand compete in the international market because its concept
involves knowledge management. How does the cluster-based approach relate knowledge
management? Given the nature of the cluster and its environment, knowledge management refers
to a method for development which requires cluster members to exchange information, interact
with each other, sharing and distribute information, create closer business relationships, and
build mutual benefit in order to sustain competitive advantage. Knowledge management (KM)
can be considered the process of creating learning in the organizational approach through
training, education, development, and research. Since knowledge management has become a big
issue. Businessmen, researchers, and educators have exhorted many companies to consider
knowledge in order to create the competitive advantage. It means that knowledge should be
focused in order to help orchid farmers. It also requires building a learning environment through
education and development that will meet the market demands. Therefore, the Ratchaburi orchid
cluster of orchid farmers, greenhouse builders, orchid fertilizer entrepreneurs, exporter will help
each other to create a culture that values learning through making a commitment together,
exchanging information with others in order to strengthen their cluster, and competing in the
world. It also shows that the individuals in the cluster approach understands the importance of
sharing and managing information through discussion, training, and development. These
activities create and link to develop orchid farmers. For example, the cluster members can
provide suggestions and recommendations based on their knowledge, including their experience
to the other members. Furthermore, the researcher would like to urge colleges to produce more
students with a major in orchids because these students would graduate with understanding and
in-depth knowledge about quality orchids. In this situation, there should be more cooperation
with other vocational colleges throughout Thailand so that there are more people with expertise
in orchids that are capable of improving the quality of orchids in Thailand. The benefit from
development of these people knowledge management can help their business to grow, and
productivity and innovation will be enhanced.

BIBLIOGRAPHY

Arthur, W.B. (1990). Silicon Valley “Locational clusters: Do increasing returns imply monopoly?,” Mathematical
Social Science, Vol. 19: 235-251.
Banister, P. & Burnman, E. (1994) Qualitative Methods in Psychology. Milton Keynes: Open University Press.
Baptista, R. (1996). An empirical study of innovation, entry and diffusion in industrial clusters,unpublished
doctoral thesis, London: London Business School.
Grinnell, R.M. (1988) Social Work Research and Evaluation, Ithaca: New York: Peacock.
Jacobson, E. & Mottair W. (1999) The Economy of Cities. USA: New York.
412 Boon-anan Phinaitrup

Japan International Cooperation Agency (JICA). 2004. “The Study on Streng Capacity of SME Clusters in
Indonesia.” Final Report: KRI International Corp.
Kuah, A.T.H. 2002. Cluster Theory and Practice: Advantages for the Small Business Locating in a Vibrant Cluster.
Journal of Research in Marketing and Entrepreneurship: Volume Four, Issue 3.
Marshall, A. 1920. Principles of Economics. London, Macmillian.
._________. (1990) Industry and Trade, London: Macmillan.
Phambuka. CA. (2008) Creating Competitive advantage in developing countries through business clusters: A
Literature review. African Journal of Business Management. Vol.2(7),pp.125-130.
Pandit, A. (2001a) The dynamics of industrial clustering in British financial services, Service Industries Journal,
Vol. 4, 33-61.
Porter, M.E. (1990) Competitive Advantage of Nations. London: Macmillan.
Oakey, N. (1985). Clusters and Regional Competitiveness: Recent Learnings. Paper presented at the International
Conference on Technology Clusters, Montreal, Canada.
Rosenfield, S.A. 1997. “Bringing business clusters into the mainstream of economic development”, European
Planning Studies, Vol. 5-1, 3-23.
Schimtz, H. (1995a). “Small shoemaker and the Fordist Giants: Tale of a super-cluster”, World Development,
23(1): 9-28.
Segal Quince & Partners, 1985. The Cambridge phenomenon: The growth of high technology industry in a
university town, Cambridge: Segal Quince & Partners.
Shotton, R. 1998. “Clusters in the context of the European Union’s cohesion Policies”, in_Steiner, M. (Ed.).
Clusters and Regional Specialization: On Geography technology and networks, London, Pion Limited.
Swann, G.M.P., Prevezer, M. and Stout, D. eds. 1998. The dynamics of industrial clustering: International
comparisons in computing and biotechnology, Oxford: Oxford University Press.
Tambunan, T. 2005. Promoting Small and Medium Enterprises with a Clustering Approach: A Policy Experience
from Indonesia. Journal of Small Business Management, 43(2), 138-154.
Tayler, P., & McRae-Williams, P. 2005. Internal versus External Economies of Scale. Working Paper, Centre for
Regional Innovation & Competitive.
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

S-ar putea să vă placă și