Inter-actor Network Creation

Cluster-based development in Organized Industrial Zones

The Case of Ostim and Roadmap for Construction and Engineering Machines

Important Notice

Launched in March 2007, “Development of a National Clustering Policy” is an EU-funded technical assistance project (the Project, hereinafter) that seeks to contribute to elaboration of a national clustering policy, through development of a “whitepaper” on clustering. The Project is being implemented by the Undersecretariat for Foreign Trade (UFT) with the technical assistance of an international consortium, contracted by Central Finance and Contracts (CFCU).

The methodology, deployed for the development of this and other Roadmaps reflects the key priorities of the DCP Project. Therefore, it, on the one hand aims at developing a roadmap that demonstrates how the cluster can be more competitive, and on the other, serves the key purpose of informing the process of cluster policy-making and development of policy-level and institutional recommendations. This Roadmap has been developed with direct involvement of a broad range of stakeholders: enterprises, governmental and non-governmental organisations, academic and research organisations, and other relevant cluster actors. Cluster roadmap itself, is the strategic plan of cluster development that includes the cluster vision, definition of its strategy, key factors for its successful development and the skills, competences and capabilities which are required for ensuring that the success factors are in place. Roadmap report then proceeds to the analysis and recommendations related to the cluster governance and outlines specific cluster activities in the form of pilot project fiches that should be implemented in short-, medium- and long-term.

Inter-actor Network Creation

Cluster-based development in Organized Industrial Zones

The Case of Ostim and Roadmap for Construction and Engineering Machines

1.1. Vision

In line with the opinions and recommendations obtained through the site visits and working group meetings performed within the scope of the project, strong and weak aspects have been tried to be detected. While determining the vision, long-term objectives of the three clustering in OSTIM have been considered and common points have been determined. As a result of the study conducted, a vision including the concepts specified below has been concluded.

All the participants agree on the fact that the development of the regions and industries is associated with the new technology development and utilization capacity of the clusters. Within the next 10 years, very serious developments in many fields such as nano technology are expected. Significant changes in many products and sectors as a result of the adaptation of such developments in industry are unavoidable. It is impossible for the regions, which can not follow the technological developments and develop technologies, to maintain their competitive power.

Sustainable competitive power of a sector shall not only rely on its capacity to produce cheap and quality products. It is unavoidable that the industries move from the regions/countries, which only compete basing on the quality and price, to the regions which can make cheaper production. Therefore, development of high value-added finished products through R&D, utilization of new technologies and cooperation is one of the important factors for a sustainable industrialization and regional development.

The markets in many sectors considered indispensable due to new technologies as well as the new products developed and the products may get rapidly smaller and the firms may be destroyed. Dependence of the countries increases day by day due to the development of communicational opportunities and the increased globalization. The survival and the sustainable development of the clusters depend on their ability to follow-up the developments in the markets and take the necessary steps in line with such developments.

As a result of the studies conducted, the Vision including the above-mentioned issues and agreed by the members of the working group has been defined as:

“Turning into a group of interrelated clusters producing high value-added products with up-to-date high technologies and meeting the needs of rapidly developing markets”

1.2. Strategy

As specified previously, the clustering initiatives started in OSTIM have different characteristics. There are great differences among the factors bearing a significant importance on the competitive power such as the number, developments levels, technological skills, staff and management structure of the firms within the cluster. Each cluster shall determine its priorities and develop its strategies by considering such differences.

Clustering of Renewable Energy and Environmental Technologies

It is an important need that the external dependence of Turkey for the energy resources is decreased for its sustainable economical development. Turkey meets a significant portion of its energy needs through imports. In a study conducted to determine the sectors having clustering potential in OSTIM, one of the prominent sectors considering their subjective importance was defined as Alternative Clean Energy. Renewable Energy is an important sector also in terms of national strategy and security policies. OSTIM management has initiated studies of the development of this cluster by taking the contribution of the environment-friendly renewable energy resources to the economy of the country and the region into consideration.

There are 42 enterprises currently operating in the Renewable Energy clustering. While 6 of these firms are directly engaged in the production of renewable energy materials and equipment, the remaining firms provide support to the main producer firms. Public institutions and the concerned stakeholders shall also provide support to the initiative. When the producer firms within OSTIM were analyzed, it was detected that many of those firms could be considered as part of a renewable energy cluster.

In the analysis performed for the Renewable Energy Clustering, the following issues came to light:

• The firms within the cluster have product types which they have developed individually in this sector. However, since this sector is not developed yet in Turkey and therefore, there are not powerful producers within the sector, the OSTIM firms are likely to work as suppliers.  There would have to be full sub-assemblies produced locally and at least one systems integrator, to consider that OSTIM has moved to the next level of clustering.
• Since the electrical utility is government owned, the government should have an especially high interest in supporting with not only university-based core research but also applied research and commercialization of technologies.  The level of the knowledge on this sector in Turkey is quite high.  The Ministry of Energy follows the studies conducted and expresses its support for the formation of the cooperation therein.
• Training of qualified labour force within the sector is urgently required.
• Investment desires of the firms are high in parallel with the growth of the sector.
• Although the level of knowledge, expertise and investment desires is high, the communication among the firms which will design, invest, produce, sell and purchase is hardly available.
• There exist some similarities considering the structure in the neighbor countries of Turkey and the Target Market shall include not only our country but also the foreign countries.
• The firms have some progresses in terms of innovation and consider that there are external supports as well as planning support available for this respect.
• The firms have some difficulties in access to the market. In the existing situation, the buyers look for large rates and amounts of production other than small-scale production. This fact requires a joint sale organization.
• Some difficulties are encountered in the international documentation and technology follow-up.
• Since the most of the products developed by the firms are of genuine nature, they are required to be taken under a patent and commercial protection. The level of awareness of the firms for this issue is low.

The strategy in the Renewable Energy and Environmental Technologies cluster is to:

“Eliminate the gaps in the value chain by attracting firms, which can thrive locally within the sector and develop high technology, environment-friendly integrated commercial applications that leverage our intensive inter-firm linkages”.

Clustering of the Defence Supply Industry

Turkey, located in a problematic geo-politic region, allocates a significant portion of its budget to defence investments and expenditures every year. High defence expenditures are the most important driving force for the development of the national defence industries. Turkey has a significant internal market with an approximately USD3.5 billion supply expenditures for the defence system. Although “decreasing its dependence on foreign countries in defence expenditures” is an important strategic priority of Turkey, the rate of meeting its needs out of national resources is still about 25%.

Considering the need for increasing the domestic production for meeting the defence need, “Defence Supply Industry Clustering Studies” have been initiated with 77 OSTIM firms which are already engaged in the defence industry.

There are some structural differences between the firms within the Defence Supply Industry cluster and the firms in other sectors. The issues brought to light in the analysis conducted for the detection of the capacities, development problems and the development areas of the firms in this cluster are as follows:

• A strategic sector is one of the basic elements of a strong defence industry infrastructure and national security strategy. Development of a self-sufficient defence industry is quite vital in terms of military-strategic, economical and political aspects. Therefore, the related public institutions as well as the Turkish Armed Forces shall provide supports and working opportunities for the initiatives in line with these strategies.
• Human Resources; Compared to the firms in other sectors, the number of university graduates and the persons who know foreign languages employed in the Defence Supply Industry is quite high. These personnel have the necessary qualification not only in terms of the technical aspects but also for the development of cultural cooperation.
• Innovation capacity; Most of the firms within the cluster has gained experience in terms of patent, utilization of the patent databases, R&D supports, project design. Innovation and R&D studies, both individual and through cooperation, of the firms continue.
• Central firms; The Central players such as Aselsan, TAI, Roketsan, MKE, Otokar, FNSS, etc. detected through cluster network map are institutionalized, large-scale firms managed by professional managers. These firms perform their production in an integrated way with their suppliers.  
• Supporting firms, suppliers; Most of the firms within the sector are the enterprises which are established by splitting from the firms constituting the backbone of the Turkish Defence Industry through spin-offs. Since they are the suppliers of important actors, they are required to keep themselves up-to-date in terms of quality, qualified human resources, up-to-date machinery, productivity, etc.   

In the light of the analysis performed, the strategy for the Defence Supply Industry Clustering is defined as...

“Creation of shared R&D capacity via increased cooperation, skills development and technology transfer to SMEs and meeting the needs of the defence industry within the country”

Clustering of the Work and Construction Machinery (İŞİM)

Çankaya University started its clustering studies with OSTIM management in 2007. A study based on 22 criteria in 6 candidate sectors was conducted so as to determine the sectors having clustering potential. As a result of the new analysis and evaluation of the existing studies performed by Çankaya University with the OSTIM management, the Work and Construction Machinery sector was selected for further process. 

At the beginning of the study, 120 Work and Construction Machinery producers in OSTIM/Ivedik zone have been identified and detailed analysis for determining the status of such enterprises is being conducted. The issues brought into light within the İŞİM cluster are as follows: 

• Information exchange between the enterprises appears to be minimal or nonexistent.
• The competition between the enterprises is intense.
• The cost of labour is high. Firms have a difficult time hiring a sufficient number of qualified personnel.
• Investment willingness of the enterprises is low.
• Innovation and new technology-adaptation and development capacity of the sector is limited.

In light of these issues, the necessity of developing technical skills and abilities by making improvements primarily at the enterprise level so as to obtain successful results in the İŞİM clustering initiative has been made clear. The development areas determined by Çankaya University for the development of the İŞİM are defined as the development of the technical staff structure and management skills in the short-term, development of cooperation by strengthening the vertical relations in the medium-term, and the formation of R&D and innovation skills and technical infrastructure in the long-term. Considering the development areas, the proposed strategy of the İŞİM cluster is as follows:

“Creation of commercial applications of high tech products developed through cooperation on upgrading of technical skills and abilities of enterprises, resulting in the improved competitiveness of the cluster.”

1.3. Key Success Factors, Requisite Skills and Capabilities for İŞİM Cluster

Below table lists the key success factors, which need to be in place for the cluster to implement its strategy, and progress towards achievement of its vision. It also includes the range of skills, competences and capabilities at the cluster level that are required for successful cluster development (in the short-, medium- and long-term).

Key Success Factors and Requisite Skills and Capabilities

1.4. Cluster Governance for İŞİM Cluster

Cluster governance is about the intended, collective actions of cluster actors to upgrade a cluster^[1]F” Effective development of the cluster and the implementation of the Cluster Roadmap depend, to a large extent, on the ability of the cluster actors to organise its activities in a coherent way, to manage and implement the planned strategic actions, as well as to monitor, review, obtain feedback and update its overall strategy and vision, if and when necessary.

The notions of ‘governance’ and ‘management’ have much in common; the difference is that governance refers to a more strategic overview and setting direction for the development of the overall cluster community:

Governance describes the mechanisms that an organisation or system uses to ensure that its stakeholders and members follow its established processes and policies. It implies the key ways of maintaining oversight and accountability in a loosely coupled organisational structure. Proper governance strategy includes systems to monitor and record progress, takes steps to ensure compliance with agreed policies and strategies, and provides for corrective action in cases where the accepted rules have been ignored or misconstrued.

Management and coordination of cluster projects and initiatives at a more practical, day-to-day level, is also very important and needs to be combined with the overall governance of the cluster. Therefore, mechanisms to ensure the overall cluster governance and detailed management and coordination, need to be established in order for the cluster to operate efficiently as a coherent system.

When the international cases are examined, it is observed that there are many different models for the governance and coordination of the clusters. Governance structure of each cluster may vary according to the cultural structure of the region it is located in, strategy and objectives of that cluster and the relations between the cluster actors. Adoption of the process by the important cluster members and their leadership are important factors for the formation of the governance structure.

The studies for the completion of the governance structure in the İŞİM Cluster were started together by Çankaya University and the OSTIM in 2007. The activities of the cluster have been determined so far by the cluster management board consisting of mostly the managers of the OSTIM and Çankaya University. In the following period, it is desired to increase the projects as well as the activities planned for the development of the cluster. In addition to the contributions of the OSTIM and Çankaya University, upon the supports to be provided by the state and the EU resources, a multi-layer governance structure requiring cooperation with more actors will be needed. Taking the long-term objectives and the strategies of the cluster into consideration, the “draft structure” given below has been developed for the governance of the İŞİM cluster. It is recommended that this structure is to be revised through the analysis to be performed according to the problems and needs to be encountered within the course of time.

Cluster Governance and Management

General Board of Cluster Stakeholders: It is a structure with a high level of participation covering all the actors with which the cluster is associated. This structure consists of the members coming from the relevant Public Institutions, Universities, Chambers of Industry and Commerce, Exporters’ Union, Organized Industry Zones, Private Sector Firms, Non-governmental Organizations and the Municipalities located in the cluster region. It is a superior board during which all the stakeholders are informed and the views are exchanged about the general progress of the cluster as well as the projects determined. This board shall act as an advisory and supervision board. The Board is planned to meet 1 or 2 times in a year.

Management Board of the Cluster: It is a board with less participation level consisting of the members determined by the OSTIM (1 member), Çankaya University (1 member), Cluster Firms (2-4 members), and the General Board of Cluster stakeholders (3 members). This board shall be responsible for the follow-up and update of the general vision of the cluster, strategies, success factors and the determination as well as the implementation of the projects in line with the strategies through monthly meetings. It shall also be responsible for management and the performance monitoring of the Cluster Management Coordination Unit.

Cluster Management Coordination Unit (CCU): CCU shall be responsible for the execution of necessary studies in line with the determined strategies, preparation and implementation of the projects (announcement of the projects, formation of the project working teams, calls for meetings, etc.) and the daily management and the coordination of the cluster. Çankaya University and the OSTIM have jointly undertaken the duties and the responsibilities of the Cluster Management Coordination Unit so far. In parallel with the activities to be initiated, it is planned to define clearly and develop the structure of this unit.

Another point is the necessity of ensuring the cluster coordination unit gains a legal status in the medium-term. Determination of the legal status is a factor which is also important for the financing of the cluster activities. Cluster Coordination Unit shall try to create financing resources for the financing of the cluster activities by submitting the cluster projects to the existing and developing state aid mechanisms and the EU programs.

Legal Structure: Another important point for discussion for the formation of the clusters is the determination of the legal structure of the cluster representative “agency”. The stakeholders consulted within the scope of the study have stated that the cluster cannot survive in the long-term without a legal status. Another important point in the determination of the legal status is the content of the policy and incentive mechanisms being prepared by the state. In order to determine the most suitable structure for the cluster governance, it has been decided to examine the alternatives such as non-governmental organization (foundation, association, union, etc.) or incorporation. However, each of the existing legal structures has specific advantages and disadvantages for the operation of the cluster. Çankaya University conducts a study for this respect with the Law Faculty of the University. Following the completion of these studies, the legal structure of the İŞİM Cluster will be clarified. 

Task Forces (Working Teams): They are the cooperation platforms to work jointly in the strategic development areas determined by the cluster. They are the working groups including the stakeholders and the representatives of the firms related with the issue. The working teams formed with the participation of the OSTİM Management, Çankaya University and the relevant stakeholders still conduct studies for the strengthening of the cluster governance structure, working on the EU funding of the projects and the enterprise development. Cluster Coordination Unit shall be responsible for the formation and coordination of the working groups under the supervision of the Management Board. The working groups may be formed in the areas specified below or any other areas that will come up at the later stages: (1) formation of the policy dialogue – studies for the improvement of the legal frame in the areas having impact on the cluster; (2) training and the development of the strategic human resources (3) Development of the skills and the abilities of the enterprises; (4) evaluation of the cooperation opportunities; (5) formation of the technology platforms; (6) development of the quality standards, etc.

1.5. Cluster Actions for İŞİM Cluster

Cluster Action 1: Cluster Governance, Coordination and Institutionalization

In order to implement the road map and ensure efficient coordination, monitoring and evaluation activities, an appropriate management unit should be established. In the İŞİM Cluster, Çankaya University and the OSTIM management carry out some studies with their own resources so as to develop the cluster coordination and governance structure. However, for the efficient development of the cluster, formation of a strong cluster management coordination unit, which is in contact with all the stakeholders and has its own resources, is required.

Cluster Action 2: Cluster Communication and Promotion Portal

For a successful cluster development, an efficient communication and data transfer among the stakeholders is needed. Formation of a multi-function “online” web portal which can support the activities planned by the cluster will provide the infrastructure required for the development of the communication and coordination among the cluster actors and a positive contribution to the development of the cluster. Studies for the formation of this portal in the İŞİM cluster continue.

Cluster Action 3: Enterprise Development Projects

Firstly the improvements at the firm level are needed for the development of the cluster. Some of the problems detected at the enterprise level during the site studies can be eliminated with the supports and services to be provided by the universities. Projects for the elimination of the problems encountered by the enterprise should be developed with the teams consisting of the university lecturers, students and the representatives of the enterprises. Çankaya University has initiated the projects for the elimination of the problems encountered by the enterprises. Through such projects, the skills and the abilities of the enterprises will be increased and they will be ready to make cooperation and utilize advanced technology. Enterprise development projects will ensure the Universities understand the problems as well as the expectations of the industry and the University graduates meet needs of enterprises in a better way.

Cluster Action 4: Human Resources Development Projects

Competitive power of the firms within the cluster is highly associated with their access to the qualified and sufficient number of human resources. Provision of the communication and the coordination among the cluster firms, occupational training institutions and the target labor force is an important need. Preparation of the human resources inventory of the sector, detection of the personnel required, development of the training programs for the training of new personnel, ensuring a continuous communication between the trainers, students and the enterprises are some of the activities to be carried out within the scope of the Human Resources Development Project.

Types of HR Development Projects:

1.      Executive Development School

a.       Management Development assessment

b.      Development of decision making skills in financial management, marketing management, strategic management

c.       Leadership programs

d.      Innovation management

e.       Making decisions in HR management

f.       Tailor made programs to meet specific needs

2.      Vocational training centre

a.       Training needs analysis

b.      Organization of facilities for the vocational training

c.       Study tours to best vocational training centres in developed countries

d.      Attraction financing for the equipment and development of contacts with multinationals to give donations to the Centre.

3.      Development of Technical Expertise

Cluster Action 5: Joint Procurement

Cost of raw material has a significant portion in the production costs. Although the firms utilize the same or similar raw materials and the auxiliary materials, they do not make joint procurement cooperation. Establishment of a joint procurement system will provide opportunity for supplying the large scales of materials with a good price structure. Cooperation will not only decrease the procurement costs but also decrease the costs of stocks by improving the maturity structure. 

Cluster Action 6: Development of the Supply Chain & Detection of Joint Production Opportunities

Although the firms under the body of the İŞİM cluster sold products to each other in parts before the establishment of the cluster, they could not make cooperation for the development of new products. Within the scope of the İŞİM cluster support and coordination, it is aimed at realizing such productions and introducing higher value-added products into the market. For this respect, the supply chains within the cluster should be analyzed and the joint production areas should be detected. It is aimed at providing support to the firms for the elimination of the weak points as well as the problems in the supply chain and ensuring coordination by establishing the confidence required for the joint production. Development of the supply chains will increase the cooperation with the other sectors and in the long term make positive contributions to the development of the innovation capacity of the zone.

Cluster Action 7: Market, Development, Tendency and Technology Monitoring Centre

A unit which will support the cluster firms in following the markets they are interested in and the technology as well as the tendency developments therein is needed. This unit must firstly be familiar with the sectors to which the cluster sells products and the technical skills as well as the abilities of the cluster firms. The Centres shall follow all the developments likely to affect the machine manufacturing industry and inform the cluster firms about the developments. Target markets shall be followed and the members shall be ensured to come together for the large-scale tenders. The risks and the opportunities (new technologies, industrial tendency, partnership opportunities, innovation management tools, etc.) detected shall be analyzed with the cluster stakeholders and a long-term strategy shall be established for the cluster. The centre shall not only act as a source of information but also provide technical support (such as the detection of the technology suppliers, benefit-cost analysis, investment financing analysis) for the adoption of the new technologies by the cluster firms.

Cluster Action 8: Development of the R&D Innovation Capacity

The firms within the İŞİM cluster produce with the methods which are mostly based on labour force and not very sensitive. In order to increase the competitiveness, innovative product and production technologies are required to be developed.  However, the firms do not have sufficient capacity for this respect. Although the firms are aware of the necessity of the innovation and developing technology, they do not have sufficient technical capacity. There are some information deficiencies in terms of what the innovation and R&D are and how they can be achieved. No sufficient human resources could be achieved for providing support to the firms in this issue. For this purpose, capacity will be tired to be built both in the universities and the private organizations (consultancy centres, R&D laboratories).

Cluster Action 9: Formation of a Joint R&D Infrastructure

In the machine manufacturing industry, development of the products and the new technologies requires laboratory and test devices including expensive and high technologies. It is not possible for the firms at a SME scale to establish and utilize by themselves an infrastructure including such an expensive and advanced technology. Therefore, the cluster should have such an infrastructure in the long term and serve all the firms within the cluster. Through the cooperation to be created with the universities, the number of the research personnel will increase and the R&D infrastructure will efficiently be utilized.

The cluster activities briefly explained above will contribute to successful implementation of the cluster strategy by eliminating the existing gaps in the key success factors. Each of the proposed cluster action corresponds to the key success factors that have been identified for successful implementation of the cluster strategy.

Key Success Factors against Cluster Actions

The activities that need to be fulfilled within each cluster action, along with indicative budgets are presented in the annexes. Although, most of the proposed actions can (and should) be launched as soon as possible, it is clear that establishment of a cluster coordination and management agency is a prerequisite for others. The following chart presents the actions that need be pursued (Æ) over the 5-year period between 2008 and 2013, and critical milestones (P).

A Roadmap for Ankara Construction and Engineering Machines Cluster.rar

Cluster Development Timeline