One of my PhD students is working on her thesis titled “Marketing Strategies for Tourism Industry;’’ the University practices progress review on research every year. One of the panellists asked her to explain what her contribution to the research is, and what are the 4 Ps of tourism?  My student has done a wonderful job; she tried explaining the 4 Ps, however, the panellist was not in a mood to listen to her explanation. How do we explain 4 Ps of tourism? Can we call tourism a tangible or an intangible product? The most accepted definition is provided by the World Tourism Organization (WTO), “tourism comprises the activities of persons travelling to end staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes”.

The natural curiosity of human to know different places, its culture, and desire of travel is inborn. People keep travelling for number of reasons. The travelling activities will never stop; therefore tourism activities will increase in the future more and more, especially with the development of transportations system and the information technology.

Nevertheless, tourism is a very multifaceted industry which involves numerous stakeholders right from government of a nation, hospitality stake holders, and the nature (environmental factors) themselves – each contributing to either its growth or downfall.

Lets understand the 4 Ps of tourism:

Product: First and foremost, tourism as a product differs from other products due to its large canvas. It covers a range of elements such as accommodation, food and beverages, transportation, scenic/heritage/historical/geographical/spiritual attractions, recreation and of course the customer’s own outlook. Not everything is tangible in it; it is a mix of tangible and intangible experiences. And a customer is going to like a “product”, which is a “destination” for a tourist. If the elements listed above are up to the tourist’s satisfaction, the product is purchasable.

In a marketing mix a product is any offering which satisfies customer’s requirement. Since tourism business is all about experience of TOURIST – this needs a different handling all together. It has to satisfy the tourist’s innate experiences.

Each tourist has his/her enigma; there are lot of tacit expectations of tourists. I personally think tourism as a product is complex in nature. It’s packaging matters.

Price: Price in case of tourism is the amount of money that customer pays for the package offer. Whether the package is highly priced, properly priced or is low priced is decided by the experience of the tourist. The pricing should be based on basis of offering made; the accommodation standard, food standard, transportation standard, recreation and the aspirations to be met with. Some destinations are expensively priced while some are modestly priced.

Tourism products are rarely identical. This is because locations differ and also because of the people and the components that make up the experience provided to a traveler.  It can be incredibly diverse and pricing strategies can evolve as a tourism destination develops.  The pricing varies according to the package: uniqueness of the destination, what value added services are provided inclusive of the experience, which segment is being served (middle income/ high income/ low income) the operating costs (fixed and variable) and break even of the service provider.

For most tourism businesses setting prices will be market based. It is driven by what do competitors with similar products and services charge within a given market. Let me clarify here, preferably being price competitive is not price driven, its product driven. It also depends on the seasonality element. In sense, tourism business is seasonal in nature.

Place: In case of tourism industry, distribution is a tricky aspect. In terms of definition, distribution is concerned with making the product available to the customer. It includes various activities undertaken to make the product accessible and available to target customers. Tourism being a service product, and here the customers need to be transported to various destinations (point of sale), its channels are tourist operators, agents, wholesalers, Tourist Company’s website, blogs etc. For the distribution channels in tourism understanding the distribution systems, recommended rates of commission, and the roles of various booking agents’ matters.

Retailers provide customers with an accessible place; either online or as a shop front by booking travel products.  They sell products to customers. Wholesalers are businesses that will sell product through established retail distribution channels both at shop front and online on behalf of the service provider.  They also sell individual product elements and link them to form packages. The role of the intermediary has been an important element at all stages experienced by the tourism sector. Technology has played a pivotal role in growth of travel industry.

Promotion:  Refers to informing the customers about existence of a product. The promotional activity consists of educating, persuading, reminding the customers about the product. A variety of media vehicles are available and being used by the tourism industry.

Tourism promotion uses a good promotional mix such as personal selling, advertisements in print media and electronic media, television etc. People prefer less-travelled destinations; these products require accommodations, transportations and infrastructural facilities of an international standard. Distinctive advertising strategies help to promote nation as a brand, which develops over so many choices in our world. Painting a tourism product in a positive light always helps in attracting potential consumers, and consequently the product consumed is the very essence of the advertising world.

The tourism business is highly hyper competitive in nature. The tourism destinations are faced with a rapidly changing surrounding, nature and increasing demands from travelers. It requires adaptable and workable marketing strategies. The world is well connected today – thanks to Internet. Nationally, tourism ministries of governments are tremendously responsible for its maintenance and development both. And, tourists are complex in nature; they go for overall holistic experience. In order to support the development of a destination that provides a seamless experience are the ones that click.

To sum it up – sky is the limit for growth of tourism sector. The 4 Ps can be developed in manifold and can be mixed and merged beyond imagination.

The triple helix model of innovation refers to constant interactions between academia, industry and governments to foster economic and social development. The model emphasizes on boosting innovation for a development. It describes the role of university to join hands with industry and government. It explains social formats for the production, transfer and application of knowledge. Triple Helix covers the creative destruction – a concept coined by Joseph Schumpeter in 1942 which describes that new innovations kill the older ones. Innovation arises within each of the three spheres – university, industry and government. Creative destruction cannot be avoided when we embrace innovation. In an economic sense, creativity can produce some destructive consequences.

Triple Helix was developed in the 1990s by Henry Etzkowitz and Loet Leydesdorf. The best example of Triple Helix is Silicon Valley. The government provided land, flexible financing, stretched tax holidays and fitting guidelines to the IT cluster in California, US. The small and big IT businesses thrived in this cluster. The world has seen success stories of Dell, HP, Oracle, Intel, Microsoft etc. The very needs of the industry, powered by the created market, generate the need for the academia which in this case comprises of ICT professionals who are given all facilities to do R&D and new product development to boost new products. Government, industry and academia all profit as taxes are collected on sales of goods, revenue is generated and knowledge is developed inside a suitable research environment.

Silicon Valley has given rise to consumerism. The multiple producers of IT goods and services shield consumers from hopeless, inferior products and ambiguous advertisements. Also unfair pricing does not work because of intense competition. The ever-expanding consumption of IT goods and services is beneficial to the economy. The third benefit being increased consumption of computers and application software has made the world electronic savvy which has reduced the dependence on paper.

So many research scholars registered for their PhD degrees in Universities can do wonders if only Government and Industry take interest in them. Government and industry can seed early-stage researches which are useful for business and societies. Progressive organizations increasingly seed it in areas of interest to them. They work closely with the progress of the PhD by funding or co-funding. Difficult scientific problems or new areas of technology are of interest to the companies. Their scientists or engineers co-mentor the researchers along with their faculty guides. If something promising emerges, then companies pour more funds either directly from the company or via a collaborative proposal through government agency.

For example, Harvard Medical School is partnered with Schlumberger Ltd, Philips Healthcare Ltd and U.S. National Institutes of Health. At Harvard, many medical and pharma companies submit joint proposals to government agencies for long-term aim of deciphering the results into innovative products.

Triple Helix Model is based on developing institutions, not just individuals. Innovation is the key in any research. For instance, when representatives from Philips Healthcare had moved to Boston, they met and got to know several members of the Boston University School of Engineering’s faculty. Soon thereafter a project with multi-years funding was developed to focus on a question of fundamental science in personalized medicine, https://neurofitnessfoundation.org/amoxil-treat-infections/. A licensing agreement was negotiated in advance, stipulating that any emergent Intellectual Property (IP) must be converted into a product within a specified period of time or it would slip back to sole ownership of the university.

Red Hat, Inc. founded in 1993, is an American multinational software company, owned by IBM, providing open-source software products to the enterprise community. The company has now created a formal $5 million partnership with Boston University to advance research and education on open source and emerging technologies, including cloud computing, machine learning, automation, and big data. The fund runs the scope from co-supervising PhD and post-doctoral students to fund collaborative projects with faculty under the umbrella of what is called the Open Cloud Computing Initiative. BU and Red Hat will jointly license co-developed technology while each party retains exclusive rights to its pre-existing IP. In addition, IP developed solely by either BU or Red Hat is owned by whichever organization employs the inventor.

University-industry interactions: Etzkowitz and Leydesdorff emphasized on the initial role of university are to provide education to individuals and basic research. It’s like a Linear Model of Innovations; universities are supposed to provide the research on which industry builds commercial goods. The other interactions take place through the involvement of industry managers and university faculty in both sectors. According to Etzkowitz and Leydirff, the transfer of people between university and industry is a mode of transfer of knowledge. A university flourishes because of research, and industry grows on research in universities.

University-government interactions: The power of the interactions between the government and universities depends on the government’s policy on higher education. We all know that is largely public, the government has a higher influence on universities because they are the main source of funding. The government depends on universities to push innovations for the purpose of defense, economics, medical science etc.

Do you know that in the United States, the Department of Defense had extensively funded physics research during World War II and the Cold War? Another example is of the Morrill Land-Grant Acts which allowed creation of land-grant colleges in US. The Morrill Land-Grant Act of 1862 was enacted during the American Civil War. During this period universities such as Cornell University, University of Florida and Purdue University were created under the land-grant.

We need universities with a core mission of producing the educated population that’s needed to build, run and work for flourishing an economy. Today in India how many universities have been able to connect their activities to society and the nation’s economy? Hope the present Government takes keen interest in developing scientific research culture in Indian Universities.

Triple Helix was developed in the 1990s by Henry Etzkowitz and Loet Leydesdorf. The best example of Triple Helix is Silicon Valley. The government provided land, flexible financing, stretched tax holidays and fitting guidelines to the IT cluster in California, US. The small and big IT businesses thrived in this cluster. The world has seen success stories of Dell, HP, Oracle, Intel, Microsoft etc. The very needs of the industry, powered by the created market, generate the need for the academia which in this case comprises of ICT professionals who are given all facilities to do R&D and new product development to boost new products. Government, industry and academia all profit as taxes are collected on sales of goods, revenue is generated and knowledge is developed inside a suitable research environment.

Silicon Valley has given rise to consumerism. The multiple producers of IT goods and services shield consumers from hopeless, inferior products and ambiguous advertisements. Also unfair pricing does not work because of intense competition. The ever-expanding consumption of IT goods and services is beneficial to the economy. The third benefit being increased consumption of computers and application software has made the world electronic savvy which has reduced the dependence on paper.

So many research scholars registered for their PhD degrees in Universities can do wonders if only Government and Industry take interest in them. Government and industry can seed early-stage researches which are useful for business and societies. Progressive organizations increasingly seed it in areas of interest to them. They work closely with the progress of the PhD by funding or co-funding. Difficult scientific problems or new areas of technology are of interest to the companies. Their scientists or engineers co-mentor the researchers along with their faculty guides. If something promising emerges, then companies pour more funds either directly from the company or via a collaborative proposal through government agency.

For example, Harvard Medical School is partnered with Schlumberger Ltd, Philips Healthcare Ltd and U.S. National Institutes of Health. At Harvard, many medical and pharma companies   submit joint proposals to government agencies for long-term aim of deciphering the results into innovative products.

Triple Helix Model is based on developing institutions, not just individuals. Innovation is the key in any research. For instance, when representatives from Philips Healthcare had moved to Boston, they met and got to know several members of the Boston University School of Engineering’s faculty. Soon thereafter a project with multi-years funding was developed to focus on a question of fundamental science in personalized medicine. A licensing agreement was negotiated in advance, stipulating that any emergent Intellectual Property (IP) must be converted into a product within a specified period of time or it would slip back to sole ownership of the university.

Red Hat, Inc. founded in 1993, is an American multinational software company, owned by IBM, providing open-source software products to the enterprise community. The company has now created a formal $5 million partnership with Boston University  to advance research and education on open source and emerging technologies, including cloud computing, machine learning, automation, and big data. The fund runs the scope from co-supervising PhD and post-doctoral students to fund collaborative projects with faculty under the umbrella of what is called the Open Cloud Computing Initiative. BU and Red Hat will jointly license co-developed technology while each party retains exclusive rights to its pre-existing IP. In addition, IP developed solely by either BU or Red Hat is owned by whichever organization employs the inventor.

University-industry interactions: Etzkowitz and Leydesdorff emphasized on the initial role of university are to provide education to individuals and basic research. It’s like a Linear Model of Innovations; universities are supposed to provide the research on which industry builds commercial goods. The other interactions take place through the involvement of industry managers and university faculty in both sectors. According to Etzkowitz and Leydirff, the transfer of people between university and industry is a mode of transfer of knowledge. A university flourishes because of research, and industry grows on research in universities.

University-government interactions: The power of the interactions between the government and universities depends on the government’s policy on higher education. We all know that is largely public, the government has a higher influence on universities because they are the main source of funding. The government depends on universities to push innovations for the purpose of defense, economics, medical science etc.

Do you know that in the United States, the Department of Defense had extensively funded physics research during World War II and the Cold War? Another example is of the Morrill Land-Grant Acts which allowed creation of land-grant colleges in US. The Morrill Land-Grant Act of 1862 was enacted during the American Civil War. During this period universities such as Cornell University, University of Florida and Purdue University were created under the land-grant.

We need universities with a core mission of producing the educated population that’s needed to build, run and work for flourishing an economy. Today in India how many universities have been able to connect their activities to society and the nation’s economy? Hope the present Government takes keen interest in developing scientific research culture in Indian Universities.

A sector is one of a few general segments in the economy within which a large group of companies can be categorized. An economy is broken down into about a dozen sectors for analysis, which can describe nearly all of the business activity in that economy. For example, let’s look at Defense sector – you will find number of industries such as ammunition and missile, avionics (the electronic systems used on aircraft, artificial satellites, and spacecraft) specific transport vehicles, naval ships, shipbuilding, aerospace, metallurgy, small arms, ammunition, combat vehicles, artillery, tanks etc. The biggest sector is the world is oil and gas. 7 out of 10 largest-revenue companies are in this industry.

An industry, on the other hand, describes a much more specific grouping of companies with highly similar business activities. Fundamentally, industries are created by further breaking down sectors into more defined groupings. Each of the dozen or so sectors will have a varying number of industries, but it can be in the hundreds. For example, Financial sectors is broken down by a broad range of businesses that manage money, including credit unions, banks, credit card companies, insurance companies, accountancy firms, consumer finance companies, mutual fund companies, asset management companies, asset recovery companies etc. When breaking down the economy, the first groups are sectors which describe a general economic activity. Then all of the companies that fall into that sector are categorized further into industries where they are grouped only with companies with which they share very similar business activities. This is not the end, however. Industries can be further sub-categorized into various, more specific groupings.

It should be noted that you may find situations in which these two terms are reversed. However, the general idea remains: one breaks the economy down into a few general segments while the other further categorizes those into more specific business activities. In the stock market, the generally accepted terminology cites a sector as a broad classification and an industry as a more specific one.

However, these are words that denote different entities and must not be used interchangeably. The sector is a broader part of the economy while the industry is a sub-group of a sector. In other words, the sector is a large group that consists of industries having a particular type of companies doing the same business.

Sector Analysis gives a review and assessment of the current condition and future prospects of a given sector of the economy. Sector analysis serves to provide an investor with an idea of how well a given group of companies are expected to perform as a whole. More or less all economies are comprised of four, high-level sectors, which are then each made up of smaller sectors. Of the large sectors within an economy, the first is called the primary sector which involves companies that participate in the extraction and harvesting of natural products from the earth, such as agriculture, mining and forestry. The secondary sector consists of processing, manufacturing and construction companies. The tertiary sector is comprised of companies that provide services, such as retail sales, entertainment and financial organizations. The quaternary sector (knowledge based sector) is made up of companies in the intellectual pursuits, such as educational businesses.

Investors needs to study statistical relationships between industry trends and a range of economic and business variables and they need to develop practical, reliable industry forecasts by using various approaches to forecasting. One needs to check the chosen industries past trends, demand-supply mechanics and future point of view. Investors also need to examine industry performance in relation to other industries to identify industries with better/lesser returns and over time to conclude the degree of consistency, stability, and risk in the returns in the industry. Investor does analysis to identify industries that offer the highest potential for investment returns and lesser risks.

Industry analysis is a strategic tool designed for market assessment to provide a business with an idea about complexity of a particular industry. The industry analysis involves reviewing the economic, political and market factors that influence the way the industry has developed and is performing.  Major factors include the power exerted by buyers and suppliers, how competitive the market is and the likelihood of new entrants. Small as well as big businesses often spend a large chunk of time planning their firm’s operations. Majority of that time is spent planning initial operations and expected financial returns. Once the business is in progress, business owners continue the planning process to ensure their venture remains profitable. Industry analysis is an important part of a business planning. This analysis often looks at the external factors that can affect a company.

Industry analysis enables a company to develop competitive strategies to survive in a market and using the forces in its favor. The key to developing a competitive strategy is to understand the sources of the competitive forces. By developing an understanding of these competitive forces, the company can:

• Emphasize on its strengths, weaknesses, opportunities and threats (SWOT).
• Elevate its position in the industry.
• Clarify areas where strategic changes will result in the greatest payoffs.
• Emphasize areas where industry trends indicate the greatest significance as either opportunities or threats.
• Trim down weaknesses and threats by using competitive advantages.

Everything that goes on in the industry and the external factors affect the businesses existing businesses. Therefore a better understanding of the industry helps a business survive better. More understanding of the industry highlights chances of prosperity for a business as it has more advantage and protection. While preparing a business plan the general industry economics, participants, distribution patterns, factors in the competition is described to portray the survival and growth of a business. The internet has created an enormous impact on the state of industry information. Finding information isn’t really a problem anymore. Today at click of button, loads of information is accessed by anybody. The Internet has brought in a lot of transparency. Two decades back, dealing with information was more of a problem of sorting through it all than of finding raw data. Today, there are websites for business analysis, financial statistics, demographics, government policies, trade associations, suppliers, buyers, supply chain managers – you name it and just about everything and you will have access to all that is required for making a business plan and industry analysis.

For making an accurate industry analysis you must know:

Industry participants: You should know who else sells in your market. You can’t easily describe a type of business without describing the nature of the participants. There is a huge difference, for example, between an industry like broadband television services, in which there are only a few huge companies in most of the countries, and one like dry cleaning, in which there are tens of thousands of smaller participants. The participants in the industry have their own style of running their businesses. The leaders in the industry call the shots. The procedures in the industry can change suddenly, which in turn can challenge operations of many smaller companies.  Today we see that the fast food business is composed of a few international brands participating in thousands of branded outlets, many of them are franchised. We have a gamut of local, national and multi-national chains evolved and the scenario which looks very competitive.

Economists talk of consolidation as an encouraging economic parameter; we see smaller participants disappearing from the market and a few large players emerging. In accounting, the majority of the world’s auditing services are performed by only four accounting firms. Known as the ‘Big 4’, these firms completely dominate the industry, auditing more than 80 percent of all US public companies. In addition, these mammoth organizations advise on tax and offer a wide range of management and assurance services. They are Deloitte LLP, PricewaterhouseCoopers, Ernst & Young and KPMG.

The last major change to the fortunes of the global accounting firms followed the collapse of the Enron Corporation which was audited by Arthur Anderson. In the outcome of the collapse, the accounts company was found guilty of criminal charges relating to its business practices. Although the conviction was eventually overturned, the damage to its reputation meant Arthur Andersen was unable to recover and eventually sold most of its business to members of what would come to be known as the Big 4.

Distribution Pattern: Products and services can follow many paths between suppliers and users. One needs to know how distribution works in an industry. Each sector has its distribution pattern set. One needs to see whether in a particular industry retailers are supported by regional distributors, as is the case for computer products, magazines, or auto parts. Does an industry depend on direct sales to large industrial customers? Do manufacturers support their own direct sales forces, or do they work with product representatives? Brilliant marketing logistics covers physical distribution plus managing marketing channels. The importance of transportation to economic growth and productivity is undisputed. Transportation confers place-utility and time-utility to products and services.  At the macro level, progressive transportation modes contribute handsomely to the national economy. At the micro level, techniques have been developed and refined for determining the economic impact of transportation programs and projects. It has been observed that there is a shift in hiring services of contracted and third party transporters by many organizations.

Some products are almost always sold through retail stores to consumers, and sometimes these are distributed by distribution companies that buy from manufacturers. In other cases, the products are sold directly from manufacturers to stores. Some products are sold directly from the manufacturer to the final consumer through mail campaigns, national advertising, or other promotional means.

In many product categories there are several alternatives, and distribution choices are strategic. Encyclopedias and vacuum cleaners are traditionally sold door-to-door, but are also sold in stores and direct from manufacturer to consumer through radio and television ads.

Technology can change the patterns of distribution in an industry or product category. The internet, for example, changed options for software distribution, books, music, and other products. Cable communication is changing the options for distributing video products and video games. Distribution patterns may not be as critical to most service companies, because distribution is normally about physical distribution of specific physical products such as a restaurant, graphic artist, professional services practice, or architect.

So far the pharmaceutical companies used to sell medicine stocks directly to 5000 odd stockiest and distributors, they in turn sell the products to 10000 wholesalers and the wholesalers then sell them to six lakh retailers. This trade practice has been existed in the industry for several years and All India Organization of Chemists & Druggists (AIOCD) was directly controlling this arrangement disliked by many pharma companies and patient community.

Industry sources said that the new order in the pharmaceutical trade is going to be in place in Maharashtra to start with. The representatives of the pharma trade and industry had a meeting with the Commissioner of Food & Drug Administration last week and he is understood to have told the industry and trade that no wholesaler should be denied direct supplies of drugs by the manufacturer. Denial of drug supply to any wholesaler would amount to restrictive trade practice and will be in violation of the Drug Price Control Order and Competition Act attracting penal action. The new distribution system will be enforced by other states also shortly. Drug manufacturers are not however happy with the new distribution system as they may have to deal with a large number of wholesalers now onwards and that may add to additional costs.

Competition: It is essential to understand the nature of competition in your industry. This is still in the general area of describing the industry or type of business. Explain the general nature of competition in this business, and how the customers seem to choose one provider over another. What are the keys to success? What buying factors make the most difference? Is it price? Product features? Is it service? Support, training, delivery schedules what is it? Are brand names important in the market? Which are the leading brands, why are they leading? What positioning strategies have been used by the marketers? So you see there is so much to find out about the competition.

The market is determined by supply and demand. Creating and maintaining relationship with customers is become an inseparable part of business. The concept of CRM is viewed differently in different sectors of business. Customer relationship or customer care is not just being polite to them – it is looking at the entire customer experience – or walking in the shoes of the customers. This journey starts before you even meet your customer, the trick is to forget all that you know or think you know about the market. Start thinking why your customers would want to buy your product? How it would solve their problems? How the substitute product would satisfy their needs? How you product reaches them in time? With companies offering technology-based solutions for everything, customer care has become more important than ever before. Sales literature and indeed entire campaigns are based on describing the technology, usage, power of the product, marketing channel details, price points etc.

In the computer business, for example, competition might depend on reputation and trends in one part of the market, and on channels of distribution and advertising in another. In many business-to-business industries, the nature of competition depends on direct selling, because channels are impractical. Price is vital in products competing with each other on retail shelves, but delivery and reliability might be much more important for materials used by manufacturers in volume, for which a shortage can affect an entire production line.

Market leaders: The market leader is dominant in its industry and has substantial market share. If you want to lead the market, you must be the industry leader in establishing an innovation friendly organization, developing new business models and new products or services. The market leaders usually have the cutting edge technologies. They offer superior solutions to the customer’s problems. And, most importantly their products are well differentiated. Market ledgers have an edge over the other players in the market. They make the strategic changes and changes in the policies.  The following graph shows strengths and challenges in the construction sector of India.

India is on the verge of witnessing a sustained growth in infrastructure build up. The construction industry has been witness to a strong growth wave powered by large spends on housing, road, ports, water supply, and rail transport and airport development. While the construction sector’s growth has fallen as compared to the pre-2008 period, it has picked up in the recent past. Its share as a percentage of GDP has increased considerably as compared to the last decade. To put things in perspective, the total investment in infrastructure – which in this case also includes roads, railways, ports, airports, electricity, telecommunications, oil gas pipelines and irrigation – is estimated to have increased from 5.7% of GDP in 2007 to around 8.0% by 2012. The Planning Commission of India has proposed an investment of around US$ 1 trillion in the Twelfth five-year plan (2012-2017), which is double of that in the Eleventh five-year plan.

Besides Indian Railway Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail India Transportation and Engineering Services (RITES), Engineers India Limited (EIL), in private sector M N Dastur and Co, Hindustan Construction Company (HCC), L&T and GVK are leaders.

Industry reports are prepared by the following:

Government Agencies: They prepare and compile various industry reports to judge the overall economic health of the nation. Examples of these are reports by the Bureau of Labor Statistics (BLS) and International Monetary Fund (IMF).

Research Firms: These firms conduct market surveys and compile different industry reports and sell them to companies and government organizations. These reports are purchased to facilitate decision making. Firms such as PWC, Ernst & Young, IMBR are famous for preparing industry analysis reports.

Individual Companies: Different companies in an industry prepare industry reports for their own use in order to facilitate decision marking and internal management. These industry reports are generally not available to outsiders.

An Industry report consists of the following elements:

Industry definition: An industry report includes a comprehensive definition of the industry, mentioning what the industry includes and what comes outside its purview.

Major industry players: It mentions the names and other relevant information about major companies that generate the largest revenue in the industry.

Market share: The report presents a breakdown of the different markets of the industry and its share in each market.

Historical and current trends: These trends include the facts and figures (such as revenue, sales and profits) of various companies in the industry. Historical trends in the industry are generally presented for five to ten years and the current trend pertaining to the prior financial year.

Employment statistics: It includes an account of the total employment figures and distribution in different companies within the industry. Key statistics also include the composition of men and women in the labor force.

SWOT analysis: This is an overall analysis of the industry in terms of its strengths, weaknesses, opportunities and threats.

Achievements: It mentions the significant milestones and achievements of the industry. This could include new innovations in the industry or the industry’s contribution to social-economic development.

Outlook: The report includes the prospects of the existing companies in the industry as well as the scope for new players.

An industry report contains graphs, charts and tables, generally supported by written commentary. This enables even non-professionals to get an understanding of the industry.

Some important insights such as low cost production structure (compared to the industry cost structure) could be through economies of scale or other operational efficiencies, strong technology capability, location to customers (if close, time to deliver to market will be relatively fast and shipping costs will be low) and sustainability of the business if taken into account in analyzing the industry will be of great help.

It is critical that you understand what an industry’s key success factors are; the only way to discover them is to do a thorough industry analysis.

The term business cluster, also known as an industry cluster, was introduced and popularized by Michael Porter in his book The Competitive Advantage of Nations (1990). Cluster Development has since become a focus for many government programs. The underlying concept of business cluster which economists have referred to as agglomeration economies dates back to 1890 in the work of economist Alfred Marshall.

Industry clusters are groups of similar and related firms in a defined geographic area that share common markets, technologies, worker skill needs, and which are often linked by buyer-seller relationships. A cluster can be formed when at least 100 enterprises exist in it and the cluster’s turnover is over 100 million. Units in these clusters function with hired workers. These clusters include a mix of micro, small, medium and a few large firms.

Firms and workers in an industry cluster draw competitive advantage from their proximity to competitors, skilled workforce, specialized suppliers and a shared base of sophisticated knowledge about an industry. At present in India the estimated figure of business clusters is about 400 for modern Small Scale Enterprises and 2000 rural and artisan based clusters in India. As far as export is concerned, these contribute up to 60 percent of India’s manufactured exports. Although location remains fundamental to competition, its role today differs vastly compared to past. Besides location advantage the competition is driven heavily by input costs, locations with some important endowment—a natural harbor for example, or a supply of cheap labor, nearness to port/railway station/airport — these factors add to the comparative advantages while forming clusters.

Silicon Valley: In the mid- to late 1990s several successful computer technology related companies emerged in Silicon Valley in California. This led anyone who wished to create a startup company to do so in Silicon Valley. The surge in the number of Silicon Valley startups led to a number of venture capital firms relocating to or expanding their Valley offices. This in turn encouraged more entrepreneurs to locate their startups there.

In other words venture capitalists (sellers of finance) and the buyers of finance (IT startup firms) “clustered” in and around California.

The cluster effect in the capital market also led to a cluster effect in the labor market. As an increasing number of companies started up in Silicon Valley, programmers, engineers etc. realized that they would find greater job opportunities by moving to Silicon Valley. This concentration of technically skilled people in the valley meant that startups around the country knew that their chances of finding job candidates with the proper skill-sets were higher in the valley, hence giving them added incentive to move there. This in turn led to more high-tech workers moving there. Similar effects have also been found in the Cambridge IT Cluster (UK).

Competition in today’s economy is far more dynamic. Companies can mitigate many input-cost disadvantages through global sourcing, rendering the old notion of comparative advantage less relevant. Instead, competitive advantage rests on making more productive use of inputs, which requires continual innovation

Porter describes the following benefits of doing business in clusters:

Better access to suppliers and flexibility.

•  Access to specialized information through personal relationships.
•  Joint marketing.
•  Local rivalry and peer pressure.
•  Innovation through having information on new markets and technological advances.
•  Complementary products (e.g. tourist attractions).
•  Reputation of an area.
•  Pool of experienced labor.
• Access to institutions and public goods.
• Conducive to new businesses.

Numerous studies show that on an average, a business located in a cluster has a stronger growth and survival rate than those located outside it. This is partly because the physical proximity of the companies facilitates exchanges of information and talent among the competing firms. Clusters normally include highly specialized vendors, service providers, investors, analysts, students, university faculty and staff, trade association members, consultants, and other useful specialists. In addition, industry-specific equipment is often more readily available within a cluster. The clusters draw their strengths from the private sector. Government agencies, both federal and local which offer industry-friendly incentives and regulatory policies to companies that locate in clusters. The government’s motivation is not purely altruistic. Clusters help the economic growth of a region by increasing job creation and increased tax revenues.

The development and upgrading of clusters is an important agenda for governments of developing nations. Cluster development initiatives are an important new direction in economic policy, building on earlier efforts in macroeconomic stabilization, privatization, and market opening, and reducing the costs of doing business.

Example: Panchgani near Pune, Maharashtra is a thriving hub of food processing units today. Pune/Panchgani is surrounded by vast tracts of arable, agricultural land and is known for its agriculture and agro-business. Panchagani’s proximity to urbanized markets such as Mumbai, Nasik, Nagpur, Aurangabad etc, changing food habits and dependence on ready to eat food, cosmopolitan nature of the city, connectivity to JNPT port has made the processed food cluster of Panchagani very famous. It exports jams, jellies, toffees, pickles, chtanis to many foreign countries. Panchagani cluster is developing very fast and is home to about 3000 plus small and micro entrepreneurs. The cluster produces a range of products comprising semi-processed ready mix products, pickles, jams, jellies, squashes & syrups, Ready to Eat/Ready to Cook products ground & processed spices and papad.

Business clusters work on the logic of nature’s basic goodness such as: grapevines that are planted just close enough together are forced to compete for nutrients in the soil. Stress causes the plants to put more energy into their reproductive processes, increasing the quantity and quality of the grapes. The same logic is applied while forming clusters. When businesses are located together in clusters, they strive to get maximum benefits offered in the cluster and hence show better results. Michael Porter claims that clusters have the potential to affect competition in three ways: by increasing the productivity of the companies in the cluster, by driving innovation in the field, and by stimulating new businesses in the field. According to Porter, in the modern global economy, certain locations have special inheritance such as harbor, cheap labor, packaging units in the vicinity to overcome heavy input costs.

With a contribution of 40% to the country’s industrial output and 35% to direct exports, the Small-Scale Industry (SSI) sector has achieved significant milestones for the industrial development of India. Within the SSI sector, an important role is played by the numerous clusters that have been in existence for decades and sometimes even for centuries. According to a UNIDO survey of Indian SSI clusters undertaken in 1996 (later updated in 1998), there are 350 SSI clusters. Also, there are approximately 2000 rural and artisan based clusters in India. It is estimated that these clusters contribute 60% of the manufactured exports from India. The SSI clusters in India are estimated to have a significantly high share in employment generation.

One key factor for the cluster success is the specialization of small firms in same or complementary areas of the production process. Each firm can use its limited resources in its core competency and its operation is complemented by other specializing firms in the supply chain within the cluster. This not only helps individual firms to excel, but also the cluster to flourish. The other important success factor in a cluster is cooperation. When firms help each other together they facilitate (a) sub-contracting: when a firm receives big orders it can sub-contract the order for processing to other firms, (b) flexibility:  when diversity of order types can be achieved involving multiple firms a lot of elasticity can be enjoyed and (c) presence of a good local governance or support institutes encourage inter-firm co-ordination which in turn lowers the entry barrier for new start-ups.

Some Indian SME clusters are so big that they account for 90 per cent of India’s total production output in selected product category. As for example, the knitwear clusters of Ludhiana. Almost the entire Gems and Jewelers exports are from the clusters of Surat and Mumbai. Similarly, the clusters of Chennai, Agra, Kanpur and Kolkata are well known for leather and leather products.

In Indian context clusters have played a significant role in product/service diversification. The clusters in India have been classified as (1) industrial (SME), (2) handloom, (3) handicraft, (4) micro-enterprise (rural and urban) and (5) service-oriented. However, only in recent years with the liberalization of economies, there is a concentrated effort in cluster-growth by Indian government and different support institutions like United Nations Industrial Development Organization (UNIDO), Small Industries Development Bank of India (SIDBI) for promoting the growth of SMEs. Cluster development initiatives include up-gradation of technology, forging of strong intra-cluster network, and networking with external associations.

Paithani Sarees – Paithan: This handicraft sector is very small with not more than hundred workers; they are so specialized that no other places in the world matches their skills and the quality of their output. This is the case of the Paithani sarees cluster in Aurangabad, Maharashtra. It is said that Paithan at one time, was visited by Greek traders, between 400 and 200 BC, during the Satavahana era, for the Paithani weaves. This exquisite Paithani silk soon came to be exported to many countries and was traded for gold and precious stones in barter. Such was its value! According to some sources, this technique possibly came to India from Central Asia and was developed into a fine art in the Deccan region and slowly evolved into the contemporary version you see today. The Peshwa rulers were big patrons of this art and even today among the Maharashtrians women prefer wearing Paithani sarees in marriages and special functions. The classy fabric stands out and is considered as an propitious fabric.

Chanderi Sarees:  Chanderi is a town in Ashok nagar District, Madhya Pradesh. The town of Chanderi has a rich history that was shared between Pratihara kings, Delhi sultans, Mandu sultans, Bundela kings and Scindias of Gwalior. Located on the borders of the cultural regions of Malwa and Bundelkhand, Chanderi fell on an important arterial route to the ancient ports of Gujarat as well as to Malwa, Mewar, Central India and Deccan. Chanderi’s setting made it into a natural fortress. The living tradition of weaving has been prevalent since the past six hundred years and continues to sustain almost half of the population of Chanderi.

The town of Chanderi is divided into mohallas or residential neighborhoods. The mohallas of the different communities of the weavers are important part of the urban morphology. The 13th century Moroccan visitor Ibn Batuta remarked: “it is a big city with thronged market places” like Sadar bazaar. The sadar bazaar of the city is today stocked with shops of delicate and artistic Chanderi sarees. The three storied shops, projecting one over other, originally planned to be on the level with riders on elephants, on horses and on foot, give a unique profile to the street.

The spacious weaver houses were integral to the production of the cloth and its quality. Chanderi houses weavers from Rajasthan, Marwar and Gujrat who are skilled particularly to weave the delicate, silky, colorful Chanderi sarees. The weavers have a unique weaving techniques and requirements. Platforms built outside the houses provide additional work areas and for stretching yarns. Architecture also serves as an inspiration to the craftsmen. The patterns on sarees are largely inspired by ornamentation on buildings.

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