Dusting off Savile Row 6106 Industry Clusters and Firm Competitiveness Corinna Gross (41296) Oscar Holm (50276) David Schlicht (41150) Jaroslav Tran (41303) Inez van der Sande (41280) Executive Summary 2 Page 3 - 9 London shows significant micro-economical strengths, particularly relating to FDIs, access to capital and demand sophistication. There are, however, also weaknesses and challenges to be Regional framework conditions addressed, including tax policy, barriers and uncertainty surrounding Brexit and an all-time high in global competition. Savile Row is the world’s most renowned cluster for bespoke Page 10 - 23 tailoring. While the cluster was very dynamic the first half of the 20th century, it is rather static today and is endangered to drift into the museum stage. Overall, there are several major Cluster analysis macroeconomic as well as cluster specific challenges that are being faced (e.g. expensive rents and business rates and a lack of young tailors). Page 24 - 28 Henry Poole & Co., was established in 1806 and is considered to be the first one to set up shop in Savile Row. Though they are internationalizing, they seem to do little to stay competitive. Firm strategy However, compared to the other tailors, Henry Poole has established itself somewhat better in the cluster. Page 29 - 33 To sustain the long term success of the cluster and tackle the identified challenges, three recommendation blocks were Recommendations for the cluster developed. Exemplary action steps include setting up an International Talent Program and incorporating new technologies such as virtual fitting rooms. Introduction Regional analysis Cluster analysis Henry Poole Recommendations Conclusion In order to conduct the cluster analysis, the Funnel model was applied 3 Regional framework conditions including London’s legacy, economic conditions and competitive challenges Cluster analysis including mapping, history, performance, competition and the Diamond Model Firm strategy including firm overview and business model canvas Recommendations for the cluster Introduction Regional analysis Cluster analysis Henry Poole Recommendations Conclusion London is a region described by a long legacy of cluster development1 4 8.7 mil inhabitants London grew Continuously through In the early 2009 Old Street became the UK’s prominence 1837 marks the start of the Victorian attractive to start-up tech due to recent in trade. In the early 20th century, era with vast industry growth. London recession and cheap rents. Thanks to Oxford street became an early was not only the trade capital, but also government subsidies, the area grew shopping cluster starting with a trendsetter through aristocrats and from 200 to 5000 tech companies, Selfridge’s and Harrod’s but today rich business men, one of whom was including Facebook & Google. Beau Brummel, the first dandy containing flagship stores from almost and inspiration to Savile Row all the global retailers. Great fire of 1666 razed most of the tailoring. city, this was the modern starting point for London as we know it, with roughly Hatton Garden Jewellers was started in 630 000 inhabitants at the time the 16th century and is still a cluster today. th In the 18 century London became a SoHo Post-Production for the film industry trade capital of the world. With a vast starting with Warner Bros in the 1940s 630 k inhabitants fleet and widespread colonies, goods Billingsgate Fish Market was the were brought to the city from all over formed in the 17th century because of the world. This was the foundation of London’s trade-route-centrality the London Financial cluster. London clusters are largely a result of its legacy as the world’s trade hub UKs prominence during colonial times meant London became the trade capital of the world, and in turn the home turf of the times’ most fashionable sectors. Over centuries London built what can be referred to as an enormous “Business Cluster”. However, the foundation of these sectors are based on old merits, is the climate competitive today? Introduction Regional analysis Cluster analysis Henry Poole Recommendations Conclusion UK´s macroeconomic environment ranks 8th place on the global competition index, down from 7th2 5 The highlighted data gives an overview of the UK’s economic landscape relative to the 75th percentile and top performers. The environment will then be further mapped using the diamond model. Top performer 75th percentile UK Budget balance % GDP Quality infrastructure Basic 82% 81% -3,1 85 Corporate tax rate (%) Trade tariffs (%) 86% Efficiency 79% 30,9 1,1 Patents per million R&D % of GDP 84% Innovation 76% 99,1 1,7 The UK’s business landscape is characterized by comparatively low public investment rates3 noticeable in infrastructure, very Competition 84% sophisticated financial markets attracting FDI4 and a limited rate th Index th 8 of innovation seen in patents and R&D. This makes the UK 8 in Total score 79% the world in terms of competitiveness. Introduction Regional analysis Cluster analysis Henry Poole Recommendations Conclusion The strong microeconomic landscape of London is threatened by the Brexit and increasing competition 6 v Subject to UK decision- Chance making incl. tax policy Government v BREXIT and immigration v Infrastructure below competing countries (low v Openness of market has historically been a great advantage: compromised public investment) through BREXIT? v Labor force skills very strong in support services v Labor market regulations complicated by EU with primary fields in banking and insurance, v Competition intensified by presence of global actors however declining within manufacturing Firm strategy, v Tax incentive shrinking compared to other similar regions v Strength through financial markets (capital structure and rivalry availability) v R&D investments are quite low compared to others which is also reflected in patents filed Factor condition London Demand conditions v Extremely broad, well educated and international Related and demand v High number of renowned education institutes v High sophistication levels pressuring suppliers, v Financial cluster providing high availability of VC supporting industries however beneficial demand climate may cause v Tourism: museums, shopping cluster generating revenue inertia in terms of innovation v Seemingly few cluster-supporting organizations outside of dominant fields v UK ranks 12th in the world in terms of demand (finance, insurance etc.) conditions in GCI, slightly below overall rank2 Introduction Regional analysis Cluster analysis Henry Poole Recommendations Conclusion The strong microeconomic landscape of London is threatened by the Brexit and increasing competition 7 London Diamond (detailed) The openness and accessibility has been a regional advantage11 Infrastructure and public investment2 v This could be threatened by Brexit, creating barriers for international firms v In terms of infrastructure and public investment UK ranks relatively low, and talents to enter and intensify competition especially if compared to other regions with similar historical development v Brexit could also have a positive impact on simplifying regulations v Relatively high debt % of GDP undermines heavy future public Importance of global rivalry investments v Globally competing companies constitute a very significant share of Strength is in financial markets and capital accessibility5 business in London, which is vital for long-term competitiveness of the v The financial cluster in London provides an almost unparalleled area. An important challenge is to make sure they stay Firm strategy, Firm strategy, accessibility to funding which can be the ignition for new clusters 5 Factor Factor conditions Incentives such as low taxes are no longer as prominent structure and rivalry and structure v 10th lowest in 1999, 20th lowest in 2010, mostly other regions changing London contains some of the world’s top universities6 Broad and well educated international demand v The city is especially prominent within economics, science & technology v Very diverse and high-skill population creates significant pressure on and health sciences competing actors in the region v High access to a skilled workforce through these institutions, but high Sophistication of demand is high living costs lead to decline in more low skill labour7 v London has a history of being the city where you can get anything, e.g. v A large share is made up of international students, giving talent diversity Harrods. This is a position which is threatened by the accessibility that E- Traffic from tourism and business clusters commerce supplies. UK ranks 12th in the world, lower than their overall2 industries v 1,37 billion annual tube passengers providing immense retail traffic8 v Threatening because it makes London’s business less unique but could v 31,5 million annual tourist visitors to London, a figure which is growing9 also be positive as it further increases demand sophistication 12 One of the worlds top financial clusters conditions Demand Government environmental incentives to suppliers is average Related and supporting supporting and Related v Provides high accessibility to capital and high FDI-attraction v Below top performers which could become more significant in the future - v London was very anti-Brexit but the decision in the end is made by the London has strong influence on governmental decisions entire country and the emerging uncertainty has an effect on exports, v Due to national government being based in London, the region naturally investments