AUTOMOTIVE CLUSTER : GERMANY

GROUP 1

Cluster: Stuttgart

Education & Technology

From 19th century: government-financed system for education - focus on scientific research

Baden-Württemberg (Stuttgart region) : the most renowned universities in Germany

9 state universities - 3 privates - 22 public colleges Technologically oriented - offer special courses for the

automotive sector - more applied research Supply automotive companies with well trained, practical

specialists Government-financed system for research in technology,

science and business Science-based firms with in-house R&D laboratories

Growth Drivers

Demand After WWII: Federal Republic Of Germany (West) 1990: Germany reunification + 17 million people 1992: Maastricht Treaty - Creation of the European Market German consumers’ behavior - demand for high quality

products Engineering-driven concepts in Germany vs consumer-driven

convenience concepts in cars in the US

Government Policy 19th century : Abolishment of traditional restrictions on the

freedom to engage in business Infrastructure: launch of construction of roads and canals,

encouragement of railway construction

Growth Drivers

Development of the Industry

Stuttgart region: development of the 1st ever automobile in the 1887 by Carl Benz and Gottlieb Daimler

Development of DaimlerChrysler, Porsche & Bosch

1800s:import of technical know-how from Britain and Belgium in machine-building, iron and steel industries

1920s: Industry consisted of 150 small automotive/components producers

1934: Nazi government ordered the industry to standardize production

Formation of Automotive Industry Economic Group 1930s: Nazi government initiatives – production going from

52,000 to 352,ooo units Late 1930s: 3rd largest automobile manufacturer in the world

Porter 5 ForcesBargaining Power of

Supplier• Medium

(Switching Cost, Product Quality & technology)

Intense Rivalry VW, M.Benz, Porsche,

Opel(Innovation,

Differentiation, Price, Volume, Technology)

Bargaining Power of Buyer

• Medium(not many options)

• Generate better quality

Barriers to Entry (new entrants)

• High Capital• High R&D

• Technical Expertise• Economies of Scale• Supply/dist. network

Threat of Substitutes• SMALL

• Electric Cars*• Solar Cars*

Porter DiamondFirm strategy, structure &

rivalry:•Support for National companies• Hierarchical & rigid internal

structure• Trade Unions

• Main strategy: Quality• Associations with in Industry• R&D, innovation vs. Lock-ins &

Spill-over

Related & supporting industries:

• Iron and Steel industry• Education

• Component suppliers & IT• Trade Association (VRS & WRS)

Factor conditions:• Geographical (logistics)

• Infrastructure• Skilled Labour• Technological

• Non-pecuniary externality

Demand Conditions:• High internal demand• European Union• Government

LinkagesGovernment and StateBaden-Württemberg.The Stuttgart Region Economic Development Corporation

Vehicle design and assemblyDaimler ChryslerPorscheAudi

Education and researchUniversities atHeidelberg,TübingenFreiburg, StuttgartKarlsruhe, Mannheimplus special courses at technical collegesInstitute for Vehicle Concepts

Tyre IndustryContinental

EnginesEberspächer diesel heaters

Vehicle PartsBosch. Largest in world

Aerospace industryEADS with Dornier,DASA Zeppelin Luftschifftechnik

Production equipment

LogisticsWincanton

Vehicle components Approx 200 plantsMahle – engine components /pistonsMahle/knecht - filtersMann + Hummel - Filter and air systemsBeru Ignition technology Friedrichshafen AG transmissions and steering

GlassSaint-Gobain Sekurit

Plastics/ ChemicalsBehr - Paints

Buses/ Agricultural vehiclesNeoplan (Man) Kässbohrer, Iveco, John Deere, Evo Bus, and Mercedes-Benz

ElectronicsBeru

Innovative technologyBertrandt

Information technologyDassault

Metal manufacture/processingThyssen

Future Challenges

External and Internal (Macro)• National Framework vs. Regional Framework• Ambiguity in defn. vs. interconnectedness among firms• Cluster Development – Present: exception vs. Future: Rule?• EU (Lisbon treaty) : Opportunity vs. threat• Cluster Policy vs. private cluster initiatives

Indirect vs. Direct (Micro)• Maturity vs. depth• Convergence (Cooptation) vs. divergence (PPP)• Institutional arrangements vs. Implementation Framework• Competition (Lock-ins) vs. sustainability (continuous innovation)• Congestion vs. growth• Brand management (takeovers) vs. B2B, B2C, Value chain cost

reduction

Q&A?

THANK YOU!

References:

• Gert Hermann- The Eastern German Automobile Cluster

• Joseph Cortright- Making sense of Clusters

• Dr. Heinz- Automotive Clusters in Germany

• Dr. Holger- Cluster Platform for Innovative Railway Technology in Bavaria

• Dina Lonescu- What are Clusters?

• Alex Burfitt- The Challenges of Pursuing Cluster Policy in the Congested State

• European Commission- Cluster Building and Networking

• EMCC- The Automotive Cluster in Baden-Wuttemberg, Germany

• The Global Competitiveness Report 2008-2009

• Kristian Ketels- European Clusters