Tuesday, June 9, 2015

Growing the market for Jablonec glass

In Jablonec’s glass industry, competition for market share is favouring larger, more industrialised firms, which use modern equipment to achieve economies of scale. The smaller firms’ reliance on pre-industrial methods of production makes it hard for them to attract the capital investment they need to compete with the larger firms on their own terms.

Individual survival
In Jablonec’s glass industry, several of the small firms don’t operate in a factory as such. Instead,
Pressing strings of beads, Jablonec
each firm’s operations are dispersed across a number of sites. These may include:
·      part or all of a building, which the firm rents to run the business, store and distribute its products and, perhaps run a shop
·      small workshops in rented premises
·      private homes in which people make the firm’s products on a ‘piecework’ basis (i.e. they are paid for each piece of glasswork that they produce).

When asked, “What one thing would enable you to develop your business?”, the owner of one of Jablonec’s small glass firms answered that he would really welcome capital with which to buy premises in which to gather his operations together in one place. This would bring him several benefits: his premises would be a capital asset, rather than a drain on income through rent; his control over his whole operation would increase; and he could build a narrative through which to market his products – “tell the whole story”, as he put it.

Glass beads get pearlescent coating - Jablonec
A bank would seem an obvious first stop for a company seeking capital to develop. However, that same owner said that the local banks are cautious and conservative lenders. Instead of backing small companies wishing to develop, they restrict their loans to larger, wealthier firms. As ever, the wealthier you are, the easier it is to become wealthier still; and the less you need to borrow money, the keener the banks are to lend you some!

Collaborative development?
Jablonec’s smaller glass firms need alternative business strategies if they are to survive the local banks’ intransigence and match their larger competitors’ economies of scale. For example, the area’s glass firms could collaborate to grow the market overall for Jablonec glass. However, the firms’ present single-minded focus on competing with each other – while necessary for their survival - precludes anything more than minimal collaboration between them.

Hand-making glass beads - Jablonec
There is a vehicle for such collaboration - the local glass industry association, to which many of Jablonec’s glass firms belong. However, the association restricts itself to assisting individual firms to attend trade shows and exhibitions. This reproduces the firms’ individual competition, rather than advancing the interests of the local industry as a whole, or even expressing a view about what those interests are.

New sources of investment
If Jablonec’s smaller glass firms decide to collaborate – within or alongside the local industry association – they could get around the local banks’ reluctance to invest in them by approaching two alternative funding sources: the Czech Ministry of Regional Development and the European Union’s European Regional Development Fund.

The Czech Ministry of Regional Development (www.mmr.cz/en/Homepage)
The Ministry is an obvious potential source of funds to develop Jablonec’s glass industry. However, its website (in English) doesn’t describe its day-to-day activities; and while it mentions the spending of money, there’s no indication as to what this money is spent on or the criteria by which it is spent. Perhaps a direct personal approach would elicit more useful, practical information.

European Regional Development Fund  (http://ec.europa.eu/regional_policy/en/funding/erdf/)
The ERDF aims to help reinforce economic and social cohesion by redressing regional imbalances and co-financing the conversion of declining industrial regions. It supports a rage of activities, including research, development and innovation; telecommunication, energy and transport infrastructures; and health, education and social infrastructures. In 2014 – 2020, ERDF support will concentrate on three themes:
·      research and innovation, including support to public research and innovation bodies and investment in technology and applied research in enterprises
·      creating and safeguarding sustainable jobs, through co-investment in small and medium-sized enterprises
·      climate change mitigation.
Clearly, the first two of those themes are relevant directly to the development of the glass industry in Jablonec.

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