Friday, June 5, 2015

Jablonec glass - in search of a virtuous circle


Jablonec, in the Czech Republic, has been renowned for its glasswork for centuries. However, on a visit to the town in May 2015, it appeared that competition between the town’s glass businesses, compounded by an influx of cheaper glass products from China, is preventing Jablonec’s glass businesses from growing their market.

A 'factory house' in Jablonec
Jablonec (‘Yab-lon-etz’) began to develop as a centre of glass art in the Middle Ages, when it was part of Bohemia. By the eighteenth century, Bohemia had displaced Venice as the centre of Europe’s glass industry. Today, Jablonec’s glass industry consists of two broad sectors: several small manufacturers and a few large wholesalers. Between them, they make and sell glass sculptures, chandeliers, tableware, beads and buttons.

‘Zero sum’ competition
Competition in Jablonec’s glass industry - both within and between its two sectors - resembles a ‘zero sum’ game. Each business can only increase its share of the market (e.g. for glass beads and buttons) at the expense of other businesses, until only one business – or a small group – remains in each market.

In that ‘zero sum’ game, Jablonec’s smaller glass businesses find it hard to compete with the larger ones. The larger businesses use modern equipment and processes, achieving economies of scale that enable them to fill orders swiftly. Many of the smaller businesses rely for their income on a pool of glass workers whom they pay at ‘piecework’ rates (i.e. per piece, rather than per hour) to produce glasswork using centuries old techniques and tools - often in centuries old family premises.

Hand-making glass buttons in Jablonec
The smaller businesses’ reliance on old techniques and tools can make it hard for them to compete with the larger ones. This, in turn, limits their ability to replace their old equipment with modern versions; and this makes it harder for them to fill orders swiftly … and so on, in a vicious circle of competition.

Growing the market
An investment of fresh capital could break that vicious circle, but one small glass business owner said that the local banks are reluctant to lend money to smaller businesses; and anyway, the availability of that pool of home workers reduces the urgency of the search for investment.

However, unless something is done soon, the smaller glass businesses will start to go under. Their current glass workers know that their skills and techniques are centuries old, and that there is a good chance that their skills and techniques will die with them. They are an ageing population, working in conditions that often sit uneasily alongside contemporary health and safety concerns; and local young people are reluctant to take on the jobs because of the poor pay and conditions. So unless the smaller local businesses can devise new business models that will attract younger people, the glass industry in Jablonec will contract into a small number of large companies. The ‘zero sum’ game will be played to its end.
 
From vicious to virtuous circle
One alternative business model would be to grow the market overall, increasing the income of each company within it - “The rising tide lifts all the boats” as US President John Kennedy described it.

Simply growing the market would reproduce the current disparity in wealth between the industry’s large and small companies. However, the disparity would be at a higher level of income, increasing smaller companies’ ability to not just survive but to innovate and diversify their operations. This would strengthen Jablonec’s glass industry as a whole, turning the current vicious circle of competition into a virtuous circle of economic and cultural development that could keep alive the area’s traditions of glass art, craft and industry.

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