An Intermediary –
Basic Concepts of a Cluster or Network
• There is no uniform definition for each of the following
concepts
• a Cluster
– a Business Cluster
– Porter´s Diamond Framework
– a Micro-Cluster (in Tourism)
• Clustering
– Horizontal, Vertical, Diagonal
• a Network
– Global, National, Regional, Local
– Theme-based
• Networking
– Horizontal, Vertical, Diagonal
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
An Intermediary –
Developing Cluster Concept
“ Generally, the more industries are
located in a given area 
the greater the external economies
become possible.”
- Mountjoy 1966– The principals of cluster analysis have their origin
in traditional location theories established in 1960s
– Michael Porter revised the cluster concept, also
known as a competitive cluster, industry cluster or
Porter's cluster, in 1990.
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: Ewen M., Micro Clusters
www.Wikipedia.com
An Intermediary –
Developing Cluster Concept
• Clusters are geographic concentrations of
interconnected companies and institutions
in a particular field linked by commonalities
and complementarities (Porter 1998)
• Clusters are geographically bounded
concentration of interdependent businesses
with active channels for business
transactions, dialogue and communications
and that collectively shares common
opportunities and threats (Rosenfeld 1998)
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: Ewen M., Micro Clusters
www.Wikipedia.com
An Intermediary –
Clusters and Global Competitiveness
• Michael Porter claims that clusters have the potential
to affect competition in three ways:
1. by increasing the productivity with which
companies can compete, nationally and globally
in the cluster
2. by driving innovation in the field
3. by stimulating new businesses in the field
• Clusters are internationally/globally competetive
– The companies which belong to clusters have
been proven to be globally competetive
• Globally competetive clusters have evolved during
tens of years and they ´ve existed before they were
even named ”clusters”
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: www.wikipedia.com and
Mäkinen H. Klusteri vai verkosto?
An Intermediary in a Network Clustering
• A Tourism Cluster is
– A Structure which consists of companies/actors
joint linkages and interdependencies in the value
chain in producing products, services and
innovations
• A Tourism Clustering is
– The Process used by the companies/actors in
the cluster to extract greater commercial benefits
in operating with different ways to utlise the
synergies
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: Ewen M., Micro Clusters
www.Wikipedia.com
An Intermediary –
Different Clusters
1. Geographical Cluster
• a Cluster of businesses operating together within the
same geographical area
2. Sectoral Clusters
• a Cluster of businesses operating together within the
same commercial sector e.g. tourism
3. Horizontal Cluster
• interconnections between businesses in sharing
resources e.g. knowledge management
4. Vertical Cluster
- i.e. a supply chain cluster
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: www.Wikipedia.com
An Intermediary –
Cluster or Network –
The Umbrella Concept
The Cluster concept can be considered the
upper “Umbrella” concept
– A cluster can consist of numerous networks
which are different from each other
according to formality, type, size, age,
tightness etc.
A CLUSTER
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: Mäkinen H. Klusteri vai verkosto?
Producers of Knowledge
= Educational and Research Institutes
Substance
= The Information flows of
The Basic Knowlidge
Relevant to Business
Small Companies
Big Companies
Medium Companies
An Intermediary on a Borderline: knowledge, information, know-how
Technology
The Structure of the Region
= The Control Mechanisms
Dynamic Components
= Unification of Strategies
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Strong Interaction and Willingness to Develop
An Intermediary on the Borderline
Tourism Network
“To Destination”
Consumer
Intermediator
Consumer
Individual
Consumer
Group
Regional Level
Destination Accommodation
Company or Chain
Consumer
Business
Company
Intermediary
Travel Agency
contract
Husky
Farm
Consumer
Travel tourism
Company
National and
International Levels
contract
Travel Producer
DMC =
Destination
Management Company
Service Producer
Reindeer
Farm
Subcontractors
Local, Regional,
National and
International Levels
Samish
Village
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Regional Level
Local Level
Horizontal Network in Tourism
Operating:
- in the same Business field
DMC =
Destination
- on the same geographical area
Management Company
– Same and different size organizations Service Producer
– chains, networks, co-operative
associations
– Making agreements, settling unified
procedures between companies
operating in the same stage of the value
chain
Reindeer
Farm
Husky
Farm
Samish
Village
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Horizontal Network in Tourism
• Most common and easily recognised type of cluster
formation
• Occurs in:
– similar or alike companies from the stage in the value
chain for the same industry locating in a same
geographical area
– companies are competitors, selling products and
services using similar productive resources
• Their pools are:
– the potential customer availability
– labour supply
– shared information and infrastructure
– reducing costs in concentation
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: Ewen M:, Micro Clusters
Horizontal Network in Tourism
• Can lead to competition problems, if the co-operation
causes negative influence to
– pricing (too low prices)
– production (stuck with the same content)
– innovation (how to ensure, if the volumes are
high?)
– product selection and –quality (through monopol)
• Significant economical benefits could be reached in
terms of:
– diving risks through co-operation
– save costs
– combine know-how
– benefitting faster from innovations
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Vertical Network in Tourism
• Operating
– usually within the same industry supply chain
– co-operation not necessarily permanent
– situated in the same/different geographical area
– targeted markets and areas also define this
• is the product/service sold outside (outbound Tourism) or
inside (inbound Tourism)
National and
Regional Level
contract
Intermediator International Level
Travel Agency
Destination accommodation
Company or chain
Source: Boxberg, Komppula. Matkailutuotteen markkinointi- ja jakelukanavat. 2001
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Vertical Network in Tourism
• The close proximity between companies
– minimizes logistics and distributional costs
– may help to concentrate labour supply
– workforce skills
– market information
• If vertical agreements are made between
competing companies, they have to be evaluated
according to the principals of horizontal
agreements
– For example it is forbidden to make contracts that aim in
restricting competition by
• Rising the prices
• Limiting the production
• Dividing the customers
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: Ewen M:, Micro Clusters
Diagonal Network in Tourism
- entitles networks consisting
players of several types and sizes
- each player involved brings added
value to the product or activity
National and
International Level
Intermediator
Travel Agency
contract
Destination accommodation
Company or chain
Regional Level
Regional Level
DMC =
Destination
Management Company
Service Producer
Reindeer
Farm
Local Level
Subcontractor
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Diagonal Network in Tourism
• Clustering in which there is increasing
concentration of complementary (or symbiotic)
companies
• Each company adds value to the activities of
others even though their products may be quite
distinct and clearly belong to other industry
classifications
• Occurs when where companies working together
create a bundle of separate products and services
that the consumer effecively purchases as a single
item
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: Ewen M:, Micro Clusters
The Optimal Toursim Network
Horizontal Network
The optimal outcome for an industry
based network:
1. a variety of companies operating
across all three dimensions
2. to maximaze the gains in their location
in co-operation
Optimal
Cluster
Vertical Network
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: Ewen M:, Micro Clusters
Intermediation –
Dynamic Packaging
• common packaging in eBusiness
• combines various travel products
and services
• package is tailor made, built
according to customer wishes
• more flexible on it’s refund,
change and cancellation conditions
• calculation methods in purchase
are various: may be used with
tourism producer prices, allotments
and special agreements (codes)
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Intermediation –
Dynamic Packaging
Producer Price:
• price which can be used in
package building; demands certain
conditions
• conditions are defined by
producers and their agreements in
product network
• for example minimum or maximum
duration of stay in the destination
Intermediary’s role as a producer has
grown through dynamic packaging
• package tour –product
• package tour -legislation
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Intermediation in Lapland –
Accommodation chain
• a powerful developer of the business in Finnish
Lapland
• Chaining process has created:
– Many diverse ways of co-operation
• Vertical, Diagonal and Horizontal with the
national producers and services:
www.lappiin.fi
• Horizontal with the regional and local players:
– Combining products/suppliers within the
region
– Improved the visibility and recognition
internationally
• Foreign co-operation partners
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007
Source: Finnish Tourism Board
Intermediation and
distribution channels
CUSTOMERS ABROAD
INTERMERIARIES ABROAD
INTERNET,
RESERVATION
SYSTEMS
A is independent with
Internet.
B, C, D work together
using traditional way
E works alone in traditional channel.
F sells directly abroad.
G, H have cooperation and sell
directly to Tour
Operator abroad
TOUR OPERATOR ABROAD
DMC OR INCOMING AGENT AT DESTINATION
REGIONAL TOURISM BUSINESS COMPANIES
Intermediaries. RAMK HanniVaara & Tekoniemi-Selkälä 2007