The Athletic and Outdoor cluster in Portland Joe Cortright Business Summit: Stretegic Innovation Partnerships
4 September
Oregon’s Athletic & Outdoor Cluster
September 2013
Project funded by Portland Development Commission, Oregon Business
Development Department, Oregon Business Council
Joe Cortright, Impresa, Inc.
Roadmap Definition Metrics
Value Chain Industry Structure & Rivalry
Evolution Implications
Definition Athletic & Outdoor Cluster
Firms that design, produce and market
apparel, footwear and related equipment for sports, recreational and casual use
Core NAICS Codes for Athletic & Outdoor Cluster
NAICS Code Sector Name 315 Apparel Manufacturing 3162 Footwear Manufacturing 33992 Sporting and Athletic Goods Manufacturing 42391 Sporting and Recreational Goods and Supplies Merchant Wholesalers 4243 Apparel, Piece Goods and Notions Merchant Wholesalers 5414 Specialized Design Services 3322 Cutlery and Handtool Manufacturing 33699 Motorcycle, Bicycle, and Parts Manufacturing
Note: Not an exclusive list of firms that are included in the cluster; firms in other NAICS categories, for
example, professional services, are part of the cluster, but not the “core.”
Footwear
Apparel
Gear and Tools
Most US Knives are designed or
manufactured in Portland
Leatherman, Gerber, Kershaw and Others
Related Industries
Supporting Industries
Marketing/Advertising/ Branding
IP Attorneys
IT
Logistics/Inventory Management
Packaging Design
Marketing
Distribution
Product Design
Sustainability
Industry analysts
Orientation
Methodology Statistical Analysis
Focus Groups and Interviews On-Line Survey
Survey Methodology
Online business survey
80 responses Response rate: 21.7%
Response rate, core firms: 19.6% Response rate, service firms: 29.3%
Questions Firm history: founding & entrepreneurial
background Geography of business partners Interactions with local customers/users
14
Key Metrics
14,000 Employees 700 firms with a payroll 3,200 “non-employer” firms Average wage: $82,700
High Wages
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
1st Qtr
Metro Average Industry Average
Industry Characteristics
•Non-Durable •Fashion and Performance •Globalized, Outsourced Manufacturing •Some Technical Differentiation •High Marketing Component •Dominant Brands, Niche Players
A Global Marketplace
Sales by Market Area
Company U.S. Rest of World
Nike 34.1% 65.9%
Adidas 23.3% 76.7%
Columbia 55.2% 44.8%
LaCrosse 94.8% 5.2%
Note: For Adidas U.S. data covers is N. America.
Source: Company Annual Reports
Advertising Expense
Company Amount Percent of Sales
Nike 2,351.0 12.3%
Adidas 2,000.6 13.2%
Columbia 65.2 4.9%
LaCrosse 3.1 2.2%
Nike: includes endorsement contracts.
Amounts for Adidas converted from Euros to Dollars at 1.40 dollars/euro
Patent Analysis Patents by Firm
Market Share of Patents in Key Classifications Time Series data on patents
Relative contribution to Oregon patenting
Footwear Patents
Footwear Patents (Class 36), by State, 1990 to 2010 1 Oregon 274 2 California 239 3 Massachusetts 182 4 Washington 72 5 Florida 54 6 Michigan 54 7 North Carolina 49 8 New York 48 9 Ohio 44 10 Vermont 44
Athletic & Outdoor Cluster Characteristics
and Value Chain
Athletic & Outdoor value chain
Source: adidas 2009 Annual Report, page 88
Portland: high value functions
Source: adidas 2009 Annual Report, page 88
Portland specializes in these
steps in the value chain
Interactions with local customers
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completely unimportant
somewhat unimportan
t
neither unimportant
nor important
somewhat important
extremely important
Valid N
Material development
17.7% 9.7% 17.7% 33.9% 21.0% 62
Material improvement
12.9% 11.3% 19.4% 37.1% 19.4% 62
Visual design & styling
4.8% 3.2% 12.7% 25.4% 54.0% 63
Feedback on product concept & prototype
7.9% 4.8% 11.1% 25.4% 50.8% 63
Testing products
7.9% 7.9% 11.1% 25.4% 47.6% 63
Brand image
4.8% 3.2% 14.3% 27.0% 50.8% 63
Suggestions & ideas for new applications
8.1% 4.8% 17.7% 38.7% 30.6% 62
How important are each of the following interactions with local users/consumers to your
company`s development of products (Please choose one rating in each row)?
Trade Flows
Donguan
Los Angeles
Memphis
Container to LA Rail to Memphis
Portland
Athletic & Outdoor Value Chain
Function Location Wage Production China $2 to $3/hour Distribution Midwest $12-14/hour
Design, Finance Marketing, Mgt. Portland $40/hour
Firm Structure, Strategy and Rivalry
Portland’s Big Three
Firm Portland Worldwide Nike 5,700 34,300 Columbia 1,500 3,100 Adidas 800 38,982
Rivals
Interfirm Labor Mobility
Workers at incumbent firms, 2008 8,490
Workers moving to other Oregon firms 1,767 (20.8%)
To other Athletic & Outdoor cluster firms 295
To other incumbents 133
To startups 162
Competitive Advantage
Design with fashion and performance
Highly talented workers
The local innovative milieu Worker/Users Active Living
“The Hybrid Lifestyle”
Self-Reinforcing
Lifestyle Talent
Culture
Cluster
U. S. Competitor Regions Principal Athletic & Outdoor Competitor Regions,
Employment and Location Quotients, 2008
NAICS 315 3162 4243 43434
Industry Apparel Footwear Apparel Wholesaling.
Footware Wholesaling
Portland 500 (0.32) 345 (2.77) 6,017 (5.17) 5,246 (24.87)
Los Angeles 63,010 (7.31) 786 (1.14) 23,309 (3.6) 3,557 (3.04)
New York 28,634 (2.32)
Boston 1,551 (0.42) 929 (3.13) 3,916 (1.41) 866 (4.99)
Seattle 1,621 (0.63) 503 (1.44)
San Francisco 3,148 (1.02) 2,051 (0.89) 419 (1)
Boulder 71 (0.63) 866 (1.44)
Memphis 295 (0.32) 1,851 (2.69)
Evolution
Physical Activity
Compared to the average for the US, Portlanders are:
Twice as likely to go camping 60% more likely to go hiking or backpacking
40% more likely to golf or hunt Region ranks last in theme park attendance
Oregonians rank lowest in sedentary life styles and 2nd highest of vigorous physical activity
How it started
• In the late 60s the jogging craze takes off in many towns led by Eugene Oregon
• A guy starts selling Japanese running shoes out of the back of his station wagon
Emergence of firms in Portland, Oregon
Source: Portland Athletic & Outdoor Industry Research Project
42
Nike Inc.
Columbia
Sportswear
adidas America
Sports Inc.
Moved to PDX:
Yakima Racks (2004)
Keen (2006)
Icebreaker, Li Ning (2007)
1980s:
Nike`s trans-
formation into a
global brand
1990s:
Competitors
move to PDX,
esp. adidas
America
2000s:
Expansion &
diversification of
industry
through
spinoffs
& new
firms
moving to
region
Three Phases
Source: Portland Athletic & Outdoor Industry Research Project
43
Nike Inc.
Athletic and
Outdoor Cluster
Micro-foundations of Clusters
•Labor Market Pooling
•Supplier Specialization
•Knowledge Spillovers
•Entrepreneurship
•Path Dependence and Lock-In
•Culture
•Local Demand
Creation
•Labor Market Pooling
•Supplier Specialization
•Knowledge Spillovers
•Entrepreneurship
•Path Dependence and Lock-In
•Culture
•Local Demand
Growth
•Labor Market Pooling
•Supplier Specialization
•Knowledge Spillovers
•Entrepreneurship
•Path Dependence and Lock-In
•Culture
•Local Demand
Today’s Competitiveness
•Labor Market Pooling
•Supplier Specialization
•Knowledge Spillovers
•Entrepreneurship
•Path Dependence and Lock-In
•Culture
•Local Demand
Implications
Co-Evolution of industry and attitudes
Phase I: growth of recreation and fitness as a socially valued and acceptable idea
Phase II: growing informality in social and business relations (jeans, ties)
Phase III: creation of new forms of recreation (windsurf, kiteboard, cyclocross, dragon-boat,
etc. Phase IV: Hybrid lifestyle, blurring boundaries
between work and social life.
Path dependence and selection
Social interaction—the big sort More fun to be in a place where others share
your values Externalities in consumption—need people with similar interests to maximize utility
associated with consumption Cities are selection environments for new
lifestyles
Example: Bike Culture(s)
Spandex Fixies
Cyclocross City Bikes Art Bikes
Bike Gallery Manifesto
Live to Bike Eat to Live Work to Eat Bike to Work
Compensation is multi-faceted; more
than money
Direct compensation Future value (skills, reputation and contacts
acquired) “Know how” and “know who”
Consumption externalities
Cluster Drivers Duranton & Puga: Functional Specialization
Von Hippel: User-Innovation Porter: Local Demand
Saxenian: Business Culture Schoales: Alpha Cluster
Implications
Economic & social innovation are complements
Changes in values and lifestyles create market niches
Portland’s culture is ahead of the curve in generating social innovations, and giving local
firms insight into future market niches