A Research on the Regional Economy Growth in the Cluster of Small and Medium Ent

Abstract. The regional economy growth and the small and medium-sized enterprise cluster have the mutual promotion and mutual influence relationship between each other. Based on the cluster of small and medium-sized enterprises regional economic breeding, it is realize the cluster of small and medium enterprises has a strategic choice for sustainable development. This paper focus on the regional economic connotation of scientific definition, study some related attributes on the region economy, elaborating region economy in the development of industrial cluster, and discuss the strategies of small and medium-sized enterprise clusters to regional economy.

Key words: small and medium-sized enterprise clusters, regional economy, economic growth

1. Introduction

In views of the small and medium-sized enterprises plays an significant position and role in the national economy and social development. Meanwhile, Central Committee seriously puts forward clearly to take from strategic height the development of SMEs in china. To identify small and medium sized enterprise clusters, which is in a particular field, it usually seem as the core in leading industry, interrelated to the small and medium enterprises and institutions in the geographical position on the high assemble. The cluster of small and medium enterprises is to promote the development of SMEs important path choice. Since the reform and opening of our country small and medium-sized enterprises, especially the development of medium and small businesses in civilian battalion, such as in Zhejiang, Guangdong and other places, they have confirmed the development path effectiveness. However, the majority of the cluster of small and medium enterprises goes to the extensive development mode, which improves manufacturing capacity, and professional market and improve the industrial supporting ability development. Its product building did not cause enough attention, and its specific performance for the process capability is redundant, many companies exist in the market, lots of small size organizations, and the lack of independent products. Therefore, it is necessary to cultivate regional economic, shape cluster overall image, realize the upgrading of the industrial structure, promotes the small and chose the right strategic development for the medium-sized enterprise clusters.

2.The Association Study on Industrial Clusters and Regional Economic Development

Currently, many scholars use the industrial cluster theory to explain the success of the regional economic development in certain phenomena, which means their researches are leading-edge, for example, in the industrial cluster and the development of regional economy research field. Wang (2001) is one of the earliest scholars who did the research from the interdisciplinary perspective on industrial clusters and regional economic development. Focusing on the enterprise agglomeration and regional development association mechanism, based on industrial cluster theory, she analyzed the most typical examples of industrial agglomeration not only in domestic market, but the abroad market. And the result shows that one of her main contribution is the theory of industrial cluster are the latest development of regional economy theory for the studies. Moreover, Gai (2002) construct a theoretical system of regional innovation network systematically. His analysis of the industry agglomeration and network innovation activities, combined with the area developments, and discussed the future of regional innovation network and its development trend. However, in the industrial cluster and regional economic growth relation research field, Zhu Yingming (2003) build a regional economic growth of the conceptual model, whereby he analyzed industrial assemble area effect based on the data in Japan and South Korea. Next, address the industrial agglomeration in Yangtze River Delta, quantitative analysis on the relationship between developed areas of the foreign-invested enterprises spatial agglomeration and its regional growth. At the same time, Chen Jihai (2003) distillates on the analysis of foreign investment agglomeration effect and the relationship between economic growth and agglomeration effect in each region differences, but their implications for regional economic growth contribution. Nevertheless, in the industry cluster and industrialized relation research field. Tang Jie et al (1989) take Tianjin as an example; focus on the city industrial agglomeration economy effect and agglomeration economy. According to the research, Tianjin's leading industries agglomeration economy effect to advance the concept and classification of agglomeration economic benefit, and the economic analysis. While Feng Yunting (2001) accumulate the economy and city change development as a starting point. He studies the city agglomeration and the efficiency of resource allocation theory, focus on city agglomeration theory of systematic theoretical analysis and its empirical studies. Elaborated economic agglomeration mechanisms, its structure, the condition and all results, and then explore the latest rules of development in China.

Based on the above analysis, the scholars by using the theories of regional economics, economic geography and economic sociology to integrated a phenomenon that is from the study of industrial cluster to promote the development of regional economy to the relationship study of industrial cluster and the regional economy development. And it is obvious that research method from the early qualitative research, normative research mainly gradually to the quantitative research and the empirical study. For the main research field also wide transition gradually, from early mainly focus on the competitive advantage of industry cluster to both the industrial cluster risk and its management.

3. Model of Regional Economy Analysis

According to the competition in product difference, Hotelling demand model (Figure 1) can examine the regional sales on the market competition strategy. Within the Hotelling model, it is supposed that each company's products in the geographic or its product feature space have a special position, which means if two products or the product features in a closer geography space, they will become others alternatives. On the other hand, if the buyers have a long distant in geographic or product feature space, the buyer will spend higher cost of the purchase price. Meanwhile, the well-known products will compete with their competitors directly, and each of them has a certain market power in the industry.

Based on figure 1, it is obvious that the market of consumer preference equilibrium distribution in the line 1 segment. Then take the enterprises into market competition in Hotelling model, we can find that the demand for product differentiation is qi=q(p1, p2, H1, H2 ). It is supposed that the difference product market competition is a linear model, and the Hotelling model can satisfy the following conditions:

First is the products’ differentiation. It is hypothesized that enterprise confirm its products and sales area, the market behavior activity space can use the segment of line 1, called as Hotelling segment. As shown in figure, the starting point is 0, and the ending point is 1. The products have two differentiation parameters H1 and H2, which represent the product of "value", separately a and b to instead. Then the values of a and b in the range of 0-1. Supposed that if each enterprise can provide a product, and just focus on only one consumer sales region, so the enterprise's market value just the only value of enterprise, and enterprise 1’s value a at the left side of enterprise 2’s value b. So the formula is

0 ≤ a ≤ b ≤ 1

In the following analysis, it is assumed that a ≤ b, wherein if a=b, it means the market place of those two companies are in the same value, therefore, there is no difference for the products, because both of them are the homogeneous products.

Secondly, if the two enterprises in the continuous production conditions, the product of marginal cost and unit cost is fixed and equal (C1=C2=C). If the market various enterprises in scale to achieve the optimal state, then with the same raw material market and have the same production technology, so production cost structure is also the same.

Thirdly, the fixed cost in the market, if the market and foreign enterprises enter the market and participate in the competition, and it must undertake additional fixed cost which is F.

Fourthly, the transportation cost ". It is going to set the buyer’s preference is H, located in Hotelling model, between 0-1 segment. The distance of enterprise 1’s position a to point h is |h-a|, and the distance of enterprise 2’s position b to point h is |b-h|. Buyer preference represents the value and enterprise's market value, which has two meanings: may be the buyers are not satisfied for the regional sales, or may also not satisfied with the products. These differences will bring additional cost for buyers. On the other hand, in the market, buyers in order to obtain a satisfactory product, it has to buy the products, or forced to sacrifice some profits, and the acceptance does not exactly what the desired product. Suppose the market consumers from spending "cost” represents:

C1(h)=t(h-a)2

C2(h)=t(b-h)2

The parameter t is the cost of transport rate, or named as the product differentiation rate. The bigger value t it is, the greater for the customer product consumption preference. When t=0, consumer products do not have the consumption preference difference, so the transportation cost is zero.

The fifth factor is demand distribution. If buyers number in each region presents a balanced distribution, which indicates that the Hotelling linear model, buyers represented by the point spread evenly above the line. If buyers at the enterprise 1 to purchase the product is h ≤h*, and the enterprise 2 to purchase the product is h>h*, it shows the enterprise 1 of the market share is s1=h*, the enterprise of 2 market share is s2=1-h. Therefore, market consumption preference of equilibrium distribution reflects the discrete consumer preference patterns.

Generally speaking, there are two kinds of products exist in the market at the same time, namely: q1>0 and q2>0, but it does not exclude a monopoly market conditions (Q=qi=1). Then, the competitiveness of products refers to the product between the value (b-a), product differentiation rate is t and product pricing differences is (P2-P1). On the other hand, market demand is always inclined the lower price products, known as two enterprise product values is a and b on the market, the price of each product was P1 and P2, and the customer market consumption preference is h, therefore, the product’s price in enterprise 1 has to identify as follows:

P1+c1(h)≤P2+c2(h)

It shows that the market demand will accept enterprise 1 products. If put the transportation cost expression into the formula, there is:

P1+t(h-a)2≤P2+t(b-h)2

After that, if combine them together, there is:

When meet the above inequality, buyers will purchase the products at enterprise 1. Among them, h* means there is no differences in preferences. In this case, the actual price in these two enterprises will affect buyer behavior. So enterprise 1 corresponding product demand is:

And enterprise 2 corresponding product demand is:

The results show that, the market share in enterprise 1 and enterprise 2 depends on three factors, they are the natural demand, the competitive intensity and the price difference .

Based on the above analysis, it is suggests that each enterprise in the market has its own "natural demand". The "natural demand" in enterprise 1 is the consumer preference h≤(a+b)/2, they buy enterprise 1 products, because those products’ market position is much closer to their consumption preference value. But, consumer preference for h>(a+b)/2 customers, the consumer preference in enterprise 2 products, which tends to buy enterprise 2 products. In the conditions of the same prices, if eliminate the price of product demand, so enterprise can obtain the market consumer groups which equal to its "natural demand". In short, if enterprise's market value is closer to the competitor's market value, the more helpful to conquest the opponent’s “natural demand".

Moreover, the price advantage will conducive to the expansion of market demand. If enterprise 1 has a price advantage, namely, the consumer groups will be superior than the original natural source. When P2-P12t(b-a), those natural source belonging to enterprise 2 will turn for the enterprise 1 source, increasing the consumer is not because of product quality, because it is close to their consumption preference, but due to the low price. Similarly, if the price in enterprise 1is in inferior position, so that those part of the natural demand will away from it, and turn into the enterprise 2. Additionally, the bigger transportation cost t(b-a) it is, the larger differences between the products. Because different product in the vicinity of the consumer monopoly force strengthening, competition between products increasing weakly, so consumers' price sensitivity decreased, then the monopoly is able to large.

4.Conclusion

The development of enterprise clusters is to enhance the regional visibility and reputation, becoming the basis of regional economic growth. Based on the cluster of small and medium-sized enterprises products breeding is to realize regional sustainable development strategic choice. This requires that all members of the cluster has to take real actions to foster regional product, establishing and maintaining of regional product reputation, enhancing regional competitiveness and promoting the sustainable development of small and medium-sized enterprise cluster. In short, in the cluster of small and medium enterprises, through improving product prices competitive advantage and improve the differences between products to improve the competitiveness of the products, so that enterprises can obtain high monopoly profits. On the other hand, from the consumer's point of view, the higher subjective preference degree from the customer aspect, the smaller price of influence on the consumption demand it is. It means a successful business strategy running in the cluster of small and medium enterprises will influence those regional economy growths very deeply.

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