Advantage of cluster and

Network corporation among SMEs

Prepared by: Dr.K-Talebi

Cluster and Competition

What is cluster?

Why cluster?

SMEs and Cluster?

Economy-Based Knowledge and cluster

What is cluster

Definition of cluster:

A Sectoral and geographical concentration of SMEs faced

with common opportunities &

Threats.

Cont.

What is Cluster

A cluster is a geographically proximate group of interconnected

companies & associated institution

in a particular field linked by commonalities & complementarities.

Prof: M.Porter

Definition of Horizontal Network

A form of cooperation among independent firms of the same scale that produce the same/similar type of products & that decide

to group together for product marketing joint purchase of raw materials, joint manufacturing of finished products

Definition of vertical Network

A form of cooperation between firms that occupy adjacent links in the productive

chain and that aim at achieving competitive

advantages outside their individual reach

The Shifting Economic Policy Agenda

Macro Micro

Current productivity Innovation

Economy wide Cluster

National Cross-national

Regional / local

Economic Economic integrated

with social

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Comparative

Advantage

Competitive

Advantage

Wealth is set by

endowment

Wealth is created by national or regional

choice/s

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Clusters Fuel for Strong Economies

Clusters improve competitiveness through cooperative competitions & proximity

Clusters give local producers specialization & first mover advantages

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Michael Porter’s “Diamond of Advantage”

Firm Strategy structure ,

and Rivalry

Related & SupportedIndustries

FactorCondition

DemandConditions

Government

Chance

Cluster have life cycles

Rule of Thumb 4: Stages of Development of a cluster shape its needs and interests

- Embryonic

- Growth

- Mature

- Decaying

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Identifying industry Clusters

Statewide

Regional

Labor needs

Potential

TimeGeography

Three

Dimensions

Existing

Emerging

Value chainLinkage

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How can state governmentsbuild industrial clusters?

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Identify existing, emerging andpotential export-oriented ortrading industry clusters.

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Obstacles to the Formation of Vertical Network

Mutual mistrust and misinformationClient-Supplier dependent relationsLake of homogeneity between client and

supplier firms

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Success Factors* concepts

- Innovation

- Imitation and competition

- Entrepreneurship

* Connections

- Networks and networking

- Connections and Intermediaries

* Competencies

- Specialized labor force

- Industry leaders

- Talent

- Knowledge

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Successful Cluster Initiatives(Porter)

A shared understanding of competitiveness and the role of clusters in competitive advantage

A Focus on removing obstacles and easing constraints to cluster upgrading

A structure that embraces all clusters in a nation or state

Appropriate cluster boundaries

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Successful Cluster Initiatives (cont.)

Wide participation of cluster participants and associated institution

Private sector leadership Close attention to personal relationships A bias toward actionInstitutionalization

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Reasons for Success

Firm-level competitiveness Low costs of coordination within small

units Greater flexibility and adaptability to

constantly changing marketsSelf-entrepreneurship

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Reasons for Success

Cluster-level competitiveness Inter-firm cooperation Competition Local Governance

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Improvements in productivity depend on healthy competition,productivity and productivity growth are the connection between competition and standard of living