Clusters New Economics of Competition 1 1221031919599072 9

8/4/2019 Clusters New Economics of Competition 1 1221031919599072 9

1/21

Clusters & The New EconomicsOf Competition

A Cluster Is the Manifestation of the

Diamond at Work


2/21

Introduction to Clusters

Todays economic map of the world isdominated by clusters: critical massesinone placeof unusual competitive success inparticular fields.

Clusters are a striking feature of virtually

every national, regional or state economy.E.G., Silicon Valley, Bollywood or Puneauto cluster.


3/21

Productive Use of Inputs

Competition in todays economy is far more

dynamic. Companies can mitigate input-costdisadvantages through global sourcing.

Now competitive advantage rests on making

productive use of inputs, which requires

continuous innovation.


4/21

Environment

What happens inside a company is important

but clusters reveal that the immediatebusiness environment outside companies

plays a vital role as well.

Clusters often extend downstream channels

and customers and laterally to manufacturers

of complementary products.


5/21

Why Cluster?

Reduce costs

Specialize

Leverage on anothers specialties

Increase rates of innovation

Pursue joint solutions to common problems

Build common labor pool, technology andinfrastructure

Learn collectively what it takes to be competitive


6/21

What Is a Cluster?

Clusters are geographic concentrations of

interconnected companies and institutions ina particular field.

E.G., Suppliers of specialized inputs such as

components , machinery, services &

specialized infrastructure.


7/21

Clusters and the new economics of competition. Harvard Business Review; Boston; Nov/Dec 1998; MichaelE. Porter; http://polaris.umuc.edu/~fbetz/references/Porter.html


8/21


9/21

Constituents

Many clusters include governmental & otherinstitutions such as universities, standardsetting agencies, think tanks, vocationaltraining providers & trade associations.

Clusters promote both competition and

cooperation. Rivals compete intensely to win& retain customers. Without vigorouscompetition, a cluster will fail.


10/21

How do clusters collaborate?

Informnewsletters and cluster directories

Learnseminars, conferences and training

Marketstrategic plans for exports, cluster brochures

Purchasebuyer-supplier linkages

Producebidon projects, joint ventures

Build Economic Infrastructuretechnology transfer andtelecommunications

Networkingformal and informal


11/21

Clusters and the new economics of competition. Harvard Business Review; Boston; Nov/Dec 1998; MichaelE. Porter; http://polaris.umuc.edu/~fbetz/references/Porter.html


12/21

Clusters Are Critical to

Competition

Clusters increase productivity of companies

based in the area.

Clusters drive the direction and pace of

innovation, which underpins productivity.

Cluster allows each member to benefit as if ithad greater scale or as if it had joined with

others formallywithout losing flexibility.


13/21

Improves Productivity

Better access to employees & suppliers

Access to specialized information

Complementarities

Access to institutions & public goods

Better motivation & measurement


14/21

Clusters & Innovations

Presence of sophisticated buyers.

Companies plug into customer needs & trends

speedily.

Ongoing relationships with others within the cluster

enables learning about evolving technologies,

marketing concepts & so on. Close involvement of cluster members in the

innovation process.


15/21

Stimulates New Business

Formation Needed assets, skills & inputs are easily

available in cluster locations.

Cluster often presents a significant localmarket & an entrepreneur may benefit fromestablished relationship.

Local financials institutions already familiarwith the cluster may require a lower riskpremium


16/21

Stimulates New Business

Formation

Individuals working in a cluster can more

easily perceive gaps in products and services.

Barriers to entry are lower.


17/21

Maharashtra clusters

Centre releases Rs 15 crore for the Rs 67crore auto clusterbeing established in Pune-

Pimpri-Chinchwad. Sectors planned for thecluster include auto electronics, CAD/CAM andrubber/polymer & plastics.

Other clusters proposed are at Roha andThane Belapur (for chemicals), Ichalkaranji(textiles) and Aurangabad (auto components).


18/21

Auto Cluster in Pune

Automotive componentmanufacturers, trade associations,engineering colleges, researchinstitutes, banks, financialinstitutions (FIs) and government

agencies have been asked todevelop & promote this cluster.

UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION


19/21

Cluster Development Programme




20/21

UNIDO in Action

Honduras

IndonesiaBolivia

El SalvadorNigeriaNicaragua

Mexic

o Jamaica

Madagascar

Tunisia

Zimbabwe

Morocco

Senegal

Pakistan

India


Cluster Development Programme


21/21

India Project

UNIDO was requested by the Indian Ministry of

Industry to promote pilot projects in selectedclusters, and formulate a national clusterdevelopment programme.

With initial funding provided by the Italian

Ministry of Foreign Affairs, a comprehensiveProject was prepared to promote clusterdevelopment.

Clusters New Economics of Competition 1 1221031919599072 9

Documents

Transcript of Clusters New Economics of Competition 1 1221031919599072 9