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Cluster Development
Rural Planning SeminarKSU – September 2000
J. W Keller
With acknowledgment to
Professors Michael Porter & Michael Enright
Cluster Development
• Industry clusters have become a popular strategy for rural economic development, yet their benefits to the local areas have not been fully examined. Labor is expected to be more productive within clusters, which should translate into higher wages. Our analysis
• confirms this, showing that workers’ earnings in rural industry clusters are about 13 percent higher than those of comparable workers outside clusters. The wage boost is similar for workers regardless of age or education level.
Globalization and Localization
Competition across a wide range of industries is globalizing …
… but at the same time, competitive advantage is localizing
The challenge is to be among the winners in the process
Globalizing Forces and Features
• International finance and financial markets• Improved communication and transportation• Rapid spread of knowledge and technology• Blurring of national identities of firms• Emergence of global oligopolies• Reductions of barriers to trade and investment• Supranational organizations• Electronic communities• Entry of nations into the world economy• Expansion strategies of multinational firms• Decoupling and decentralization within firms
GlobalisationDecoupling and decentralisation within firms
• Auto design for Asian companies
California, UK Midlands• European biotech companies
California, New England• Financial services
New York, London, Tokyo
Local clusters increasingincreasing their drawing power
Localization of Economic Development Initiatives
• Globalization of competition
• Localization of competitive advantage
• Failure of national development policies
• Realization that one size does not fit all
• Success of particular locations
• Devolution for greater responsiveness
What are Clusters?
• Clusters imply a mix of industries linked together both geographically and functionally. An important subset of clusters, though, is identified primarily as a cluster of similar establishments that draw upon common suppliers. Sometimes called sectoral clusters because they consist mostly of one industrial sector, these groups are probably much more common in rural areas than the broader, more complex type of cluster. Several clusters of this type have become well-known in the rural development literature, including the carpet industry in northwest Georgia, furniture manufacturing in the Piedmont region of North Carolina and Tupelo, Mississippi, and manufactured housing in Indiana.
US: Local, World Class Clusters
Minneapolis - supercomputers
Wichita - small aircraft
San Francisco - biotechnology
Silicon Valley - semi conductors, electronics
Los Angeles - motion pictures,military aerospace
Gulf Coast - chemicals
Grand Rapids - office furniture
Detroit - autos
Boston - medical services, medical devices, software, biotechnology
Hartford - insurance
New York - finance, advertising
Carolinas - textiles, apparel
Dalton - carpets
U.S. Counties - Clusters
Cluster SectorsTransportation equipment Tobacco Textiles and apparel
Lumber and wood Furniture Paper Printing/publishing
Chemicals Petroleum refining Rubber and plastics
Leather products Stone, clay, and glass
Primary metals Food Processing
Professional equipment
Primary metals
Fabricated metal
Machinery and computing equipment
Electronic equipment
Italy - Local, World Class Clusters
Udine - furniture
Biella - wool textiles
Milan - finance, machine tools
Turin - autos
Parma - food industries
Carrara - stonework
Prato - wool textiles
Montebelluna - ski boots
Carpi - knitwear
Sassuolo - ceramic tiles
Modena - sports cars
Bologna- food machinery & packaging machinery
Castel Goffredo - hosiery
“Non-cluster” Clusters
• Telemarketing• Credit Card processing• Back office processing• Software services• Information processing• Data Entry
• Light aircraft
Omaha
South Dakota
Dublin
Bangalore
Sydney
Manila
Wichita
High Performance Clusters• Multiple linkages trust• Rivalry and cooperation
• Specialized ecosystem• Strategic leadership team,
participative, consultative, common vision,tight alignment
Clusters…….
• …. do not conform to:– political boundaries– standard industrial classifications
• …. involve high-tech and traditional• …. vary in size, breadth and state of
development• …. can be examined at various levels
– e.g. Trailer manufacturing in Kansas
Clustering Among Firms
• Overcoming lack of scale
• Overcoming distance
• Identifying and creating joint gains
• Linking with public sector
• Leading the process
1+1=3
Are Rural Firms...
• sufficiently knowledgeable about foreign customers?
• sufficiently knowledgeable about foreign competitors?
• sufficiently knowledgeable about best practice in their industry?
• capable of making the investments necessary to fill the gaps?
• able to identify and use local advantages?
Accelerating Local ClustersAnalyse
LocalEconomy
AnalyseLocal
EconomyInitial
ClusterReview
InitialClusterReview
DevelopClusterVision
DevelopClusterVision
IdentifySteppingStones
IdentifySteppingStones
ImmediateAction
Agenda
ImmediateAction
Agenda EmpowerLeadership
Team
EmpowerLeadership
TeamUpgrading Strategic Agenda
Upgrading Strategic Agenda
Seven Stage Cluster Process
1. Analyse Local EconomyIdentify the local drivers • Identify community priorities for early
focus. Short listed clusters should:
• Already generate ‘export’ income
• Already have a range of firms with
some interfirm connectivity
Brand Components
Rational properties
Associated activities
Social image
Brand personality
Icons and symbols
Essence
Emotive properties
© BRIAN R RICHARDS BRAND DEVELOPMENT MARCH 1999
Marlborough’s Image
ProgressiveInteresting, Innovative, New
DerivativeOrdinaryApologeticHesitantPrudish
UniqueSpecialUnashamedProudDelighted
ConservativeParochial, Uninteresting, Reactive, Old
MarlboroughNow
MarlboroughCould Be
© BRIAN R RICHARDS BRAND DEVELOPMENT MARCH 1999
© BRIAN R RICHARDS BRAND DEVELOPMENT MARCH 1999
Do Clusters Help Rural Wages