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