An observation, first made by Michael E. Porter, that a firm can develop a subst
ID: 428785 • Letter: A
Question
An observation, first made by Michael E. Porter, that a firm can develop a substantial competitive advantage in manufacturing certain goods when a large number of its competitors and suppliers are located in close proximity, because the area then attracts the most talented employees, and the extraordinary competition between the firms generates a greater need to innovate and become efficient. Such a grouping of companies is called a cluster. Silicone Valley is a cluster; Research at least location (city) that can be considered a cluster What characteristics do industrial clusters have that other cities do not have? Can you think of another industrial cluster in the United States or abroad?
Explanation / Answer
Companies within an industrial cluster demonstrate powerful inter-relations. The flow of commodities between geographically grouped businesses of a cluster is more powerful than the flow connecting them to the rest of the economy. An industrial cluster is distinct from the conventional description of industrial sectors (for example- construction and manufacturing ) as it denotes the complete value chain of a widely outlined industry from the suppliers to the end manufacturers, incorporating specialized infrastructure & supporting services. By establishing close to each other, firms are able to acquire info, communicate & share resources in a manner so as to add to a ‘collective’ benefit which couldn’t otherwise be obtained alone. Industrial clusters foster cooperation in order to overcome mutual concerns & hurdles. This can be accomplished directly via forming industrial associations/ indirectly via regional legislation. Although few companies may be competing, particular collaborations, like providing industrial-pertinent training, are still advantageous. Common aims & geographical concentration results in the development of some specialized competencies & alliances in the cluster collection.
Example-The San Diego’s biomedical goods industrial cluster manufactures instruments; medical devices & apparatus chiefly for use by the medical domain.