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 integrated with social

Dr.Talebi8 Comparative Advantage Competitive Advantage Wealth is set by endowment Wealth is created by national or regional choice/s

Dr.Talebi9 Clusters Fuel for Strong Economies § Clusters improve competitiveness through cooperative competitions & proximity § Clusters give local producers specialization & first mover advantages

Dr.Talebi10 Michael Porter’s “Diamond of Advantage” Firm Strategy structure, and Rivalry Related & Supported Industries Factor Condition Demand Conditions 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

Dr.Talebi12 Identifying industry Clusters Statewide Regional Labor needs Potential Time Geography Three Dimensions Existing Emerging Value chain Linkage

Dr.Talebi13 How can state governments build industrial clusters?

Dr.Talebi14 Identify existing, emerging and potential export-oriented or trading industry clusters.

Dr.Talebi15 Obstacles to the Formation of Vertical Network §Mutual mistrust and misinformation §Client-Supplier dependent relations §Lake of homogeneity between client and supplier firms

Dr.Talebi16 Success Factors * concepts - Innovation - Imitation and competition - Entrepreneurship * Connections - Networks and networking - Connections and Intermediaries * Competencies - Specialized labor force - Industry leaders - Talent - Knowledge

Dr.Talebi17 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

Dr.Talebi18 Successful Cluster Initiatives (cont.) § Wide participation of cluster participants and associated institution § Private sector leadership § Close attention to personal relationships § A bias toward action §Institutionalization

Dr.Talebi19 Reasons for Success § Firm-level competitiveness § Low costs of coordination within small units § Greater flexibility and adaptability to constantly changing markets §Self-entrepreneurship

Dr.Talebi20 Reasons for Success § Cluster-level competitiveness § Inter-firm cooperation § Competition § Local Governance

Dr.Talebi21 Improvements in productivity depend on healthy competition, productivity and productivity growth are the connection between competition and standard of living