Unit 3

Defensive Cluster Strategy

• Defensive strategies are used to prevent an attack from a potential
competitor.
• Here, the cluster protects its share of the market keeping the profits
stable.
• It involves knowing the market and areas in which it is best equipped
to operate in and how to widen its appeal to enter into new markets.
• Defensive strategies involve holding onto what the cluster has and
also using its competitive advantage.
• Approaches of defensive strategy - The first approach is aimed at blocking
competitors who are attempting to take over part of your business's market
share.
• It involves Cutting the price of your products, adding incentives or discounts to
encourage customers to buy from you or increasing your advertising and
marketing campaigns are the best common ways of going about this.
• The second approach is more passive in nature
• Clusters make use of new product innovations, plan a company expansion by
opening a new chain or reconnect with old customers to encourage them to
buy from you.
• Second approach is more relaxed and less-aggressive than the first approach.
Advantages
• Increasing marketing and advertising, can help in getting both old and
new customers.
• Are less risky than offensive strategies.
• Defensive strategy helps in enhancing the value of products or
services being offered by the cluster. By emphasizing the benefits of
its own cluster it simultaneously devalues the competitors.
Disadvantages
• The biggest disadvantage to defensive strategy comes when a
business does not understand its target market. The key is to know
the share of the market and to work hard to hold onto that piece of
the pie.
• Another disadvantage comes when the cluster relies more on its
laurels or achievements when it comes to innovation and product
development.
• A Successful cluster should keep its eyes open for opportunities to
engage in new markets, to sell cutting-edge products and to reach
new customers.
Offensive Cluster Strategies
• Offensive strategies are aimed at attacking the market competition.
• It consists of actively trying to pursue changes within the cluster.
• Done through making acquisitions and investing heavily in research
and development (R&D) and technology in an effort to stay ahead of
the competition.
• Offensive strategies are designed to obtain an objective, usually
market share, from a target competitor.
• An offensive strategy could be designed to obtain key customers, high
margin market segments, or high loyalty market segments.
• As clusters attempt to improve their position, they engage in
competitive battles and adopt offensive strategies.
• Successful use of offensive strategies can help a firm improve its
competitive position, gain market share, and increase profits.
• It helps in taking market share away from rivals.
• Offensive strategies include direct and indirect attacks or moving into
new markets.
• Clusters need to engage in offensive strategies to accomplish their
growth objectives.
Prospective Cluster Strategies
• Prospective clusters are those contacts who might become leads – in
other words, 'prospective' leads.
• Includes – A new strategy for clusters, see true impact of the cluster,
build capacity for cluster management, building innovation,
• The prospective approach introduced the possibility of recognizing several
possible states keeping in mind the dynamics of change.
• The reflections on the future focus only on the identification or extrapolation
of trends.
• Thus, the prospective strategy provides the basis for long-term reflection on
the system being studied that give a multi-dimensional and multi-scale vision
of it.
• There are a variety of available methods and techniques that have been
developed to deal with long-term strategic reflections
• This gives the ability to decision-makers to make estimations of futures,
identify future-bearing facts and to make inferences about the future.
Cluster Consolidation Strategies
• The consolidation phase is a stage in the industry life cycle where
competitors in the industry start to merge with one another.
• Companies will seek to consolidate in order to gain a larger portion of
overall market share and to take advantage of synergies.
• Cluster consolidation is initiated to improve operational efficiency by
reducing redundant personnel and processes.
• Benefits - Repay debt sooner, Simplify finances, Get lower interest
rates and Boost credit.
Cluster Based Recruitment
• Cluster hiring, a recruitment practice known to increase diversity and
promote interdisciplinary collaboration.
• It is becoming increasingly popular
• The practice is used to meet institutional goals, enhancing
performance, attracting and retaining talent along with increasing
diversity and inclusive excellence.
• Provides opportunity for interdisciplinary discussions and brain
storming.
• The underlying concept behind this approach is getting success through
networking and collaboration.
• Ensuring a cluster hire is successful once new employees are brought
on board depends on the “pre-work”
• Developing opportunities for community building before beginning
the cluster hire process can help avoid some of the potential
drawbacks of this form of recruitment.
• Careful thought is given into budgeting, communicating faculty
expectations, and establishing metrics to measure a cluster hire’s
success before beginning the hiring process.
• Cluster should brings in an employee and follow through with them to
make the challenging collaboration work for them.
• Cluster is intended to diversify as well as promote the study of race,
ethnicity, and social justice.
• New hires should be offered mentoring and peer support, research
circles, writing workshops, and “other ongoing professional
development to foster a sense of community and, most importantly,
inclusion.
• Increasing the diversity prepares them for an increasingly globalized
and diverse world
• Diversity, equity, and inclusion touches on every aspect of the
community
Industrial Clusters
• Alfred Marshall in 1890 used the term ‘industrial districts’ to describe the
advantages generated by businesses located in the same geographical areas.
• It relates to geographic concentration of specific industries in particular
locations.
• These specialized industrial clusters are identified by - the ready availability
of skilled labor, the growth of supporting ancillary trades, and the
development of a local inter-firm division of labour in different stages and
branches of production
• Local industrial atmosphere – which meant shared knowledge about ‘how to
do things,’ common business practices, tacit knowledge, and a supportive
social and institutional environment”
Industry Clusters
• “Industry cluster” is a broad concept.
• A cluster consists of firms and related economic actors and institutions that draw
productive advantage from their mutual proximity and connections.
• Cluster goes by many different names, including “industrial district,”
“agglomeration,” and others.
• Porter (1998) sees clusters as including:
• • linked industries and other entities, such as suppliers of specialized inputs,
machinery services, and specialized infrastructure
• • distribution channels and customers, manufacturers
• • Research organizations, universities, standard-setting organizations, training
entities, and others.
• Micro-foundations of Clusters
• • Labor Market Pooling
• • Supplier Specialization
• • Knowledge Spillovers
• • Entrepreneurship
• • Path Dependence and Lock-In
• • Culture
• • Local Demand
Dimensions of Industrial Clusters
• Industrial Connections: Buyer-Supplier Relationships and the Value Chain
– Firms buy inputs and sell their products and thus the dense network of
suppliers and buyers is advantageous
• Inter firm Relationships and Industrial Organization - Industry clusters can
be characterized by relationships between firms. Firms are equal and
engage in competition and yet cooperate with each other.
• Geographic Extent - geographic extent of clusters varies widely from
industry to industry. (The garment industry cluster in New York City is
famously localized to just a few blocks in midtown Manhattan (Rantisi
2002). The automobile industry in the United States spans five states and
two interstate highway corridors (Klier 1999). )
• Cluster Life Cycle - Clusters exhibit a life cycle. Often the product of
economic development efforts attempts to create an industry cluster
where none currently exists. The cluster life cycle also includes the
possibility that clusters may reinvent or redefine themselves as
markets and technology change. Such reinvention or redefinition may
reinvigorate a declining cluster.
• Relationships among Cluster Participants - Another distinction of
clusters is the relationships among participants in a cluster.
Clusters as a Framework for Policies
• Clusters should be aimed at organizing principle for economic development.
• Clustering does not determine economic success.
• It can help diagnose a region’s economic challenges and opportunities and
identify what a region might do to influence its economic future.
• At times economic development focuses on individual firms and specific events
thereby missing to address the underlying causes of industry growth and
development.
• The cluster approach can help deepen the practice of economic development to
build better communications among the firms
• This will further help in making up the regional economy and to focus public
policy on issues having long term effect on regional growth.