Cluster Development

Introduction 2
 Actors in a Cluster and their linkages
• SME Enterprises
• Related Enterprises
• Private and Public Service Providers
• Centres of higher education and research
• Entrepreneur groups
• Large Enterprises
• Financial Institutions and Banks
• Non-Governmental Organizations (NGOs)
• State and Local Governments
• The National or Central Government and related bodies:
map
 EXAMPLE: KNITWEAR CLUSTER OF LUDHIANA

• EXPORTER-MANUFACTURER(100) AND TRADER-MANUFACTURER

(400)
• FINISHING UNITS (500)
• MACHINERY SUPPLIERS (100), SPINNERS(500)
• TECHNICAL AND FINANCIAL INSTITUTIONS:15
• COMMON PROBLEM: LACK OF APPROPRIATE HUMAN RESOURCES,
LIMITED MARKET, INFRASTRUCTURAL BOOTTLENECK
• COMMON OPPORTUNITY: HRD, EUROPEAN MARKET, NEW
MARKETING CHANNEL, MODERN APPAREL PARK
 CLUSTER : AN AGGLOMERATION OF FIRMS
AND SERVICE PROVIDERS?

Support Firm Firm Firm

Firm Institution Firm

Firm

Support Firm
Service Provider Firm
Firm

Firm Firm Support Firm Firm

 CLUSTER HAS MORE TO IT

POLICY ENVIRONMENT

Commercial Service Providers

(Designer, Testing Laboratory, Transporter, Financier, Import Agents
etc.)

Production System
Backward Forward
linkages Firm Firm linkages

Raw Selling
Material Agents
Suppliers
Firm Firm

Machinery
Suppliers Firm Firm Firm Direct
Consumers

(Public & Private) Support and Service Institution

INTERNATIONAL ENVIRONMENT
TYPOLOGIES OF CLUSTERS
• VERTICAL
• HORIZONTAL
• MIXED

WHAT IS NOT OR NOT NECESSARILY A

CLUSTER
• AN INDUSTRY
• AN INDUSTRIAL ESTATE
• A NETORK OF FIRMS
• A PRODUCT SECTOR
 Typologies of Clusters
Performing Under-performing
cluster cluster
Number of principal firms H H
Share of local market in turnover of principal M/L H
firms
Share of regional/national market in turnover H/M L/N
of principal firms
Number of support firms M L/N
Important forward linkage outside the cluster H/M N
Presence of truly representative network of H/M N
stakeholders
 DIFFICULTIES OF SMES: SOME EXAMPLES

• DIFFICULTIES IN ACHIEVING ECONOMIES OF SCALE IN

PURCHASE OF INPUTS AND CONSULTING SERVICES
• NOT ABLE TO TAKE ADVANTAGE OF MARKET OPPORTUNITIES
THAT REQUIRE LARGE PRODUCTION QUANTITITES,
HOMOGENOUS STANDARDS AND REGULAR SUPPLY
• NOT ABLE TO INTERNALIZE FUNCTIONS SUCH AS TRAINING,
MARKET INTELLIGENCE, LOGISTICS AND TECHNOLOGY
INNOVATION
• NOT ABLE TO IMPROVE PRODUCTS AND PROCESSES WITH OWN
EFFORT
 ADVANTAGES OF COOPERATION

• SMES CAN COLLECTIVELY ACHIEVE ECONOMIES OF SCALE THROUGH

•BULK PURCHASE OF INPUTS

•ACHIEVE OPTIMAL SCALE IN USE OF MACHINERY AND EQUIPMENT

•POOL PRODUCTION CAPACITIES TO MEET LARGE ORDERS

• INTER-ENTERPRISE COOPERATION ENABLES SMES TO SPECIALIZE

• INCREASED RESPONSIVENESS TO MARKET CHALLENGES

• SPEEDY DISSEMINATION OF BEST PRACTICES: ORGANIZATIONAL

CAPABILITIES, SKILLS, TECHNOLOGICAL INNOVATION, ETC.