Business cluster refers to the geographical concentration of closely related businesses, suppliers, and firms belonging in a given field. The primary objective of forming these clusters is to boost the productivity with which firms compete at both national and international levels. Clusters are also crucial in the strategic management processes. This article discusses the benefits of such clusters, the management at domestic and international scales, and the negative aspects of clustering (DeWitt, Giunipero & Melton, 2006).
Concentrated clusters promote the management of supply chains by developing strong relationships between the customer and supplier. Employing the concept of concentrated clusters enhances the benefits a company derives from its interaction by linking various companies and other business entities within the same industry. Operating in concentrated cluster enables firms to understand the precise needs of customers and vice versa. With this situation in place, businesses are able to establish permanent clientele who in turn add a personal touch in the manner transactions is conducted. In addition, concentrated clusters enable firms to standardize their products thus ensuring customers are able to get consistent product (Porter, 2000).
After cluster analysis in a given region's economic drivers, the results obtained can be applied in determining existing gaps in the value-adding chain. These gaps can be in the form of imbalance between the suppliers of definite components and the general demand of those components in the cluster. The policy makers can then move into action of mitigating the gap having established...
This can be done by focusing investment programs, attractions efforts, and infrastructural development towards aspects that demand most attention. Consequently, the driving industries would benefit from the values added to the supply chain (DeWitt, Giunipero & Melton, 2006).
In addition, industry cluster is beneficial to the management of the companies involved as it offers an opportunity for enhanced productivity. This may exist in the form of collective knowledge, technology, or technical expertise. In addition, many businesses seize the opportunity to access local capital resources that might have been allocated to the cluster by the government (Coia, 2002). Shared knowledge emanates from the willingness of the firms in the cluster to network with each other while developing joint ventures at the same time. The management complexity in accessing employees, training programs and other prestigious institutions is minimized. Furthermore, the performance and service delivery of a firm in a cluster is enhanced by the fact that it can use the products of its competitors as a benchmark to improve its productivity (Porter, 2000).
The management concepts in clusters for firms operating at the international and domestic levels exhibit significant variations. For firms operating in a local market, the management complication tends to be minimal as such firms are enjoying similar benefits to other firms dealing with similar products. This implies that it is now the sole duty of such a firm to boost the quality of its service or product to compete favorably. On the other hand, firms operating…
