Successful New Industries And Clusters example essay topic

Table of Content Content Pages Introduction 1 Concern of the case 1 Assumption 1 Mauritius - Its Implication 2 Conclusion 3 Bibliography 3 Clusters and the New Economics of Competition (Michael Porter, 1998) Les Districts et Les Choix D'Implantation (Francais) Introduction As a source of competitive advantage, location is losing its importance because of the existence of corporate networks, global markets, faster transport and communication media. However, clusters represent a new way of thinking about location whereby competition takes place in the global economy based on local things such as knowledge, relationships, motivation that distant rivals cannot match. Clusters are geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition.

Clusters often extend downstream to channels and customers and laterally to manufacturers of complementary products and to companies in industries related by skills, technologies, or common inputs. Competitive advantage, thus, rests on making more productive use of inputs, which requires continual innovation. Concern of the Case Modern competition depends on productivity, not on access to inputs or the scale of individual enterprises. Thus, the concern of the case is achieving productivity as a competitive advantage through strategic location in a cluster. Hence, clusters reveal that the immediate business environment outside plays a vital role. Porter claims that productivity rests on how companies compete, not on the particular fields they compete in.

Porter further adds that understanding clusters adds four issues to the company's strategic agenda: (1) Choosing location, (2) Engaging locally, (3) Up-grading the cluster and (4) Working collectively. Globalisation eliminates the traditional comparative cost advantages and location choice is more clusters centered. Engaging locally facilitates access to important resources and information and binds the cluster with a social glue. The local business environment is important to an organisation and upgrading the cluster should be part of management's agenda. Working collectively suggests a new agenda for clusters' operation in the private sector such as scale operation, government and business cooperation. Governments have new roles to play and they should strive to create an environment that supports rising productivity and cluster development.

Assumptions For clusters to succeed, fierce competition has to take place. As a new spatial organisational form, clusters offer advantages in efficiency, effectiveness and flexibility for independent and informally linked companies. In clusters, firms compete intensively to win and retain customers while cooperating together with related vertical industries and local institutions. Competition is important to clusters mainly because it increases productivity of companies based in the area, it drives the direction and pace of innovation, which will determine the future productivity growth, and eventually it stimulates the formation of new businesses that will strengthen the cluster itself. Being part of a cluster allows companies to operate more productively in sourcing inputs, accessing information, technology, and needed institutions, coordinating with related companies and measuring and motivating improvement. In addition to enhancing productivity, clusters play a vital role in a company's ongoing ability to innovate.

Other entities in the cluster enable companies to learn about evolving business environment and practices and thereby innovate at a pace suitable to them. The cluster often presents a significant local market and new business formation increases the collective pool of competitive resources, which benefit the cluster's entire member. Mauritius - Its Implication The Mauritian economy is characterised by four sectors namely the sugar sector, the textile sector, the tourism sector and the Information and Communication Technology sector. Clusters are operational within the island but in a less formalized way. The ways businesses are organized and effected suggest that the concept of clustering applies in Mauritius. The sugar sector is characterised by around seven sugar factories, which produces and sells sugar to a sole purchaser namely, The Sugar Insurance Fund Board.

Hence, the different sugar mills cooperate to achieve the allocated quota attributable to Mauritius by the European Union. The sugar factories often help each other in the sale of bagasse for electricity production. The sugar factories compete on the basis of vary of sugar and quality of sugar produced. Thus, there is the concept of cooperation and competition. Clustering occurs in the geographic location of Mauritius.

The textile sector is characterised by a large number of textile factories whereby firms compete on quality standards and fight for production contracts. The Coromandel and Plaines Lauzun are geographically concentrated export processing zones where textile factories are present. There are textile factories in various places on the island and each of them is regulated by the MEPZA. The MEPZA encourages cooperation of firms among each other to meet excess demand from particular organisations. The textile sector is highly competitive on fiber processing techniques, cloth quality and achieving standards. The government encourages the productivity-working atmosphere by allowing the piece rate pay and overtime to employees and settle trade agreements from other countries such as the AGOA and the WTO summits.

The tourism sector is made up of many hotels, restaurants, casinos and other related businesses. The tourism sector is considered as the most efficient one on the island. The sector encompasses chains hotels such as the Sun resorts, five star hotels and other lower star rated hotels. Travel agencies often sells air tickets, make reservation and organize trips for tourists. For instance, the Mauri tours work closely with hotels to ensure island trips and restaurant clientele. Innovation is a considerable feature in sector for examples of golf courts, water parks, under water marine and other sports.

For instance, Grand Bay is a geographical location on the island where the tourist can access any service namely money exchangers, supermarkets, hotels, casinos, pubs, restaurants, shops (magasin), tour operators and car rental. Hence, clustering occurs in the tourism sector. The ICT sector is a developing one on the island and it is also expected to show some clustering characteristics. The Cybercity is expected to include Information Technology specialized shops, tele shops and software engineering organisation and other networking institutions. Hence, the forthcoming Cybercity is already showing signs of competition from existing ICT institutions like Blanche Birger, Harrell Malla c, Mauritius Telecom. The government is closely monitoring the business environment through lately reduced communication tariff that would enable productivity-based competition.

Hence, the ICT sector will also show characteristics of cluster. Conclusion As global competition eliminates traditional comparative cost advantages and exposes companies to the best rivals from around the world, a growing number of multinationals are shifting their home bases to more vibrant clusters-often using acquisitions as a means of establishing themselves as insiders in a new location. By revealing how business and government together create the conditions that promote growth, clusters offer a constructive way to change the nature of the dialogue foundations for competition will ultimately determine productivity and competitiveness. Governments - both national and local - have new roles to play. They must ensure the supply of high-quality inputs such as educated citizens and physical infrastructure. They must set the rules of competition-by protecting intellectual property and enforcing antitrust laws, for example-so that productivity and innovation will govern success in the economy.

Finally, governments should promote cluster formation and upgrading and the buildup of public or quasi-public goods that have a significant impact on many linked businesses. Government, working with the private sector, should reinforce and build on existing and emerging clusters rather than attempt to create entirely new ones. Successful new industries and clusters often grow out of established ones. Clusters are subject to birth, evolution and decline over time.

Bibliography

Porter M. (1998), "Clusters and the New economics of Competition", Harvard Business Review, Volume 76, 77-90.