Describe a Cluster
Describe a cluster of related industries and explain how it is related to the other three elements in Porter’s diamond model—i.e. factor endowments, demand conditions, and firm strategy, structure, and rivalry. You’ll want to talk about why it makes sense that the companies/industries you choose would be centered in one location. Consider questions such as: Why is the location a good one? How do the industries/companies in the cluster complement each other?
Describing Cluster and Porter’s Diamond Model
A cluster of industries is visible in many countries, and it is associated with many business sectors. For Instance, an industry cluster is a group of firms or related areas, which exists in a geographical region along with a similar market, work skills, technologies, and many other business elements. An industry cluster is interrelated with three aspects of Porter’s Diamond Model. Regarding the factors condition, industry cluster may exist due to the skilled labor force and availability of natural resources (Kuroiwa & Heng, 2008).
These are critical success factors to exist strongly in the market. Also, a firm strategy can play a role in the success of the company in an industry cluster. In the competitive automobile market of Japan, corporations such as Toyota, Nissan, Honda, Mitsubishi, and many other firms intend to shape unique business or market strategy to compete with each other. Firm policy and structure are to be shaped perfectly to emerge in an intense rivalry. The rationale and success of the industry cluster are also based on the demand conditions. It is a fact that the company may want to enter the market where demand for a particular product or service is high.
Despite having the competition, high demand will help the company to grow and expand. It is a crucial reason for companies in a particular industry to start operations in a specific geographical area. Location is a factor in the business environment. Companies in a cluster complement each other due to demand and growth opportunities. If a corporation takes advantage due to demand and natural resources, it also creates a motive for other firms to start operations in a particular location. The location sets the business foundation for corporations. Existence in the right place can create opportunities for firms to improvise and gain a competitive advantage in the long run. It depends on the corporation how it analyzes the market and gets the edge (Ozgen, 2011)
References
Kuroiwa, I., & Heng, T. M. (2008). Production Networks and Industrial Clusters: Integrating Economies in Southeast Asia. Institute of Southeast Asian Studies.
Ozgen, E. (2011). Porter’s Diamond Model and Opportunity Recognition: A Cognitive Perspective. Academy of Entrepreneurship Journal, 17 (2), 61-76.
