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Michael Porter (1990) introduced the word “cluster” in the world of business and economy. In his investigation of industrial competitiveness and its implications for the strategic approach and the national economy, he stated the attributes of  (1) factors condition (2) demand condition

(3) related and supporting industries and (4) firm strategy, structure and rivalry or collectively  called as The Diamond of National Advantage ( Porter, 1990). The  effects of this diamond as a system are domestic rivalry and geographic concentration. The creation of clusters of  competitive environments, which are  linked vertically in a buyer-seller relationship and horizontally by a customer, channel, and technology factors. Clusters are either scattered  physically or geographically concentrated. Through this concept, it was defined that clusters  are geographical concentration of interlinked companies and institutions in related branches of industry that complement each other by joint relations of exchange and activities along one or several value creations chains. ( Michael Porter, 1990). There is a broad definition of cluster. It could be defined  based on different parameters like activities, origin, size wise, technology wise, linkage wise, market wise, state of development and based on entrepreneurs among others (Md. Joynal Abdin and  Md. Mizanur Rahman, 2015).

Cluster can be industrial zones, business associations or even regional areas. Cluster has different aspects of specializations but has a common concept on the theoretical approach and beliefs, thus , clustering can also be referred as companies that are linked either horizontally or vertically in any lines of businesses and supported by organizations. There occurs a healthy competition, active interaction, collaboration  and extensive networking involve  among the businesses of the same interests and the stakeholders.

There are three different approaches of clustering (MELE and FCA, Government of the Republic of Croatia, 2013). The (1) National Clusters addresses development issues (2) Regional Clusters are specialized, networked environment and (3) Commercial Clusters are grouped of companies that collaborates, membership-based with fee structure.

References:

Maxwell Stamp Plc. Prepared for the Ministry of Economy, Labor and Entrepreneurship (MELE), and the Central Finance and Contracting Agency (CFCA), Government of the Republic of Croatia, (2013), Guidelines for Cluster Development A Handbook for Practitioners.

Md. Joynal Abdin, Md. Mizanur Rahman. Cluster Development Models: Challenges and Opportunities. International Journal of Economics, Finance and Management Sciences. Vol. 3, No. 4, 2015, pp. 358-366. doi: 10.11648/j.ijefm.20150304.15

Porter, M,E, (1990). The Competitive  Advantage of Nations. Harvard Business Review, March/April90

Porter, M. E. (1998).Clusters and the New Economics of Competition. Harvard Business Review, Nov/Dec98, Vol. 76 Issue 6, p77-90.