Introduction
Industrial clusters refer to a group of related industries located in a certain area. They tend to have its primary strength in one sector, which usually is in a particular upstream or downstream link within that sector. There is an increasing trend for industrial clusters in many countries, as these groupings offer much potential in job creation, improvement of competitive advantage among local companies and appreciation of the land areas where they are located.
Motivations for an Industrial Cluster
The establishment of an industrial cluster is often propelled by various motivations. A key factor is the advantage of concentration, which involves the collaboration between geographically concentrated enterprises and organizations, suppliers, customers and intermediaries, with the mutual objective of achieving economic efficiency of scale and competitive advantage. Education and research institutions with expertise in dealing with associated industrial problems can come together to form an industrial cluster. The lower transport, commodity and other costs, as well as the right environmental and economic conditions, also add to the creativity of the clustering in specific regions.
Benefits of an Industrial Cluster
The benefits of an industrial cluster are most generally seen from the point of view of a region or an area. For example, the local areas in which the industrial cluster is located can enjoy increased job opportunities, improvement of industries and sharing of the infrastructure facilities within the cluster. The availability of large volumes of resources, along with a localized use of the same, can improve the overall efficiency of the industries within the cluster. Fewer wastages, cost advantages, innovation advantages, productivity advantages due to efficient labor, R&D spillovers and collaboration among different types of firms are some of the other significant advantages of an industrial cluster.
Challenges Faced by an Industrial Cluster
However, the establishment of an industrial cluster is often associated with certain challenges. Inconsistency of policies among different governments, lack of a cohesive organizational structure and weak governance among the enterprises are some of the common issues. The need for efficient allocation of resources and capital, competition from international companies and the difficulty of training local employees are some other complications associated with the flowering of an industrial cluster. Moreover, lack of adequate awareness and lack of proper knowledge about the benefits of a cluster can cause the clustering process to not progress.
Conclusion
In spite of the challenges associated with the establishment of an industrial cluster, the formation of such a wonderful grouping of related industries helps improve the overall economic development of a region. It also helps in the promotion of a healthy competition amongst the major players in the locality and also helps to create a conducive environment for innovation and creativity. Over time, industrial clusters have become an integral part of any economic development plan in many countries. Thus, the future of industrial clusters appears to be bright, and their associations will further help enrich various sectors, including infrastructure, economy and society.
