The purpose of the article is to explore what the clustering phenomenon really means for firms and how management can actively seize the opportunities arising from this trend. Based on the article, cluster is a group of firms and institutions of one industrial sector that are complementing each other along a value chain and also overlapping in a limited geographical area. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. Clusters are also very important aspects of strategic management.
Business cluster gives many benefits such as productivity benefits, innovation and higher profitability compared to their isolated competitors. The producers that located within clusters can more easily concentrate on their core competencies and increase productivity.
In clusters, it is easier for companies to recruit suitable employees and for employees to specialize in terms of their education. However, a wage-spiral may arise in a very dynamic cluster if employees frequently switch from one firm to another. The significance of employees moving from company to company becomes clearer still when viewed as a mechanism for knowledge exchange. People take their knowledge with them to their new jobs, combining it with the knowledge acquired at their new firms and thus developing the common knowledge base further. This provides an explanation for research findings showing that a few selected centers are host to most of the innovations in an industry.
Companies anchored in such clusters can yield, on average, higher productivity than isolated companies and also benefit from greater innovative strength. Consequently, they are more PROFITABLE. The competitive success of a firm is thus influenced by location as well as such factors as wages paid or the quality of management.
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