Clusters – past or present?

By February 4, 2016 No Comments

A cluster is defined by Webster’s dictionary as a number of things of the same kind growing, or held together. Many economic development organizations are utilizing cluster-based economic development strategies to determine optimal ways to invest resources. Such an approach is not foreign. It has been practiced by many developed and developing countries throughout the world.

So how does a cluster look like? A cluster is an area where you will find businesses within the same industry in close proximity. Some of the most evident clusters around the world are banking clusters. Cities like London and New York have been known for centuries for their banking industries. Banks are located in specific, well known areas creating very distinct banking clusters. Having banks in close proximity allows customers to have easy access to available options, usually all in walking distance. So did anyone take a moment to think why would similar companies choose to cluster together by their competitors? Clusters enable them to benefit from economies of scale, taking advantage from the amount of expertise and skills from neighboring companies within the same industry that can add value, such as improving the production process or services delivery; i.e. suppliers, labor support.

Some people may say that clusters are not effective anymore. Nowadays with a global economy and technology we do not need to be in close proximity to one another to gain the same benefits. However, clusters continue to be established notwithstanding the technology industry itself! We have Silicon Valley in California, home of the tech industry. We also have other high tech clusters which have flourished around academic institutions such the cluster in Cambridge, UK. In Europe we have countries well known for their car industries, medical cities, and all of them follow the concept of clusters as clusters promote both competition and cooperation. Competition can help advance company capabilities as they try to win over customers, while cooperation can help develop enterprises by pooling together knowledge and expertise.

Let us now take a close look at Bahrain and whether we have developed clusters or not. If you examine Bahrain’s economy, you will find many companies within the same industry grouped together in particular locations such as automotive companies, furniture, construction, and banking companies. Let us not forget our organically grown food and beverage cluster situated in the heart of Adliya. We always hear people say, why do so many restaurants and cafes open up next to each other? In reality, it’s great for consumers and keeps the restaurants and cafes on their toes because they want to be able to gain the most customers to their business. Furthermore, we know Salmabad as the area we can go to fix our vehicles. With so many car workshops and complimentary services, companies can benefit from each other’s expertise and give their customers a variety of services all done in one area such as car repair, car cleaning, polishing, etc.

Rather than shying away from clusters, economic plans should promote them. Clusters improve the productivity of enterprises, provide better access to employees and suppliers, and open up new doors of information by building relationships with customers and competitors. Clusters also help enterprises complement each other, which can widely be seen in touristic areas where you will find tourist attractions with nearby hotels, restaurants, shopping malls, and transportation, which all contribute to the success of each other. From a development perspective, economic development agencies can better measure the performance of enterprises when they are in clusters. Companies can easily be compared to their peers, which also drives them to further develop their businesses to out beat their competitors. Clusters have been present globally for years and many have grown organically. Now that we clearly see the benefits to both enterprises and consumers, would you not agree that clusters should be part of economic development plans?

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