International Business Essay

3613 words - 15 pages

PRABINA THAPA (1303864)
WORD COUNT: 2560
Date: 21/04/15
-------------------------------------------------
BE413- INTERNATIONAL BUSINESS ENVIRONMENT
‘Michael Porter’s (1998) work on industrial clusters has been seen as a new and potentially fruitful way of understanding how innovation can be stimulated in particular regions and firms. What are the main features of Porter’s cluster model and what advantages does it bring for business and society?’
PRABINA THAPA (1303864)
WORD COUNT: 2560
Date: 21/04/15
-------------------------------------------------
BE413- INTERNATIONAL BUSINESS ENVIRONMENT
‘Michael Porter’s (1998) work on industrial clusters has been seen as a new and ...view middle of the document...

However, Porter (1998) also argues that competitive advantage has made location gain importance. Additionally, main features of Porter’s model includes competitive advantage, interconnection, collaboration and specialisation; these features arouses innovation which can be stimulated in a particular region or firm (Porter, 1998). Moreover, Clusters form from three basic factors; historic, factor endowment and technology (Boja, 2011). Furthermore, this essay will further discuss about these statements in depth; focusing more on the features of clusters and its benefits to the business and society.
Firstly, Porter’s work on clusters has been seen as ‘new’, this can be interpreted that Porter originated the idea. However; during 1890, “industrial districts” was the originated and followed the concept, Marshall started with this concept to describe an area where workers live within walking distance to work (Storper, 1997). The term has been reinterpreted by economists throughout time; for example, Becattini introduced Marshallian concept by clustering the enterprises during the 1980s (Belussi et al, 2003). However, Porter contributed that a value of geographical and competitive advantage needed to be recognised; resulting in Porter’s cluster (Belussi et al, 2003). Therefore, clusters is not originally Porter’s new creation as cluster was only evolved; the concept existed under a different name. Nevertheless, we could argue that there was still a ‘new’ idea added to this concept making Porter’s clusters ‘new’. Besides, modern global economy also suggests that comparative advantage are less relevant than competitive advantage (Porter, 1998). Competitive advantage tries to correct comparative by stressing scale economies in goods and services that acquire premium prices (Stutz and Ward, 2009). The use of focusing on competitive advantage gives a severe change to the concept, making the Porter’s theory new. This suggests that the concept of clusters has been changing dramatically that it has become difficult to indicate a concept that is preferred. Another interpretation of ‘new’ could mean that new industrial industries are introduced that use clusters, however this is certainly not the case as there are lots of historical industries who use clusters.
One of the main feature of clusters is the interconnection between the networks, this suggests that this improves interaction between companies within the cluster because of the proximity location between the companies. This is also because the channel of links, challenges and opportunities are the same for the companies within a cluster. It will also be advantageous to the companies as there will be a good atmosphere that they will work in which leads to an increase in upright productivity, it will also be convenient for society as they will receive good products. In contrary, clusters can also be duplicated from one region to another; regionally the companies would not be interconnected effectively....

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