Understanding Industrial Clusters and Their Impact
What are clusters?
Clusters are geographic concentrations of companies, specialized suppliers, service providers, and associated institutions acting in a particular field of industrial activity or any other economic sector in a country or region.
What are the factors that determine industrial location?
These factors are diverse and among them are:
- Access to markets: The end of all industrial production is to meet demand; thus, a location near consumer markets can be decisive, as it reduces transport costs.
- The possibilities of communication: Industrial location is favored by the existence of communication infrastructure, as it allows easy access to markets.
- The quantity and quality of workmanship: Many industries require personnel with specialized preparation in large numbers, and cities are where you can find such labor.
- Physico-geographical factors: Industrial centers tend to locate in areas close to sites where they can obtain raw materials, thus avoiding costs.
- Historical factors: These are associated with the initial settlement of the territory and the origin and development of major population centers that have become attractive for industrial location due to their potential demographic.
What is the value added?
Value added is the value of the products that undergo a new phase of transformation in production processes each time they are purchased.
What is the degree of industrialization?
It is an indicator of the characteristics of industrial structure, defined as the proportion of gross domestic product provided by the industrial sector to total product formation.
Why has much of the industrial sector failed to be competitive?
Seven patterns of uncompetitive behavior keep economic sectors of Latin American countries in a lagging position in the international market. These include:
- Excessive reliance on basic factors such as an abundance of natural resources and cheap labor.
- Poor cooperation between companies, inhibiting vertical and horizontal linkages between industries and sectors.
- Poor knowledge of customers, their preferences, and needs.
- Little or no integration forward, leaving many companies at the mercy of middlemen in distribution.
- Paternalism from the state, inhibiting companies from accepting autonomy and responsibility.
- Poor knowledge of the relative position, meaning the position of each company or industry over its competitors.
- Defensiveness from industry representatives in both the private and public sectors.
In what ways can industries be classified?
Industries can be classified in two ways:
- According to the personnel employed:
- Small industry: establishments employing between 5 and 20 people.
- Medium industry: establishments with a capacity to employ between 21 and 100.
- Large industry: industries that employ more than 100 people.
- According to sectors or types of production: The following groups of industries exist:
- Traditional industries: produce final consumer goods.
- Intermediate industries: produce raw materials or intermediate products.
- Basic industries: process raw materials and provide intermediate products.
- Engineering industries: produce capital goods or finished products used in various activities, including production.
- Other industries: classified as waste, do not fit within the four preceding groups.
What is import substitution?
Import substitution is the process by which goods that were previously imported become produced internally within the country.
Examples of goods:
Screws (M), Shoes (T), Blenders (M), Cement (I), Albums (R), Shirts (T), Magazines (R), Soft Drinks (T), Televisions (M), Paper (R).