Industry Clustering Essay Example | Topics and Well Written Essays - 1500 words

Industry Clustering - Essay Example Some of the general deductions that can be made from the clustering phenomenon in business location involve synergy in operations where conglomeration facilitates efficient industry-specific microeconomics. To illustrate this, it is an economic fact that an industry relies on a support economy including supplies and other secondary support services. In a clustered environment, it is certainly possible for the entire cluster, working as a system, to influence the market forces of the ancillary system. The influence exerted increases the bargaining power of the firms in attracting the relevant support systems in that location. Among the most definitive determinants of clustering, including supplies and labor as briefly discussed below. Despite the fact that there are different levels of dependence on suppliers across firms as dictated by the nature of business engaged, firms may cluster together o take advantage of supply dynamics. It can be projected that firms with a higher reliance on supplies in the running of their operations would be a favorable business opportunity if they were located together. Pulling suppliers’ attention towards a centralized market reduces costs for their operations and facilitates in increasing the firms’ bargaining power thereby creating a favorable environment for the players. In addition, labor intensity in the operations of industries is varied across business types, but it affects the location considerations by firms across the various levels of their labor demand. Labour supply is influenced towards the clusters as a center of interest for the labor market where high specificity across the skills levels is likely to be met. Such a setting dramatically changes the dyn amics of the labor market by attracting its availability and quality.  Ã‚