What is a business cluster?

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Also known as an industry cluster or competitive cluster, a business cluster is a term used to describe a geographic location that houses a significant number of companies that are all interconnected in some way. Such a cluster usually includes several companies that offer similar goods and services, suppliers that supply raw materials and other essentials to those companies, and possibly even related institutions such as colleges or universities that offer courses related to the industry associated with those companies. . Cluster development can occur for a number of reasons, such as some examples of factors such as tax incentives, access to resources or transportation hubs, or an abundant supply of labor.

Although the actual reference to a business cluster began to emerge in the latter part of the 20th century, the concept was already well established in many places and involved a variety of industries. Cities that were home to large textile factories were also often the places of choice for companies that supplied machinery parts and raw materials to these factories. In the automotive industry, automotive factories have been and continue to be accompanied by the establishment of suppliers that supply various components relatively close to these factories. In both cases, colleges and universities close to these industrial centers would offer courses and, in some cases, degrees related to some aspect of the sector’s operation.

The advent of computer technology has led to the development of additional business cluster communities at strategic points around the globe. As with older models, a cluster that has to do with computer technology can include companies that use hardware to build systems, those that manufacture that hardware, and even companies that develop software to run on those systems. Related industries like web browsing companies can also be located in these areas. Local higher education institutions can also offer industry-related courses, a strategy that helps renew the supply of new labor to keep these operations running.

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Several benefits arise from creating a business cluster. By having key resources relatively close together, production delays are kept to a minimum. Jobs tend to remain plentiful, which in turn encourages young people to stay in the area rather than seek opportunities elsewhere. As long as the demand for goods and services produced by the members of the business cluster remains high, the community will benefit from a continuous flow of money through the local economy, which in turn helps to keep the standard of living at an equitable level.

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