OM in the News: Industry Clustering and the New Economy

We bring up the subject of “clustering” in Ch.8,  Location  Strategies, and illustrate how various regions/nations have become homes to major resources such as machine tools (Busto Arsizio, Italy), software (Silicon Valley), theme parks (Orlando), or wine making (Napa Valley/Bordeaux area of France). As a nice supplement for class discussion, USA Today (June 7,2011) has 2 articles on the very topic. The paper points out that hubs  grouping manufacturers, suppliers, training programs, and researchers in the same region aren’t new.  But with the loss of 8.7 million jobs in the recession, governments are now trying to speed the growth of nascent clusters to create new jobs. Emerging  industry centers, encouraged by government incentives, include electric car batteries in Michigan, clean energy in Colorado, and robotics in Pittsburgh.

The 1st USA article  reports that Ohio has a $2.3 billion program to nurture new tech-based businesses. The story details Cleveland’s biomedical startups and its success in more than doubling the number of  biomed firms in the past decade, to 600. The Cleveland Clinic and Case Western U. were among the draws for firms  like the Israeli-based Simbionix, which makes computers that simulate surgery for med students.

The 2nd article describes how Portland, Oregon has emerged as the #1 cluster for athletic footwear and outdoor clothing. Nike, of course, is the draw (founded in the 1960’s by Phil Knight). Its managers spun off a slew of new ventures and the cluster now boasts  over 300 companies, employing 12,000 workers. The deep talent pool and outdoorsman culture have brought others, such as apparel maker Icebreaker.

Colorado, meanwhile, has a renewable energy cluster of 1,600 companies that employ 20,000. The hub is anchored by the National Renewable Energy Laboratory, which lures scientists and companies like Vestas. Vestas is the wind turbine giant with 4 plants in the state, drawing 10 parts suppliers to follow it to Colorado.

Discussion questions:

1. Why is clustering an important topic in Location Analysis?

2. Ask students to name other clusters and the reasons why they have come into being.