Clusters, Value Chains & Supply Chains
The TCI Network has produced a Recovery Playbook, a guide to how economic development organizations and industry associations can leverage clusters to respond to a new economic context.
Value Chain and Cluster approaches have the potential to enhance the competiveness of individual businesses.
Most commonly employed by industrial enterprises(but capable of being adapted and transferred to other sectors), firms can engage in one or both of approaches to address challenges or opportunities that they would be hard pressed to tackle as individual entities. Both of these approaches have common intellectual roots in Harvard University’s Michael Porter, who played a key role in developing both theories.
Video: “Value Chains versus Supply Chains”
Differences between the two approaches can be subtle. This chart highlights key characteristics of both models.
| Value Chains | Clusters | |
|---|---|---|
|
Defination |
The value-creating flow of a good from raw materials, production, commercialization, and ultimately delivery to end-users or consumers |
A geographic concentration of interconnected businesses, suppliers, and associated institutions creating direct and indirect synergies among them |
|
Membership |
Closed |
None Required |
|
Geographic Focus |
Entire value chain, regardless of location |
Typically, industry firms are in a concentrated geographic area, which may or may not include entire value chain |
|
Composition |
Typically, industry firms are in a concentrated geographic area, which may or may not include entire value chain |
Typically, industry firms are in a concentrated geographic area, which may or may not include entire value chain |
|
Relationships |
Sequential |
Cooperative & Competitive |
|
Basis for agreements |
Mutual arrangements, contract based or not |
Social norms & reciprocity |
|
Value Added |
Allows firms to focus on core competencies |
External economies |
|
Major Outcomes |
Increase profits & sales and cost reductions |
Information and knowledge sharing |
|
Basis of external economies |
Coordinated functions & resources |
Location/proximity |
|
Shared goals |
Business outcomes |
none |
Matrix adapted from Stuart Rosenfield “The Origin of Networks and Public Policy”
In the Subscribers Only Section you will find:
- A guide to understanding the value chain and determinants of successful value chains
- An extensive array of case studies on value chains and clusters
- Developing cluster focussed strategies
- Creative industries clusters
- Tourism clusters
- Clusters in rural regions
- Links to cluster and value chain websites