Cluster Approach and SME Competitiveness

Need for Cluster Approach

MSMEs, especially, in developing economies are credited with generating the highest rates of employment growth, industrial production and exports. In a study conducted during the year 2009, the MSME sector in India registered a higher growth rate compared to the overall industrial sector. Considering the enormity of their presence, which is close to about 90 per cent of the total enterprises, the role of MSMEs in propelling economic growth and in promoting equitable regional development cannot be ignored.

As per available statistics, this sector had employed an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises. The major advantage of the sector is its employment potential at low capital cost.

Trade liberalisation and globalisation has no doubt enhanced the scope for SMEs. However, the emergence of global markets has also led to an enhanced customer expectations and intra-industry competition.

In order to attune and benefit from the emerging global opportunities, SMEs have to:

  1. Transform themselves and increase their competitiveness
  2. Take advantage of synergic effects of cooperative development

CII-Centre of Excellence for Competitiveness has used the Cluster Approach to handhold MSMEs for meeting challenges related to globalization. A group of 6-12 SMEs work closely, share knowledge and strive to improve on their business indicators & enhance their productivity, innovativeness and competitiveness.

Role of Cluster & Innovation

It has been seen that Clusters are important drivers of competitiveness and innovation. Innovation cannot be created in isolation rather only in dynamic environments where similar organisations come together, interact in a constructive and a complementary manner to generate newer and smarter ways of doing things.

The Centre for Competitiveness encourages innovation and breakthroughs among cluster companies by way of Awards like the ‘Cluster Championship’ and ‘Kaizen’ awards.

Benefits of Cluster Approach:

Power of Collaboration

Member organisations learn and grow in a supportive environment with each one addressing similar challenges.  

Other advantages include: