Concept and Importance of Industrial Cluster Development

Cluster is a concentration of homogeneous interlinked and interdependent manufacturing or service provider organizations in a particular location. In Bangladesh, more than 50 homogeneous enterprises collocated in a particular cluster and shares common strengths, weaknesses, opportunities and threats is known as a cluster. Availability of raw materials, skilled labors, market demands, favorable infrastructure so on and so forth factors have direct or indirect impact to develop a cluster at a specific location. Alfred Marshall, the English economist, is supposed to have propounded the cluster concept in 1910. He examined the industrial districts found in Europe and explained that main reasons of localization of industry are physical conditions such as climate and availability of raw materials. These factors resulted in benefits of externalities for firms within them such as technology availability, access to a skilled labor, access to inputs and marketing advantages. Later on, Michael E. Porter (2003) who is recognized as the founder of industrial cluster concept defined cluster as a “Geographically proximate group of interconnected companies, suppliers, service providers and associated institutions in a particular field, linked by externalities of various types�? (Porter, 2003). SME Foundation defined SME cluster for the first time in Bangladesh in 2013 as “A Cluster is a concentration of enterprises producing similar products or services and is situated within an adjoining geographical location around 5 km radius and having a common strengths, weaknesses, opportunities and threats�? (SMEF, 2013).