Can clusters help your clients choose a successful location?

by Sheri Smallwood   All REALTORS® know the importance of location, but for corporate real estate the new mind set is clusters.

A cluster is a geographically concentrated group of interconnected firms and related institutions that arise out of linkages across industries. For example, Austin is associated with high-tech; Houston with energy. What does this mean to you? It could help you succeed by pointing your clients toward strategically competitive business environments.

Harvard Business School Professor Michael E. Porter has a new database tool to pinpoint the 41 industry-specific clusters in the United States.

In an e-mail interview with Harvard Business School Working Knowledge, Porter explained that the company’s location is just as essential as the decisions it makes and the company assets. Clusters make companies more competitive because they provide easier access to skilled people and suppliers, which results in increased productivity and efficiency.

According to Porter, companies have been making a mistake with location, looking mainly at input costs such as labor and tax breaks, instead of focusing on total costs. He also pointed out the hidden costs of outsourcing, such as the cost of inventory, lead time, and slower innovation. Locating in a cluster can help a company incorporate changes more quickly and, thus, gain a competitive benefit.

The Cluster Mapping Project assesses whether a cluster is expanding or shrinking, and identifies segments Porter calls subclusters. It gives information about employment, wages, and patents by state, economic area, and metropolitan area. Access to the data is free; for more intense mapping information, a subscription fee is required. You can find the Cluster Mapping Project at http://data.isc.hbs.edu/isc.

Porter claims that the data can help decision makers by giving them information from which to make better decisions. Armed with this knowledge, you and your clients may have the ability to map out a very bright future.

Illustration © Artville.

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