Industry Clustering using the Value Chain Approach
Transforming Relationships to Increase Competitiveness and Focus on End Markets
Undersecretary Merly M. Cruz DTI-Regional Operations Dev’t Group 12 March 2012
OUTLINE OF PRESENTATION I Introduction (Concept, Legal Basis)
II Value Chain as a Tool III Industrial Governance Framework IV National Industry Cluster Capacity Enhancement Project (NICCEP)
V Sample Application (Coco Coir & Peat)
Industry Clusters are groups of competing, collaborating and interdependent businesses within a value chain. It has increasingly been recognized as an effective approach in industrial development and promotion of micro, small and medium enterprises as it encourages competitiveness. The clustering process necessitates the operation of upstream (raw material suppliers, production inputs) and downstream (logistics, value-adding, packaging and marketing) economic activities to support the whole value-chain.
- The value-creating flow of a good from RM, production, commercialization, & ultimately delivery to end-users or consumers.
- A geographic concentration of interconnected businesses, suppliers, & associated institutions creating direct & indirect synergies among them.
In the Philippine Development Plan for 2011-2016, Inclusive growth and poverty reduction goal Increase productivity and efficiency of the industry and services Contribute more to economic growth and employment. The strategy towards clusters should have coordinated interventions to provide an integrated response to the needs of the industry clusters. The PDP recommends maximizing public-private partnerships (PPP) in the identification of solutions for the challenges and problems of the industry clusters.
Alignment to PDP 2011-16
Value Chain Framework
Basic Functions (chain links)
Provision of specific inputs Production Transformation Trade Final Sale
Provide - Equipment - Inputs
Grow Harvest Dry etc,
Classify Process Pack
Transport Distribute Sell
Specific consumer market
Categories of Chain Operators and their relations
Specific input providers Primary producers Logistics centers, industry Traders Final Sales point/Retailer
Source: ValueLinks Manual, gtz
Mapping the Institutional & Policy Environment
for Agro Industry
Processing Production Collection
Food Services Supplier
Key Institutional/Policy Factors Influencing Chain Dynamics and Actor Behavior Tenure Services Private Standards Marketing regulations Public Standards Tariffs Foreign Investment Policy Cultural Preferences
Main types of industrial clusters in developing countries
Clusters of large national firms and local suppliers Clusters of Small & Medium Enterprises Subsidiaries of MNCs and local suppliers
Cluster-based Industrial Development Strategy
Advantages of Industry Clusters
It’s demand-driven Requires raw material production and optimizes utilization Reduces costs of operation and encourages productivity Requires specialization of major players Provides an avenue for leveraging on another’s specialties Increases opportunities for innovation to be competitive Players pursue joint solutions to common problems They build on common labor pool, technology and infrastructure They learn collectively what it takes to be competitive Cluster-based Industrial Development Strategy
Guidelines for Cluster Development
Clear view of the goals Let the private sector lead One size does not fit all Match initiatives to the level of government
support/program Build a cluster organization Promoting and supporting , networking and co-operation Cluster-based Industrial Development Strategy
The way forward: new...
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