Page 55 - 100 Great Business Ideas: From Leading Companies Around the World (100 Great Ideas)

21 CLUSTERING

By setting up in “industry centers” where similar businesses are
clustered together, firms gain instant access to a large and varied
range of benefits.

The idea

The idea of clustering seems counter-intuitive. It suggests that
firms should pay high real estate prices to be positioned close to
their competitors. Although there are many businesses that prefer
cheaper real estate further from the threat of competitors, clustering
is surprisingly common in many industries. From the shops of
Oxford Street in London to the technology companies of Silicon
Valley, clustering has a far-reaching appeal.

The benefits of clustering are particularly relevant to new
businesses. It affords easy access to an already established
network of customers, suppliers, and information. It can also
help build reputation—it encourages customers to associate
your organization with the other respected and long-established
businesses in the area.

Clustering is also a blessing for the firm in a highly competitive
industry, like selling cars. While it remains easier for customers
to choose your rival over you when it is positioned next-door, a
company with a truly superior, competitive offering has little to
fear from this.

One of the most famous examples of clustering is the entertainment
industry of Hollywood, where freelancers and small firms prospered

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