Myself given power-point presentation on "Cluster Development" in Cluster Awareness Programme held on 06th April, 2014 at MADITSSIA

1. www.maditssia.com
Cluster
Development
Initiative
April2014
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2. INDEX
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 MADITSSIA - Cluster Development Initiative
 History
 Vision & Mission
 Defining Clusters
 Basic Features of a Cluster (What is a
Cluster?)
 Why are Cluster Development Programme ?
 Cluster Development Methodologies
 MSE-CDP activities (How Clusters are
developed?)
 Guidelines for Bottom-Up Approaches to
Building Clusters

3. INDEX
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Define your Cluster Vision / Mission and Values
Start the analysis – external andinternal
Internal Analysis -7S
Diagnostic Study
Summaries with a thorough and accurate SWOTstatement
Soft Interventions
Scope and Objectives of the Study
WHATISADPR?-Detailed project report
Hard Interventions (Setting up CFCs)
Infrastructure Development
Project Cost and GoI Grant
Implementing Agencies
CFCin engineering Cluster,Hosur
Legal Model for a Cluster
Hybrid type has a advantages
Cluster Development Strategy
Strengthen the implementation of the existing policy forclusters

4. HISTORY
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Clusters of micro, small and medium enterprises (MSMEs) are found in
abundance across the globe.
Since the early nineties, cluster based development of MSMEshas been
adopted in more than fifty countries.
The MADITSSIAfor MSMEClusters was conceptualized to contribute
towards this process of cluster based development of MSMEsand thus
enhance their competitiveness, generate sustainable employment and
alleviate poverty.
At the suggestion of the Ministry of Small Scale Industries, Government of
India, the United Nations Industrial Development Organization (UNIDO)
conceptualized and initiated the process of creating the MADITSSIAfor
MSME Clusters.
Subsequently, the MADITSSIAwas legally constituted as a non-government,
non-profit registered trust under the auspices of the Entrepreneurship
Development Institute of India (EDI),Tamilnadu, in the year2014.

5. VISION
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Tobe a CenterofExcellencefor
EntrepreneurshipDevelopment,Research&
Consultancyin the MSME Sector.
Enhancethe competitivenessofthe
existingenterprises.
Toworktowardsan economically progressive,
sociallyconnected, Contribute towards
sustainablyestablishing more number of
potential enterprises.

6. MISSION
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MADITSSIAaims tobe the leading providerof
QualityProfessionalDevelopmentServices,
Researchand Information Servicesin the fields
ofEntrepreneurshipMotivation, and
Development,EnterpriseCreationand
Management.
Weassist institutionsundertake effective and
inclusivecluster based localeconomic
developmentin developingand transition
economies.

7. DEFINING CLUSTERS
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A cluster is a geographical concentration of micro, small,
medium and large firms producing the same or a similar
range of products (goods or services).
Units in a cluster face same or similar set of threats
(e.g. product obsolescence or lack of markets) and
opportunities (e.g. increasing turnover through quality
up-gradation or the introduction of new products, and
increasing exports through targeted marketing).
The firms producing ‘the product’ by which a cluster is
known are called principal firms or principal
stakeholders of the cluster.

8. BASIC FEATURES OF A CLUSTER (WHAT IS A CLUSTER?)
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Group of enterprises within an identifiable,
contiguous area and producing same/similar
products/services.
Similarity in the methods of production, quality
control and testing, energy consumption, pollution
control, etc.
Similar level of technology and marketing
strategies /practices.
Similar Channels for communication among the
members of the cluster.
Having Common challenges and opportunities.

9. WHY ARE CLUSTER DEVELOPMENT PROGRAMME ?
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To support sustainability and growth of MSEs by addressing common
issues such as improvement of technology, skills and quality, market
access,accessto capital, etc.
Forenhancing competitivenessof the MSEunits toensureself
sustainability, growth& employment generation.
Tobuild capacity of MSEsforcommonsupportive action throughself
help group,consortia, etc.
Tocreate/upgrade infrastructural facilities in the new/existing industrial
areas/ clustersof MSEs .
Toset upcommonfacility centers(for testing, training centre, raw
material depot, effluent treatment, etc).

10. CLUSTER DEVELOPMENT METHODOLOGIES
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Followingare the main steps:
Selection of cluster(s)
Selection of Cluster Development Executive(s)
Trust building
Diagnostic study
Preparation of action plan
Approval of budget and leveraging of funds from various
institutions
Implementation of the action plan
Monitoring and evaluation
Handing over and exit
Self-management phase

11. CLUSTER DEVELOPMENT METHODOLOGIES
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Selection of Clusters: Ajudicious selection
framework based on a cluster's importance.
Diagnostic Study: Gathering dispersed
knowledge through a participatory study.
Trust Building: Establishing an atmosphere of
trust within a cluster is essential for building a
realistic action plan that will have support from
firms, service providers and support agencies.

12. CLUSTER DEVELOPMENT METHODOLOGIES
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Action Plan:Anaction plan for the cluster is
more than the sum total of the demands voiced
by different cluster actors.
Implementation: The implementation of the
action plan is not simply the realization of the
targets set in the action plan.
Monitoring and Evaluation: Quantifying the
outputs of the activities implemented helps
disseminating best practices and strengthening
trust.

13. MSE-CDP ACTIVITIES (HOW CLUSTERS ARE DEVELOPED?)
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Admissibleactivities forGoI Grant/support:
Diagnostic Study Reports(DSRs)
Softinterventions
Detailed ProjectReport
Hard Intervention/Common FacilityCenters
(CFCs)
InfrastructureDevelopment

14. GUIDELINESFORBOTTOM-UPAPPROACHESTOBUILDING CLUSTERS
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15. DEFINEYOURCLUSTERVISION/ MISSIONANDVALUES
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What is the purpose of the cluster – the reason
for being of this cluster initiative?
What is it we want to achieve by setting up this
cluster?
Howwill we know we have been successful in our
efforts – i.e. what will a successful cluster look
like, be doing, be recognized as and for?
What values will we adopt? What is important
for us in the waywe do business?
Do all potential cluster member share
these values? If not, what will we do about
it?

16. STARTTHEANALYSIS– EXTERNALANDINTERNAL
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PESTELAnalysis
Politicalfactors
Economicfactors
Socialfactors
Technologicalfactors
Legalfactors
Environmentalfactors

17. INTERNALANALYSIS-7S
Strategy
Structure
Systems
Shared Values
Style
Staff
Skills
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18. INTERNALANALYSIS-7S
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Strategy: the plan devised to maintain and
build competitive advantage for the cluster over
its competition.
Strategy
What is our cluster strategy?
How do we intend to achieve our objectives?
How do we deal with competitive pressure?
How will changes in customer demands be dealt with?
How will strategy be adjusted for the future?

19. INTERNALANALYSIS-7S
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Structure: the way the cluster organization is structured and
who reports to whom.
Structure
How is / will the cluster organization / team be organized?
What is the hierarchy?
How do the various departments coordinate activities?
How do the team members organize and align themselves?
Is decision making and controlling centralized or decentralized?
Is this as it should be, given what we're doing?
Where are the lines of communication? Explicit or implicit?

20. INTERNALANALYSIS-7S
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Systems: the daily activities and procedures
that staff members engage in to get the job
done.
Systems
What are the main systems that run the
organization? Consider financial and HRsystems
as well as communications and document storage.
Where are the controls and how are they
monitored and evaluated?
What internal rules and processes does the
team use to keep on track?

21. INTERNALANALYSIS-7S
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Shared Values: called "superordinate goals" when the
model was first developed, these are the core values
of the company that are evidenced in the corporate
culture and the general work ethic.
Shared Values
What are the core values of our cluster organization?
What is the cluster team culture?
How strong are the values?
What are the fundamental values that the
cluster team was / should be builton?

22. INTERNALANALYSIS-7S
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Style: the style of leadershipadopted.
Style
Howparticipative is the
management/leadership style?
Howeffective is that leadership?
Do members tend to be competitive or
cooperative?
Are there real teams functioning within the
cluster or are they just nominal groups?

23. INTERNALANALYSIS-7S
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Staff: the employees and their general
capabilities.
Staff
What positions need to befilled?
What knowledge / experience mix do we
require ?
Are there gaps in required
competencies?

24. INTERNALANALYSIS-7S
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Skills: the actual skills and competencies of the
employees working for the cluster / company.
Skills
What are the strongest skills represented within
the cluster team?
Are there any skills gaps?
What is the cluster known for doingwell?
Do the current employees/team members have
the ability to do the job?
Howare skills monitored and assessed?

25. DIAGNOSTIC STUDY
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Gathering dispersed knowledge through a
participatory study is essential to learn notonly
about the potentials and constraints faced bya
cluster but also about the strength of linkages
and support mechanisms. The participatory
process helps build trust with the local actors
and secure their positive involvement in the
cluster development program.

26. DIAGNOSTIC STUDY
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First & foremost activity in the clusterdevelopment process.
Objective isto map all the businessprocessesof cluster units to find
out its strengths, weaknesses,threats & opportunities (SWOT),
problemsetc. & thereby:
Propose/suggest fora well-drawnaction plan forenhancing
competitiveness of the units to ensure self sustainability, growth&
employment generation.
Focusontechnologyupgradation, best manufacturing practices,
marketing ,employment generation etc.
GoIgrant :Max. Rs.2.5 Lakhs/ cluster-prepared byendusers
Timeframe 3 months

27. SUMMARIESWITHATHOROUGHANDACCURATESWOTSTATEMENT
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Howto UseSWOTAnalysis
Strengths:
What advantages does your cluster organization have?
What do you do better than anyone else?
What unique or lowest-cost resources can you draw upon
that others can't?
What do people in your market see as your strengths?
What factors mean that you "get the sale"?
What is your cluster’s unique selling point (USP)? -what
differentiates your cluster offering from others in the
marketplace Consider your strengths from both an internal
perspective, and from the point of view of your customers
and people in your market.

28. SUMMARIESWITHATHOROUGHANDACCURATESWOTSTATEMENT
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Weaknesses:
What could youimprove?
What should youavoid?
What are people in your market likely to see as
weaknesses?
What factors lose yousales?

29. SUMMARIESWITHATHOROUGHANDACCURATESWOTSTATEMENT
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Opportunities:
What good opportunities can you
spot?What interesting trends are you aware of?
Usefulopportunities can comefromsuchthings as:
Changes in technology and markets on both a broadand
narrow scale.
Changes in government policy related to yourfield.
Changes in social patterns, population profiles,lifestyle
changes, and so on.
Local events.

30. SUMMARIESWITHATHOROUGHANDACCURATESWOTSTATEMENT
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Threats:
What obstacles do you face?
What are your competitors doing?
Are quality standards or specifications for your job,
products or services changing?
Is changing technology threatening your position?
Could any of your weaknesses seriously
threaten your business?

31. SOFT INTERVENTIONS
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Activitieswhichleads togeneral awareness,counseling,
motivationand trust building, exposurevisits,market
development,participationin seminars,workshopsand training
programmedontechnologyupgradation, etc.
Critical massshouldbe max.but not lessthan 25 units
participatingin clusterdevelopment activities.
GoIgrant: 75% of the projectcostof maxRs.25 Lakhs/ cluster
90% forNE& Hill States, >50% micro/village, women,SC/ST units
Share of cluster beneficiaries shouldbe as highas possiblebut
not lessthan 10 per cent of the total cost
State Govt.contributionisconsideredas gap funding
Duration of soft interventionsmaximum18 months.

32. SCOPEANDOBJECTIVESOFTHESTUDY
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1. Toassess the impact of soft interventions undertaken
in terms of:
Improvement in existing skills.
Adoption of new skills, techniques or technologies.
Awareness of modern trends and needs in the
markets.
Adoption of better and efficient manufacturing
practices.
Increase in market share in domestic and global
markets.

33. WHAT IS A DPR? -DETAILED PROJECT REPORT
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Detailed project report is a complete document for
investment decision-making, approval, planning whereas
feasibility study report is a base document for investment
decision-making.
Detailed project report is base document for planning the
project and implementing the project.
Preparation of detailed project report is a step in firming up
the proposal.
When an investment proposal has been approved on the
basis of functional report and the proposal is major
proposal, it would be necessary for detailed project report to
firm up the proposal for the capital cost as well as the
various facilities. It includes

34. WHAT IS A DPR? -DETAILED PROJECT REPORT
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Examination of technological parameters.
Description of the technology to be used.
Broad technical specification.
Evaluation of the existing resources.
Schedule plan.
General layout.
Volume of work.
Project description.
Planning and implementation of the project.
Specifications.
Layouts and flow diagrams.

35. HARD INTERVENTIONS (SETTING UPCFCS)
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CommonFacilityCentreslike TestingFacility,DesignCentre,Production
Centre,Effluent TreatmentPlant, TrainingCentre,R&DCentre,RawMaterial
Bank/sale depot,DisplayCentre,Information Centre, etc.
GoIgrant :70% of projectcostof max.Rs.15 crore/ CFC
90% forNE& Hill States, > 50% micro/village, women,SC/ST units
Costof land and building(max.25% of the projectcost)shall be met by
SPV/State Govt..
SPVformationismustpriortosettingup& runningof CFC& SPVshould be:
- Aclear legal entity (Cooperative / Regtd. Society, Trust or aCompany)
- Min. 20 MSEcluster units as members & provision for newmembers
- Should have provisions for CDE/CDA& State Govt. official as member
ATripartiteAgreementamongthe GoI,State Governmentand SPVis signed.
CFCshouldfunctionwithin2 years fromdate of final approval, if not
extended .

36. SCOPEANDOBJECTIVESOFTHESTUDY
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2. Toassess the impact of hard interventions
undertaken in terms of:
Improvement in the product quality.
Improvement in processes and technologies.
Cost competitiveness.
Diversification in the product portfolio.
User fee and self management of SPVs.

37. INFRASTRUCTURE DEVELOPMENT
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Schemeconsistsof projects forinfrastructural facilities like
Development of land, powerdistribution n/w, watersupply,drainage
& pollution controlfacility ,construction of roads, telecom, raw
material, storage, commonfacilities suchas FirstAidCentre,
Canteen, other need based infrastructural facilities in new/existing
industrial (multi- product) areas/estates/clusters.
Thelocation of the Projectsshouldhaveaccessto basicfacilities like
Proximityto railwaystations / state highways,Availabilityof water
supply,power,telecommunicationfacilities etc.
GoIgrant: 60% of the project costof maxRs.10 Crore/ ID
80% forNE& Hill States, >50% micro/village, women,SC/ST units
TheState govt./UT will providesuitable land for the project.
Projectto be completed within 2 yearsfromthe date of final
approval.

38. PROJECT COST AND GOIGRANT
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Intervention
ProjectCost
(Rs.in lakh)
GoIGrant in %
Normal cluster #
DSR 2.5 100 100
DPRfor i) CFC/ ii)ID 5 100 100
Soft interventions **25.00 75 90
Hard Interventions 1500 70 90
Infra Dev 1000 60 80
* * Moderated as per size/ turnover of the cluster. Max Rs25 lakh per cluster
# NE& Hill States, Clusters/Industrial Estates with more than 50% (a) micro/ village
(b) women owned (c) SC/ST units

39. IMPLEMENTING AGENCIES
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Activity Implementing Agency
Diagnostic study • Offices of the Ministry of MSME
• Offices of State Governments
• National and international institutions
engaged in development of the MSE
sector.
• Anyother institution/agency approved
by the Ministry of MSME
Soft Interventions
Setting up of CFC
Infrastructure Development projects State/UT Governments through an
appropriate state government agency with
a good track record in implementing such
projects.

40. CFC IN ENGINEERING CLUSTER,HOSUR
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41. CFC IN ENGINEERING CLUSTER,HOSUR
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42. CFC IN ENGINEERING CLUSTER,HOSUR
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43. CFC IN ENGINEERING CLUSTER,HOSUR
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44. CFC IN ENGINEERING CLUSTER,HOSUR
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45. LEGALMODELFORACLUSTER
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Thechoiceof a legal formof a cluster depends
onthe goalsof the cluster. Thefollowingfour
questions shouldbe posedwhendecidingon
what legal status tochoosefora specific cluster:
1) What is the vision/mission and purpose of thecluster?
2) How closely do the partners in the cluster wish to
cooperate?
3) What is the role of commercial activities in thecluster?
4) How quickly should new members be integrated –
exclusivity versus inclusivity?

46. LEGALMODELFORACLUSTER
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Broadlyspeaking, the legal form of a cluster that
willfocusheavilyoncommercial activities will
differ from the one focusedsolelyonR&Dactivities.
Therule isthat “structure follows strategy”.
Some possible legal forms for clusters are:
Association (non-profit or for-profit)
Private limited company (PLC)
Joint stock company
Hybrid forms (mix of association and publicor
private limited company)
Foundation

47. HYBRID TYPE HASA ADVANTAGES
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A cluster with the identity of an Association has
no difficulties in registering new members and it
is open to everyone willing to work for the
benefit of that sector in the region. This is not
the case with a limited company, as itis too
complicated and too expensive tointroducenew
company members after the limited company
has been established;

48. CLUSTER DEVELOPMENT STRATEGY
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Its sets out six main areas for the futurestrategic
development of clusters:
Improving the management of cluster development
policy.
Strengthening of clusters and cluster members.
Promoting innovation and transfer of new technologies.
Strengthening of export potential and
internationalization of clusters.
Strengthening the knowledge and skills for cluster
development.
Effective use of Government funds and Government
Community Programmes.

49. STRENGTHEN THE IMPLEMENTATION OF THE EXISTING POLICY FOR CLUSTERS
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MEASURINGPROGRESS– SALES,EXPORTS,OUTPUT, JOBS:
Initially the proposed 10indicators to be monitored in cooperation with cluster managers are:
Number of clusters supported.
Number of member companies.
Range of cluster activities.
Export promotion initiatives undertaken.
Sales and exports of all cluster companies.
Employment and annual change.
R&D expenditure (%of sales).
R&D project contracts with universities.
Cluster budget.
Cluster staff.

50. Thank You
CLUSTER DEVELOPMENT TEAM
CONTACT DETAILS:
 Rtn. K.P. Murugan – Cluster Awareness Coordinator – Mobile: 9345203336
CommunicationAddress:
MADITSSIA
Dr. Ambedkar Road (near Madurai Corporation Office)
Madurai – 625020.
Contact Person:
 Rtn. MUTHUKUMARAN. C – Cluster Manager – Mobile: 9052795252,
7708249796
E-Mail id: kumarancmuthu@gmail.com, muthukumaran.ncs@gmail.com
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