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OM in the News: China’s New Magacities and Industry Clustering

October 3, 2012

The subject of industry “clustering,” discussed in Chapter 8, Location Analysis, comes up in Businessweek’s article (Sept. 30-Oct. 6, 2012) about China’s new megacities and the specialties driving their economies. For example, almost unknown outside China, Changsha (population 3.1 million) is one of the second-tier cities emerging as engines of China’s next wave of growth.  McKinsey  projects that by 2025, 13 of the world’s 25 fastest-growing cities will be in mainland China, and that by 2025, that country’s top 225 cities will be responsible for 30% of global economic growth.

Last year, Changsha’s economy grew nearly twice the national rate and will continue the pace in coming years. Changsha has boosted its economy in part by turning itself into a TV filming center. Its Hunan TV is responsible for launching the wildly popular American Idol-like audition shows Chao Ji Nu Sheng (Super Girl) and Kuai Le Nan Sheng (Super Boy). Changsha is not just an entertainment center cluster, it’s also home to major construction-equipment makers like Zoomlion and Sany, which have benefited from the national building boom and are selling their excavators and  truck cranes to India, Brazil, and Africa.

Just as Changsha has become an entertainment hub, many other second-tier cities are also thriving because they specialize. Chengdu is a high-tech manufacturing center: Intel recently moved its assembly and testing facility there from Shanghai, while Dell and Texas Instruments also have operations in the city. Wuxi, home of Suntech, is a leader of Chinese solar panel manufacturing; Xi’an, historically a base of the military-industrial complex, is a main center in the country’s efforts to develop an aerospace industry. The northeastern city of Shenyang has become an industrial center thanks to assembly plants operated by BMW, Boeing and other foreign investors.

Discussion questions:

1. Like China, Italy has many industry cluster cities. Name some of them and their specialities.

2. What are the OM advantages to clustering?

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