Competitiveness of the Inner Cities - Essay Example

Competitiveness of the Inner Cities of the Introduction Michael Porter’s work on evaluating the competitive advantages of the inner cities has made many economic researchers to evaluate the reasons behind the lack of economic growth and revitalization occurring in the inner cities of the Americas. Although many economists have addressed the issue, Porter’s work is considered to be the most rewarding and meaningful. In the current paper the competitive advantages of the inner cities has been vividly discussed, highlighting the work of Michael Porter. The paper also incorporates the critical reviews of other authors in relation with Porter’s ideas, alongside of presenting the personal ideas of the researcher. Inner cities in most nations are seen to lack economic development and are submerged with unemployment, poverty and poor lifestyle standards make the economic conditions in these regions highly adverse. The paper tries to analyze such conditions and the reasons behind them from the view point of Porter and other authors. Porter’s View Point Porter had identified that crushing conditions of poverty and lack of resource availability have made the lives of the inner city dwellers difficult. Also the various revitalization efforts taken by the government and commercial institutions to improve the conditions in these areas were not successful. In fact the conditions existing in these regions continued to deteriorate (Porter, 1995). Past efforts taken towards the development of the inner cities were mainly centered on providing relief in the form of income, food stamps and housing subsidies. These programs were designed in a manner such that they could provide solutions to only the real and the most visible needs of the society. The initiative taken towards development of the economy was seen to remain ineffective. The approaches were also seen to be highly fragmented and considered the inner city as an isolated part from its surrounding regions. Porter states in his review that it is high time for the authorities to consider altering their approach towards the development of the inner city regions across the U.S. The current development programs only facilitate developing the educational and the general human needs of the society. However for the long sustainable development, stronger economic strategies for strengthening the inner city regions require to be developed (Porter, 1995). Porter considers putting attention upon recognizing those aspects which propel economic growth. He states that charities are not a viable means of attaining economic success in the inner city region. Instead reliance must be developed upon private investments (Porter, 1995). Private firms are profit oriented and seek to put attention upon the long term strategic sustainable practices. This is precisely what the inner city regions must look towards acquiring. Companies in the inner city regions are largely small sized and many of them are not able to sustain in the long run due to lack of proximity with suppliers and customers. There hardly exist suitable location advantages in the inner city, driving firms to move farther away. In order to strengthen the industrial base, it is essential to first recognize the advantages which exist in the inner city regions and accordingly set plans for economic development. Advantages for companies do not arise in isolation. Instead the development of a cluster of companies is necessary to ensure growth. Hence merely the development of one or two firms would not be sufficient (Porter, 1996). Porters research upon the inner city regions have led to the identification of four main types of advantages, namely; human resource, high local demand, strategic location and regional cluster integration. Inner cities are seen to have better educational than the external areas. The clusters of schools and universities attract a number of schools (Butler, 1996). Organizations can therefore take advantage of the expertise and skilled human resource available in the inner city regions. Inner cities possess certain location advantages which are not adequately recognized or made well use of by companies. Such advantages arise out of good transportation links, closeness with the down town areas which harness small traders, concentration of entertainment and tourism centers and finally the flagship centre for companies. Hence there exist significant advantages in the inner city area which business firms fail to recognize. If these advantages are further developed upon, it would be possible to implement a strong industrial base, which would eventually quench the needs of economic growth (Butler, 1996). Another significant advantage of the inner city region is the existence of a strong market demand. The high population density coupled with substantial purchasing power leads to attracting retail chains. This is one reason why the inner city areas are seen to have a number of shops and supermarkets in variable sizes (Johnson, Farrell & Henderson, 1996). Many entrepreneurs have recognized this opportunity and have exploited the same to their advantage. Since local demand is large and massively diversified owing to the population concentration, retailers are able to cater the products to the nearby sates, suburban areas and even export the same to other nations. However lack of managerial efficiency has led to lower exploitation of such advantages. Porter has therefore found that it is essential for the inner city regions to attract the highly skilled breed of entrepreneurs who can take advantages of the spending power existing in the inner cities. They must be able to plough back the profits earned towards growth of their businesses. Hence private firms must be largely oriented to such tasks due to their greater profit mindedness than the public sector firms (Johnson, Farrell & Henderson, 1996). Porters evaluation of the inner city business areas crucially reveals that a large number of businesses located in the inner city region are not export oriented. This means that goods and services are offered in the local areas only. Hence trade relation with suppliers and companies located outside the peripheries of the inner cities are less developed. In case of exporting, it becomes possible to utilize the purchasing power of consumers located in other regions. As a result the spending of external consumers will be getting used for propagating economic growth in the inner city region. In reality however, firms and organizations fail to perceive such opportunities. This restricts economic growth of the existing companies of the inner city. Overtime unemployment rises and other segment of growth simultaneously gets restricted. Porter’s evaluation of the inner cities reveals that government efforts should be directed towards direct investments and not provides the same in the form of charity funds. Also it is noticed that the highly skilled minority group are directed towards social development rather than using their skills and expertise in the business sector (Wilson, 2012). Critical Literary Review Porter’s model was seen to be effective in terms of guiding other researchers in identifying the root causes of slow and deteriorated economic situations of the inner city regions. The identification that inner cities have higher human resource capabilities which are underutilized served as an important knowledge for other researchers such as Dymski (1996). The notion that Inner city restoration requires more business oriented funds was supported by other authors such as Rosabeth Kanter (Henry, 1996), had stated in support of the concepts put forward by Porter that isolated business units of the inner city regions restrict their interaction with the external business environment and consequently leads towards the loss of export opportunities. Kanter agrees that unless business units expand from being simply localized, success and growth are not easily obtained. He stated that firms operating in the present day business environment, in order to give effect to economic growth of the inner city region must focus upon competencies, concepts and connections. These are also popularly known as the three C’s of industrial growth. Contrary to the theories established by Porter, Hutton (2004) cited that there was no clear distinction between social and economic expenditures. There is also a shortage of information regarding the sectors which should be primarily concentrated while making investments as not all investments might lead towards the generation of adequate profits. Also authors have stated that although porter states that the inner cities consists of highly educated work forces, in reality it is not true for all regions in the U.S. Many inner cities of the nation have educated individuals who simply come to the region for completing their education and then leave for securing better jobs. Hence the existence of talented workforce in the inner city region is not entirely true. Moreover the hardships and the difficult conditions existing in these regions drive away the able workforce (Dymski, 1996). Retaining competition is becoming harder for the inner city regions. Considering such aspects, it is sated by many authors that it is essential to change the basic roots of the society in addition with economic reforms. Hence social development and revitalization is also identified by many as equally important. As business institution and government authorities seek ways in which industrial opportunities can be improved, attention must also be given towards social value enhancement. This would come in the form of creating more politically stable environment, developing better lifestyle conditions, reducing congestion and pollution. It is also argued by many scholars such as Blakely (2001) that even though Porter states that investment is essential, opportunities for making such investments are lacking in the inner city regions. Investment opportunities can only be developed when the primary sector is well established. Primary sectors generally consist of the power, transportation, infrastructure and other basic sectors. Without the development of these sectors, the growth of the secondary industries would be difficult. In order to enhance the strength of the primary sector, it is essential to bring in government investments. However going by Porters theory, such government investments must be directed towards business institutions which are profit oriented. Hence a public private partnership model would be deemed most beneficial (Bagwell, 2008). Conclusion Porter’s evaluation of the inner cities and its existing competitive advantages and disadvantages adequately reveals that a vast majority of investments are required to be made in strengthening the business sector solely. If the economic base is strong, automatically the other areas of issue such as unemployment, lack of interaction external businesses and lifestyle improvement can be effectively dealt with. The existing technique of addressing the disadvantages of inner city through subsidies must be abolished. Alternatively the disadvantages must be addressed directly. Additionally government and commercial institutions must understand that the cost of revitalizing the inner cities is higher than the cost of development of the suburbs. However based on the theories of other eminent researchers, the investments towards growth must be made specifically in the primary sector. Additionally as the investment opportunities grow, government initiative towards social development must not be interrupted. References Bagwell, S. (2008). Creative clusters and city growth. Creative Industries Journal, 1(1), 31-46. Blakely, E. J. (2001). Competitive Advantage for the 21st-Century City: Can a Place-Based Approach to Economic Development Survive in a Cyberspace Age? Journal of the American Planning Association, 67(2), 133-141. Butler, J. S. (1996). Entrepreneurship and the advantages of the inner city: How to augment the Porter thesis. The Review of Black Political Economy, 24(2-3), 39-49. Dymski, G. A.1. (1996). Business strategy and access to capital in inner-city revitalization. The Review of Black Political Economy, 24(2), 51-65. Henry, C. M. (1996). The porter model of competitive advantage for inner-city development: An Appraisal. The Review of Black Political Economy, 24(2), 131-160. Hutton, T. A. (2004). The new economy of the inner city. Cities, 21(2), 89-108. Johnson, J. H., Farrell, W. C. & Henderson, G. R. (1996). Mr. Porter’s “Competitive advantage” for inner-city revitalization: Exploitation or empowerment? The Review of Black Political Economy, 24(2), 259-289. Porter, M. E. (1995). The competitive advantage of the inner city. Harvard Business Review, 73(3), 55-71. Porter, M. E. (1996). An economic strategy for America’s inner cities: Addressing the controversy. The Review of Black Political Economy, 24(2-3), 303-336. Wilson, W. J. (2012). The truly disadvantaged: The inner city, the underclass, and public policy. Chicago: University of Chicago Press. Read More