Salmon cluster chile

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THE SALMON CLUSTER IN CHILE |
Analyzed though Porter Forces Model |
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Santiago Echeverría Griffin |
01/10/2010 |

[A perfect example of the development of a Cluster, its growth and its analysis through the “5 Forces Model” of Michael Porter (HBR 1979).] |

Index

Introduction Page 3
About Chile Page 4
The history of salmon in Chile Page 5
TheChilean salmon cluster Page 6
The process of salmon Page 8
The 5 forces analysis model Page 10
1. Threat of substitutes Page 10
2. Bargaining power of buyers Page 11
3. Bargaining power of suppliers Page 12
4. Threats of new entrants Page 12
5. Rivalry among existing competitors Page 13
6. Government Page 13
7. ChancePage 13
Critic of Michael Porter model Page 15
Conclusions Page 16
Bibliography Page 17
Appendix 1 Page 19
Appendix 2 Page 21



Introduction

The Cluster of Salmon in Chile was produced thanks to big effort from the private and public sectors who worked in agreement to develop this industry, especially since 1990. In the 10th region of Chilein the year 2007 there were about 1200 firms working for this industry, satisfying all the needs and requirement producers had. This region in 2008 was the one with lowest unemployment and with very high standards of living. But that year, the industry fall, due a virus that entered from Norway called ISA, and harmed the industry so deeply that many firms went bankrupt or they merged with otherswith more power and capital to stay alive.

The idea of this paper is to show not the fall of this industry, but to expose how this industry become a cluster very fast, coming a very small country, Chile, could almost satisfy 40% of worlds demand for Salmon. And analyze the industry from the point of view of Michael Porter’s 5 forces model. The model is very interesting to analyze but it does notfit exactly the industry, because the world has change during the last 30 years (date when the model was originally published by the Harvard Business Review).

The Salmon industry, has suffered a huge pressure for globalization, and small countries like Norway or Chile satisfy almost the 80% of the world demand for this fish. This paper is an invitation to learn more about Chile, and its SalmonCluster.

About Chile

Chile is a small country in the south west of Latin America, with about 17 million people, and about 7 million on its labor force. It is located next to Argentina, Bolivia and Peru. The country is divided in 15 regions to decentralize the power from the capital, Santiago.

Since the military government in the 70’s, Augusto Pinochet developed a neoliberal plan, fromthen on Chile has reduced the role of the state and created an strong private system, encouraging a strict capitalism and starting a history of economic success, which has maintain until nowadays. Its main industries were focused on the natural resources of the country, industries that have been growing due the help of the free commerce, the good relations with foreign countries and the lowinfluence of the state on its politics and actions. All these factors have created strong industries in Chile, and the country has a relevant place in the trade of copper, salmon, wine and forest resources. These four industries present the main part of the annual revenues, and let the country have positive balance on the “Commercial Payments Balance”.

The location of Chile seems to be very far fromthe large industrialized economies, but actually it is not, because Chile has access via the Pacific Ocean to the Asian markets and the United States and easily access to the Atlantic Ocean to export to Europe.

Since 1990’s the country has been developing a large web of partnerships via joining several associations like MERCOSUR or APEC and a considerable amount of Free Trade Agreements...