Go with your peers, or go on your own?

With industry ‘districts’ – like Dubai’s Design District and Abu Dhabi’s twofour54 – increasingly popular, what are the pros and cons of locating your business alongside others in the same sector? Is it better for an SME to be surrounded by peers, or on its own?

Business districts exist across the world, with common advantages. These include:

  • Cross-selling between companies, who naturally need one another’s products and services. In effect, a ready-made mini marketplace on your doorstep.
  • Joint activity, such as collective procurement and marketing, and shared facilities.
  • The halo effect: if several companies in a district are successful, generating ‘buzz’, then others can benefit by association – especially if customers start flocking to ‘the place to go for xyz’.
  • Improved competitiveness. That same factor of successful peers can spur others on too. Competition might be more motivating when it’s close by, than when you operate in relative isolation.
  • Concentration of talent. People will be drawn to an area if it contains numerous employers they’d like to work for. And if your business is a standout success, you become the one they’d like to work for. (Indeed, when it comes to people switching employers, there are even practical benefits such as not having to change a commute significantly – it may be small, but it can be a factor.)

To these universal factors, a unique set of UAE benefits can be added. These include the extra help (and keenly-priced rates) districts often provide in terms of start-up costs and business licensing. In effect, they act as a new generation of the freezone concept, making it easier and cheaper for a business to operate here. (And as SMEs, we appreciate anything that ameliorates these costs!)
Another soft benefit often found here: ‘the right atmosphere’. This is particularly important in creative sectors, such as those hosted by twofour54. Here, a campus feel is key in attracting the right tenants.

But there are also negatives to consider…

  • The ‘silo’ mindset. Sometimes, exposure to a richer variety of businesses, sectors and opportunities can be what helps your company grow and develop. If you’re not in an environment where that might happen, are you in danger of missing out?
  • Staying in your ‘comfort zone’. Equally, it can be easy to settle into a holding pattern: partners, customers, suppliers all sorted, no need to look elsewhere or think afresh… Again, is that element of “we’re on our own” struggle lacking; might that be what would ultimately make your company stronger?
  • Chasing the same customers. The inverse of healthy competition is too much competition. If customers start seeing a district as a ‘buyer’s market’, it could work against you and your margins.
  • Employee poaching. A concentration of talent can work the other way too, if your top personnel are tempted to join a rival ‘across the way’ because they see them doing well, know other employees there, it’s an easy move, and so on.

Disclaimer:
“The opinions expressed within this article are generic. Mashreq is not responsible for the accuracy, completeness, suitability or validity of any information on this article. The information, facts or opinions appearing in this article do not reflect the views of Mashreq. Mashreq does not assume any responsibility or liability for the same.”

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