2a-dutchflowercluster seca gr2


2/13

Netherlands and Floriculture

In 2009, Netherlands was the 22ndlargest economy in this world with the ninth highest GDP per capita

which is much above the EU average

The logistic network in Netherlands is very extensive and the govt. invests heavily towards it

Floriculture contributes to 35% of their agriculture exports and formed a $ 16.7 billion sales revenue.

This industry focussed on delivering variety, colour, quality, texture and longevity for the flowers theygrow

Special process were involved in the harvesting, grading, packing and transportation of these flowers

The temperature control was an integral part of the postharvest supply chain

Transportation overseas ranged from 60-90% of the total cost to produce the flower

Germany, UK, USA and France formed the major importers of flowers


3/13

Evolution of Dutch Flower Cluster

1900-1920:The firstflower tradeorganization,the DutchHorticulture

Council wasestablished

1923-1960:Bulbinspection

service (BKD)was graduallyestablished toinspect theflowers

1960: Largenumber of auctionhouses opened up

1970:Mergers ofauction houses

2009: Only twoauction houses

left - Plantationand Flora Holland


4/13

Porters Diamond of National Advantage (1)

Factor Conditions

Geographic location & climate

Loamy soil, temperate climate,huge natural gas reservoir,waterways to big cities

High labour productivity of $53 peremployee per hour with lowunemployment percentage (3.7%)

Extensive logistics network withheavy investment on transportsystems (6% of GDP)

No significant trade or investmentbarriers

Demand Conditions

Netherlands had strong impulsepurchases of cut flower

50% flowers are bought fromflorist

Prices are determined by rarity,quality and season

Third highest per capitaconsumption of cut flowers in theworld ( Porter says that nation willbuild competitive advantage if ithas high demand in the domesticmarket)


5/13

Porters Diamond of National Advantage (2)

Related and Supporting Industries

Netherlands was the world leader inthe development and supply offloriculture propagation material

It is home to world class plant breedingorganisation that helped in continued

marketing of new varieties Twenty Dutch companies were

specialised builders of greenhouse withtotal revenue of 350 million

Development of capital intensiveharvesting technologies in The

Netherlands Place to auction the cut flowers selling

44.8 million flowers daily

Firm Strategy, Structure and Rivalry

Strict regulation of environmentalimpact

Competitive auction process with fourmajor auction houses sharing thecomplete pie of auction, which later

consolidated into two- Plantion &FloraHolland


6/13

Sustaining International Leadership

Flower Cluster Value Chain:-

3770 growers (2007)

competing on variety,

product quality, price

Use of Greenhouses tocounter marked seasonality

Increasing focus on value

addition-marketing, sales.

Members of Dutch Floral

Council

LTO run programs for skill

development, MPS

certifications

Government pressure to

reduce environmental

impact

World Leader in

development & supply of

floriculture propagation

material, new breed seeds

Support infrastructure

CPVO, Rabobank,

AgroEnergy

20 specialized

greenhouse builders with

80% of world market share

Govt. aid, innovations in

energy efficiency

conserve surplus heat, use

of biofuels

Energy costs ~ 30% of

final cost

Plantion & FloraHolland

traded 20,000 varieties- 44.8

mn flowers sold

Roses, Chrysanthemums,Tulips & Lilacs - popular

80% of Dutch trade & 60%

of international trade

Use of Automated

processes random quality

checks for QA

Concept of the auction

Clock that ensured higher

sales price

Sales tracking with ICT &

EDI, Flower Access

Largest share of mark up-

50% of final price

Florists, Retailers,

Supermarkets

Export companies- logistics

Alternate means of

transport- refrigerated

trucks; trains & ships, air

transport

Strict inspection &

Regulation standards

2009- unwillingness to

carry inventory, Demand for

JIT, fall in order sizes

SUPPLIERS GROWERS AUCTIONS RETAILERS


7/13

Effect of Innovations on Porters Diamond

Firm Structure& Strategy

DemandConditions

Related &SupportingIndustries

FactorConditions

As a global supplier

Logistics NetworkSkills & Technology


8/13

Reason for Internationalization:

Netherlands Competitiveness Ranking

In Favour:Indicator Ranking

Logistical Infrastructure 8

Communication Infrastructure 3

Quality of Scientific Research 9

Indicator Ranking

Pay and Productivity 82

Strength of Investor Protection 86

Flexibility of Employment 84

Against:

The points against Netherlands made it to internationalize the production


9/13

Profit Analysis

Netherlands Kenya Ecuador Colombia

Revenue

25.6 29.9 36.3 33.7

Cost

24.1 23.8 28.9 31.3

Profit

1.5 6.1 7.4 2.4

Carnations:

Roses:

Netherlands Kenya Ecuador Colombia

Revenue134.9 127.5 168.6 188.6

Cost127.8 104 156.2 168.3

Profit7.1 23.5 12.4 20.3

0

5

10

15

20

25

30

35

Netherlands Kenya Colombia Ecuador

Seed

Transport

Labour

Energy

0

20

40

60

80

100

120140

160

180

Netherlands Kenya Colombia Ecuador

Seed

Transport

Labour

Energy


10/13

South America

Colombia: Dutch companies have local

subsidiary

Provide irrigation, cuttingequipment, seeds, etc

Heavily involved in logistics

FloraHolland had created acompany FH Services ColombiaLtd.

Ecuador: Four of the largest farms are

dutch owned Dutch subsidiary provide small

plants, seeds, etc

FloraHolland opened an office inQuito

Provide information, trade

facilitation and logistics support


11/13

Africa & Asia

Kenya:

Flow of FDIs from Dutch investors 70% of cut flower production owned

by Dutch growers

Dutch company Van Puttenestablished cooling facilities

Local office of FloraHolland provide

exporting, logistics and othersupport

China: Dutch company Van den Berg Roses

developed infrastructure

Also provided fertilization, energy,heating, and software skills

Dutch companies in joint ventureswith Chinese companies

FloraHolland have 5% share inflower auction process in China


12/13

China: Opportunity or Threat

Opportunity

Favorable climatic conditions

Largest cultivated area for cutflowers

Good presence of Dutch

companies providingtechnological support

Dependency on Netherlandsfor plant stock

Japan is a major export

destination

Threats

No proper mechanisms forquality control

High levels of piracy of plantvarieties

With dependency on Netherlands and large presence of Dutch

Companies, China is an opportunity for Netherlands


13/13

FloraHollandsDilemma

Focus on high value services Vs local production

Continue production of Tulip and Anthurium to maintain itsdominance (Constitute 100% of worldwide export volume)

According to theory of relative advantage, Netherlands can

reduce production of roses while maintaining tulip dominance

Can reduce production of Carnation as Colombia has idealgrowing conditions producing

Exploit the extra-ordinary network of logistics it has developedin other countries, as knowledge & collective learning are theclusterskey advantages

2a-dutchflowercluster seca gr2

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