Regional Forum on Cluster Development in the Caribbean:

Opportunities for Business

Cluster Development in Agribusiness & Tourism in Jamaica

Beverley MorganThe Competitiveness Company

November, 2011

Competitiveness: Context for Clusters

• Competitiveness analysis covers the range of actions through which nations and firms “manage the totality of their competencies to achieve prosperity or profit” (Garelli, Top Class Competitors, Wiley, 2006, p.3).

• Productivity key component of competitiveness- determines “how much firms or nations produce with limited resources”

• Much more to competitiveness than productivity alone. ‘Competitiveness is also about changing mindsets: looking at the world, nations, firms, and people from a different perspective” (ibid, p. 21).

Every morning in on the Masai Mara in Kenya, a zebra awakens. She has only one thought: To be able to run faster than the fastest lion. If she cannot, then she will be eaten.

Every morning on the Masai Mara in Kenya a lion awakens. He has only one thought: To be able to run faster than the slowest zebra. If not, he will be hungry and he will not be able to feed his pride.

It is enough to know that with the rising of the sun, you must run. And you must run faster than you did yesterday or you will be eaten.

Why Clusters Matter

• Firms often possess competitive advantage because national institutions that surround them are better suited for organising industrial activity in their particular sector of the economy (Porter, M, On Competition, Harvard University Press,1998)

• “Firms do not create all the resources, infrastructure, and knowledge that are required to, make a product by themselves. If one considers the variety of supporting organizations associated with a particular industry, it becomes apparent that competency-enhancing or – destroying innovations can occur not only at the firm level but also at the level of what analysts have called the industrial district...(Murmann, J.P., Knowledge & Competitive Advantage, Cambridge University Press, 2003, p. 63).

The Challenge for the Caribbean

• In the context of the Caribbean:

Can the focus on cluster development alter the competitive space within which micro, small and medium-sized enterprises operate, thereby making them more competitive?

Developed vs. Developing

Country Dichotomy• Porter:

– Clusters in developing economies essentially less rich in connections

– Involving fewer participants – More limited communications – Less developed linkages between institutions

and firms.

– On the contrary• clusters in developed economies involve “a

dense mesh of continually evolving relationships and linkages…”

The Juke Box on The CornerCriteria Scoring (Points)

Willingness to embrace new ideas w/supporting resources Low = 1-3 points Medium = 4-6 pts High = 7-10 pts

Potential to be internationally competitive Low = 1-3 points Medium = 4-6 pts High = 7-10 pts

Employment potential and GDP contribution Low = 1-3 points Medium = 4-6 pts High = 7-10 pts

Mass (no#) of qualified firms Low = 1-3 points Medium = 4-6 pts High = 7-10 pts

Potential to motivate other potential clusters Low = 1-3 points Medium = 4-6 pts High = 7-10 pts

Macro barriers to success High = 1-3 points Medium = 4-6 pts Low = 7-10 pts

Cluster Selection Results

Cluster Results

Agribusiness High Overall Score

Tourism High Overall Score

Entertainment & Culture Medium Overall Score

Shipping and Berthing Medium Overall Score

v

The Agribusiness and Tourism clusters posted high overall scores with generally comparable results across all of the criteria.

The Shipping and Entertainment clusters both posted medium overall scores but their results differed significantly across the criteria.

Phased Approach

Facilitator-ledPhase 0

Engage

Phase 1Mobilise

Phase 3Institutionalise

Phase 2Execute

1. Revalidate Objectives

2.Engage Others

3.Search for Insight

4.Select & agree winning strategies

5. Commit to Act

•Define and engage

•Evaluate competitiveness potential (define competitiveness objectives)

•Get authorisation / coordination / encouragement to proceed

•Communicate with public and coordinate participants

•Execute important competitiveness-building initiatives

•Regular performance monitoring and active change management

•Standardise new competitive practices and diffuse broadly

•Reconfigure operational systems, supporting organizations to sustain new standards

•Leaders & members reflect to consolidate learning, internalise guiding principles, set priorities for future

What Were People Thinking? Mental Models Survey Results

Respondents considered the overall business environment in Jamaica to be extremely challenging. Government support for the private sector and the level of trust between the two was considered to be amongst the worst

in the world.

Amongst the best in the world (1 to 3) Average (0) Amongst the worst in the world (-3 to -1)

Rate Jamaica’s current levels of each source of prosperity ranging from “among the best in the world” to “among the worst in the world”

Generally speaking, would you say that most people in your country can be trusted, or that you can't be too careful in dealing with people?

A significant majority of respondents stated that you can’t be too careful in dealing with fellow Jamaicans. JCCP

Mental Models Survey Results

Phase I Mobilisation efforts include:

Meetings with over 300 companies 15 workshops with the IAC members Public presentations given to Associations and Chambers of Commerce in Kingston,

Mandeville, Port Antonio, Ocho Rios, and Montego Bay Formal meetings held with dozens of chamber heads, industry association presidents,

and large company CEOs Formal meetings held with Senior Government Ministers Newspaper articles voice competitiveness issues nationally Radio interviews on clusters and competitiveness

Process Report

Phase I:

MobilisePhase II:

ExecuteThe

National Summit

The National Summit marked a transition point in the project. The JCCP moved forward from mobilisation phase to execution phase:

(Facilitator – Led)

Agribusiness Cluster Process

THREE LEVELS OF EFFORT & ACTIVITY

1. Full Session: Agribusiness Sector A. Learning Environment B. Overarching strategy and direction-setting C. Cross-cutting initiatives D. Sub-group initiative updates & cross-fertilization E. One new strategy tool per session F. Initially, bi-weekly, then monthly

2. Sub-groups A. Marketing, Sales Channels, Packaging, Standards, Supply B. Analysis of each opportunity area C. Initiatives to fill gap/meet opportunity D. Meetings as needed: initially, less frequently, increasing during

implementation

3. Individual Company Projects

A. Coaching as requested (by senior experts & cluster facilitators)

B. Open to all cluster participants

Agribusiness Cluster Production Supply Working Group (Groups Work with Facilitator Support)

Commodity Jamaican Production Practices Best International Practices

Yield(kg/ha)

Cost ofproduction

Volumeproduced

Yield(kg/ha)

Cost ofproductio

n

Volume produced

Country Red Pepper

Scotch Bonnet Pepper

11364 J$35.2 /kgJ$22.12

300 t 9000 J$16.1 /kgJ$15.40

N/A

Ginger 8-13t J$0.48/lb 295t 48.3t 15 500 t

Tamarind ? N/A N/A 960 N/A 257 t

Escallion 16845 21.44/kg 13761 t 31524 N/A N/A

Onion J$31.86/kg 788t

Pimento 1500 N/A 1485 t 800 N/A 8012 t

Thyme 5896 J$93 /kg 1510 t

Quantities in pounds/acres (kg/ha) Data represent averages collected during past 5-10 years

Almost all packaging inputs are imported (Trinidad, Venezuela, USA, UK):

Delivery from suppliers of packaging inputs inconsistent. Suppliers require 6 weeks to process and deliver orders, but supplies are rarely received on time. This scenario happens for various packaging inputs at different times.

Because of the need to ensure against any hitch in production and to reduce the cost of the imported inputs it is necessary to carry a large inventory of these items, this ties up working capital.

Import costs would be reduced if container space could be shared, however this degree of cooperation has proven rare.

Packaging related inputs account for 40% to 66% of total production costs.

Bureau of Standards is the key agency for product packaging and labeling.

Agribusiness: Packaging Working Group

8.2¢ 7.4¢

2.1¢ 1.6¢

26%

Real Results for Real Firms

Consolidated purchasing of glass bottles:

12%

The avg. cluster member realised overall cost savings of some 10%.

Greater reliability of supply resulted in improved customer service and reduced lead times as inventory now located in

Kingston not off-island.

Per Unit Cost (5oz bottle):

Shipping/storage/transport:

Finance:

Individual Consolidated

14%

24%

11%

Cost Savings

Distributor

Sau

ce M

an

ufa

ctu

rers

Glass

Manufacturer

Cluster

Initiatives: Packaging

Glass bottle Consolidated Purchasing Program:

JEA/EXIM Financing

Reduced pricing ~ 10%

Handling equipment

Technical Support

120 day financing facility

Brokering services

Trucking services

Warehousing facilities

Lower costs (unit & service)

Extended terms (N60 days)

Greater reliability of supply

Framework for consolidated purchases of other inputs (closures)

By consolidating their purchases cluster members shifted the balance of power away from suppliers and realized significant improvements in pricing, service levels, and payment terms.

THE FAMOUS BOTTLE INITIATIVE

THE PROCESS IDENTIFIED THE ISSUE

THE DATA WAS GATHERED

THE SOLUTIONPROPOSED

THE INITIATIVE UNDERTAKEN

THE RESULTS ASSESSED

Tourism Cluster: Data Analysis for Informed Decision-Making (Process)

Source: CTO, Ireland Tourist Board, JTB

Average spend per day in Select Destinations in 2000

The metric to watch is not solely arrivals but a combination of other factors that makes each firm (attraction, tour operator, restaurateur, hotelier) more profitable. Jamaica ranks amongst the lowest on average spend per day.

96.10 92.30

275.00

158.60 160.08

0.00

50.00

100.00

150.00

200.00

250.00

300.00

Cuba Jamaica Turks andCaicos

Hawaii Ireland

Birth of a New Group & Segment

Working groups created 5, 7 and 10 day experiences that travelers can choose from to ‘Explore, Taste and Feel the Vibes’ of Jamaica. Many Tours in collaboration with Sauces & Spices and Entertainment Clusters

Roots Jamaica Taste of Jamaica

• Food

• Local Theatre

• Art exhibitions

• Cultural shows

• ATV

• Maroon Towns

• Dance Hall sessions

• Rum Bars

• Fish feeds

• Markets

• Trench Town Culture Yard

• Round Robin in Towns on Friday nights

• Dominoes

Jamaica Naturally• Waterfalls

• Hiking Trails

• Natural Parks

• Caving

• River rafting

• Bird watching

Unique Jamaica – Explore it, Taste it, Feel the Vibes

Unique Jamaica (Tourism)The Power of

CollaborationBLCF GrantCollaboration within

the cluster:o Development of Bed &

Breakfast SegmentAcross clusters:o Entertainmento Agribusiness

Sauces & Spices (Agribusiness)Joint Purchasing of

BottlesSharing of Shelf SpaceSharing of Market

ContactsMarketing

CollaborationHigh six figure order

for 1 firm (ongoing)

What Was Achieved? Cluster Level

• More than 300 firms participated in the programme

• Approximately 200 organisations (over 150 firms) actively participated in the three selected clusters

• While the bulk of firms were micro, small and medium-sized enterprises (SMEs), larger firms also participated actively in cluster activities.

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Outcomes: Reach

Best Practices

What Did We Learn that is Generalisable?

Imperative of Transparent ProcessesImportance of Rigorous Methodologies for SelectionNeed for Cluster Diagnostics to Ground Choice of InitiativesNeed to be able to build consensus on basis of data Protocols around respectful interpersonal interactionsProcess Must be Private Sector - Led and DrivenImportance of Cluster Facilitators with Skills to both Analyse and

FacilitateImportance of Clustering as Learning Process – at the end of the

day, participants are enriched and enabled to practiseClear & Meaningful ProcessesGood Cluster Leaders Make Enormous DifferenceGood Public – Private Partnerships necessary

Lessons Learned