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Cutting Porter’s Last Diamond: Competitive and Comparative (Dis)advantages in the Dutch Flower Cluster

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Abstract

The Dutch are the world’s leaders in the flower business even though they seem to lack comparative advantage in the traditional sense. Comparative advantages played a role in the history of the Dutch flower cluster and they still have a role today. Based on a critic of Porter’s theories, the investigation suggests that the exploitation of comparative advantages is allowed only to those firms and clusters that already possess a competitive advantage, based on technology, logistics infrastructure, innovation and human skills. So that comparative advantages and competitive advantages join in a sort of helix process based on social innovation and collective learning.

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Fig. 1

Notes

  1. 1.

    About 4.5 billion Euro (1998). Source: De Groot (2001).

  2. 2.

    The share in fresh cut flowers comes close to 90%. This could be taken as an indicator for the relative efficiency of the Dutch logistics system since the characteristics of fresh cut flowers (extremely short longevity and delicacy) demands very fast yet careful transportation and handling.

  3. 3.

    The Netherlands has a temperate maritime climate. Average temperatures range from 2 to 17°C.

  4. 4.

    The Netherlands is one of the most densely populated countries in the world—and within the country, most people live in the western part: Holland. The string of big cities along the coastal shore is called “Randstad”. In the province of Zuidholland (where the Westland region is situated) the density figure is 1,000 people per square km. For the sake of comparison, comparable figures are only found in Bangladesh. The average figure for Italy is 195.

  5. 5.

    At the end of the nineteenth century the Westland region was already known for its grapes. These were produced using sun lounges that were imported from Belgium.

  6. 6.

    The horticulture industry is one of the major producers of CO2 in the Netherlands.

  7. 7.

    In Porter’s jargon, ‘selective factor disadvantage’ may have a stimulating effect on (technological) innovation (Porter 1998, pp. 78–82). Examples at the national level are Canada and Australia that due to there extensiveness are frontrunners in distant applications (e-Education, e-Health). At the regional level, the wireless technology/satellite cluster around Calgary originates in the combination of remote sites (mining industry) connected to a central office and rugged landscape which prohibits to use of conventional land-based communication technology (Langford et al. 2003). The argument is also connected to demand conditions (1998, p. 87): industries will have an advantage in market segments which are more important at home than elsewhere (compulsory education and health care in remote areas in Canada and Australia, serving the communication needs of remote mining plants in the Calgary region). Also compare the remarkable evolution from the Finnish firm Nokia from a wood processing firm into a world leader in mobile telecommunications (Häikiö 2002).

  8. 8.

    The contrast with competing regions with more favourable natural conditions is striking in this respect. The Italian flower districts, for instance, which started to make serious inroads in European exports, are still recovering from the severe cold which hit them in 1987. History has recently repeated in Spain.

  9. 9.

    It took the institute, “Westland Vereeniging”, over 30 years to bring all growers under the collective auction system. Ultimately, the state of emergency during WWI (during which the Netherlands remained neutral) was used to force the resistant growers to use the auction system (by making participation to the auction association compulsory for the submission of an export permit).

  10. 10.

    Especially tomatoes and cucumbers for the German market. This has remained an important market up until today.

  11. 11.

    Most growers in Kenia and Africa are Dutch emigrants. The same goes for Brazil which has a Dutch enclave specialised in producing seedlings (for the Dutch market). The share of imports from Africa is constant (about 68%) but the overall volume of import is sharply rising.

  12. 12.

    The African nurseries are big competitors in the literal sense. One of the nurseries in Kenia has 200 ha of roses (average size in The Netherlands is about 1 ha). About 50% is traded via (the Dutch) auctions (used to be 100%). The other 50% is directly to wholesale and retail trade (roses are already pre-packaged in the wrapping of the super market chain) using the own logistical infrastructure of the firm. The firm has its own airplanes.

  13. 13.

    The strict observance of official international environmental regulation would in theory be beneficial to the Dutch growers since they can easily meet the standards whereas many of their competitors cannot; for example MPS (which is a Dutch collection of labels in various classifications—MPS A, B, C—providing information on the social, environmental or quality aspects of a product in the flower sector) requires fully automated processes. In practice most other countries are rather lenient and as a consequence the green hallmarks do not function as a filter for quality. Instead these hallmarks are being used by wholesale traders to force down market prices—which has little or nothing to do with the environment anymore.

  14. 14.

    This innovation is a direct outcome of the tight Dutch environmental regulation (Porter and van der Linde 1995). In order to reduce energy consumption in the horticulture industry the Dutch government made the use of sun blinds obligatory. Growers initially were reluctant to use the new technology since it reduced the influx of light and hence directly affected the yield. However, the technology turned out to be a blessing in disguise. By dynamically controlling the sun blinds the irregularity of the natural patterns of sunshine could be evened out. This has significantly increased rather than decreased yields. The latest process innovation is to directly feed highly localized weather forecasts into the computers that control the movement of the blinds (Meteoconsult, mimeo).

  15. 15.

    This is a rather energy-intensive method that might not be economically feasible at all—or only at a very large scale.

  16. 16.

    For instance, too much or too frequent changes will slow down the growth of plants (in the words of one of the nurserymen we interviewed, “they get stressed”…) The special process computers that are needed to control the greenhouses are developed and produced by local Westland firms such as Priva (http://www.priva.nl).

  17. 17.

    See, for instance, http://www.groeinet.nl.

  18. 18.

    Den Hertog et al. (2001) state that it remains to be seen whether the presence of an own primary production is a necessary precondition to maintain the nexus of the global logistical system in The Netherlands. They argue that at least some production should be done in The Netherlands in order to keep the knowledge up to standards.

  19. 19.

    In this respect the Westland might not be much different from a typical industrial district. Within The Netherlands, the region is rather unique (the only comparable cluster may be the Dutch dairy industry).

  20. 20.

    In the transport component, for instance, not only are there numerous local firms specialized in the transport of flowers but they are even further specialized in the transport of specific types of flowers. In the non “green” services, the local banks are completely tuned to the special financial needs of nurseries (which includes very attractive financial schemes for [re]starting of nurseries—the banks know it is safe business).

  21. 21.

    Bloemenveiling Aalsmeer (VBA) is a cooperative in the joint ownership of 3,500 member growers which was born as a typically Dutch reaction to the power of the middlemen. The members appoint a board of nine from among their ranks, all of whom are growers, to determine policy. A chairman, a vice-chairman and a secretary are selected from this board. Management and the implementation of policy are in the hands of the three general management members (managing director, commercial director and operational director). The Supervisory Board provides policy recommendations and verification. Half of the members of this board are member growers while the other half are experts drawn from Dutch industry and university life. The 3,500 cooperative members are grouped into 15 regionally active sections, each with a section board. The section boards and cooperative management regularly gather during policy meetings. General meetings take place twice a year, to which all members are invited.

  22. 22.

    A standardized electronic consignment note is being used. A printout of the note is attached to the trailers with flowers. Specialized transport firms pick up the trailers from the nurseries (and drop empty ones for the next day) and deliver the flowers to the auctions.

  23. 23.

    For example, there are 300 gerberas, over 500 chrysanthemums and 400 different roses. The incredible variation in flowers is a result from the differentiation strategy that was been followed by most Dutch growers up to the early 1990s. After the shift in favourable market conditions (demand no longer exceeded supply) the increasing pressure on margins forced many growers to turn to a cost domination strategy.

  24. 24.

    One example is the wholesale trader Metz which directly delivers flowers from nurseries to its customers around Europe. Customers can place their orders via Metz’ own electronic system IRIS (see http://www.metz.nl/en/index.html). The financial settlement is still via one of the auctions.

  25. 25.

    Marketing & Sales Aalsmeer (MVA) is the active sales organisation of the VBA. MVA helps to gear products to the wishes and needs of the market as accurately as possible, and provides expert advice in customised operations. MVA also provides customers with tailored supply information. In 2003 11% of cut flowers transactions (up from 9% in 2002 and 8% in 2001).

  26. 26.

    TFA is specialized in roses grown outside the Netherlands (especially Africa).

  27. 27.

    The jump from antithesis to synthesis is not a trivial and easy one since it involves a genuine paradigm shift from labour substitution (the high-tech trajectory) to labour upgrading (Den Hertog and Kern 2007). It remains to be since to what extend the Westland cluster can make that transition and whether emigrating individual firms can survive on their own, isolated from the tightly knit original home base.

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Correspondence to Ernesto Tavoletti.

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Tavoletti, E., te Velde, R. Cutting Porter’s Last Diamond: Competitive and Comparative (Dis)advantages in the Dutch Flower Cluster. Transit Stud Rev 15, 303–319 (2008). https://doi.org/10.1007/s11300-008-0017-2

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Keywords

  • Dutch flower cluster
  • Comparative advantages
  • Competitive advantages
  • District
  • Innovation
  • Cluster

JEL Classification

  • Q17
  • M16
  • L26