Víctor Daniel Maldonado Garibay 564791

Ulrike Filippi 574118

Anna Cecilia Arrambide Herrera 188465
Simon Misik 575255

International Competitiveness

“The Dutch Flower Cluster”

Group #3
Universidad de Monterrey
Postgraduate Division

Prof. Dr. Carlos Atoche

Prof. Dr. Francisco Azcúnaga
Date of Submission: September 28th , 2017

1
 We, Víctor Daniel Maldonado Garibay, Ulrike Filippi, Anna Cecilia
Arrambide Herrera, and Simon Misik, hereby affirm that we have done
this activity with academic integrity.

2
Introduction
(...)

Question 1: Draw a cluster map of the Dutch flower cluster including the relevant
groups of firms, institutions, and other involved entities.

Question 2: Why has the Netherlands built the most competitive cluster in the world
in a country with a cold and cloudy climate?

Question 3: How has the Dutch cluster sustained its leadership position for so long?

3
 1. The Netherlands has always been a major player on the world market for cut
flowers.
2. The Netherlands started cultivating and growing flowers with tulips from
Turkey by the end of the sixteenth century. As a market for flowers
emerged, greenhouses of glass, heated by gas were built and in 1908 the first
flower trade organization was founded.
3. Around 60% of the world export market for flowers is traded in The
Netherlands, with sales of $25 billion of Floricultural products in 2014.
4. In 2009, there were two flower auctions (of which FloraHolland is the biggest in
cut flowers) trading 20,000 varieties, 3,770 growers, 693 exporting companies and
20+ associations, councils, research centers et cetera. The square meters of
greenhouse were declining in The Netherlands, but yield was growing through new
production techniques.
5. Production was growing rapidly in competing countries with a more favorable
climate and lower cost of labor such as Columbia, Ecuador and Kenya. Most of
these flowers were still traded via the Dutch auctions and ran through its extensive
logistic system. In 2009 44.8 million flowers were sold in 125,000 daily
transactions, most of them being roses, chrysanthemums and tulips.
6. In 2011, The Dutch Flower Cluster faces some major strategic challenges. Rapid
technological developments, for instance internet applications and remote buying,
pose a potential opportunity as well as a challenge for the Flower Auction. Another
challenge lies in the changes in the cluster network and linkages. Examples are the
emerging competition from African and Southern American countries, and the links
with economic development of these countries. Increased prices of fossil fuels put
pressure on Dutch growers (natural gas for the greenhouses) as well as on
transportation, comprising a large portion of product cost.

2.- Why has the Netherlands build the most competitive cluster in the world, in
a country with cold & cloudy climate?

One of the Netherlands’ competitive advantage in the flower industry is their technological level,
which put the country in a favored position, due to the increasing environmental concerns in the
early 2000’s.

In 1993, the first Environmental Sustainability Certification Program was introduced, The Milieu
Project Sierteelt. This covered topics like Spraying, Drainage Ditches considerations (waste
management), Fertilizer Regulations (tracking fertilize records –Such as the use of animal manure
injected into the soil, rather than simply spreading it on top–), and the Cultivation of Organically
Grown Lighting Bulbs.

4
The country’s technology level allowed the introduction of practices and techniques such as “cut
flowers” (natural flowers with artificial pieces); Specialized Logistics Processes; Artificial Lighting;
Climate Control Greenhouses; and Mechanized Growing & Harvesting Techniques that secured
year-round production. This put the country in a favored position, due to the increasing
environmental concerns in the early 2000’s.

Historically, the Netherlands has been a trade and logistics leader, since the times of the Dutch
East India Company in the XV century. Therefore, it does not surprise that their international
position within the cluster outperforms its competitors, for the Dutch government allocates 6% of
their GDP to continuously develop an extensive logistical network and transportation systems,
which made it easy for local producers to establish effective specialized market channels (such as
the auctions systems). One of many examples is Amsterdam’s Schiphol Airport, which is one of the
world’s most efficient airports, and Europe’s 4th largest. Additionally, the country has world-class
leading railway and high-speed railway systems, extensive maritime networks of canals and rivers,
as well as highway infrastructures. Consequently, the Netherlands is one of the world’s main
promoters of trade within the WTO and OECD apparatus.

Moreover, they rely on the advantage of a well-educated and sophisticated labor force, which
allows them to easily meet their strategic goals. The Dutch Organization for Agriculture and
Horticulture (LTO), facilitated study trips for growers to Africa and South America

Similarly related, is industry aggrupation. Most growers were members of the Dutch Flower
Council and the Association of Dutch Grower’s Research Groups, which, along other trade
associations, provided specialized training seminars and workshops for its members.

In addition, their stock exchange market is one of the oldest and most developed in the world,
therefore a very safe one. This facilitates Dutch companies to secure and hedge their operations
thru their stable financial market.

Another favorable characteristic is their corporate income tax rates, which are lower than EU
average. Dutch companies have one of the most developed Corporate Governance standards in
the world.

Economic Cartels, Monopolies, and Imperfect Competition have been historically rooted to Dutch
history. It is one Europe’s most permissible markets, especially in the field of Mergers &
Acquisitions, Consumer & Competition Authority, and Industry Self-Regulation. The previous
factors, along with the fact that the Netherlands has one of the most generous Development Aid
Programs in the world (high subsidization), generates perfect conditions for cluster fostering.

3.- How had the Dutch cluster sustained its leadership position for so long?

By exploiting its competitive advantages, like in the case of logistics. The so-called
“propagators”. In the case of producers, breeders, thru technology developments

5
(distributed among the different levels of the supply chain), such as the ICT Systems &
Electronic Data Interchange (EDI) created for tracking sales and calculating real-time
pricing; and environmental standard setting. For such matters, the protection of intellectual
capital has played a highly important role. (Porter, et al. p.9)

The advantage of having a dynamic logistics infrastructure, created new commercializing

channels, like auctions, in which large bulk transactions occurred between breeders and
propagators (wholesalers, retailers, etc.). Nonetheless, it also provided the feasibility of
enhancing global trade, given their world class state-of-the-art trade infrastructure. The
combination of large production levels, and a dynamic scheme for local commerce,
propitiate the global exports of the local product’s remaining volumes to be allocated in
foreign markets. (Porter, et al. p.11)

A very crucial role within the cluster are the different research organizations involved.
These include the joint and active collaboration of industry interest groups and educational
institutions, such as:

 The Plant Research International Center at the University of Wageningen, which

specialized in cut flower systems, herbicides, and biological markers for breeding
(Porter, et al. p.11)
 The Flower Bulb Research Center lead physiology and environmental impacts
studies (Porter, et al. p.11)
 Leiden University’s botanical garden plays a crucial role in the development,
collection, and preservation of biodiversity flowers (Porter, et al. p.11)

Moreover, the Netherlands has Agricultural Educational Institutes, and educational centers.
3,000 out of 27,212 students in these institutions are specializing in floriculture. In fact,
many universities offer specialized degrees, education, and training with special focus on
the flower industry, such as the degree on Bachelor of Science in Food & Flower
Management, offered by the Fontys University of Applied Sciences. (Porter, et al. p.11)

6
4.- Why has flower production internationalized over the last few decades?
How are the flower clusters in the various countries connected? How do they
compete?

The flower production can be characterized as a highly consumer-driven industry with its
main markets in Europe, North America and Asia. Generally speaking, the wealthier a
country, the greater its demand in cut flowers. Traditionally, the flower culture was
strongest in North European countries, but as globalization lead to wealth creation, also
other regions started demanding cut flowers increasingly. In 2008, the European market
was mainly supplied by The Netherlands, Isreal and Kenya, whereas Ecuador mainly
provided for the North American market and China, Taiwan, New Zealand and The
Netherlands for the Asian market. Increasing levels of sophistication in technology and
transportation, supported the internationalization of flower production immensely.

The Dutch flower cluster was a pioneer in the international trade of flowers and still
dominates many markets. Further competitors are Columbia, Ecuador, Kenya and China.
With its extremely strong flower cluster, Columbia is the second largest exporter of
flowers, especially to the U.S., but also to Russia, the U.K. and Japan. Another strong
competitor is Ecuador which is due to its climate conditions a perfect country for flower
production. Furthermore, Kenya is one of the leading flower clusters and leading supplier
for the European market. Lastly, China has become a massive production and trading hub
for flowers, being covered with thousands of hectares of flower crops.

Most importantly, however, is the fact that all these clusters are closely interconnected with
the Netherlands acting as a mayor facilitator of auction markets, quality standards as well
as consulting and training. Furthermore, many flower clusters conduct research together
and trade among each other to diversify the flower supply globally. As different clusters
emerge, competition intensifies among producers.

7
5.- What are the challenges facing the Dutch cluster in 2011? What
recommendations would you make to FloraHolland? To the Dutch
government? To a major grower?

8
References:

Porter, M., Ramirez-Vallejo, J., Van Eenennaam, F., (2013). The Dutch Flower Cluster. Harvard Business
School. Retrieved from https://cursos-udem.blackboard.com/bbcswebdav/pid-2639295-dt-content-
rid-16973970_1/courses/1036.201812/Caso%2005%20-%20The%20Dutch%20Flower
%20Cluster.PDF.