IAMA paper

E-business and the Dutch Flower Industry

A survey for strategic opportunities

Presentation IAMA Chicago 2005

April 30th 2005 Nico van Hemert, INHOLLAND University

1.
1.1

Introduction
Background and focus
The business of greenhouses in the Netherlands is the only Dutch diamond as mentioned by Porter (1990). It is the world of flowers and pot plants, vegetables and fruit with great global potency. It is organized in value chains and clusters where seed-producers, growers, traders and transporters are working closely together with most of the time the auctions as marketplaces in a central position. In terms of Porter (1998) the Dutch modern cultivation techniques have allowed the Dutch Flower Industry to achieve differentiation on freshness, quality and variety. Important aspects contributed to this position: the existence of highly specialized research organizations in flower cultivation, packaging and shipping (factor conditions) a strong home demand (demand conditions), a highly efficient infrastructure in flower handling and air freight (related and supporting industries), and active domestic rivalry on certain focused places and specialized home-based suppliers (firm conditions). This Dutch Flower Industry is operating on a global scale with an increasing number of turnovers based on international activities. The total export was growing with 4,1% from 5.7 billion euro in 2002 till 5,9 billion euro in 2004. The growth of cut flowers was 2,1% from 3,0 billion in 2002 till 3,1 billion euros despite problems in the export to US and Russia. Especially the growth of the export of pot plants was enormous: a growth of 15,6% from 1,4 billion in 2002 till 1,6 billion euros in 2004. The main five countries are Germany, UK, France, Italy and Belgium. For the export market the Dutch Flower Office predicted growth of 45% in the next 10 years. This growth is mainly based on a growing demand in Europe including Russia. It is based on the assumption that the Dutch Flower Industry at least stabilizes on the current market share. In case of a growing market share outside the Netherlands the growth potential for the Dutch Flower Industry can be even bigger. The production for this export is not only done in the Netherlands. The volume of the import of cut flowers has decreased slightly with -0,2% from 481,7 million euros in 2002 till 480,8 million in 2004. Main import countries are Kenai, Israel, Zimbabwe, Ecuador and Uganda. The import of pot plants was growing fast with 30,4% from 29,9 million euros in 2002 till 39,0 million in 2004. Main import countries are Belgium Germany, Denmark, Spain and Portugal. The growing international character and potency of the business give a need to consider the opportunities of getting more competitive advantages by using Internet technology and Ebusiness models. This has to be considered together with the questions on its impact on existing external value chains and clustering.

1.2

The world of greenhouses

There are about 6.000 hectares of greenhouses in The Netherlands, which provide 71.500 direct and 120.000 indirect jobs for employment excluded seasonal labour. The main concentration of greenhouses lies in the province of South-Holland and the local council Westland, which is known as the Dutch glass village. In the external value chain of the Dutch Flower Industry there is a very strong position for the Dutch auctions. The main auction is Flora Holland with a turnover of 1.9 billion euros, 3.000 employees, a market share of 56% in the Netherlands and 52,3% worldwide. It is specialised in cut flowers (70% of the turn over) and pot plants (30%). About 7,6 billion products are sold in this marketplace, mainly Dutch products (5,8 billion) but also a growing number of imported products (1,8 billion). Flora Holland is doing business with about 16.000 suppliers, 4.600 traders and 2.600 exporters. Another important auction is VBA (Aalsmeer) with a turnover of 1,6 billion euros. Both auctions are organized as cooperations and have started about a century ago to strengthen the position of the growers in their negotiations with traders and retailers. The greater part of the Dutch growers of flowers and pot plants are still member of these auctions: 79% of the flowers and even 83% of pot plants are still traded using the Dutch auctions. A member of these cooperations is obliged to bring his products to these market places. RABO-bank (2002) gives some important insight on future developments in the Dutch Flower Industry. They predict a transformation from solo working companies towards partners in value chains. They analyzed a big change in the use of different channels. The channel of supermarkets, garden centers and shops for building materials will increase from 34% in 2000 till 55% in 2010 whereas the channel of florist and selling on markets and streets will decrease from 57% till 38% in the same period. Also the channels used by wholesale traders for buying and selling will change. They will buy slightly less from the marketplaces and more directly from growers, especially when trading pot plants. This decrease in using the Dutch marketplaces is for cut flowers from 92% in 2000 till 85% in 2010 and for pot plants 71% till 65% in the same period. The Dutch wholesale traders will also increasingly sell directly to foreign retailers. There will be a growth on this point from 48% in 2000 till 60% in 2010 both for cut flowers and pot plants. The use of foreign wholesale traders for cut flowers will decrease from 36% in 2000 till 25% in 2010 and for the pot plants from 31% till 15% in the same period. RABO-bank (2002) sees many advantages in bundling the offers of the Dutch Flower Industry. With synergy, partly virtual, the Netherlands can offer a complete and international assortment. Also it is possible to reduce costs for promotion, market investigations, sale, transactions and logistics. They argue that cooperation horizontal and vertical is very important to cope with the international opportunities. They see a further development of up scaling, other structure of companies and a need for good developed human resource management. Exclusiveness, standardization and reliability will be more important than new sorts.

2.
2.1

Justification
Hypothesis and research questions
The main point of paper is to prove the hypothesis that e-business can improve the external value chain and can enhance the competitive advantages within the Dutch Flower Industry. There will be a focus on B2B-models and a special attention to the position of virtual marketplaces. Therefore the main question is: What are the strategic opportunities for the Dutch Flower Industry, its clusters and external value chains to strengthen the position as market leader and insure competitive advantages by using B2B models concentrated on virtual marketplaces? To reach this aim the primary research is based on the following research questions: 1. 2. 3. 4. 5. What is the situation of the value chains and clusters of the Dutch Flower Industry? What is the position of the marketplaces in these chains and clusters? Is there a need to change the way the Dutch Flower Industry is organised? Which new models for the Dutch Flower Industry do interviewees mention? Where can E-business improve the performance of the Dutch Flower Industry and create new strategic opportunities?

The answers on these questions will lead to the final conclusions and recommendations on the opportunities for the Dutch Flower Industry using new B2B-models.

2.2

Methodology
In this paper different methodologies are being used. For the description of the world of greenhouses (see paragraph 1.2) there has been a search in (mainly Dutch) public publications and databases. The stated definitions (see paragraph 2.3) are based on a search in several databases on four topics: e-business, value chain, clustering and virtual or electronic marketplaces. It was focused on books and articles. This search was completed by checks on websites like digitalenterprise.org of the North Caroline State University and the websites of Fortune, Business Week and IAMA (International Agriculture & Food Management Association). For the primary research itself (chapter 3) there has been a choice for open-ended interviews knowing that the industry of greenhouses is in an early stage of adopting E-business and Internet-technology. Interviews are held with four different groups assuming four different approaches towards this subject. These four groups are academics (from the Erasmus University, Wageningen Research University and INHOLLAND university), important and known innovative entrepreneurs/CEOs of the Dutch Flower Industry, important opinion leaders (Chairman Association of Wholesalers of Floricultural products, Director of Dutch Flower Office, account managers RABO-bank etc), and the CEO and heads of departments of Flora Holland as the market leader on auction in the Dutch Flower Industry.

The results of these open structured interviews are presented in a narrative way of reporting including the level of agreement within the group of interviewees on a stated opinion. It varies whether all interviewees agreed on a stated subject, or many (more then half of the interviewees), or several (between 5 and 10 interviewees), or a few (less then 5). When appointing to a special opinion or suggestion or quote there is a reference to one interviewee.

2.3

Definitions
In this article the following definitions will be used: E-commerce is about presence (make sure everybody has a Website) and about transaction (buying and selling over digital media), whereas E-business (as the third phase of E-commerce) is about profitability and includes all the applications and processes enabling a company to service a business transaction (Kalakota & Robinson, 2001) B2B: doing business between companies and/or organisations (several authors) E-business model: an Internet business model is the system components, linkages and associated dynamics- that takes advantage of the properties of Internet to make money (Afuah & Tucci 2003) E-market (or hub): e-markets are seen as the place where buyers, sellers, intermediaries meet to conduct business (Cunningham 2002). Supply chain: the flow of materials, information, money and services from raw materials of suppliers (upstream) through factories (internal) to the end customers (downstream) (Turban 2004) E-supply chain: a supply chain that is managed electronically, usually with Web technologies (Turban 2004) Logistics: the management of inbound and outbound logistics (Chaffey 2004) Value chain: a model that considers how supply chain activities can add value to products and services delivered to the customer (Chaffey 2004). A cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities. A cluster is a form of network. (Porter 1998) A network is a finite set of actors and the relation or relations defined on them (Omta 2001)

3.
3.1

Findings from primary research

Chains and clusters in the Dutch Flower Industry
All interviewees describe the traditional external value chain of the Dutch Flower Industry as seed-production, seed-grower, grower, auction, wholesale trade, exporter, florist/retail and consumer. There are several examples of shortening this value chain by delivering from growers directly to wholesalers, exporters and/or retailers. By delivering directly to a foreign lumberyard I can cut out several links and their costs. I only need some supporting services, as one of the interviewee said. This external value chain can be completed and transformed to a conceptual cluster diagram of the Dutch Flower Industry by adding the complementary companies and institutions like technical suppliers (including ICT), logistics, the two big main ports of the Netherlands Schiphol and Rotterdam, the universities and other institutions for (higher) education, business services like consultancy, and the Government. This last item includes the Dutch government, the province of South-Holland and relevant municipalities like Westland. These activities together made a conceptual cluster diagram as showed in the figure below.

Technical suppliers including ICT

Logistics

Schiphol & Rotterdam

SeedProducer

Grower

Auction

Wholesale trade

Exporter

Florist or retailer

Consumer

Universities & (higher) education

Business services

Government

Figure: Conceptual cluster diagram of the Dutch Flower Industry

To emphasize the working of this cluster some quotes: The power of the Dutch Flower Industry is the fact that relative small companies specialized in a few elements of the value chain are working together. The power of the Dutch Flower Industry is a fine woven construction with very specialized growers and the ability to bundle this into a broad assortment. Our core competence is the ability to offer a broad assortment, every day fresh, with quality, with an acceptable price and with the guarantee that appointments will be realized. Having their own specialized core competencies there is a strong need to cooperate; without that there is no continuation.

Several interviewees mentioned important differences between the chains of flowers and pot plants. Most important difference is the fact that a flower after being cut, losses value of 15% every day in case not delivered to the customer. So especially in the flower chains speed is very essential. A second mentioned difference is the fact that consumers normally buy several flowers, also as bouquet, whereas pot plants are sold piece for piece, most of the time in a pot. A third difference is the function of the retailer. In the world of pot plants the role of the garden centers and lumberyards is much stronger than in the flower chains. This leads to direct deals between growers and retailers with a much higher volume.

3.2

Position of the Dutch marketplaces

The historical role of a marketplace was to guarantee the growers a good price and turnover knowing that there are a lot of growers and fewer numbers of wholesalers. In this sense it was logical to let these marketplaces been organized as a cooperation owned by the growers. They pay a yearly contribution, have influence on the main decisions of the cooperation and are obliged to use the marketplace for their trade. The traders and logistic companies only pay for their physical appearances at the marketplace and the use of services. All interviewees agree that the Dutch marketplaces still have an important role knowing that there many specialized growers and a fewer number of wholesalers. The core competency of the Dutch marketplaces is transferring the products of specialized growers into a bundled assortment, as one opinion leader said. Flowers and pot plants are auctioned using the trading clock. A growing alternative is the mediation bureau owned by the marketplaces where grower and trader can deal directly. Several interviewees indicated that the function of the marketplaces is under pressure for several reasons. First, the number of growers is decreasing and the remaining companies are scaling-up. This means a more business-driven approach by these companies and a growing desire to get a better position in the external value chains, even to change them. Second, the driving force to get competitive advantages as said by many interviewees is still freshness, quality and variety. This can achieved with strong cost control and cost leadership questioning every element of costs related to the added value. I even check the annual fees for the marketplace and see if it is worthwhile as an entrepreneur said. The Dutch marketplaces say that their main services are pricing (using the auction clock), internal logistics (cross docking) including services like auctions cars etc to enable that process, financial guarantees towards the growers, procurement (buyer to auction, auction to grower) including financial administration, standardization on messages and codes including specifications for ICT-systems, a database with an overview of the flowers and pot plants available, descriptions of levels of quality combined with a trust index. The marketplaces are working on a new system of codes and messages, and on orchestrating more the logistical processes on collecting flowers and pot plants from growers to the marketplaces. We are also thinking about further activities on tracking and tracing, and on supporting growers in their marketing strategy and development of marketing concepts, one interviewee said.

Interviewees have different opinion on the lasting role of the auction clock. It varies from The clock will stay the main way of pricing till Perhaps I will use the clock for products I cannot sell otherwise. There is hardly discussion on the functions on cross docking, financial guarantee, procurement and related administrational services. One interviewee mentioned the need to improve the internal logistics of the marketplaces by organizing the processes in such a way that the auction can be done at standard working hours instate of very early in the morning at very expensive hours. Many interviewees see an important role for the marketplaces to guarantee quality of the products (color and freshness of a flower or pot plant). Also mentioned is the need to guarantee the quality of the financial, logistical and administrative processes, and the partners in the value chains. Several interviewees mentioned strongly the need to create trust and to improve the effectiveness and efficiency of the value chains, inside but mainly outside the Netherlands. Especially when I trade abroad directly to retailers, I need to guarantee the quality of the product and the procedures to be able to create and maintain trust. as an entrepreneur stated. Several interviewees stated that the Dutch auctions should develop towards the role of service provider or as shared service center. These interviewees were not specific in the services they expected from this center in addition to the current situation. They did mentioned a need for more coordination of logistics not only on the collecting but also on the distributing part of the value chain to avoid lorries being half empty, tracking and tracing, handling of complaints and redistribution. One interviewee put the opportunity of a service provider into perspective by mentioning: It could be cheaper to buy these services separate from dedicated companies instate of buying these services from one service provider. Another interviewee put it more mildly by asking for a focus on reduction of costs. Many interviewees see ICT and information as an important role for the Dutch marketplaces. Several interviewees pointed out that the level of ICT at this moment is only at a starting point. One interviewee also argued that the marketplaces should be involved in activities on design of new information systems and other electronic support of the business. He was speaking about a role as partner and not as the leading partner in a consortium. A few interviewees mentioned the fact that the data owned by the marketplaces on supply and demand including the financial and logistical aspects, can be a strategic asset.

3.3

A need for change?

As said before, there is a predicted growth for the Dutch Flower Industry of 45% in the next 10 years. Interviewees have different opinions on the question how to deal with this opportunity. One group argues that the existing value chains and networks organized more efficiently and effectively, can handle this growth. A second group predicts great changes like the disappearance of the marketplaces and/or that of the wholesale trade. A third group uses a more evolutionarily approach at the speed of the ability to adept changes by the customer. They see a change in the position of the marketplaces for example by cutting the combination between auction (information and pricing) and logistics.

More deeply lay the discussion which kind of innovation is needed. The focus of the entrepreneurs is mainly on process and product innovation including experiments on the floating greenhouse, the greenhouse as source of energy and the closed greenhouse. More on an academic level there is a discussion on the need of a complete form of system innovation. It is an attempt of a reorganization of the Dutch Flower Industry (and the Dutch Vegetables Industry) in all aspects including ICT, logistics, value chains and networks, branding, position of the Universities and Education etc. It is an attempt to get ready for the opportunities, to be aware of the threats and it is getting bought in from bigger companies and the Dutch Government. There is a strong tendency to reverse the chain from production-driven towards a more customer-driven. It is a shift, which also changes the balances of power within the value chains as said by many interviewees. The power is moving towards the retailer as main intermediary towards the end-customer. Especially for the pot plants but also for the flowers the role of the florist is decreasing. For the grower it has become important to realize the needs of the customer and therefore be able to think and act considering strongly what is happening further up in the value chain. One interviewee mentioned the possibility of building up a strong position for the Dutch Flower Industry by excellent managing the logistics, ICT and services towards the retail and the customers. A few interviewees argued that there are many advantages to bundle the activities virtual and get more synergy within the Dutch Flower Industry. They emphasis that this will lead to the situation where the Netherlands can provide a complete and international assortment, with an effective logistics, growing possibilities in alternative channels, and with reduction of costs for promotion, trade and transactions. One can see a trend from production and trade on a European scale towards a global scale. What will the Dutch auctions do? Will they use the current strategic knowledge and assets? as one interviewee wondered.

3.4

Possible futures of chains and clusters in the Dutch Flower Industry

The interviews give sight on different opinions about the future of the external value chains of the Dutch Flower Industry in the next 10 years. These opinions can be summarized in three models. Model 1: current situation with the auction clock and mediation Model 1 contents the current situation where the products of specialized growers are crossdocked into a bundled assortment. The auction clock plays an important role in this system. There will be a growing role for mediation fulfilled by the marketplaces. The prediction by some interviewees is that in 2014 60% of the flowers and 10% of the pot plants will pass the clock while 30% of the flowers and 70% of the pot plants will pass the system of mediation. The role of the marketplaces is concentrated on pricing (when using the auction clock), cross docking, logistics within the marketplace, some administrative procedures and guarantees for the growers on price and turnover.

Model 2: direct trade In model 2 the development of direct trade between growers and especially retailers and large shop chains for building material, has moved on. The pot plants are traded together with pots in different colors, style and volume. This means for the growers a strategy of diversification instead of cost leadership, aiming for a higher added value. This will be combined with a strategy of branding to ensure the feeling of quality, variety, style and the guarantee that appointments will be fulfilled. This development seems to be possible only for the bigger growers mainly on pot plants. The volume can be more than predicted for the use of the clock (10%) and of mediation (70%) in 2014 (see model 1). This means that direct trade can scoop the volume of mainly mediation. The role of the marketplaces is in this model not ensured. It depends on their capability of anticipating with their services on the new needs of growers and retailers. Model 3: hubs in Europe or even worldwide In this model the physical and information flow are separated. Using the unique Dutch competencies of matching demand and supply in the chains for flowers and pot plants, and the quality of the Dutch cluster, a network of logistical hubs are being made in Europe and even worldwide. This will make it possible to coordinate the trade independence from the place of demand and production. This production can be done by Dutch companies working in- or outside the Netherlands and also by foreign growers. The current Dutch cluster including breed and grow stays important as foundation and central point of coordination for these hubs. The combination of coordination of information and physical logistics will make it possible to transform the Netherlands on this issue from a logistical potters wheel towards an international service provider. Several interviewees mentioned the quality of the logistical systems as a critical success factor. One interviewee said that it is essential to know in detail the special needs of the local markets. This model will strengthen the position of the Dutch Flower Industry in Europe and will make it possible to widen this model to a global scale. A strong coordination by the Dutch auctions is needed. The mentioned conditions of logistics and knowledge of the local markets is in this global model even stronger. A few interviewees mentioned that in the next five years no international competitor is able to make a transformation like this.

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4.
4.1

Final analyses and conclusions

Judging the mentioned models
Model 1: Current situation The use of ICT and Internet technology in this model will mainly be to enable a more efficient way of doing business. If strategic opportunities also mean achieving competitive advantages by reducing costs, model 1 can be seen as a strategic use of Internet technology. Model 2: Direct trade Several interviewees spoke about the ambition for further integration of the supply systems on the physical flow of flowers and pot plants, information, money and needed services upstream and downstream, internal and external. The end game should be direct and automatic order at the moment an end-customer buys his/hers flower or pot plant at a florist, a retailer or a lumberyard. This order will be placed directly at a big group of growers (with enough economics of scale) and/or trading companies. Needed is a strong upstream and downstream integration between retailers and/or trading companies, and supplying growers. It is quite clear that this way of direct ordering will lower the time of delivery. As said before this is very important knowing that freshness of the flowers and pot plants is one of the most important specifications for the end-customer. To achieve this Internet technology will be a strategic opportunity due to its flexibility and interactivity. Model 3: Hubs In this model there will be a fundamental split up of the physical flow of flowers and pot plants and the information and financial flows. To achieve this and to be sure that there will be enough integration of the different flows, the use of Internet technology is prohibited. In this option there will be a role for the Dutch marketplaces as a trusted third party. Guarantee quality of the products and the players in the networks of flowers and pot plants will be one of the main aspects of this trusted role. One interviewee put this vision into perspective by saying that all this depends at the speed of the ability to adept changes by the customer. From the Dutch marketplaces was stated: We look carefully to the need of the international markets need and wholesale traders. One interviewee mentioned the volume of the different flows as important in the planning of logistic hubs. Several interviewees referred to the present advantages of the well-organized physical transportation of for example roses from Kenya via Schiphol to England. Opportunities to strengthen the international position The current growth of the Dutch Flower Industry is mainly based on model 1 and model 2. These models will help to strengthen the current position as market leader in Europe. To develop even a global position model 3 is the right one with the warning that plugging into B2B virtual markets is not easy (Kambil & van Heck 2002). An initiative like this needs the support of the two largest Dutch auctions, learning from earlier initiatives (Blok e.o. 2003).

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4.2

Further analyses
On ICT Several interviewees mentioned that the level of ICT of the Dutch Flower Industry is at a starting point. There is a growing use of EDI and proposals to implement XML-based EDI. One can argue that this use of electronic exchange is not suitable to the chosen definition of E-business in paragraph 2.3 where the use of Internet and its interactive possibilities are prohibited. There are some Internet applications. Many companies have websites, which can be seen as Web presence (Kalakota & Robinson 2001) or as Brochure ware (Hartman & Sifonis 2000). There are a growing number of Internet applications facilitating transactions. In terms of Venkatrama (1991) one can see that the Dutch Flower Industry is mainly in the evolutionary levels of development of ICT applications with focus on localised exploitation and internal integration. There are initiatives to get external integration, which is still an evolutionary approach. On transaction costs As said before the interviewees give sight on different opinions on the future of value chains of the Dutch Flower Industry and the position of the marketplaces. This diverted future will be made even more diverted by the use of Intern technology which lowers (if managed properly) the transaction costs. Referring to Coase (1937) and to examples from the automobile industry, Klapwijk (2004) argues that there will be a further de-verticalization. Looking to the trends on digitalization and connectivity he predicts grow of flexible business systems and value chains registered by mainly virtual companies. This opinion suits with predictions of several interviewees that in the next decade there will be may (also virtual) ways of doing business along the external value chain depending on size and capability of the grower, services of the marketplaces and needs on the demand side. On information and knowledge as strategic asset Adding information, connectivity and knowledge to it can extend the concept of supply chain management. See Rayport & Sviokla (1995) where they focus on creating value by a sequence of five activities: gathering, organizing, selecting, synthesizing and distributing information. To do so, a clever use is needed of the existing data on the match of demand and supply, in combination with a specific knowledge of the information needs of growers, traders, retailers, florists etc. This can be seen as a really strategic opportunity for the Dutch marketplaces with their data and knowledge about the match of supply and demand. On clustering and E-business There seems to be little literature on the impact of E-business on clusters and on the balance between location (see Location matters Porter & Stern 2001) and the virtual aspects of Internet (see Exploiting the virtual value chain, Rayport & Sviokla 1995). The business case of Dell (see for example Fortune, March 2005) and The Internet Galaxy (Castells 2001) give sight on a concept where a strong local position and networks can be combined with or even can be prohibited for, a strong position in the virtual business world.

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At this moment the concerns on the future organization of the Dutch clusters are mainly concentrated in getting enough added value per square metres. This challenge directly influences the strategy of several companies. One company for example changed from production towards trade while a second one is changing from production towards seed grower. There are companies running and starting up new production plants in- and outside the Netherlands. One element in the current situation will probably be of great importance for the further development of the Dutch cluster in the balance between the physical and virtual business world. It is the role of the Dutch marketplaces as meeting point or coffee house to check out news and trends, as described by several interviewees.

4.3

Conclusions
The Dutch Flower Industry is the only Dutch diamond as mentioned in Porter (1990). It is a strong and fine woven cluster with very specialized growers and the ability to bundle these into a broad assortment. The position of the Dutch marketplaces is traditional based on pricing and financial guarantees for growers and expending into other services. More services seem to be needed. There is no communion opinion on the need to changes the way the external chains are organized now. All distillated models gives sight on the strategic opportunities of E-business differentiated from cost saving (model 1, current use of auction clock and mediation), integrating of internal value chains towards e-supply chains (model 2, direct trade) till creating virtual marketplaces (model 3, hubs in Europe or even worldwide). To strengthen the position of market leader a development towards model 3 in combination with 1 and 2 seems to be the right strategy. The level of ICT needed for that needs improvement strongly. In all models the use of information about the match between supply and demand can be a strategic opportunity for the Dutch marketplaces. To do so, a clever use is needed of the existing data on the match of demand and supply, in combination with a specific knowledge of the information needs of growers, traders, retailers, florists etc. It is an E-business model based on knowledge and enabling knowledge networks. Looking to the growing possibilities of digitalization and connectivity and the impact of Ebusiness on transaction costs one can predict a grow of flexible business systems and value chains registered by mainly virtual companies. This opinion suits with predictions of several interviewees that in the next decade there will be several many of doing business along the value chain depending on size and capability of the grower, services of the marketplaces and needs on the demand side. It is not clear what the impact will be of these developments on the physical structure of the clusters. From literature one can conclude that a strong local position and networks can be combined with or even can be prohibited for, a strong position in the virtual business world. The role of the Dutch marketplaces as meeting point or coffee house will stay an important aspect in the balance between the physical and virtual business world. As one interviewee stated: It is in the DNA of our cluster to act in a flexible and diverted world.

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