The Dutch flower cluster is about the growing flower industry and how The Netherlands has been

the top player in this industry. It also talks about the various aspects of the industry like production, supply, auction and logistics. Though the Dutch companies have been successfully leading the business from quite a while now, there is a great competition coming up from countries like Colombia, Ecuador, Kenya and China. This is due to the fact the natural conditions in these countries are more favourable than in The Netherlands. Dutch companies have not only been leaders in production but have also in breeding and adding value to the cut flower production. They have been offering their services to aforementioned countries as well. Now the main decision on hand is to whether to continue with production and remain in competition or to stop growing and focus on value added services. In The Netherlands, a major portion of the production is done in greenhouse farms. Other countries in competition do not have to bear high operation cost of such farms as the climatic conditions are more favourable and fewer resources are devoted to such farms. These countries have relatively warmer weather conditions because they are geographically close to the equator. However some of them lack in skilled labour, some in infrastructure and some of them do not have the logistic expertise.

In recent years the area under the flower production in The Netherlands has decreased significantly, the retailers are bypassing the Dutch auction companies and directly contacting growers and finally there has been more preference for just-in time deliveries rather than keeping inventories. These reasons combined have been making the Dutch flower industry uncertain. In addition it is essential to consider the rising costs of the resources. One of the main drivers of this industry is the efficient transportation. As the cost of natural gas has been increasing rapidly in the recent years, the pressure on the industry has risen to explore alternative ways of transporting flowers. The main consumers of the domestic gas in The Netherlands are the greenhouse farms accounting to 10% of the total gas consumption. Another interesting fact here is that oil and gas together contribute to 9.4% of the Dutch export revenue. So it seems wise to continue the export of oil and gas and make a fortune than to consume these natural resources for high cost production. At the same time it will not be feasible to stop the production and move out of competition. There are several pros of continuing the business the way it is at the time of the case. The Netherlands itself is a big consumer of flowers. Also there were 693 companies involved in the export of the production as of 2008, generating millions of dollars contributing a big chunk towards GDP of The Netherlands. Dutch companies have to invest more in their superior DNA technology to introduce unique breeds of flowers and also take initiatives to cut costs in their transport and logistics cost. Dutch

firms can make use of government subsidies, tax credits and FDIs hosted by Dutch banks to offset the cons of continuing local business. In addition to the countries in competition there is huge potential in North America and the emerging markets of Asia. The Dutch flower companies can tap these new markets by starting up new joint ventures, partnering with the already operating companies and making research tie-ups with the universities in these countries. In small growing

countries like Spain, Israel, Ethiopia, Zimbabwe and Japan, there is lack of knowledge and infrastructure resulting in lower yield and low quality production. However they have got cheap labour and better climatic conditions suitable for production. We could use our experience to offer services to make the system more efficient in these countries. These services may include providing greenhouse construction expertise and fertilization techniques, developing and selling patent seeds, water supply

methodologies, energy and heating supply systems, computer and software skills and improving logistics and infrastructure. Another initiative could be sending research students on exchange. This will benefit the cultural exchange and relationships between the countries. More programs like Grow2gether should be created, in order to encourage collaborative efforts of the countries involved. These services are already been provided in some of the countries in competition, however there are vast potential markets to which these could be sold. Also according

to David Ricardos trade theory of comparative advantage, the production should be done where the maximum output can be attained most efficiently. There are several factors that need to be considered for operating in foreign markets. One of the main factors would be the environmental pressure on the industry due to the carbon footprint that has been building up because of the extensive use of chemicals agents and the fertilizers. Dutch companies need to work together with the host countries to find more alternate and less harmful ways to grow flowers. Another issue to deal in foreign countries is the piracy, as stated in the case, 80% of a certain type of flower in China came from copies. Strict patent laws need to be in place to keep the research going and to maintain the quality of production. Considering all the factors, it is suggested that Dutch firms should keep operating in the local market, feeding their home country and the neighbouring countries in Europe, by bringing the production costs down. At the same time it should take the opportunity to invest in the huge potential flower markets in North America and Asia by providing logistical support and technical expertise.