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THE DUTCH FLOWER CLUSTER

GROUP 2 | AKSHAY | ANUJ | APARNA | ARJUN | PRADNYA


Netherlands and Floriculture
In 2009, Netherlands was the 22
nd
largest economy in this world with the ninth highest GDP per capita
which is much above the EU average
The logistic network in Netherlands is very extensive and the govt. invests heavily towards it
Floriculture contributes to 35% of their agriculture exports and formed a $ 16.7 billion sales revenue.
This industry focussed on delivering variety, colour, quality, texture and longevity for the flowers they
grow
Special process were involved in the harvesting, grading, packing and transportation of these flowers
The temperature control was an integral part of the postharvest supply chain
Transportation overseas ranged from 60-90% of the total cost to produce the flower
Germany, UK, USA and France formed the major importers of flowers
Evolution of Dutch Flower Cluster
1900-1920:
The first
flower trade
organization,
the Dutch
Horticulture
Council was
established
1923-1960: Bulb
inspection
service (BKD)
was gradually
established to
inspect the
flowers
1960: Large
number of auction
houses opened up
1970: Mergers of
auction houses
2009: Only two
auction houses
left - Plantation
and Flora Holland
Porters Diamond of National Advantage (1)
Factor Conditions
Geographic location & climate
Loamy soil, temperate climate,
huge natural gas reservoir,
waterways to big cities
High labour productivity of $53 per
employee per hour with low
unemployment percentage (3.7%)
Extensive logistics network with
heavy investment on transport
systems (6% of GDP)
No significant trade or investment
barriers
Demand Conditions
Netherlands had strong impulse
purchases of cut flower
50% flowers are bought from
florist
Prices are determined by rarity,
quality and season
Third highest per capita
consumption of cut flowers in the
world ( Porter says that nation will
build competitive advantage if it
has high demand in the domestic
market)
Porters Diamond of National Advantage (2)
Related and Supporting Industries
Netherlands was the world leader in
the development and supply of
floriculture propagation material
It is home to world class plant breeding
organisation that helped in continued
marketing of new varieties
Twenty Dutch companies were
specialised builders of greenhouse with
total revenue of 350 million
Development of capital intensive
harvesting technologies in The
Netherlands
Place to auction the cut flowers selling
44.8 million flowers daily
Firm Strategy, Structure and Rivalry
Strict regulation of environmental
impact
Competitive auction process with four
major auction houses sharing the
complete pie of auction, which later
consolidated into two- Plantion &
FloraHolland
Sustaining International Leadership
Flower Cluster Value Chain:-
3770 growers (2007)
competing on variety,
product quality, price

Use of Greenhouses to
counter marked seasonality

Increasing focus on value
addition-marketing, sales.

Members of Dutch Floral
Council

LTO run programs for skill
development, MPS
certifications

Government pressure to
reduce environmental
impact
World Leader in
development & supply of
floriculture propagation
material, new breed seeds

Support infrastructure
CPVO, Rabobank,
AgroEnergy

20 specialized
greenhouse builders with
80% of world market share

Govt. aid, innovations in
energy efficiency
conserve surplus heat, use
of biofuels

Energy costs ~ 30% of
final cost
Plantion & FloraHolland
traded 20,000 varieties- 44.8
mn flowers sold

Roses, Chrysanthemums,
Tulips & Lilacs - popular

80% of Dutch trade & 60%
of international trade

Use of Automated
processes random quality
checks for QA

Concept of the auction
Clock that ensured higher
sales price

Sales tracking with ICT &
EDI, Flower Access
Largest share of mark up-
50% of final price

Florists, Retailers,
Supermarkets

Export companies- logistics

Alternate means of
transport- refrigerated
trucks; trains & ships, air
transport

Strict inspection &
Regulation standards

2009- unwillingness to
carry inventory, Demand for
JIT, fall in order sizes

SUPPLIERS GROWERS AUCTIONS RETAILERS
Effect of Innovations on Porters Diamond
Firm Structure
& Strategy
Demand
Conditions
Related &
Supporting
Industries
Factor
Conditions
As a global supplier
Logistics Network
Skills & Technology
Reason for Internationalization:
Netherlands Competitiveness Ranking
In Favour:
Indicator Ranking
Logistical Infrastructure 8
Communication Infrastructure 3
Quality of Scientific Research 9
Indicator Ranking
Pay and Productivity 82
Strength of Investor Protection 86
Flexibility of Employment 84
Against:
The points against Netherlands made it to internationalize the production
Profit Analysis
Netherlands Kenya Ecuador Colombia
Revenue
25.6 29.9 36.3 33.7
Cost
24.1 23.8 28.9 31.3
Profit
1.5 6.1 7.4 2.4
Carnations:
Roses:
Netherlands Kenya Ecuador Colombia
Revenue
134.9 127.5 168.6 188.6
Cost
127.8 104 156.2 168.3
Profit
7.1 23.5 12.4 20.3
0
5
10
15
20
25
30
35
Netherlands Kenya Colombia Ecuador
Seed
Transport
Labour
Energy
0
20
40
60
80
100
120
140
160
180
Netherlands Kenya Colombia Ecuador
Seed
Transport
Labour
Energy
South America
Colombia:
Dutch companies have local
subsidiary
Provide irrigation, cutting
equipment, seeds, etc
Heavily involved in logistics
FloraHolland had created a
company FH Services Colombia
Ltd.

Ecuador:
Four of the largest farms are
dutch owned
Dutch subsidiary provide small
plants, seeds, etc
FloraHolland opened an office in
Quito
Provide information, trade
facilitation and logistics support
Africa & Asia
Kenya:
Flow of FDIs from Dutch investors
70% of cut flower production owned
by Dutch growers
Dutch company Van Putten
established cooling facilities
Local office of FloraHolland provide
exporting, logistics and other
support
China:
Dutch company Van den Berg Roses
developed infrastructure
Also provided fertilization, energy,
heating, and software skills
Dutch companies in joint ventures
with Chinese companies
FloraHolland have 5% share in
flower auction process in China
China: Opportunity or Threat
Opportunity
Favorable climatic conditions
Largest cultivated area for cut
flowers
Good presence of Dutch
companies providing
technological support
Dependency on Netherlands
for plant stock
Japan is a major export
destination
Threats
No proper mechanisms for
quality control
High levels of piracy of plant
varieties
With dependency on Netherlands and large presence of Dutch
Companies, China is an opportunity for Netherlands
FloraHollands Dilemma
Focus on high value services Vs local production

Continue production of Tulip and Anthurium to maintain its
dominance (Constitute 100% of worldwide export volume)

According to theory of relative advantage, Netherlands can
reduce production of roses while maintaining tulip dominance

Can reduce production of Carnation as Colombia has ideal
growing conditions producing

Exploit the extra-ordinary network of logistics it has developed
in other countries, as knowledge & collective learning are the
clusters key advantages

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