Trading Environment on the Flower Industry - Case Study Example

International Business: Competing in the Global Marketplace - Flowers in Holland - Table of Contents I. Introduction ………………………………………………………………. 3 II. International Success of Holland within the Global Floricultural Industry …………………………………………….. 3 a. Porter’s “Diamond” on the National Competitive Advantage of Holland in the Floricultural Industry .……… 4 a.1 Firm Strategy, Structure, & Rivalry …………………… 4 a.2 Demand Conditions ……………………………………. 4 a.3 Related & Supporting Industries ……………………… 5 a.4 Factor Conditions ………………………………………. 6 b. Impact of Significant Changes in the Trading Environment on the Flower Industry ……………… 6 III. New Player in Holland’s Floricultural Industry …………………………. 7 a. Business Opportunity and Barriers to Entry of a New Player that Plans to Penetrate the Floricultural Industry in Holland …………..…………………. 7 b. Proposed Entry Strategy to Enable the New Player to Effectively Penetrate the Industry …………………………… 7 IV. Impact of Cultural and Ethical Factors in Shaping the Involvement of a New Business Player ………………………………… 8 V. Recommended Marketing Mix ………………………………………….. 8 VI. Conclusion ………………………………………………………………… 9 Appendix I – Porter’s Diamond of National Advantage ……………………… 10 References ………………………………………………………………………… 11 Introduction The Netherlands also known as Holland is considered the leader in floricultural industry within the global markets. In the process of discussing the international success of Holland within the global floricultural industry, Porter’s “Diamond” of National Advantages will be used in determining its national competitive advantage followed by discussing the impact of significant changes in the trading environment on the flower industry. Eventually, the business opportunity and barriers to entry of a new player that plans to penetrate the flower industry in Holland will be assessed. To Black Well (UK) to effectively penetrate the business, a proposed entry strategy will be provided in the study. For the last part of the study, the impact of cultural and ethical factors in shaping the involvement of Black Well will be tackled. Prior to conclusion, recommendation on how Black Well should standardise its marketing mix within Holland’s floricultural industry will be provided. International Success of Holland within the Global Floricultural Industry The strong support of Holland government in the development of floricultural activities is an important success factor. As a way of encouraging floricultural breeders to develop new variety of plants, the government protects them under the intellectual property rights to enable them to generate more income out of exclusively selling a specific plant variety (Ministry of Agriculture, Nature and Food Quality, 2008). Aside from protecting the players within the industry, Holland government also supports the development of more effective greenhouses by sponsoring the trials of newly innovated greenhouse that enables the growers to make use of surplus heat during summer which will be consumed as heat during winter or convert the heat into electricity (Alter, 2006). Porter’s “Diamond” on the National Competitive Advantage of Holland in the Floricultural Industry Firm Strategy, Structure, & Rivalry Since there is significantly large number of players within the Holland’s floricultural industry, the business players within the industry are experiencing tight competition in both domestic and international markets. For this reason, each business player need to pay close attention on having a tight quality control over cut and potted flowers to enable them to maintain a close business relationship with its domestic and global distributors and regular customers. Aside from giving importance with the tight quality control on horticultural production, each business player within the industry also need to continuously innovate new technology that will enable them to effectively produce their specialized floral species with less operational cost. (Ministry of Agriculture, Nature and Food Quality, 2008; Post, 2008) Basically, the use of combined traditional and high-tech production methods will enable each business owner to operate the business using fewer human resouces. In line with this matter, investment on greenhouse enables them to continuously produce large volume of finish products all year round despite the significant changes in climate or weather condition. Demand Conditions There is a significantly large demand for Holland’s floricultural products. Each year, the country export as much as €5 billion worth of flora to its neighbouring countries including Germany, France, Britain, Italy, Eastern Europe, and Russia as the biggest market. (Verjee, 2006) This makes the Holland one of the most competitive business players in horticultural industry within the global markets. The fact that Holland has a stable demand from its nearby countries as well as in far away countries like in Asia and the United States reveals that floricultural industry in Holland is capable of determining and recognizing the specific needs of its target market as compared to its rival competitors within the global markets. Related & Supporting Industries Since Holland is one of the biggest exporters of floricultural products all over the world, the government strongly promotes a closely interconnected supply chains for floricultural industry (Ministry of Agriculture, Nature and Food Quality, 2008). Among the active members of the supply chain includes not only the growers and breeders but also the domestic and international market distributors and traders. Considering that the supply chain of floricultural industry in Holland is closely interconnected with one another, there is a higher tendency for the industry to meet the global market demands effectively (Ministry of Agriculture, Nature and Food Quality, 2008). As a result of close connection between the manufacturers of high-tech equipments and the growers, manufacturers are able to build and design equipments based on the specific needs of each growers. Factor Conditions Among the factor conditions that contribute to the success of floricultural activities in Holland includes the use of continuously improved flower cultivating technology (Verjee, 2006), the presence of highly skilled human resources, and a stable transportation and network distribution throughout the different countries around the world. Each year, Holland is able to produce 1,170 new floral varieties by using its traditional and high-tech breeding techniques (Ministry of Agriculture, Nature and Food Quality, 2008). Since Holland is capable of producing different variety of flowers, plants, and trees, the country is able to open new business opportunities all year round. Holland researchers who are working within floricultural industry is not only studying new ways to minimize the need to hire excessive number of man power but also develop new ways to allow breeders to grow plants using less chemicals and energy to make the business more competitive in the global markets (Ministry of Agriculture, Nature and Food Quality, 2008). Through the application of DNA-technology, the length of time needed in breeding and propagating new plants is shortened. With regards to penetrating the world market, developing a reliable transportation and distribution network is crucial in enabling the local businesses to reach its target markets. (Batt, 2000) Impact of Significant Changes in the Trading Environment on the Flower Industry Since Holland is heavily dependent on exporting floricultural products, most of its business players are using on-line trading to enable them to capture more business opportunities in the global markets (Holland Flowers, 2008; Michelle, 2008). New Player in Holland’s Flower Industry Business Opportunity and Barriers to Entry of a New Player that Plans to Penetrate the Floricultural Industry in Holland There is a promising business opportunity in floricultural industry given that the world demand for flowers is still increasing over time. (Wijnands, 2005: p. 66) Aside from the fact that floricultural business in Holland is already saturated, there are some barriers to entry that a new player has to consider when planning to penetrate the floricultural industry in Holland. Considering that Black Well in UK is planning to penetrate the floricultural industry in Holland, Black Well may experience operational problems since expertise in breeding and growing a different varieties of plants is an important part of making the business successful. Aside from the need to have expertise in growing flowers, Black Well will have to invest large amount of money for the needed equipments and the building of greenhouse. Since Holland have winter season, expensive greenhouse is essential in keeping the business operational all year round. Proposed Entry Strategy to Enable the New Player to Effectively Penetrate the Industry The best way for Black Well to penetrate floricultural industry in Holland is for the new player to enter into a partnership or a joint venture agreement with a business entity or another person. When choosing a business partner, the new player has to consider whether or not the selected person has the following: (1) expertise in growing plants; (2) knowledgeable on how businesses are conducted within the country; (3) has a good potential market and political connections; and (4) has the financial capacity to invest on the business. Impact of Cultural and Ethical Factors in Shaping the Involvement of a New Business Player Cultural and ethical factors are crucial in shaping the involvement of a new business player in Holland’s floricultural industry. Each nation has its own set of business rules which are greatly influenced by the social, cultural, and political systems within the country (Cable, 1996). Since business culture in UK is different from Holland’s. Black Well should carefully study the common norms and rules when doing business in Holland. Knowing this basic information will enable Black Well to effectively deal with the local suppliers and other related institutions that are crucial to the success of the business. For example: Holland does not allow businesses to employ children who are considered minors. Therefore, it is unethical to hire the minors to do some work for the business. Another good example is the fact that Holland recognizes intellectual property right on the development of new technology or plant species throughout the country. Therefore, the businessman should respect the market rights of these people to avoid facing any forms of legal problems when doing business in Holland. Recommended Marketing Mix Aside from growing conventional flowers like rose and tulips, Black Well should develop and innovate floral species to give them to have competitive advantage over other growers. With regards to pricing, Black Well should be able to sell these products competitively and within the range of global market prices. Basically, the company will be able to offer competitive prices by keeping its operational costs low. Since domestic market for these products is already saturated, Black Well should focus on targeting international markets. This can be done by establishing strong business connections with floral distributors who are based in different countries. Since Black Well will be targeting the global markets, the company should establish their own website to enable prospective floral distributors to communicate with the business managers. At the same time, the website will also be used in promoting and advertising floral products to consumers. Conclusion Floricultural industry in Holland is already saturated. Through continuous innovation, Holland manages to become one of the biggest exporters of floricultural products. The application of Porter’s “Diamond” of National Advantages enables the researcher to effectively determining the national competitive advantages of Holland within the global markets of floricultural industry. To enable Black Well to effectively penetrate the industry, the company should establish a partnership agreement or a joint venture with a qualified business entity or a person who has the knowledge and skills in doing the business. As part of the proposed marketing mix, Black Well should be able to effectively produce traditional flowers and innovate new floral species which will be sold in the global markets at a competitive price. Black Well should also establish a website to enable the company to capture its global target markets aside from enabling them to develop promotional activities to attract floral distributors and customers. *** End *** Appendix I – Porter’s Diamond of National Advantage References: Alter, B. (2006, June 16). Treehugger. Retrieved September 14, 2008, from Dutch Flower Growers Get Greener: http://www.treehugger.com/files/2006/06/dutch_flower_gr_1.php Batt, P. (2000). Strategic lessons to emerge from an analysis of selected flower export nations. Journal of International Food and Agribusiness Marketing , 11(3):41 - 73. Cable, V. (1996). The new trade agenda: Universal rules amid cultural diversity. International Affairs , 72(2):227 - 246. Holland Flowers. (2008). Retrieved September 14, 2008, from http://www.israel-gifts-flowers.com/Holland/index.asp?category_id=0 Michelle. (2008). Retrieved September 14, 2008, from There’s no better day to send a bouquet: http://www.flowersbymichelle.org/ Ministry of Agriculture, Nature and Food Quality. (2008). Retrieved September 13, 2008, from Hooland Floriculture - a High-tech World Player: http://www.netherlands-embassy.org/files/pdf/sierteelt.pdf Post, J. (2008). ICOGO. Retrieved September 13, 2008, from Potted Orchids in the European Union. Vol. 2, No. 1.: http://www.icogo.org/images/ICOGO_Vol_2_No_1_2008_WEB.pdf Verjee, N. (2006, June 3). Times Online. Retrieved September 13, 2008, from Dutch growers seek new form of flower power: http://business.timesonline.co.uk/tol/business/article671086.ece Wijnands, J. (2005). Sustainable International Networks in the Flower Industry. Bridging Empirical findings and Theoretical Approaches. ISHS, Leuven. Read More