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Beverly Morgan - RFCD Conference @ Arthur Lok Jack GSB - November 2011
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Regional Forum on Cluster Development in the Caribbean:
Opportunities for Business
Cluster Development in Agribusiness & Tourism in Jamaica
Beverley MorganThe Competitiveness Company
November, 2011
Competitiveness: Context for Clusters
• Competitiveness analysis covers the range of actions through which nations and firms “manage the totality of their competencies to achieve prosperity or profit” (Garelli, Top Class Competitors, Wiley, 2006, p.3).
• Productivity key component of competitiveness- determines “how much firms or nations produce with limited resources”
• Much more to competitiveness than productivity alone. ‘Competitiveness is also about changing mindsets: looking at the world, nations, firms, and people from a different perspective” (ibid, p. 21).
Every morning in on the Masai Mara in Kenya, a zebra awakens. She has only one thought: To be able to run faster than the fastest lion. If she cannot, then she will be eaten.
Every morning on the Masai Mara in Kenya a lion awakens. He has only one thought: To be able to run faster than the slowest zebra. If not, he will be hungry and he will not be able to feed his pride.
It is enough to know that with the rising of the sun, you must run. And you must run faster than you did yesterday or you will be eaten.
Why Clusters Matter
• Firms often possess competitive advantage because national institutions that surround them are better suited for organising industrial activity in their particular sector of the economy (Porter, M, On Competition, Harvard University Press,1998)
• “Firms do not create all the resources, infrastructure, and knowledge that are required to, make a product by themselves. If one considers the variety of supporting organizations associated with a particular industry, it becomes apparent that competency-enhancing or – destroying innovations can occur not only at the firm level but also at the level of what analysts have called the industrial district...(Murmann, J.P., Knowledge & Competitive Advantage, Cambridge University Press, 2003, p. 63).
The Challenge for the Caribbean
• In the context of the Caribbean:
Can the focus on cluster development alter the competitive space within which micro, small and medium-sized enterprises operate, thereby making them more competitive?
Developed vs. Developing
Country Dichotomy• Porter:
– Clusters in developing economies essentially less rich in connections
– Involving fewer participants – More limited communications – Less developed linkages between institutions
and firms.
– On the contrary• clusters in developed economies involve “a
dense mesh of continually evolving relationships and linkages…”
The Juke Box on The CornerCriteria Scoring (Points)
Willingness to embrace new ideas w/supporting resources Low = 1-3 points Medium = 4-6 pts High = 7-10 pts
Potential to be internationally competitive Low = 1-3 points Medium = 4-6 pts High = 7-10 pts
Employment potential and GDP contribution Low = 1-3 points Medium = 4-6 pts High = 7-10 pts
Mass (no#) of qualified firms Low = 1-3 points Medium = 4-6 pts High = 7-10 pts
Potential to motivate other potential clusters Low = 1-3 points Medium = 4-6 pts High = 7-10 pts
Macro barriers to success High = 1-3 points Medium = 4-6 pts Low = 7-10 pts
Cluster Selection Results
Cluster Results
Agribusiness High Overall Score
Tourism High Overall Score
Entertainment & Culture Medium Overall Score
Shipping and Berthing Medium Overall Score
v
The Agribusiness and Tourism clusters posted high overall scores with generally comparable results across all of the criteria.
The Shipping and Entertainment clusters both posted medium overall scores but their results differed significantly across the criteria.
Phased Approach
Facilitator-ledPhase 0
Engage
Phase 1Mobilise
Phase 3Institutionalise
Phase 2Execute
1. Revalidate Objectives
2.Engage Others
3.Search for Insight
4.Select & agree winning strategies
5. Commit to Act
•Define and engage
•Evaluate competitiveness potential (define competitiveness objectives)
•Get authorisation / coordination / encouragement to proceed
•Communicate with public and coordinate participants
•Execute important competitiveness-building initiatives
•Regular performance monitoring and active change management
•Standardise new competitive practices and diffuse broadly
•Reconfigure operational systems, supporting organizations to sustain new standards
•Leaders & members reflect to consolidate learning, internalise guiding principles, set priorities for future
What Were People Thinking? Mental Models Survey Results
Respondents considered the overall business environment in Jamaica to be extremely challenging. Government support for the private sector and the level of trust between the two was considered to be amongst the worst
in the world.
Amongst the best in the world (1 to 3) Average (0) Amongst the worst in the world (-3 to -1)
Rate Jamaica’s current levels of each source of prosperity ranging from “among the best in the world” to “among the worst in the world”
Generally speaking, would you say that most people in your country can be trusted, or that you can't be too careful in dealing with people?
A significant majority of respondents stated that you can’t be too careful in dealing with fellow Jamaicans. JCCP
Mental Models Survey Results
Phase I Mobilisation efforts include:
Meetings with over 300 companies 15 workshops with the IAC members Public presentations given to Associations and Chambers of Commerce in Kingston,
Mandeville, Port Antonio, Ocho Rios, and Montego Bay Formal meetings held with dozens of chamber heads, industry association presidents,
and large company CEOs Formal meetings held with Senior Government Ministers Newspaper articles voice competitiveness issues nationally Radio interviews on clusters and competitiveness
Process Report
Phase I:
MobilisePhase II:
ExecuteThe
National Summit
The National Summit marked a transition point in the project. The JCCP moved forward from mobilisation phase to execution phase:
(Facilitator – Led)
Agribusiness Cluster Process
THREE LEVELS OF EFFORT & ACTIVITY
1. Full Session: Agribusiness Sector A. Learning Environment B. Overarching strategy and direction-setting C. Cross-cutting initiatives D. Sub-group initiative updates & cross-fertilization E. One new strategy tool per session F. Initially, bi-weekly, then monthly
2. Sub-groups A. Marketing, Sales Channels, Packaging, Standards, Supply B. Analysis of each opportunity area C. Initiatives to fill gap/meet opportunity D. Meetings as needed: initially, less frequently, increasing during
implementation
3. Individual Company Projects
A. Coaching as requested (by senior experts & cluster facilitators)
B. Open to all cluster participants
Agribusiness Cluster Production Supply Working Group (Groups Work with Facilitator Support)
Commodity Jamaican Production Practices Best International Practices
Yield(kg/ha)
Cost ofproduction
Volumeproduced
Yield(kg/ha)
Cost ofproductio
n
Volume produced
Country Red Pepper
Scotch Bonnet Pepper
11364 J$35.2 /kgJ$22.12
300 t 9000 J$16.1 /kgJ$15.40
N/A
Ginger 8-13t J$0.48/lb 295t 48.3t 15 500 t
Tamarind ? N/A N/A 960 N/A 257 t
Escallion 16845 21.44/kg 13761 t 31524 N/A N/A
Onion J$31.86/kg 788t
Pimento 1500 N/A 1485 t 800 N/A 8012 t
Thyme 5896 J$93 /kg 1510 t
Quantities in pounds/acres (kg/ha) Data represent averages collected during past 5-10 years
Almost all packaging inputs are imported (Trinidad, Venezuela, USA, UK):
Delivery from suppliers of packaging inputs inconsistent. Suppliers require 6 weeks to process and deliver orders, but supplies are rarely received on time. This scenario happens for various packaging inputs at different times.
Because of the need to ensure against any hitch in production and to reduce the cost of the imported inputs it is necessary to carry a large inventory of these items, this ties up working capital.
Import costs would be reduced if container space could be shared, however this degree of cooperation has proven rare.
Packaging related inputs account for 40% to 66% of total production costs.
Bureau of Standards is the key agency for product packaging and labeling.
Agribusiness: Packaging Working Group
8.2¢ 7.4¢
2.1¢ 1.6¢
26%
Real Results for Real Firms
Consolidated purchasing of glass bottles:
12%
The avg. cluster member realised overall cost savings of some 10%.
Greater reliability of supply resulted in improved customer service and reduced lead times as inventory now located in
Kingston not off-island.
Per Unit Cost (5oz bottle):
Shipping/storage/transport:
Finance:
Individual Consolidated
14%
24%
11%
Cost Savings
Distributor
Sau
ce M
an
ufa
ctu
rers
Glass
Manufacturer
Cluster
Initiatives: Packaging
Glass bottle Consolidated Purchasing Program:
JEA/EXIM Financing
Reduced pricing ~ 10%
Handling equipment
Technical Support
120 day financing facility
Brokering services
Trucking services
Warehousing facilities
Lower costs (unit & service)
Extended terms (N60 days)
Greater reliability of supply
Framework for consolidated purchases of other inputs (closures)
By consolidating their purchases cluster members shifted the balance of power away from suppliers and realized significant improvements in pricing, service levels, and payment terms.
THE FAMOUS BOTTLE INITIATIVE
THE PROCESS IDENTIFIED THE ISSUE
THE DATA WAS GATHERED
THE SOLUTIONPROPOSED
THE INITIATIVE UNDERTAKEN
THE RESULTS ASSESSED
Tourism Cluster: Data Analysis for Informed Decision-Making (Process)
Source: CTO, Ireland Tourist Board, JTB
Average spend per day in Select Destinations in 2000
The metric to watch is not solely arrivals but a combination of other factors that makes each firm (attraction, tour operator, restaurateur, hotelier) more profitable. Jamaica ranks amongst the lowest on average spend per day.
96.10 92.30
275.00
158.60 160.08
0.00
50.00
100.00
150.00
200.00
250.00
300.00
Cuba Jamaica Turks andCaicos
Hawaii Ireland
Birth of a New Group & Segment
Working groups created 5, 7 and 10 day experiences that travelers can choose from to ‘Explore, Taste and Feel the Vibes’ of Jamaica. Many Tours in collaboration with Sauces & Spices and Entertainment Clusters
Roots Jamaica Taste of Jamaica
• Food
• Local Theatre
• Art exhibitions
• Cultural shows
• ATV
• Maroon Towns
• Dance Hall sessions
• Rum Bars
• Fish feeds
• Markets
• Trench Town Culture Yard
• Round Robin in Towns on Friday nights
• Dominoes
Jamaica Naturally• Waterfalls
• Hiking Trails
• Natural Parks
• Caving
• River rafting
• Bird watching
Unique Jamaica – Explore it, Taste it, Feel the Vibes
Unique Jamaica (Tourism)The Power of
CollaborationBLCF GrantCollaboration within
the cluster:o Development of Bed &
Breakfast SegmentAcross clusters:o Entertainmento Agribusiness
Sauces & Spices (Agribusiness)Joint Purchasing of
BottlesSharing of Shelf SpaceSharing of Market
ContactsMarketing
CollaborationHigh six figure order
for 1 firm (ongoing)
What Was Achieved? Cluster Level
• More than 300 firms participated in the programme
• Approximately 200 organisations (over 150 firms) actively participated in the three selected clusters
• While the bulk of firms were micro, small and medium-sized enterprises (SMEs), larger firms also participated actively in cluster activities.
[
Outcomes: Reach
Best Practices
What Did We Learn that is Generalisable?
Imperative of Transparent ProcessesImportance of Rigorous Methodologies for SelectionNeed for Cluster Diagnostics to Ground Choice of InitiativesNeed to be able to build consensus on basis of data Protocols around respectful interpersonal interactionsProcess Must be Private Sector - Led and DrivenImportance of Cluster Facilitators with Skills to both Analyse and
FacilitateImportance of Clustering as Learning Process – at the end of the
day, participants are enriched and enabled to practiseClear & Meaningful ProcessesGood Cluster Leaders Make Enormous DifferenceGood Public – Private Partnerships necessary
Lessons Learned