The Dutch Sailboat Construction Industry Treading into unknown waters

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Rijksuniversiteit Groningen Page | 1 E.H. van den Brand

The Dutch Sailboat Construction Industry

Treading into unknown waters

Author:

Evert Herman van den Brand

Student Id:

s1270915

Date:

02 February 2007

1st Supervisor University

of Groningen

Mr drs H.A. Ritsema

2nd Supervisor University

of Groningen

Drs D.F.F.R. Maccow

Small Business & Entrepreneurship

International Business

Rijksuniversiteit Groningen

(University of Groningen)

Faculteit Bedrijfskunde

(Faculty of Management and Organization)

Landleven 5

9747 AD Groningen

The Netherlands

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Foreword

Before you lies the thesis “The Dutch Sailboat Construction Industry. Treading into unknown waters”. This thesis represents the closure of my Management and Organization studies at the University of Groningen. My specializations being; Small Business & Entrepreneurship and International Business. In search for a research topic I concluded that it had to be something in which my interest would not fade during the research. My passion for sailing and results from previous research for writing a business plan for a yacht designer provided the answer. It had become clear to me that the sailboat construction industry was lagging behind internationally. After the initial research Australia and New Zealand seemed to have a much better performance and fortunately I could create opportunities to go there for a combination of research and traveling. After having spend five months in Australia and two in New Zealand I returned to the Netherlands to finish this thesis. Identifying possibilities for the Dutch sailboat construction industry, using the gained international experience and knowledge, as my central aim.

Before venturing further into the topic of this thesis I would like to thank certain individuals who have helped making this research possible. First of all I would like to present my gratitude towards the people who have taken the time to either answer my questions in the interviews or were willing to fill in the questionnaires. They have provided me with most valuable information which is used intensively in this thesis. Secondly I would like to thank both my supervisors from the University of Groningen. Mr. Ritsema for his guidance and inspiring me to think creatively, even taking the time to meet in Melbourne for a talk about the proceedings. Mr. Maccow for his input during this research and previous instances over te course of my studies.

Last but not least I owe my parents, family and friends gratitude for their emotional, and sometimes financial support. Without them I could never have accomplished to write this thesis.

I would like to wish you as much enjoyment reading this thesis as I have had writing it. Erik van den Brand

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Management Summary

Traditionally, SMEs have been known to lack the resources to reach benefits of economies of scale and scope. Large firms which can achieve these benefits through the use of their resources, standardize production and dominate the markets leading to a demise of SMEs and forcing the surviving ones into niches…. Sounds familiar? It does to the Sailboat Construction Industry (SCI) of the Netherlands. How can they ever survive amidst huge international sailboat production plants while being Calimero?

The Dutch SCI is highly fragmented and consists of many Small & Medium sized Enterprises. Their focus is the custom-end segment of the market and is slowly losing the battle. How can it be then, that SCIs in some other countries seem to prosper? This inspired me to look for an answer to the main research question; What can the Dutch sailboat construction SMEs learn from SMEs operating in foreign industries in order to increase their competitiveness in an international sailboat

construction industry? Based on Porter’s national competitive advantage theory which identifies innovation and clustering as sources for the advantage, I have selected the variables needed to analyze the industries. These variables could be sub-divided under the following headings; Competition, Cooperation, Demand and Government. For the selection of foreign industries the choice was made to search for comparable SCI structures and their performance on innovation. New Zealand and Australia came out on top and were, thus, selected for further analysis.

The first important finding is that innovation in the Dutch SCI is poor, the conventional demand and lack of skilled labor for innovative projects keeps product and process innovation low. Additionally, cooperation within the industry is hard to find although the cooperative mindset and friendly inter-firm attitudes are peaking around the corner. The second finding is that the Australian SCI does not outperform the Dutch on either innovation or clustering and is also losing the battle against the European and American serial production yachts. New Zealand however has achieved to implement an industrial district which defines as; Concentration of firms involved in interdependent production processes, often in the same industry or industry segment, that are embedded in the local community and delimited by daily travel to work.’ It is one of the highest forms of clustering regarding the level of cooperation resulting in an innovation level which is amongst the highest in the world. The super yacht sector, the marine industry association and the government contributed very favorable circumstances on which the SCI had the change to thrive. The highly skilled employees are said to be the cornerstone of the New Zealand marine industry.

Based on comparison of the countries I suggest the following recommendations for the Dutch SCI:  The SCI needs to develop a strategic heading

 Cooperation needs to be intensified within the SCI

 Cooperation with and between suppliers, related and supporting industries, government, knowledge institutions and the industry association HISWA needs to be intensified.

 Product and process technologies need to be improved to increase innovation and efficiency.  Comprehensive industry wide adjustment of the educational structure

 Standardization of the SBI code of the water sports industry to increase transparency and reliable economic indicators for the industry.

 Technological, environmental and SME policies need to become transparent  International reputation of the Dutch SCI needs to be improved

 Customer need to be educated on new technologies

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Introduction

For century’s mankind has been using water as a means of transportation and recreation. In the earlier days the main power resource for nautical travel was wind. Although not yet efficient, mankind used this natural resource to get from A to B. The upcoming of the steam engine and later on the fuel engine changed the way of conventional transport, leaving sailing for ‘recreational’ purposes only. Notwithstanding that recreational sailing, and other water sports for that matter, has remained popular.

During centuries some particular countries build the reputation of being water sports-minded. One of the biggest influences on this would of course be the access to water en waterways. Although the countries have a water sports-culture, inhabitants differ from each other in preferences. There are many ways to engage in water sports, for instance, power boating, sailing and waterskiing, just to mention a few. This paper will concentrate on sailing, and to be more precise, on the construction industry of sailboats between 7 and 25 meters.

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List of contents

Foreword ... 2 Management Summary ... 3 Introduction ... 4 List of contents ... 5 Chapter 1 Background ... 8

1.1 Introduction in Marine Industry ... 8

1.2 Recreational boatbuilding industry ... 9

1.3 Sailboat construction industry ... 10

1.3.1 Sailboat construction industry ... 10

1.3.2 Innovation in technology ... 11

1.4 Characteristics and performance of the Dutch recreational sailboat construction industry 12 Chapter 2 Methodology ... 13

2.1 Problem indication ... 13

2.2 Research Proposal ... 14

2.2.1 Purpose of research ... 14

2.2.2 Main research question ... 14

2.2.3 Sub-questions ... 17

2.2.4 Conceptual model ... 22

2.2.5 Restrictions ... 23

2.2.6 Definitions & abbreviations ... 23

2.2.7 Data collection ... 24

Chapter 3 Selection of comparable industries... 25

3.1 Determinants for comparison ... 25

3.2 Competitive advantage ... 27

3.2.1 Demand ... 27

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3.2.3 Related and supporting industries ... 28

3.2.4 Firm strategy, structure and rivalry ... 29

3.2.5 The role of the Government ... 29

3.2.6 The role of Chance ... 30

3.3 Clustering ... 31

3.4 Conclusion ... 31

Chapter 4 Research model ... 33

4 Research Variables Model ... 33

Chapter 5 Dutch sailboat construction industry ... 40

5.1 Competition in the Dutch SCI ... 40

5.2 Cooperation in the Dutch SCI ... 41

5.3 Demand in the Dutch SCI ... 43

5.4 Government and the Dutch SCI ... 44

5.5. Innovation in the Dutch SCI ... 45

5.6 Clustering in the Netherlands ... 46

Chapter 6 Australian sailboat construction industry ... 47

6.1 Competition in the Australian SCI ... 47

6.2 Cooperation in the Australian SCI ... 48

6.3 Demand in the Australian SCI ... 49

6.4 Government and the Australian SCI ... 50

6.5. Innovation in the Australian SCI ... 51

6.6 Clustering in Australia ... 51

Chapter 7 New Zealand sailboat construction industry ... 53

7.1 Competition in the New Zealand SCI ... 53

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7.3 Demand in the New Zealand SCI ... 55

7.4 Government and the New Zealand SCI ... 56

7.5. Innovation in the New Zealand SCI ... 57

7.6 Clustering in New Zealand ... 57

Chapter 8 Conclusions and Recommendations ... 59

8.1 Results and differences ... 59

8.1.1 Current status on variables ... 59

8.1.2 Important relationships between variables ... 61

8.2 Conclusions ... 62

8.3 Recommendations & Process design ... 64

8.3.1 Implementing cluster ... 64

8.3.2 Complementary clustering recommendations ... 66

8.4 Future research ... 67

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Chapter 1 Background

The marine industry encompasses, like other industries, many different activities that form industries for themselves. In order to gain insight into the focus of this thesis, the sailboat construction

industry, it is inevitable to look at the overall marine industry since these incumbent industries are often overlapping or interlinked. This thesis will therefore start with in introduction into these different industries. The second paragraph intents to deepen the aforementioned insight into the recreational boatbuilding industry before arriving at the focus industry in the third paragraph. Ending this chapter with a global overview of the Dutch recreational sailboat construction industry. This overview can be seen as an introduction of the problem that will be the main subject of this thesis. A specific indication of the problem will be given in the first part of chapter two.

1.1 Introduction in Marine Industry

A single definition on marine industry and which incumbent industries it entails does not exist. Explanation for the ambiguous definitions and a resulting lack of freely available statistical information, can be found in the ways of categorizing industry activities. The Dutch water sports association HISWA states the example for the Netherlands, freely translated they write the following on their website; “Disadvantage is that the water sports industry is hidden in 10 different so called SBI codes, which is a standard division of the industries. This way it is nearly impossible to get a good overview concerning the number of companies, bankruptcy, new entrants and statistical economic numbers of the industry.”1 As to define the marine industry I have made the following categorization that will encompass the industries. This categorization is based on the commonly agreed upon industries found in the scarcely available present literature on the marine industry and the diverse categorizations national governmental bodies employ.

 Commercial Shipbuilding

Commercial shipbuilding consists of the construction of commercially employed vessels; for instance: Oil tankers/Roll-on – Roll-off (Ro-Ro’s)/Containerships/Ferry’s.

 Navy & Defense Shipbuilding

Vessels built for the government without intention the exploit the vessels commercially. Also includes the R&D expenditures for these vessels.

 Recreational Boatbuilding

Several kinds of boats are included in this category: 1. Trailerable boats

2. Power boats/yachts 3. Sail yachts

4. Race yachts (under 25 meters)  Super Yachts

Consists of construction companies of power and sail yachts above 25 meters in length.  Repair and Refits

Repair and Refits are commonly done by shipyards which may or may not also engage in building activities.

 Suppliers/Services/Components

This broad group ranges from naval architects, manufactures of all vessel/yacht components and boating equipment, the retail selling equipment to consumers, etc.

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Rijksuniversiteit Groningen Page | 9 E.H. van den Brand  Marine Brokers and Retailers

Brokers and Retailers of yachts, new (imported yachts) and second hand.  Marinas

Includes birthing, mooring, dry mooring and maintenance of vessels.  Services to support marine industries

Education and training of professional employees and courses to yachtsmen, also the marine insurance is included in this industry.

1.2 Recreational boatbuilding industry

Different cultures and access to water result in differences in expected boat ownership across countries. Table 1 lists the boat-ownership per capita of some selected countries. Selection is based on the significance of the country in the world market. The word boats here comprises race yachts and trailerable-, power- and sailboats.

Table 1 Boating industry statistics by country source: Allen consulting Group

Although there is a lack of freely available official statistics on the boatbuilding industry some comparisons between countries can be made.

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Rijksuniversiteit Groningen Page | 10 E.H. van den Brand output indicating larger companies, et vice versa. This in turn can be related to standard production versus custom built (high end spectrum of boats). Although this is a generalization the following can be concluded. The US and Poland have a very high production of smaller powerboats while France produces bigger sized production yachts, Italy and New Zealand have production activities in the custom built segment.

1.3 Sailboat construction industry

In sailing people have different wishes about, for example the looks and handling of their boat. Different wishes result in different types of sailboats, just as it is with cars. You may just like to sail recreationally on inner waters or across the seas, others like to participate in recreational and professional races, while another group just uses their boats as a symbol of status. Simply put, some boats are designed for their looks or comfortable sailing while others are designed for speed. Sailboats have been developed continuously throughout the years. Nowadays new materials and technology result in ever more sophisticated designs in order to fulfill the high requirements placed on the goods by the recreational and professional customers. In the first part of this paragraph a rough sketch of the sailboat construction industry will be drawn. The second part will focus on the role of innovation in the industry.

1.3.1 Sailboat construction industry

In order to give an indication of the structural characteristics of the sailboat industry, a distinction can be made between three production processes for three different categories of sailboats. Given the nature of the product; exclusive, high-end, production intensive construction the sector is highly fragmented, meaning that it is characterized by a large number of SMEs.2

Standard production sailboats

The first group of sailboats are being produced on a relatively ‘big’ scale by ‘large’ companies. The main advantage of these boats is that production is rather cheap because economies of scale that can be reached. The hull of these sailboats are almost always built from polyester and have a standard interior and exterior. Mast and beam that are placed are made out of aluminum. These boats originate from one design and are ‘identical’.

Semi custom built sailboats

Standard design of the boat is the basis for semi-production boats. It is possible to make changes concerning the interior and there are different options available so customers can adjust the boat so that it complies more with their individual wishes. Some of these options are; type of keel, rigging and different materials for mast and beam. Options are however limited because everything has to comply with the standard design of the boat. These semi-production sailboats are built by SMEs.

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ALLEN CONSULTING GROUP, 2005. Benchmarking Australia’s Marine Industries.

http://www.industry.gov.au/content/itrinternet/cmscontent.cfm?objectid=5444BFEF-65BF-4956-BA2FC4AC33F28A3A&indexPages=/content/sitemap.cfm?objectid=095C0828-B04A-EAE8-83004E5A26E76A09

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Rijksuniversiteit Groningen Page | 11 E.H. van den Brand Custom designed/built sailboats

These boats are being designed and built according to the specifications of the customer. The customer will go to a naval architect and specifies his wishes. The architect creates a design that conforms to the wishes and practical building possibilities. This design will be given to the boat builder who builds the boat, interaction between the designer, builder and customer is needed and changes will be made during construction. These types of boats are exclusive, comply with almost every wish of the customer and are of superior quality to the standard production boats and therefore much more expensive than the standard designs. To achieve superior quality these yachts are usually built with the newest materials. Small scale SMEs are typically found in this part of the industry.

Currently, sailboats which contain exotic materials (newest materials with superior quality) have to be semi- to fully custom built. This is necessary because the materials need to go through a lot of processes which are labor intensive. Process technologies are being developed in order to make the processes more time-efficient, create economies of scale and produce products of better quality. Although new technologies are continuously being implemented it still remains very labor intensive. Economies of scale and scope are very difficult to attain in the semi- to custom sailboat segment.3 Because of the labor intensive nature of building a composite sailboat and because it is still rather new, these boats are mostly being built by Small and Medium-sized Enterprises (SMEs). They fill the niche that the big players leave untouched. The larger boat builders around the world focus on a big part of the market. Their customers are currently being “provided” with production-line polyester boats. Polyester boats can be produced modular which makes them fairly cheap. Although

conventional materials are still being used on a big scale there is a shift noticeable towards the newer (exotic) materials. These composite materials, and different combinations of those in sandwich constructions, are generally speaking, lighter, stronger, more durable and need less maintenance. 1.3.2 Innovation in technology

Looking at innovation in sailboat construction, a comparison can be made with the automobile industry. In this industry most innovations are made in racing. The knowledge created is used to enhance automobiles for the general public. To quote an article in the journal Technovation: “ While the spectacle the dominant attraction is for the paying public, to the providers of the sport, the whole essence of Grand Prix racing has always lain in the development of technology and its practical and economic exploitation.”4

The Volvo Ocean Race, formerly known as Whitbread Round the World Race and the America’s cup can be seen as the Grand Prix’s of sailing. The Volvo Ocean Race is one of the longest and most demanding races in the world, approximately 31.600 nautical miles long with half of the race taking part in the Southern Ocean, also known as the ‘Roaring Forties’. This indicates that for the boats which participate in this race strength and endurance of materials is essential. Technologies developed for these sailboats are state of the art. As within the automobile industry, these technologies slowly diffuse into sailboats for the general public, setting the new standard. Since the 1980’s the biggest advancement in technology is the use of ‘exotic materials’ in construction. “Innovations pertaining directly to boatbuilding, however, have been largely in the

3_{ALLEN CONSULTING GROUP, 2005. Benchmarking Australia’s Marine Industries.} 4

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Rijksuniversiteit Groningen Page | 12 E.H. van den Brand construction process; in particular, the technologies relating to composite materials.”5 These materials are reinforced plastics (composites) like glass fibre, aramids and carbon. The materials are lighter, stronger and more durable. Disadvantage however, currently they are still very costly for the recreational customer.

1.4 Characteristics and performance of the Dutch recreational sailboat

construction industry

Current situation in the Netherlands

In the first paragraph of this chapter it has already been mentioned that there is a lack of statistical information on the Dutch marine industry. Yet, from the following it can be concluded that the Netherlands is not doing well. “New boats, and particularly those fewer than 12m are not selling well at all in the Netherlands. On the other hand the semi-custom and custom builders are certainly finding life more difficult these days than, say, a couple of years ago, the best-known super yacht builders generally continue to prosper.”6 Reason for the relatively good performance of these builders is that this segment attracts many international customers. The demand in the segment of sailboats below 25 meters is, for a big part, being served by the imports of serial production sailboats. These boats are relatively cheap in comparison to the semi- and fully custom built boats. The Netherlands does not have a construction factory such as those in Germany, France, Sweden and the upcoming countries like Poland and Croatia but it consists of Small (and some) Medium sized Enterprises that focus on semi- to custom built boats. Their output ranging from 2 to 40 boats per year, while the German company Bavaria (serial production) has an output of over 3000 boats per year. One important difference is that the serial production boats are usually built with materials such as polyester which lend themselves for this kind of production while the customers of custom built boats usually want their boats constructed of composite materials.

These findings seem to contradict the popular believe that the Netherlands is one of the leading countries in the industry. Although this may be true for boat design, some commercial shipping and super yachts in which they enjoy a good reputation, it certainly is not the case for the construction of sailboats under 25 meters. Recently the Dutch have performed extremely well in the Volvo Ocean Race. ABN-AMRO sponsored two boats which would compete in this race. Both boats were built in the Netherlands. “Black betty”, as they lovingly nicknamed one of these boats, dominated in most legs of the race and won the overall race. This is a performance not paralleled in the Dutch sailing history. Implications of this victory are uncertain. A brief look would suggest that the level of innovation in the Dutch sail yacht construction is among the highest in the world. A second look reveals that all needed skills were attracted from the UK, Australia and New Zealand.

The question remains how the companies in the semi- to custom segment can improve their

performance. Because of the nature of building these kinds of boats, which are very labor intensive, use expensive materials that do not lend themselves easily for process technologies and require specific skills and education, it would be impossible to engage in price competition with the serial produced boats. On the other hand there always will be a market for these kinds of boats. Serial production will never be able to produce a boat that is fully compliant with the wishes of the customer. And there will always be customers that are willing to pay the price for something that is exclusive and comply with their needs.

5_{GLASS, M.R. and HAYWARD, D.J., 2001. Innovation and interdependencies in the New Zealand custom}

Boat-Building industry. International Journal of Urban and Regional Research, 25 (3), 571-592.

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Chapter 2 Methodology

In this chapter the research proposal will be set out. Before doing this, an indication of the problem situation will be given in paragraph 2.1; the second paragraph concentrates on the research

proposal. This research proposal includes the main research question, sub-questions, conceptual-model, restrictions and definitions.

2.1 Problem indication

In the Netherlands SMEs in the sailboat construction industry (SCI) are struggling to keep their business profitable while comparable SMEs in other countries seem to prosper.

Multiple variables can be expected to influence this; most obvious will be the economic situation. This variable is just one explanation in a web of different variables, which are not fully understood, that interact in a complex way. One aim of this research is to create a clear picture of which variables interact with each other in this industry.

The sailboat industry lies in the high-end customer segment, meaning that competition for market share is driven by consumer demand. There has been a significant rise in the production and selling of imported serial produced sailboats in the last 25 years. These serial produced boats are still in the high-end segment because of the amount of money paid for a boat. The high-end spectrum indicates that the customer ultimately determines what the industry will produce. Innovations to better suit their preferences is detrimental. So it should be important that the environment suits innovation. Additionally, culture, strategic objectives of companies, government, infrastructure etc. all influence this environment and thus must be analyzed.

The Dutch SMEs, mostly specializing in the semi- to custom built boats, are lagging behind in the international context. One could say they are ‘stuck in the middle’, successful European and

American companies are mostly gaining benefits of economies of scale and scope while New Zealand companies have gained a very good reputation in the custom built boats regarding innovation and quality. The small domestic market for New Zealand companies could not generate enough output to reap the benefits of scale economies and therefore concentrated on innovation in niche segments.7

The Dutch SMEs however, seem to operate without a sound strategic course and are trying to get all advantages.

There has not been a lot of research conducted in the Netherlands on innovation in the industry. Furthermore, the Dutch SCI can be defined as being individualistic, resulting in different opinions about the strategic course which should lead them to better performance. This research should help the Dutch industry to better comprehend the urgency of a strategic course, and what this course should be.

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2.2 Research Proposal

In the research proposal an overall goal of the research will be set, a research question formulated as to accomplish that goal and sub-questions will be derived from this main question. The conceptual model will give a clear indication of the relationships between the factors included in this research. Because there is always the issue of time needed for a particular research, restrictions will be given in §2.2.5. These will set the boundaries of the research. Towards the end of this chapter definitions will be given; these are used to describe the terminology used during this paperand will make subjective terms objective. In §2.2.7 the data collection methods will be explained.

This chapter will bring structure in the research and helps to give a clearer picture of the subject at hand. The reader of this thesis will get a better understanding of the problem and how the research is conducted to tackle this problem.

2.2.1 Purpose of research

To give insight in the sailboat construction industry structures of two comparable well performing foreign industries and the Netherlands. Focus will be on the level of innovation and cooperation in these industries. Purpose is to identify and analyze the possibilities for Dutch SMEs to learn from their comparable counterparts in order to enhance their competitive position in an increasingly

international environment.

2.2.2 Main research question

What can the Dutch sailboat construction SMEs learn from SMEs operating in foreign industries in order to increase their competitiveness in an international sailboat construction industry?

The main research question raises many questions. These questions will be formulated in the sub-questions which will be used to answer the main question. Before compiling these sub-questions it is necessary to gain a deeper understanding of what should be included in the research. In order to understand the industry it is elementary to understand the structure and which internal and

environmental elements influence the industry. Theoretical models on industry structure are widely available. In this research I have chosen to use Porters National Competitive Research model. In basics, this model covers the factors on a national level from which a competitive advantage can arise. The following description of the theory will indicate which variables must be researched. The sub-question will be distracted from this model.

Porter’s theory of competitive advantage

“… why does a nation become the home base for successful international competitors in an

industry? Or, to put it somewhat differently, why are firms based in a particular nation able to create and sustain competitive advantage against the world’s best competitors in a particular field?”8 In some countries boat builders seem to prosper while Dutch builders have a difficult time. Porter’s diamond of the Determinants of National Advantage9can be used to provide insight into this matter.

8

PORTER, M. E., 1998. The Competitive Advantage of Nations. New York: Palgrave, 1.

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Rijksuniversiteit Groningen Page | 15 E.H. van den Brand Porter argues that these four broad attributes (squared) determine the competitive advantage of nations. Figure 1 shows the relationships between the determinants as well as the role of the government and chance.

Determinants of National Competitive Advantage Demand Conditions: theory

Demand can be divided into composition of home demand, demand size and pattern of growth, and the transmitting to foreign markets of the industry’s product.

“Domestic rivalry becomes superior to rivalry with foreign competitors when improvement and innovation rather than static efficiency, are recognized as the essential ingredients for competitive advantage in an industry.”10

Demand conditions are influenced by intense rivalry which is assumed to increase the home demand and make demand more sophisticated. Factor conditions improve and influence demand on their turn so knowledge and skills are attracted into the country. Related and supporting industries contribute to the industry by spillovers of technology, in turn creating higher demand and ever more sophisticated industries. Complementary internationally successful industries can attract foreign demand for the industry’s product.

Customer preferences eventually determine the industry. Variables that determine the preferences have been mentioned before and need to be examined if comparisons are made between the countries.

10

PORTER, M. E., 1998. The Competitive Advantage of Nations. New York: Palgrave, 117/118.

Chance Firm Strategy, Structure, and Rivalry Demand Conditions Factor Conditions Government Related and Supporting Industries

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Rijksuniversiteit Groningen Page | 16 E.H. van den Brand Factor conditions: theory

Factor conditions refers to inputs used as factors of production such as labor, land, natural resources, capital and infrastructure. Traditional international economic theory is based on these factors. It assumes that trade will occur in the goods that use the abundant factor against goods that are relatively more expensive to produce. Porter argues that, in contrary to traditional theory, these factors are not inherited but can be created resulting in factors that are scarce will create an innovative mindset while abundance is followed by waste.

Factor creation is strongly influenced by domestic rivalry. Intense competition stimulates

development of skilled human resources, technologies, market-specific knowledge and a specialized infrastructure. These effects will be strongest if they are concentrated in a region, i.e. clustering; Silicon Valley is an excellent example in this. Clustering includes pooling with related and supporting industries in order to share ‘abundant/specialized’ factors of all industries. Home demand conditions seem to push priorities towards factor creating investments.

Related and supporting industries: theory

Related and supporting industries also add to the competitive advantage of an industry. Porter argues that a set of strong related and supporting industries is important to the competitiveness of firms. This usually occurs at a regional level as opposed to a national level. These clusters are also known as Industrial Districts in which competitors (and upstream and/or downstream industries) locate in the same area.

Factor conditions are transferable to and from related industries, helping all industries towards a more, continuously increasing, sophisticated state. While the growing demand stimulates the deepening with the related /supporting industries, other domestic rivals also encourage these industries to specialize. In the sailboat construction industry these related and supporting industries are: Shipbuilding, marine component manufacture, yacht design, marine equipment retail and the marinas and boating infrastructure.

Firm strategy, structure and rivalry: theory

The last attribute includes the goals of companies and individuals which may differ across nations. Organizational structures and domestic rivalry increase competitive advantage.

Through the creation of factors an abundance of these will appear and will attract new companies, both new entrants and entrants from the related/supporting industries. Again, the increasing demand stimulates domestic rivalry, thereby increasing the importance of structure and strategy of the companies in the industry. Companies have their own goals which they try to achieve; this may not comply with what would be best for the industry as a whole. Clusters should have the possibility to enlarge the ‘pie’ so every company can have a larger share when cutting it. Trust amongst

incumbents is an essential element for clusters to succeed. The role of the Government: theory

As can be seen in figure 1, the government can influence, and be in influenced by, each of the four determinants in a positive or negative way. Porter states; "Government’s proper role is as a catalyst and challenger; it is to encourage - or even push - companies to raise their aspirations and move to higher levels of competitive performance …"11 Governments can attempt to do this through:

- Influence factor conditions through subsidies, policies regarding: capital markets, education, etc.

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Rijksuniversiteit Groningen Page | 17 E.H. van den Brand - Influence demand by establishing local product standards or regulations that influence

buyers’ needs

- Shape the circumstances of the related and supporting industries and

- Influence firm strategy, structure and rivalry through tax policy, antitrust laws and capital market regulations

The industry can attempt to influence the government to implement these policies and regulations. The role of Chance: theory

Chance events are outside the influence of the companies, yet they do provide opportunities for them to gain a competitive advantage. These random events create discontinuities in the market. Examples are; pure invention, major technological discontinuities, and the like. Companies that recognize these events can adjust to the new circumstances and gain a competitive advantage. From this information certain variables can be subtracted, which are; industry structure,

competition, cooperation, demand and government. In §2.2.3 the resulting sub-questions will be formulated and a brief explanation of each will enhance further understanding.

2.2.3 Sub-questions

In order to answer the main research question I will split the main research question in relevant sub-questions.

1) Which two sailboat construction industries are comparable to the Dutch industry? 2) How can the structure of sailboat construction industries of these countries be

characterized?

3) Which factors determine competition and what kind of competition exists in the sailboat construction industry?

4) Which factors determine cooperation and what relationships exist between companies in the marine industry?

5) Which factors determine demand?

6) How does the government influence the industry?

7) Which variables determine the level of innovation in the sailboat construction industry? 8) What can Dutch SMEs learn from the comparable SMEs to enhance their competitive

position in an international market?

The first sub-question will be answered in the third chapter of this thesis. Looking at sub-questions two to seven it becomes evident that before an empirical analysis can be done the variables must be understood. A theoretical exploration of these sub-questions will be given underneath. In the following paragraph a conceptual model shows the way these sub-questions are related to one another. In the forth chapter a research model is proposed which operationalizes the theoretical base for further research. The analysis of the countries, treated in chapters five, six and seven, will be done according to this model.This research focuses on two foreign and the Dutch sailboat

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Sub-question Theoretical Operationalization Empirical

1 Chapter 3

2 § 2.2.3 AD. 2 Chapter 5/6/ 7

3 § 2.2.3 AD. 3 Chapter 4 Chapter 5/6/7

8 Chapter 8

Table 2 Sub-questions

AD 1. Which two sailboat construction industries are comparable to the Dutch industry? In the first sub-question the identification of elements will form the basis for finding comparable industries. The selection will primarily be made on the type of production process, output of sailboats and the reputation on innovation. An analysis that covers these aspects is the aforementioned analysis on the competitive advantage by Porter which will be used to give an elaborate overview of the Dutch as well as the foreign (sail)boat construction industries.

AD 2. How can the structure of sailboat construction industries of the countries be characterized? The way of organizing the industry is ever more related to the level of success of the industry. A research by Johnston states: “Clusters enhance economic performance through increases in the productivity of member organizations, driving the pace and direction of innovation, stimulation of the formation of new businesses, and access to new knowledge and learning.”12 In congruence with this view, this research will look at structure from a cluster perspective.

Clusters differ from each other; the following definitions will categorize the different kinds of cluster that can be identified. These are;

1) Individual companies

In an industry which does not have any form of clustering. The companies are not or almost not related to each other in any way. There is none or virtually no cooperation between the companies or with a very low intensity.

2) Regional clusters

A regional cluster is an industrial cluster in which member firms are in close geographic proximity to each other. A more inclusive definition would be: regional clusters are geographic agglomerations of firms in the same or closely related industries. (see Enright 1992, 1993)

3) Industrial clusters

An industrial cluster is a set of industries related through buyer-supplier and supplier-buyer relationships, or by common technologies, common buyers or distribution channels, or common labor pools.13

12

JOHNSTON, R., 2003. Clusters: A review. ‘Mapping Australian Science and Innovation' Department of Education, Science and Training.

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Rijksuniversiteit Groningen Page | 19 E.H. van den Brand 4) Industrial districts

Industrial districts (such as the Italian industrial districts described in Pyke, Becattini, and

Sengenberger, 199214) are concentrations of firms involved in interdependent production processes, often in the same industry or industry segment, that are embedded in the local community and delimited by daily travel to work distances (Sforzi 199215).

These types of clustering can be seen as different levels and intensity of clustering. Furthermore, it distinguishes between industrial or geographical boundaries.

AD 3. Which factors determine competition and what kind of competition exists in the sailboat construction industry?

Competition is a broad concept and can manifest itself in many different ways. The following five variables have been selected to gain a good understanding of competition in the SCI. The first variable is the sources of competition.

1) Competition can occur on different ‘sources of competition’16 being; quality, service, flexibility, speed and costs. The first four increase the level of innovation by trying to differentiate from other companies. Competition on cost will most likely lower de level of product innovation since there is no room for experiments. It can however stimulate process innovation because companies introduce new processes to make production more efficient. The following four variables are distracted from a model proposed by Maria Bengtsson and Örjan Sölvell.17

2) The intensity of competition is an important variable in assessing the industry. It is an important drive for innovation. If intensity is low companies tend to co-exist without trying to continuously improve their activities and products. High competition spurs companies in the industry to differentiate themselves from their competitors. High competition can also hinder the degree of cooperation. Individualistic goals are to be accomplished without thinking what might be best for the industry as a whole.

3) Skilled employees are important in the semi- to custom built segment. Skilled employees are the source of high quality and efficiency. Findings of Glass and Hayward (2001) suggest that employees are one of the most important sources for innovation. This would indicate competition for employee skills.

4) This refers to the next variable which is important for the degree of competition and cooperation; the attitude of companies towards sharing skills, inputs and knowledge. Clusters need a positive attitude towards cooperation as well as high competition to work effectively.

14

PYKE, F., BECATTINI, G., SENGENBERGER, W., 1992. Industrial Districts and Inter-firm Co-operation in Italy. Geneva. International Institute for Labor Studies.

15_{SFORZI, F., 1992. "The quantitative importance of Marshallian industrial districts in the Italian economy," in}

PYKE et al. (1992), 75-107.

16_{GUNASEKARAN, A., PATEL, C., McCAUGHEY, R.E., 2004. The framework for supply chain performance}

measurement. International Journal of Production Economics, 87 (3), 333-347.

17

BENGTSSON, M and SÖLVELL, Ö., 2004. Climate of competition, clusters and innovative performance.

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Rijksuniversiteit Groningen Page | 20 E.H. van den Brand 5) Symmetry is another variable that determines the competition the most important are

product and market symmetry. If symmetry between companies is high the more intense the competition is and therefore a higher rate of product and process innovation.

AD 4. Which factors determine cooperation and what relationships exist between companies in the marine industry?

SMEs are said to have the weakness that they lack the technical superiority of infrastructural facilities and financial resources.18 Most of the limitations can be overcome through the establishment of collaborative relationships aimed at reaching the benefits of networking.19

Cooperation contributes to the performance of companies and the industry. There are various degrees of cooperation. On industry level it can exist between companies, suppliers and their customers. On the inter-industry level cooperation can exist between companies and related and supporting industries as well as other institutions such as financial institutions, universities and the government. Goal of these relationships is to create economies of scale and scope, gain knowledge, share technologies and create favorable circumstances for the industry.

AD 5. Which factors determine demand?

Demand for sailboats depends on the level of income as it is a luxury good. Most important variable is the customer preferences and tastes. In the high-end spectrum it is necessary to look at the customers and their exact wishes. An accurate understanding of existing needs in the market is necessary for the development of successful commercial products. Customers can influence the pace of innovation by demanding new products. Rogers and Shoemaker20 state that “Users whose present needs foreshadow general demand exist because important new technologies, products, tastes, and other factors related to new product opportunities typically diffuse through a society, often over many years, rather than impact all members simultaneously.” Von Hippel21 calls these users ‘Lead Users’. Analyzing the Lead Users for sailboats gives a good representation of future demand. There are many factors that eventually determine customer preferences. The most important one’s are:

Purpose of use The yachting culture

The different sailing activities people engage in also reflect their wishes concerning comfort and speed. The boating culture that develops over time within a country can give insight in the history over sailing within that country. This is important because it reveals what kinds of materials are used, if there is a healthy sports competition, etc.

Other variables determining demand are:

Demographics; age, gender and free time of the SCI customers.

Geographic’s (access to waterways, conglomeration of cities near water, weather)

18_{DANGAYACH, G.S. and DESHMUKH, S.G., 2001. Manufacturing strategy. Literature review and some issues.}

International Journal of Operations & Production Management, 21 (7), 884-932.

19_{GRANDO, A. and BELVEDERE, V., 2006. District’s manufacturing performances: A comparison among large,}

small-to-medium-sized and district enterprises. International journal of Production Economics, 104, 85-99.

20_{ROGERS, E.M. and SHOEMAKER, F.F., 1971. Communication of innovations: a cross cultural approach. New}

York: The Free Press.

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Rijksuniversiteit Groningen Page | 21 E.H. van den Brand AD 6. How does the government influence the industry?

Analyzing the influences of government policy is important since it can encourage the industry towards higher standards or it can limit the possibilities of the industry. In a research by Hernesniemi et al.22 about Finnish industries a model is proposed that contain the elements of government influence. For the purpose of this research I will filter the most important variables, which are: General economic policy, international agreements and integration, technology, labor and education, small and medium- sized enterprises, competition, financing and taxation.

AD 7. Which variables determine the level of innovation in the sailboat construction industry? Virtually all economic theories on economic growth incorporate innovation as a crucial element. When considering innovation it is necessary to contemplate the potential for both design innovations- that introduce significantly new ways of using or making goods- as well as product innovation, that introduce significantly new products.23

Thus, innovation can be divided into product and process innovation. Product innovation refers to changes of the physical product itself, process innovation looks at the manufacturing of the product for more effective and efficient processes. Innovation is the result of many different variables. The foregoing variables all determine in some way the level of innovation, as can be seen in the conceptual model.

AD 8. What can Dutch SMEs learn from the New Zealand and/or Australian SMEs to enhance their competitive position in an international market?

In order to strengthen the SCI all SMEs should do their part to make a viable sector. But what can Dutch SMEs do to make it better? A comparison with the chosen industries should give more insight. Note that it will never be possible and desirable to mimic these industries. Their success is based on their own specific circumstances and thus will create other contingencies towards that success, but if you take all things into account it should be possible to design a plan for the Dutch construction companies, through their own and combined efforts to gain some ground in the international market.

22_{HERNESNIEMI, H., LAMMI, M., YLÄ-ANTTILA, P., 1996. Advantage Finland. The future of Finnish industries.}

Helsinki: Taloustieto Oy.

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Rijksuniversiteit Groningen Page | 22 E.H. van den Brand 2.2.4 Conceptual model

Environment

Sailboat construction industry

Demand

- Tastes and preferences - Purpose of use - Yachting culture - Demographics - Geographic’s Co-operation Industry level: - Competitors - Suppliers - Customers Inter-industry level: - Supporting/ - related industries - Government - Knowledge Institutions Competition - Intensity of competition

- Skill level employees - Interfirm attitudes - Symmetry - Competition on - quality - service - flexibility - speed - costs Government

- General economic policy - Int. Agreements and integration

- Technology

- Labor and education - SME policy

- Policy on competition - Financing and taxation

Learning opportunities for Dutch SMEs in sailboat construction Innovation - Product innovation - Process innovation

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Rijksuniversiteit Groningen Page | 23 E.H. van den Brand 2.2.5 Restrictions

In order to make this extensive research manageable some restrictions have to be made. These are necessary because otherwise it would be too time consuming and side-tracks can be avoided.

- This research will focus on SMEs whose business activities lie in the construction of sailboats. - Due to time limitations the research will include two foreign industries.

- These sailboats are larger than 7 meters and under 25 meters.

- Focus on construction industries in two comparable countries and the Netherlands. - Interviews and questionnaires will be taken from a sample of boat builders, suppliers and

marine associations. (maximum of 15 per country)

2.2.6 Definitions & abbreviations

Boat: an expensive vessel propelled by sail or power and is used for cruising or racing, bigger than 7 and smaller than 25 meters.

Sailboat: an expensive vessel propelled by sail and is used for cruising or racing, length must be over 7 and smaller than 25 meters.

Super yacht: an expensive vessel propelled by sail or power and is used for cruising or racing, length must be over 25 meters.

Cluster: “a set of small-to-medium-sized companies located in the same area”24_{, focused on a}

specific production activity, whose key competitive drivers are price, quality and service, constantly competing and cooperating with each other.”25

SMEs:

SME: Small and Medium sized Enterprises SCI: Sailboat Construction Industry

CNC: Computer Numerical Control

CADCAM: Computer Aided Design/Computer Aided Manufacturing MIAA: Marine Industry Action Agenda

MIA: Marine industry association New Zealand BITO: Boating Industry Training Organisation

24_{PIORE, M.G. and SABEL, C.F., 1984. The second industrial divide: Possibilities for Prosperity. New York: Basic}

Books.

25

GRANDO, A. and BELVEDERE, V., 2006.

Enterprise category Headcount Turnover or Balance sheet total

medium-sized < 250 ≤ € 50 million ≤ € 43 million

small < 50 ≤ € 10 million ≤ € 10 million

micro < 10 ≤ € 2 million ≤ € 2 million

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Rijksuniversiteit Groningen Page | 24 E.H. van den Brand 2.2.7 Data collection

This research can be characterized as an ethnographic research. It is naturalistic enquiry instead of a controlled, and mostly qualitative instead of quantitative, method.

In this research, secondary as well as primary information is used. Secondary information sources are: articles, publications and internet. Primary information was gathered through semi-structured interviews (appendix 1), questionnaires (appendix 2) and observation.

Attention must be given to the reliability and validity of the research. “Since ethnographic

researchers use themselves as the instrument through which they observe the group, the method lends itself to extreme subjectivity; that is, the interpretation may be idiosyncratic to the observer with all of the associated limitations, eccentricities, and biases and is not matched by the

interpretation of other observers.”26 To obtain reliability, cross checks of the observations are made through the use of triangulation. Interviews with people in different levels of the cluster should eliminate biases by one particular group (or researcher). Requirement of validity, the quality of the research, will be met through connecting the researcher’s interpretations to evidence of the findings.

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Chapter 3 Selection of comparable industries

Virtually all theories of economic growth incorporate innovation as a crucial element, an analysis of Porters diamond of national advantage, which also incorporates innovation, will be used for a preliminary research on the selected countries in the second paragraph to see which countries actually do experience this national advantage. Before going into this analysis two countries will be chosen for comparison, this choice is based on some quantitative and qualitative measures.

3.1 Determinants for comparison

The lack of freely accessible data on the marine industry and the usage of differing methods of categorizing the industry that exist internationally creates an obstacle in the process of selecting comparable industries. In order to find two industries comparable to the Dutch, the selection asks for a selection on qualitative rather than a quantitative approach. The selection of comparable industries is made on the following, mostly qualitative, variables: Production process, Relative output of sail and super yachts, Reputation on product/process innovation.

Production Process

Each of the countries will be assessed whether the production process can be defined as being: Serial production, Semi custom built or custom built. Difference between these production processes has already been highlighted in §1.3. Reasoning behind these selection variables is that I assumethat shifting between production processes is very difficult because there have to be market conditions that allow a successful shift.

Relative output of recreational sail and super yachts.

In general demand and production of power boats is higher than sailboats. The focus of this paper is on the production of sail yachts. Therefore it is necessary to look at countries which have a

noticeable output of sailboats. Super yachts will also be included in this variable since many companies produce both ‘standard’ sized yachts and super yachts.

Reputation on product/process innovation.

The assumption throughout this paper is that innovation is a determinant for growth. Since

innovation is generally difficult to measure I have chosen to look at the reputation countries enjoy on innovation.

The production process that dominates the Dutch market can be defined as semi to custom built. There are many SME’s in the market who produce high quality custom built yachts. The output produced consists of 60% powerboats and 40% sail yachts.27 In terms of relative output of sailboats this can be considered as high. The Dutch super yacht industry is also considered as one of the best in the world. Concerning reputation on product and process innovation the Industry does not perform as well as it should. Process innovation is low and product innovation barely reaches medium.

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Rijksuniversiteit Groningen Page | 26 E.H. van den Brand The performance of other countries that can be considered as comparable industries are given in following table.

Country Boat

builders

Persons per Boat

Production Process Relative output recreational sail & super yachts

Reputation on product/process innovation

Australia 390 31 Custom built Medium High/Medium

Finland 58 7 Semi custom built Medium Low/Medium

France 115 66 Serial production High Low/Medium

Germany 438 184 Serial production Medium Low/High

Italy 680 68 Semi custom built Low Medium/Medium

New Zealand 150 8 Custom built High High/Medium

Norway 90 7 Semi custom built Medium Low/Medium

Sweden 50 7 Semi custom built Medium Medium/Medium

UK 400 102 Custom built Low Low/Medium

US 1100 16.7 Serial production Low Low/High

Table 4 Selection for comparison

I assume the type of production process is an important factor since a shift would incorporate big changes for companies. The Netherlands being a custom built production process country only custom and semi custom built processes will be considered as comparable industries. Reputation on innovation of comparable industries should be as high as possible in order to learn from these countries. Relative output of recreational sail and super yachts is less important but it should be as high as possible.

In table 5 the suitability for comparison with the Dutch industry is given. The scale - - / - / 0 / + / ++, represents the suitability for comparison, - - being the lowest and ++ the highest.

Boat builders Boats per person Production Process Relative output recreational sail – super yachts Reputation on product/process innovation Australia + + ++ 0 ++ Finland - - ++ 0 0 - France 0 0 -- + - Germany + - -- 0 + Italy + 0 0 - + New Zealand 0 ++ ++ + ++ Norway - ++ 0 0 - Sweden -- ++ 0 0 + UK + 0 ++ - - US ++ ++ -- - +

Table 5 Suitability for comparison

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Rijksuniversiteit Groningen Page | 27 E.H. van den Brand These two countries will be analyzed using Porter’s National Competitive Advantage theory in the following paragraph. Some facts and figures of these countries are listed below.

New Zealand (Auckland): “Known as the ‘City of Sails’, with more sailboats per capita than any other city in the world, these days Auckland’s reputation as a sailor’s Mecca is cemented by repeated successful defences of the America’s Cup.”28 Home demand has been declining but exports have been rising for years. Although the New Zealand sailboat industry is small when compared with other countries in the rest of the world it enjoys the reputation of the highest level of innovation in the world. Imports of sailboats have been declining while the exports are rising. The industry is made up of SMEs that focus on the construction of semi- to custom built boats. For New Zealand, the marine exports sector is of significant importance despite being comparatively small internationally. This is particularly apparent when considered against the backdrop of a poor overall national performance in manufacturing over recent years.

Australia: Boat building has been identified as one of the fastest growing industries in Australia for 1999-2004. Turnover has risen from AUD$ 500.9 million in 1999 to AUD$ 794.8 million in 2004.29 Australia has a growing international reputation for the design and production of high quality fiberglass, composite and aluminum motor, sailing and light commercial boats, ranging from small dinghies and trailerable boats to vessels of up to 50 tons displacement.30 Australia has 36,000 km of coastline and most major cities situated along the coast, it is no surprise that boat ownership is among the highest, per capita, in the world.”31

3.2 Competitive advantage

After having selected the countries which would be included in this research a preliminary research according to Porter’s competitive advantage theory will deepen our understanding of the industries. 3.2.1 Demand

New Zealand

Demand in New Zealand is declining domestically but it is rising at a significantly more rapid pace internationally. The increase in domestic demand in the 80’s resulted in a more sophisticated

industry as a whole with high standards demanded by the customers. The high quality and innovative products resulted in a worldwide recognition of the industry, thereby increasing its exports. New Zealand situation has been characterised as: “The industry's export success and worldwide

reputation is built on excellence in grand prix race boat and super yacht design and construction….. This success has confirmed that New Zealand has benchmark standards for high performance and advanced technology in the areas of racing technique, boat-building and design, refits, sails, spars, electronics, technology, software and systems.”32

28_{http://www.excite.co.uk/travel/guides/australia_and_south_pacific/new_zealand/ResortsExcursions}

[Accessed 18 November 2006]

29_{ALLEN CONSULTING GROUP, 2005. Benchmarking Australia’s Marine Industries.}

30_{http://strategis.ic.gc.ca/epic/internet/inimr-ri3.nsf/en/gr-78483e.html}_{[Accessed 18 November 2006]} 31_{http://www.aust-immig-book.com.au/in_grtnation.html}_{. [Accessed 18 November 2006]}

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Rijksuniversiteit Groningen Page | 28 E.H. van den Brand Australia

Demand in Australia is growing, domestically as well as internationally. “Australia’s marine industries have undergone significant expansion in recent years, in terms of both domestic and international markets….The strength of the Australian economy during the last decade has been very beneficial to the recreational sector.”33 The increase in domestic demand resulted in the same benefits as

described in the New Zealand situation although on a lower level. The Netherlands

As stated in paragraph 1.3, Dutch demand has decreased for sailboats, especially in the range up to 25 meter. Economical situation has been just one determinant for this decline. People are more cautious in spending their money and especially in luxurious goods. As demand is rather low, investments of companies are set back. While demand in new sailboats of 12 to 25 meter is low, sailing seems to be a sport which gains popularity each consecutive year. Prospect is that demand in this segment will rise as the economy strengthens. Current demand is mostly fulfilled by serial produced boats.

3.2.2 Factor Conditions New Zealand

Traditional factor conditions still remain important, yet according to Porter, scarcity of these factors can be overcome by creation of these factors. Creation occurs through radical and incremental innovation. As stated, the New Zealand sailboat industry is well known for their innovativeness. New Zealand still is on top of ‘all’ potential factor shortages.

Australia

The Australian sailboat industry is also recognized as being very innovative. Australia seems to have more difficulties than New Zealand. They recognize that, because of the high growth, factors as skilled labor and the infrastructure (such as marina’s and birthing moores) might not keep up with the high pace.34

The Netherlands

Factors of production such as labor, natural resources and capital are available, although rather expensive compared to other countries. The infrastructure is well developed and offers potential for the industry.

3.2.3 Related and supporting industries New Zealand

New Zealand is ahead of all competition in this regard since it developed a huge cluster in which most companies interact. “Custom boat building in New Zealand is a globally competing industry comprising a densely interconnected community of small and medium-sized enterprises. The industry’s success in niche markets has been attributed to innovation and product design

33_{MARINE INDUSTRIES ACTION AGENDA, 2004. Discussion paper.}

http://www.industry.gov.au/content/itrinternet/cmscontent.cfm?objectid=EDBF0D6D-65BF-4956-B51AB854505C210C&indexPages=/content/sitemap.cfm?objectid=48A3BA2D-20E0-68D8-ED6466CB348E50A5

[ Accessed 18 November 2006]

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Rijksuniversiteit Groningen Page | 29 E.H. van den Brand leadership.”35 The industry also relies on other industries such as Aerospace and the Automobile industry from which they implement innovations and recently developed technologies.

Australia

In Australia there are regional clusters. The Sydney (New South Wales) cluster and the Gold coast (Queensland) cluster being the biggest and most promising in the country. These clusters include Shipbuilding, boatbuilding and component manufacture. The intensity of the cooperation between the segments is still too low in order to maximize the benefits of clustering.

The Netherlands

The same industries that are related and supporting in the Australian/New Zealand context are applicable to the Dutch industry. Difference is the state of competitive advantage of these industries. As Dutch design and super yacht segment are well known around the world. Other industries fall behind. Cooperation between the different industries, as well as the cooperation between

companies in the industry, is uncoordinated and lack efficiency. The cooperation that exists mostly concerns itself with supplier relationships in order to lower purchasing costs.

3.2.4 Firm strategy, structure and rivalry New Zealand

The expanding market resulted in a highly competitive place for companies to be in. International pressures drive the market towards ever more sophisticated products and processes. New Zealand has already coordinated the industry in such a way that they can gain the advantages associated with clustering.

Australia

The Marine Industry Action Agenda concludes; “Australian marine and indeed other manufacturers have an advantage in presenting themselves to international (and domestic) markets in that we are generally perceived as a reliable producer of high quality, innovative products. Perhaps more could be done to further capitalise on that image, through better marketing of our capabilities, especially regarding our highly innovative products and processes.” “In developing any markets, domestic or international, there would almost certainly be benefits from all areas of the industry working together in a more coordinated way.”36 Individual companies are slowly working towards a model of cooperation that is based on trust.

The Netherlands

Because of the declining economic situation after a period of high growth that attracted new entrants has triggered an industry shakeout. Imports of low-cost production boats have taken up much of the market pushing domestic companies into the high-end niche. The intense rivalry in this sector has developed an individualistic attitude.

3.2.5 The role of the Government New Zealand

The New Zealand government takes the role of facilitator. Funds have been allocated to support industry clusters, regions and groups of businesses in order to coordinate their strengths and use their combined size to generate increased sales as well as reaching some economies of scale.

35_{GLASS, M.R. and HAYWARD, D.J., 2001. Innovation and interdependencies in the New Zealand custom}

Boat-Building industry. International Journal of Urban and Regional Research, 25 (3), 571-592.

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