The Analysis Methodology for
International Business Opportunities
A best-practices approach in research on the New Zealand’s
greenhouse sector
Master Thesis
Maurice Bertolini
The Analysis Methodology for
International Business Opportunities
A best-practices approach in research on the opportunities in
the New Zealand’s greenhouse sector
Author: Maurice Bertolini
Student number: 1270478
University: University of Groningen
Faculty: Faculty of Economics and Business
Specialization: MSc International Business and Management
First supervisor RuG: Dr. B.J.W. Pennink
Second supervisor RuG: Prof. Dr. L. Karsten
MANAGEMENT SUMMARY
This thesis has the approach to develop a framework that is based on the combination of the best practices of the four researches and literature and that is tested in New Zealand with the greenhouse-growing industry as case study. In New Zealand the business opportunities for Dutch greenhouse building suppliers is investigated for the Royal Netherlands Embassy located in Wellington New Zealand. The choice for this sector for analysis is done in coordination with the counsellor of the Embassy, Mr. Leo Bouter, responsible for all economic affairs, and the Economic Information Service department from the Dutch Ministry of Economic Affairs, the EVD.
With the theoretical frameworks used by the previous researchers conducted for the Netherlands Embassy and Consulate-General located in Vietnam, the literature on business sector analysis, and research on what information Dutch stakeholders for the greenhouse sector need, we came to a new theoretical framework that performs an analysis on macro-, meso- and micro-level in order to provide information for the Dutch greenhouse building suppliers. The goal of this research is twofold; to create a useful framework for business sector analysis that can be used by the Netherlands embassies and consulate-generals around the world and to test if the previous frameworks still hold for business sector analysis.
The new developed framework uses the same narrowing down analysis as the previous researchers have done. First is started with a macro-level analysis according to the theory of Palmer and Hartley on the foreign business environments, the theory of Whitley on business systems, and the theory of Hofstede on culture. Next step was the meso-level analysis based on Porter‟s diamond and five-forces model and the Resource-Based View perspective. At last the micro-level analysis was conducted based on the market entry strategies and finished with a SWOT analysis that recaps the findings of these analyses and the greenhouse growers opinions into a review on the strengths, weaknesses, opportunities and threats for the Dutch greenhouse growers.
The conclusion is that the previous framework hold stand as the Business systems and the diamond model proved to be useful tools in business sector analysis. With the additions of the foreign business environment analysis, the cultural dimensions, and the resource-based view and by building further on Smidts framework by taking the market entry strategies into consideration we believe that the new framework provides a comprehensive tool for business analysis that supports the Royal Netherlands Embassies and Consulates-Generals in gathering information for stakeholders. The framework needs to be further developed, however. The recommendation is to conduct further research on the information needs of the preliminary stakeholders of a business sector analysis and on new insights on the business sector analysis.
TABLE OF CONTENT
Contents
MANAGEMENT SUMMARY ... 3
TABLE OF CONTENT ... 4
TABLES & FIGURES ... 8
CHAPTER 1 SET-UP OF RESEARCH AND THESIS ... 10
1.1 Content and structure of this research ... 10
1.2 Content and Structure of the Thesis ... 11
CHAPTER 2 INTRODUCTION IN THIS RESEARCH ... 15
2.1 Globalization and international trade ... 15
2.1.1 International trade according to the comparative cost advantage and returns to scale ... 16
2.1.2 Need for information ... 17
2.2 New Zealand as research area ... 17
2.2.1 Choice of sector for research in New Zealand ... 18
2.3 The goal and contribution of this research ... 19
2.3.1 Greenhouse building suppliers in the Netherlands ... 20
CHAPTER 3 RESEARCH DESIGN ... 21
CHAPTER 3 RESEARCH DESIGN ... 21
3.1 A management research approach ... 21
3.2 Problem statement and research objective ... 22
3.3 Research question... 23
3.4 Sub questions ... 24
3.5 Methodology ... 24
3.6 Data collection ... 25
3.7 Demarcations on research ... 27
CHAPTER 4 THE GOAL OF A BUSINESS SECTOR ANALYSIS ... 30
4.1 The main goal of a business sector analysis ... 30
4.2 The industry attractiveness ... 32
4.3 Market-Sector Combination Possibilities Analysis at the Netherlands Embassy ... 32
CHAPTER 5 LITERATURE REVIEW ON ANALYSIS METHODOLOGIES ... 34
5.1 Selection of literature ... 34
5.2 Selected literature... 35
5.4 Business systems by Richard Whitley ... 37
5.4.1 Key features ... 38
5.4.2 Institutional context ... 40
5.5 Cultural dimensions and Hofstede ... 42
5.5.1 Cultural dimensions by Trompenaars and Hampden-Turner ... 45
5.5.2 Trompenaars & Hampden-Turner’s dimensions in comparison with Hofstede’s dimensions .... 48
5.6 Porter’s Diamond and Five Forces model ... 49
5.6.1 Diamond Model ... 49
5.6.2 Five forces model ... 51
5.6.3 The “six forces” model as determined by the Game Theory: ... 53
5.6.4 Using Porter´s framework in business sector analysis ... 55
5.7 Resource-Based Value Perspective ... 55
5.7.2 Using Resource-Based View and Porter´s framework in a composite model ... 56
5.8 Market entry Strategies ... 57
5.2.7 SWOT analysis ... 58
CHAPTER 6 ANALYIS OF THE METHODOLOGIES IN PREVIOUS RESEARCHES ... 59
6.1.1 Smidts, W.D., (2006), Bilateral Trade and Investments Research ... 59
6.1.2 Foundation for further research ... 61
6.2 Van Wasbeek, R.M., (2007), Wastewater treatment in Vietnam ... 62
6.3 Koopman, J.M., (2007), The Vietnamese banking sector in transition: Looking for promising investment opportunities... 63
6.4 Velderman, N.A., (2007), Foreign investment in Vietnam: Business opportunities for Dutch firms in the cold chain industry in Vietnam ... 65
6.5 Theories used ... 67
6.6 Similarities in the used methodologies between the researches ... 68
CHAPTER 7 REDESIGNING THE METHODOLOGY FRAMEWORK ... 69
7.1 What is opted to analyze? ... 69
7.2 Results from questionnaire ... 71
7.3 Conceptual Methodology Framework ... 72
CHAPTER 8 INSIDE NEW ZEALAND ... 78
8.1 Key facts about New Zealand ... 78
8.2 Political environment ... 80
8.3 Economical environment ... 81
9.1 The State ... 86
9.2 Financial System ... 86
9.3 Skill Development and Control System ... 87
9.4 Trust and Authority Relations ... 87
9.5 Characteristics of the Business system ... 88
9.6 New Zealand’s business system identification ... 89
CHAPTER 10 DIMENSIONS OF NEW ZEALAND´S CULTURE ... 90
10.1 Power Distance dimension ... 90
10.2 Uncertainty Avoidance dimension ... 90
10.3 Individualism dimension ... 91
10.4 Masculinity dimension ... 91
10.5 Long-term orientation dimension ... 91
10.6 Conclusion ... 92
CHAPTER 11 PORTER´S DIAMOND ON NEW ZEALAND'S GREENHOUSE SECTOR ... 93
11.0 Greenhouse sector in general ... 93
11.1.1 Factor conditions ... 93
11.1.2 Demand conditions ... 94
11.1.3 Related and supportive industry ... 95
11.1.4 Firm strategy, structure and rivalry ... 95
11.1.5 The government and chance factors ... 95
11.2.1 Threat of New Entrants ... 96
11.2.2 Bargaining power of suppliers ... 96
11.2.3 Bargaining power of buyers ... 97
11.2.4 Threat of Substitute Products or Services ... 97
11.2.5 Rivalry among Existing Competitors ... 97
11.3 Conclusion ... 97
CHAPTER 12 RESOURCE-BASED VIEW PERSPECTIVE ON NEW ZEALAND'S GREENHOUSE SECTOR ... 98
12.1 Value of the resources ... 98
12.2 Rarity of the resources ... 98
12.3 Non-imitable resources ... 99
12.4 Non-substitutable resources ... 99
12.5 Conclusion ... 99
CHAPTER 13 MARKET ENTRY IN NEW ZEALAND'S GREENHOUSE SECTOR ... 100
13.1 Market entry barriers ... 100
13.2 Joint ventures ... 101
13.4 Strategic Alliances ... 101
13.5 Licensing and franchise strategy ... 101
13.6 Greenfield strategy ... 102
13.7 Conclusion ... 102
CHAPTER 14 SWOT ANALYSIS OF THE NEW ZEALAND'S GREENHOUSE SECTOR ... 103
14.1 Sector strengths ... 103
14.2 Sector weaknesses ... 103
14.3 Sector opportunities ... 103
14.4 Sector Threats... 104
CHAPTER 15 CONCLUSION ON THE METHODOLOGICAL FRAMEWORK ... 106
CHAPTER 16 RECOMMENDATIONS FOR FURTHER RESEARCH ... 107
REFERENCES ... 108
WEBSITES ... 113
APPENDIX A - Questionnaire to Dutch companies and organizations in greenhouse building sector ... 114
APPENDIX B - Table with results from questionnaire ... 119
APPENDIX C - Overview scores per category ... 120
APPENDIX D – Overview Dutch Greenhouse Building Suppliers ... 121
APPENDIX E - Statistical tables about NZ and NZ horticulture... 122
TABLES & FIGURES
Table 1: Schematic overview Thesis ... 12
Table 2: Sub questions and related chapters ... 24
Table 3: Sources of secondary data for research ... 26
Table 4: Characteristics of business systems ... 39
Table 5: Institutional features among different types of business systems ... 40
Table 6: Results of questionnaire divided by importance ... 72
Table 7: Ranking of countries investing in New Zealand ... 79
Table 8: Current participating agreements ... 82
Table 9: Future agreements under negotiation ... 82
Table 10: Top 3 major export and import products for New Zealand ... 83
Table 11: Top 3 of export market countries and supplier countries for New Zealand ... 83
Table 12: New Zealand‟s distribution of GDP per sector ... 83
Table 13: Characteristics of Business systems ... 88
Table 14: Institutional features among different types of business systems ... 89
Figure 1: three phases of research ... 10
Figure 2: Porter´s Diamond and factors of national advantage ... 51
Figure 3: Porter´s five forces ... 52
Figure 4: The Theoretical framework for Business Sector Analysis ... 73
PART 1
GENERAL INTRODUCTION
CHAPTER 1
SET-UP OF RESEARCH AND THESIS
This introduction chapter will explain the set-up of the research on business sector analysis conducted in New Zealand and the structure of this thesis. This chapter will not discuss the introduction on the research itself as this will be done in the following chapters.
The research is conducted in twofold and thus consists of two phases, and phase three as concluding part. In phase one the focus of the research was on the development of a framework for systematic business sector analyses on foreign business sectors. In phase two the focus of the research was on the actual approach of the developed framework on the greenhouse growers sector as located in New Zealand. To stay in line with this set-up of two different phases, and to make reading the thesis in a more convenient matter the reader can find three parts in this thesis, where two parts are representing the two phases of the research and the latter part is containing the overall conclusion on the research.
The content and structure of the research will be explained and discussed in more detail in paragraph 1.1, and the content and structure of the thesis will be explained in paragraph 1.2.
1.1 Content and structure of this research
As it will be discussed more in detail in chapter two, this chapter briefly highlights the content of the three phases. The consistence of the three phases is made clearer in figure 1.
The first phase of the research has the focus on the development of a new methodological framework for business sector analysis that is founded on the previous business sector researches conducted in Vietnam and literature. In this phase the methodologies of the previous researches will be analyzed on their efforts. In combination with literature research there will be a new methodological framework created. This part has the specific aim to create a tool that can be used for future business sector analyses providing that information that is needed to know and that provides how to get this information.
In phase 2 of this research this methodological framework is used to analyze the greenhouse sector within the horticulture sector in New Zealand. The specific aim of this phase is to inform
Phase 1
Analysis of previous researches and literature → Creation of new methodological framework Phase 2 Test new methodological framework on
greenhouse sector New Zealand
Phase 3
Conclusion on
observations of the results from the new
methodological framework and recommendations for further research
about the business opportunities in the greenhouse sector for Dutch companies. Next to this, phase 2 of the research also to serve as case study for the developed framework.
The last phase comprises the conclusion on the used theoretical framework and on the recommendations for further research.
1.2 Content and Structure of the Thesis
The three phases of the research as mentioned in paragraph 1.1 are divided into five parts, each part covers one specific element of the research. Table 1 displays the structure of the thesis based on the 5 parts. The thesis is also split up in phase 1 (containing part 1, 2 and 3) and phase 2 (containing part 4 and 5).
Part 2 of this thesis is the introduction on the research and covers the introduction in the research and the research design.
Part 3 covers the development of the methodological framework, and contains the following topics; the goal of business sector analysis, the literature review on business sector analysis theories, the analysis of the methodologies used in the previous researches on business sector analysis, and will finalize with the redesign of the methodological framework, and will be the basis of phase 2 of the research.
Phase 2 of the thesis contains part 4 and 5. In part 4 the business sector analysis is done on the greenhouse sector in New Zealand based on the new framework. This part is subdivided into 6 chapters where each chapter covers a step of the new framework. First is started with a general description of New Zealand discussing the general features of the country with a global insight in political, economic, demographic features. Chapter 9 will cover the business systems in New Zealand. Chapter 10 will analyze New Zealand‟s cultural dimensions.
Chapter 11 and 12 will focus on the greenhouse sector at meso-level. Chapter 11 covers Porter‟s framework whereas in chapter 12 the Resource-Based View perspective will be discussed. Chapter 13 will focus on micro-level with the market entry analysis within the sector. Chapter 14 will discuss the SWOT analysis based on the interviews with the stakeholders in the Greenhouse sector of New Zealand.
Phase 3, the final part, is the overall conclusion part with the conclusion of this research in chapter 15 and the limitations and the recommendations for further research in chapter 16.
P has e 1 De v e lopm e nt of f ra m e work Part 1
General introduction Chapter 1 Set-up of Research and Thesis
Part 2
Introduction on research
Chapter 2 Introduction in Business Sector Analysis Research
Chapter 3 Research Design
Part 3 Development of Methodological
Framework
Chapter 4 Goal of Business Sector Analysis
Chapter 5 Literature Review
Chapter 6 Analysis of Methodologies
Chapter 7 Redesign of Methodological Framework
P has e 2 A ppl y ing the fra m e work Part 4
Business Sector Analysis on New Zealand's Greenhouse Sector
Chapter 8 Nex Zealand’s business environment
Chapter 9 Business System of New Zealand
Chapter 10 Dimensions of New Zealand's Culture
Chapter 11 Porter's Diamond on New Zealand's Greenhouse Sector
Chapter 12 Resource-Based View Perspective on New Zealand's Greenhouse Sector Chapter 13 Market Entry in New Zealand's Greenhouse Sector
Chapter 14 SWOT analysis of the New Zealand's Greenhouse Sector
P has e 3 C oncl usi on on fra m e work Part 5 Conclusion
Chapter 15 Conclusion on the Methodological Framework
Chapter 16 Limitations and Recommendations for Further Research
Table 1: Schematic overview Thesis
PHASE 1
PART 2
INTRODUCTION ON RESEARCH
Chapter 2: Introduction in Business Sector Analysis Research
CHAPTER 2
INTRODUCTION IN THIS RESEARCH
The chapter starts with the introduction in globalization and growth in international trade. Globalization can be seen as a driver for companies seeking for opportunities abroad their domestic markets and thus creating a need for foreign business sector analyses. In this chapter will also be explained what and to whom this study will contribute and what the importance of this study in specific is. The latter part of this chapter will contain the explanation of the choice for New Zealand as the country for research, and the greenhouse sector that is the subject of research.
With regard to this thesis, the whole research is done in favour of the Netherlands Embassy in New Zealand whereas the business sector analysis itself is done for the Dutch companies and organizations operating in the greenhouse sector. However, both the Netherlands embassy and the Dutch companies and organizations must be seen as subjects in this research and the business sector analysis tool that is designed in this research is not solely designed specific for only the Netherlands embassy or consulate and for only the greenhouse business sector, but as a multiple applicable tool that can be used at all embassies and consulates and for all sector researches by these embassies and consulates around the world.
2.1 Globalization and international trade
As Palmer and Hartley (2006) have stated in their work; a number of developments have caused that business environments have become more global. Examples of these developments are disappearing international trade barriers and improvements in the communications as well as more convergence between different cultures and the growth of large multinational corporations. In this perspective companies are seeking towards opportunities to go abroad and expand their markets along with the increasing importance of international trade (Palmer & Hartley, 2006). Palmer and Hartley (2006) state that explanations for the globalization and international trade reasons can be found at two levels: At micro-level, and at macro-level.
At micro-level, the pull factors of going global are derived from the attractiveness of a potential overseas markets, and the push factors for the globalization make the organization‟s domestic market appear less attractive and stimulate to go across the borders. Added to both factors can also be the inputs of resources.
the increase in household incomes resulting in a greater consumption worldwide (Palmer & Hartley, 2006). Davis (1997) argues that there are two principal theories of why countries trade; the comparative advantage and the increasing return to scale.
With the process of globalization companies are more and more seeking towards opportunities abroad for market expansions and for continuation or improvement of the company‟s growth. As a result, these companies are looking for information on what their opportunities are in the business sectors in other countries, in developing and in developed countries.
2.1.1 International trade according to the comparative cost advantage and returns to scale
Adam Smith refers in his work „An Inquiry into the Nature and Causes of the Wealth of Nations‟ (1776) to the principle of absolute advantage, to describe how a country can benefit from trade when it has the lowest absolute cost of production in a good. In short, the idea behind the theory of Smith is that the world economy, and so the national economies will benefit if all countries concentrate on the production of what they are good at and exporting the surplus of their production and import from other countries those goods in which the other countries have an advantage in production (Palmer & Hartley, 2006).
David Ricardo explained the comparative advantage in his work „On the Principles of Political
Economy and Taxation‟ (1817), in what he describes that countries should specialize in the
products and services in what it has a comparative advantage. Ricardo (1817) stated that even if a country could produce everything more efficiently than any other country, it would gaining the most from specializing in what it was best at in producing and trade their surpluses with other nations (Case & Fair, 1999). Both theories contribute to the understanding of the globalization process and the international trade, with the description of the processes of why countries produce and export one good and/or service and import the other good and/or service.
The Heckscher-Ohlin theorem takes into account the returns on scale more as reason for international trade than the comparative advantage (Davis, 1997). The Heckscher-Ohlin model considers relative endowments of the production factors as land, labour and capital as the determinants for a country‟s comparative advantage. The local abundance of the required factors of production gives the country the comparative advantage (Dunn & Mutti, 2004)
similar technologies, trade between North-North countries exists through returns to scale and economies of scale.
2.1.2 Need for information
The introduction of the theories on comparative advantage contributes to the understanding of the search for business opportunities and the need for a functional methodology to analyse the attractiveness of a business sector in New Zealand for Dutch companies. Even with the fact that both countries can be seen as equal and thus neither country has an absolute advantage over the other, the theory of comparative advantage indicates that there can be opportunities in New Zealand.
The promotion of bilateral trade and investment is a part of the role that the Royal Netherlands Embassy and Consulate General of the Netherlands has. With the cooperation between the ministries of Foreign Affairs and Economic Affairs more attention is paid to this aspect, in the role of reporting the market sector combination opportunities for the Economische
Voorlichtingsdienst, abbreviated as EVD (Economic Information Service). This is set up to
provide information on the markets per country for Dutch companies interested in that country. The EVD is a subdivision of the ministry of Economic Affairs in the Netherlands, and is in charge of the promotion and facilitation of the international activities of the Dutch companies, governments and institutions.
In the recent past four researches have been conducted in Vietnam for the Consulate-General in Hanoi. The researchers have analyzed the opportunities in specific business sectors in Vietnam for Dutch companies. The purpose of these researches was to support the Royal Netherlands Embassy and Consulate General situated in Vietnam by providing information on the potential sectors and by providing an analysis tool for future research (Smidts, 2006; Koopman, 2007; Velderman, 2007; Van Wasbeek, 2007).
2.2 New Zealand as research area
developing country at the moment of the previous researches. One of the most important reasons however to conduct research in New Zealand is being the high investment level of the Netherlands in New Zealand, being the fourth-largest investing country in New Zealand, but low bilateral trade level existence between both the countries. This could imply that there are possibilities for more opportunities. New Zealand, for example, is being selected as a two-star country by the Dutch government according to a ranking system for economic importance of the foreign countries for the Netherlands. This ranking system is set up as an outcome of the same cooperation between the Dutch ministries of Economic Affairs and Foreign Affairs, in order to promote more the economic roles as well as the information services tasks of the Embassies and Consulate-Generals (Ministries of Economics and Foreign Affairs, 2000).
Indications as the geographical location of New Zealand is one of the main reasons indicated by the Dutch companies why they do not look directly to New Zealand as interesting new market to enter. Other reason for this is the small market size of New Zealand. Despite of these reasons, to conduct the research on a business sector in New Zealand creates value in several ways. First, as also is mentioned by Smidts (2006) in his work, it supports and improves the information services at the Netherlands Embassy directly. Second, it could provide also insights for the managerial field of international business with the analysis of methodologies and the providence of a revised systematic tool for creating knowledge on the foreign markets, tested in a case-study in New Zealand.
2.2.1 Choice of sector for research in New Zealand
This research serves two goals; in the first place to test the new framework as analysis tool in the field of international business, and in the second place, it serves the Netherlands Embassy located in Wellington, New Zealand. This makes the Netherlands Embassy the primary decider in the choice of what sector will be subject to analyze.
First of all, it is important to demarcate the sectors of a country for the business sector analysis. In the previous researches, several characteristics are determined for the identification of promising industries. An industry is promising at a combination of an attractive market, and a reasonably expected suitable Dutch supply according to the EVD. The definition by the EVD of promising industries is also used in the previous researches.
The researchers have also followed the following determinants for promising sectors:
Identification as priority sector by national government Leading role of Dutch companies in the specific industry
The EVD holds an interest in knowledge on sectors in a specific country that has the most requests for information and according to the Embassies and Consul-Generals do have market-sector combination opportunities. The Netherlands Embassy has in consultation with the EVD identified certain sectors in New Zealand worth for business sector analysis. The choice for the sector depends also on the amount of interest by the Dutch companies and organizations for information about the sector.
The EVD reports that over 2007 of all the trade requests on New Zealand, 20.4% of them were solely for the agriculture sector, making it one of the sectors with the most requests. This is indicating that there is attention from Dutch companies for this sector.
Based on the above mentioned determinants, the Netherlands Embassy in New Zealand and the EVD have brought up the „greenhouse‟ sector in New Zealand as promising sector that would need further analysis. The greenhouse sector must be seen as the production of fruit, vegetables, flowers, horticultural specialties etcetera in glasshouses. In New Zealand this is called greenhouses, because it covers both the glass- and plastic houses. The sector is according to International Standard Industrial Classification part of the broader agriculture, hunting and forestry sector, the category A. By narrowing this further down, it belongs to the ISIC group 011; growing of crops, market gardening, horticulture, so far the production is in glasshouses or greenhouses.
The focus within the greenhouse sector is on request by the EVD on the water management and especially the energy saving technology because of the leading role the Dutch companies have within these technologies, and the need from the New-Zealand greenhouse growers as indicated by Horticulture New Zealand, the umbrella organization for the horticulture industry in New Zealand. This need strongly finds its base in the Kyoto-Protocol and the growing importance of sustainability and climate change issues when policies are formulated, and environmental regulations settled by the New Zealand‟s government that proceeds from contributing to deal with sustainability and climate change. The so-called „greenhouse‟ gas emissions, named after the effect of gases on global warming equal to how the greenhouse operates, in New Zealand is a result of the energy consumption by the agriculture sector, that is the largest contributor with half of the total greenhouse gasses in New Zealand (Ministry for the Environment, 2008)
(2006), Koopman (2007), Velderman (2007) and Van Wasbeek (2007) have been seeking for additional methods and theories to complete their business sector analysis. Promising industries are identified on the hand of a range of factors. These factors and the methods and theories the researchers used will be described in more detail later in chapter five. The purposes of the four studies have been the same but differ in methodology and theories used.
The attempt of this research is to analyze the methodologies and theories used, and to develop a new framework for business sector analysis offering a contribution to the Royal Netherlands Embassy in New Zealand and to provide an updated tool in the area of international business. In this area managers do need practical tools they can use for analysis, and with the growing roles of the economic departments at the Netherlands Embassies and Consulate Generals, the tool should contribute to and make ease of their information service providing role towards the Dutch companies and future research. In that perspective this research has the attempt to contribute to the studies of international business and business sectors.
2.3.1 Greenhouse building suppliers in the Netherlands
Next to the already mentioned contribution of this research towards the Netherlands Embassy in New Zealand and towards the management field of international business, this research contributes to the greenhouse building companies located in the Netherlands as it analyses the content of the greenhouse-sector. The analysis provides information on the sector on the hand of the description of both the institution and composition of the industry and its opportunities and creates value as it contributes to the decision-making process of the Dutch greenhouse-building companies whether or not to go into business with or in New Zealand.
Dutch greenhouse building suppliers do play a leading role in providing high-end greenhouse buildings for the professional growers. Regarding the environmental requirements the greenhouse buildings comply with the latest requirements on efficient energy-saving greenhouses that produce less carbon and have lower maintenance costs. These kind of greenhouses can play an important role for greenhouse growers in the production.
Chapter 3 goes further into detail on the research design of this research.
CHAPTER 3
RESEARCH DESIGN
In this chapter the research design for the research is described; it will discuss how this research is done. The chapter starts with a discussion on the content of research; this will give insights in the set up of this research. This is followed by the description of the research objective and problem statement. These two paragraphs in fact describe the topic of research. Gill and Johnson (2006) reckon that the work of a management research cannot start until a topic for the research is identified. The topic in this research is defined as the development of an updated analysis tool for information about business opportunities in different sectors.
Following to the research objective and problem statement will be continued with the explanation of the research question and the sub questions. Next to this the methodology that is used for the research and the scope of research is discussed. According to De Leeuw (2000), a problem statement is build up in a research objective, a research question, and the demarcations of the research. The demarcations of this research are explained in the scope of research part. The chapter will be finished with the overview of the limitations of this research.
Baarda and De Goede (2001) make a difference between practical relevance and theoretical relevance of a research. Practical relevance refers to research collecting information that is useful for solutions of the given problem. Theoretical relevance refers to the goal of research in order to contribute and expand knowledge on topic that not directly has to have a social utility. This research fulfils both relevancies. First it has the practical relevance in the way of helping the Netherlands embassy with the task to provide information services to Dutch companies requesting on the country, as Smidts (2006) has made clear in his thesis. The theoretical relevance lies in the fact that a new theoretical framework is designed for business sector analyses and that is also useful for future analyses on other business sectors.
3.1
A management research approach
Within the management field, and with special focus on research, the accusation is that there is the existence of a gap between academic research and the management practice. Solutions defined in academic researches are difficult to implement because of misunderstanding or theory does not fit the practice (Gill & Johnson, 2006). Managers seemed to believe that management research is largely irrelevant to the problems they were facing.
organizations? As Pfeffer (1995) has argued; management research should develop a consensus between theory and management methodology that is enforced by theoretical and methodological conformity.
This research starts from this point of view by involving also the end users of a business sector analysis more into research. Here must be noticed that we must make a distinction in end users when using this term in this research. Within this research we can identify different types of end users; there is on one hand of course the Royal Netherlands Embassy in New Zealand in the first place, with the attempt to serve with the findings of this research, and on the other hand there is the group of end users of the information provided by a business sector analysis. It is this group of end users who are involved more into this research.
For this research, the end users are identified as the Dutch companies and organizations operating in the greenhouse sector.
3.2
Problem statement and research objective
Smidts (2006), Velderman (2007), Van Wasbeek (2007), and Koopman (2007) have stated that the use of the theories of Whitley and Porter are of good fit for this type of research. This could thus mean that the theories of Whitley and Porter are the key stones in each analysis tool that is used for the business sector analysis.
Richard Whitley (1999) has developed a theory to understand in what business system the sectors are operating and Michael Porter (1980; 2008) has developed the diamond model and the five forces that explains why different countries have different comparative advantages, and also why business sectors have different comparative advantages.
With each tool the purpose of each research was the same; to analyze the business sector opportunities for Dutch companies. Comparing the frameworks of Smidts (2006), Velderman (2007), Van Wasbeek (2007), and Koopman (2007) together teaches us that each researcher has used additional methods, next to the theories of Whitley (1999) and Porter (1980;2008), to fulfil their analysis that differs from each other. In this light, we can conclude that each research has the same purpose, but different method for reaching that purpose. The researches show that there are several ways for analysis of the opportunities within a business sector in a foreign country. According to Verschuren (1999), a research problem consists of a research objective and the research question. The research objective is the goal of doing research and is derived from the problem indication. Within this light, the problem indication for this research is; is it possible to create a combination of the different methods used into a new optimal methodological framework on business sector analysis, with additions from literature research on this topic?
3.3
Research question
As outlined in the problem statement, this study has the goal to develop an optimal analysis tool, that is built on the methodologies used in previous research and on literature, and that is general applicable for future business sector analysis. With the attempt to design an „optimal‟ framework for business sector analysis, it is important to keep the prevention in mind within the research question, as it is difficult to measure what is optimal, making the research question of a normative nature (Baarda & De Goede, 2001). However, an optimal framework in this research will be defined as a framework that in a systematic manner helps to analyse a business sector and providing that information that meets what is requested by the end-users of the business sector analysis. Hence, we can say two things about the analysis tool; one, it should be systematic, and two, it should meet the request for information, or in other words, the analysis tool should give that information that is requested.
The research question is therefore:
What theoretical framework can be used for international business sector analysis? The main question is stated more general than rather specific, but in this research the question will be answered by a narrowing down approach within the analysis of previous researches and literature. A remark here is that we search for an optimal tool for international business sector analysis. The meaning of optimal is rather subjective and thus difficult to measure and that makes it dangerous to use in research context. The optimal analysis tool should be defined here as the analysis tool that in a systematic manner and for general use gathers the information covering the needs by the Dutch companies and organizations in this case.
In this research a section will also contribute to the global overview of New Zealand‟s position, with general information on New Zealand as country and as participant in the world. This part will also contain an economical, political, and environmental part. Not only is the goal of this section to provide the reader the opportunity to create a clear view of New Zealand as a whole, as in the research the focus is mainly on a business sector in New Zealand, but more important, it provides a general understanding of the environment wherein the business sector is operating. As the tool will serve for the economic departments of the Consulate Generals and Embassies, it makes sense that they also need to provide general, or on macro-level, information about the country.
3.4
Sub questions
Sub questions are determined in order to help with answering the main research question. Similar to the main question, also the sub questions are derived from the problem statement and the research objective. By answering these sub questions, an answer can be found on the main research question. Table 1 displays what following sub questions are determined and in what chapters these sub questions are answered:
Sub question: Chapter:
What is the goal of a business sector analysis? 4
What are the characteristics of the business sector opportunities? 4
What is stated in the literature about business sector analysis? 5
What methods are used in the four researches? 6
What is the content of the best practices framework design? 7
What are the results of the analysis of the New Zealand business sector? 8, 9, 10, 11, 12, 13, 14
What do these results contribute to the business sector analysis? 15
Table 2: Sub questions and related chapters
The sub-questions are designed to give a clear view on what exactly the goal of a business sector analysis is, and what is opted to measure. What are the characteristics of the opportunities must give a clear definition of the attributes that needs to be measured in the sector. For the creation of the best-practices analysis tool literature on this topic needs to be screened for additional elements to this tool, so together with the best-practices from the four previous researches a new framework for tool can be created. This new framework is than tested in the case of a research on the opportunities for the Dutch companies in a business sector in New Zealand, the water and energy saving techniques for the greenhouse sector in New Zealand. As mentioned before; in this research there will be also a part that provides general information on New Zealand, but this will not be seen as an answer to the research question, and therefore there is no sub-question on this.
3.5
Methodology
information gathered in the business sector analysis intents to inform the organizations and companies in their decision making process. The analysis tool will be designed, however, to help the Netherlands Embassy in providing this information and therefore the focus cannot only be on the end users alone. This means that the new analysis tool cannot be solely based on the companies and organizations in the greenhouse sector. This sounds logical rather than awkward, because the tool should be general applicable, as being one of the conditions it should fit. In other words, it should be able to be adapted on also other sectors and thus serving other end users in that specific sector, who can have different needs for information. A questionnaire was designed for measurement of what the Dutch companies and organizations see as important within a business sector analysis. The outcomes provide a manual for the further development of the theoretical framework that helps with gathering information on these subjects. Literature review and the analysis of the previous researches provide insights in what is needed for an analyzing process of the business sector in general. In the chapter on the goal of business sector analysis is tried to define what is opted to measure with the business sector analysis in order determine the needed theories. To put it simple, on one hand you have the preferences for different types of information, and on the other hand you need to find out how to gather this information. You look for the theories or a combination of theories in analysis that cover all the information that is needed.
It might be contrary that the literature review chapter follows the chapter on the goal of a business sector analysis, wherein also attention is paid to the literature on business sectors, but the literature review chapter and the previous researches analysis chapter the theories will be discussed that might contribute to the analysis of the business sector. Based on these findings a new framework will be developed in chapter six. The framework is designed that it 1) answers the needs of the Dutch companies and organizations operating in the greenhouse sector and 2) it adds relevant information that is useful for these companies and 3) it is useful for future research of other business sectors conducted by the Netherlands Embassy in New Zealand.
3.6
Data collection
The data collection within this research is done from both primary resources and secondary resources (Baarda & De Goede, 2001). For information from primary resources is made use of semi-structured questionnaires, as its value lies in the fact that it both can provide rich and unexpected findings, and that it has systematic coverage leading to more precise answers and consistency (Baarda & De Goede, 2001; Robson, 2002).
agencies, United Nations, research organizations, publications, trade associations and online resources.
Table 2 hereunder shows the sources of secondary data that are used in this research for business sector analysis:
Sources of secondary data for research Government agencies Ministry of Agriculture and Forestry Ministry of Foreign Affairs and Trade Ministry of Environment
CIA world Factbook New Zealand Government
National agencies New Zealand Horticulture Export Authority New Zealand Horticulture Exporters Council Statistics New Zealand
United Nations International Monetary Fund World Bank
Research organizations Economic Intelligence Unit Crophouse Limited New Zealand
Publications Datamonitor
Hortresearch
Trade associations New Zealand Trade and Enterprise Horticulture New Zealand
Tomatoes New Zealand
Online resources Energy Efficiency and Conservation Authority (EECA)
Table 3: Sources of secondary data for research
The Horticulture New Zealand, representing 7000 commercial fruit and vegetable growers in New Zealand, provides information about the sector, the business system, the culture, and the New Zealand greenhouse-growers and therefore can serve as both secondary and primary resource. The greenhouse growers operating in New Zealand and the Dutch companies in the greenhouse technology are identified as further sources of primary information and data for this research.
Horticulture Export Authority includes: working with Product Groups in the development of their EMS, approving and enforcing EMS requirements, export licensing, monitoring & enforcement of license holders, trade access advocate for horticulture and lobbying government on relevant issues.
The Energy Efficiency and Conservation Authority (EECA) promote sustainable energy by changing the way New Zealanders think about, and use energy. EECA works to raise community awareness of energy efficiency and renewable energy issues and provides businesses and individuals with the tools to make changes. EECA develops programmes to meet the needs of specific markets, often working in partnership with other organisations.
3.7
Demarcations on research
An important remark needs to be made that the research about what required information a business sector analysis should contain is done solely under the stakeholders in the greenhouse sector. This is thus a demarcation as the results only represents the requirements from this specific group of stakeholders and can therefore not be accepted as the general requirements within every specific sector. For this research however the assumption is made that the results will be more or less the same when this research is done among stakeholders in other sectors and therefore will support the analysis tool that is developed in this research. Although here a recommendation will be that in further research an analysis of the requirements from the stakeholders in different sectors is done. See also chapter 16 limitations and recommendations at the end of this thesis.
Following to this is the demarcation that the research is done in one sector in one country because of the timeframe, that makes examining the analysis tool not optimal as the conclusions about the function of the analysis tool are based on a single test area. However the analysis tool is also based on the results in previous researches in different sectors in Vietnam and is a best practices tool. Therefore the assumption can be made that it will be applicable in other sector analyses as well.
Another demarcation is the moment in time of conducting this research. This can be seen as a more common problem within research. Although in this research is aimed to develop an analysis tool according to the latest and most up-to-date theories, there is always the risk of being outdated at the moment of publication of this research. To pursue the possibility of continuous usefulness of this analysis tool, it will be based on the still standing and common theories within the business and economics science.
PART 3
DEVELOPMENT OF METHODOLOGICAL FRAMEWORK
Chapter 4: The goal of Business Sector Analysis Chapter 5: Literature Review
Chapter 6: Analysis of Methodologies
CHAPTER 4
THE GOAL OF A BUSINESS SECTOR ANALYSIS
The content of this chapter is to answer the first sub-question; what is the goal of a business sector analysis. By answering this question it aims to support the development of the new framework for business sector analysis, as the design process will use the findings in this chapter to match theory to information needs. It is logical that the framework should support the goal of the business sector analysis.
In order to answer the sub question, it is important to define the main goal of the business sector analysis, and thus will this be the first step. Reviewing the components of industry attractiveness helps to identify those attributes that might be in interest of the Dutch companies to know about a business sector. Both paragraphs lead to the question what is opted to measure with a business sector analysis.
In this research thesis the term business sector analysis is used. This is not a common denomination, as sector analysis is more often used, or industry analysis. However, the term business sector seems to reflect the content of the research, as only the term sector in economics spans the primary, secondary, tertiary, and public sector. The term business sector narrows it down towards a group of companies with the same operations and products (Whitley, 1999).
4.1 The main goal of a business sector analysis
To define what the goal of a business sector analysis is, an adaptation of the point of view of the actors who are requesting the analysis is needed. As a matter of fact, here is asked what do we
want with a sector analysis? By simply saying that the main goal of a business sector analysis is
providing information on the trade and investment opportunities within the sector, provides a more general answer to the question, rather than an in-depth answer.
Companies are demanding information about a business sector at the Netherlands governmental representatives in foreign countries as they base their decisions whether or not to go into business by trade or investment with the sector of that country. Therefore the representatives of the Netherlands, the Netherlands Embassies and the Consulate-Generals, need sector analyses to be able to provide the information. Or as Smidts (2006) state to fulfil the gap between information needs on the country by the Dutch companies and the provision of the information by the Consulate-General, or in this study the Embassy, to these companies. Smidts also highlights that the sector analysis should be a systematic analysis according to a framework that he has established (Smidts, 2006).
international level business sectors are classified according to the International Standard Industrial Classification (ISIC) from the United Nations Statistics Division, based on the activities of each sector.
An analysis of a business sector in general seeks answers to questions as what the business opportunities are in that sector with comparable operations, what the sector looks like as in how it is constituted, with the aim to understand the sector and to know the business opportunities, and so on. As is stated by Smidts (2006), this process of understanding should be done in a systematic manner.
In the light of the systematic understanding, Michael Porter has developed a framework for the industry analysis and business strategy development. Porter uses the term industry analysis, but has the same intent as the business sector analysis. According to Porter (2008), „awareness of the five forces can help a company to understand the structure of its industry and stake out a position that is more profitable and less vulnerable to attack‟. The five forces determine the competitive intensity and therefore attractiveness of a market (Porter, 2008). The framework of Porter (2008) will be further discussed in the literature review in chapter 4, but is mentioned here because it helps to understand the underlying industry structure and Porter mentions that the industry structure drives competition and profitability. It reveals insights to inform important decisions about whether to leave or enter the industry or sector. Understanding the sector means also understanding the institutions of the business environment of the country and sector in the decision making process. Whitley (1999) on the other hand has developed theoretical concepts of ideal types of business systems. Understanding in what ideal type or types of business systems a country can be placed means understanding the context of doing business according to Whitley (1999). His focus is on high level, in other words on country level whereas Porter (2008) focuses more on the sector level.
Both Whitley (1999) and Porter (2008) systematically analyse the structure and context of the environment of the sectors and wherein companies operate.
Both authors are the keystones for the analyses in the previous researches, and as will be shown in the following chapters, they will also be the keystones of the updated framework here.
4.2
The industry attractiveness
What are the components of the attractiveness of an industry? How to identify the attractive markets? When reporting on potential success for Dutch companies in overseas market sectors a first step is to identify these attractive markets. In principle, competitive advantage of the Dutch companies, operating in or supplying to a specific sector, should be a perfect supplement to the overseas similar to that specific sector. However, basing on the assumption that Dutch companies do have in essence a degree of competitor advantage, what can make overseas markets interesting? As is noted earlier, Velderman (2007) and Van Wasbeek (2007) mention in their work the factors for determining the opportunities of a sector as being; reasonable demand, commercial attractiveness, strategic importance, the price/quality ratios, business durability, the identification of the sector as being a priority, and the leading role of the companies in that industry.
Andrews (1971) suggested that the attractiveness of an industry depended on the nature of a firm‟s resources. Wernerfelt and Montgomery (1986) have considered the effects of industry profitability and industry growth on industry attractiveness and argue against viewing industry attractiveness seen as a universal dimension in their article on what an attractive industry is, as they state that what is attractive depends on a firm its relative advantages. Hofer and Schendel (1978) see industry growth and average industry profitability as two common measures of attractiveness. Wernerfelt and Montgomery (1986) argue however that these common measures do have contrary implications for different types of firms. Their findings conclude that efficient diversifiers would do better the more profitable t heir industries while inefficient diversifiers would prosper in less profitable environments. Other conclusion is that inefficient diversifiers would benefit relatively more from high market growth than efficient diversifiers.
In this perspective, when projecting it on the business sector analysis an industry is attractive for Dutch companies if they have an advantage that is needed in the sector in New Zealand, and when this sector is in growth and making profit, no matter the companies are efficient or inefficient diversifiers. This makes industry profitability and growth important attributes in the analysis phase of a sector and should also be included in the process.
It is logical that the market wherein a company is willing to enter is attractive because of the advantage in its broadest form the company has does fit in this market. Also when the market has growth potential, it creates opportunities in that companies want to be involved.
4.3 Market-Sector Combination Possibilities Analysis at the Netherlands Embassy
CHAPTER 5
LITERATURE REVIEW ON ANALYSIS METHODOLOGIES
„Whatever its scale, any research project will necessitate reading what has been written on the
subject and gathering it together in a critical review which demonstrates some awareness of the current state of knowledge on the subject, its limitations and how the proposed research aims to add to what is known‟ (Gill & Johnson, 2006, pp. 24-25). Gill and Johnson have defined that a
well conducted literature review finds its importance in the facts that it helps to describe the topics of interests and it refines research questions and directions for focus, it also presents clear descriptions and evaluations of theories and concepts, it will clarify the link toward previous research and highlights where new research can contribute in the area of research possibilities, a literature review also provides methodological and substantive insights into the research topic and the literature review can justify new research by underpinning the importance of new research through critical analysis on previous research and assumptions.
“…there is nothing so practical as a good theory.” (Gill & Johnson, 2006, p. 28). This chapter on literature review contains the analysis of the literature on the topic of business sector analysis. The attempt is to discuss different perspectives on systematic business sector analysis methodologies and to create a foundation for the framework that can be used on the sector analysis in New Zealand.
5.1 Selection of literature
The attempt is to search for literature discussing additional methodologies for sector analysis or the existing methodologies that are selected by; 1) the previous researchers in their analyses, 2) by the characteristics for market sectors drawn up by the EVD, and 3) the methodologies according to the judgment and opinion of the researcher. Gill and Johnson (2006) state that the researcher is the one that decides what concepts represent the aspect of the problem under investigation (Gill & Johnson, 2006, p35)
1991) and Rumelt (1991) should in combination with Porter´s framework offer a supplementary perspective on firm performance in a sector.
The selection of literature consists of a number of literatures wherein business sectors or business environments are analysed. Also the findings from the questionnaire are taken into account in this literature research and selection of theories; the respondents have for example also indicated that they would like to see a SWOT analysis on the sector and therefore the literature on SWOT analysis will be discussed in this literature review.
5.2 Selected literature
In this literature review is chosen to start from a broader macro-level focus towards a narrower micro-level focus. In this line first Palmer and Hartley will be reviewed. Palmer and Hartley (2006) discuss on how to evaluate overseas business opportunities by the leads of four types of environments. Next to this the literature of Whitley (1999) on business systems will be reviewed with his macro level methodology to analyze business systems. Also from a macro-level perspective the cultural dimensions of a country according to Hofstede (1991; 2001) and Trompenaars & Hampden-Turner (1997) will be discussed. From a meso-perspective Porter (2008) will be reviewed on his diamond of national advantage and the five forces model. The diamond is a framework that describes the determinants of national advantage, whereas the five forces model describes the five forces that shape industry competition. Next to Porter the Based View will be discussed. Rather than Porter´s framework (2008), the Resource-Based View has a more inside out approach on the firm performance within an industry (Spanos & Lioukas, 2001). From a perspective of conducting foreign business, the opportunities for market entry via a number of strategies is important (Yadong, 1999; Salomon, 2006; Sherman, 2004; Palmer & Hartley, 2006). Smidts (2006) discusses the advantages and disadvantages of a set of market entry strategies and the importance of choosing the right strategy. At last the SWOT analysis (Weihrich, 1982; Kumar and Waheed, 2007) will be discussed.
5.3 Evaluation overseas business opportunities by Palmer and Hartley
environmental factors can differ from the home market, and proper understanding of this environment can be the difference between success and failure of overseas operation. The questions that need to be asked in a so-called „overseas business environment analysis‟ are derived from the political, economic, social and technological environments. Each environment provides a different sight on the attractiveness of the foreign market different attributes that needs to be answered in order to conduct relevant analysis.
With this macro-level analysis of a foreign business environment Palmer and Hartley (2006) pave a path for a structural evaluation of the overseas business opportunities.
Lim (1996) uses the same approach, but serving a different goal, in her analysis of the evolution of Southeast Asian Business Systems. With the attempt to describe and explain existing business systems, Lim discusses first the economic, political, and cultural environment.
Political environment
The attractiveness of a specific national market is influenced by the political system stability. Even minor changes in the political system of a developed country can influence the attractiveness of the market. Protection of domestic producers by the government through for example licensing systems will disadvantage the foreign organization in entering that market. An organization also needs to analyze the regulations concerning product standards in the specific market. It is obvious that in international trade the merchandise traded should fit the country‟s requirements for the product or service groups. The country‟s restrictions on import of manufactured goods or government policies influencing the possibilities for production for companies can make the company‟s overseas operations uneconomic and inflexible and therefore unviable. Restrictions on currency movements out of the foreign country can make the country unattractive.
Economic environment
For the economic attractiveness of a country Palmer and Hartley (2006) recommend the use of the Gross Domestic Product per capita, as it is generally accepted as measurement because of the positive relationship between increase in GDP per capita and the increase in demand for products. Palmer and Hartley rightly discuss the use of the distribution of income within the country, as this may identify also valuable niche markets and location of these markets. Within the analysis of the economic environment it is important to place „great emphasis on future economic
performance and the stage that a country has reached in its economic development‟ (Palmer &
Social and cultural environment
As Hofstede (2001) has expressed; „culture is often a source of conflict than of synergy…‟1 Understanding of the culture is critical in doing business, as different rules and conventions apply across cultures. Also with entering foreign markets, it is of great importance of understanding the cultural differences between markets. Not only differences in the taste for products and services, but also different responses to similar products and services. These differences expand over the buying processes variations, obsoleteness of categories of goods and services in particular cultures and/or social structures, social acceptance of products and services in different cultures, different attitudes towards promotional programs, acceptable activities in procuring sales, and attitudes towards work. These attributes have effects on the performance of the organization when entering foreign markets.
Technological environment
The technological environment consists of those forces that affect the technology and that can create new products, new markets, and new marketing opportunities.
The analysis of the technological environment of the foreign market is of special importance for organizations requiring the use of well-developed technical infrastructures and labour able to work with technology. When exporting and implementing advanced technologies a logical requirement is that not only the infrastructure in a country is suitable for these technologies, but also that the local labour is well skilled to work with these technologies. This must also be analysed in a business sector analysis.
5.4 Business systems by Richard Whitley
