RFCD 2011: Dr. Beverly Morgan: Cluster Development in the Caribbean Agribusiness & Tourism in Jamaica
Regional Forum on Cluster Development in the Caribbean: Opportunities for BusinessCluster Development in Agribusiness & Tourism in Jamaica Beverley Morgan The Competitiveness Company November, 2011
Competitiveness: Context for Clusters• Competitiveness analysis covers the range of actions through which nations and firms “manage the totality of their competencies to achieve prosperity or profit” (Garelli, Top Class Competitors, Wiley, 2006, p.3).• Productivity key component of competitiveness- determines “how much firms or nations produce with limited resources”• Much more to competitiveness than productivity alone. ‘Competitiveness is also about changing mindsets: looking at the world, nations, firms, and people from a different perspective” (ibid, p. 21).
Every morning in on the Masai Mara in Kenya, a zebra awakens. She has only one thought: To be able to run faster than the fastest lion. If she cannot, then she will be eaten.Every morning on the Masai Mara in Kenya a lion awakens. He has only one thought: To be able to run faster than the slowest zebra. If not, he will be hungry and he will not be able to feed his pride.It is enough to know that with the rising of the sun, you must run. And you must run faster than you did yesterday or you will be eaten.
Why Clusters Matter• Firms often possess competitive advantage because national institutions that surround them are better suited for organising industrial activity in their particular sector of the economy (Porter, M, On Competition, Harvard University Press,1998)• “Firms do not create all the resources, infrastructure, and knowledge that are required to, make a product by themselves. If one considers the variety of supporting organizations associated with a particular industry, it becomes apparent that competency-enhancing or – destroying innovations can occur not only at the firm level but also at the level of what analysts have called the industrial district...(Murmann, J.P., Knowledge & Competitive Advantage, Cambridge University Press, 2003, p. 63).
The Challenge for the Caribbean• In the context of the Caribbean: Can the focus on cluster development alter the competitive space within which micro, small and medium-sized enterprises operate, thereby making them more competitive?
Developed vs. Developing Country Dichotomy• Porter: – Clusters in developing economies essentially less rich in connections – Involving fewer participants – More limited communications – Less developed linkages between institutions and firms. – On the contrary • clusters in developed economies involve “a dense mesh of continually evolving relationships and linkages…”
The Juke Box on The Corner Criteria Scoring (Points)Willingness to embrace new Low = 1-3 points Medium = 4-6 pts High = 7-10 ptsideas w/supporting resourcesPotential to be internationally Low = 1-3 points Medium = 4-6 pts High = 7-10 ptscompetitiveEmployment potential and GDP Low = 1-3 points Medium = 4-6 pts High = 7-10 ptscontributionMass (no#) of qualified firms Low = 1-3 points Medium = 4-6 pts High = 7-10 ptsPotential to motivate other Low = 1-3 points Medium = 4-6 pts High = 7-10 ptspotential clustersMacro barriers to success High = 1-3 points Medium = 4-6 pts Low = 7-10 pts
Cluster Selection ResultsCluster ResultsAgribusiness High Overall ScoreTourism High Overall ScoreEntertainment & Culture Medium Overall ScoreShipping and Berthing Medium Overall Score vThe Agribusiness and Tourism clusters posted high overall scores withgenerally comparable results across all of the criteria.The Shipping and Entertainment clusters both posted medium overallscores but their results differed significantly across the criteria.
Phased ApproachFacilitator-led Phase 0 Phase 1 Phase 2 Phase 3 Mobilise Execute Institutionalise Engage •Standardise new 1. Revalidate competitive practices•Define and engage Objectives and diffuse broadly •Communicate •Reconfigure•Evaluate 2.Engage Others with public and operational systems,competitiveness coordinate supportingpotential (define 3.Search for participants organizations tocompetitiveness Insightobjectives) sustain new standards •Execute important 4.Select & agree competitiveness-•Get authorisation winning •Leaders & members building initiatives reflect to consolidate/ coordination / strategiesencouragement to learning, internalise •Regular guiding principles, setproceed 5. Commit to Act performance priorities for future monitoring and active change management
What Were People Thinking? Mental Models Survey ResultsRate Jamaica’s current levels of each source of prosperity ranging from “among the best in the world” to“among the worst in the world” Amongst the best in the world (1 to 3) Average (0) Amongst the worst in the world (-3 to -1) Respondents considered the overall business environment in Jamaica to be extremely challenging. Government support for the private sector and the level of trust between the two was considered to be amongst the worst in the world.
Mental Models Survey ResultsGenerally speaking, would you say that most people in your country can betrusted, or that you cant be too careful in dealing with people? A significant majority of respondents stated that you can’t be too careful in dealing with fellow Jamaicans. JCCP
Process ReportThe National Summit marked a transition point in the project. The JCCP movedforward from mobilisation phase to execution phase: (Facilitator – Led) Phase I: Phase II: The National Mobilise Execute SummitPhase I Mobilisation efforts include: Meetings with over 300 companies 15 workshops with the IAC members Public presentations given to Associations and Chambers of Commerce in Kingston, Mandeville, Port Antonio, Ocho Rios, and Montego Bay Formal meetings held with dozens of chamber heads, industry association presidents, and large company CEOs Formal meetings held with Senior Government Ministers Newspaper articles voice competitiveness issues nationally Radio interviews on clusters and competitiveness
Agribusiness Cluster Process THREE LEVELS OF EFFORT & ACTIVITY1. Full Session: Agribusiness Sector A. Learning Environment B. Overarching strategy and direction-setting C. Cross-cutting initiatives D. Sub-group initiative updates & cross-fertilization E. One new strategy tool per session F. Initially, bi-weekly, then monthly2. Sub-groups A. Marketing, Sales Channels, Packaging, Standards, Supply B. Analysis of each opportunity area C. Initiatives to fill gap/meet opportunity D. Meetings as needed: initially, less frequently, increasing during implementation3. Individual Company Projects A. Coaching as requested (by senior experts & cluster facilitators) B. Open to all cluster participants
Agribusiness Cluster Production Supply Working Group (Groups Work with Facilitator Support)Commodity Jamaican Production Practices Best International Practices Yield Cost of Volume Yield Cost of Volume (kg/ha) production produced (kg/ha) productio produced nCountry Red PepperScotch 11364 J$35.2 /kg 300 t 9000 J$16.1 /kg N/ABonnet J$22.12 J$15.40PepperGinger 8-13t J$0.48/lb 295t 48.3t 15 500 tTamarind ? N/A N/A 960 N/A 257 tEscallion 16845 21.44/kg 13761 t 31524 N/A N/AOnion J$31.86/kg 788tPimento 1500 N/A 1485 t 800 N/A 8012 tThyme 5896 J$93 /kg 1510 tQuantities in pounds/acres (kg/ha) Data represent averages collected during past 5-10 years
Agribusiness: Packaging Working GroupAlmost all packaging inputs are imported (Trinidad, Venezuela, USA, UK):Delivery from suppliers of packaging inputs inconsistent. Suppliers require 6weeks to process and deliver orders, but supplies are rarely received on time. Thisscenario happens for various packaging inputs at different times.Because of the need to ensure against any hitch in production and to reduce thecost of the imported inputs it is necessary to carry a large inventory of these items,this ties up working capital.Import costs would be reduced if container space couldbe shared, however this degree of cooperation hasproven rare.Packaging related inputs account for 40% to 66% of totalproduction costs.Bureau of Standards is the key agency for product packaging and labeling.
Real Results for Real FirmsConsolidated purchasing of glass bottles: Individual Consolidated Cost Savings 8.2¢ 7.4¢ 11%Per Unit Cost (5oz bottle):Shipping/storage/transport: 2.1¢ 1.6¢ 24%Finance: 26% 12% 14% The avg. cluster member realised overall cost savings of some 10%. Greater reliability of supply resulted in improved customer service and reduced lead times as inventory now located in Kingston not off-island.
Cluster Initiatives: PackagingGlass bottle Consolidated Purchasing Program:Sauce Manufacturers Glass Distributor Manufacturer JEA/EXIM Financing Lower costs (unit & service) 120 day financing facility Reduced pricing ~ 10% Extended terms (N60 days) Brokering services Handling equipment Greater reliability of supply Trucking services Technical Support Framework for consolidated Warehousing facilities purchases of other inputs (closures) By consolidating their purchases cluster members shifted the balance of power away from suppliers and realized significant improvements in pricing, service levels, and payment terms.
THE PROCESS IDENTIFIED THE ISSUE THE DATA WAS GATHEREDTHE FAMOUSBOTTLE INITIATIVE THE SOLUTION PROPOSED THE INITIATIVE UNDERTAKEN THE RESULTS ASSESSED
Tourism Cluster: Data Analysis for Informed Decision- Making (Process) Average spend per day in Select Destinations in 2000 300.00 275.00 250.00 200.00 158.60 160.08 150.00 96.10 92.30 100.00 50.00 0.00 Cuba Jamaica Turks and Hawaii Ireland CaicosSource: CTO, Ireland Tourist Board, JTB The metric to watch is not solely arrivals but a combination of other factors that makes each firm (attraction, tour operator, restaurateur, hotelier) more profitable. Jamaica ranks amongst the lowest on average spend per day.
Unique Jamaica – Explore it, Taste it, Feel the VibesRoots Jamaica Taste of Jamaica Jamaica Naturally• Dance Hall • Food • Waterfalls sessions • Local Theatre • Hiking Trails• Rum Bars • Art exhibitions • Natural Parks• Fish feeds • Cultural shows • Caving• Markets • ATV • River rafting• Trench Town Culture Yard • Maroon Towns • Bird watching• Round Robin in Towns on Friday nights• DominoesWorking groups created 5, 7 and 10 day experiences that travelers can choosefrom to ‘Explore, Taste and Feel the Vibes’ of Jamaica. Many Tours incollaboration with Sauces & Spices and Entertainment Clusters
What Was Achieved? Cluster Level Unique Jamaica Sauces & Spices (Tourism) (Agribusiness) The Power of Joint Purchasing of Collaboration Bottles BLCF Grant Sharing of Shelf Space Collaboration within Sharing of Market the cluster: Contacts o Development of Bed & Marketing Breakfast Segment Collaboration Across clusters: High six figure order o Entertainment for 1 firm (ongoing) o Agribusiness
Outcomes: Reach• More than 300 firms participated in the programme• Approximately 200 organisations (over 150 firms) actively participated in the three selected clusters• While the bulk of firms were micro, small and medium-sized enterprises (SMEs), larger firms also participated actively in cluster activities.[
What Did We Learn that is Generalisable?BestPractices
Lessons Learned Imperative of Transparent Processes Importance of Rigorous Methodologies for Selection Need for Cluster Diagnostics to Ground Choice of Initiatives Need to be able to build consensus on basis of data Protocols around respectful interpersonal interactions Process Must be Private Sector - Led and Driven Importance of Cluster Facilitators with Skills to both Analyse and Facilitate Importance of Clustering as Learning Process – at the end of the day, participants are enriched and enabled to practise Clear & Meaningful Processes Good Cluster Leaders Make Enormous Difference Good Public – Private Partnerships necessary