Internationalization of a common is most common concept in modern days. Company engage in International business in many ways such as export, import, acquisition, merge, direct investment, strategic alliance and International Cluster. Over the past decades the stealth of business cluster has been increasingly emphasized as a determinant of the global competitive advantage.
However, Cluster is an economic and business phenomenon in where many farms collaborate and compete to achieve various economic advantages. Most accepted definition of Cluster is given by Porter (1998) "Geographic concentration of interconnected companies and Institution in the particular field". The geographic area of Business Cluster may range from a single city or state to a country or even a group of neighbouring countries (Porter 2000). Most common Cluster in world economy is in Silicon Valley (computer software), Hollywood (film industry), London (financial service) and Holland (flower) (Ketels et, al. 2008).
The Netherland is the world's leader in trading and producing flower, with over ten thousand companies and institution a large and dynamic economic Cluster has evolved. All companies are responsible for each other for innovation and competitiveness (BloominHolland, 15.11.2010). Dutch competitive advantage by auction market, knowledge sharing, specialized education system, innovation, skilled workforce etc.
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To become successful in International business company must need a well organized supply chain. Supply Chain management (SCM) is the modern version of logistics and operation management. Supply chain is border than logistics, logistics only mean activities within organization but supply chain means activities of network of companies which cooperate together for delivering the product to the market. Supply chain is the links between firms which brings product or service to the market for consumption (Lambert et. el, 1998).
Another Important sector is for international company to have a good Corporate Governance. Corporate Governance is the system by which companies are directed, operated and controlled. The Broad of Direct are the responsible for the general operation of the company but they are selected by Shareholder of the company, who also select the Auditor to satisfy themselves that perfect structure is in place for the company. Corporate Governance is a wide range including business strategy, executive and non-executive management, investor relation to accounting and information systems and remuneration (Cadbury Committee, 1992).
1. International Business Clusters
In Internationalization process Companies can act alone or with others (Julian and Morin, 1995). International Business Cluster is the perfect way of engaging International Business for the company. Ciccolella Holding International B.V. is one of the biggest flower trading companies in Netherland and part of Ciccolelle S.p.A. based in Italy. Internationalization in Ciccolella started in 2006 by acquisition Zurel, one of the biggest companies in flower and planet business industry. Ciccolella is the part of Dutch Flower Cluster which is responsible for half of the Global Flower Industry. (http://www.ciccolella.nl/en/ciccolella/about-ciccolella)
However, Cluster is an economic and business phenomenon in where many farms collaborate and compete to achieve various economic advantages. The concept of Business Cluster has existed for many years by different names such as industrial district and agglomeration (Cortright, 2006). Alfred Marshall a well known economist identifies three vital reasons for companies to collaborate with one another: supplier specialization, labour market polling and knowledge sharing although he did not use the terms 'Cluster' (Cortright, 2006). Most accepted definition of Cluster is given by Porter (1998) "Geographic concentration of interconnected companies and Institution in the particular field". The geographic area of Business Cluster may range from a single city or state to a country or even a group of neighbouring countries (Porter 2000).
Morosini (2004) argues that Business Cluster is a socioeconomic entity in a specific geographic area characterized by a social community of people and population economic agents localized in close proximity. From this description we can characterize International Business Cluster by following way; Economic activity among companies from different country, It is limited to only particular industry, It is a both horizontal and vertical links between manufacturer, supplier, dealer and customer in a same type industry, All companies contribute to the development of cluster although they are competitor.
1.1 General Factors of International Business Cluster:
According to Rosenfled (1971), the main elements of a cluster are their member. However, elements can be varies from one cluster to another based on their industries and the maturity of the Cluster but the links between all elements is vital for innovation, growth and competitive advantage (Motoyama, 2008).
Always on Time
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Major elements of cluster provided by Porter (1998) are given below; Companies in industry related by their skills, common inputs, supplier or technology, Specialized infrastructure provider, Government and other related institution, Customer.
The Competitive Advantage of Nations (Porter, 1990) research shows the perfect model of Cluster called 'Porter's diamond model' highlights four factors such as Strategy and competition, demand and market conditions, related supporting industry and external factors (Figure 1).
Figure 1: Porter's Diamond model. Source: (Porter, 1990).
In addition, Specialization, Internationalization process has increased the degree of specialization in various geographic levels such as local, regional and national. Specialization is the consequence of Internationalization of business (Roelandt & Hertog, 1999).
Table 2 shows another cluster factor model given by Solvell (2008). There are some other factors which are important for a strong cluster such as media, financial system, education and research, government policy.
Figure 2: Cluster Factors model. Source: (Solvell 2008)
However, there are some other factors which are important for a strong cluster such as entrepreneurship skills, knowledge, innovation, competition (Roelandt et. al., 1999).
1.2. Dutch Flower Cluster:
International Industry Cluster as become vital elements of economic development policy world wide. Each regional or local company become specialized in sectors that are more concentrated. Not every county can be successful but only successful place or country develop focus innovative capacities on particular type industry or clusters (Rosenfield, 2002).
Most common Cluster in world economy is in Silicon Valley (computer software), Hollywood (film industry), London (financial service) and Holland (flower) (Ketels et, al. 2008). Table 3 presents the elements related to Dutch Flower Cluster.
Figure 3: Dutch Flower Cluster Map. Source: Nyenrode Business University - Nyenrode Strategy Centre (modified).
The Netherland is the world's leader in trading and producing flower, with over ten thousand companies and institution a large and dynamic economic Cluster has evolved. All companies are responsible for each other for innovation and competitiveness (BloominHolland, 15.11.2010).
1.3. Competitive Advantage of Dutch Flower Cluster Companies:
The Netherland is a country with probably most unfavourable climate condition for flower production (unsuitable land and little sun) has succeed in flower business and become the world leader only because of competitive advantage they have created in Flower Industry. Most important local, regional and international competitive advantage is given below;
Auctions: This is the most great opportunity provided by Dutch flower cluster to their companies. It gives the company great competitive advantage over their international as well domestic counterparts. With effective and efficient transaction of flower between seller and buyer auctions market turn out to be place where supply meets demand. (FloraHolland)
Knowledge Sharing: It is another section where Dutch Flower Cluster has competitive advantage. Companies within Dutch Cluster share their knowledge about products as college rather than competitor (Van Oosten, 1998).
Specialized education and R&D Institute: Many well known Dutch University contributes to the Flower industry by developing and researching flower planets. West Netherland region has become field of science and technology and this ability has increased by investing in R&D (European Cluster Observatory). Companies under Dutch Flower Cluster enjoy the opportunity where government and education institution provide support for successful R&D (NFIA).
Innovation: Clusters common and natural disadvantage (perfect weather and lack of abundant land), become one of the strongest competitive advantage. Dutch Cluster forced to become Innovate in all parts of the value chain. The recent innovation is development of energy saving technology for flower plant. Innovation in marketing mix, innovation in cultivation technique and innovation in product allow cluster to gain competitive advantage (European Cluster Observatory).
Skilled Workforce: Skilled worker is another reason for higher performance of the Dutch flower industry; most of the worker is highly educated. Professionalism, knowledge and skill of the worker contribute to the success of the individual companies of Dutch Cluster, so the whole cluster. (NFIA)
Technology Infrastructure: In the Netherland most advanced communication technology are made and adopted faster than any other because of huge investment. Up to date technology infrastructure allow high quality and efficient operation of flower Auction (NFIA).]
Logistic: It has great contribution for the success of the Dutch flower cluster. Without a proper logistic channel it was impossible to become number one in business sector. However, the main reason of great logistic service is the geographic area of the Netherland. It is in the centre of the Western Europe, provide another competitive advantage to the companies of Dutch flower cluster- approximately 250 million customer within radius of 500 km. (European Cluster observatory)
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Government Policy: The Netherland government cluster policies are part of particular intervention to strength the cluster. The Cluster approach is driven by idea of innovation, growth and creating competitive advantage. Positive Government policy towards Dutch Flower Cluster has made private organization and knowledge institute to work together and exchange of information about elements affects flower industry (Van Oosten, 1998).
1.4. Challenges and Potential changes of International Cluster:
Market Leader in particular industry is a challenging position and need continuous changes to maintain that position. The major challenge of the Dutch Flower Cluster is intensive growth. In recent days many change has taken place such as relocation activities and increasing international impact forced cluster continuous improvement through innovation (European Cluster observatory).
Dynamic: Dynamic is the term related to the continuous change market demand such as market size and faster delivery. Due to increase of market demand new innovative solution in 'greenhouse technology' and new innovative product and service as a solution for changing market demand(Flower Council Holland).
International Competitor: Low-cost production countries are more active than before and become more attractive. Auction centre is the heart of Dutch flower cluster but new "Dubai Flower Centre" is the threat for attracting international customer (supplier or wholesaler and buyer). The possible solution might be create sub-cluster in lower cost county or for cost efficient, reduce transaction by increasing sales volume FloraHolland).
In addition, environment problem is another challenge, negative effect of the environment due to use of fertilizer. However, changes because of challenge are continuous process of the Business Industry.
2. International Supply-chain Management:
Ciccolella Group has reinforced its distribution network Europe because of Internationalization in 2006 by acquisition of important Dutch traders companies, Zurel B.V., Leliveld Group and FPP, Ciccolella is active in the distribution and sale of potted plants and cut flowers. It is able to provide great care and attention to their customer by providing quality products by efficient supply chain. Their supply chain includes from retailer to supplier, producer and wholesaler. So, the supply chain management is very important part of the Ciccolella. (http://www.ciccolella.eu/en-distribuzione.asp)
Supply chain management is the modern version of logistics and operation management. Supply chain is border than logistics, logistics only mean activities within organization but supply chain means activities of network of companies which cooperate together for delivering the product to the market. Supply chain is the links between firms which brings product or service to the market for consumption (Lambert et. el, 1998).
Supply chain can be described as flow of water in a river, where companies closer to products or original source of product is in 'upstream' and companies closer to customer or end user of product is in 'downstream' but the flow of the whole river is concerned for well being. Therefore, supply chain is a network in which purchasing of raw materials, produce or manufacturing the product or assembly and distribution of finished goods to customer or end users (Burch, 2007).
However, the process of supply chain acts as bridge between market and the core competencies. The capability of managing supply chain system with strategic core is vital to market success of the company. The scope of strategic thinking and action can be divided by two parts. The first one is the role of strategy in supply chain and the second one is achieved benefit from supply chain management (Basu and Wright, 2007).
In addition, Supply chain also known as logistic management. International supply chain management is the process of manage full flow of goods from producer to end user between two countries. The most important and vital goal of supply chain management is to reduce inventory cost by fulfilling demand of products when necessary (Bevan, 2005).
So, we can say that supply chain management is the coordination of production, location, transportation, inventory among the participants in the supply chain efficiently to serve the market for fulfilling company's goal.
2.1. Drivers of International Supply chain management:
Supply chain management plays vital role to achieve business objective of the Ciccolella Group. Slack et. al. (2004) state that Strategy of managing supply chain is they total pattern of decision which help the company long term ability of operation. He also state that the performance objective of supply chain management is related to the interest of the all types of stakeholders from company shareholder to consumer.
However, areas of supply Chain differ from industry to industry but there are some common areas where supply chain management must make decision. Each drivers of the supply chain management directly affect the supply chain. There are main five drivers in supply chain presented in figure 5 (Hugos, 2011).
1. Production: Production indicates the capability of the supply chain to produce and store products. There are two approaches to production. First one is product focus and another one is functional focus (Hugos, 2011).
2. Inventory: Inventory is the important driver for the supply chain, it includes everything from raw materials to work in process and finished goods by all parties (distributor, retailer and manufacturer). In inventory there are three decisions to make for management such as cle inventory, safety inventory and seasonal inventory (Hugos, 2011).
3. Location: Location drivers of supply chain indicate the geographic. Decision about centralize activities or decentralize activities has to make by supply chain management. Management has to consider various types of factors (cost of labour, cost of facilities, skilled workforce available and infrastructures) when making decision about location (Hugos, 2011).
4. Transportation: It is the very important drivers in supply chain. Transportation means movement of goods (raw material to finished goods). There are six types of general transportation company can use such as Ship, Rail, Pipeline, Truck, Airplanes and electronic Transport (Hugos, 2011).
5. Information: In modern days information is important part of supply chain. Information is like input in which management take decision about other factors related to supply chain. Generally there are two purpose for information in supply chain; coordinating of daily task and forecasting and planning for future (Hugos, 2011).
Figure 4: The five major drivers of supply chain. Source (Hugos 2011)
2.2. Structure of Supply Chain:
Generally supply chain is formed of a company, their supplier and their customer. They are main group of participants in supply chain structure. Figure 6 presents two types of supply chain structure: simple supply chain and extended supply chain. Simple supply chain only includes supplier, company and customer but on the other hand extended supply chain includes market research, product design, manufacturer, distributor, retailer customer, business customer, customer, logistic provider and finance provider (Hugos, 2011).
Figure 5: The five major drivers of supply chain. Source (Hugos, 2011)
Supply chain structure is differ from companies to company and depends on their operation. Flower industry supply chain can be divided by four ways there are many groups are involved to distribute the product from producer to customer such as wholesaler (importer), retailer (importer) and consumer.
1. Traditional Supply Chain: In traditional supply chain product go through form Producer to Auction market in the Netherland than from auction market to wholesaler (importer), from wholesaler to retailer and from retailer to end user (consumer).
2. Auction Retailer Supply chain: This supply chain is identical to traditional supply chain but without wholesaler farm sale directly to retailer (importer) from auctions. And retailer sells to consumer.
3. The traditional direct supply: In this supply chain farm directly sell the flower to others countries wholesaler (importer) and than that wholesaler sell that product to retailer in their own country and retailer sell them to consumer.
4. The mass market direct supply chain: This supply chain is shortest form of supply chain. Company directly sells the flower to retailer (importer) and retailer (big retail super market) sells them to end user consumer).
Table 6: Cut-flower Supply chain Structure for Ciccolella.
However, form the Table 6, we can say one common thing that Importer is one of the common group connected in each supply chain in terms of International supply chain. Importer could be wholesaler or retailer from foreign country.
2.4. Aligning Supply Chain with Business Strategy for International Business:
Supply chain is the part of the company's strategic planning; the main aim of the supply chain is to approach its product to customer in market place in efficient, cost effective way. Supply chain respond to the market demand as the way company strategy support. The main business strategy of a company is to satisfy customer needs. So depending customer needs supply chain provide perfect mix of responsiveness efficiently. If the supply chain can meet the customer need efficiently than other companies supply chain than the market share o the company increase due to higher demand of the product (Hugos, 2000).
According to Hugos (2000), there are three steps to align with business strategy. The first stage is understanding market, second one is define own strength and core competencies and the last steps is develop the needed supply chain for the company to support companies role in market. Figure 7 illustrate the steps of aligning supply chain with business strategy. They are given below in more details:
1. Understanding the Market: Firstly, Company should know their own market condition. Company needs to know what kind of customer they serve, what the types of current supply chain; answer of this question will tell company which part of supply chain needs to emphasize (efficiency or responsiveness). Chopra and Median (0000), provide the below aspects that help the company to identify requirements for the consumer served;
The amount of quantity of the products needed in each lot
The response time that consumer agree to tolerate
The types of product needed by customer
The level of service required
The price of the product, customer willing to pay
The aspire rate of innovation in the product
2. Define Core Competence: Second step to align supply chain to business strategy. Company must identify what type of supply chain they have right now, what roles they wants to play in supply chain and what is their core competence. Answer to that question will tell the company management that what type of supply chain is perfect for the company (Hugos, 2000).
However, Company can serve multiple market in different countries so same supply chain might not be appropriate for all markets. To overcome this problem company have to look for ways to leverage its core competencies (Hugos, 2000).
3. Develop Needed in Supply Chain Operation Capability: This is third and final stage of aligning supply chain to company strategy. Once company in what kind of market company operates and role of company in supply chain than company can take this final step, in which company needs to develop its supply chain as required. This development is guided by five drivers (Described in section 2.1.) of supply chain. Every single of this driver can develop and control to emphasize efficiency or responsiveness based on the companies requirements.
Figure 7: Three steps of align supply chain to business strategy. Source (Hugos, 2000).
To align Supply chain with Business Strategy is the only way of success in International Business.
2.5. Factor Affecting International Supply Chain Management:
Company needs to observe its operational activities in terms of competitive advantage, which available in different countries they operates their business. Efficient Supply chain management can lead competitive advantage in cost, quality, lead time and innovation. However, international factors can divided in three categories which affects the international supply chain; Role of country, Industry and MNC Strategy). (Prasad, S., and Sounderpandian, J., 2003).
1. Country factors such as Endowment factors, Cultural factors, Arbitrage and Leverage factors and Government Incentives and policies affect the international supply chain management.
2. Industry factors such as Raw Material, Value of material Perish ability and Complexity and Process employed affect the supply chain.
3. Companies Market, Transportation, Technology, Financial Strategy and HRM Strategy also affect supply chain.
Figure 8: Factors Influence Global Supply Chain (Source: Prasadm S. And Sounderpandian, J., 2003)
2.4. Risk Management Strategy of supply Chain:
Common definition of risk are depend on unpredictability of potential returned are expected (Baird and Thomas, 1990). According to Aarrow (1965), risk is a variation in the distribution of potential result, their probability of occurrence and there subjective value. However, an empirical study by March and Sharpria showed risk often reduce to its negative component in practical business, whereas positive deviation are considered as "Chances". Risk may be define as the product of the probability of occurance of a (negative) event and the resulting amount of damage (March and Shapira, 1987).
According to Kiser and Cantrell (2006), a perfect risk management strategy has several key components. First of all, company must it risks for the entire life cycle of each product or service the company provides, them it must be capable to forecast the financial impact that a supply disruption can cause, after that it must recommend strategies that can ease the effects of any disruption of supplies, and it must delve deeper into the supply chain than the first tier. The key strategy is the holistic perception and the focus on the actual impacts.
According to Kiser and Cantrell (2006) there two types of risk in supply chain management. One is internal risk driven by manufacturing, business personnel change, inadequate planning and ineffective controlling and mitigation and contingency risk. Another one is External risk caused by downstream or upper stream in supply chain such as risked caused by change in demand, disturbances in supply and environmental risk, business (financial), and physical risk (place).
However, Kiser and Cantrell (2006) has provided Six steps to manage supply chain risk. They are given below;
Step 1: Supplier base such as identify raw materials
Step 2: Measure the supply chain vulnerability
Step 3: Evaluate the implication
Step 4: Find out mitigation or improvement and take action
Step 5: Analysis the cost and benefits of mitigation
Step 6: Implement the measure the result or outcomes and take actio
3. International Corporate Governance:
Corporate Governance is the system by which companies are directed, operated and controlled The Broad of Direct are the responsible for the general operation of the company but they are selected by Shareholder of the company, who also select the Auditor to satisfy themselves that perfect structure is in place for the company. Corporate Governance is a wide range including business strategy, executive and non-executive management, investor relation to accounting and information systems and remuneration (Cadbury Committee, 1992).
However, Corporate Governance idea is continuously developing in recent years. The IIA describe Corporate Governance is a system which is combination of some process and structure execute by the Broad of Directors to direct, manage, monitor and inform the activities of the companies to achieve of the organizational goal. Therefore, International Corporate Governance is the process of direction and controlled of an International Organization.
Therefore, Corporate Governance is a very important for a country as like as company. Importance can be categories by; creation of key institution which drives perfect economic transformation to a market based economy, effective allocation of capital in financial market, attract foreign investment and make contribution for countries development.
3.1. Principles of Good Corporate Governance:
Cadbury report (1992), consists Code of Best Practice for Companies what is build on three principles (probity, transparency and accountability) along with concept of equity. OCED is a organization known world-wide for benchmarking Good Corporate Governance. They have published a revision of Principle of Corporate Governance in 2004. Also, UK Independent Commission for Good Governance in Public Services has published a good Governance Standard in 2005. Figure 9 presents the principles published by both organizations with Generic Principles.
Principles of Governance table
Figure 9: Principles of Corporate Governance. (Source:
However, OECD principles cover six key areas in Corporate Governance framework. All principle is based on non-prescript so they can maintain their relevance in varying legal, economic and social contexts. These six principles are one of the Twelve Key standards for Sound Financial System adopted by the Financial Stability Forum (FSF). (www.oecd.org/corporate/principles/)
Figure 10: The main area of OCED Principles.
(Source: at: www.oecd.org/corporate/principles/)
OCED principle strength the ownership role of shareholder by advocate that shareholder must have right to ask question about agenda in meeting, they can remove the board members and participant to nominate them. Also, OCED principle help strengthen the companies oversight by boards. In addition, OCED principles helps deals with conflicts of interest between all stakeholders of the company.
3.2. Strategy of International Corporate Governance
The Business ethics or mortality must permit the entire operation from top to bottom management and embrace all stakeholders, Corporate Governance Strategy or practice is the internal part of the company. There five Golden Rules for the perfect Strategy of Corporate Governance are describing below.
1. Business Ethics is the most important for perfect corporate governance in the company. Ethics or mortality in corporate governance must be from top to bottom and embrace all stakeholders. There are four major factors which highlights the importance of ethics such as long term growth by future vision, risk and cost reduction, anti-capitalist sentiment and limited resources.
2. Align Business goals towards a common goal are another strategy for corporate governance. Failure to align business goals with corporate governance is most common reason of business failure. Companies should align business goals through their relationship with stakeholders, industry knowledge and management information system. To align business strategy first company needs to have clear business goals then they have make sure that employees are well aware of the company's long term vision or goal.
3. Strategic Management is another part of good corporate governance. Corporate governance requires effective strategic management process to be successful. Strategic management set a goal, set a process to achieve that target, assign needed workforce to carry out the planning and control the process.
4. Organization effectiveness is not a goal but rather it is a means to achieve company's goal. To implement strategic management process in operation requires effective organization. Figure 11 presents a structure of a Corporate Governance.
5. Effective Communication between all stakeholders is very important to be success Above all parts of the good strategy of corporate governance need effective communication. It is also rational that in order to know how well company are doing in implementing business strategy and achieving companies goals, management need a monitoring and reporting method which is connected directly to the stakeholders upon whom that success depends.
Figure 11: Structure of Corporate Governance.
Figure 11 illustrate the structure of Corporate Governance. The main responsible post Corporate Governance Structure is Boards of Director selected by the Shareholders. It is responsibility of board of directors to foster long term success for the corporation in behalf of the shareholder of the corporation. Bard of Directors act with transparency, accountability and in fairness. They determine the corporation purpose, ensure company follow relevant laws identify risk and provide solution, in short board of directors are responsible for everything in Corporate Governance. Also, there are other important parties in corporate structure such as, Audit committee, Compensation committee, senior management etc.
3.3. Challenges of International Corporate Governance:
In recent years Corporate Governance has attracted huge attraction with recent managerial misbehave and corporate scandal. There many challenges International Corporate Governance face. Figure 12 presents how some factors affect the corporate governance. The legal factors of the country are the main challenges. There are hundreds of legal in the world. The legal factors were first brought by LLSV (1997-2002). According to them legal factor is the primary factor that affect all other operation in in corporate governance system. They also state that law system of any country has impact on investor protection, financial market and ownership right.
Also, the political factors can affect the corporate governance through transplantation system. Political view of the governing part forced to change law about business which directly affect the business performance and corporate governance. According to Gorevitch (2003), Politics that produce the regulation which shape the corporate governance come from coalition.
In addition, changing the law and government policy is not good enough for corporate governance unless culture of the county allow that change in reality. Customs, Ethnicity and beliefs of the people affect the corporate governance. Difference in culture can effect investors protection around the world (Stulz and Williams, 2003).
Figure 12: Factors affecting Corporate Governance (Source:
The first part of this paper presents the International Cluster for internationalization of a company. The factors of International Cluster were described then showed how a company achieved competitive advantage through International Cluster. Challenge of Cluster and their solution were provided. Present of Stronger Cluster in a Country allow national company to compete based on quality rather than low cost strategies.
Second part of the Study presented the importance of Supply Chain Management, drivers of the supply chain management and structure of supply chain. Also, this parte presented tthe importance of aligning supply chain with business strategy for international operation as well factors affecting supply chain management and risk management strategy of supply chain.
Third or final part of this paper showed importance of Corporate Governance for business success, principles of the good corporate governance and strategy and challenges for perfect Corporate Governance.