Cooperating to compete – with each other — Exporter Magazine

Perhaps one of the most baffling characteristics of New Zealand’s international business activity is the very low level, by global standards, of cooperation amongst exporters.  

Even more mind-boggling is the enthusiasm with which some companies seek out and effectively undermine the businesses of their fellow New Zealanders.

To those who study these things it’s not news that New Zealand businesses operate in a comparatively low trust environment when measured against countries of similar size. Scandinavian countries, comparable in size to New Zealand and every bit as reliant on their export income, find numerous ways to cooperate – both within their economies and in their various export markets.

They realise that business managers in small countries tend to be personally better known to each other than they are in large economies and that they tend to share many of the same values. These in turn create stronger bonds between like-minded enterprises and a willingness to support cooperation within industries. For the Danes, Swedes, Finns and Norwegians this is pretty much part of their business routine.

Not so, at least certainly nowhere near to the same extent, in New Zealand.

Quite why this is so beggars the imagination, and there certainly doesn’t seem to be any compelling logic to explain it.

If greater market penetration, improved margins and greater brand visibility can be gained from the type of cooperation seen in the Norwegian fishing industry, or industry clusters in Finland, then the opposite is demonstratively clear in New Zealand. 

It’s not as if it’s a new idea. New Zealand got an academic admonishment from Professor Michael Porter at the beginning of the 1990s in his report “Upgrading New Zealand’s Competitive Advantage”. Amongst other observations about the way New Zealand was adapting (or not) to the changing global environment Porter and his co-authors observed that we could do a lot better if sectors worked together. 

Spurred on by this advice the NZ Trade Development Board (now NZTE) launched an aggressive programme to bring sectors together to form “Joint Action Groups”, which became better known by their acronym JAGs. 

The idea behind these was relatively simple. Put a group of like-minded managers in a room, give them some funding to keep the group operating and provide a secretariat, and sooner or later they will come up with ideas that are mutually beneficial. Then they’ll get on with them and the cumulative effect will far outweigh the efforts of any individual company.

At their peak the number of JAGs amounted to around 50. However, within five years the number had dwindled to just a handful. Today just one, or perhaps two, can be seen albeit in a significantly changed form.

Perhaps the most ambitious of the JAGs was the loftily named Food & Beverage Exporters Council (FBEC), which included virtually all of the major food exporters of the day. The formation of this group was made a little easier with the presence of single desk marketers in some sectors; nevertheless the group sported the major dairy, seafood, produce, wine and meat companies of the day.

The discussions and debates around the FBEC table were surprisingly productive and gave rise to initiatives such as Brand New Zealand, since reincarnated as “The New Zealand Story”, as well as a vigorous and much needed push to improve the quality standards of the country’s food manufacturers. So insightful were some of the outputs of this group that the Food & Beverage Taskforce set up ten years later, which consumed over $3 million of taxpayers’ funds, traversed very little new ground.

FBEC, along with virtually all of the other JAGs, eventually collapsed. Looking around today I can only see the NZ Pine Manufacturers Association showing any sign of its original incarnation. 

A simple explanation of this sudden disintegration could be that somewhere in the second half of the ‘90s Trade NZ decided to stop funding the administration of the JAGs. If the removal of such a small contribution was indeed the cause then it suggests that either the collaborations weren’t working or that nobody wanted to play nice (or both!).

Subsequent analysis showed that one of the key contributors to the demise of the JAGs was that some participants were actually seeking to undermine or disrupt the groups’ activities. Further, it became quite clear that some were joining the groups to gather market intelligence from those they saw as competitors. 

This created a sometimes hilarious environment with companies offering palpably false information to the group about a particular market in the hope that the others would go on a wild goose chase and leave them alone! 

Around the same time the meat industry was busy demonstrating that it too could reduce the value of its flagship product, lamb, in the relatively non-competitive US market. Over the second half of the ‘90s the price of New Zealand lamb resolutely dropped despite little competition from anyone other than the Australians. Why did they do this? 

Put simply, they regarded other New Zealand (and Australian) companies as their competitors. It didn’t occur to them they could actually grow this underdeveloped market together – or if it did they didn’t do it. They were in the business of moving volume; the US customers were in the business of rubbing their hands together.

Collectively Australia and New Zealand could have maintained and improved on the retail price of lamb in the US had they chosen to do so. This was inadvertently proven when a $1 per pound penalty was imposed on lamb imports by the Clinton administration without the slightest downward flicker in consumption being experienced. When the penalty came off the price stayed up.

Not all is lost

New Zealand’s exporting history is littered with the ruins of failed collaborations – JAGs, clusters, hard networks and other attempts at cooperation. The latest to quietly disappear, sadly, is the Pure New Zealand Greenshell Mussel group set up in China in an attempt to realise the true value of this unique product. No doubt there are a few ‘told you so’ comments drifting around the primary sector.

There are some collaborations, however, that continue to show what can be achieved. 

Zespri is clearly one. The Winegrowers Association is another.

There’s an interesting primary sector group being formed in mainland China and the latest ‘C’ word to come out of NZTE is ‘Coalition”. 

Here’s hoping.

Rod MacKenzie is executive director of NZFocus (NZ) Limited and a former regional director, Greater China, for NZTE.

Publishing Information

Magazine Issue 

Exporter Magazine November/December 2014 issue 36