Zespri- the Kiwi Fruit Industry

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MEMORANDUM

To: Director of University of Auckland Business School Case Centre

From: Rebecca Machado

Date: 27th April 2011

Re:A critical review of the industry in which New Zealand Company Zespri International operates, and the company’s strategy and business model.

INTRODUCTION:

1409 was the start of New Zealand long and prosperous relationship with Kiwifruit growing. Ironically, the kiwifruit seeds themselves were brought back by Whanganui teacher Mabel Fisher after a trip in China. Horticulturist, Alexandra Allison nurtured and sprouted the seeds that have now turned into an iconic Kiwi industry. Hayward Wright is the man responsible for the start of the Zespri brand. Exploiting the rich, volcanic soils from the bay of plenty, Hayward cultivated the kiwifruit industry that is not only synonymous to kiwis but is exported all over the world. In the years following, Kiwi ingenuity and entrepreneurship led to the brand evolving into Zespri international limited, a global organization. During this time the Zespri kiwifruit brand was endorsed with a firm commitment from various kiwifruit growers to grow and sell the best kiwifruit in the world. This commitment has not only become the ‘vision’ of Zespri but coupled with the aim of creating a worldwide, yearlong supply of Kiwifruit, Zespri also achieve their focus of customer satisfaction, here in little New Zealand and in overseas markets.

INDUSTRY:

The health benefits of Kiwifruit include a combination of nutrients which are more concentrated than most fruits. In a commercial sense, growing kiwifruit was traditionally small and localised with products being locally produced and sold at growers markets. With the creation of Zespri International, the profile of kiwifruit here and abroad has increased as more people are aware of the fruit’s health benefits. According to (welkerseconomics) Kiwifruit has been one of New Zealand’s niche exports for over the past forty years, currently producing around 30% of the internationally traded kiwifruit.

To better understand the competitive forces in the industry and the industry in general I have referred to (Aren). In addition a SWOT analysis [page 7] to better understand the internal and external factors in the industry is also a valuable aid. It is essential for Zespri International to understand the power of these forces namely the external ones so it can Pin point and implement their chosen business strategy.

In assessing the industry forces as part of a Global picture, the position of Zespri International started off as being Global Industry leaders and arguably even a potential monopoly back in 1956. However the emergence of other kiwifruit growers in Europe and Chile led to the industry forming more of an oligopoly structure. So while there are several keen producers (welkerseconomics) advises that only a few firms or countries, including Zespri International, Italy and Chile appear to be significant players. There is a high level of competition not collusion as these producers are all independent. To compete with Zespri, a Firm would need a significant amount of money, expertise and knowledge as barriers to entry are high. The high cost of setting up a fruit growing firm as well as the development of contacts and channels to successfully distribute the product overseas. In addition there are multiple sunk costs which encourage the existing firms from exiting the industry.Structural changes have occurred throughout the industry. Exporting of Kiwiwfruit is now dominated by Zespri International. Developments within the industry have been identified by (aren) as enhanced orchard productivity, development of the Zespri brand and development of International marketing strategies. Zespri Internationals’ involvement is notable with its involvement in several key decisions. It is useful when examining the Kiwifruit industry to break the activities up into value generating activities. While...
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