A comparative study of the sources of competitive advantage in the New Zealand and Uruguayan beef industries

Abstract

According to Porter (1990), there are certain characteristics of a country that allow its industries to create and sustain competitive advantage, or prevent them from doing so. The objective of this study was to identify and compare the sources of competitive advantage or disadvantage for the Uruguayan and New Zealand beef industries. To accomplish these objectives, Porter’s Diamond Framework was selected as the theoretical framework to assess the competitive advantage of nations. Two case studies “the Beef Industry in Uruguay” and “the Beef Industry in New Zealand” were carried out. The information was obtained from secondary sources and open-ended interviews to key informants in both countries. Uruguay and New Zealand possess observable similarities, such as size, population, similar farmland area, and an economy based on agriculture with low levels of subsidies and trade regulations. In addition, the industries in both countries target the international market. Considering beef production, these countries produce beef based on pastures; hence, they have similar seasonal fluctuations in slaughter and in the product offered into the market. These similarities make these countries interesting to compare. On the other hand, Uruguay and New Zealand have differences. They are in different stages of economic development, and have cultural, sociological and educational differences. The beef industry is the most important economic activity in Uruguay, as can be illustrated by the resources allocated in this sector and in the volume and value of exported beef. In New Zealand, the beef industry is less important; however, it constitutes an excellent complementary activity for sheep and dairy productions. Both beef industries also have differences in their levels of productivity, stock compositions, stock categories, age of slaughtered animals, sanitary status, and locations in relation to markets. This suggests different sources of competitive advantage. The results show that the Uruguayan beef industry has a weaker diamond than its New Zealand counterpart does. However, the industry in Uruguay has been increasing the use of resources in comparison to other pastoral activities such as dairy and sheep. In contrast, the New Zealand beef industry, despite having a stronger diamond than the Uruguayan beef industry, has a secondary role behind the sheep and dairy industry. There are two clear limitations for the Uruguayan beef industry. First, the performance of the primary sector is poor. Second, the Uruguayan exported beef receives a lower price than the New Zealand product, and has difficulties for gaining access to certain markets. These two characteristics were identified as the most dissimilar for both industries. The selected research design and theoretical framework were adequate to accomplish the objectives. Although most of Porter’s findings were not supported in this study, using the framework allowed the development of an exhaustive analysis of the possible factors affecting the sources of competitive advantage in both industries. Comparing diamonds in different countries has not been done before; therefore, this research provides empirical evidence of the advantages and disadvantages of using this framework for international comparisons. Finally, the information presented in this research did not intend to suggest possible strategies or policies to increase the competitiveness of both industries. However, the results are likely to provide useful information for further studies in these industries.