Importers and import substitution
In the 19th century many large companies grew because it was cheaper to import materials and add some finishing process in New Zealand than to import finished products. A motor vehicle assembly industry grew from the 1920s on the basis of adding some local materials to imported vehicle bodies and engines. Some companies involved, such as the Todd Corporation and Colonial Motor Company, also provided imported petrol, and grew into large companies. Large foreign investors such as Ford and the British Motor Corporation also competed. Tariffs favoured British imports from the early 1930s, and after 1938 import licensing gave preference to material and equipment over finished products. Large companies grew in the New Zealand manufacturing sector, for example Lever Brothers and Colgate Palmolive, which made toiletries.
Import licensing and supporting local manufacturing was promoted by the government in the late 1930s. Many large companies were subsidiaries of overseas companies. Companies that had previously supplied imports started manufacturing or assembling in New Zealand. They continued to supply the market, but with materials rather than finished products.
Foreign investment was also promoted. For example in the late 1950s the government offered cheap electricity from the Manapōuri power scheme as an incentive for Comalco to build an aluminum smelter at Tīwai Point in Southland. Similarly during the 1950s Tasman Pulp and Paper depended on the expertise of foreign firms, and had Australian shareholders. Its major market was newsprint for Australia, and Australian newspapers and newsprint manufacturers sought to integrate it into their supply networks. This venture was what would later be called a public-private partnership. New Zealand private interests, especially Fletchers, joined with overseas wood processors such as Reeds and Bowaters, and with the New Zealand government to exploit the Kaingaroa forest. Other large companies in forestry such as New Zealand Forest Products focused more on servicing the local market.
Mergers and acquisitions
Large companies often grew by mergers and acquisitions of other firms. In 1921 there were 55 brewing firms, in 1939 there were 34, in 1952 there were 26 and by 1972 there were just 4. In 1998 the two market leaders, Lion Nathan and DB Group, had 90% market share.
In the early 2000s industries dominated by large companies were often in a duopoly or oligopoly situation. In a duopoly two companies dominate the market. For example in the early 2000s supermarkets were dominated by two firms – Progressive Enterprises and Foodstuffs. In an oligopoly a small number of large firms dominate the market. For example four large multinational petrol companies dominate the New Zealand market – Shell, BP, Mobil and Caltex.
Public companies – companies which were floated on the stock exchange and which the public could buy shares in – were generally not very large in New Zealand until after the Second World War. For example Fletchers, which grew into New Zealand’s largest company by the 1980s, was a family-owned private company until it became a public company in 1940. The absence of privately-owned large companies was in part due to the small scale nature of the early colonial economy. Sectors of the economy where large companies tend to arise, were overseas-owned (banking, oil and shipping) or state owned (electricity, coal, forestry and railways).
Privately owned companies were mainly provincial and were small enough to be controlled and financed by families. Owners controlled companies and ownership passed from one generation to the next. From the 1940s the domestic market moved increasingly from a provincial to a national scale and the capital required grew beyond the means of most families. Many formed public companies and issued shares to raise funds. Others teamed up with overseas interests. The government was also heavily involved in trying to set up industries.
Over the 20th century New Zealand shared the trend towards greater scrutiny of companies, especially large ones. Company law was refined, not always in the direction of exerting greater restraint, but generally providing for more scrutiny. Competition law extended far beyond the initial anti-monopoly requirements, and eventually a government agency, the Commerce Commission (established in 1986), became responsible for controlling the acquisition and use of a dominant position in a market.
Biggest 1970s employers
A 1971 survey found 166 enterprises employing more than 500 people in New Zealand. Seventy of these were in manufacturing, 59 in administration and 20 in transport and communications. There were 94 in the public sector and only 72 in the private sector.