Export development and the role of information

Despite the significance of information in developing export activities, much of the literature suggests that this is relatively ad hoc especially for SMEs (Leónidas and Adams-Florou, 1999). As a firm proceeds through export stages, information assists with strategic problems including what market expansion strategy to adopt, where to introduce new products and how to evaluate the overall export performance. However, many SMEs do not fully appreciate the need for marketing research. Often the research is not rigorous, formal or systematic. This can be the result of:

■ A lack of sensitivity to differences in customer tastes, habits and preferences

■ A limited appreciation of different marketing environments

■ A lack of knowledge about information sources and an inability to use them properly

■ A tendency to use experience in place of market research.

While much of the above may be true in relation to developing new export markets, many firms make a perfectly successful entry into international markets without spending much time and effort on information gathering. The business environment is often too dynamic for the luxury of formal market research. An opportunity arises and the firm will decide to take advantage of it based on an informal mixture of intuition and experience. Many of the national agencies for the provision of export information (as we saw in Chapter 2) charge for their services which acts as a deterrent for the smaller firm. Often this information is too general and not market specific enough to meet their perceived needs. To be fair, many of the providers are in a difficult situation of having to meet so many different needs and expectations that it is almost impossible. Once firms have some experience of international activities, they tend to develop their own networks for information gathering, and may only use national providers for specific opportunities. In turn, the national providers perhaps have more to offer the new exporter with limited experience, to whom the general information is of more interest. Targeting of such services is important but can be difficult.

In a study of export award winners in the UK, this changing pattern of use was found. Respondents were asked to distinguish between providers of information which they had perhaps used once or twice, a category referred to as 'have used', and those which they found themselves returning to time after time. This category was referred to as 'frequently used'.

In terms of 'have used' the top five are chambers of commerce, British Overseas Trade Board/Department of Trade and Industry, overseas embassies, banks and trade fairs. However, those 'frequently used.' are almost entirely different with only trade fairs moving from the 'have used' category to 'frequently used' status. The top five 'frequently used' were:

■ Overseas agents

■ Personal contacts overseas

■ Overseas subsidiary company

■ Personal contacts in the UK.

The Implication of the contrast between the 'have used' and 'frequently used' categories is that a number of organizations, although used by exporters, do not receive repeat business. The conclusion is the assistance given was not helpful, or inappropriate to the changing needs of the exporter.

For those sources which the exporters had used at any time, they were asked to indicate how useful the assistance was which they received. From the analysis three groupings emerged. These were given the descriptive labels of positive, neutral and negative (Table 5.6).

The interpretation given to this pattern was that the sources included in the positive group were those which the exporters had found to be the most useful.

Table 5,6 Utility of information sources



Personal contact overseas 1

Overseas agent 2

Trade fairs 3

Personal contact UK 4

Overseas subsidiary company 5

Overseas company office 6



Chambers of commerce 8 Bank(s) 9

Overseas embassies 10

Trade associations 11

UK embassies 12


Public libraries 13

Commercial libraries 14=

Professional institutions 14=

CBI 16=

University/polytechnic 16—

In contrast those in the negative category had been least useful. Between the two extremes there were a set of providers who did not evoke feelings of great satisfaction or dissatisfaction from the users. Thus, from the viewpoint of the users you have the emergence of in and out-suppliers of information relating to their needs.

The findings suggest that there is great variation in the pattern of sources of export information used, and that some sources are not regarded by the companies as being of great use to them. It appears that personal contacts, and those sources where there is a high chance of interaction (overseas agents, personal contacts overseas and trade fairs) between the inquirer and the provider, tend to be most popular. It is possible that firms are missing out on useful sources of export information from, for example, commercial and public libraries, simply because they are non-traditional points of contact for the firm. These are sources of information which, have been scored poorly by the exporters but often public libraries contain, or have access to, a range of business information which the cost-conscious company could access at a relatively low price. Clearly, if these organizations wish to convey this to their potential users, there is an important awareness-raising task to be performed in order to achieve a higher profile in this area.

Watson et al. (1998) in a study of 20 SME firms found that informal networks were the most valued source of information. People located In the international markets were particularly found to be useful, as were the commercial sections of embassies and trade associations. In terms of the information they sought, most needed help to find agents and distributors and to identify lists of potential customers.

While information is an important issue it should be remembered that, from a marketing point of view, success in overseas markets is still largely based on delivering what you promised to the customer and, as Archer (1991) cautioned, a firm must avoid spending 'so much time keeping itself informed that it will have no time for exporting'.

Strategic alliances

Hansen et al. (1994) in a study of Danish exporters explored the role of market responsiveness, technology and export co-operation in contributing to the success of SME exporters. The study used as its database the export behaviour of almost 200 companies in Jutland, a peripheral area within Denmark. Due to the small size of the Danish economy, the SMEs are under pressure to export if they wish their businesses to develop.

Market responsiveness occurs because the companies undertake a high level of process and product adaptation for the export markets, thus they specialize in providing new or specialty products for particular groups of customers. A second strength of the group is the use of technology to innovate in the production process, including use of just-in-time systems. Thus, while the companies themselves are not engaged in high-tech production, they integrate new technologies into their internal organization in ways that diffuse innovation. The third key feature was their use of alliances. This enabled them to finance higher levels of investment, to absorb greater risk, to access knowledge and know-how more rapidly, and allowed increased specialization, and therefore increased efficiency. Alliances were helped by the geographical proximity and cultural similarity among the firms, thus the social network helped to create an environment of mutual trust.

This use of an alliance of some sort is not unusual in SME exporting. Joynt and Welch (1985) reported the encouragement by the Swedish government of alliances between geographical distant companies. Likewise Kaufmann (1995) observed that SMEs would often use distribution agreements, and sometimes production cooperation, to expand into foreign markets and therefore improve their international competitiveness. By co-operating, the companies realize synergies that otherwise would call for a merger. Co-operation is an efficient alternative, as long as the sum costs are less than the cost of going it alone.

Berra et al. (1995) have observed 'learning by co-operating' in companies involved in the Italian clothing industry. From the study of a large database, recording some 1051 contractual ventures and direct investments from 1987 to 1991, they identified some 709 deals at the international level. Of these 362 were co-operative deals and 347 were non-co-operative. It was found that in this particular industry the international growth of the SMEs took place through co-operative contractual deals (68%) than by non-co-operative deals (32%). This contrasted with the larger companies were non-co-operative strategies prevail (54%). The kinds of co-operative operations included are:

■ Commercial and distribution agreements

■ Manufacturing licensing

■ Long term subcontracts

■ Commercial licensing

■ Transfer of trade-marks and of granting patents

■ Management contracts

* Transfer of know-how and turnkeys (the later being a management contract for the construction of a plant, training of personnel and the initial operation of a plant for a local investor)

■ Portfolio investments.

It appears that the companies in the study attempt to reproduce the same pattern of linkages at the international level as they operate on the domestic level. In Italy the SMEs decentralize their production within the country through networks of companies and industrial districts, whose horizontal connections (among the SMEs themselves) and vertical connections (with large companies) provide flexibility and low costs.

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