August 2014 | Export Performance
Thanks to accelerating globalization trends, intensifying competition and increasing market integration, exporting has become one of the fastest-growing areas of world economic activity. Exporting is the first step in a firm’s internationalization process and as such, it requires fewer resources, involves less risk and has greater flexibility compared with other more advanced foreign market entry modes, such as wholly owned foreign production.
Although it offers numerous benefits to the firm, including capacity utilization, wider market scope and growth opportunities, the continuation or abandonment of export business operations largely depends on how satisfactory its performance is in international markets. This has given rise to a growing body of research that focuses on understanding the drivers, moderators and outcomes of the firm’s strategic export behavior and its ultimate impact on export performance. These issues provide the central theme for a collection of five articles published in the Journal of International Marketing over the last three years.
In “National Export Promotion Programs as Drivers of Organizational Resources and Capabilities: Effects on Strategy, Competitive Advantage, and Performance,” published in 2011, Daydanda Palihawadana, Marios Theodosiou and I stress the role of possessing specific resources—managerial, production/R&D or intellectual, for example—and specific capabilities, such as business identification, relationship building or innovation, when building a sound export marketing strategy, paying particular attention to product, price, distribution and promotion. Our research also underscores the instrumental role of government assistance programs, particularly those relating to export information and trade mobility, in providing an external boost to each of a firm’s export-related resources and capabilities. In fact, this boost becomes stronger in the case of smaller firms, which have limited resources and skills, as well as among exporters with limited experience in international activities (thus little foreign market knowledge and few business contacts). In addition, we demonstrate that the proper implementation of a firm’s export marketing strategy leads to multiple competitive advantages, hinging on product differentiation, cost reduction and service quality dimensions, which have favorable effects on both the firm’s market performance and its financial performance in foreign markets. Inevitably, firms with high export market performance are destined to enjoy enhanced export financial performance outcomes.
Among strategic resources, the lack of innovativeness has been regarded as a serious obstacle in a firm’s export development process because engaging in export activities per se often has been described as an innovative process. This issue was the focus of attention in “Firm Innovativeness and Export Performance: Environmental, Networking, and Structural Contingencies,” published in 2013. Authors Nathaniel Boso, Vicky M. Story, John W. Cadogan, Milean Micevski and Selma Kadić-Maglajlić examine the moderating role of both environmental and organizational factors to demonstrate that the relationship between innovativeness and export performance is not linear. The authors suggest that intense competition and dynamic forces (and, thus, uncertain customer needs and preferences) in foreign marketplaces require relatively high levels of innovativeness by the firm to achieve superior export performance. From an internal organization perspective, the positive effect of innovativeness on export performance is amplified when the exporting firm has, (a.) a stronger capability in building personal connections, ties and networks with various parties in the foreign market, such as suppliers, buyers and competitors; and, (b.) an export organization characterized by an informal, decentralized, organic structure, as opposed to a mechanistic, more centralized, more formal structure.
An important, but often neglected, strategic area of exporting is pricing in foreign markets. As demonstrated in “Competitive Export Pricing: The Influence of the Information Context,” by Calude Obadia and published in 2013, the manipulation of export prices is greatly influenced by the level of competitive intensity. Under conditions of foreign market ambiguity, where the quality of information received is deficient, exporters tend to manipulate various price dimensions, such as volume discounts, credit terms and special prices for new products, because operating in unfamiliar and complex foreign business environments initiates a sense-making process that pushes a firm to change its current behavior. However, under conditions of high information asymmetry, where the exporter lacks information regarding the activities of his or her import customers, such manipulations of price can seriously damage export performance because the possession of limited information will impede the firm’s sense-making process and make export pricing policies relatively ineffective.
Another critical, but debatable, dimension of exporting is promotion strategy adaptation (or standardization) in foreign markets. Using a strategic fit approach, authors Magnus Hultman, Constantine S. Katsikeas and Matthew Robson demonstrate that an adapted perspective on export promotional activities positively affects performance only in the case of firms with low international experience in terms of both duration and intensity. In “Export Promotion Strategy and Performance: The Role of International Experience,” published in 2011, the authors indicate that, on one hand, as a firm gains more experience over time, it is in a better position to understand local customer preferences and appreciate the aspects of a promotional program that can be standardized in a more cost-efficient way. On the other hand, greater intensity in export operations implies a wider, more in-depth knowledge of foreign markets, which encourages formalization through the adoption of more standardized promotional efforts. Notably, another dimension of international experience, the scope of exporting, was not found to have any moderating effect on the promotion/adaptation performance link. However, feedback from managers indicates that the wider the scope of exporting, the higher the possibility of becoming experienced and familiar with customer preferences in culturally distant countries, which, in turn, may facilitate export promotion standardization.
Finally, in “Antecedents and Consequences of an Eco-friendly Export Marketing Strategy: The Moderating Role of Foreign Public Concern and Competitive Intensity,” published in 2013, Constantine S. Katsikeas, Thomas A. Fotiadis, Paul Christodoulides and I highlight a contemporary, but often underestimated, strategic exporting issue: acting in an eco-friendly way in international markets. This is particularly important nowadays where there is a growing concern regarding ecological issues in many parts of the world, not only by governments, but also by many business organizations, eco-conscious consumer segments and the general public. Our research shows that being environmentally sensitive in all elements of an export marketing program is essential to harnessing the exporting firm’s financial performance, particularly in foreign markets characterized by high competitive intensity and strong environmental concerns. Adopting an eco-friendly marketing strategy seems to be of greater necessity when selling industrial goods rather than consumer goods, or when operating in developed rather than developing countries. Designing and implementing such a strategy is not an easy task. It needs to be continuously supported and sustained by adequate physical, financial and experiential resources, as well as by appropriate organizational capabilities, such as the existence of a shared vision among company employees, effective cross-functional coordination and the use of relevant technologies.
A number of observations can be made regarding the content of this collection of articles:
1. A firm’s export performance is affected, directly or indirectly, by numerous strategic factors, ranging from the firm’s organizational resources, capabilities and marketing mix elements to more specialized factors such as innovativeness and eco-friendliness.
2. Export performance is a multidimensional concept, expressed in many different ways, that needs to be carefully conceived, operationalized and measured to yield accurate results.
3. The relationship between export performance and its antecedents is not straightforward. Instead, it is contingent on various external forces, such as foreign competitive intensity, and internal forces, such as organizational structure.
4. The various phenomena relating to export performance can be explained from different, but complementary, theoretical perspectives, such as a resource-based view, industrial organization theory or contingency theory, which have significantly enriched knowledge of the process and dynamic aspects of firm performance in foreign markets.
5. To achieve superior performance in international markets, both corporate and public policymakers need to take more drastic action toward rethinking their export policies and strategies based on fresh insights derived from recent academic research.
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Boso, Nathaniel, Vicky M. Story, John W. Cadogan, Milean Micevski, and Selma Kadić-Maglajlić (2013), “Firm Innovativeness and Export Performance: Environmental, Networking, and Structural Contingencies
,” Journal of International Marketing
, 21 (4), 62-87.