Examination of export constraints affecting the export

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European J. International Management, Vol. 3, No. 3, 2009

Examination of export constraints affecting the export performance of the Indian sports goods industry Navjote Khara* and Balram Dogra Apeejay Institute of Management, Jalandhar, Punjab, India Email: [email protected] Email: [email protected] *Corresponding author Abstract: Despite the benefits derived from exporting in the increasingly globalised market, firms, specifically smaller ones, face numerous barriers to exporting. This paper offers an analysis of export development barriers faced by firms in the Indian setting. This research is a census study conducted on the sporting goods exporters based in the Northern state of Punjab, using personal interviews. The results of the empirical findings suggest that the exporters face constraints classified into financial (availability and cost of finance), marketing (export marketing, export packaging and creativity), technological (related to access and quality management) and inputs (availability of skilled labour and raw materials). Subsequently, conclusions and implications are derived for policy makers and export managers. Keywords: export barrier; export constraint; export performance; sports goods; India. Reference to this paper should be made as follows: Khara, N. and Dogra, B. (2009) ‘Examination of export constraints affecting the export performance of the Indian sports goods industry’, European J. International Management, Vol. 3, No. 3, pp.382–392. Biographical notes: Navjote Khara is a Senior Lecturer at Apeejay Institute of Management, India. Her area of expertise is international marketing and corporate strategy. Her articles have appeared in many reputed journals and books. Her most recent book is Strategic Outsourcing, published in 2005 by Deep and Deep Publishers. Balram Dogra is presently Director, Apeejay Institute of Management, India. His area of expertise is general management and marketing. More than 40 articles of his have appeared in different journals and seminar proceedings. His most recent book is Rural Marketing: Concepts and Practices, published in 2008 by Tata McGraw Hill.

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Introduction

In recent years there has been a renewed focus on factors determining the export performance of firms. Despite the benefits gained from exporting to increasingly globalised world markets, the path to exporting is not smooth. Growing liberalisation Copyright © 2009 Inderscience Enterprises Ltd.

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of trading systems; expansion of regional economic integrations; excessive liquidity in financing cross-country purchases; and increasing connectedness with customers and marketing partners due to major advances in information, communication and transportation technologies (Keegan, 2002; Leonidou, 2004) are characterising international trade. Importance of international trade to a nation’s economic welfare and development has been a heavily documented subject in the economics literature since Adam Smith’s work on the nature and causes of the wealth of nations (Morgan and Katsikeas, 1997). Several economic theorists have suggested that international trade can influence Gross Domestic Product (GDP) (Meier, 1984; Marin, 1992). The belief that exports lead to growth is that as export sales increase, other things being equal, the GDP of a nation will rise and provide a stimulus to improved economic well-being and societal prosperity. Early theories of internationalisation focused mainly on the international activities of the firms (Ayal and Zif, 1979; Beamish and Banks, 1987). Calof and Beamish (1995) have defined internationalisation as the process of adapting a firm’s operations (strategy, structure, resources, etc.) to international environments. Internationalisation has also been defined as the outward movement in an individual firm’s international operations (Johanson and Vahlne, 1977; Piercy, 1981). Welch and Luostarinen (1988) define internationalisation simply as the process of increasing the involvement in international operations. Participation in export operations is vital in spreading business risks across different markets and ventures; improving technology, quality and service standards in the organisation; generating more revenues and funds for reinvestment and further growth; exploiting idle operating capacity and improving production efficiency; and attracting and rewarding shareholders and employees through the creation of a better profit base (Terpstra and Sarathy, 2000; Czinkota and Ronkainen, 2001). However, in the process of exporting, firms face problems related to internal organisational weaknesses, strategic business flaws, home-country deficiencies or host-market problems (Onkvisit and Shaw, 1988; Korth, 1991). The purpose of this paper is to identify the key constraints that influence the export performance of firms. The specific national setting for the examination reported in the study is the sporting goods industry in India. This study will be uniquely valuable to the industry as there have not been any previous published studies focusing on the export experience and performance of Indian sports goods. This study will also contribute to the existing export literature, as the value of single industry studies is being increasingly recognised (Dess et al., 1990; Silverman et al., 2003). Another important contribution of this research is that majority of studies have been conducted in developed countries (e.g. USA, Canada and Western Europe) with very little attention given to developing countries (Julian, 2003), especially India. Sports goods industry in India is largely concentrated in the cottage and small-scale sector, which does not have enough resources for technology upgradation or to effectively market their products. Geographically, the industry is mainly concentrated and manufactures 318 items. However, major items that are exported are inflatable balls, hockey sticks and balls, cricket bats and balls, boxing equipment, fishing equipment, indoor games like carrom and chess boards and different kinds of protective equipment. European Union (EU) has been the leading importer of Indian sports goods followed by Australia, USA and South Africa. Within the EU, UK is the largest importer with approximately 25% market share in 2005. It is followed by

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Germany which has more than 7% market share, France accounts for 5.22% of Indian sports goods exports to EU whereas Italy accounts for 4.64% share in sports goods exports to EU, in 2005 (data based on Comtrade statistics).

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Literature review

A number of studies deal with the barriers affecting the export development of firms. Leonidou (2004) performed a comprehensive analysis of 39 export barriers extracted from a systematic review of 32 empirical studies conducted on the barriers hindering small business export development. Export barriers have been classified as internal, that is barriers associated with organisational resources and capabilities and company approach to export business, and external, that is barriers stemming from the home and host environment within which the firm operates. For analytical purposes the internal barriers are broken down further into functional, informational and marketing, while external barriers are separated into procedural, governmental, task and environmental. Badrinath (1997) has studied the operational issues affecting the competitiveness of SMEs in the global marketplace based on a study of firms in Bangladesh, India, Indonesia and Pakistan. The study shows that the major constraints faced by SMEs are in the critical areas of access to finance, technology and markets. Tesfom and Lutz (2006) in their research article derived a classification of export problems of SMEs from developing countries on the basis of a comprehensive literature study review of 40 articles published over a period of 25 years (1980–2004). They also classified the export problems into internal and external barriers, with the internal barriers including company barriers and product barriers and external export barriers being the industry barriers, export market barriers and macro environment barriers. Katsikeas and Morgan (1994) conclude that the export barriers include difficulty in collecting payments from foreign customers and providing after sales service, high costs of selling abroad, problems associated with fluctuating exchange rates and the difficulty in arranging a licensing or joint venture arrangement with foreign firms. Confusing import regulations and procedures, risks involved in selling abroad, the high value of foreign currency in export markets (Katsikeas and Morgan, 1994; Leonidou, 1995; Da Silva and Da Rocha, 2000) are other barriers affecting the export performance of firms. Lages (2000) identifies management’s emphasis on developing domestic markets, lack of capital to finance export expansion and a lack of capacity dedicated to a continuing supply of exports as export barriers. At the macro level, high foreign tariffs and lack of government assistance act as an impediment to the firms. Further barriers to export marketing include distribution access and adapting to foreign market needs, along with gathering information on foreign markets (Karakaya, 1993), language and culture differences and the need to modify product, price and promotional strategies (Koh, 1991; Moini, 1997; Albaum and Tse, 2001).

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Methodology

3.1 Research design A significant volume of research is dedicated to the relationship between the effects of export barriers on export expansion of firms (Barrett and Wilkinson, 1985; Burton and

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Schlegelmilch, 1987; Ford and Leonidou, 1991). At the same time, export performance of firms has been measured by a wide variety of indicators, including sales, market growth, market share, profitability, return on investment, attainment of export goals and perceived satisfaction (Julian, 2003). This implies that there is a relation between the firm’s perceived export barriers and its export expansion, and the subsequent export performance. This research is based on an empirical study on the perceived export barriers of Indian sporting goods exporters. The main objective of the study was to understand the constraints faced by the sports goods exporters and subsequently suggest policy changes to the concerned agencies. Consequently, a cross-sectional survey was conducted in Jalandhar (India) to collect primary data from the 60 members of Sports Goods Export Promotion Council (SGEPC) based in the North Indian state of Punjab and a census survey conducted. The earlier approaches to collecting international data implicitly assume that firms design and implement identical marketing strategies for all their products in all foreign markets where they operate. Though Porter (1986) considers industry as the appropriate unit of analysis in international strategy, other researchers differ. Prahlad and Doz (1987) and Hout et al. (1982) analyse international strategy at the business level. Cavusgil and Zou (1994) consider the unit of analysis as an individual product-market export venture of the firm. This means that the firm’s export venture consists of a single product or a product line exported to a single market. This approach is used in the current research and follows the recommendations of previous empirical studies (Cavusgil and Zou, 1994; Styles, 1998; Zou et al., 1998; Ling-yee and Ogunmokun, 2001). The major steps followed to accomplish the research objectives are briefly outlined as follows. As mentioned earlier, the present study is based on information obtained from the Indian sports goods exporters that are registered with the SGEPC. A structured questionnaire was developed using a multistage process to conduct the survey. First, prior studies on exporting were reviewed to identify the previously used measures in export marketing. Second, based on the identified measures, a list of items was assembled and Likert-type statements were used. Third, the questionnaire was pre-tested in two stages to ensure the content validity. In stage one, the questionnaire was evaluated by three professors from international marketing and marketing research. Based on their feedback some items as well as scales were added, modified and deleted. In stage two, the questionnaire was administered to nine sports goods exporters using personal interviews. The interviews lasted for one to two hours and the objective was (a) to find the critical issues Indian sports goods exporters face in developing and implementing successful export programmes, (b) to study the problems of the exporters and (c) to build industry support for the next, structured survey phase of our study. The pre-test provided useful feedback about the length of the questionnaire, the time required to complete the questionnaire and the appearance of the questionnaire.

3.2 Sample and data collection After finalising the questionnaire, the method of data collection used was that of personal interviews with the Managing Director of the sports goods firms. The sampling unit consisted of all sports goods export firms based in Jalandhar in the Northern state of Punjab, which collectively account for more than 60% of Indian sports goods

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exports. The unit of analysis was an Indian firm that exports sporting goods to one or more countries. Sixty firms were contacted for appointments and the questionnaire administered to 37 willing exporters, giving a response rate of 61.66%.

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Results and findings

The responses obtained from the sports goods exporters formed the basis of statistical analysis carried out using SPSS. A profile of the survey respondents is given in Table 1. The turnover and investment figures are given in Indian Rupees (Rs.). Table 1

Profile of the survey respondents

Characteristics

Number of firms

Percent of firms

Annual sales volume (Rs. Million) 200

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8.1

Number of employees 500 Age of firm (Years) 0–10

9

24.3

11–30

10

27.0

31–50

10

27.0

51–70

4

10.8

>70

4

10.8

Legal status Sole proprietorship

9

24.3

23

62.2

5

13.5