Abstract
Purpose:This research seeks to extend earlier work by Scharf et al.(2001) that examined the challenges faced by Es along their path of internationalization.In particular,the internationalization process in transitional and developed economies is examined.
Design/methodology/approach:The central research methodology for the project uses aqualitative approach involving the in-depth investigation of a“critical incident.”The incident explored is the firm’s“worst nightmare”or“biggest challenge”in conducting international business.Respondents are asked to“tell the story”of the“critical incident”,its nature and consequences.
Research limitations/implications:The research methodology provides both limitations and benefits.This type of in-depth critical incident ysis lends itself to all sampl sizes,in this paper 29 cases.The limitation is the generalizability of the findings because of the all sample.The benefit is that the methodology yields an in-depth understanding of the challenges faced by E exporters.
Originality/value:This paper extends earlier work examining challenges faced by Es by comparing the experiences of managers in two different economic environments and finding differences in their respective challenges.
Keywords:International business;Exports;all to medium-sized enterprises;Vietnam;Qualitative methods
Introduction
This study extends earlier work by Scharf et al. (2001) that examined the challenges faced by Es along their path of internationalization.Scharf et al.’s work was distinguished by its use of qualitative methodology as means for extracting a rich understanding from managerial experiences.Weadopt this methodological tradition inexamining the problems faced by Es exporters in two different economies,transitional and developed,as represented in two countries,Vietnam and the USA. Es exporters in the transitional economy encountered export problems related to product quality acceptance and logistics management.In comparison,E exporters in the developed economy facedchallenges such as country differences and general business risk..
Literature review
all and medium-sized enterprises substantially contribute to country exports around the world(Fletcher,2004).Not only are all firms becoming increasingly international,they appear to be enteringthe international arena at an earlier age than had been the case in previous decades(Andersson et al.,2004).Yet exporters may face daunting challenges that limit their ability to realize such growthopportunities.aller and younger firms may be particularly susceptible to export barriers,as resourceconstraints and organizational limitations increase their vulnerability(Katsikeas and Morgan,1994;Miesenbo¨ck,1988).
In comparison to the broad bodies of literature addressing internationalization,entrepreneurship and all business management,there has been substantially less work done on the experiences of E exporters as they grow internationally.Yet these firms represent one of the fastest growing segments in the economies of various countries.all-scale businesses can play an especially crucial role in export and employment generation in developing countries(Arinaitwe,2006).Further,the overwhelming majority of studies examining export barriers facing Es have been conducted in North America and Europe.Research dealing with the export barriers faced by firms in developing countries has been quite rare(Leonidou,2004).
As noted by Leonidou(2004),ysis of export obstacles can be crucial for all business managers,public policymakers,and business educators,as well as those researchingexporting processes to develop more comprehensive models of the field.This study aims to contribute to such yses bycomparing the obstacles faced by firms in very different socio-economic contexts.The challenges faced by firms in transitional versus developed economies are likely to lead to different implications for managers,policy makersand educators in those contexts.Further,understanding of the scope andimportance of different barriers may be broadened by extending such studies outside of the developed-country arena..
Prior research on exporting has provided a foundation for understanding the specificaspects of this internationalization strategy and the implications it presents for the firm’s manager.Various researchers have investigated the problems facing exporting firms.Bilkey(1978)found that lack of finances,foreign government restrictions,inadequate knowledge of foreign sales practices,inadequate distribution and lack of foreign market contacts were common problems in exporting.Exporting may also beinhibited by the E’s limited resources and management skills,language inability,cultural differe ces,and psychic distance(Fletcher,2004;Miesenbo¨ck,1988;O’Farrell et al.,1998).
Tesar and Tarelton(1982)distinguished between start-up export problems and problemsassociated with on-going export operations.They found that initiating issues involved identifying overseas opportunities,export documentation,and start-up costs, while on-going issues involved representation,servicing foreign markets,differences in consumers and standards,securing payment,and costs.These findings were supported by Albaum(1983)andBannock(1987).
Classification of export barriers was also undertaken by Leonidou(2004),who distinguished internal barriers(those associated with an exporting organization’s resources,capabilities,and approach to exporting)from external barriers(barriers stemming from the homeor host environment,including foreign rules,regulations,tariff barriers,and different customer habits).The internal barriers were further divided into informational,functional and marketing barriers,while external barriers were classified as procedural,governmental,taskand environmental barriers.
Sullivan and Bauerschmidt(1989)focused on the location-related differences of issues specific to all firm exporters.In particular,aside from issues related to the size of the domestic market,they found that all firms in the US and Europe have generally similar perspectives to their larger counterparts.Building on the country of origin distinction,Bell(1997)studied firms in Norway,Finland and Ireland and found very little difference in the nature,strength or rank of export problems due to location.
Scharf et al.(2001)used this prior work as a foundation to developing a rich understanding of the experiences of E exporters.Their approach utilized methodology focused on a“critical incident”faced by the manager(Bitner et al.,1985).Their approach was to conduct loosely structured,in-depth,face-to-face interviews using a common template in Ireland and Australia.The results indicated that finding suitable intermediaries,distribution,product adaptation and finance issues were prominent issues encountered by E exporters.Scharf et al.(2001)also distinguished between initiating problems and on-goingproblems,with initiating problems relating to a lack of experience or knowledge and on-going issues relating to greater involvement with foreign markets.They also noted problems due to outsourcing and sub-contracting components and finished goods.It is against this literature backdrop that the current study was positioned,as a means to extendthe methodology and understanding to other locations in an effort to uncover similarities,differences and greater understanding.
The country contexts
In this study we looked at the exporting experiences of Es in two distinct locations:Vietnam and USA(Idaho).In a sense,the economies in both countries are transitioning away from their historical bases to new economies.Vietnam is moving away from a state controlled economy based on agriculture to a more market oriented economy with exports playing a larger role.Idaho has gone from being predominantly a producer and processor of natural resources and agriculture to a producer and exporter of technology-based products.The comparison of businesses in these countries provides surprising similarities and striking contrasts.
Vietnam
Located in southeastern Asia,Vietnam is bordered by China,Laos,Cambodia,the Gulf of Thailand,the Gulf of Tonkin,and the South China Sea.Its 84 million people inhabit 329,560 square kilometers.It has a long history of international trade with countries near and far.In the early 1970s,Vietnam unified its north and south under a centrally planned government andeconomic structure.However,inrecent years,Vietnam has begun to introduce more market-oriented measures into its economy.The Doi Moi reforms,introduced in the mid-1980s,have resulted in wide spread economic and institutional changes in Vietnam.Along with other legal system changes,thesechanges have helped to create an environment more conducive to developing private sector enterprises,encouraging private sector employment and allowing international access to/by foreign companies and markets(Baughn et al.,2004;Harvie and Tran,1997;Wolff,1999).
In the period 1991-2000,the GDP of Vietnam increased 200 percent.The industrial sector including construction increased from 22.7 to 36.6 percent and services from 38.6to 39.1 percent of GDP,while the agricultural sector declined from 38.7 to 24.3 percent of GDP.Over one million new jobshave been created annually(Van Kien Dai Hoi DaiBieu Toan Quoc Lan Thu IX,2001).Much of this growth was attributed to the transition from state-owned enterprises(SOEs)to quasi-private ownership and to an increase in private Es.Vietnam’s 2005 exports had an estimated value of US$36.9 billion.Theseexports were primarily composed of crude oil,marine products,rice,coffee,rubber,tea,garment and shoes(Central Intelligence Agency,2006).Exports to the USA doubled in 2002 and 2003,accounting for over 20 percent of Vietnam’s exports in 2005.
In 1990,Vietnam adopted various laws to create a new environment for private business holdings.In the eight years following their adoption,more than 35,000 enterprises were established.Sixty one percent of these new start-ups were seen as the basis of Vietnam’s economic boom period of 1993-1995.In response to the Asian economic crisisof the late 1990s,these laws were revised and adopted in 1999 in an effort to further encourage new business growth(Baughn et al.,2004).Although the intent of the reform was to foster a market economy under socialist guidance,it has resulted in abusiness environment characterized by a dual ideology,a weak legal system and a cash economy(Nguyen,2005).
While these reforms have had a tremendous impact on Vietnam’s economic growth,the country’s socialist tradition has inhibited the development of effective private sectormanagers.Yet,having a sufficient number of adequately trained managers can be crucial to the accomplishment of the country’s economic growth goals.As a country transitioning from a controlled economy to a market-oriented economy,evidence suggests that many managers in Vietnam do not adequately possess the necessary skills and support to compete in the increasing competitive global market(Neupert et al.,2005;Steer,2001).
Idaho,USA
The state of Idaho is in the northwest section of the USA.Washington,Oregon,Nevada,Utah,Wyoming,Montana and British Columbia(Canada)border its 138,187 square kilometers area and populationof 1.3 million people.Idaho’s largest production industries include high technology manufacturing,agriculture and food processing,and wood products.Its leading service industries include retail trade and services related to travel,touri,health and business(US Department of Commerce,2006).Idaho has made the economic transition from historically being reliant on agriculture and natural resources to drawing most of its gross state product from high technology manufacturing.While not representative of the USA as a whole,it does represent a trend in many western USA states that nurture high technology for future economic growth(Perry,2002).
The value of Idaho’s exports increased more than doubled from 1998 to 2005 fromUS$1.5 billion to US$3.2 billion.In 2004,the top export product category was high technology products(71 percent)while agriculture was second at 11.7 percent(Estrella,2006).Much of this growth is made up of E exporters that provide products and servicesto these industries.Accordingly,the state works to support the growth and success of E exporters as a source of economic growth.
Methodology
The central research methodology for the project uses a qualitative approach involving the in-depth investigation of a“critical incident”.The incident explored is the firm’s “worst nightmare”or“biggest challenge”in conducting international business.Respondents are asked to“tell the story”of the“critical incident”,its nature and consequences(Eisenhardt,1991).This approach provides context for the challenges encountered and a greater understanding of the specific nature of the problems faced by the managers(Neupert et al.,2005;Loane et al.,2004;Loane and Bell,2002).
We used a standard set of questions for all of the managers interviewed for this study.The questions were:
(1)What has been your most challenging experience,or“worst nightmare”,in conducting international business?
(2)What activities or resources were necessary for you or your company to resolve the situation?
Generally,the interviews lasted between 45 and 90 minutes.In Idaho,the interviews were conducted in English.In Vietnam,the interviews were conducted in Vietnamese,and translated to English by two bilingual researchers.All interviews were transcribed.The written records were then reviewed by two researchers and grouped according to common themes.In incidents where the two reviewers did not agree,a third researcher reviewed the interview.Overall,there was consensus among the researchers in grouping the themes that came out of the interviews.It is the depth of the descriptions and explanations in the responses that provide insights into the exporting challenges faced by E managers.
Research sample
For the study,we interviewed 16 export managers in Idaho and 13 export managers in Vietnam.In Idaho the managers’companies were chosen from the state trade directory of export firms.In Vietnam,the managers’firms were identified from published listingsof businesses in Hanoi and Ho ChiMinh City.In Idaho,high technology products and manufacturing,agriculture and agriculture machinery were the predominant industries.In Vietnam,the companies represented exporters of manufacturedproducts and services.The interviews were conducted in two major Vietnamese business centers,Hanoi and Ho Chi Minh City,and in Idaho at various locations around the state.
Findings
In Idaho,the problems faced by E exporters can be categorized as relating to either “initiating”or“on-going”export operations.Problems noted such as adequate training for customers,understanding logistics in the receiving(importing)country,international measurement standards,and customs documentation are clearly related to early stage export effort.For the most part,once these problems have been encountered,they are not likely to be repeated as managers adjusted their policies and procedures to anticipate such problems.
By contrast,problems with agents,foreign government bureaucracy,cultural differences,international competitiveness,and business risk are associated with on-going export operations.While companies may make adjustment to their policies and procedures to anticipate such situations,there is really no way to preempt them.What managers learn is notso much how to prevent,but rather how to effectively deal with them when they occur.In only one case was product quality raised as a problem.In this instance,the companysent a sophisticated camera system to a customer in Japan that turnedout to be defective.While the company repaired and replaced the system for the customer,they learned an important lesson relating to product quality in the international marketplace.In only one case was international market quality was a problem.
Using the distinction between“internal”and“external”barriers noted by Leonidou(2004),most of theobstacles encountered by the Idaho firms would be classified as “external.”That is,relating to country differences in rules and regulations,as well as socio-cultural and procedural differences.Overall,the challenges faced by Idaho E exporters addressed problems encountered in the process of exporting,but not usually related to the product itself.
By contrast,many of the companies in Vietnam encountered problems related to poorproduct quality or products that did not satisfy the specifications required by the contract with their customers.It seems that these problems are not so much related to exporting per se,as they are to effectivemanagement of the production process and value chain suppliers.Using Leonidou’s(2004)classification scheme,these barriers problems wouldbe characterized as“internal”.Within the context of Scharf et al.’s(2001)research these problems can be seen as fitting within“initiating”problems in that the Vietnamese exporters did not understand or were not aware of the product quality expectations in the international marketplace.In several cases,such as Cases VN 2,VN 6,VN 7,VN 9,VN 10,and VN 11,the companies shipped sub-standard goods.
Although the products may have been supplied by sub-contractors or outsourced,the problem or basis of the challenge goes to the heart of effective management skills,notexporting skills.Other cases involved damage to goods during shipment.Such incidents are to be expected and from the interviews,it seems that the managers and firms have learned to better manage the packaging and shipping process.
Discussion
In noting these differences,the issue of home country can be noted.However,to explain these differences,the question is whether the differences are related to location or are related to the skills ofthe managers in each location.Given that the number of years involved in exporting is similar for each group(13 years and 10 years),we propose that the differences relate more to the experience base of each country’s managers.Put another way,exporters in the USA have been selling to the international market for many years and understand the strong relationship between product quality and sales.In contrast,Vietnamese exporters and Vietnamese managers have only been producing for aninternational free-market economy for slightly more than 10 years.As such,we suspect that Vietnamese managers are still developing an understanding of the relationship between product quality andcustomer satisfaction in the international market.
In the transitional economy,many of the companies in Vietnam encountered problemsrelated to poor product quality or products that did not satisfy the specifications required by the contract.It seems that these problems are not so much related to exporting per se,as they are to effective management of the production process and value chain suppliers.Although the products may have beensupplied by “sub-contractors”or outsourced,the problem or basis of the challenge goes to the heart of effective management skills.
By comparison,in the developed economy,the problems faced by E exporters canbe categorized as relating to either“initiating”or“on-going”export operations.Problems noted such as adequate training for customers,understanding logistics in another country,international measurement standards,and customs documentation are clearly related to early stage export effort.For the most part,once these problems have been encountered,they are not likely to be repeated as managers adjust these policies and procedures to anticipate such problems.
Therefore,we make the distinction between creating products with a consistent and high level of quality and the process of selling those products.We can make the ogy of similar developmentin other centrally planned economies.For example,China has been a centrally planned economy that went through a period without an export orientation since the 1940s.However,in the last 20 years,ithas moved toward a more market-oriented and export-oriented economy.The result has been that Chinese made products have gone from having a reputation for be poorly made to now being madeat a level of quality that is internationally competitive for many product segments.As China has evolved,we may see Vietnam evolve.
By comparing export challenges in developed and developing countries,this study offers a broader understanding of how such challenges are shaped by their country context.For example,Leonidou’s(2004)review of 32 empirical studies(based almost entirely inNorth America and Europe)listed“meeting export product quality standards” as a barrier having low impact on the exporting firms studied.While this appears to be consistentwith the Idaho firms in this study,it is clearly at odds with findings regarding the Vietnamese firms.The implications for managers in these countries will differas well.For the Vietnamese firms,greater emphasis on quality control and supply chain managementisneeded.Support for this may be provided by the developed-country importer as well.Training andsupport for USA exporters is more likely to require a variety of issues,including exporting procedures/documentation,rules and regulations in different countries,socio-cultural differences,and general business risk.
Conclusion
This study provides an exploratory step in extending the work of Scharf et al.(2001)to other countries.In particular,we supported the distinction between initiating and on-going operation export problems.Also,we provide evidence to support their observation of problems related to outsourcing andsubcontracting of components and finished goods.In addition,we found support for Leonidou’s(2004)classification scheme of“internal”and“external”exporter problems.
These findings provide an earlier base for additional research.Through additional ysis of the interview transcripts and comparisons with findings from other countries,we expect to be able to develop a rich and in-depth understanding of the challenges faced by E exporters in various countries.
