Strategy, Strategy Implementation and Export Performance of Developing Country Exporters: the Case of the Philippines

This paper investigates the relationships between firm, industry and market-related variables, strategy, strategy implementation and performance for Philippines exporters. The model follows Cavusgil and Zou (1994) with the addition of strategy implementation as a mediating variable between strategy and performance. We conclude that strategy implementation influences performance, both directly, and as a mediating variable. Introduction, Objectives and Contribution of the Research The substantial body of literature on export performance focuses on: • The measurement of performance. • The impact of factors external to the firm such as industry characteristics;and • Strategy – in particular, the extent to which the firm adapts products, pricing, promotion and distribution to the requirements of particular export markets. Most of this research focuses on the relationships between performance and environmental factors. Less has been written about the strategy/performance linkage and, in particular, the importance of implementation of strategy. The broad objectives of the present research are: a) To investigate the relationships between environmental factors, export strategy and export performance; and b) To investigate the role of strategy implementation as a mediating variable between strategy and performance. The theoretical contributions of this research are: a) It applies an established developed-country model (Cavusgil and Zhou, 1994) of environment-strategy-performance linkages to a developing country situation. b) It includes strategy implementation as a mediating variable between strategy and performance. Strategy implementation is a generally neglected area in the marketing literature and has not been previously investigated in an export-marketing context. Implementation is the “doing” dimension of strategy. It includes organisational culture, structure, control, reward systems, information systems and leadership. A better understanding of the dimensions of strategy development and implementation can contribute to both improved performance of export mangers and can guide policy makers in deciding the most appropriate forms of government assistance. For example if the leadership qualities of export managers are shown to be a key implementation variable, leadership training may be an appropriate activity for government. The Research Framework The conceptual framework for the research is presented in Figure 1. Figure 1: Research Framework The development of the research constructs and the relationships between them are discussed in the two subsequent sections. Related Research and Development of Constructs The constructs identified in Figure 1 have been developed and tested by a number of previous researchers. We have drawn on this work as a basis for the measures used in the present research. Export performance Katsikeas, Leonidou and Morgan (2000) critiqued more than 100 empirical studies on export performance measures. They identified 42 individual measures and concluded that “measurement of this construct suffers from serious conceptual, methodological and practical limitations, hindering theory advancement in the field” (Page 505). Recognising the multifaceted nature of export performance, we used both objective measures (export sales, contribution to total sales, contribution to total exports) and subjective measures (management’s perception of the export venture’s achievement of strategic objectives, its profitability and overall success). Firm and product characteristics Firm size has been included as an independent variable in many studies of export performance. (Cavusgil, Bilkey and Tesar 1979;Chetty and Hamilton 1993, Cavusgil 1884; Moen 2000, Crookell 1979). Other firm-related variables that have been tested as determinants of export performance are: management commitment (Cavusgil and Zou 1994), export competencies (Burton and Schlegelmilch 1987), experience (Cavusgil 1884) and technology intensiveness (Cooper and Kleinschmidt 1985). The firm and product characteristics used in the present research were: international competence(number of export staff, experience in exporting, financial commitment), Firm Characteristics Product Characteristics Industry Characteristics Market Characteristics Export Marketing Strategy Strategy Implementation Export Performance international commitment (management commitment, international business intensity, number of countries sold to), experience with product, product uniqueness, acceptability of product in export market(s) and market familiarity with product. Industry and Market Characteristics Factors external to the firm appear to be the least researched, but the studies that do include them usually show a strong relationship between performance and such factors as industry structure and technology intensiveness (Madsen 1987). The second set of external factors relates to the export market and include such variables as trade barriers, export market attractiveness and export market competitiveness. The industry and market characteristics investigated in this study were technology intensiveness and legislative and other barriers in the importing country. Export Strategy In the export marketing literature, strategy has been generally defined in terms of the extent to which the firm adapts the product, distribution, promotion and pricing to the requirements of individual export markets (Cavusgil and Zou 1994; Kaynak and Kuan 1993) More recently, Styles and Ambler (2000) have applied the relationship marketing paradigm to modelling export performance. We follow the adaptation model– based primarily on Cavusgil and Zou (1994). Strategy Implementation The literature on strategy implementation is sparse in general and particularly sparse in the case of export marketing strategy. Strategy implementation includes, inter alia, organisation structure, task orientation, human resources, reward systems, information and decision processes, objectives, culture, management processes, control mechanisms (Alexander 1991). The framework in this study is that of Thompson and Strickland (1996). We grouped the seven strategy implementation variables into two categories; managerial (including organisation, leadership and culture) and operational (administrative support, rewards, best practice and budget). Research Propositions Each arrow in Figure 1 gives rise to one or more research propositions. These are: Proposition 1:Export strategy (international adaptation of pricing, product promotion and distribution) is positively related to the firm’s commitment to export, its export competence, and the uniqueness of the product. Proposition 2: Export strategy is negatively related to familiarity with the product and its acceptability in the export market (that is, little attempt is made to adapt marketing strategy when buyers know and trust the product). Proposition 3:Export strategy, in particular, product adaptation, is negatively related to technology intensiveness (because of the high cost of making changes to technology-intensive products to meet the requirements of specific markets). Proposition 4: Export performance is directly and positively related to commitment, competence and export experience. Proposition 5: Export marketing strategy is positively and directly related to export performance. Proposition 6: The relationship between export marketing strategy and performance is mediated by managerial and operational implementation tasks.