Export Decisions For Small Manufacturing Firms:

A Case Study of Irish SMEs

Aidan O’Donohoe

Dublin Institute of Technology

B.Sc. (Hons) Business and Law

DT321

Supervisor: Christina Ryan

2016

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Declaration I hereby certify that this material, which I now submit for assessment as the final year

project for the programme B.Sc. (Hons) Business and Law, DT321, is entirely my own

work and has not been submitted in whole or in part for assessment for any academic

purposes other than in the partial fulfilment for that stated above.

Signed: _________________________

Date: _________________________

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Acknowledgements Firstly, I would like to acknowledge my parents Kathleen and Ciaran and siblings Niamh and Shane, for their fantastic support throughout the entire year. A special thanks to my parents in particular in regards to this research project, for aiding me with proof reading it on numerous occasions. In addition I want to give a special thanks to my girlfriend Katie-Ruby, my friends from home Andy, Daire, John and last but not least, my colleagues in DIT Sean, Ross and Sam who all, were patient and supportive over the year, particularly in helping take my mind of the project and blow of some steam. I would also like to acknowledge Christina Ryan, who supervised my work for year. The numerous meetings throughout the year were critical to keeping me on the right track with my research project. Finally I want to thank course coordinator of Business and Law Eoghan O’Grady, for his help on a number of occasions over the last four years. His guidance and support crucial in getting to this final stage of Business and Law DT321.

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Table of Contents

CHAPTER 1: LITERATURE REVIEW 1.1  INTRODUCTION   3  

1.2  EXPORTING    ENTRY  MODE   5  

1.3  FACTORS  MOTIVATING  FIRMS  DECISION  TO  EXPORT   7  

1.4  INDIRECT  EXPORTING   10  1.4.1  EXPORT  MERCHANTS   11  1.4.2  EXPORT  AGENTS   11  1.4.3  IMPLICATIONS  OF  USING  INTERMEDIARIES   12  

1.5  DIRECT  EXPORTING   14  1.5.1  DIRECT  EXPORT  BODIES   15  1.5.2  IMPLICATIONS  OF  USING  DIRECT  EXPORTING   15  

1.6  DIRECT  VERSUS  INDIRECT  EXPORTING   17  1.6.1  INTERNAL  FACTORS   17  1.6.2  EXTERNAL  FACTORS   18  

1.7  BARRIERS  TO  EXPORTING   19  1.7.1  INTERNAL  BARRIERS   20  1.7.2  EXTERNAL  BARRIERS   23  

1.8  “STAGES”  MODEL  OF  EXPORT  DEVELOPMENT   25  

1.9  CONCLUSION  OF  LITERATURE  REVIEW   27   CHAPTER2: CONTEXTUALISATION

2.1  INTRODUCTION   29  2.1.1  VOGUE  BATHROOMS  LIMITED  (VOGUE)   29  2.1.2  CYLON  CONTROLS  LIMITED  (CYLON)   29  

2.2  MOTIVES  FOR  EXPORTING   31  

2.3  EXPORT  METHODS   32  2.3.1  VOGUE  EXPORT  METHODS   33  2.3.2  CYLON  EXPORT  METHODS   34  

2.4  BARRIERS  TO  EXPORTING   38  

2.5  STAGES  EXPORT  DEVELOPMENT  MODEL   40  

2.7  DISCUSSION  AND  CONCLUSIONS   43  

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Table of Figures

 Figure 1.0 Direct and Indirect Export Channels 7

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Abstract  

Title:

Export Decisions For Small Manufacturing Firms: A Case Study of Irish SMEs Author: Aidan O’Donohoe Supervisor: Christina Ryan Year: 2016 Abstract: Internationalisation is fast becoming a must have on the itinerary of small to medium sized

manufacturers in Ireland. Exporting offers itself as the quickest and easiest method of accessing

international markets. It offers smaller manufacturers with limited resources and finances an

avenue to reach a much broader customer base without the level of risk associated with other

forms on entry .

This research aims to analyse the methods and practices, which small manufactures use to

export their products to overseas markets. Throughout the export process, firms must make a

number of strategic decisions in how they should transport, sell and market their product to

overseas markets . The literature will also examine what export methods are suited to small

manufacturers and what factors effect a firms decisions when selecting the correct method of

exporting their products abroad.

The contextualisation uses two contrasting cases to compare the alternative export practices

taken by manufacturing firms in Ireland. The first, Vogue Bathrooms Limited, a manufacturer

of bathroom fixtures and fittings, who utilises direct methods of exporting to the U.K. market.

Secondly, Cylon Controls Limited, a manufacturer of building energy control systems, who

utilise a form of indirect exporting to reach multiple markets around the world. The cases are

used to make a comparison between best practice export method identified in the literature

and the actual export practices of small Irish manufacturers.

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Chapter 1:

Literature review

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1.1 INTRODUCTION

Globalisation is an ever present process in today’s business environment. Manufacturers

around the world must not only compete with domestic competitors but also with

manufacturers from around the world. In order to compete in many industries small to medium

manufacturers must actively participate in internationalisation to ensure they stay competitive

and profitable. Internationalisation has been explained as the process whereby firms engage in

international markets in a series of stages (Johanson and Vahlne, 1977). Exporting in most

cases is the quickest and simplest method of entering foreign markets as it provides a high level

of flexibility cost effectiveness (Sousa, 2004). In regards to small manufacturers it could be

considered the first rung on the ladder to engaging in international markets.

The common thought is that international markets are dominated by large Multinational

Enterprises (MNE) with access to an abundance of resources providing them with economies

of scale which make an uneven playing field for Small to Medium Enterprises (SME) that want

to compete. However, many argue that “today’s consumers demand very specific products with

high levels of service orientation and considerable levels of corporate responsiveness”

Czinkota (1996). It is smaller firms which are better able to adapt and service these distinct

needs that customers are demanding more than ever (Czinkota, 1996). This competitive

advantage that smaller firms have allows them to compete in international markets regardless

of size. Suárez-­‐Ortega & Álamo-­‐Vera (2005) Argued that smaller firms which hold distinct

competitive advantages should proactively export in overseas markets.

Exporting as a business activity is one of the multiple international entry modes to foreign

markets. Albaum and Duerr (2011) define international entry modes as the “arrangement

necessary for the transfer of a firms products, technology, human and financial capital into a

foreign market”. As previously stated amongst the variety of entry modes identified, exporting

is considered easiest and simplest way to service customers needs in a foreign market.

As a firm develops from a non-exporting manufacturers to manufacturers experienced in

exploiting multiple oversea market opportunities, it must make a number of strategic decisions

along the way. The first decision to be made is whether entry to overseas markets is a viable

option for the firm and is their potential to profit and grow by internationalisation. This is

followed by the decision whether or not exporting is an entry mode that suits the business, their

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product and the overseas market. To understand the exporting process it is important to

understand why firms choose exporting as a foreign market entry mode. The literature will

begin by exploring exporting as an entry mode and what critical factors influence a firms

decision to engage with foreign markets through exporting.

The next decision manufacturers face when attempting to export their product abroad is what

method of exporting will allow them to maintain their competitive advantage in new markets.

Exporting methods can be distinguished into two broad categories, Indirect and Direct

exporting, which can be differ in how the transaction is made between the manufacturer and

the overseas buyer (Albaum and Duerr, 2011). The literature will continue by examining what

export methods are most suited to small manufacturers looking to export their products abroad.

All export decisions are moulded by what Leonidou (2004) refers to as barriers to exporting.

Firms must identify what barriers are influencing their export decisions and preventing them

from achieving their potential in overseas markets. The literature will look at how these barriers

influence export decisions in smaller firms and what effects these constraints can have on

exporters making successful decisions. The literature review will conclude with a consideration

of a theory, Bilkey and Tesar (1977) Stages Export Development Process which in some cases

my be applicable to small exporting manufacturers.

In completion of the literature it is hoped that key export decisions will be identified for small

to medium manufacturers that contribute to them selecting the best export method when

entering and growing in foreign markets. It is hoped that the research will demonstrate to

manufacturers interested or engaged in exporting, what is best practice exporting method for

their firm and what critical decision they must make to ensure success in overseas markets.

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1.2 EXPORTING ENTRY MODE

Exporting as a business activity can be seen as the first step to establishing deeper commitment

to the internationalisation process. If small firms wish to succeed in an increasingly competitive

global market they must give thought to entry mode selection and choose the correct entry

mode to a market which fits the firm and the market they are entering. Bradley (2005)

highlights two primary motives for a small firm’s internationalization. The first is the search

for new markets that will award them a competitive advantage in the domestic market and the

second is to exploit opportunities in foreign markets. Bradley and Gannon (2000) divides a

firm’s entry possibilities into three types; export indirectly through the use of agents or

distributors or directly to the overseas customer by contractual entry which includes licensing,

franchising, contract manufacturing and co-production agreements, and finally, investment

entry by means of joint ventures or foreign direct investment. Bradley (2005) concludes that a

firm must ask two questions when choosing an entry mode. What level of resource commitment

are they willing to make and what level of control they desire of their export?

An element that can impact entry mode selection is the nature of the asset. If the use and nature

of the product is easily explained then exporting will be a common mode of entry selected

(Bradley, 2005). For commodities type or mature products their use is easily understood and

explained. Therefore products can be transferred with no after sale service required from the

manufacturer. However if a products use requires a significant level of “tacit knowledge” to

use and explain firms have a high tendency to opt for other forms of modes of entry other than

exporting directly. If a firm manufactures more complex goods where the transaction process

requires special or custom modifications to suit the overseas market or the requirement of

specific knowledge to identify customers, then manufacturing firms are more likely export

Peng and Ilinitch (2001).

Bradley and Gannon (2000) highlights that a firm must realise the importance of market

strategy, the organization, the industry and the target market when it comes to selecting an

entry mode. Bradley (2005) identifies two generic market entry strategies that exist in the

internationalisation, Diversification Strategy and Market Concentration Strategy

Diversification Strategy involves dividing resources among multiple different markets. Firms

commit minimal resources to each market with the result of a high level of return. This can be

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advantageous to a firm in that it allows for flexibility in having access to multiple overseas

markets, reduced dependence on a single markets success and it allows a firm to identify and

capitalise on a market where they might have a competitive advantage Bradley (2005). Firms

who export would more commonly select this entry strategy.

Market Concentration Strategy involves greater level of resource commitment to a single

market. This allows firms to have high level of control and establish relationships with overseas

customers. This would be more common with firms manufacturing products that require a high

level of tacit knowledge and would normally be associated with foreign direct investment as

an entry mode Bradley (2005).

Exporting compared to other modes of entry favours firms who produce goods or services that

do not require high level of tacit knowledge and those who do not want or have high level of

resources to commit to internationalization. It also allows firms a low risk entry mode but they

will have minimal amount of control. Exporting is also an ideal form of entry should a firm

wish to export to multiple markets over concentrating on one single market. Exporting allows

firms to allocate minimal resources to multiple markets and also diversifies risks to many

separate markets (Albaum et al., 2011; Czinkota et al., 2001).

Albaum & Duerr (2011) maintain there are two basic forms of exporting, indirect and direct.

They can be differentiated by three determinants, firstly by the level of vertical control the

exporter requires, secondly by the cost of the export function and thirdly by the transaction cost

that arises from the organization of the export activity. In exporting firms have a choice of two

channel options, they can indirectly export with help from an intermediary or they can directly

export to the consumer (Peng and York, 2001).

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Figure 1.0 Direct and Indirect Export Channels

(Albaum & Duerr,2011)

1.3 FACTORS MOTIVATING FIRMS DECISION TO EXPORT

In understanding which method of exporting suits small manufacturers it is important to

understand what motives influence them to engage in exporting in the first place. The literature

is extensive about small firm’s motives for exporting but often conflicting. Weaver, Berkowitz

and Davies (1998) held with small manufacturers operating out of large economies e.g. United

States, the key motivation to export is long term profit and risk diversification, meaning they

reduce risk from market failure by entering multiple markets. Other authors contest that the

key motivator comes when small firms have excess capacity to operate and export to operate

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at full capacity and be more cost effective (Brooks and Rossen, 1982). Cavusgil, Tammer, and

Nevin (1981) contend that a firm will engage in exporting when it realises it has a competitive

advantage in a market.

According to Albaum and Duerr (2011) motives can be identified as reactive and proactive.

Reactive factors are factors or happenings which result in a firm engaging in exporting to

counteract those factors whereas proactive factors involve firms making a proactive decision

to export to exploit factors. Czinkota and Taser (1982) discussed extensively over two decades

on the small firm’s motives to export.

Managerial Attitude is an internal factor. Due to the nature of smaller firms strategic decisions

depend heavily on the decisions of management and owners. If management is favourable

towards exporting then a firm is more likely to do so (Albaum and Duerr, 2011). Axinn, Savitt,

Sinkula, and Thach (1995) held that management attitudinal preference to exporting is the

greatest influencing factor to firms exporting. Managerial urge would be considered a proactive

motivator. (Czinkota et al., 2001)

Economies of Scale is an internal proactive factor that influences a firms decision to export.

Some firms may choose to export in order to benefit from economies of scale (Bradley, 2005;

Czinkota et al., 2001). Economies of scale arise when a firm achieves a reduced unit cost

overall by scaling up production, distribution and marketing functions. Exporting may result

in increased intensity of production and firms may benefit from economies of scale (Albaum

et al., 2011; Czinkota et al., 2001). Firms may export to increase customer base and benefit

from the economies of scale. Czinkota (2001) contends that The Boston Consulting Group

stated that by “doubling output, production costs can be reduced by up to 30%”.

Foreign Market Opportunities is an external and proactive factor, meaning a proactive firms

looking to internationalise may be influenced by information received about foreign market

opportunities available (Albaum et al., 2011; Czinkota et al., 2001). Often a firm may have

special knowledge about overseas customers or market opportunities. Firms may engage in

exporting as it is the quickest and simplest method to access overseas markets. Example maybe

if a manager visits a foreign market and spots potential gap in the market.

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Change Agent is a proactive external motivator to engage in exporting and refers to the support

and encouragement received by firms from semi-state bodies, financial institutions and/or trade

associations. These bodies, given their level of support, can profoundly influence a firm’s

decision to start exporting (Albaum et al., 2011; Czinkota et al., 2001)

Risk Diversification is a reactive factor that motivates a firms decision to export. This means

that the firm is examining the possibility of exporting to counteract other business forces or

factors. According to Leonidou and Katsikeas (1996) exporting firms are exposed to less

market risk then non-exporting firms. Therefore, if a firm operating in multiple markets, is

exposed to a recession in the domestic market, it can offset the loss in sales in domestically by

increasing exporting to markets with more stable conditions (Albaum et al., 2011; Czinkota et

al., 2001). Firms here are reacting to the possibility of an economic slowdown hurting the

business.

Excess Capacity is a factor that can apply to firms in smaller economies in which the domestic

market may not be able to absorb the potential output of the firm (Czinkota, 1996). Exporting

allows a firm to operate at maximum capacity and export products abroad if the domestic

market becomes saturated which reduces overall cost by not having equipment and labour idle

(Albaum et al., 2011).

Domestic Market Conditions sometimes may not be large enough to support a manufacturer or

industry, therefore exporting is necessary for a firm to exist (Albaum et al., 2011; Czinkota et

al., 2001). This is particularly common in Ireland, with a population of only 4.5 million yet it

has a high concentration of manufacturing companies, which could not survive in the domestic

market alone. Another market condition which will influence firms to seek overseas customers

is the level on competition in the market. Czinkota et al. (2001) maintain that competitive

pressures can also act as a motivator for smaller firms to export, which in turn can be caused

by the limited opportunity of the domestic market.

Unsolicited Orders is another reactive factor. Firms who are not interested or engaging in

exporting may receive unsolicited orders from overseas markets. Firms initially may ignore

these, however, there is overwhelming evidence to suggest that firms often begin exporting by

fulfilling unsolicited orders and gradually intensify activity in overseas markets over time

(Albaum et al., 2011; Czinkota et al., 2001).

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1.4 INDIRECT EXPORTING

Indirect exporting occurs when a manufacturer uses an independent intermediary located in the

the domestic market to organise the export process. Furthermore the manufacturer may have a

dependent export organisation (export department) that works with international marketing

organisations to co-ordinate the entire export effort (Albaum & Duerr, 2011). Indirect

exporting is explained by Fletcher (2004):

Whereby small firms are involved in exporting, sourcing or distribution agreements with

intermediary companies who, on their behalf manage, the transaction, sale or service with

overseas companies.

Terjesen et al. (2008) suggests that smaller firms can use intermediaries to overcome

knowledge gaps, find new customers and limit the risks associated with operating in overseas

markets. An export intermediary is defined as “a specialist firm that functions as the export

department for several manufacturers in non-competitive lines” (Balabanis, 2000).

These Intermediaries act as a “middleman” in international trade by linking independent

organizations that operate in different markets that previously would not have been able to

contact each other (Peng and York, 2001). Trabold (2002) adds some transactions would not

be able to take place in a direct form, due to geographic differences and intermediaries allow

this to happen.

Intermediaries can be described as both suppliers and customers as they can provide services

such as financing, distribution infrastructure and payment collection on behalf of customers

(Balabanis, 2000).

Export intermediaries consist of two basic categories, export merchants and export agents

(Albaum & Duerr, 2011). Export merchants differ from agents in the fact that they take the

title to the manufacturers goods with the result the buying and selling is at their own risk.

Export agents provide a service to the manufacturer and do not take the title (Li, 2004; Peng

and York 2001). Albaum and Duerr (2011) outline three different types of export merchant

based from the the domestic market.

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1.4.1 Export Merchants Export Merchants – are firms that engage in exporting and importing and operate in a similar

fashion to domestic wholesalers. They organize the sale and marketing of the commodity and

they take title of the product from the producer. Export merchants are usually large

organisations and are not dependent on exporting a certain manufacturers product to stay

profitable. This gives them a commanding position over the manufacturers they act for.

Trading Companies –operate in a similar manner to export merchants but operate on a far

greater scale. They also offer other services such as financing. An example would be Glencore

a multibillion-dollar Anglo-Swiss trading company (Glencore, 2005).

Export Desk Jobbers – primarily used in the sale of raw materials, desk jobbers rarely see the

goods. They take ownership of the goods and sell them on over a period of time.

Multinational Enterprise Intermediaries - Terjesen et al. (2008) introduced a fourth type of

export merchant available and suggested that foreign MNEs (Multinational Enterprises) can

act as an intermediary route to internationalisation. This involves smaller manufacturers

exporting their products through already established MNE who have established knowledge,

infrastructure, distribution and contacts to overseas markets. The MNEs manage the export

process, marketing and sales of the products. Smaller firms can benefit from gaining

experience, knowledge spillover and contacts to various markets. However, the potential

downsides are the larger MNEs can have too much control of the smaller venture due to the

nature of the relationship.

1.4.2 Export Agents Albaum and Duerr (2011) identify a number of types of agent that act as intermediaries. Agents

will not take ownership of the goods which leaves the burden of financial risk with the

manufacturer and generally they operate on a commission basis.

Export Commission House - is a reactive type of exporting as it involves independent buyers

sourcing products from the manufacturer. A foreign buyer uses the export commission house

agent to source and export the product to them for a fee.

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Resident Buyer – is employed by an overseas buyer in the domestic market with the role of

sourcing and exporting goods to the overseas buyer. This is common practice with large retail

stores such as Walmart, who have resident buyers in China. This give both parties an

opportunity to develop a relationship.

Export Management Company – is an international sales specialist who act as an independent

sales department for several non-competing manufacturers. Export Management Companies

(EMC) can perform a range of tasks from research to sales and promotion. Manufacturers gain

international experience through the use of EMC and it also reduces costs of shipping as EMC

can consolidate shipments from all clients. This is the ideal exporting tool for smaller firms

looking to export. EMC’s often help businesses to develop their own export departments and

help companies make contacts in overseas markets.

1.4.3 Implications of Using Intermediaries

Intermediaries allow firms to benefit from improved export performance or a lower cost than

if they carried out the exporting themselves. This is as a result of the intermediaries’ expertise

in entering and operating in foreign markets (Li, 2004). Intermediaries also save clients money

by helping them to avoid costs associated with searching for new customers and monitoring

the enforcement of contracts (Acs & Terjesen, 2006).

When compared to direct modes of exporting, the use of intermediaries involves less risk and

resource commitment (Johansson and Wiedersheim-Paul 1975). However, the use of

intermediaries also adds cost in the form of transaction costs and fees/commissions (Acs and

Terjesen, 2006). Another disadvantage, which is more alarming to exporters, is the potential to

lose control over how your product is marketed and serviced in the foreign market.

(Blomstermo, Sharma, & Sallis, 2006). Loss of control when a firm uses an intermediary is a

significant issue if firms choose this option of exportation.

Export Intermediaries duties differ considerably from domestic intermediaries. Their duties

involve a much greater level of risk and exposure to variables i.e. exchange rates, government

policy, trade barriers and cultural differences (Bender and li, 2002). Williamson (1985) affirms

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the exposure to risk and cost for intermediaries is greater due to administration complexities.

Furthermore, Williamson (1985) argues that manufacturers and export intermediaries can

develop trust issues. This is down to reasons such as operating in different countries,

information asymmetry, cultural issues and environmental diversities that can hinder

communications and lead to break down in cooperation.

Terjesen et al. (2008) holds that the use of an intermediary can have associated advantages of

reducing risk, uncertainty and costs when exporting and certain disadvantages including loss

of control of goods. For small firms which lack resources and foreign market knowledge

intermediaries can be of considerable benefit as a tool for internationalization. Firms can

overcome risks and uncertainty associated with exporting by using intermediaries (Peng and

Ilinitch 1998).

In other cases, firms may have a competitive advantage in domestic markets and may rely on

these advantages to overcome uncertainty and risk associated with exporting. In order to

maintain control of their products they may select not to use intermediaries and will directly

export to the customer.

Albaum and Duerr (2011) highlight the importance of formal contracts outlining agreements

with intermediaries in most cases a firm’s agent or distributor will be the sole trader of that

product in the overseas market.

Spulber (1998) concludes that using intermediaries can give advantages over direct exporting

by “pooling and diversifying risk, reducing transaction costs and lowering costs of matching

and searching”.

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1.5 DIRECT EXPORTING

Direct exporting occurs when a manufacturer or exporter sells directly to an importer, buyer or

retailer in a foreign market area, thus the transaction occurs between two nations and between

the dependent organisation of the manufacturer and a foreign marketing organisation or

customer (Albaum & Duerr, 2011).

Czinkota and Ronkainen (2007) maintain that in direct exporting the manufacturer or firm sells

their product direct to the user in an overseas market. In order to begin exporting directly a firm

must have an export sales division or department. This division has the duty to identify

potential markets or segments abroad and manage marketing strategies for the overseas market

(De Burca, Fletcher and Brown, 2004).

Czinkota and Ronkainen (2007) maintains that a key element in direct exporting is exploiting

the use of ecommerce on an international basis. ecommerce has become a critical tool in

exporting for smaller firms looking to market their products internationally. The internet acts

as a source of information and a place to buy (Albaum & Duerr, 2011). The major advantages

of ecommerce to small exporting firms is that it reduces costs and extends reach (Sheth and

Sharma, 2005). Customers can view products offered by firms at any time from any location,

helping to overcome geographical barriers. Foley (1999) identified that e-commerce can be

advantageous to small and large firms alike, and is an important tool for people looking to

directly export.

In order for a manufacturer to engage in direct exporting it is necessary to establish a domestic

export department or division. This department can service exports in two forms, it can directly

make export sales to foreign based customers or it can act as a home based export marketing

department to control and coordinate other dependent organisations based in foreign markets

(Albaum and Duerr, 2011).

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1.5.1 Direct Export Bodies Domestic Departments - are established departments in the domestic country with the sole duty

of managing exports and come in three forms. One form is a built in export department. The

success of these departments relies greatly on the appointed manager of the department. This

method usually suits small firms new to exporting. Another form is a separate export

department which is an entire team dedicated to managing the export process on a full time

basis. The third and final form of export department is an export sales subsidiary which is

established as a separate organization and benefits from unified financial control and greater

ease of raising finances as it is separate from the manufacturer.

Foreign Sales Branch - When the intensity of sales in a particular foreign market increase a

foreign sales branch may be required. A foreign sales branch can incorporate sales, storage and

housing facilities in the foreign market. This suits a firm operating on a large export basis.

Foreign Sales Subsidiary – is similar to a foreign sales branch, however the entity has complete

operational control over the overseas market or region it is based in. This can be advantageous

in reducing barriers and there can also can benefit from tax advantages. Again this would be

associated with firms that are larger or experienced in exporting as the resource requirement

and risk is high.

1.5.2 Implications of Using Direct Exporting

Albaum and Duerr (2011) maintain that directly exporting gives firms a number of advantages

when engaging in international markets. Firms receive a full return from export sales, there are

no transaction fees required as exporting is fully controlled by the firm.

Firms who directly export have full control over the marketing methods and sales promotion

of their products, therefore they are protected from neglectful third parties who do not have as

vested an interest as the manufacturer in how a product is managed and sold (Albaum and

Duerr, 2011).

Katsikea and Morgan (2003) found that firms with foreign based sales branches or subsidiaries

benefit from “sales specific” benefits by having sales facilities in the overseas market. These

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include greater sales control, customization of product solutions to suit the market, flexibility

in marketing techniques to suit the local market, greater product knowledge amongst sales staff,

direct customer feedback and customer loyalty may be heightened due to local presence in

overseas market.

Another benefit to direct exporting is that it can result in creation of permanent export channels

(Albaum and Duerr, 2011). In indirect exporting with the use of independent intermediaries

there is often a risk that they may drop the exporter’s line in place of a competitor.

Perhaps the greatest disadvantage and deterrent for small firms to directly export is the large

initial investment of resources and finances (Albaum and Duerr, 2011). Financial requirement

for internationalisation is a key obstacle facing SMEs expanding to foreign markets Nummela,

Loane and Bell (2006).

Manufacturers must also take greater risk when exporting directly. It is usually the case that if

a smaller firm was to directly export it would have to assume credit or financial risks. Should

the product not suit the overseas market and fail, the consequences could be monumental to

the firm’s future, even in the domestic market (Albaum and Duerr, 2011). Yeoh and Calantone

(1995) comment that financial strength and commitment are the two most important criteria a

firm must possess in order to be successful through direct export methods.

Success in foreign markets may require market specific knowledge for a product to be

successful. Marketing techniques between markets can vary greatly and firms run the risk of

failing in an overseas market due to lack of knowledge. (Albaum and Duerr, 2011).

Firms attempting to directly export to a market may find it difficult to initially make contact

with potential customers (Leonidou, 2004). However, this may not have a huge implication for

small firms looking to export. As cited previously, there is overwhelming evidence to suggest

that firms often begin exporting after receiving unsolicited orders from overseas markets

(Czinkota et al., 2001).

Direct exporting is the process by which the exporter becomes totally committed to the export

process on a proactive basis.

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1.6 DIRECT VERSUS INDIRECT EXPORTING

When a company has decided to use exporting as their method of entry into a market it must

then make a decision to directly or indirectly export to the overseas markets. In examining the

factors of why companies would select indirect over direct exporting the literature highlights a

number of different factors that may influence a firm’s choice of export method. In reviewing

the literature, a number of authors identified both internal and external factors that influence a

firm’s export method decision. Internal factors deal with the firm’s internal capabilities as well

as how product specification influences decision, whereas external factors deal with the

external environments both domestic and overseas and how they influence a firm’s export

strategy.

1.6.1 Internal Factors

Industry Factors - The first internal factor is to identify what field the firm is operating in and

how it is perceived as a global industry. If a firm operates in a certain sector and

internationalisation has been a strategic goal from the outset, a firm is more likely to engage in

direct exports (Brady and Bearden, 1979). Firms of this nature are not internationalizing on a

stage by stage learning experience as suggested in Uppsala Model (Johanson and Vahlne,

2009). They are more committed to the internationalization process and therefore willing to

commit more resources with higher risk (Brady and Bearden, 1979).

Product Factors – For goods with a high fixed cost of production and where customers expect

a high level of after purchase service a firm is more likely to export directly in order to fulfill

the customers need (Peng and Ilinitch, 2001). The more commodity orientated the product the

more likely a firm will use an intermediary. However, it was also argued the lack of

requirement of after sale service with homogeneous goods results in firms having less of a need

to use more resources, therefore they can take a greater risk by directly exporting (Bernard,

Grazzi and Tomasi, 2011).

If a firm manufactures more complex goods where the transaction process requires special or

custom modifications to suit the overseas market or customer or the requirement of specific

18

knowledge to identify customers manufacturing firms are more likely to directly export (Peng

and Ilinitch, 2001).�

Managerial Factors – is another internal factor that influences a company’s decision to export

directly or indirectly. If a manager’s attitude is more favorable towards exporting resulting in

a high perception of advantages and low perception of barriers, a firm will show a higher

propensity to directly export (Cavusgil, Tammer and Nevin, 1981) and (Morgan and Katsikeas,

1997).

Conversely, if managers have a lack of market knowledge or high perception of export barriers

and risks, the firm will be more inclined to indirectly export via an export intermediary. The

choice mode of internationalisation is dependent on “the entrepreneur’s prior experience, the

entrepreneurs prior network ties” (Brady and Bearden, 1979)

Brady and Bearden (1979) also infer that managers who have no experience in exporting show

a high propensity to choose an indirect method of exporting. Again this can be explained due

to the high perception of risk and lack of market knowledge due to inexperience. Coviello

(2006) affirms that whatever stage of development a firm is at influences its mode of

internationalisation Firms in earlier stages for development are more inclined to indirectly

export.

Dyer and Handler (1994) conclude that firms that are family ownership orientated are more

inclined to indirectly export to reduce the risks associated with internationalisation. Harris

(1994) concludes that family owned firms show “inherent conservatism and general aversion

of risk”. This is assumed to be due to the sentimental value a family business has to its owners.

1.6.2 External Factors Market Conditions - Brady and Bearden (1979) ague that a manufacturing firm has a higher

propensity to export directly should domestic market conditions be favorable. In particular, if

production costs are low manufacturers have a cost advantage over other exporters to the

overseas market. Reduced cost results in firms choosing to directly export.

19

Bernard, Grazzi and Tomasi (2011) also conclude that firms operating in smaller markets have

a greater tendency to use an intermediary to export. Smaller manufacturing markets tend to be

export orientated due to domestic market limitations. For this reason, high concentrations of

intermediary services are available. Therefore, an indirect option is favorable for smaller

manufacturers.

Schroder et al., (2003) found that overseas market access cost results in a firm’s greater

intention to use an intermediary. If the perceived level of difficulty or cost of operating in an

overseas market is high, then firms will reduce risk through use of intermediary.

Access to Finance - Bernard, Grazzi and Tomasi (2011) conclude that favorable access to

finance for smaller firms results in them showing a higher propensity to use intermediaries

They suggest this may be due to investors and banks providing a connection between

intermediaries and firms.

Although alternative methods exist for exporting a manufacturer may use various methods to

service various markets. Entry modes should not be sacred and dependent on foreign market

conditions. Entry modes should vary to suit these conditions (Albaum & Duerr, 2011).

Terjesen et Al. (2008) observe the choice between direct and indirect exporting as an entry

mode lies fundamentally with what barriers present to entry, transaction cost and level of

control the manufacturer wishes to maintain over the product.

1.7 BARRIERS TO EXPORTING

The barriers and limitations to exporting have been investigated extensively in literature. In

these studies the barriers to exporting are categorised as External and Internal, Bannock,

(1987); Bell, (1997); Neupert, Baugh and Thanh, (2006). Leonidou (2004) affirms that

“external barriers include procedural, governmental and task barriers”. The source of these

can be domestically or from the prospective foreign market. 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. Leonidou (2004) examined 49 barriers, identified and catagorised them into internal

20

barriers consisting of informational, functional and marketing and external barriers which

consist of procedural and environmental. They were rated in level of impact on the firms, most

already being engaged in exporting functions.

1.7.1 Internal Barriers

Informational Barriers refer to “problems in identifying, selecting, and contacting” (Morgan

and Katsikeas 1997) international markets due to information inefficiencies and the below were

identified as being the three most critical informational barriers to exporting (Leondiou, 2004).

Limited Information to Locate/Analyze Foreign Markets - Having extensive access to correct

information to analyze foreign markets is critical to export success (Welch and Wiedersheim-

Paul, 1980)

Inability to Contact Overseas Customers - Making initial contact with overseas customers acts

as the second most destructive informational barrier to both exporter and non exporters.

(Leonidou, 2004).

Identifying Foreign Business Opportunities – This is the third informational barrier that

Leonidou (2004) found to be of very high impact on a firm’s willingness to engage and expand

through exporting (Albaum and Duerr 2011). However, it was stated that most opportunities

were identified though unsolicited orders from foreign countries or by direction from external

agencies. (Leonidou, 1995; 2004). Its argued that when opportunities are not researched

properly and ‘fall into the lap’ of smaller firms, they are unprepared and uninformed to engage

in the international process.

Functional Barriers to exporting refer to the firm’s capabilities in relation to human resources,

financing and export capabilities. A firm’s structural factors play a large role in facilitating or

inhibiting a firm’s engagement in exporting (Leonidou and Katsikeas, 1996).

Firm’s size - Size can affect a small firms export development process (Reid, 1982). The

principal argument is that size translates to resource availability and a critical factor in

successful internationalization is the need to increase the amount of resources applied to the

internationalisation process (Johanson and Vahlne, 1977).

21

It is said that larger firms will have greater ability to expend resources and manage risks than

smaller ones as well as possessing greater bargaining power, thus making them more likely to

internationalize (Erramilli and Rao, 1993). However, Bonaccorsi (1992) argues that size should

not affect an exporting firm. Once a firm is engaged in exporting it usually results in increased

overall sales. Export sales usually leads to increased availability of resources beyond what is

required to operate an export process.

Suárez-­‐Ortega & Álamo-­‐Vera (2005) conclude that a firm’s size has a positive effect on export

development and increases a firm’s propensity to export. It is widely debated in literature

whether or not a small firm in possession of a competitive advantage can be a positive factor

when exporting. It is argued that distinctive capabilities (e.g. operating in a niche) positively

influence smaller firms to engage in foreign markets as they tend to cover certain “sunk costs”

that are usually incurred when operating within a distinctive capability (Wiedersheim-Paul et

al., 1978). Cavusgil and Nevin (1981) contested firms competitive advantages alone are not

sufficient to fully initiate internationalisation. In contrast, it is argued that firms who hold

distinct advantages should engage in exporting to reach new markets as there can be limited

domestic demand for their product (Suárez-­‐Ortega & Álamo-­‐Vera, 2005).

Inadequate Export Personnel - The requirement of personnel experienced in the export process

is of great importance if a firm wants to engage in exporting. Firms often lack personnel who

can manage logistics, documentation and maintain contact with overseas markets The lack of

such personnel can act a barrier to exporting (Leonidas et al, 2004)

Working Capital and Finance - Nummela et al. (2006) argues that finances required for

internationalisation are a key obstacle facing SMEs expanding to foreign markets. Bannock et

al. (1987) hold financial issues are the most significant barrier to SME internationalisation, in

the form of access to credit, cash flow and delays in payments which can dissuade an already

risk adverse small firm from exporting.

Marketing Barriers outlined by Leonidou (2004) and come in the form of barriers in relation

to product specification, pricing in overseas markets and distribution.

Product - Firms can see exporting as a managerial business function and can often overlook

the fact that overseas markets may require a variation of certain products. Firms may not

develop or adapt their product to suit foreign consumers. Another issue is meeting quality

22

standard of overseas markets which can be a large deterrent for firms exporting from less

developed nations. Also firms may not have the means to provide after sale service due to

geographic distance. Consumer taste and habits vary between international markets due to

differences in “topographic and climatic conditions, household size and structure, level of

technical understanding, income level and income distribution, educational standards,

manners and customs, and so on” (Cateora and Graham 2001; Leonidou, 2004). Firms must

adapt operations to satisfy these changes in need of consumers which inevitably incurs extra

cost and export time. (Leonidou, 2004).

Price - Smaller firms identify pricing as a barrier. They often find it difficult to match local

competitors due the extra costs incurred over the export process. This is not a huge issue with

larger firms who can benefit from economies of scale. Credit facilities can also be an issue

because customers being located in overseas markets usually means that the manufacturer and

buyer do not know or trust each other therefore firms find it difficult to offer credit facilities

which can result in loss of customer’s interest. Difficulty in matching competitor’s prices was

identified as one of the most “severe” barriers facing small firms exporting (Leonidou, 2004).

This can be explained by unfavorable exchange rates, poor price strategy, local industry

governmental support or “excessive costs” that comes with transportation and logistics.

Operating in Niche markets allows small firms to compete on “non-price considerations”

(Doole and Lowe, 2001; Leonidou, 2004).

Distribution - Distribution channels vary from market to market. Some distribution channels

can be complex and difficult to access in an overseas market. Obtaining representatives to

manage these channel can also act as a barrier to export.

Managerial Attitudes can act as barriers to exporting and was identified by Axinn (1985) to

be one of the most critical factors that can influence firms decision to engage in exporting.

Bilkey (1978) agreed that some managers “expectations, beliefs and attitudes towards

exporting” play a significant role in influencing firms decision to export.

Aversion to Risk - Bell (1997) affirmed that managements aversion to risk or negative attitude

to unknown markets are the greatest internal barriers to a small firms internationalisation, as

the owner/manager has key influence on international strategies. This works against the small

firms as the decision to export is based on managerial intuition rather then calculated and

researched approach.

23

Lack of Managerial Knowledge – stems from difficulty managers have accessing appropriate

information or where decision makers lack resources and business skills to gather and interpret

the information required to make the most informed and effective decisions on market strategy

and entry mode selection (Morgan and Katsikeas, 1997). Johanson, & Vahlne (2011) s “The

more knowledge firms acquire, the greater their perception of risk.”. Modern global

information platforms give managers access to a much larger source of information, which

results in managers perceiving greater risks as they make strategic decisions based on

incomplete information sets. Some argue that sometimes too much information is available to

owner or decision makers which results in a “Logical, intuitive, and de-structured” decision

processes taking place. (Figueira-de-Lemos et al., 2011)

Education Level - An Entrepreneurs education can be a significant factor (Schlegelmich, 1986).

McConnell (1979) concludes that younger and newly qualified decision makers tend to be more

internationally minded. Younger managers maintained a high propensity to engage in

international activities (Hook, Ralph and Czinkota, 1989).

1.7.2 External Barriers

The classification of export barriers undertaken by Leonidou (2004) identified external barriers

to be stemming from the foreign environment, including foreign rules, regulations, tariff

barriers, and different customer habits. Cateora and Graham (2001) in contrast identified

changes in consumer habit or taste to be a marketing barrier to exporting.

Procedural Barriers include aspects that prevent the ease of payments from overseas markets.

These can come in the form of unfamiliarity of procedures, difficulties in communications and

slow payment processes (Moines 1997; Leonidou, 2004)

Procedural Expenses - SMEs who are first engaging in exporting find that procedure and

unfamiliarity with documentation can give firms a negative attitude towards exporting. Moini

(1997) held that the thought of “excessive cost, time loss and red-tape” are the most

discouraging factors to exporting when it comes to procedures. However, Leonidou (2004)

argued that procedural expenses only account for 7% of total export costs and continues to state

that freight forwarders can be used to handle these procedures at the early stages of

development for reasonable prices.

24

Communicating with International Customers -This can cause a big issue that limits the

effectiveness of an SMEs exporting process. Leonidou (2004) stated that issues can come in

the form of misunderstandings from information exchange, loss of control of activities in

overseas markets, delayed decision making and receipt of inadequate feedback from foreign

market

Environmental Barriers incorporate primarily the economic, political–legal, and

sociocultural environment of the foreign markets within which the company operates or is

planning to operate (Kedia and Chhokar 1986; Moini 1997). These barriers usually are subject

to rapid changes and are very difficult to predict and control. Of these, the highest impact seems

to come from barriers of an economic and regulatory nature.

Strict Foreign Country Rules and Regulations - Foreign governments can impose a number of

controls on companies that sell goods in their markets. These may include; entry restrictions

which delay or restrict the flow of the product in the market; price controls which limit the

firm’s profitability particularly in inflationary economies; special tax rates which increase the

export price of the product in the foreign country; and exchange controls which create

difficulties in sales and/or profit repatriation (Cateora and Graham 2001). Clearly, the diversity

and intensity of these controls may turn the exploitation of export opportunities into a tedious,

expensive, and prolonged task, which deters many small firms from venturing into foreign

markets.

Governmental Barriers include the actions or lack of action taken by foreign and domestic

governments. Firms new to exporting find struggle with unfamiliar export documentation or

government rules and regulations, which can put them of engaging in exporting. (Terpstra and

Sarathy 2000; Leonidou, 2004).

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1.8 “STAGES” MODEL OF EXPORT DEVELOPMENT

Andersson (2000) maintains that a firm’s internationalization is a learning process. It is noted

that use of intermediaries is a step towards more direct forms of internationalization (Lamb and

Liesch, 2002). Brady and Bearden (1979) concluded that small firms that begin exporting

indirectly and over time change to direct exporting show the export development process. This

change in export methods arises from the export development process which occurs in stages

(Bilkey and Tesar, 1977).

Bilkey and Tesar (1977) conceptualized the export development process in which at least six

stages exist on the export development model in relation to managerial attitudes to exporting.

The stages differ in terms of the level of commitment and intensity of the firm to exporting.

The first two stages are common with newer firms who still have growth opportunities in the

domestic market. Stage 1 firms show “lack interest in exporting” and Stage 2 firms will “fulfill

unsolicited orders” from abroad usually by means of intermediaries, however they still have

no intention to invest resources into overseas sales.

Stage 3 “Exploring feasibility of Exporting” warrants greater discussion as firms become more

dynamic in their decision making. It was found that a firms interest in exporting is not

stimulated by expectation of profit but influenced by the perceptions of the competitive

advantages they may possess abroad (Bilkey & Tesar, 1977) Managerial attitudes towards

exporting or managements perception of a foreign markets are the greatest influences for a firm

interested in exporting (Langston and Teas, 1972). It has been suggested that “Stage three of

the export development process seems to be much more nearly a function of managements

general images of exporting and of foreign lands, than of any immediate economic

considerations” (Bilkey & Tesar, 1977).

In Stage 4 of “experimental exportation” the most significant factors influencing firms

exporting involved firms receiving unsolicited orders displaying a large tendency to

experiment with exporting and also the quality and dynamic of management, meaning they

may hire export managers or establish departments to focus on exporting.

26

This stage was also seen as a test stage to see if engaging in exporting could contribute to the

firm’s success. Firms in Stage 4 of the export development model need to make decisions on

export methods to suit the firms strategic goals (Bilkey & Tesar, 1977). It is suggested that

firms may find the use of an intermediary as a method of experimental exporting. Brady and

Bearden (1979) as previously cited state firms with no experience in exporting show a high

propensity to choose an indirect method of exporting. Intermediaries can help to overcome

knowledge gaps, find new customers and limit risks associated with exporting (Terjesen et al.,

2008).

Stage 5 “experienced exporters” make rational decisions based on overseas demand and what

competitive advantage a firm may have in a particular market. Bilkey & Tesar (1977) found

that in this stage of developments performance expectations and perceived barriers influence

the decision making process. It was also concluded that top performing firms in this stage may

have some production facilities in overseas markets, which considerably cut the exporting

costs. It could be inferred that during this stage of export development firms move from indirect

methods to direct methods as Lamb and Liesch (2002) determined that the use of intermediaries

is a step towards more direct forms of internationalization.

Stage 6 in the export development process involved “exploiting export opportunities” far from

domestic markets with production facilities located to cover regional markets. Firms in this

stage exploit multiple export methods depending on which is most cost effective to the market

in question (Bilkey & Tesar, 1977)

Leonidou and Katsikeas (1996) maintain that exporting could be viewed as a learning process,

as firms familiarize them selves with overseas markets and operations they are likely to choose

to take greater risks and explore new markets.

27

1.9 CONCLUSION OF LITERATURE REVIEW Ultimately small manufactures have a number of options they can take to export their product

to overseas markets. In selecting their method of exporting they must take in to consideration

a number of factors both internal and external to the business.

Firms must assess their motives for exporting and whether or not their decision to export a

justified and is exporting viable option for the firm or should they use alternative entry modes

of entry. Next it is important to identify what method offers them the highest possibility of

success in overseas markets. They must examine what export methods are suitable for their

product, suit the overseas market and what effect will its managements characteristics have on

their exporting practices. Firms must also realise the effect certain barriers may have on their

export decisions and take necessary steps to overcome these.

For small manufacturing firms, the literature can be perceived to identify the best practice

export method is to initially use indirect methods of exporting. The strongest barriers facing

smaller firms are informational barriers and functional barriers including lack of knowledge of

overseas markets, lack of ability to make overseas contacts and lack of access to capital and

finance. The use of intermediaries to begin exporting allows firms to export their products and

overcome these barriers at a relatively low cost.

The literature also reveals that exporting is a development process. Firms must realise that their

export practices should not be stagnant and remain in one form. Exporting offers firms an

opportunity to learn and develop their business practices. Knowledge spillover from

intermediaries allows firms to understand better exporting procedure, make overseas contacts

and develop an understanding of overseas markets. Once a firm begins exporting with the use

of intermediaries it should make a proactive effort to better understand the process, allowing

them to move towards more direct methods of exporting, which grant them greater control over

their products and are more cost effective in the long run.

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Chapter 2:

Contextualisation

29

2.1 INTRODUCTION

The purpose of this section is to test the literature reviewed based on manufacturers strategic

decisions in export mode selection and implementation. The literature will be tested against

two small Irish manufacturers established in Dublin. The manufacturers will be studied from

their motives to export, factors that enable and inhibit the export process and decisions in

selecting export channels and the method selected. The first company, Vogue Bathrooms

Limited, is a medium sized manufacturer of bathroom fixtures. Information was sourced from

a body literature of primary research carried out on Vogue Bathrooms limited (Muldowney,

2008). The second company Cylon Controls Limited is a manufacturer of building

management systems. Information has been sourced from a number of cases studies (Lachet,

1993) and academic articles (Terjesen, O’Gorman & Acs, 2008).

2.1.1 Vogue Bathrooms Limited (Vogue)

Vogue was established in 1984 as a business based out of Dublin. It had three locations

including manufacturing, storage and retail facilities. The business originally started as a

manufacturer of plumbing materials. The business experienced expansion over the 1990’s and

in 2001 Vogue Bathrooms Limited was incorporated. Vogue acted as a distributor of heating

and bathroom fixtures as well as a manufacturer of own brand bathroom furnishings. Vogue

began exporting to the UK in 2004 (Muldowney, 2008).

Vogue manufactured bathroom furnishings and supplied their own brand to the UK and Irish

markets. The company employed 32 people and 20% of its turnover was derived from

international activities up until 2012 . The company was dissolved in 2012. The company’s

purpose was described to manufacture and retail affordable luxury bathroom fixtures

(Muldowney, 2008).

2.1.2 Cylon Controls Limited (Cylon)

Cylon Controls Limited provides building management control systems (BMS) to a global

market. The company manufactures and markets systems to control buildings temperature,

ventilation systems and energy conservation equipment. Cylon building and energy control

30

systems have been installed in Europe, North America, Asia, the Middle East and Africa

(Cylon, 2013).

The company provides building energy control systems to commercial facilities, colleges,

hospitals, schools, health and fitness centres and industrial housing. Cylon has a competitive

edge over its competition as its systems are designed to be easily upgraded even 10 years after

initial installation. Cylon also promises to provide the correct control system fine tuned to

client’s requirement (Cylon, 2013).

Cylon was established in 1985 by John Byrne, Sean Giblin and Naveen Goswami, all graduates

of University College of Dublin (UCD)’s school of engineering. While studying at university

the trio developed a timing application that was intended to control energy use in building

systems. The potential behind their application was realized by UCD and Enterprise Ireland.

The graduates received financial backing to develop the timing application further from both

organisations which funded further research and development. resulting in the production of a

number of prototypes. In continuing the support UCD had the first operational prototypes

installed in a number of new buildings on the UCD campus in Belfield Dublin (Lachet, 1993).

The three engineers then developed a commercial product and established the company which

operates in the niche market of Process Control and Instrumentation Sector. Cylon’s first client

was a Multinational Enterprise with its European headquarters in Ireland (Lachet, 1993).

The three engineering graduates found themselves under-experienced and lacking in marketing

and financial know how to establish and run a successful operation. In order to overcome this

barrier, the three decided that the use of a domestic intermediary would help them to overcome

their lack of market knowledge. The company found an already established intermediary with

experience and credibility in the niche sector. In 1987 Cylon established a distribution deal

with ABB. It was agreed that ABB would manage the distribution of Cylon’s new system, but

only in servicing the Irish market. However, the ABB deal was not the only distribution

agreement Cylon arranged. It also made several other agreements to have Cylon's timing

control system distributed in Ireland (Lachet, 1993).

Peng and Ilinitch (1998) affirmed that SMEs lacking in market knowledge and resources

looking to export can benefit from using intermediaries. Cylon, interestingly, due to the nature

of the industry and probably its management inexperience, used intermediaries to distribute its

product in the domestic market.

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2.2 MOTIVES FOR EXPORTING

In small economies the size of the domestic market can be a motivator for small manufacturers

to export overseas (Albaum et al., 2011; Czinkota et al., 2001). The principal motivator for

Vogue to engage in exporting was limited domestic market opportunity. This was also a

prominent issue for Cylon as it is in many cases influencing firms to internationalize from

Ireland. To put it into perspective for Cylon it was estimated that in 1992 the domestic market

accounted for 1% of the entire European market for BMS. For both companies the limited size

of the Irish market was a key motivator to export (Lachet, 1993).

Managing Director Conor Whelan also acknowledged that Vogue was profitable in 2004 and

had the excess capacity which acted as an encouraging factor to engage in internationalisation

which was affirmed by Czinkota et al. (2001).

Another influencing factor to export for Vogue was the receipt of a number of unsolicited

enquires from the U.K., which they failed to fulfil. However these unsolicited orders acted as

an incentive to export to the U.K. as its first overseas markets (Muldowney, 2008). Czinkota

et al. (2001) concluded that firms receipt of unsolicited orders from abroad will eventually

motivate a smaller firm to export to markets from which they receive unsolicited orders.

The three entrepreneurs in Cylon, from the outset, had internationalization in mind, John Byrne

was quoted (Lachet, 1993).

we only ever saw Ireland as a stepping stone to get started, we never based our company on

doing business in Ireland alone … We wanted to be the leading BMS firm in Europe by 1994,

but we knew we couldn’t get there on our own

Albaum and Duerr (2011) maintained that managerial or decision makers attitudes towards

exporting are key to whether or not a firm will engage in exporting. Cylon’s management from

the offset showed favorable attitudes to exporting.

On a manufacturing level Vogue were experiencing increased levels of competition in

bathroom fixtures from UK manufacturers. The increased level of competition from overseas

manufacturers and the fact that Vogue’s two main competitors had begun exporting to the U.K.

were influencing factors in Vogue’s decision to also engage in exporting. Vogue’s decision to

32

enter into the U.K. market was influenced by a number of factors. Due to internationalisation

Vogue experienced a growing level of competition from foreign companies entering the Irish

market. From a the domestic distribution aspect Vogue Bathrooms Ltd experienced increased

levels of competition from distributors sourcing products from cheaper manufacturing markets

like China. Director of Vogue Conor Whelan states “I would bet that any distributors worth

their salt are going to the far east for more competitively priced products” (Muldowney, 2008).

Czinkota et al. (2001) highlights that competitive pressures play a role in a firm’s decision to

export. Vogue was experiencing increased levels of competition from foreign competitors in

the U.K. which acted as a motivator to export to the U.K. market.

2.3 EXPORT METHODS Vogue and Cylon operate in very different sectors. Cylon operates in a high tech manufacturing

sector developing and manufacturing building energy management systems whereas Vogue

specialized in manufacturing bathroom furnishings. Bradley (2005) maintains that when a firm

is deciding what export method they want to use, they must, among other matters, assess the

level of resource commitment they can make to internationalization and what degree of control

they wish to maintain over their product.

Bradley (2005) argued that the nature of the product plays a large role in the decision.

Commodities or mature products which are easily understood (which would apply to Vogue

products) are easily and often exported. Vogue initiated its exports to the U.K. in 2004 and

after the first four years international sales accounted for 20% of turnover. Vogue selected

direct exporting to U.K. retailers as their mode of entry. The retailers acted as customers in

taking ownership and rights to distribution of the Vogue products in the U.K. market

(Muldowney, 2008).

In contrast Bradley (2005) argues that manufacturers producing goods that require greater tacit

knowledge and after sale services may use alternatives modes of entry other then exporting.

Interestingly Cylon who produce a complex product, which requires a level of expertise when

transferring the product to the customer, identified the use of intermediaries as the best solution

to export their product to overseas markets. They sought out already established firms

33

providing BMS in overseas markets, and decided to distribute their product through these

credible firms. Cylon decided to internationalize by acting as a supplier to distributors who

typically re-branded the products under their own ‘badge’ (Lachet, 1993).

2.3.1 Vogue Export Methods Albaum and Duerr (2011) illustrate direct exporting to include a manufacturer selling to an

importer or a buyer in a foreign market area, thus the transaction happens between two

independent organisations in separate markets. Vogue’s export method selected was to export

directly to U.K. retailers who would take ownership and rights to the products. After the sale

was complete Vogue. would pass ownership on to the U.K. retailers, who would take

responsibility for marketing, retailing and distribution in the U.K. market.

Czinkota et al. (2001) maintain that competitive pressures can also act as a motivator for

smaller firms to export, which in turn can be cause by the limited opportunity of the domestic

market. The size of the Irish domestic market was seen to be a factor that influenced Vogue to

export to the U.K.. Bernard, Grazzi and Tomasi (2011) held that in smaller markets small firms

have a greater tendency to use an intermediary due to high availability of export services,

however this was not the case with Vogue as the barriers to exporting to the U.K. were not very

restrictive and they were enabled to directly export instead (Muldowney, 2008).

Vogue established a “built-in” export department to manage international sales. Albaum and

Duerr (2011) maintain that this is a suitable method of export management for small firms with

limited resources. It was also highlighted in the literature that “built-in” export departments

rely greatly on the appointed manager of the department. Vogue recognized the importance of

export management and hired an export manager whose duties included international activities,

sourcing new customers, and servicing overseas markets. The internet was identified by Vogue

as being under utilised and was developed as a mechanism to service direct export to the U.K

(Muldowney, 2008).

With excess capacity available and ease of transportation and communications between Irish

and U.K. markets the use of a third party intermediary may have been considered unnecessary.

34

Bradley and Gannon (2000) highlights that a firm must realise the importance of market

strategy when deciding to export. Vogue followed a market concentration strategy, focusing

greater level of resources on a single market, which allowed Vogue to maintain control over

their product and establish better relationships with their customers (Muldowney, 2008).

Vogue also rely on the internet as a tool to reach customers in the U.K. When their new export

manager joined the Vogue team he highlighted the importance of ecommerce in connecting

with overseas customers. An interesting note that owner Conor Whelan identified was that the

Irish market was a lot less responsive to purchasing online (Muldowney, 2008). Czinkota and

Ronkainen (2007) maintain that a key element in direct exporting is exploiting the use of

ecommerce on an international basis

2.3.2 Cylon Export Methods

Terjesen et al. (2008) suggests that the use of foreign Multinational Enterprises (MNEs) as an

intermediary to gain access to foreign markets is a recognized form of entry to an export

market. Smaller manufacturers export to MNEs in overseas markets and benefit from already

established infrastructure, distribution and market contacts.

Cylon entered the UK through a UK BMS company, Landis & Gyr, which was a supplier to

their Irish distributor ABB. Landis & Gyr. agreed to distribute Cylon's timing application,

however as part of the deal Cylon’s product was sold under the Landis & Gyr name and Landis

& Gyr reserved the rights of sale of Cylon’s products in the United Kingdom and Cylon gained

from Landis & Gyr. distribution to a number of overseas markets simultaneously (Terjesen,

O’Gorman & Acs, 2008). Interestingly Albaum and Duerr (2005) states that indirect exporting

occurs when a manufacturer uses an independent intermediary located in the the domestic to

organise the export process. However in the Cylon case they use an independent intermediary

in a foreign market, who organises the export process to other overseas markets.

The distribution deal showed immediate effects, when after the first year of exporting to the

U.K. market, Cylon’s turnover increase by 700% to €800,000. Cylon, to encourage growth,

invested 20% of all turnover back into research and development. Cylon continued to seek

other international distributors, however four years after the deal with Landis & Gyr., over 65%

of Cylon’s revenue was came from its U.K. distributor (Terjesen et al., 2008).

35

Johanson and Wiedersheim-Paul (1975) explain when comparing indirect to direct modes of

exporting, the use of intermediaries involves less resource commitment. Cylon decision to

export indirectly was influenced by its difficulty in committing resources to achieve direct sales

to overseas.

Cylon’s founders felt that reduced costs in marketing and development of infrastructure as well

as reduced risk were major factors in the decision to use intermediaries. Terjesen et al.

(2008) confirmed that the use of an intermediary can have associated advantages of reducing

risk, uncertainty and costs when exporting (Terjesen et al., 2008).

Brady and Bearden (1979) also infer that if a firm has no experience in exporting it may opt

for indirect exporting. Cylon, only distributing their control system in Ireland, had no

experience in exporting or overseas markets. The entrepreneurs were aware of their lack of

experience and foreign market knowledge when deciding to sell through an established firm.

The directors at Cylon realised soon after establishing their distribution arrangement with

Landis & Gyr, that while their control systems timing application was performing well in a

number of overseas markets, in order to continue growing it would have to develop a new

complete control system capable of controlling all sizes of building from a high rise office

block or a single level retail outlet. As apposed to producing a singular component of a building

management system, they wanted to develop an entire control system that could compete with

their distributor in the U.K. directly. Developing such a product would give Cylon a much

greater potential customer base (Terjesen et al., 2008).

Terjesen et al. (2008) declares that smaller firms who export through MNE intermediaries

operating in the same industry can benefit from knowledge spillover and various market

contacts. The Cylon founders explained that a major motivator to use an intermediary was the

ability to attract future foreign clients. They also expected to benefit from the reputation that

they gained from being connected to a well established MNE.

Czinkota et al. (2001) indicate that semi-state bodies, financial institutions and trade

associations, given their level of support can profoundly influence a firms decision to start

exporting. In 1989, with funding from state development agencies promoting indigenous

exporting, Cylon completed a new software interface that was compatible with Microsoft

36

windows. Although Cylon were already exporting through an intermediary in the U.K., this

financial support allowed and motivated them to intensify exporting and move to the next stage

of the export development process.

In 1992 Landis and Gyr acquired ownership of a US based company producing a similar timing

control product to Cylon. Due to the nature to its agreement with Landis & Gyr., Cylon’s access

to overseas markets was limited to the U.K. and Switzerland. Landis & Gyr. began sourcing

the similar product from their newly acquired US company and drastically reduced its orders

from Cylon (Terjesen et al., 2008).

A year on the directors of Cylon recognised that they would have to reach a deal Landis & Gyr

which would get them out of the distribution agreement without being too damaging to the

firm’s future prospects. The company renegotiated the distribution deal with Landis and Gyr

and established agreements with intermediaries with in Italy and Germany. They reduced

turnover dependency with Landis and Gyr to 20% and decided, going forward that no customer

would be responsible for over 20% of the company’s turnover, which put Cylon in a better

position of control (Terjesen et al., 2008).

Growth in new customers rocketed as the company was now trading under Cylon Control

Limited and its products were branded the same. All customers they were previously losing to

Landis & Gyr. were now coming straight to Cylon as direct customers which the owners

maintain was due to the level of innovation and quality of the product they were producing

(Terjesen et al., 2008).

As cited in the literature Andersson (2000) maintains that a firm’s internationalization is a

learning process. It is suggested that use of intermediaries is a step towards more direct forms

of internationalization (Lamb and Liesch, 2002). Cylon established a foreign sales branch in

the U.K. with a managing director, technical director and secretary. Cylon at the time employed

20 people in the UK and sales reached the equivalent of €1.6 million annually. Albaum and

Duerr (2011) found that as sales increase in a certain overseas market a foreign sales branch

may be established to manage the market (Terjesen et al., 2008).

In reviewing the case, Cylon’s use of intermediaries as a method to engage international

markets a number of drawbacks become apparent. Blomstermo, Sharma, & Sallis, (2006)

37

identify loss of control when a firm uses an intermediary as a key issue if firms choose

intermediary exportation.

In the case of Cylon we get an insight into how larger MNEs can leverage their size and power

over a smaller firm in the intermediary dealings. Prior to signing the deal Landis & Gyr. had

insisted that Cylon expand its capacity, which required it to seek additional financing and move

premises (Terjesen et al., 2008).

Cylon experienced a loss of control in a number of aspects from the outset of the agreement.

Cylon were restricted from sales to the U.K. markets unless they went through Landis & Gyr.

The directors also described how when expanding to other European markets they were limited

to markets that would not compete with Landis & Gyr’s exports. They then suffered greatly

when Landis & Gyr. procured a U.S. firm producing a competitive component to Cylon’s

product which resulted in their restriction to sales in only two European markets (Terjesen et

al., 2008).

This ultimately led to Cylon having to negotiate out of the export distribution agreement, no

doubt at a cost, in order to continuing growing. The level of control Landis & Gyr. maintained

throughout the relationship was significant. Williamson (1985) argues that manufacturers and

export intermediaries can develop trust issues. This is apparent with Cylon as over time the

entrepreneurs felt that the relationship was undesirable and Landis & Gyr. had become

overpowering and self-interested in the agreement.

By the late 90s Cylon was considered by some to be the largest privately owned manufacturer

of BMS products in Europe. However, the goal of the founders was not to be market share

leader, their mission is to be leaders in product concepts and design (Terjesen et al., 2008).

38

2.4 BARRIERS TO EXPORTING Informational barriers identified by exporters include Limited Information to Locate/Analyze

Foreign Markets, Inability to Contact Overseas Customers and Identifying Foreign Business

Opportunities (Morgan and Katsikeas 1997; Leondiou, 2004).

Vogue found that its knowledge of foreign markets and ability to identify customers abroad

was limited. However Vogue at the time were highly profitable and had the excess resources

to establish an export department. These barriers were easily overcome by hiring an

experienced export manager. Vogue had apprehensions about expansion to further markets due

to informational barriers. Its export manager was experienced in the U.K. market so that was

identified as a significant asset in engaging in exporting (Muldowney, 2008).

As explained earlier the three engineering graduate founders of Cylon found themselves under

experienced and lacking in marketing and financial know how to establish a significant

international operation. In contrast to Vogue, Cylon overcame this barrier through the use of

an intermediary they could help them to overcome their lack of market knowledge.

Vogue and Cylon used different export methods in order to overcome similar barriers. This

may be explained due to the differing nature of their products they manufacture. Bernard,

Grazzi, and Tomasi (2011) believed commodity orientated products such as Vogue’s bathroom

fixtures that do not require high levels of tacit knowledge to sell were suited to direct exporting.

Vogue had the ability to use more resources and could take greater risk by directly exporting.

Due to the technical nature of the product Cylon was producing, making foreign market,

contacts and lack of foreign market knowledge were identified as significant barriers to

exporting.

Peng and Ilinitch (2001) highlight if a firm manufactures more complex goods, where the

transaction process requires special or custom modifications to suit the overseas market or

customer, or the requirement of specific knowledge to identify customers, the firms are more

likely to directly export. However, in Cylon’s case the owners lack of resources and markets

knowledge were too great and the use of a MNE Intermediary to export their product was the

most viable option.

39

Functional Barriers, which are common place among small manufacturing firms, were

identified to be firm’s size/ limited resources, inadequate export personnel and lack of working

capital and finance (Erramilli and Rao, 1993; Leonidas et al, 2004; Nummela et al., 2006)

Vogue did not experience difficulty with functional barriers. However the firms limited size,

meant it experienced management time shortages from exporting to the U.K.

Management time shortages were noted as one of the most significant barriers, in that

management found it difficult to service the international markets over domestic market

commitments. Mr. Whelan commented that with 80% of revenue coming from domestic

markets, it was important not to neglect the it. He emphasised the importance of overseas

expansion, however “growth on the export side takes time” (Muldowney, 2008). The result

was that Vogue could not dedicate as much resources to exporting as was needed without

sacrificing resources already focused on domestic markets.

Cylon’s founders began to consider internationalization, however it had 4 employees and

finances valued to approximately €100,000. They realised that access to finance was a critical

issue if Cylon wished to engage in international markets (Terjesen et al., 2008). These barriers

to exporting were very strong with Cylon but the Intermediary export method allowed for a

firm of small size, with limited resources and finances access international markets with

relative ease.

Cylon’s directors experienced functional barriers on multiple levels throughout the export

development process. Bilkey and Tesar (1997). When establishing themselves in overseas

markets they experienced all of the above barriers, however, again their decision to indirectly

export helped them to overcome all functional barriers.

After Cylon exited its agreement with Landis & Gyr. it began to manage its own exports,

however, it continued to export using intermediaries as distributors globally. Cylon found that

it still lacked adequate personnel to manage the international exports (Erramilli and Rao, 1993).

Cylon in order to control sales in Europe hired a European Marketing Manager whose addition

to the company was invaluable according to the founders. The new European marketing

manager changed the strategic direction of the company, marketing a product that could be

sold worldwide (Terjesen et al., 2008).

40

Following the appointment of the new marketing manager Cylon signed distribution

agreements in Norway, Sweden and France. A restructuring took place resulting in the

establishment of a technical support department to service customer care and a marketing

department (Terjesen et al., 2008) which allowed for a better system of servicing client needs,

which is an expectation that customers have with Smaller sized manufacturers over larger

multinationals which is, “a higher level of service orientation and cooperate responsiveness”

(Czinkota, 1996).

According to Leonidas (2004) small exporters can experience marketing barriers in the form

of price differences, requirement of product modifications or distribution barriers. Director of

Vogue, Mr. Whelan, identified similarities in product specifications as an incentive to export

to the U.K. market, however he identified that further expansion to other European markets

may require modifications to products.

2.5 STAGES EXPORT DEVELOPMENT MODEL Bilkey and Tesar (1977) conceptualized the export development process in which at least six

stages exist on the export development model. Elements of the model are visible in both the

cases of Cylon and Vogue.

Vogue can bee seen to follow the export development process proving the model. Stage 1

involves firms concentrating on domestic market. Stage 2 follows in which firms receive yet

do not fill unsolicited orders from overseas markets. In following Bilkey and Tesar (1977)

model Vogue’s director described how their interest from exporting came from receipt of

unsolicited orders. They then followed the model by investigating the viability of exporting to

the market they received unsolicited orders from.

In the 4th stage of “experimental exportation”, the most significant factors influencing firms

exporting in this stage, showed that firms who received unsolicited orders had a large tendency

to experiment with exporting and hire or appoint export specialists to explore the potential in

exporting. It can be argued that Vogue were operating in this stage. Director Conor Whelan

explained that although 20% of sales were coming from overseas markets, they were still

focusing main resources on domestic markets and he acknowledged that the exporting process

was experimental and would take some time to grow.

41

With the development of Cylon exporting process stages 1 – 3 of Bilkey and Tesar (1977)

export development model do not apply. From the outset the three founders of Cylon knew that

the domestic market could not support their industry. The export development model is based

on managerial attitudes to exporting. It is clear that if a company manager’s intention is to

export from the outset, the early stages of the model do not apply. It is also the case that if a

firm operates in a specific type of sector, like Cylon, internationalisation can be a strategic goal

from the outset (Brady and Bearden, 1979).

As soon as they had established manufacturing facilities and a domestic subsidiary for

distribution. Brady and Bearden (1979) argued that small firms that begin exporting indirectly,

over time change to direct exporting as they learn.

Cylon began with using the U.K. distributor Landis & Gyr. to indirectly export their product

to the U.K. and other overseas markets. Based on Bilkey & Tesar (1977) at this stage they were

operating in the 4th stage of “experimental exportation”. Terjesen et al. (2008) held that at this

stage of a small firms export development intermediaries can help to overcome knowledge

gaps, find new customers and limit risks associated with exporting.

As referenced in the literature Stage 5 “experienced exporters” make rational decisions based

on overseas demand and what competitive advantage a firms may have in a particular market.

Cylon realized that they could develop a product that could compete or outperform Landis &

Gyr. In recognizing this as well as a relationship breakdown with their intermediary MNE,

Cylon exited its agreement with Landis & Gyr. and sought to export directly to overseas

markets. Cylon signed distribution agreements in Norway, Sweden and France (Terjesen et al.,

2008). A restructuring took place resulting in a technical support department to service

customer care and a marketing department which allowed for a better system of servicing client

needs, which is an expectation that customers have with smaller sized manufacturers have over

larger multinationals which is, “a higher level of service orientation and cooperate

responsiveness” (Czinkota, 1996). Due to the nature of the industry Cylon adopted a

diversification strategy when expanding their exports, Bradley (2005) highlighted this benefits

firms as it reduces dependence on a single market.

It could be inferred that during this stage of export development firms move from indirect

methods to direct methods as Lamb and Liesch (2002) determined that the use of intermediaries

42

is a step towards more direct forms of internationalization. Cylon arranged a distribution deal

with a company based out of Singapore which allowed them to produce a branded control

system to export directly to Singapore which had been agreed with their European distributor

ABB. Now Cylon were producing their own product for the Asian market but they had to figure

out the correct distribution channel (Terjesen et al., 2008).

Bilkey and Tesar (1997) found that in this stage of development performance expectations and

perceived barriers influence the decision making process. Cylon’s growth continued over the

next decade establishing distribution agreements in countries around the globe where it was

acting as a supplier producing unbranded BMS for distribution, except in the U.K. where they

established their own distribution and sales center now competing directly with Landis and

Gyr. Cylon has established foreign sales branches in a number of European cities and a

distribution network for “Approved Cylon System Integrators” (Terjesen et al., 2008). Bilkey

and Tesar (1997) found that in this stage of developments performance expectations and

perceived barriers influences the decision making process.

Bilkey and Tesar (1997) also concluded that top performing firms in this stage have some

production facilities in overseas markets, which considerably cut the exporting costs, however

this was not the case with Cylon in the UK, Cylon established its own distribution, although

over time it found that this was too expensive and closed the office (Terjesen et al., 2008).

Cylon arranged a distribution deal with a company based out of Singapore which allowed them

to produce a branded control system to export directly to Singapore which had been agreed

with their European distributor ABB (Terjesen et al., 2008). Trabold (2002) maintains some

transactions would not be able to take place in a direct form, due to geographic differences and

intermediaries allow this to happen. As mentioned previously now Cylon were producing their

own product for the Asian market but they had to figure out the correct distribution channels,

the further use of intermediaries may be required to tap into the manage successful expansion

to the Asian market. Albaum and Duerr (2011) also highlight that distribution channels can be

very different from market to market, which may cause Cylon trouble in the future as the Asian

market may differ greatly from the European.

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2.7 CONCLUSIONS AND RECCOMMENDATIONS In reviewing the literature, I identified the use of an intermediary as best practice export method

for small manufacturing firms looking to internationalise. However, in concluding the

contextualization it is apparent that this may not always be the best possibility for firms. Best

export practice can be majorly influenced by a number of factors relating to the firm.

A firms initial motives to export can play a role in deciding which export practice is operated.

Managerial motives have a great impact in both cases export decisions. Vogues management

were interested but not fully invested in the export process. It was mentioned that their

predominant focus was on the domestic market and they were exporting to the UK on a fraction

of what was possible. The management decided to directly export to a large consumer (retailer),

handing over control of sales and marketing of their products to their UK customer.

In contrast, Cylon from the outset were fully invested in the export process and Ireland only

played the role of helping to establish the firm. For Cylon, best export method was to use

intermediaries to export their product, which allowed them to access multiple markets all over

the world. Motivation to export can influence the level of intensity and resources a firm will

apply to the export process, in turn it will select the method of exporting which allows the firm

to export its products to the level it desires.

It was also discovered that the nature of the firm can influence what practice is most suitable

to the export requirement of a firm. Market conditions and can the nature of the industry play

a role in the export decision. Ireland being a small market place influenced firms to export.

More so the nature of the product can effect and export method. Vogue produced products with

relatively low level of tacit knowledge, meaning they could directly export to a large consumer

without the requirement to provide an after sale service or the need to identify specific

customers. Alternatively, Cylons product required a high level of tacit knowledge, carrying

with it a prerequisite to identify specific customers in overseas markets. By using MNE

Intermediaries to export their products to other EU markets, they can benefit from the

intermediaries overseas contacts and provide a knowledge based service to them, which would

be unlikely should they have attempted to directly export their product.

Firms size and access to capital and finance also influence what export method is most suitable

for a specific firm. Vogue did not suffer from issues when deciding to export allowing them to

invest easily in a more direct method of exporting. Vogue was a newly established firm and

44

was indeed lacking in capital and financial resources in order to export. Again Landis & Gyr.

allowed the small manufacturer to overcome traditional barriers as they could benefit form the

intermediaries already established sales and distribution channels, reducing the cost of the

exporting significantly.

Small manufacturers looking to export are subjected to a multitude of barriers. In the case of

Cylon Intermediaries provided a method to overcome a number of these perceived barriers,

however it is not to say that it does not come at a price. Apart from the cost of using an

intermediary, firms are exposed to a number of downsides including lack of control of their

product, intermediaries becoming overpowering and risk of break down in relationships. In the

case of Cylon, their MNE intermediary used their controlling position over Cylon to limit their

competitiveness in the BMS industry, restricting their product sales to two European markets

and ultimately resulting in a breakdown of the relationship. Cylon exited the agreement with

their intermediary, however at an undisclosed, yet assumed to be, costly price.

In both cases Vogue and Cylon follow exports in a development process. Although they engage

in exporting at a different level of intensity and follow different stages of export development,

for both firms exporting presents itself as a learning process. It is apparent that managements

decision making and characteristics have the most significant impact the export development.

In both cases managements orientations and attitudes to exporting, influence the impact and

success of the export process.

To conclude this research, I have a number of recommendations for small manufacturers in

deciding what export practice to adopt. Firstly, the method of export chosen as previously

stated is largely influenced by factors specific to the firm, the sector and the market of

operation, however I feel that use of intermediary to establish export channels for small

manufactures are the best practice to begin exporting to overseas markets. However, it is

recommended that firms do not become over dependent on their intermediary and take action

to develop an understanding of the export process though their intermediary.

Secondly, from my research, export success regardless of what method selected is greatly

influenced by management of the firm. I recommend that firms ensure they have the right

personnel motivating, developing and managing the export process.

Finally, it is of great importance that firms realise that exporting is a development process and

not just a business activity. It is important that firms do not stay stagnant in their export methods

45

and continuously look to grow and develop by adopting new or additional forms of export and

entry to multiple overseas markets, this is the key to export success.

46

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