Determinants of Export Performance of Thai Canned Fruit Manufacturer by yurtgc548


									Determinants of Export Performance of Thai
       Canned Fruit Manufacturer

    Presented at the 10th SGBED Conference
        Kyoto, Japan, 9th September 2007
   Teay Shawyun and Virapol Siriwattanatum
       Assumption University of Thailand
    Canned Fruits export statistics
• The export value in Thailand for 2004-2005 had
  grown around 22 % annually; Japan was around
  15 %, China was up by 35 % and other Asian
  countries increasing at the rate of 15-20 %
• Canned fruit - the 12th highest export product
  with export values value between 2004-2005
  dramatically increased by 11.2 % as a result of
  lower tax and tariff in importing countries.
• Canned fruit and canned vegetable export was 80:
• Canned fruit export - pineapple covered > 50 %.
  Other canned fruit product included Lynchee,
  rambutan, longan, mangoesteen and jack fruit,
  which made up 40 % of the total export volume
     Canned Fruits export Markets

• The main markets of canned fruit from the last 5
  consecutive years remained the same with United
  States as the highest value purchaser with more
  than 50 % of the total export value of Thailand
  followed by Holland and Japan, where the import
  values were almost equal (
• During 2005- 2007, the export value to Japan will
  increase as a result from the reduction in import
  tax after the FTA (0% within 5 years).
• Other export markets consisted of Germany,
  Russia, UK, Canada, and Australia
 Non-Controllable external problems
• Some of the Non-controllable problems were:
  – The fluctuation in climate which will be a problem for
    production planning and raw material management;
  – Increases in cost of raw materials in this industry, 20% for
    steel in 2004-2005, 67 % for sugar mix in 2006, 15% for
    transportation in 2004-2006 (Thai trade facts sheet,
    Issue3 March, 2006);
  – Fluctuation in exchange rate with the Baht having
    appreciated more than 16 % that affected profits reduction
    from sales revenue (Bank of Thailand literature, April,
  – Trade barriers imposed by import countries like JETRO
    (2006) “prohibit ingredients and food additive”, FDA in EU
    and HACCP USA, (2005) that caused higher cost of
    production and quality control adding to the non-
    competitiveness of canned fruit;
  – Competition from China (30% to 43% in 2003-2005,
    Philippines (15% to 17%), and some countries in South
    America (17% in 2005) were gaining more market share
    especially in pineapple product.
     Internal Controllable factors

• Two of the main internal controllable
  factors are:
  – Management attitudes toward export market as
    they still maintain the family business mindset;
  – Quality control of Thai canned fruit does not
    reach international standard (sterilization
    standards – 20%, short shelf life – 40%, dented
    tin – 25%, and production defect – 10%).

  This research aims to identify the factors
   and their importance that have an effect(s)
   on export performance focused on Thai
   canned fruit manufacturers
   Literature Review of Factors Determinants 1/3

Factors       Key Variables                            Literature

Export           the capacity to produce different    Hofer & Schendel (1978); Porter
marketing         varieties of goods and the quality   (1980); Ledesma (2002); Aaby and
strategy          of the product                       Slater (1989); Burton and
                 differentiation through marketing    Schlegelmilch (1987); Weerachai and
                  mix                                  Patriya (2002) Poh-Lin and Jeong
                 being innovative, more pro-active    (1995); Chetty and Hamilton (1993)
                  and were risk takers                 White (2000); Bredahl and Zaibet
                 channel adaptation, dealer/          (1995). Cooper (1985); Cavusgil and
                  distributor support, motivation,     Zou (1994), and Kirpalani and
                  and involvement                      MacIntosh (1980)

Managers’        management’s point of views,         Narver (1993); Pitt (1996); Da Rocha
attitudes         opinions                             and Christensen (1994); Cavusgil
and              how they perceived the export        and Zou (1994); Axinn (1998);
perceptions       activities in terms of strategies,   Cavusgil and Kirpalani, (1993);
                  marketing, positioning, barriers,    Leonidou and Katsikeas (1996)
                  advantages and situation
                 international orientation of the
   Literature Review of Factors Determinants 2/3

Firm                firm’s number of years in             Kaynak and Kuan (1993), Bodur
characteristic       exporting insignificant if they did   (1994) Das (1994) and Louter,
s and                not adapt themselves to the           (1991); Aaby and Slater, (1989);
competencies         competitive environments              Reid (1986); Chetty and Hamilton
                    positive relationship between         (1993)
                     R&D/technology and innovation
                     and export performance

Industry            industry’s technological intensity    Cavusgil and Zou (1994), Holzmuller
                     or “Manufacturing complexity”         and Kasper (1991); Holzmuller and
                     had a positive influence on export    Stottinger (1996); Kaynak and Kuan
                     performance                           (1993), and Madsen (1987);
                    negative effect of export market      Kirpalani and MacIntosh (1980);
                     barriers (trade barrier, physical     Xuto (2003); Griffin and Pustay
                     and psychological distance),          (1996) and Grimwade (1992)
                     which were not significant
                     predictor of export performance
                    non-tariff barrier or non-
                     quantitative NTBs were the ways
                     in which imports might be
     Literature Review of Factors Determinants 3/3

Managers’            educated and internationally       Da Rocha and Christensen (1994)
characteristics       experienced managers was           and Axinn (1998); Cooper and
                      insignificant                      Kleinschmidt, 1985); Chartien, 1993
                                                         and Christien (1988)

Foreign and          positive effect on export          Katsikeas (1997); Seringhaus,
domestic              performance for the national       (1998), Aaby and Slater (1989),
market                export policy, but a non-          Abalaka (1999); Diamantopoulos
characteristics       significant effect for domestic    and Schlegelmilch (1994); Narver
                      market pressure and domestic       (1993); Pitt (1996); Cateora (1996)
                      currency devaluation               and Scherer & Ross (1990)
                     direct relationship between
                      market information, market
                      knowledge and export
                     marketing orientation of firms
                      impacted positively on business
                     socio-cultural environment had
                      a significant impact on export
                      performance through the import
                      countries’ rules and regulations
        Research Framework

Internal Controllable Variable

 Firm competencies
Management attitude                     Export
 Business Strategies                 performance

Channel adaptation                 Export sales
   Product Quality                 Export profits
                                   Sales growth

   Trade barriers

External Uncontrollable Variable
                   Research Hypothesis

•   H01 to H06    : There is no relationship between the determinants of
                  firm competencies, management attitude, business
                  strategies, channel adaptation, product quality and
                  export performance of Thai canned fruit
•   Ha1: to Ha6:  : There is a relationship between the determinants of
                  firm competencies, management attitude, business
                  strategies, channel adaptation, product quality and
                  export performance of Thai canned fruit
•   H07 : There is no effect of determinants of firm competencies,
          management attitude, business strategies, channel adaptation,
          product quality on export performance of Thai canned fruit
•   Ha7 : There is an effect of determinants of firm competencies,
          management attitude, business strategies, channel adaptation,
          product quality on export performance of Thai canned fruit
              Research Methodology

• 257 canned fruit manufacturers as listed in Thailand Export
  Promotion Department in 2005 and the sample size needed was
  154 companies.
• Firstly, the 257 companies were listed and were assigned an
  ordered number.
• The ratio of medium firms (with total employees of 51 – 200) and big
  firms (more than 201 employees) was 40:60 (,
  fact sheet of canned fruit January 2006).
• The number 1 – 103 was assigned to medium companies and 104 –
  257 to big companies respectively. Then, the sample units were
  selected by picking up odd numbers from 1 – 257 to get 128
  companies (with 52 medium and 76 big firms) as the sampling units.
• The target respondents were persons who were engaged in export
  business such as export management people: Director, export
  manager or assistant export manager.
• A total of 770 sets of questionnaires were sent with each firm being
  allocated 5 sets. The overall response rate was 39%

                           No of   Cronbach' s
Questionnaire components   items       Alpha

Trade Barrier               8        0.8821

Business strategy           3        0.7325

Management attitudes        5        0.7268

R&D and technology          4        0.7187

Product quality             4        0.8767

Channel adaptation          5        0.8160

Export performance          3        0.8178
       Level of concern for the determinants
Concern Factors      Overall Mean    SD      Qualitative   Rank
                                               Rating       order

Trade barrier           4.079       1.055      Neutral      5

Business strategy        4.9        1.167    Quite High     3

Management             4.306        0.9532     Neutral      4
Firm competencies        4.95       1.044    Quite High     2

Product Quality        5.6725       0.884       High        1

Channel Adaptation      3.982       1.028      Neutral      6
                                                  Hypothesis      Level of     Correlation   Result
                                                    testing     significance   Coefficient
         Hypothesis of H01 to H06                 technique
H01: There is no relationship between R&D/       Pearson's      .000           .57           Reject Ho
   technology and export performance of           Correlation
   Thai canned fruit manufacturers
H02: There is no relationship between            Pearson's      .54            .863          Fail to
   management attitudes and export               Correlation                                 Reject Ho
   performance of Thai canned fruit
H03: There is no relationship between business   Pearson's      .000           .32           Reject Ho
   strategy and export performance of Thai       Correlation
   canned fruit manufacturers
H04: There is no relationship between Channel    Pearson's      .781           -.037         Fail to
   adaptation and export performance of          Correlation                                 reject Ho
   Thai canned fruit manufacturers
H05: There is no relationship between Trade      Pearson's      .000           -.643         Reject Ho
   barrier and export performance of Thai        Correlation
   canned fruit manufacturers
H06: There is no relationship between product    Pearson's      000            .783          Reject Ho
   quality and export performance of Thai        Correlation
   canned fruit manufacturer

 • Test of Hypothesis H07

                                     Unstandardized         Standardized
                                       Coefficients          Coefficients
Model                                 B        Std. Error       Beta         t       Sig.
1       (Constant)                   -2.254         .558                    -4.042     .001
        TRADE BARRIERS                -.754         .106           -.726    -5.810     .009
        DIFFERENTIATION STRATEGY       .518         .120            .427     5.810     .000
        MANAGEMENT ATTITUDE            .160         .127            .133     1.261     .220
        R&D/TECHNOLOGY                 .622         .106            .542      .794     .008
        PRODUCT QUALITY               1.129         .136            .870     8.309     .000
        CHANNEL ADAPTATION            -.117         .098           -.106    -1.199     .243
  a. Dependent Variable: EXPORT PERFORMANCE
                  Main findings
• 4 determinants of firm competencies, business
  strategies, trade barrier, product quality and
  export performance of Thai canned fruit
  manufacturers were significant,
• 2 determinants of management attitudes and
  channel adaptation which might be construed that
  these 2 factors were not crucial or directly related
  to the export performance
• the internal factors of product quality (0.870),
  R&D or the firm’s competencies (0.542) and
  business strategy or its differentiation strategy
  (0.427) were significantly important in predicting
  the export performance
• The only external factor of trade barrier showed
  a significant inverse prediction of performance,
  meaning that if the trade barrier is high, and its
  export performance will decrease significantly
         Research Implications 1/2
• Product quality: Government sectors should improve
  and issue more quality regulation and systems in order
  to comply with the International Food and Drug
  association standards (JETRO, FDA, EU standard).
  Private sectors also have the duty to improve the
  product quality in term of process and production by:
  (1) Improving the packing through stronger cans to
  avoid the damages during the transportation; (2) proper
  and adequate wrapping up of the product with strong
  pallets and roping the front row of container; (3)
  adjusting the label by adding specific information and
  explanation like nutrition facts and better designs as
  required by importing nations.
• Trade barrier: Government was not only a regulator of
  the sector by developing the sector in the right way the
  use and implementation of internationally accepted
  standards, but also as a negotiator for a more favorable
  balance of trading
          Research Implications 2/2

• Firm Competencies: Product innovation and the
  technology improvement in production and
  processes are mandatory as these represent the
  core competency inherent in the firm’s internal
  competitiveness through Customer Value = f
  (Product Quality, Service Quality, Relationship,
• Business strategy: The components of the
  business strategy capitalize on the value addition
  through Economies of scale, scope and speed and
  knowledge of the customers, competitors,
  organization and its technology utilization

• It would be noted that Product
  Quality, Firm Competencies and
  Business Strategies are key internal
  controllable factors affecting
  competitiveness and sustainability
  that can be classified as:
  – Organization and Individual Capacity
  – Organization and Individual
Organizational and Individual Capacity 1/2

• Individual capacity is the nuts and bolts of
  capacity building means the skills, knowledge,
  experience, personality (de Jager and Clarke, 2001)
  and the ability not only to do something but also
  over a period of time to build up a reservoir of
  knowledge, experience and expertise that
  determines present and on-going performance.
  This underlies the “motive, trait, and skill, aspect
  of one’s self-image or social role, or a body of
  knowledge which he or she uses” (Boyatzis, 1982).
• Non-individual capacity or the institution
  administrative capacity provides the context (in
  essence the values, beliefs and ideals) in which
  individual capacity is developed as they work in the
  institutional setting which influence their mind-
Organizational and Individual Capacity 2/2
o Organization capacity refers to the size, scope and scale of
  the performance of the total institution system, the efficiency
  and rationality (exercise of reason and judgment) of the
  implementation and sustainability of maintaining the level of
  output over time. This refers to the internal structures,
  procedures and policy frameworks and collective capabilities
  of the staff and external environmental factors (de Jager and
  Clarke, 2001) or sets of behavior pattern needed to perform
  (Woodruffe, 1992).
o Capacity and capability development aspects would include:
   o Skill enhancement – capabilities enhancement include
     intelligence, skills, knowledge and mental sets of all academic
     and administrative staffs (Lounser, 1991).
   o Organization strengthening – covering the process of
     institutional development or institution building implying an
     infrastructure mentality (Berg, 1992) that could mean the values
     and cultural aspects of institution building (Morgan, 1993).
   o Procedural improvements and Management – covering general
     functions changes or systems reforms in the academic and
     administrative units that are on-going (Berg, 1992 and Morgan,
        Human Capacity and Capability
• The human element of knowledge (Chatzkel, 2002;
  Davenport and Prusak, 1998; Fowler and Pryke,
  2003; Hildreth 1999). The imperatives of tacit
  knowledge residing in people (Hendriks and Vriens,
  1999). Kane et. al., (2006) categorized knowledge
  into 2 groups of:
   – Individual/Tacit – which are expertise, know-how that
     are manifested through action, acquired through practice
     and difficult to transfer based on individual beliefs,
     values, subjective insights or emotions that are contained
     in the container
   – Public/Explicit – which are the rationalization of
     information that can be stored, codified and transmitted
     and can be articulated as facts which is about the
     container or embodiment of knowledge (Manesh and
     Suresh, 2004) which is the organizational memory (Anand, 1998) or systematic memory
     • Thank you
• Questions and Answers

To top