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This is to certify that the

thesis entitled
THE INTERNATIONAL MARKET SELECTION PROCESS
OF SMALL- AND MEDIUM-SIZED AGRI-FOOD FIRMS

presented by

Steven Michael Struyk

has been accepted towards fulfillment
of the requirements for

M.S. degree in Agricultural Economics

 

 

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Major professor

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TO AVOID FINES rotum on or baton dot. duo.

DATE DUE DATE DUE DATE DUE

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MSU to An Aflirmottvo ActioNEquol Opportunity Instituion
M

”3-91

THE INTERNATIONAL MARKET SELECTION PROCESS
OF SMALL- AND MEDIUM-SIZED AGRI-FOOD FIRMS

By

Steven Michael Struyk

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF SCIENCE

Department of Agricultural Economics

1995

ABSTRACT

THE INTERNATIONAL MARKET SELECTION PROCESS
OF SMALL- AND MEDIUM-SIZED AGRI-FOOD FIRMS

By

Steven Struyk

The goal of this study was to identify the market selection methodologies and
factors utilized by small- and medium-sized agri-food firms. While much information is
available on how manufacturing firms select their international markets, little is known
about how smaller agri-food firms select theirs. A survey was conducted to collect
information on the characteristics of agri-food exporters, their market selection
methodologies, and the frequency with which they utilize different market selection factors.

This study found that among experienced, successful agri-food exporters: (1)
qualitative/contractible selection methods predominate, (2) selection factors related to
marketing, food and agricultural characteristics, and trade, legal, and political
characteristics were highly important, and (3) successful market selection efforts may be
focused on a rather limited set of seven specific selection factors, including current product
demand, customer preferences, government stability, food preparation methods and eating

habits, import tariffs, import licensing regulations, and stage of development.

This thesis is dedicated to my wife Claudia, our son Alexander,
and our daughter Esmeralda.

ACKNOWLEDGMENTS

I would like to thank Dr. Chris Peterson for serving as my thesis advisor. His
guidance and support were essential to the successful completion of my graduate program.
I would also like to thank Dr. Kandeh Yumkella for his advice and direction. Dr. Peterson
and Dr. Yumkella have both sparked my interest in International Agribusiness, and have
given me the tools to succeed in a competitive world.

I also wish to express my appreciation to Dr. David Schweikhardt for his help,
constructive criticism, and valuable advice. In addition I would like to thank Dr. Carl
Eicher, my major professor, for his concern and guidance throughout my graduate studies.
Finally, I would like to thank the graduate students, support staff, and faculty of the

Department of Agricultural Economics.

iv

TABLE OF CONTENTS

LIST OF TABLES ..................................................................................... viii
LIST OF FIGURES ..................................................................................... ix
CHAPTER 1 RESEARCH SETTING ............................................................... 1
1.1 Problem Statement .......................................................................... 1

1.2 Goals and Objectives ....................................................................... 4

1.3 Thesis Organization ........................................................................ 6
CHAPTER 2 LITERATURE REVIEW ............................................................. 8
2.1 Introduction .................................................................................. 8

2.2 Existing Classification of Approaches ................................................... 9

2.2.1 Qualitative and Quantitative Market Selection Approaches ................ 9

2.2.2 Expansive and Contractible Market Selection Approaches ............... 10

2.3 Conceptual Market Selection Studies .................................................. 11

2.3.1 Cluster Analysis ................................................................. 12

2.3.2 Econometric Methods .......................................................... 14

2.3.3 Market Screening ............................................................... 17

2.4 Experiential Market Selection Studies ................................................. 20

2.4.1 The Internationalization Process .............................................. 20

2.4.2 Nearest Neighbor, Psychic Distance and Ethnic Affinity ................ 22

2.5 Comparison of the Conceptual and Experiential Literature ........................ 26

2.6 Information Acquisition .................................................................. 28

2.7 Market Selection Criteria ................................................................ 29

2.7.1 Macroeconomic Factors ....................................................... 31

2.7.2 Geographic, Infrastructural, and Demographic Factors .................. 33

2.7.3 Trade Barrier, Legal, and Political Factors ................................. 35

2.7.4 Social and Cultural Factors .................................................... 37

2.7.5 Food and Agricultural Factors ................................................ 38

2.7.6 Marketing Factors .............................................................. 38

2.8 Conclusion ................................................................................. 39
CHAPTER 3 SURVEY METHODOLOGY ...................................................... 42
3.1 Introduction ................................................................................ 42

3.2 Research Objectives ...................................................................... 42

3.3 The Pre-Survey Stage .................................................................... 46

3.4 Survey Design ............................................................................. 48
3.4.1 Phase One: The Survey Postcards ........................................... 48

3.4.2 Phase Two: The Questionnaire .............................................. 50

V

3.5 Response Rates ............................................................................ 55

3.6 Summary ................................................................................... 58
CHAPTER 4 SURVEY RESULTS ................................................................ 60
4.1 Introduction ................................................................................ 60

4.2 Results Related to Research Objective 1 .............................................. 61

4.3 Results Related to Research Objective 2 .............................................. 70

4.4 Results Related to Research Objective 3 .............................................. 73

4.4.1 Macroeconomic Factors ....................................................... 77

4.4.2 Geographic, Infrastructural, and Demographic Factors .................. 78

4.4.3 Trade Barrier, Legal, and Political Factors ................................. 78

4.4.4 Social and Cultural Factors .................................................... 79

4.4.5 Food and agricultural factors ................................................. 80

4.4.6 Marketing Factors .............................................................. 80

4.5 Results Related to Research Objective 4 .............................................. 81

4.5.1 Performance Indicators ........................................................ 81

4.5.2 Market Selection Groups ...................................................... 84

4.5.3 Correlation Analysis ............................................................ 88

4.6 Results Related to Research Objective 5 .............................................. 89

4.7 Summary ................................................................................... 97
CHAPTER 5 CONCLUSION ...................................................................... 102
5 .1 Introduction ............................................................................... 102

5.2 Findings ................................................................................... 103

5.2.1 General Characteristics ....................................................... 103

5.2.2 Market Selection Methodologies ............................................ 104

5.2.3 Market Selection Factors ..................................................... 105

5.2.4 Export Performance ........................................................... 107

5.2.5 Comparison of Different Types of Agri-Food Firms .................... 108

5.2.6 Comparison of the Findings with the Market Selection Literature ..... 109

5.3 Limitations of Data ...................................................................... 112

5 .4 Recommendations for Future Research .............................................. 113

5.5 Suggestions to Agri-Food Firms ...................................................... 114

5.6 Concluding Remarks .................................................................... 116
APPENDD( A ......................................................................................... 117
APPENDIX B ......................................................................................... 119
APPENDIX C ......................................................................................... 131
APPENDIX D ......................................................................................... 134

vi

APPENDIX E ......................................................................................... 135

BIBLIOGRAPHY ..................................................................................... 136

vii

TABLE 3.1
TABLE 3.2
TABLE 3.3
TABLE 4.1
TABLE 4.2
TABLE 4.3
TABLE 4.4
TABLE 4.5
TABLE 4.6
TABLE 4.7
TABLE 4.8
TABLE 4.9
TABLE 4.10
TABLE 4.11
TABLE 4.12
TABLE 4.13
TABLE 4.14
TABLE 4.15
TABLE 4.16
TABLE 4.17
TABLE 4.18
TABLE 4.19
TABLE 4.20
TABLE 4.21
TABLE C-l
TABLE C-2
TABLE C-3
TABLE D
TABLE E

LIST OF TABLES

PHASE 1 RESPONSE RATES ................................................................... 56
SURVEY OF NON-RESPONDENTS ........................................................... 57
PHASE 2 RESPONSE RATES ................................................................... 57
NUMBER OF EMPLOYEES ..................................................................... 61
GROSS ANNUAL SALES ........................................................................ 62
PERCENTAGE OF EXPORT SALES .......................................................... 63
YEARS EXPORTING ............................................................................. 64
COMMODITIES EXPORTED ................................................................... 65
PRODUCT FORM ................................................................................. 66
EXPORTIN G CHANNELS ....................................................................... 67
GEOGRAPHICAL MARKETS ................................................................... 68
NUMBER OF EXPORT MARKETS ............................................................ 69
MARKET SELECTION METHODOLOGY ................................................... 71
QUALITATIVE AND QUANTITATIVE METHODOLOGIES ........................... 72
MARKET SELECTION FACTORS BY FACTOR GROUP ................................ 75
MOST FREQUENTLY UTILIZED MARKET SELECTION FACTORS ................ 76
MARKET SELECTION EFFECTIVENESS ................................................... 82
EXPORT GOALS ................................................................................... 83
EXPORT GROWTH RATE ....................................................................... 84
MARKET SELECTION GROUPS .............................................................. 86
CORRELATION S WITH PERFORMANCE INDICATORS ............................... 89
MARKET SELECTION FACTORS BY CLUSTERS ....................................... 91
CHARACTERISTIC DIFFERENCES BETWEEN CLUSTERS ........................... 93
MEAN DIFFERENCES BETWEEN CLUSTERS ............................................ 94
MARKET SELECTION FACTORS RANKED BY CLUSTER 1 .......................... 131
MARKET SELECTION FACTORS RANKED BY CLUSTER 2 .......................... 132
MARKET SELECTION FACTORS RANKED BY CLUSTER 3 .......................... 133
TWO TAILED T-TEST ............................................................................ 134
MARKET SELECTION FACTORS IN THE LITERATURE .............................. 135

viii

FIGURE 2.1
FIGURE A-l
FIGURE A-2
FIGURE B-l
FIGURE B-2
FIGURE B-3

LIST OF FIGURES

PROACTIV E MARKET SELECTION METHODOLOGIES. .............................. 26

SURVEY POSTCARD ............................................................................. 117
FIRST MAILOUT .................................................................................. 118
PHASE II SURVEY ................................................................................ 119
PHASE II COVER LETTER ..................................................................... 129
POSTCARD REMINDER ......................................................................... 130

ix

CHAPTER 1 RESEARCH SETTING

1.1 Problem Statement

Over the past 15 years Michigan’s agri-food companies have been increasingly
involved with international marketing. The Michigan Apple Industry has described the
international marketing process as tremendously important (Braman, 1994), and the
Michigan Dry Bean Industry has said that Michigan would not have an industry without it
(Kuenzli, 1994). Michigan firms realize that they are not only competing with other US
firms, but with firms from every corner of the globe. Even non-exporters are affected by
weather in Brazil, a political crisis in South Africa, or bumper crops in Chile.

The internationalization of Michigan’s fruit and vegetable exporters is extremely
important. It is widely acknowledged that Michigan’s agricultural shippers face an
increasingly competitive environment with the growing saturation of many domestic and
international markets. There is also an increasing number of domestic competitors
establishing footholds in foreign markets. The growth of global trade has redefined the
manner in which firms must think about marketing. Firms that fail to adapt to this dynamic
business environment will lose markets to more aggressive companies. This explosion in
international trade, accelerated by rapid advancements in transportation and instant
communication, has made global marketing a reality for Michigan’s fruit and vegetable
industries. Small- and medium-sized shippers must take the appropriate steps to assure
their position in the future. One such step in this direction is the selection of appropriate

foreign target markets.

2
Within the internationalization process, firms typically pass through several stages

as they transform themselves from non-exporters to fully committed and active exporters.
Many firms begin to export by simply reacting to unsolicited orders (Johansson and
Valhne, 1977; Bilkey and Tesar, 1977; Albaum, 1983; Strandskov, 1986; Cavusgil,
1984). At this stage, market selection and entry is typically nothing more than sending the
requested quantity and product to the soliciting firm. However, as with domestic markets,
active exporters nwd a systematic approach to market selection and entry. Firms actively
dealing with this complex and risky international environment should depend heavily upon
strategic marketing (Papadopoulos, 1986). An important step in the formulation of an
international marketing strategy is export market selection (Albaum et al. , 1989).

It may be assumed that market selection only entails the selection of those markets
where firms would expect to receive higher retums; however, the process of market
selection is much more complicated than that. The difficulty with international trade is that
markets are in a constant state of flux. While a given market may provide the best retum
this year, it may not necessarily provide it in the next. This is because exchange rates
fluctuate, economies go through business cycles, and even an anticipated political change
can effect the current trade opportunities within a country. However, it is rarely feasible to
export one year and not do so the next since importers prefer to buy from reliable and
committed sources. So international trade does not necessarily mean higher prices, but
rather the ability to maintain a more stable portfolio of markets (Braman, 1994). This
requires a long term commitment, which makes the initial selection of export markets very

important.

3
It would seem likely that market selection and entry decisions are made on the basis

of overseas market characteristics. Market selection is a continuous process in which
marketers must monitor changing market opportunities. The relative importance of
individual market characteristics on the likelihood of a domestic firm exporting to that
market, and the choice of a market entry strategy, varies both across industries and across
countries. Yet market selection for many small- and medium-sized agricultural exporters
can be a difficult and costly task, especially for new-to-export agri-food companies.
Unfortunately, many studies have found that new-to-export firms enter their first
international markets without any research at all (Cavusgil, 1980; Bilkey and Tesar, 1977).
Another study estimates that roughly 83% of all small- and medium-sized enterprises do not
approach international market selection systematically in their first internationalization
attempts (Kothari, 1978). If agri-food companies could be shown how to choose their
initial markets in a more systematic way, they may experience a higher level of success and
view exporting as a less risky prospect.

Many small- and medium-sized firms perceive the export market selection process
as a difficult and time consuming task. The monitoring of international markets requires
close attention to many changing market selection factors (Cavusgil, 1987). Some common
characteristics which may be considered by shippers during the market selection process
include population, gross domestic product, cultural acceptance, and phytosanitary
regulations, but often the process of information gathering is an informal one in which the
marketer is continuously considering new export markets by listening to trade leads and
networking (Kirkconnell, 1988). An informal process is a process nonetheless, and it is

this “process” which will be the focus of this study. It is designed to help further our

4
knowledge of how agricultural exporting works in the real world, and to give us insights

into how to make Michigan’s agri-food companies more competitive in the world market.
This market selection process is a critical component for any successful exporter, valuable
information for firms developing new export programs, and important study material for

students who will become Michigan’s future export marketing managers.

1.2 Goals and Objectives

This study is primarily concerned with international market selection with emphasis
on Michigan’s fresh and processed agricultural commodities. Because Michigan is the
nation’s leader in dry bean and tart cherry production, as well as a significant apple
producer, this study will examine the market selection processes utilized by successful
exporters in the apple, tart cherry, and dry bean subsectors. It will also examine the export
practices utilized by firms that export apricots, carrots, celery, corn, cucumbers, grapes,
nectarines, onions, peaches, pears, and plums.

From the standpoint of international fruit and vegetable marketing, there are many
questions which remain to be answered. Although some literature pertaining to
international market selection by manufacturing firms exists, there is little information on
how agri—food shippers select and develop their export markets. This thesis will attempt to
add to that literature.

The primary goal of this thesis is to provide useful information to the industry,
agribusiness students, agricultural extension specialists, and teachers on how agri-food

shippers currently select international export markets. This will be accomplished by

5
identifying both the market selection techniques and the particular market selection factors

currently being utilized by successful international shippers. By comparing the differences
between various firms and industries, shippers may learn new market selection techniques
that will help them to identify potential export markets more efficiently. N on-exporters
may also find that this study offers a useful guide to developing their own export marketing
programs. By identifying which methodologies and key market selection factors are
correlated with export performance and the types of market selection factors that different
types of exporters select, it is our hope to offer agri-food companies a more systematic way
in which to chose their foreign target markets. The isolation of these procedures and
factors will help to make shippers more efficient at locating high potential markets with less

cost, effort, and risk.

The objectives of this thesis are:

0 Review the existing literature on international market selection.

0 Classify the existing set of international market selection literature as being
either experiential‘ or conceptualz.

0 Compare and contrast the methodologies and types of market selection
criteria in the conceptual and experiential literature.

0 Administer a market selection survey in order to answer the following six
research objectives:

1. Identify the general characteristics of agri-food

exporters.

 

' Experiential market selection literature utilizes statistical methods for analyzing how firms
actually carry out the market selection process.

2 Conceptual market selection techniques are attempts to argue from theory and concept
how market selection should be carried out by firms.

6
2. Identify what types of market selection

methodologies agri-food exporters use for selecting
target markets.

3. Identify the specific market selection factors that
agri-food exporters utilize to distinguish one target
market from the next.

4. Identify which types of market selection factors are
related to export performance.

5. Identify and compare different types of agri-food
firms based upon the total mix of market selection
factors that these firms utilize for selecting target
markets.

6. Compare and contrast all of the above findings with

the literature on manufacturing firms.

1.3 Thesis Organization

Chapter 2 of this thesis will review the international market selection literature to
date. It will briefly discuss two approaches for organizing the current set of market
selection literature. Chapter 2 will then concentrate on the differences between the two
main types of marketing studies actually found within the market selection literature. The
larger of these two categories, which this thesis refers to as the conceptual category,
focuses on studies which attempt to argue from theory and concept how market selection
should be performed. The second major group of market selection studies, which this
thesis refers to as the experiential market selection category, attempts to analyze the actual

market selection processes currently being utilized by exporters. Finally Chapter 2 will

7
attempt to cover the most common market selection factors used and suggested from within

the current body of market selection literature.

Chapter 3 describes the survey methodology used by this study for collecting
information on the market selection processes currently being utilized by small- and
medium-sized agri-food exporters. This includes the methodology used for creating a
comprehensive mailing list from the PIERS (Port Import/Export Reporting Service) data
set, a CD-ROM data base (Phone Disc), and the first phase of the survey. Chapter 3 also
describes how the methodology used in the second phase of the survey, as well as the
response rates achieved by each phase of the survey. Finally Chapter 3 discusses the
statistical procedures used for analyzing the survey results.

Chapter 4 will cover an analysis of the survey results obtained from Phase I and
Phase II of the survey. It classifies the information collected from the survey into six
categories based upon the six research objectives identified above.

Chapter 5 summarizes the results obtained from the survey along with the
information obtained in the literature review. It also recommends a market selection
methodology consistent with the findings of the survey. Finally, this chapter identifies the
areas where future research is needed to continue helping small- and medium-sized agri-

food exporters with the internationalization process.

CHAPTER 2 LITERATURE REVIEW

2.1 Introduction

This chapter examines the existing literature on market selection. The first section
of this chapter describes two schemes that have been suggested for classifying market
selection approaches. The next two sections of this chapter divide the existing market
selection literature into two distinct categories that the author believes better distinguish the
two main themes of the literature. The first category reviews those studies that argue from
theory and concept how market selection should be carried out by firms. For the purposes
of this study, this set of market selection literature is called the conceptual market selection
group. The next section of the chapter reviews the market selection literature which utilizes
statistical methods for analyzing how firms actually carry out the market selection process.
This set of market selection literature is called the experiential market selection group.
Most market selection research falls into the conceptual group. These techniques include
econometric analysis, cluster analysis, and market screening. As will be discussed later in
this chapter, there seems to be a significant difference between how exporters actually
select their export markets and how most of the conceptual market selection methodologies
suggest it should be done.

After a section comparing and contrasting the conceptual and experiential market
selection studies, a brief overview will be presented suggesting how firms could reasonably
acquire market information. This section is presented because international market

information is a key element in market selection decisions.

9
Finally, this chapter will discuss many commonly suggested factors utilized in

market selection by actual exporters as well as those suggested from within the set of
conceptual literature. Regardless of the market selection method employed, every country
is distinguished by its individual market characteristics. The factors that an exporter uses

to capture these characteristics will ultimately define which export market is chosen.

2.2 Existing Classification of Approaches

This research began with a comprehensive review of trade publications, journal
articles, and USDA statistical reports. Two classifications of approaches to market
selection have been suggested in the literature: qualitative vs. quantitative and expansive

vs. contractible.

2.2.1 Qualitative and Quantitative Market Selection Approaches

Papadopoulos and Denis (1988) divide the international market selection literature
into two categories. They are referred to as the “quantitative” and “qualitative” market
selection approaches. As their names imply, quantitative market selection approaches
typically utilize quantifiable market selection factors, whereas qualitative market selection
techniques typically utilize qualitative factors.

Quantitative approaches entail the systematic screening of large amounts of
secondary information about many or all foreign markets. These approaches tend to utilize
formal statistical procedures for grouping countries into similar clusters or ranking them by
order of preference. In contrast, qualitative market selection approaches may start by

establishing objectives and constraints that are used to identify a short list of countries.

10
Other qualitative approaches focus on the nature, appropriateness, and sources of

qualitative information which can be used as input into the market selection process.
Among other sources, these studies typically suggest the use of government agencies,
chambers of commerce, banks, export agents, and even the customers themselves.
Assuming that the needed market information exists, quantitative factors are
typically easier to measure and compare than qualitative factors. Qualitative factors are
typically more difficult to measure or compare because they must be measured and
compared based upon the subjective judgment of the decision maker. Yet as will be shown
later in this chapter, most of the market selection techniques actually used by exporters tend
to fall into the qualitative market selection category. Qualitative approaches may also be
limited by their very nature to considering a limited number of countries (Papadopoulos and

Denis, 1988).

2.2.2 Expansive and Contractible Market Selection Approaches

In contrast to the Papadopoulos and Denis (1988) approach, Albaum et al. (1989)
classify the international market selection techniques into expansive and contractible
approaches. An expansive market selection technique starts from the decision makers home
market and “expands” outwardly during the market selection process. Typically the first
market ever considered is the nearest neighboring country. Expansive market selection
techniques tend to utilize the home market as a basis for analyzing other markets as noted
by Albaum:

“Market selection over time is based upon similarities between the national

market structures of a political, social, economic, or cultural nature, so that

the exporter expands from one market to the next introducing a minimum of

further adaptation to the product as well as other export marketing
parameters” (Albaum et al., 1989, pg. 96).

1 1
As opposed to expansive methods, contractible methods start with the total number

of possible export markets and, through various screening or market grouping techniques,
systematically narrow down the original set to include only the most attractive markets.
The least attractive markets are systematically eliminated, and those markets which are
ultimately left after several screenings are then analyzed in-depth. While expansive
methodologies may be easier for small- and medium-sized companies to administer, they do
not consider all possible target markets in the initial market selection analysis.

The qualitative and quantitative classification suggested by Papadopoulos and Denis
(1988) and the expansive and contractible classification suggested by Albaum et al. (1989)
are both continua more than true dichotomies. Some selection methodologies are more
expansive or qualitative than others. In other words, selection methodologies may be
scaled relative to each other as being more or less qualitative or quantitative, or more or

less expansive or contractible according to their different traits.

2.3 Conceptual Market Selection Studies

Based on the literature review done for this study, it appears that a third
classification scheme has considerable merit. This scheme would divide existing studies
into those addressing conceptual market selection techniques and those addressing
experiential techniques. In this section, the former will be described while the later will be
discussed in the next section.

Conceptual market selection techniques are attempts to argue from theory and

concept how market selection should be performed. They are not necessarily based upon

12
the actual market selection techniques currently being utilized by exporters. Although some

of the suggested market selection techniques are improved versions of the non-systematic
procedures currently being used by many small- and medium-sized exporting firms, other
authors have based their suggested market selection techniques on the analysis of market

potential indicators using complex statistical models.

2.3.1 Cluster Analysis

Cluster analysis is a method for grouping countries together based upon their
relative similarities (Ronen and Shenkar, 1985; Liander et al., 1967; Hofstede, 1980;
Ronen and Kraut, 1977). Most market grouping techniques utilize key macroeconomic,
social, and cultural factors as a basis for decision making. Cluster analysis is used for
identifying similar countries to the home market. This methodology is thought to increase
firm efficiency by reducing the cost of delivering the final product to a consumer in a
foreign market through the standardization of marketing strategies and operations of the
firm for a set of similar markets (Davidson, 1983).

Bartels (1963) is recognized as a pioneer in the development of important factors
which would later be utilized in cluster analysis. Bartels suggested that an international
market assessment should begin with a brief description of each nation’s size, location, and
population. Although Bartels’ list consists of a vast number of important market selection
factors, it was Liander et al. (1967) who developed the first organized market comparison
techniques for market selection. In the first phase of the Liander approach, all possible
export markets were placed into five distinct groups based upon their varying levels of

resource development. In the second phase, each of the countries within the five distinct

l3
resource groups were compared according to 12 different macroeconomic and societal

factors which were considered important to marketing. Those countries which exhibited
similar characteristics to other countries within the same resource groups were then
subdivided again into clusters. These final clusters represented specific markets with
common marketing attributes.

It was thought that this form of cluster analysis would provide a useful technique
for companies who have already had successful exporting relations with a similar country.
For example, if an American company has successfully exported to Germany in the past,
they may also be able to utilize the same marketing strategy in Austria, assuming that
Austria was in the same market cluster as Germany after performing the cluster analysis.
This methodology offers an alternate approach to a purely geographic classification of
countries. It should be pointed out, however, that the types of clusters that are ultimately
developed, greatly depends upon which factors are chosen. Logically, the factors chosen
must be relevant for the specific product that the company wishes to export.

This methodology is classified by Albaum et al. (1989) as an expansive market
selection technique because cluster analysis is not used for ranking countries, but rather for
identifying similar countries to the home market. However, because the actual
methodology of cluster analysis itself may start by comparing all possible markets to the
home country it also demonstrates some contractible market selection characteristics. It is
also difficult to classify cluster analysis as being a qualitative or quantitative technique
because there are many different methodologies for performing cluster analysis. Cluster
analysis can just as easily group countries together based upon qualitative factors such as

language as it can be based upon quantitative factors such as population growth or GDP.

14
This methodology offers the benefit of being relatively simple to use. Its ability to

utilize both quantitative and qualitative factors is another key strength. Unfortunately
cluster analysis may cause exporters to exclude potentially profitable markets solely on the
basis of cultural differences. Many of the factors suggested in the market selection
literature rely exclusively on general country indicators which lack product specificity

(Papadopoulos and Denis, 1988).

2. 3.2 Econometric Methods

Econometric modeling uses various macroeconomic and cultural factors to predict
current product demand through regression analysis. Unfortunately these models often
require data that are not easily available. Papadopoulos and Denis (1988) also believe that
econometric analysis may be too time consuming and costly for small- and medium-sized
exporters to operationalize. For this reason they contend that this methodology is not
commonly used by exporters. Nevertheless, many econometric market selection models
have been devised. With this in mind, econometric modeling may still offer two important
contributions to small- and medium-sized agri-food companies. First, government agencies
and universities may be able to operationalize these models and disseminate this market
information to local agri-food firms. This may provide a useful addition to the market
information already collected by the firm itself. Second, econometric models may be able
to offer insights into which market factors, if considered by the firm in its market analysis,
may significantly affect an exporting firm’s success.

In one of the few international market selection studies to deal with agriculture,

Salvacruz and Reed (1993) developed an econometric model for identifying the best market

15
prospects for US agricultural exporters. .This particular model attempted to estimate the US

agricultural export growth rate as a function of each country’s trade-related and
macroeconomic factors through regression analysis. Nine independent factors ranging
from the importing country’s GDP growth rate to the actual distance between a country’s
capital and Washington DC were regressed to score the world’s markets. This econometric
model predicted that the top 3 markets for US agricultural exports for the period 1994-1998
will be Mexico, Hong Kong and Guyana.

While such econometric studies may be useful for Michigan’s bean shippers, it
seems likely that these models may not always be relevant for Michigan’s apple shippers.
Many of the high potential growth areas suggested by these studies often coincide with
highly competitive markets. While Michigan’s bean shippers are able to compete in US
export markets (Kuenzli, 1994), Michigan’s apple shippers tend to select smaller markets
and avoid competing head-to-head with Washington’s high volume apple shippers (Braman,
1994). This has been the case in Taiwan, along with several other Asian countries. On the
other hand, Mexico has also been chosen by several econometric studies as a promising
export market for agricultural goods, even though Washington is the only state in the US
that was permitted to export to Mexico prior to the approval of the North American Free
Trade Agreement. Michigan may be able to take advantage of the new phytosanitary
regulations that will allow Michigan to export to Mexico (Braman, 1994).

Two other econometric studies analyzed the effect of political events on German and
American foreign direct investment (Schollhammer and Nigh, 1983; Nigh, 1984). These
studies used pooled time-series cross-sectional analysis to exam the relationship between

political events and manufacturing direct foreign investment. Although this study focused

16
on the market selection process for foreign direct investment, the effects of political events

may also have a significant impact on the international market selection processes utilized
by exporting firms.

Amador and Starbird (1989) conducted another study evaluating international
agribusiness investment locations. Multidimensional scaling was used to map countries
with similar macroeconomic, political, social, and infrastructural characteristics close
together on a chart. Proxy factors were chosen to represent the political and social
characteristics of each country. These proxy factors, in turn, were based upon their ability
to represent these main factors. For example, the political state of a country may be
evaluated by using proxies, such as the index of democratization, years since the most
recent constitution was written, level of political rights, level of civil rights, and whether
there is a civilian or military government. These factors could also be redefined to
represent more specific project criteria, such as land prices, soil characteristics, market
characteristic, or climate. This process allows the comparison of several factors
simultaneously even though they are measured on different scales. Although
multidimensional scaling is statistically more complex, the results are similar to cluster
analysis.

Econometric analysis is one form of quantitative analysis. All of the factors used in
econometric analysis are precisely defined and measured. For this reason it is arguably the
best technique for ranking countries. Nevertheless this methodology’s dependency upon
quantitative market selection factors may also hinder it from becoming commonly utilized
by agri-food exporters. Much of the data needed to perform an econometric analysis are

often difficult to find and time consuming to collect. In theory another strength of an

17
econometric methodology for market selection is its ability to analyze all possible foreign

target markets, making it a solid contractible methodology. However its previously
mentioned weakness of utilizing difficult-to-fmd factors is often compounded when
attempting to analyze developing nations. In general it is more difficult to find market
information on third world countries than it is for more developed ones.

Papadopoulos and Denis (1988) also warn that the results of many econometric
studies are highly method-bound and country-specific. They point out that Singh and
Kumar (1971) applied three different consumption function models from the econometrics
literature to data for ten countries. They reportedly found high levels of inconsistency in

the recommended target markets depending upon which model was utilized.

2.3.3 Market Screening

In general, many of the conceptual market selection approaches are not commodity
specific. It would seem likely then that if they are to be utilized as effective tools by agri-
food exporters, they must first understand how to use them and know which factors are
critical determinants of export success. It would also seem to follow that they must be
tailored to meet the needs of each individual commodity, and recognize both the time and
manpower constraints faced by small- and medium—sized firms. Papadopoulos and Denis
(1988) suggest that many of the conceptual market selection techniques are not being
utilized by small- and medium-sized firms because of their cost, complexity, and high level
of information requirements. Market screening is one conceptual market selection

technique which attempts to overcome these weaknesses.

18
The evaluation of export markets should be an ongoing research activity because the

potential of each individual market changes over time. However there are too many
possible markets in the world to analyze in detail. One of the newest techniques for dealing
with this problem is market screening. Market screening offers an efficient method for
continually assessing the world’s export markets through a step—by-step filtering process.
This filtering process eliminates inappropriate markets from a large number of possible
alternatives. This may be accomplished with the use of secondary information.

The first step in the screening process is to establish the criteria that will be used for
screening potential countries. Both Cavusgil (1987) and Papadopoulos (1986) suggest that
exporters use “cutoff points” for screening out low potential markets. Cutoff points are
predetermined factors which are used as the decision criteria for successively eliminating
inappropriate markets. This suggests that the deciding factors of what constitutes an
acceptable export market must first be considered separate from the actual market data.
Each exporter must predetermine which key factors are vital for a successful exporting
venture, which in turn is determined by experiences specific to the firm and the decision
maker. Much of this information is internal to the firm, such as, the company's own
internal strengths and weaknesses. Each company should also establish their own
objectives for international market selection. The decision criteria that a company will
utilize depends upon whether the company decides to pursue a niche, commodity, or cost
leadership strategy. After this information has been determined, the company can identify
the main characteristics for selecting an attractive market. The main difference between

market screening and cluster analysis is that market screening successively eliminates

19
unsuitable markets from the whole set of export markets, while cluster analysis groups

markets based upon their similarities.

Both Papadopoulos (1986) and Cavusgil (1987) suggest using three stages in the
screening process. Many of the screening factors used in the first stage should be based
upon common sense. For example, the lack of snow in Sierra Leone makes it an
impractical market for skis. The first stage of the screening process sets the firm’s
minimum threshold levels for specific international market selection objectives. It should
reduce the number of possible target markets to 10 or less. The second screening stage
should limit the number of possible target markets down to one or two. It is in the third
and final screening where detailed field research is utilized to ultimately choose an
appropriate target market. Detailed field research is necessary to confirm that the selection
criteria have been correctly chosen and applied. For small- and medium-sized companies,
limiting the number of countries for detailed field analysis will be an important factor in
reducing research costs.

Cavusgil (1987) offers a number of possible screening factors for quickly
eliminating inappropriate markets. Each of the three screening stages mentioned above
should utilize more stringent factors than the previous stage. For example, the first stage
may eliminate possible target markets based on profit requirements, population, stage of
development, or purchasing power. The second stage may eliminate possible markets
based upon their potential, structure, ease of access, phytosanitary laws, and growth rates.
Finally the third stage may eliminate the remaining target markets through an in-depth
analysis of the existing competition, consumer demand, cultural familiarity, and expected

profitability.

20
Market screening offers the advantage of being quicker, cheaper, and easier to

administer than many of the more complex statistical methods for international market
selection. It also has the benefit of being a contractible technique, considering all possible
target markets in its analysis, as well as the ability to evaluate both qualitative and
quantitative factors. However whenever a decision maker is forced to evaluate qualitative
market selection criteria, the results of the analysis are dependent upon the unbiased
judgment of the decision-maker. Nevertheless, this methodology offers a sound strategic
approach while avoiding the most serious criticisms of the other market selection

techniques.

2.4 Experiential Market Selection Studies

Experiential market selection studies are attempts to understand, analyze, and model
the actual market selection processes used by exporting firms. Within this framework it is
necessary to understand how a firm begins to export, otherwise known as the
internationalization process because firms tend to choose their markets in different ways
depending upon their level of export experience. The vast majority of the experiential
market selection literature depends heavily upon the use of surveys for collecting market
information. The majority of this experiential literature also tends to deal with

manufacturing firms.

2.4.1 The Internationalization Process

Over the past 30 years a great deal of research has been devoted to the process of

internationalization. lntemationalization is a process by which firms gradually increase

21
their export marketing efforts. Many studies have described the internationalization process

as a series of stages that firms pass through as they gain knowledge about foreign markets
and export procedures (Cavusgil 1982, 1984; Cavusgil and Nevin, 1981; Johanson and
Vahlne, 1977). It has long been recognized that the single most important determinate of
whether or not a firm begins to intemationalize depends upon whether the firm receives an
unsolicited export order. Many studies have reported that between 40% and 60% of all
exporting firms begin to internationalize in this way (Bilkey and Tesar, 1977; Albaum,
1983; Strandskov, 1986; Cavusgil, 1984).

Consistent with this finding, the existing market selection literature recognizes two
types of exporters (Cavusgil, 1984; Albaum et al., 1989). Reactive exporters are
classified as exporters that typically only react to unsolicited orders. Proactive exporters,
on the other hand, are market-oriented and seek new orders. They are actively engaged in
the formal process of searching for new markets. This is done through systematic market
research which involves the use of secondary data. Proactive exporters may also collect
primary data through one or more visits abroad. Many authors feel that there are no clear
cut differences between reactive and proactive exporters. Many exporters will tend to
apply a proactive strategy in their primary markets, and a reactive strategy may be used in
secondary or marginal markets (Albaum et al. , 1989). However, it should be pointed out
that Piercy’s (1983) survey on market information found that exporters with less than 500
employees tend to be reactive exporters while larger companies with more than 500
employees tend to be active exporters.

International market selection is one of the most important factors related to export

success. In 1980, Tessler and Andrew examined the marketing methods of 360 British,

22
French, and German competitors who had to deal with rising costs and exchange rates. Out

of 100 identifiable factors related to export success, the three most important factors were
manpower deployment, market selection, and product concentration and design-policy.
Many of the experiential market selection studies highlight the fact that many firms
in their first internationalization attempts do not use any systematic methodology at all.
Often their approaches are ad-hoc and based more on intuition than fact. Some studies
have pointed out that many small- and medium-sized enterprises tend to collapse their first
three international decisions (whether to intemationalize, which markets to select, and
which entry mode to choose) into a “go/no—go” decision (Papadopoulos and Denis, 1988).
In fact, many exporters select their first target markets without any market research
(Cavusgil, 1980; Cavusgil and Nevin, 1981; Kothari, 1978; Bilkey and Tesar, 1977).
Nevertheless, these experiential market selection studies have recognized several non-
systematic approaches commonly used by small- and medium-sized exporters. These
approaches include the nearest neighbor, psychological nearness, and ethnic affinity

methods.

2.4.2 Nearest Neighbor, Psychic Distance and Ethnic Affinity

One of the most commonly mentioned non-systematic approaches for choosing an
export market is called the nearest neighbor approach. These studies suggest that many
firms initially begin to export to neighboring countries because of their close proximity.
Neighboring countries often offer a high degree of similarity in macroeconomic, political,
sociological, and cultural traditions (Albaum et al., 1989). Many new-to-export companies

find these similarities very attractive, and feel that they reduce the risk involved with

23
exporting to “strange and unfamiliar” countries. For example, an American company

exporting to Canada, or a Swedish company exporting to Norway, would most likely be
able to utilize the same marketing program used in their home market. Often the nearest
neighbor has a similar language and culture, which may offer a certain level of comfort for
exporting firms. The close geographical distance will also lower shipping costs and
increase the likelihood of foreign market visits by management. Although the nearest
neighbor approach may offer a very convenient method for choosing a target market,
Cooper and Kleinschmidt (1985) suggest that a “world” versus a nearest neighbor
orientation is probably the more preferred route. They warn that such a strategy of
convenience may result in missed markets and opportunities for higher profits.

Whether or not the nearest neighbor approach is actually utilized more often by
new-to-export firms, or even commonly used at all, has been the source of a controversy
from within the market selection literature. A study by Cavusgil (1984) reported that there
were no differences in the types of markets selected by new exporters, active exporters, or
fully committed exporters when it comes to market selection. For all firms in Cavusgil’s
survey, Western Europe was the primary export market, followed by Canada and Mexico.
These results contradict the nearest neighbor theory, which assumes that experimental and
active exporters would concentrate on “geographically close” countries such as Canada,
and that committed exporters would exhibit a greater propensity to venture into
nontraditional markets (Cavusgil, 1984). However in another survey by Cooper and
Kleinschmidt (1985) a difference was found between firms that chose neighboring markets

and those that utilized a “world orientation approach”. Firms that elected to utilize a world

24
marketing strategy tended to be older and possess a higher level of previous export

experience.

Similar to the nearest neighbor approach, a number of studies have dealt with the
notion of psychological nearness (Sethi, 1971; Johanson and Vahlne, 1977; Bilkey and
Tesar, 1977; Cooper and Kleinschmidt, 1985; Davidson, 1983). It is hypothesized that
besides the attribute of being physically close to the home market, exporters gain some
comfort and advantages from exporting to countries which exhibit a high degree of
similarity in political, sociological, and cultural traditions. For example, cultural
differences may increase the “psychic distance” between an exporter and a potential target
market. Although Australia or England are physically farther away from the United States
than Mexico, it may be closer in terms of “psychic distance”. Many such trading blocks
exist, e. g. the Norway, Sweden, and Denmark, or Bolivia, Peru, and Ecuador. The
difference between the “psychological nearness approach” and “the nearest neighbor
approach” is that physical distance is no longer the defining factor.

Davidson (1983) found that firms tend to exhibit a significant preference for
markets similar to their home markets, but that this preference declines as firms gain
experience in a variety of other markets. Other studies have suggested that even reactive
exporters are affected by both the nearest neighbor and psychological nearness approaches.
They state that decision makers are more likely to respond to an unsolicited order if the
soliciting country is similar to the home market.

Reid (1981) pioneered the idea that a marketing manager’s personal contacts and
experiences with foreign markets, whether through exporting or not, are also likely to be a

critical factor when determining target markets. Many export markets are thought to be

25
chosen simply for the reason that an executive has a cultural affiliation with that country.

This is called “ethnic affinity”. An example of ethnic affinity was demonstrated by Wright
(1984) where he showed that over 70 percent of Canada’s exports to Japan were made by
nine Japanese trading companies located in Canada.

The nearest neighbor, psychological nearness, and ethnic affinity approaches have
all been criticized for the same reasons. By their very nature they tend to limit the number
of foreign markets ever considered as possible target markets. In this sense the nearest
neighbor, psychic distance, and ethnic affinity methodologies are all expansive
methodologies. Exporters may select target markets intuitively when they lack the needed
human and financial resources to carry out more complex statistical analyses. This
suggests that potential exporters do not confine themselves to making only macroeconomic
distinctions between foreign markets. They may also be limiting the possible number of
target markets based upon their personal experiences, abilities, and cultural backgrounds
(Reid, 1981; Davidson, 1983). This suggests that these methodologies are also highly
dependent upon qualitative information. For many new-to-export companies, depending
upon whether a firm is responding to an unsolicited order or actively choosing an export
market, the market selection decision is either a given or based upon the decision markers
“evoked set” of potential target markets (Reid, 1981). As a firm gains more experience in
the market selection process it would seem reasonable that it begins to choose its markets in
a more systematic manner, depending less upon intuition by attempting to acquire more

quantitative information to the point where the benefits outweigh the costs of collecting it.

26
2.5 Comparison of the Conceptual and Experiential Literature

Figure 2.1 below maps the major conceptual and experiential techniques into a
space defined by the classification schemes suggested by Papadopoulos and Denis (1988)
and Albaum et al. (1989). The upper left quadrant represents the expansive/qualitative
methodologies while the lower right quadrant represents the contractible/quantitative
methodologies. It is interesting to note the differences between the experiential and
conceptual techniques. The experiential literature clearly groups together as being
qualitative and expansive, while the conceptual literature suggests that exporters should be

using more quantitative data and more contractible market selection methodologies.

FIGURE 2.1 PROACTIVE MARKET SELECTION METHODOLOGIES.

 

 

 

 

 

 
   
   
 

I k l i M l
Experiential
Market Selection
Methodologies Conceptual
Market Selection
Methodologies

_ Nearest Neighbor
Psychic Distance

Market Screening

 

   

_ Cluster Analysis
0

Econometric Analysis

 

 

 

 

 

27
Market similarity has a great effect on the market selection process of firms. The

most probable markets that exporters choose are those overseas markets which managers
perceive as having some similarity to their home market. In this sense the psychological
nearness approach discussed above is the subconscious equivalent of market clustering.
They both offer the benefit of being relatively simple to use. Just as many new exporters
subconsciously tend to choose similar markets based on obvious factors such as language
and socio-cultural similarities, cluster analysis is a conscious attempt by systematic
exporters to perform the same task. As with the nearest neighbor and psychological
nearness approaches, cluster analysis faces some similar criticisms. Cluster analysis may
cause exporters to exclude potentially profitable markets solely on the basis of cultural
differences. Furthermore, many of the factors suggested in the market selection literature
rely exclusively on general country indicators which lack product specificity (Papadopoulos
and Denis, 1988).

Econometric analysis is a quantitative and contractible methodology. It has very
little in common with the actual market selection methodologies suggested in the set of
experiential market selection literature. On the other hand, market screening attempts to
take the benefits of the experiential techniques and combine them with the strengths of the
other conceptual techniques. It offers a quick and inexpensive method for assessing many
or all potential export markets. Market screening also has the ability to analyze both
qualitative and quantitative factors making it less dependent upon hard to find quantitative

market information.

28
2.6 Information Acquisition

Agri—food firms need to utilize systematic approaches for assessing international
marketing opportunities because potential markets may be neglected it they were never
considered in the original analysis. The key to such an approach is the accumulation of
market information from as many sources as possible (Davidson, 1983). Thus one basic
ingredient for any market selection process is the availability of, and access to international
market information. A number of studies have been devoted to how firms actually collect
this market data (Kirkconnell, 1988; Pezeshkpur, 1979; Piercy, 1983).

While international market information is key to making an intelligent market
selection decision, many businesses rush into collecting expensive primary data when
similar market information may already be available from published or other secondary
sources. Piercy (1983) found that three-quarters of all firms use secondary sources such as
government statistics and trade association reports to gather market information. Forty-five
percent also use primary marketing research. Business papers and trade journals may
already contain valuable marketing information for promising markets. Libraries contain a
vast array of cultural data which may provide useful insights into other cultures.
International directories can provide names, addresses, and descriptions of many potential
overseas customers, and almanacs and encyclopedias will provide important socio-cultural,
political and macroeconomic backgrounds for all regions of the world (Pezeshkpur, 1979).

There is also a vast amount of information available from international organizations3 .

 

3 Publications are available from the United Nations, International Monetary Fund, Export-
Import Bank, USDA, FTC, US Department of State, US Department of Commerce, and
the US Chamber of Commerce.

29
Host country contacts have also been suggested as one critical source of market

information for completing a successful market assessment (Kirkconnell, 1988). Changing
market circumstances may, over time, create opportunities where none previously existed.
A network of contacts within these markets could open many opportunities in the future. In
conjunction with making important contacts in target countries, other authors suggest that
firms should always concentrate on making invaluable contacts in their home markets.
Having a friend in the Michigan Department of Agriculture could prove to be an invaluable
international contact. Piercy (1983) suggests that a large number of firms also claim to use
"intelligence data”. Intelligence data is market information collected internally by salesmen

and agent reports.

2.7 Market Selection Criteria

The single most important step in the international market selection process is the
identification of appropriate market selection factors (Papadopoulos, 1986). As the whole
expanse of market selection literature is studied, it becomes apparent that every country,
every market, and every customer in the world is unique (Kirkconnell, 1988). These
differences make some potential export markets more attractive than others, however
formally measuring and quantifying these differences in order to compare different markets
can be a difficult and time consuming task. Each potential export market has a vast number
of macroeconomic, cultural, political, and financial characteristics which may be used to

screen out unsuitable markets. It would seem reasonable that all export marketing

30
managers, consciously or subconsciously, choose a set of these market selection factors

each time they search for a new target market.

In order to choose the proper market selection factors, a firm must first understand
its internal characteristics and its external environment. This includes an analysis of the
firms strengths, weaknesses, opportunities, and threats, as well as, an affirmation of the
firms overall objectives. This will help the firm to answer the following types of questions:
Who are our major competitors? Where do our competitive advantages lie? What are our
expectations for exporting? (Papadopoulos, 1986).

The types of markets that a firm seeks, depends upon the firm’s objectives. For
example, if the firm’s objective is simply “survival”, then the types of factors that the firm
would choose in its market selection process would tend to pick easily penetrable markets,
in the short term, with the promise of long-run sales potential. If the firm’s objective is
“long-term growth” , then the relevant factors should highlight those markets where a
strategic foothold may be obtained and where future growth rates are expected to be high.
Needless to say, the target markets that will be selected in each instance and the relevant set
of market selection factors are different (Papadopoulos, 1986).

This study has classified market selection factors found in the literature into six
categories. While there is nothing magic about the actual classification scheme used, it

does help to organize the vast number of market selection factors.

31
The six categories include:

Macroeconomic Factors

Geographic, Infrastructural, and Demographic Factors
Trade Barrier, Legal, and Political Factors

Social and Cultural Factors

Food and agricultural factors

P‘MPP’PE‘

Marketing Factors

2.7.1 Macroeconomic Factors

Macroeconomic factors are concerned with the performance and behavior of the
economy. There are a number of macroeconomic factors which have been utilized to select
export markets. One of the most commonly suggested market selection factors is a
country’s gross national or gross domestic product (GNP/GDP). This is because it is
commonly believed that a higher level of GNP/GDP per capita translates into a higher level
of imports (Salvacruz and Reed, 1993). GNP/GDP is commonly used as an indicator of
market size, and the percentage change in GNP/GDP over time is thought to be a good
indicator of market growth. GNP/GDP is also commonly used by market selection studies
as a catch-all proxy variable for measuring the degree of development and industrialization
of a country, as well as its progress in health care, education, and welfare. GDP is
published regularly in the International Monetary Fund’s International Financial Statistics.

GNP/GDP growth is also an important variable for agricultural exporters. Several
studies have found that a relatively high GNP/GDP growth rate leads to a higher level of
agricultural imports (Salvacruz and Reed, 1993). This is because as income grows and

capital is accumulated, labor is attracted to the manufacturing sector of the economy. The

32
manufacturing sector will then expand relative to the agricultural sector causing a country’s

comparative advantage to shift towards capital intensive industries. As incomes begin to
rise, consumers begin to substitute away from the relatively less expensive domestically

produced commodities for the more expensive imported agricultural commodities. This

process leads to an increase of agricultural imports (Salvacruz and Reed, 1993).

Per capita income (GNP/Population) is closely related to the notion of GNP/GDP,
and is also commonly suggested by the market selection literature. It is thought to be a
good indicator of the size and quality of a market; however, for agricultural commodities
such as dry beans, countries with low levels of per capita income may also provide
attractive export opportunities. Often countries with low levels of GNP/GDP per capita are
the recipients of certain types of food aid. It is not uncommon for the US or other foreign
governments to purchase these much needed commodities for poverty stricken nations.

As with any type of market selection factor, it is important to understand the
significance and limitations of the information. For example, a high GNP growth rate is
meaningless unless it is supplemented with market size information. A small country may
have an extremely high growth rate, but if the actual size of that countries market is only
$5,000 of imports per year, a 30% growth rate per year does not necessarily represent an
attractive market. A country with a smaller growth rate, but a larger market may actually
represent a more lucrative market prospect. Furthermore, Cavusgil (1987) warns that per
capita income figures are averages and are only meaningful if most people in that market
are near the average. Thus the distribution of income is also an important consideration.

Other commonly mentioned macroeconomic factors include exchange rate

fluctuations, inflation rates, income distribution, balance of payments, and unemployment

33
rates (See Appendix E for a list of market selection factors and where they can be found in

the literature).

2.7.2 Geographic, Infrastructural, and Demographic Factors

Geographic factors are concerned with the physical characteristics of the country,
including its climate, location, physical topography, and distance from the United States. A
country with lots of snow will have a higher demand for snow shovels. Internal barriers,
such as mountains, may cause problems in the distribution of goods. The distance between
two trading partners is a major determinant of trade since this factor is significantly related
with transportation cost (Salvacruz and Reed, 1993). Finally a market’s climate also
determines the consumption of many products. It affects the type and weight of clothes
people wear, what they eat and drink, and whether they seek recreation mainly out of doors
or indoors (Cavusgil, 1987).

Infrastructural factors are concerned with the state of a markets transportation
system and its communication technology. The accessibility of a market for entry and
internal distribution purposes is determined to a large degree by its infrastructure.
Infrastructure has been called the aggregate of all facilities that allow a society to function
(e.g., roads, railroads, bridges, major sea ports, docks, warehouses, air ports, telephone
lines, and schools, as well as the terrain and navigable rivers; Ottum and Semenik, 1993;
Cavusgil, 1987).

Demographic characteristics are also one of the most commonly studied factors in
the international market selection process. It takes people to make a market and very often

the consumption of certain products is directly correlated with population figures. For

34
certain goods considered necessary, such as ethical drugs, health-care items, products, or

educational supplies, population figures may be a very good indicator of market
opportunities (Cavusgil, 1987).

There are many different population factors. Logically the current population of a
country can be measured in terms of its actual numbers, but often there are other population
statistics which offer more information. For example, the population growth rate may offer
an indication of a country’s future demand of agricultural imports because population
growth tends to increase the demand of staple foods within a country. The urban versus
total population statistic may also provide useful information as to whether the necessary
level of critical mass exists within a country’s cities to warrant their consideration as
possible target markets.

Other factors, such as population density, may be more useful when combined with
other market factors. For example, the relationship between a country’s population density
and its agricultural import growth rate could be used to analyze the need for external
sources of food and fiber. As a country becomes more densely populated it will tend to
import more food because population increases tend to strain limited land resources
(Salvacruz and Reed, 1993).

Several indexes based upon population figures are also commonly quoted in the
export marketing literature. Market size may be defined in terms of population figures. It
is commonly expressed as a percentage of the total world market. For example, in 1983
the European Economic Community accounted for 16.28% of the total world market size

(Cavusgil, 1987).

35
2.7.3 Trade Barrier, Legal, and Political Factors

Trade barrier factors have been placed in many studies in order to account for their
negative impacts on trade (See Appendix E). Phytosanitary regulations are important trade
barriers affecting Michigan’s agricultural exporters. Other commonly mentioned trade
barriers would include tariffs, taxes, quotas, labeling and packaging regulations, and
customs paper work.

Legal factors are related to the trade laws and political environment of the target
country. Along with laws to regulate imports, legal factors may consist of local contract
and sales regulations.

Political factors are concerned with the nature and distribution of political and civil
rights, as well as, the stability and legal structure of a market. A stable government is
defined as one which has exhibited continuity in government, has achieved some level of
democracy, and which has the potential for maintaining these conditions (Amador and
Starbird, 1989).

Several studies have recently looked at the importance of political factors on the
market selection process of firms (See Appendix E). One of the major difficulties when
dealing with the affects of political events on the market selection process of firms, is that
of measurement. In this case, most authors have developed proxy factors for analyzing
these political effects. These political factors are often chosen for their ability to represent
a stable political structure.

Several unique factors were developed by Amador and Starbird (1989). The first
proxy variable is the index of democratization. It is an attempt to measure the level of

political participation of the general population within a given country. It is measured by

36
taking the percentage of the voting population, and dividing it by the percentage of votes

cast by minority parties and independents (Kurian, 1984). Another political proxy for
measuring the political stability of a country is the years since the most recent constitution
was ratified (Banks, 1987). The political rights factor is based on degree of voting process,
existence of significant political opposition, multiplicity of political parties, fair polling
practices, the relative power of elected officials, and suffrage (Gastil, 1986). The civil
rights proxy is based on censorship of press or radio, free speech rights, governmental
supervision of organizations, number of political prisoners, and the degree to which state
security forces respect individual rights (Gastil, 1986). Finally a civilian versus military
government factor was also included in Amador and Starbird’s model.

Schollhammer and N igh (1983), looked at the relevance of the following political
factors and how they affected the political events on foreign direct investments by German

multinational corporations.

0 Inter-nation political events in the host country

0 Inter-nation political events in the home country

0 The political developments in a third country.

0 The state of inter-national political relationships between the home country

and the potential host country.

Schollhammer and N igh (1983) scaled the inter-nation political events by borrowing
a methodology developed by Azar and Sloan. This information is available from a
continually updated data bank called the Conflict and Peace Data Bank or COPDAB, which

rates each country on a scale of being conflictive to cooperative, and has data on the

37
indicators of conflictive and cooperative dimensions of interaction for inter- and inta-nation

political events for about 135 countries.

2.7.4 Social and Cultural Factors

Social and cultural factors are concerned with the language and traditions of a
country, as well as the distribution and reformation of social benefits within a particular
market. Many export market researchers fail to include these factors in their analysis, as
Cavusgil notes:

“A country’s social, educational and religious systems critically influence its

marketing system. These cultural factors have a crucial impact on product

policy and are considered by many to be the biggest barrier to doing

business overseas. Yet many export market researchers fail to include these

factors in their desk research study. The reason for this may be due in part

to the problems of tying to quantify cultural characteristics (Cavusgil, Pg.

24, 1987). ”

While market screening methods are more easily adapted to dealing with social and
cultural factors, Liander et al. (1967) made one attempt to quantify social characteristics.
These factors, which were measured on likert scales, included ethnographic diversity,
religious homogeneity, racial homogeneity, and linguistic homogeneity. These factors were
used to arrange potential target markets into clusters. Ethnographic diversity was measured
as the number of ethnographic groups comprising one percent of the population. Religious
homogeneity was achieved at the point where at least 75 % percent of 3 counties population
belonged to one religion. Racial homogeneity was arbitarily chosen at the point where at
least 90% of the population was of the same racial group. Finally linguistic homogeneity

was achieved by all of those counties where at least 85 % of the adult population spoke a

common language.

38
2.7.5 Food and Agricultural Factors

Although very few market selection studies deal directly with agricultural exports,
one econometic study used to predict foreign markets was developed by the Foreign

Agriculture Service (Salvacruz and Reed, 1993).

The relevant agricultural factors used in that study were the following:

0 Total Agricultural Imports by county X in a defined time period.

0 Country X’s growth in Agricultural Imports measured over a defined time
period.

0 County X’s agricultural imports from the US measured over a defined time
period.

0 The growth in US agricultural imports to all counties measured over a
defined time period.

0 County X’s self sufficiency ratio for agriculture over a defined time period.

2.7 .6 Marketing Factors

Finally, most studies have used various marketing factors in order to obtain
information about a company’s marketing stategy. Many marketing factors would be just
as useful in a domestic marketing study as an international one. These factors try to collect
information on consumer buying behavior, product demand, tansportation costs, and the
stucture of consumption expenditures. Marketing factors may also include product
demand, shipping costs, number of local competitors, prices, customer preferences, and the

availability and quality of import tading partners.

39
2.8 Conclusion

In conclusion, firms typically pass through a series of stages as they transform
themselves from non-exporters to active exporters. Active exporters seek new markets
through a market selection process while, by definition, reactive exporters react to
unsolicited orders.

Many different techniques may be used by active exporters for assessing and
selecting target markets. Conceptual market assessment studies have suggested several
market selection methodologies. Conceptual studies attempt to argue from theory and
concept how market selection should be performed. These techniques include cluster
analysis, econometic methods, and market screening. Cluster analysis groups counties
together based upon their relative similarities. Many of the econometic methods use
regression analysis for predicting high potential export markets. Unfortunately both of
these techniques have been criticized as being costly, information intensive, and too
complicated for small- and medium-sized firms to effectively utilize. The market screening
methodology suggested by Papadopoulos (1986) and Cavusgil (1987) seems to offer the
soundest stategic methodology. Market screening uses a filtering process for eliminating
unsuitable target markets.

The experiential market selection research has identified the nearest neighbor,
psychological nearness, and ethnic affinity approaches as the most commonly utilized non-
systematic techniques currently being utilized by exporters. It is thought that these non-
systematic approaches are commonly utilized by exporters because exporters tend to feel
more comfortable when exporting to counties with similar cultures, political systems, and

languages. It is also thought that many exporters find it difficult and expensive to collect

40
the quantitative information used by econometic studies and some of the clustering

techniques.

The literature has shown that very little market selection research is directly related
to agricultural companies. Most of the literature is devoted to the study of manufacturing
firms. Many of these studies are more concerned with foreign direct investment than
exporting. The market selection literature for exporters pose some interesting problems for
agri-food shippers. Many of the suggested market selection techniques may be too complex
and costly for small- and medium-sized firms (Papadopoulos, 1986; Papadopoulos and
Denis, 1988).

The experiential market selection research is sparse. Unfortunately many of the
experiential studies on international market selection are not commodity specific, and do not
present a detailed step by step analysis of the market selection process. One reason for this
may be that many exporters do not systematically select their target markets in a step by
step manner.

Finally we can conclude that the majority of all experiential market selection
methodologies fall into the upper left quadrant of Figure 2-1 on page 26. These techniques
tend to depend heavily upon qualitative market selection criteria because it is typically
easier to collect. Unfortunately qualitative market information has the disadvantage of
being more difficult to rank. This may be one reason why exporters tend to compare their
export markets based upon their relative levels of similarity than actually ranking them.

The fact that many exporters tend to base their export decisions on market
similarities has also caused them to become expansive exporters. In contast the suggested

conceptual techniques are less expansive in their market selection approach. Both

41
econometic analysis and market screening are designed around the need to examine all

possible markets, designating them as contactible methodologies. This suggests that the
authors of the conceptual market selection literature feel that exporters may be missing

market opportunities by excluding many potential export markets from their analysis.

CHAPTER 3 SURVEY METHODOLOGY

3.1 Introduction

This chapter discusses the research objectives, survey methodologies, and statistical
procedures used in this study. The primary empirical research method used was a survey
of active agri-food exporters. This chapter will describe the development of a detailed
mailing list from the PIERS data set, and the second phase of the survey designed to
identify and evaluate the general characteristics of agri-food exporters and the specific
market selection methodologies and factors that agri-food exporters utilize. The statistical
procedures used to analyze the survey results will also be discussed. These procedures
included an analysis of the frequency that agri-food exporters use each particular market
selection factor, a ranking of the individual market selection factors, a correlation analysis
of the market factor groups with performance, and a cluster analysis. Finally, the response
rates received by each phase of the survey will be presented, as well as the differences

between the respondents and non-respondents from the first phase of the survey.

3.2 Research Objectives

The primary goal of this thesis is to develop an understanding of market selection
methods that can help small- and medium-sized agri-food companies develop new export
markets and enhance their overall business opportunities and export performance. This
thesis specifically focuses on the international market selection process because it is one of

the key decisions for any firm planning an international marketing stategy. This is the first

42

43
study known to analyze the market selection methodologies that agri-food firms use, and it

is important because very little is known about how agri-food exporters approach, analyze,
and select new export markets. This study will add needed information to the current set of
experiential market selection literature, and create a foundation for future studies attempting
to help agri-food exporters.

Given this goal, experienced agri-food exporters were the target population for this
study, and six research objectives were developed and incorporated into the survey design.
Experienced exporters were targeted because this study attempts to identify successful
market selection methodologies, not the methodologies used by firms that have had less
success with export marketing. This study is an exploratory study and the six research
objectives are designed to gather important information on the market selection process
rather than prove hypotheses, however several important hypotheses will be developed

from the information that is collected.

The six research objectives are:

1. Identify the general characteristics of successful agri-food exporters.

2. Identify what types of market selection methodologies agri-food exporters
use for selecting target markets.

3. Identify the specific market selection factors that agri-food exporters utilize
to distinguish one target market from the next.

4. Identify which types of market selection factors are related to export
performance.

5. Identify and compare different types of agri-food firms based upon the total
mix of market selection factors that these firms utilize for selecting target

markets.

44
6. Compare and contast all of the above findings with the literature on

manufacturing firms.

The first research objective of this study is to identify the general characteristics of
agri-food exporters. This is an important objective because information on even the most
basic characteristics of agri-food exporters is either not available or exists only anecdotally.
This study will add this basic information to the current set of market selection literature so
that future studies will be able to draw upon this information and help these firms with the
internationalization process.

The second research objective of this study is to identify what types of market
selection methodologies agri-food exporters use for selecting target markets. Even though
extensive information exists about the methodologies used by manufacturing firms, there is
little information on what types of methodologies agri-food firms currently use for selecting
target markets. If future research is going to help agri-food exporters with their market
selection methodologies, the current methodologies utilized by agri-food firms must first be
identified. This research objective is very important because market selection
methodologies are ultimately responsible for identifying the most appropriate target market.
A sub-optimal market selection methodology may eliminate the most promising markets
even before the market selection analysis is performed by the exporting firm.

The third research objective of this study is to identify the specific market selection
factors that agri-food exporters utilize to distinguish one target market from the next. Each
target market is unique and is distinguished by its different social, macroeconomic, and

cultural factors. This objective is important because the specific market selection factors

45
that an exporting firm utilizes should impact the ultimate effectiveness of the entire selection

process. The market selection factors that an exporting firm uses may also be related to the
type of market selection methodology utilized by the firm. For example, firms performing
an econometic analysis would tend to consider quantitative market selection factors, firms
utilizing an expansive methodology would tend to rely more heavily upon social and
cultural factors, and firms using a market screening methodology could easily utilize both
quantitative and qualitative market selection factors.

The fourth research objective of this study is to identify which market selection
factors are related to export performance. Those factors which are found to be highly
correlated with export performance could then be recommended to agri-food exporters as
key factors for selecting new target markets. This is an important objective, because it
would allow firms to focus limited resources on collecting and analyzing a limited set of
market selection factors related to export performance.

The fifth research objective of this study is to compare different types of agri-food
firms based upon the total mix of market selection factors that these firms utilize for
selecting target markets. This is an important objective because firms with different
characteristics may utilize different market selection factors when selecting target markets.
It is also important to determine whether there are several key market selection factors
common to all types of agri-food exporters regardless of firm size, the number of export
markets, or the types of food or agricultural products that these firms export. If several
key characteristics can be identified it may provide exporters with insights into where to

spend the majority of their resources when analyzing potential target markets.

45
The sixth research objective of this study is to compare and contast all of the above

findings with the literature on manufacturing firms. This objective will be incorporated
throughout this thesis. This is an important objective because most of the market selection
research analyzes how manufacturing firms develop new markets and do not consider agri-
food companies. The commodity nature of the products that many agri-food companies
export may affect the type of market selection factors and methodologies utilized. It will be
important to determine whether agri-food firms behave like other firms when selecting
target markets because this has important implications as to whether the current body of
research on the internationalization process can be directly applied to the agri-food

industry.

3.3 The Pre-Survey Stage

In order to meet the goals and objectives of this study it was decided that the most
efficient, cost effective, and timely manner for collecting information on the market
selection methodologies and factors used by agri-food firms was to administer a mail
survey. The first step in analyzing the international market selection factors used by agri-
food exporters was to develop a comprehensive mailing list of exporting companies. A
mailing list was developed from the PIERS data set (Port Import/Export Reporting Service)
which was made available to this study by Purdue University. The PIERS data set is a
detailed record of export tansactions that contains extensive information, including the
names of exporters, the cities and states where they are located, the products they export,

and the destination to which their exports are shipped. The export data used for this survey

47
were taken from a file which contained information on all fruit and vegetable export

tansactions between 1978 and 1991.

The names of companies that export apples, dry beans, tart cherries, and
blueberries were originally targeted for this study because they are important products
grown in the state of Michigan. After reviewing the PIERS data set and talking to officials
in these four industies, it became apparent that many of the exporters who export these
agricultural commodities may also ship other agricultural products. It also became clear
that the actual number of agri-food firms in the state of Michigan that export any of these
four commodities is very limited. For these two reasons a broader group of agri-food
commodities was included in the mailing list. This increased the number of exporters that
could be identified and surveyed throughout the United States.

The entire population of agri-food exporters in the PIERS data set whose addresses
could be identified and who exported the following commodities between 1978-1991 were
included in the final mailing list: apples, apricots, blueberries, carrots, celery, cherries,
corn products, cucumbers, dry beans, grapes, nectarines, onions, peaches, pears, plums,
and potatoes. These commodities were chosen because they are grown in the state of
Michigan and are relevant to Michigan’s agri-food exporters. Because the PIERS data set
does not contain mailing addresses, the information obtained from the PIERS data set was
cross referenced with a CD-ROM data base (Phone Disc) in order to identify each exporters
current mailing address. Five hundred and six addresses from 34 different states were

ultimately identified and included in the mailing list.

48
3.4 Survey Design

This study employed standard techniques in the preparation of questions for the
mail survey. Questions for Phase I and Phase II of the survey were kept very simple, and
both phases of this survey were reviewed by a committee of two professors and three
graduate students in order to assure that the survey instruments were both clear and

reliable. Instructions were given throughout the survey.

3.4.1 Phase One: The Survey Postcards

This survey was divided into two phases because the information obtained from the
PIERS data set and the CD-ROM data base provided incomplete information about the
firms on the mailing list (e. g. , no specific contact person or mailing address). Phase I of
the survey was designed to qualify the mailing list by providing information obtained from

the following four questions:

1. Does your company export a food or agricultural product?

2. How do you export (Direct, through a freight forwarder, etc.)?

3. Does your firm actively participate in the selection of any of its export
markets?

4. Who would be the primary contact for export markets within your

company?

The first question of, “Do you export a food or agricultural product?”, is important
because many firms in the PIERS data set do not consider themselves to be a food or
agricultural exporter even though they may have technically exported a food or agricultural

product in the past. There are several possible reasons for this. First, many agri-food

49
firms may have exported in the past, but they are not currently involved with export

marketing. For one reason or another, they have decided to stop exporting products
abroad. Other firms on the PIERS data list are clearly not food or agricultural exporters.
Even though they have been placed on the PIERS data list, several firms from the non-
respondent survey in Section 3.5 stated that they are actually manufacturing or chemical
companies. The most likely explanation for this is that many firms may ship half filled
containers abroad selling space to other firms in order to cover relatively higher overseas
tansportation costs for a half filled container. The third possibility, which was confirmed
from phase one of the survey, is the fact that several firms consider themselves to be an
export facilitator and not a food or agricultural exporter.

One of the primary goals of this thesis was to identify how agri-food firms select
and enter target markets compared to other types of firms. There are many different export
channels that an exporter can export through, however the most common export channels
that agri-food exporters use have not been empirically tested. The question of, “How do
you export?”, was included on the first phase of the survey because there may be important
differences between the export marketing channels that agri-food firms use compared to
other types of firms. The six different export channels considered included whether a firm
exports direct, through a cooperative, through an export agent, through a freight forwarder,
through another food, fruit, or vegetable shipper, or through a commodity association. The
most common export channel expected to be utilized by the survey respondents was the
direct marketing channel because the majority of firms surveyed will have at least five years
of export experience and most likely have left the reactive stage of the internationalization

process.

50
Finally, the primary contact for export marketing was identified for each of the

exporting companies in order to enhance the mailing list. Many companies may have
several marketing managers, and to address a survey to “Marketing Manager” would have
likely lowered the response rate.

The first phase of this survey was sent to 506 companies. A cover letter was sent
that included the survey on a small 3%” x 5%” self addressed, stamped postcard (See
Appendix A). A large percentage of the survey-postcards were expected to be returned

because of its small size and limited number of questions.

3.4.2 Phase Two: The Questionnaire

Initially, an international marketing manager from a successful fruit shipping
company and the director of a key Michigan commodity association were contacted in order
to provide information on how agri-food exporters select their target markets. These two
interviews provided valuable information for designing the survey questionnaire. Many
suggestions from these individuals were incorporated into the survey procedure. The most
important of which stems from the fact that small- and medium-sized agricultural exporters
tend to be very careful about releasing vital information on their business activities. For
this reason a cover letter explaining who was conducting this survey, why it was being
conducted, and a guarantee of confidentiality was sent with every survey. The use of
categories instead of a “fill in the blank” format was also used to increase the response rate
and ease exporters concerns on sensitive questions (e. g. number of employees, annual

revenues, etc.).

51
Phase II of the survey was only sent to agri—food exporters who responded to the

first phase of the survey as actively participating in the selection of their export markets
(See Appendix B). Again, this is important because reactive exporters do not actively
participate in the selection of their export markets and do not actively attempt to increase
their sales through export marketing. A reminder postcard was sent to all companies who
had still not returned the survey questionnaire after two weeks. The survey instrument
consisted of nine pages and was sent to 134 exporters. The questionnaire presented
exporters with 18 questions divided into two main sections.

As stated earlier, the first research objective of this survey is to identify the general
characteristics of agri-food exporters. Questions 8, 9, 15, 16, 17, and 18 were designed to
gather information on each company (See Appendix B, Figure B—l). The statistical
technique which will be utilized for analyzing this type of information will be a frequency
analysis. In particular, each company’s size will be measured in terms of its number of
employees and its gross annual sales level. Frequency data on the types of products that
firms export, average annual growth rates, percentage of sales from exports, the years a
company has been exporting, and the most common export markets will also be calculated.
The majority of firms are expected to fall into the small- and medium-sized categories of
having less than 150 employees or less than $150 million in gross annual sales.

The second research objective of this survey is to identify which types of market
selection methodologies are used by agri-food exporters for choosing target markets.
Question 12 of the survey was developed to analyze whether a company is a contactible or
expansive exporter, and question 13 was developed in order to discern whether an exporter

uses mostly qualitative, quantitative, or a mixture of qualitative and quantitative

52
methodologies for selecting new export markets. These are important questions because the

types of market selection methodologies most commonly utilized by exporting firms has
been disputed in the market selection literature. This study expects to find that most
exporters utilize a Qualitative/Expansive methodology for selecting export markets. This is
based in part upon Papadopoulos and Denis’s (1988) suggestion that quantitative
methodologies are too time consuming and costly for small and medium sized exporters to
use. The majority of studies also suggest that most exporters utilize a market spreading
approach, moving from one market to the next based upon cultural similarity.

The third research objective of this survey is to identify the specific market
selection factors that agri-food exporters utilize to distinguish one target market from the
next. The survey listed 46 different market selection factors, all of which have been
suggested by the experiential and conceptual sets of market selection literature. The first
step in this analysis will be to present the frequency that each market selection factor is
used by agri-food exporters.

The fourth research objective of this international market selection survey is to
identify which types of market selection factors are correlated with export performance. If
certain market selection factor groups are found to be highly correlated with export
performance, than exporters who are not currently utilizing these market selection factors
may want to consider including them in their international market selection analysis. In
order to identify which types of market selection factors are correlated with export
performance, the 46 individual market selection factors were placed into six different

categories.

53

These six categories include:

Macroeconomic Factors.

Geographic, Infrastuctural, and Demographic Factors.
Trade Barrier, Legal, and Political Factors.

Social and Cultural Factors

Food and agricultural factors

999959!”

Marketing Factors

Each exporter was asked to evaluate these six market selection categories on a scale
from 1 to 5 by their level of importance, the ease with which the information for each
category could be collected, and the effectiveness of each category for actually selecting an
export market. The survey information will be tested for correlations between the three
performance questions (Questions 7, 11, and 14) and the six categories of market selection
factors. This will be done with Kruskal and Goodman’s Gamma. Kruskal and Goodman’s
Gamma was used because it is a test for linear association for ordinal x ordinal data“. This
study expects to find certain market selection factors that are highly correlated with
performance. Three performance indicators were designed and incorporated into the

survey. These indicators measure the effectiveness of each firms market selection

 

" For a table of two ordered variables, cases are first compared to determine if they are
concordant or discordant. A pair of cases is concordant if the values of both variables for
one case are higher (or both are lower) than the corresponding values for the other case.
The pair is discordant if the value of one variable for a case is larger than the
corresponding value for the other case, and the direction is reversed for the second
variable. The numerator is the number of concordant pairs (P) minus the number of
discordant pairs (Q) calculated for all distinct pairs of observations. Gamma (G) can be
thought of as the probability that a random pair of observations is concordant minus the
probability that the pair is discordant. G=(P-O)/(P+Q). Gamma is 1 if all observations
are concentated in the upper left to lower right diagonal of the table. In the case of
independence, gamma is 0 (SPSS, 1993).

54
methodologies, whether each firms has met their goals for exporting, and each exporter’s

annual growth rate for total export sales.

The fifth research objective of this study is to compare different types of agri-food
firms based upon the total mix of market selection factors that these firms utilize for
selecting target markets. Cluster analysis will be used to identify the key market selection
factors common to various types of agri-food exporters regardless of size, product, or
percentage of sales abroad. The 129 respondents will be divided into clusters based upon
the 46 different market selection factors which they use. Cluster analysis identifies
homogeneous groups, and places similar cases together by measuring the differences
between the means of the cases among all of the selected factors. SPSS will calculate an
index for each of the 46 factors and group them together with similar cases. While there
are several methods for combining clusters, this study uses Ward’s method. Ward’s
method is a frequently used method that calculates the means for all factors, and then for
each case, the squared Euclidean distance to the cluster means. These distances are
summed for all of the cases, and for each step, the clusters that merge are those that result
in the smallest increase in the overall sum of the squared within-cluster distances (SPSS
Professional Manual). Individual clusters will be examined and compared by their defining
characteristics (e. g. the number of markets exported to, the percentage of exporters that
export products in the frozen form, etc.). The differences between each cluster will be
statistically tested with an Independent-Samples T Test in an attempt to form hypotheses as
to why certain clusters value certain market selection factors more than others. Finally,
this analysis should provide exporters with two types of information. It should provide

them with which market selection factors are related to export performance depending upon

55
each clusters defining characteristics, and it should provide exporters with several key

factors common to all clusters regardless of each clusters defining characteristics.
The sixth research objective of this survey is to compare and contast all of the
above findings with the literature on manufacturing firms. This will be done throughout

this study by comparing the results of this study to the market selection literature.

3.5 Response Rates

Five hundred and six companies were originally surveyed in the first phase of this
study. Of the 506 companies originally surveyed, 192 responded, 46 of the surveys were
returned by the postal service as having an insufficient address, and four of the postcards
were received after the deadline. The final response rate for the first phase of the survey

was 42.11% (See Table 3.1).

56
TABLE 3.1 PHASE 1 RESPONSE RATES

Phase 1: Survey-Postcard

# Respondents % Respondents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Involved in Market Selection 129 67.19%
Participation in Market Selection not Specified 5 2.60%
Does not Participate in Market Selection 15 7.81%
Referred to Another Exporter on List 32 16.67%
Export Facilitator or Brokerage Services 1 0.52%
Does not Export a Food or Agricultural Product 8 4.17%
Out of Business/Phone Disconnected 1 0.52%
Unwilling to Participate 1 0.52%
Total % of Respondents 192 100.00%
Surveys Returned 192 42.01%
Not Returned 264 57.99%
Total 456 100.00%
* Original Survey Size = 506

** Insufficient Address = 46

*** Surveys Received After the Deadline = 4

A 10% random sample of the non-respondents was selected from the first phase of

the survey in order to determine whether those who responded to the first phase accurately

reflect the population that this study is attempting to target. Table 3.2 shows the results of

this test. It is interesting to note that 69.23% of the non-respondents did not consider

themselves to be an agri-food exporter or were not involved in the market selection decision

while 67.19% of the respondents did. This confirms that the target population for this

study were the primary respondents. A large majority of those companies who did not

respond would not have been considered for the second phase of the survey even if they

had responded.

 

57
TABLE 3.2 SURVEY OF NON-RESPONDENT S

Phase 1: Survey-Postcard

Respondents Sample of
Non-
Respondentsi
Exports and Actively Participates in Market Selection 67.19% 19.23%
Not Exporting or Not Involved In Market Selection 29.17% 69.23%
No Response 3.65% 11.54%
Total Respondents 100.00% 100.00%

 

 

 

 

One hundred and thirty four surveys were sent in the second phase of the survey to
agri—food exporters who either stated that they actually participate in the selection of their
export markets or left this question blank in the first phase of the surveys . Of the 134
surveys sent in the second phase of the survey, 60.45 % of the companies responded (See

Table 3.3).

TABLE 3.3 PHASE 2 RESPONSE RATES

 

 

 

 

Phase 2: Market Selection Survey # Resnondents %
Surveys Returned 81 60.45%
Not Returned 53 39.55%
Total 134 100.00%

 

 

 

 

 

 

5 While 129 respondents stated that they actively participated in the selection of their export
markets, 4 surveys were received too late to be included in the mailing of the second
survey; however, the 5 respondents who failed to answer whether they actively participated
in the selection of their export markets were included in the second phase of the survey.

58
3.6 Summary

This chapter described the methodology used to meet the six research objectives and
collect the survey data. The first step in this process was to develop a comprehensive
mailing list from the PIERS data set. The entire population of agri-food exporters whose
addresses could be identified and exported the following commodities between 1978-1991
were included in the mailing list: apples, apricots, blueberries, carrots, celery, cherries,
corn, cucumbers, dry beans, grapes, nectarines, onions, peaches, pears, plums, and
potatoes.

The first phase of this survey was sent to 506 companies, and was designed to
establish whether a company actually exports a food or agricultural product, how it exports,
whether they actively participate in the selection of their export markets, and who the
primary contact for export market selection would be. The final response rate for the first
phase of the survey was 42.01%. A 10% random sample of the non-respondents from the
first phase of the survey showed that a significantly higher percentage of the non-
respondents did not consider themselves to be an agri-food exporter. Other large
differences between the non-respondents and respondents include the higher percentage of
companies that stated that they were actually export facilitators or brokerage firms which
helped to facilitate the export process for other firms, and the higher percentage of firms
that did not participate in the selection of their export markets.

One hundred and thirty four questionnaires were sent in the second phase of the
survey to agri-food exporters who actively participate in the selection of their export
markets. The second phase was designed to identify the general characteristics of agri-food

exporters, the specific market selection factors that agri-food exporters utilize to distinguish

59
one target market from the next, what types of market selection methodologies agri-food

exporters use for selecting target markets, and which market selection factors are related to
export performance. 60.45 % of the companies surveyed in the second phase of the survey

responded .

CHAPTER 4 SURVEY RESULTS

4.1 Introduction

This chapter presents the results obtained from the first and second phases of the
survey. Section 4.2 presents the general characteristics of agri-food firms. This includes
an analysis of company size and experience at exporting. This section also analyzes the
types of commodities exported, the form in which they are exported, the marketing
channels typically utilized for exporting agri-food products, and the destination markets for
these commodities.

Section 4.3 identifies the percentage of firms that utilize five market selection
methodologies. These methods include the nearest neighbor approach, market spreading,
market screening, and the quantitative and qualitative market selection methodologies.

Section 4.4 presents an analysis of the frequency that agri-food exporters utilize
each of the 46 different market selection factors.

Section 4.5 presents the results of the correlation analysis. The first step of this
analysis presents information on the individual performance indicators that will be
correlated with the different types of market selection factors. These indicators include
exporters’ opinions on how effective their current methods are for selecting target markets,
whether exporters are satisfied with their achievements in exporting, and whether a
companies export growth rate has been increasing over the past five years. The second step
presents information on the importance, ease of information collection, and the
effectiveness of the six main market selection categories. The final step presents the results

from the correlation analysis of the market factor groups with performance.

60

61
Section 4.6 covers the results from a cluster analysis. The objective of this

procedure is to identify homogeneous groups of firms based upon the 46 different market
selection factors chosen by them. The similarities and differences between the

characteristics and the different clusters will be presented and discussed.

4.2 Results Related to Research Objective 1

The first research objective of this international market selection study was to
identify the general characteristics of agri-food exporters. This is an important objective
because very little information is currently available on the characteristics of these firms.

Tables 4.1 presents information on the average size of agri-food exporters.

TABLE 4.1 NUMBER OF EMPLOYEES

 

Question

How many employees does
your company employ?

 

Percent of Respondents
n=81
Less than 10 32.1
11-25 19.8
26-100 17.3
101-150 9.9
More than 150 21.0

 

Table 4.1 reports that 79.0% of the survey participants fall into the small- and
medium-sized category of having less than 150 employees. As expected, the category of

“Less than 10 employees” represents the largest number of respondents at 32.1%.

 

62
It is interesting to note that this study found most agri-food firms with less than 150

employees to be active exporters, while Piercy’s ( 1983) survey on market information
found that exporters with less than 500 employees tend to be reactive exporters. Of the 148
firms that export a food or agricultural product in the first phase of the survey, 89.9%
actively select their target markets while only 10.1% would be classified as reactive
exporters.

Table 4.2 below also presents information on the average size of agri-food firms in

terms of gross annual sales.

TABLE 4.2 GROSS ANNUAL SALES

 

Question

Approximately what is your
company's gross annual sales level?

 

Percent of Respondents
n=79
Less than $10 million 31.6
$11-$25 million 22.8
$26-$50 million 19.0
351-5151 million 19.0
More than $150 million 7.6

 

Table 4.2 reports that 92.4% of all survey participants also fall into the small- and
medium-sized category of having less than $150 million in gross annual sales. As
expected, the category of having less than $10 million in gross annual sales represents the

largest number of respondents at 31.6%.

63
Table 4.3 below shows the level of export dependence among survey respondents in

terms of the percentage of export sales.

TABLE 4.3 PERCENTAGE OF EXPORT SALES

 

Question

Approximately what percentage
of your company’s sales come

from export markets?
Percent of Respondents

 

n=81
0-5% 14.8
645% 21.0
16—25% 13.6
26-50% 17.3
51-75% 12.3
76-100% 21.0

 

The percentage of a company’s export sales abroad is commonly used as a measure
for export market performance. Cavusgil warns that the danger in using this measure as a
performance indicator is the assumption that the greater the percentage, the more successful
an exporting firm is. This is not a valid assumption because it fails to show whether export
efficiency is lacking in the firm. The percentage of a company’s export sales abroad is
however an effective indicator of export dependence. The results presented in Table 4.3
were unexpected because the distibution is much flatter than what was originally
anticipated. A priori, a large majority of firms were expected to be in the less than 25 %
categories. 21% of the agri-food exporters report that they actually receive between 76-

100% of their total sales from abroad.

64
Table 4.4 demonstates the level of export experience that the surveyed agri-food

exporters have with exporting.

TABLE 4.4 YEARS EXPORTING

 

Question

How many years has your

 

company been exporting? Percent of Respondents
n=81
0-2 Years 3.7
3-5 Years 6.2
5-10 Years 27.2
10-20 Years 35.8
More than 20 Years 27.2

 

It should be pointed out that such a small percentage of firms exporting less than 5
years was expected because of the bias intoduced into this survey by utilizing the PIERS
data set for creating the mailing list. All of the exporters obtained from this list should
have been exporting for at least 4 years. Considering this fact, this study found that the
largest category of firms, 35.8%, has been exporting for 10-20 years, 27.2% have exported
between 5 and 10 years, and an equal percentage of firms has been exporting for more than
20 years. In general, the survey sample clearly is dominated by highly experienced
exporting firms.

Table 4.5 demonstates the vast array of agricultural commodities that the
respondents export. Multiple responses were allowed for this survey question, and many

exporters state that they export more than one of the following commodities.

65
TABLE 4.5 COMMODITIES EXPORTED

 

Question

Please check the fruit or vegetable
products that your company has
exported during the past 5 years?

 

Percent of Respondents
n=81
Apples 50.6
Pears 39.5
Dry Beans 34.6
Peaches 30.9
Corn 28.4
Carrots 21.0
Potatoes 19.8
Blueberries l7 .3
Tart Cherries 12.3
Grapes 1 1 .1
Citrus 7.4
Processed 7.4
Sweet Cherries 6.2
Cucumbers 6.2
Plums 6.2
Onions 6.2
Nectarines 4.9
Melons 4.9
Nuts 4.9
Apricots 3.7
Strawberries 3.7
Oats 2.5

 

The most commonly exported product by the respondents is apples. 50.6% of all
exporters have exported some type of apple product. Pears are exported by 39.5% of the
respondents, followed by dry beans (34.6%), peaches (30.9%), corn (28.4%), and carrots
(21.0%). This distibution is not surprising considering that these commodities were
specifically targeted in the original design of the mailing list. Commodities grown in
Michigan were the main commodities targeted. The large percentage of apple exporters in
this study was also expected because of the large number of apple shippers on the west

coast included in the mailing list. While included in Table 4.5, citus fruits, melons, nuts,

66
stawberries, and oats were the only products not originally surveyed for, but as expected

the overall percentage of exporters exporting any one of these products is fairly low. The
average number of products exported by the respondents is 3.3 with a range of 1 to 10.
The commodities exported in table 4.5 can be exported in many different forms,
including fresh, frozen, dried, canned, or processed. Table 4.6 below demonstates the
different forms in which agri-food exporters typically export their products. Multiple
responses were also allowed for this survey question, and many exporters state that they

export their products in more than one of the following forms.

TABLE 4.6 PRODUCT FORM

 

Question

In what form are your food or
agricultural products typically shipped?
Percent of Respondents

 

n=81
Fresh 51 .9
Dried 50.6
Canned 34.6
Processed 34.6
Frozen 24.7

 

While the commodities exported above can be exported in any form, the majority of
firms exported in the fresh market. 51.9% of all firms export some or all of their products
in this form. Table 4.6 also demonstates that 50.6% of all respondents export one or more
of their products in the dried form. Fewer exporters deal with frozen, canned, or
processed agri-food commodities, with 24.7% exporting frozen products, 34.6% canned,

and 34.6% processed.

67
One of the primary goals of the first phase of this survey was to identify how agri-

food firms select and enter target markets compared to other types of firms. There are
many different export channels that an exporter can export through, however the most
common export channels that agri-food exporters use has not been empirically tested.
Table 4.7 below provides the results from the first phase of the survey which asked
agri-food exporters to check all of the export channels which they utilize. Again, multiple

responses were allowed to the question.

TABLE 4.7 EXPORTING CHANNELS

 

 

Question
How do you export? Percent of Respondents
n= 153

Direct 79.1
Through an export agent 43.1
Through a freight forwarder 30.1
Through another food, fruit. or vegetable shipper 30.1
Through a cooperative 4.6
Through a commodity association 2.0

 

This study found that 79.1% of the respondents who actively participate in the
selection of their export markets export direct. It was originally believed that many
exporters may also ship through organizations such as Cherry Cental in Northern
Michigan, however very few agri-food exporters state that they export through a
cooperative or a commodity association (4.6% and 2.0%). However, 43.1% of the

respondents export through an export agent, 30.1% through a freight forwarder, and

68
30.1% through another food or agricultural shipper. Many firms used a combination of

these methods and do not rely upon only one channel for exporting their products.
Table 4.8 below shows the different export markets to which the surveyed agri-food

firms export. Multiple responses were allowed.

TABLE 4.8 GEOGRAPHICAL MARKETS

 

 

Question

Check the geographical

areas that your company

has exported to during the

last 5 years.

Percent of Respondents
n=81

Pacific Rim Countries 76.5
Western Europe 75.3
Canada 70.4
South and Central America 61.7
Mexico 55.6
Other Asian Countries 49.4
Australia 34.6
Eastern Europe 29.6
Africa 21.0

 

While a stong attaction to similar markets cannot be ruled out entirely because
Western Europe and Canada are important export markets for American agri-food
exporters, the large percentage of companies that export to the Pacific Rim suggests that
many experienced agri-food exporters do not confine themselves solely to a nearest
neighbor or psychological nearness approach for selecting target markets. The most
important export market was the Pacific Rim with 76.5 % of all exporters shipping product
to this market. The second most important export market was Western Europe with

75.3% , and Canada was ranked third with 70.4%. The fact that Eastern Europe and Africa

69
were ranked last with 29.6% and 21.0% was expected. These two markets have been

described by industry officials as poor markets, not because they often lack product demand

but rather because they lack the ability to pay.

After examining the results to table 4.8 a new variable was created in order to
identify the number of export markets to which agri-food companies typically export.

Table 4.9 below presents these results.

TABLE 4.9 NUMBER OF EXPORT MARKETS

 

Question

How many different export
markets does each agri-food

 

firm export to.
Percent of Respondents
n=81
1 Export Market 13.6
2 Export Markets 7.4
3 Export Markets 11.1
4 Export Markets 13.6
5 Export Markets 11.1
6 Export Markets 17 .3
7 Export Markets 13.6
8 Export Markets 7.4
9 Export Markets 4.9

 

The average company surveyed by this study exports to approximately 4.7 different
markets with a range from 1 to 9. This suggests that most firms have experience in
entering multiple markets and have been through the market selection process repeatedly.

In summary, the various survey questions related to general characteristics give the
following profile for the surveyed agri-food exporters: 79% have less than 150 employees

and 93.4% have less than $150 million in annual gross sales. 89.9% participate in the

70
selection of their export markets. The percentage of total sales that were export sales

varied greatly while experience in exporting averaged between 10 and 20 years. On
average, these firms export 3.3 different products. 79.1% export direct, however
exporting through export agents, freight forwarders, and other agri-food shippers is also
common (43.1% to 30.1% of respondents). Finally the average exporter exports to 4.7
different markets, the most common include the Pacific Rim, Western EurOpe, Canada, and
South and Cental America. In general, the survey respondents represent a highly

experienced group of exporters.

4.3 Results Related to Research Objective 2

The second research objective of this study was to identify what types of market
selection methodologies agri-food exporters use for selecting target markets. This research
objective is very important because market selection methodologies are ultimately
responsible for selecting the most appropriate target market. A sub-optimal market
selection methodology may eliminate the most promising markets even before the market

selection analysis is performed by the exporting firm.

71
Table 4.10 below assesses whether a company typically utilizes a nearest neighbor

approach, a market spreading approach, or a market screening approach.

TABLE 4.10 MARKET SELECTION METHODOLOGY

 

Question

When selecting new export markets,

 

does your company typically:
Percent of Respondents
n=71

Consider a relatively small number of

countries that are geographically close 26.8
Consider a relatively small number of countries

that have culturally similar markets to those you

serve in the US 16.9
Consider a relatively large number of counties,

narrowing them down to one or two target markets 56.3

 

While many studies that have surveyed manufacturing firms have found a high
degree of correlation between market similarity and market selection preferences
(Davidson, 1983), this study found that agri-food firms do not follow this pattern. 56.3%
of agri-food exporters state that they do not use a nearest neighbor or psychological
nearness approach for selecting target markets. The majority of exporters typically utilize a
methodology similar to the preferred market screening methodology suggested both by
Papadopoulos and Cavusgil. Only 26.8% state that they typically follow a nearest neighbor
approach in the selection of their export markets, while only 16.9% said that they typically

analyze a small number of culturally similar markets or use what is called a market

spreading technique. In another study by Cooper and Kleinschmidt (1985) older and more

 

72
experienced firms tended to utilize a “world orientation approach” for selecting target

markets. While no statistical difference in terms of export experience or number of years
exporting was found between those that elect to use a ‘world orientation approach” or a
nearest neighbor approach, the majority of firms in this study are experienced exporters
with more than 10 years of export experience.

Table 4.11 below assesses whether a company typically uses a more qualitative or

quantitative market selection technique.

TABLE 4.11 QUALITATIVE AND QUANTITATIVE METHODOLOGIES

 

Question
Export marketing mangers often have different methods for choosing new export markets.

Qualitative methods tend to utilize information gathered from news reports, expert opinion, or
the marketing manager's personal views and experiences about a particular country.

Quantitative methods for market selection tend to rely more heavily upon purely statistical
information. such as GDP per capita or market size.

How would you describe your methods for choosing export markets?

Percent of Respondents

 

n=79
Only qualitative methods are used 7.6
Mostly qualitative methods are used 50.6
An equal mix of qualitative and quantitative
methods are used 39.2
Mostly quantitative methods are used 2.5
Only quantitative methods are used 0.0

 

This study found that the majority of agri-food exporters use qualitative methods for
selecting target markets. This is consistent with Papadopoulos and Denis’s (1988)

suggestion that quantitative market selection methodologies may be too time consuming and

73
costly for small- and medium-sized exporters to use. On a qualitative to quantitative scale,

Table 4.11 demonstates how 50.6% of agri-food exporters typically utilize mostly
qualitative methods for selecting international markets, and 7 .6% use only qualitative
methods. While 39.2% state that they typically use an equal mix of both qualitative and
quantitative methods, only 2.5 % state that they use mostly quantitative methods and no
exporters state that they use only quantitative methodologies for selecting new export
markets.

The results for these two questions on methodology suggest that experienced agri-
food firms tend toward qualitative, contactible methods. This is a clear addition to the
existing literature since the vast majority of the literature suggests that methods should be
(conceptual literature) quantitative, contactible or are (experiential literature) qualitative,
expansive. Many experienced firms apparently seem to value contactible methods while

avoiding the complexity and cost of quantitative methods.

4.4 Results Related to Research Objective 3

The third research objective of this study is to identify the specific market selection
factors that agri-food exporters utilize to distinguish one target market from the next. This
objective is important because the types of market selection factors that an exporting firm
utilizes for selecting target markets ultimately distinguish which export market is selected
by the exporting firm. All of the marketing factors in Table 4.12 and Table 4.13 have been
suggested from either the conceptual or experiential sets of market selection literature, but

this is the first study specifically designed to analyze which market selection factors agri-

74
food exporters use (See Appendix E). Table 4.12 lists the 46 international market selection

factors according to the six market selection categories. Table 4.13 ranks the 46
international market selection factors by their overall frequency of use. The right hand
column in both tables presents the percentage of exporters utilizing that particular market

selection factor.

 

  

Factors by Factor Groups

75
TABLE 4.12 MARKET SELECTION FACTORS BY FACTOR GROUP

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Macroeconomic Factors 35.9
Gross Domestic Product per Capita 38.5
Exchange Rate Fluctuations 55.1
Inflation Rate 34.6
Income Distribution 46.2
Balance of Payments 24.4
Rate of Unemployment 16.7
Geographic, Infrastructural, and Demographic Factors 43.7
Distance from the United States 35.5
Stage of development 72.4
Availability of Ports, Highways, and Railroads 73.7
Total Population or Population Growth Rate 59.2
Age Composition of Country 13.3
Average Family Size 7.9
Trade Barriers, Legal. and Political Factors 66.13
Type of Political System 42.1
Government Stability 86.8
Local Contract and Sales Regulations 72.4
Level of Civil. Human, and Political Rights 17.1
Ability to Enforce Contracts 77.6
Phytosanitary Regulations 75.0
Labeling and Packaging Regulations 69.7
Import Tariffs 85.5
Texas or Fees 75.0
Import Licensing Regulations 82.9
Customs Paper Work 60.5
Political Orientation Towards the US 48.7
Social and Cultural Factors 24.0
Whether English is the Primary Language Spoken 15.0
The Number of Languages Spoken 8.8
The Number and Types of Religions 6.3
The Number of Different Racial Groups 10.0
Food Preparation Methods and Eating Habits 86.3
Whether Country is Culturally Similar to the US 1 1.3
Social Customs 30.0
Food and agricultural factors 71 .3
Total Annual Food or Agricultural Import from the US 57.5
Total Annual Food or Ag. Imports from all Sources 60.0
Total Annual Imports of Your Type of Product 86.3
Total Annual Imports of Similar Products 78.8
Growth Rate of Agricultural or Food Imports from US 67.5
Growth Rate of Food or Ag. Imports from all Sources 61.3
Local Production of Your Product 82.5
Local Production of Similar products 76.3
Marketing Factors 82.5
Current Product Demand 97.5
Overseas Shipping Costs 77.8
Number of Local Competitors 80.2
Average Local Prices of Your Product 82.7
Customer Preferences 91.4
Availability of Import Trading Partners 66.7
Reliability of Import Trading Partners 81.5

 

 

 

 

76

TABLE 4.13 MOST FREQUENTLY UTILIZED MARKET SELECTION FACTORS
Most Frequently Utilized Market Selection Factors

     
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Product Demand 97.5
Customer Preferences 91.4
Government Stability 86.8
Food Preparation Methods and Eating Habits 86.3
Total Annual Imports of Your Type of Product 86.3
Import Tariffs 85.5
Import Licensing Regulations 82.9
Average Local Prices of Your Product 82.7
Local Production of Your Product 82.5
Reliability of Import Trading Partners 81 .5
Number of Local Competitors 80.2
Total Annual Imports of Similar Products 78.8
Overseas Shipping Costs 77.8
Ability to Enforce Contracts 77.6
Local Production of Similar products 76.3
Phytosanitary Regulations 75.0
Taxes or Fees 75.0
Availability of Ports, Highways, and Railroads 73.7
Local Contract and Sales Regulations 72.4
Stage of development 72.4
Labeling and Packaging Regulations 69.7
Growth Rate of Agricultural of Rood imports from US 67.5
Availability of Import Trading Partners 66.7
Growth Rate of Food or Ag. Imports from all Sources 61.3
Customs Paper Work 60.5
Total Annual Food or Ag. Imports from all Sources 60.0
Total Population or Population Growth Rate 59.2
Total Annual Food or Agricultural Import from the US 57.5
Exchange Rate Fluctuations 55.1
Political Orientation Towards the US 48.7
Income Distribution 46.2
Type of Political System 42.1
Gross Domestic Product per Capita 38.5
Distance from the United States 35.5
Inflation Rate 34.6
Social Customs 30.0
Balance of Payments 24.4
Level of Civil, Human, and Political Rights 17.1
Rate of Unemployment 16.7
Whether English is the Primary Language Spoken 15.0
Age Composition of Country 13.3
Whether Country is Culturally Similar to the US 1 1 .3
The Number of Different Racial Groups 10.0
The Number of Languages Spoken 8.8
Average Family Size 7.9
The Number and Types of Religions 6.3

 

 

77
4.4.1 Macroeconomic Factors

According to Tables 4.12 and 4.13, macroeconomic factors are used relatively less
often by agri-food firms than other factors. While at first glance this may seem surprising,
it is typically only the conceptual market selection methodologies such as econometic and
cluster analysis that incorporate macroeconomic factors. The only macroeconomic factor
utilized by a majority of agri-food exporters is exchange rate fluctuations (55.1%).

It is interesting to note that 56.3% of the exporters in this study state that they
typically utilize a market selection methodology similar to market screening. One of the
key macroeconomic factors suggested by the market selection literature for screening out
inappropriate markets is gross domestic product. However, only 38.5% of the respondents
in this study state that they typically use GDP for selecting new target markets. This
suggests that gross domestic product, while extensively cited by the export marketing
literature, is not a key market selection factor for screening out inappropriate agri-food
markets. It also suggests that the most common market selection factors used by
manufacturing firms are not necessarily used by agri-food firms.

Income distibution has also been suggested by many as a good measure of market
size and demand (Bartles, 1963; Cavusgil, 1987; Cooke, 1972; Ottum and Semenik,
1993). Markets require not only people, but people with money. While the most frequent
write-in response (suggested by 15 respondents) to this question on the survey was the
ability to pay, income distibution was used by less than half (46.2%) of the respondents.
This may indicate that agri-food exporters typically do not analyze markets in terms of
whether the general population has the necessary income, but only if the import trading

partner has the ability to pay. Because of the small size of many agri-food exporters, it

78
may be that this is the key requirement for selling products abroad. Perhaps the benefits of

a deeper analysis of any particular target market’s income distibution do not outweigh the

COStS .

4.4.2 Geographic, Infrastuctural, and Demographic Factors

Among the geographic, infrastructural, and demographic factors, the stage of
development (72.4%), and the availability of ports, highways, and railroads (73.7%) were
the most commonly utilized factors for selecting new target markets. While this was
expected because of the bulk nature of the commodities being shipped and the need for
tansportation services, it is surprising that the actual distance from the United States was
only used by 35.5 % of the respondents. Age composition of a county (13.3%) and
average family size (7.9%) were the two least important factors for this group. Other
studies have suggested that population figures are highly correlated with the consumption of
many products (Cavusgil, 1987). Population trends have future implications for the size of
a market and market demand. This study found that 59.2 % of the respondents typically

utilize total population or population growth rates for selecting target markets.

4.4.3 Trade Barrier, Legal, and Political Factors

In general exporters tend to use tade barrier, legal, and political factors quite
frequently. Tariffs can affect the competitiveness of the imported products. Other
counties may have stict health and safety regulations on the import and sale of food
products. Stict phytosanitary regulations have kept exporters out of markets. For
example, Michigan apples cannot be shipped to Mexico. It appears that the factors that can

directly affect business activities such as government stability (86.8%), import tariffs

79
(85.5%), import licensing regulations (82.9%), and phytosanitary regulations (75.0%) are

very important to agri-food exporters. However it also appears that those factors which do
not directly affect agri-food exporters are not used by a majority of firms for selecting
target markets. These factors include the level of civil, human, and political rights
(17.1%), type of political system (42.1%), and the political orientation towards the United

States (48.7%).

4.4.4 Social and Cultural Factors

While Cavusgil suggests that social and cultural factors are not included by many
export market researchers in the selection of target markets, this study found that agri-food
exporters are very aware of social and cultural factors which have a direct effect upon their
marketing stategies. Food preparation methods and eating habits is the fourth most
commonly utilized market selection factor among all exporters (86.3% of the respondents
analyze this factor when selecting target markets). None of the other social and cultural
factors listed in Tables 4.12 and 4.13 are used frequently in the marketing practices of agri-
food firms. “Whether English is the primary language spoken” is only used by 15.0% of
the exporters, and social customs are only used by 30.0% of the respondents. The least
important factors are the number and types of religions (6.3%), average family size
(7 .9%), and the number of languages spoken (8.8%). From the exporter’s perspective, it
is probably safe to say that these social and cultural factors have relatively less impact on

the overall demand for agri-food products.

80
4.4.5 Food and agricultural factors

As with the macroeconomic factors, manufacturing factors similar to the food and
agricultural factors have been utilized in many econometic studies as a proxy factor for
current product demand. However, unlike the macroeconomic factors, the food and
agricultural factors seem to be heavily used by agri-food exporters. All of the food and
agricultural factors are used by a majority of the respondents. The most important food
and agricultural factors include total annual imports of your type of product (86.3%) and
the total annual imports of similar products (78.8%). It is unclear if agri-food exporters are
gathering this information from statistical reports, or just obtaining a qualitative feel for

these factors when considering target markets.

4.4.6 Marketing Factors

Finally, the most important group of market selection factors were the marketing
factors. The most frequently used market selection factors of any group are current
product demand (97.5 %) and customer preferences (91.4%). The most important write-in
response (suggested by 15 respondents) to this question was the ability to pay. It is not
surprising that current product demand is an extemely important market selection factor.
In fact, all of the marketing factors were expected to be very important for agri-food
exporters. Perhaps the most relevant question for future research is, “How do agri-food
exporters measure current product demand, and how do they stay abreast of changes in
customer preferences?”. These two market selection factors can be qualitative and each

exporter’s opinion of current product demand in any one country may be very different.

81
4.5 Results Related to Research Objective 4

The fourth research objective of this study is to identify which market selection
factors are related to export performance. This objective is important because, if certain
market selection factor groups are found to be correlated with export performance, than
exporters who are not currently utilizing these market selection factors can be shown which
market selection factors they should be utilizing in order to become more effective at

selecting new target markets.

4.5.1 Performance Indicators

The first step in this analysis was to gather information on the individual
performance indicators that will be correlated with the different types of market selection
factors. These indicators include exporters’ Opinions on how effective their current
methods are for selecting target markets, whether exporters are satisfied with their
achievements in exporting, and whether companies growth rates have been increasing over

the past 5 years.

82
Table 4.14 measures exporters’ opinions about their firm’s ability to select new

international markets.

TABLE 4.14 MARKET SELECTION EFFECTIVENESS

 

Question

Overall how would you rate
the effectiveness of your methods
for selecting foreign markets?

 

Percent of Respondents
n=80
Our methods need substantial improvement 16.3
Our methods need some minor improvements 27.5
Our methods are usually effective 50.0
Our methods are nearly always effective 6.3

 

As expected most exporters (77.5 %) feel that their market selection methods are
usually effective or only need some minor improvements. Only 16.3 % state that they need
substantial improvement, and 6.3 % feel that their market selection methods are nearly

always effective.

83
The question in Table 4.15 is aimed at analyzing the historical record of a firm’s

success in selecting export markets by analyzing whether an export marketing manager has

typically met established goals.

TABLE 4.15 EXPORT GOALS

 

 

Question
How satisfied has your
company been with its
achievements in exporting? Percent of Respondents
n = 80
Our export sales have exceeded our goals 27.5
Our export sales have matched our goals 46.3
Our export sales have been below our goals 26.3

 

Several studies indicate that a manager’s desire to pursue basic business goals can
be crucial to export market performance. The implication is that the decision-maker’s
preferences for organizational goals, or the importance placed on the achievement of each
goal, is a direct determinant of decision-making behavior. The empirical studies support
this expectation by revealing a stong relationship between export behavior and the level of
managerial aspirations for profits, growth, and risk-taking (Cavusgil, 1984).
Approximately half of all exporters, 46.3%, state that their export sales have matched their
goals, while 24.5% state that they have exceeded their goals, and 26.3% state that export
sales have been below their goals. These frequencies suggest stong performance against

goals for 73.8% of the firms surveyed.

ma
imp

Stlcg

84
Table 4.16 measures the growth rate in export sales. It is designed to identify if a

company is actively exploring and taking advantage of its international sales opportunities.

TABLE 4.16 EXPORT GROWTH RATE

 

Question

Over the past 5 years what has been
your company’s average annual growth
rate for total export sales?
Percent of Respondents

 

n=79
Declining 5.1
Stable 21.5
1-5% Growth 27.8
6-10% Growth 21.5
More than 10% 24.1

 

Again, the responses indicate relatively high levels of performance. Few exporters,
5.1% , say that their international sales are declining while 73.4% are experiencing some
level of growth.

Collectively, these three questions paint a picture of a relatively successful group of
firms. Given the extensive experience of these firms (reported earlier), this is not

particularly surprising.

4.5.2 Market Selection Groups

The second step to fulfill the fourth research objective of identifying which types of
market selection factors are related to export performance was to gather information on the
importance, ease of information collection, and the effectiveness of the six main market

selection categories. Recall that the survey divided the 46 international market selection

85
factors into six factor groups in order to determine which types of factors are correlated

with export performance.

These six groups include:

Macroeconomic Factors

Geographic, Infrastuctural, and Demographic Factors
Trade, Legal, and Political Factors

Social and Cultural Factors

Food and agricultural factors

99:59.“?

Marketing Factors

Table 4.17 below presents the results of this analysis.

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87
As expected from the analysis of the individual factors, the marketing group was

rated by exporters as including the most important factors for selecting new target markets.
Table 4.17 shows that 56.3% of the respondents feel that this group was “Very Important”.
On a scale from 1 to 5 with 5 being “Very Important”, this category received a mean score
of 4.3. Trade, legal, and political factors were the next most important category with a
mean score of 4.2. 48.1% of all exporters feel that tade, legal, and political factors are
“Very Important”. As expected after analyzing the low scores given to most of the social
and cultural factors, it is not surprising that this group was considered to be the least
important group with a mean score of 2.7.

All of the scores related to the ease of gathering information on each market
selection group were evenly distibuted. This is surprising because collecting information
on many of the quantitative market selection factors in the macroeconomic and food and
agricultural groups is taditionally a very difficult and time consuming task. The
macroeconomic and food and agricultural groups had mean scores of 3.2 and 3.1. The
geographic, infrastuctural, and demographic factor group had the highest mean score at
3.4. The fact that the difficulty ratings are so low is perhaps consistent with the notion that
agri-food firms do not measure these taditionally quantitative factors in a quantitative
manner. It is more likely that agri-food firms measure taditionally quantitative factors in a
qualitative sense. For example, firms may not actually be measuring the total annual
imports of their types of products into each possible target market, however they may be
attempting to “obtain a general feel for each market and react upon their impressions” as

one exporter wrote on the survey.

 

88
The scores for the effectiveness of each factor group were only slightly more

varied. The marketing group was rated as the most effective group with a mean score of
3.7. Also rated with a mean score of 3.7 is the food and agricultural group. As expected,
the least effective group for selecting target markets are the macroeconomic and “social and
cultural” groups. These two groups had means scores of 2.7 and 2.8, however this was not
surprising because most of the factors in these two groups are not frequently utilized by

agri-food firms.

4.5.3 Correlation Analysis

The final step in identifying which market selection factors are correlated with
export performance is the actual correlation analysis with the information collected in
Sections 4.5.1 and 4.5.2. This procedure was performed with Goodman and Kruskal’s
Gamma for Ordinal x Ordinal data in SPSS. A score of 1 represents perfectly correlated
variables, a score of 0 means that no correlation can be found, and a score of -1 means that
the two variables are perfectly negatively correlated. Table 4.18 presents the results from

this analysis.

89

TABLE 4.18
Correiations with Goodman and Kruskal's Gamma

 

 

CORRELATION S WITH PERFORMANCE INDICATORS
Performance Indicators

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Major Market Factor Groups Number 7 Number 11 Number 14
Macroeconomic Importance -0.15 0.02 -0.12
Macroeconomic Ease -0.16 -0.02 0.23
Macroeconomic Effectiveness -0.06 -0.16 0.06
Geographic Infrastructural, and Demographic Importance -0.01 -0.09 -0.09
Geographic Infrastructural, and Demographic Ease -0.20 0.13 0.24
Geographic Infrastructural, and Demographic Effectiveness -0.09 -0.05 0.02
Trade, Legal, and Political Importance 0.03 0.15 -0.06
Trade, Legal, and Political Ease -0.07 0.01 0.01
Trade, Legal, and Political Effectiveness -0.16 0.26 0.25
Social and Cultural Importance 0.06 0.13 -0.02
Social and Cultural Ease -0.19 0.09 0.35
Social and Cultural Effectiveness 0.08 0.17 -0.06
Agri-food Importance -0.07 0.13 0.04
Agri-food Ease -0.26 0.06 0.21
Agri-food Effectiveness 0.01 0.12 0.16
Marketing Importance 0.20 —0.08 -0.02
Marketing Ease -0.30 0.22 0.15
Marketing Effectiveness -0.03 0.19 0.18

 

 

 

None of the correlations are statistically significant. The highest level of correlation

found between any of the performance questions and any market selection groups was .35.

Although this result is disappointing, it is not surprising in light of the responses received.

Collectively, the respondents are a relatively homogeneous group - highly experienced,

relatively successful and in fair agreement about the importance, ease of use, and

effectiveness of the various factors. The data may not have exhibited enough variation to

create stong performance correlations. In addition, the factor groups alone are not a

complete model of market selection. Further work on an understanding of cause and effect

relationships with performance is clearly needed.

4.6 Results Related to Research Objective 5

The fifth research objective of this study is to compare different types of agri-food

firms based upon the total mix of market selection factors that these firms utilize for

90
selecting target markets. This is an important research objective because firms with

different characteristics may utilize a different mix of market selection factors when
selecting target markets. Several key market selection factors may be common to all types
of agri-food exporters regardless of each firm’s size, number of export markets, or types of
agri-food products exported.

The first step in meeting this objective was forming homogeneous groups of
respondents according to the 46 different market selection factors chosen by the agri-food
exporters. A binary test was run with SPSS in order to form clusters with Ward’s method.
Ward’s method is a commonly used method for calculating the means of all factors. For
each case, the squared Euclidean distance to each of the cluster means was calculated.
These distances were summed for all of the cases, and at each step, the clusters that merge
were those that resulted in the smallest increase in the overall sum of the squared distances
(SPSS Professional Manual).

Given that the clusters are formed upon the similarities of an exporting firm’s
responses to the international market selection factors, each cluster should represent a
group of firms with similar market selection characteristics. By analyzing the differences
between these characteristics and the market selection factors, it should be possible to
identify which factors are relatively more important for each cluster.

After a careful study of the results from the cluster analysis, all of the respondents
were divided into 3 different groups based'upon their overall usage of the 46 different
market selection factors. Table 4.19 shows the percentage of exporters in each cluster that

utilize each market selection factor.

 

TABLE 4.19 MARKET SELECTION FACTORS BY CLUSTERS

Ali Groups

Cluster I

Cluster 2

Cluster .1

 

Market Selection Factors by Clusters

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Exporters in Cluster 74 41 19 14
Macroeconomic Factors

Gross Domestic Product per Capita 38.5 24.4 42.1 78.6
Exchange Rate Fluctuations 55.1 63.4 21.1 71.4
Inflation Rate 34.6 34.1 5.3 71.4
Income Distribution 46.2 46.3 26.3 78.6
Balance of Payments 24.4 19.5 10.5 50.0
Rate of Unemployment 16.7 9.8 5.3 57.1
Geographic, Infrastructural. and Demographic Factors

Distance from the United States 35.5 34.1 31.6 50.0
Stage of development 72.4 68.3 68.4 100.0
Availability of Ports, Highways, and Railroads 73.7 80.5 52.6 78.6
Total Population or Population Growth Rate 59.2 61.0 36.8 58.7
Age Composition of Country 13.3 4.9 5.3 50.0
Average Family Size 7.9 0.0 5.3 35.7
Trade Barriers, Legal, and Political Factors

Type of Political System 42.1 34.1 36.8 78.6
Government Stability 86.8 80.5 89.5 100.0
Local Contract and Sales Regulations 72.4 78.0 47.4 85.7
Level of Civil, Human, and Political Rights 17.1 4.9 10.5 64.3
Ability to Enforce Contracts 77.6 85.4 52.6 85.7
Phytosanitary Regulations 75.0 92.7 26.3 85.7
Labeling and Packaging Regulations 69.7 78.0 31.6 92.9
Import Tariffs 85.5 87.8 78.9 85.7
Texas or Fees 75.0 78.0 57.9 85.7
Import Licensing Regulations 82.9 82.9 73.7 92.9
Customs Paper Work 60.5 61.0 42.1 78.6
Political Orientation Towards the US 48.7 36.6 36.8 100.0
Social and Cultural Factors

Whether English is the Primary Language Spoken 15.0 14.6 5.3 35.7
The Number of Languages Spoken 8.8 9.8 0.0 21.4
The Number and Types of Religions 6.3 2.4 5.3 21.4
The Number of Different Racial Groups 10.0 9.8 0.0 28.6
Food Preparation Methods and Eating Habits 86.3 90.2 78.9 92.9
Whether Country is Culturally Similar to the US 1 1.3 9.8 5.3 28.6
Social Customs 30.0 68.3 5.3 100.0
Food and agricultural factors

Total Annual Food or Agricultural Import from the US 57.5 68.3 5.3 100.0
Total Annual Food or Ag. Imports from all Sources 60.0 65.9 15.8 100.0
Total Annual Imports of Your Type of Product 86.3 95.1 63.2 92.9
Total Annual Imports of Similar Products 78.8 90.2 47.4 92.9
Growth Rate of Agricultural or Food Imports from US 67.5 85.4 15.8 92.9
Growth Rate of Food or Ag. Imports from all Sources 61.3 73.2 15.8 100.0
Local Production of Your Product 82.5 95.1 57.9 85.7
Local Production of Similar products 76.3 90.2 42.1 85.7
Marketing Factors

Current Product Demand 97.5 100.0 89.5 100.0
Overseas Shipping Costs 77.8 80.5 63.2 92.9
Number of Local Competitors 80.2 92.7 52.6 71.4
Average Local Prices of Your Product 82.7 90.2 63.2 78.6
Customer Preferences 91.4 100.0 68.4 92.9
Availability of Import Trading Partners 66.7 85.4 26.3 71.4
Reliability of Import Trading Partners 81.5 97.6 57.9 71.4

 

 

 

 

 

 

92
Cluster 3 represents a group of “high frequency factor users”. The high frequency

factor users use nearly all of the 46 market selection factors. Even overall, the low-use
factors (e.g. social and cultural factors) are used more frequently by this group than the
other two. Thirty-four of the 46 factors are used by at least two thirds of this clusters
members, while only six of the 46 factors are used by less than 50% of the members in this
cluster. Cluster 2 represents a group of “limited factor users”. Most of the market
selection factors in this group have low frequency use with very selective high frequency
use. Only seven of the 46 market selection factors are used by at least two thirds of this
cluster’s members, while 30 factors are used by less than 50% of the limited factor users.
Cluster 1 represents a group of “moderate factor users”. This group falls in-between the
limited factor users and the high frequency factor users. Twenty-six of the 46 market
selection factors are utilized by two thirds of this cluster’s members, while 16 factors are
used by less than 50% of the moderate factor users.

Table 4.20 below displays characteristic differences between each of the 3 clusters.
All of the results in Table 4.20 are expressed as the percentage of respondents in each
cluster that provided a positive response. For example, 21.4% of the respondents in cluster
3 export through a cooperative. A two tailed T-test was used to identify statistical
differences between clusters. For example, the symbol :1: means that a significantly greater
number (at the .10 level) of the respondents in cluster 3 export through a cooperative

compared to cluster 1.

93
TABLE 4.20 CHARACTERISTIC DIFFERENCES BETWEEN CLUSTERS

In Cluster 41 19 14
Cluster 1 Cluster 2 Cluster 3

% % %

Direct
3
an
a Forwarder
another Fruit or V
8 Association
to Canada
to Mexico
to Western
to Eastern
to Latin America
to Australia
to Pacific Rim
to Other Asian Countries
to Africa
Fresh Products
Frozen Products
Dried Products
Canned Products
Processed Products
Seed Products

Beans
Tart Cherries
Sweet Cherries
Blueberries
Pears
Corn
Carrots
Cucumbers
Peaches
Potatoes
Onions
Nectarines

Oats

Nuts and Almonds
s Plums
Strawberries
Melons

5 Citrus

G

a Processed Food or Product
Significantly greater than Cluster 1 at .10 Level for One-Tailed T-Test
' ' Significantly greater than Cluster 2 at .10 Level for One-Tailed T-Test

92.

4.
”56.1
34.2
”48.8
4.9
”75.6

”63.

”85.

”39.
”68.3
31.7
80.5
”56.1

22.
56.1
19.5
46.3
26.8
26.8
4.9
53.7
31.7
7.3
4.9
17.1
”43.9
34.2
19.5
4.9
31.7
22.0
”9.8
4.9
2.4
2.4
7.3
4.9
4.9
”9.8
' '12.2
' ”14.6
' ”12.2

84.
O.
31.
47.
15.
O.
52.6
26.3
47.
10.5
31.6
21.1
68.4
31.6
5.3
42.1
2.1
57.9
52.6
42.1
0.0
36.8
31.6
426.3
10.5
10.5
15.8
21.1
10.5
5.3
15.8
15.8
0.0
0.0
0.0
5.3
0.0
5.3
0.0
0.0
0.0
0.0
0.0

92.
”21.
42.
50.
”42.
0.
”78.6
”64.3
”78.6
”28.6
”64.3

#“643

”92.9
”57.1
”28.6
57.1

21.
57.1
35.7
42.9

0.
57.1
42.9
14.3
7.1

#“35.7

”57.1
21.4

:I:”42.9

14.3

”57.1

14.3
0.

' “14.3

' ”14.3

0.0

7.1

7.1
0.0
7.1

7.1

 

94
Table 4.21 below provides the mean scores for each cluster for many of the survey

questions. Appendix B must be consulted in order to identify the ordinal scale used for

each question.

TABLE 4.21 MEAN DIFFERENCES BETWEEN CLUSTERS

Number of in Cluster 41 19 14
Cluster1 Cluster 2 Cluster 3

#7 How Satisfied have been with Sales? 1.9 1.9 2.1
#8 How has been 3.8 3.7 3.7
Number of Markets ”5.2 2.9 ”5.6

#10 What of sales come from 7 3.6 3.6 3.3
#1 1 What is annual wth rate in sales? 3.5 3.3 3.4
#12 vs. Contractible) 2.3 2.2 2.6
#13 M (Quantitative vs. Qualitative) 2. 2.4 2.2
#14 How effective are methods for market selection? 2.5 2.4 2.5
Number of Different Products ' *3.6 2.1 ‘ '4.5
#17 How does ? 2.5 2.5 ' *3.4
#18 What are Gross Annual Sales? 2.6 2.2 ' ”2.8
Significantly > Cluster 1 at .10 Level for One-Tailed T-Test
' ' Significantly > Cluster 2 at .10 Level for One-Tailed T-Test

 

Several significant differences can be seen between these clusters in Tables 4.20 and
4.21. The most significant difference, which most likely affects each cluster’s overall
usage of the market selection factors, stems from the fact that the limited factor users only
export to an average of 2.9 markets. The high frequency factor users and the moderate
factor users export to an average of 5.6 and 5.2 different markets. The fact that the limited
frequency factor users have a smaller number of markets than both the moderate factor

users and the high frequency factor users is significant at the .001 level“. From this we

 

6When considering Table 4.20, Table 4.21, and the Two Tailed T-Test in Appendix D, it is
important to note that the results for the T-Test are for a Two-Tailed Test. If the relative
directions of the means are known, and one is only testing to see if the mean of the high-
end users is significantly larger than the mean of a moderate user, the significance level can
be divided by 2 for a one way T-Test.

95
can conclude that the high frequency factor users and the moderate factor users select more

export markets and use their market selection methodologies more often than the limited
frequency factor users. This may help to explain why the high frequency factor users and
the moderate frequency factor users utilize a greater number of market selection factors
than the low frequency factor users. It appears that agri-food exporters who export to a
greater number of international markets typically utilize a greater number of market
selection factors.

Other important differences between the three different clusters include the fact that
both the moderate factor users and the high frequency factor users export a greater number
of products. This is significant at the .01 level. The limited factor users only export 2.1
different products on average, while the moderate and high frequency factor users typically
export 3.6 and 4.5 different products. It appears that agri-food exporters who export a
greater variety of products also tend to utilize a greater number of market selection factors.

In general both the high frequency and moderate frequency factor users have very
similar characteristics. The most important statistical difference between the high
frequency factor users and the moderate factor users is the fact that the high frequency
factor users have a greater number of employees. This is significant at the .05 level. Both
the moderate and limited factor users have 11 to 25 employees on average, while the high
frequency factor users have 26 to 100 employees on average. The high frequency factor
users also have a significantly higher level of gross annual sales than the limited frequency
factor users at the .10 level. The high frequency factor users greater number of employees
and sales revenue may provide this cluster with the necessary resources, in terms of human

and financial capacity, to consider a much greater number of market selection factors.

96
While the overall usage of the market selection factors between each cluster varies

greatly, there are also several important similarities. One of the most interesting
observations from Table 4.19 is the relative importance of certain market selection factors
among all three clusters. There are “spikes” or certain factors that stand out as having an

equally high level of use among all three clusters.

These factors are:

Current Product Demand

Government Stability

Food Preparation Methods and Eating Habits
Import Tariffs

Import Licensing Regulations

Customer Preferences

.‘IP‘S‘PPPT‘

Stage of development

This may suggest an important hypothesis for future study: Rather than needing an
extensive list of market selection factors for selecting target markets, the bulk of the
decision making information may be obtained from a limited number of key factors. There
was no statistical difference in terms of performance between the three clusters, yet within
each of the six factor groups there was at least one factor that had high use even in the
limited use cluster. This would also help to explain why no correlations among the specific
market selection factor groups and performance were found. If this hypothesis could be
substantiated through further research, it would be an important finding for small- and

medium-sized firms. They could in effect focus their limited resources on collecting and

97
analyzing a more limited set of key selection factors without giving up much in the way of

potential performance.

4.7 Summary

Section 4.2 identified the general characteristics of agri-food exporters. This study
found that the majority of survey participants fall into the small- and medium-sized category
of having less than 150 employees (79.0%) or less than $150 million in gross annual sales
(92.4%). Contrary to many studies, the majority of small- and medium-sized agri-food
firms are active exporters (89.9%). In general, the survey sample is clearly dominated by
highly experienced exporting firms with the average company exporting 5 -10 years and the
largest percentage of firms (35.8%) exporting 10-20 years. The majority of firms export
their products in the fresh (51.9%) and dried (50.6% ) forms, followed by frozen (24.7%),
canned (34.6%), and processed products (34.6%). Most respondents also export direct
(79.1%), while a smaller percentage of exporters ship through export agents (43.1%),
freight forwarders (30.1%), and other food and agricultural shippers (30.1%). Few firms
export through cooperatives (5.3%) or commodity associations (2.3%). The most
important export market for agri-food firms was the Pacific Rim (76.5%) followed by
Western Europe (75.3%), and Canada (70.4%). Eastern Europe (29.6%) and Africa
(21.0%) were the least important markets. The large percentage of companies that export
to the Pacific Rim suggests that many experienced agri-food exporters do not confine

themselves solely to a nearest neighbor or psychological nearness approach for selecting

98
target markets. The average company surveyed by this study exports to approximately 4.7

different markets with a possible range from 1 to 9.

Section 4.3 identified the market selection methodologies agri-food exporters use
for selecting target markets. This study found that agri-food firms do not exhibit a high
degree of correlation between market similarity and market selection preferences. The
largest percentage of companies (56.3%) typically utilize a method similar to market
screening. This study also found that the majority of agri-food exporters (50.6%) use
qualitative methods for selecting target markets. The majority of conceptual literature
suggests that firms should use quantitative, contactible methods for selecting target
markets and most of the experiential literature suggests that firms typically utilize
qualitative, expansive methodologies. Experienced agri-food firms seem to value
contactible methods while avoiding the complexity and cost of quantitative techniques.

Section 4.4 identified the specific market selection factors that agri-food exporters
utilize to distinguish one target market from the next. In general, macroeconomic factors
are not used by a majority of the respondents. The average frequency for this factor group
was only 35.9%. The geographic, infrastuctural, and demographic factors were used on
average by 43.7% of all firms, however the “stage of development” (72.4%) and the
“availability of ports highways, and railroads” (73..7%) were used by most exporters. In
general agri-food firms tend to use tade barrier, legal, and political factors quite frequently
(66.2%). It appears that factors which directly affect business activities, such as
government stability (86.8%), import tariffs (85.5%), import licensing regulations
(82.9%), and phytosanitary regulations (75.0%) are very important to agri-food exporters.

Social and cultural factors on average were only used by 24.0% of the respondents,

99
however “food preparation methods and eating habits” (86.3%) was the fourth most

commonly utilized market selection factor. On average 71.3% of agri-food firms use food
and agricultural factors. “Total annual imports of your type of product” (86.3%), and
“total annual imports of similar products” (78.8%) were the two most important factors in
this category. Marketing factors (82.5%) were the most frequently utilized market
selection factors. Current product demand (97 .5 %) and customer preferences (91.4%)
were the two most frequently used market selection factors in this group.

Section 4.5 attempted to identify market selection factors related to export
performance. Section 4.5.1 identified three performance indicators for this task. These
included a measure of each exporter’s opinions about their firm’s ability to select new
international markets, an analysis of a firm’s success in selecting export markets, and each
firm’s growth rate in export sales. Most exporters (77.5 %) feel that their market selection
methods are usually effective or only need some minor improvements, state that their
export sales have matched or exceeded their goals (73.8 %), and are experiencing some
level of export growth (73.4%). Collectively, these questions portay a group of successful
agri-food firms.

Section 4.5.2 identified the importance, ease of information collection, and the
effectiveness of the six main market selection categories. The majority of respondents
(56.3%) felt that the “marketing” group was “Very Important”. “Trade, legal, and
political” factors were the next most important category with a mean score of 4.2 on a scale
from 1 to 5. The scores related to the ease of gathering information on each market
selection group were evenly distibuted. This was surprising because collecting

information on many of the quantitative market selection factors in the “macroeconomic”

100
and “food and agricultural” groups is taditionally a very difficult and time consuming task.

The scores for the effectiveness of each factor group were only slightly more varied. The
“marketing” group and “food and agricultural” group were both rated as the most effective
groups with mean scores of 3.7 on a 5 point scale. None of the correlations were found to
be statistically significant between the performance indicators and the importance, ease of
use, and effectiveness measures. The highest level of correlation found between any of the
performance questions and the six different market selection groups was .35. Although this
result is disappointing, it is not surprising in light of the responses received. Collectively,
the respondents are a relatively homogeneous group - highly experienced, relatively
successful and in fair agreement about the importance, ease of use, and effectiveness of the
various factors.

Section 4.6 compared the “high frequency factor users” , “moderate frequency
factor users”, and “limited frequency factor users”. The most significant difference
between these groups is that the limited factor users export to a smaller number of markets
(2.9) compared to the high frequency factor users (5.6) and the moderate factor users (5.2).
It appears that agri-food exporters who export to a greater number of international markets
typically utilize a greater number of market selection factors. Both the moderate factor
users and the high frequency factor users also export a greater number of products, 2.1
different products on average for low frequency users compared to 3.6 and 4.5 for the
moderate and high frequency factor users. It appears that agri-food exporters who export a
greater variety of products also tend to utilize a greater number of market selection factors.

Finally, it seems plausible that the high frequency factor users greater number of employees

101
and sales revenue may provide this cluster with the necessary resources, in terms of human

and financial capacity to consider a much greater number of market selection factors.

While the overall usage of market selection factors between each cluster varies
greatly, there are also several important similarities. One of the most interesting
observations from Table 4.19 is the relative importance of certain market selection factors
among all three clusters. There are “spikes” or certain factors that stand out as having an
equally high level of use among all three clusters. These factors are: current product
demand, government stability, food preparation methods and eating habits, import tariffs,
import licensing regulations, customer preferences, and the stage of development. This
may suggest an important hypothesis for future study: Rather than needing an extensive list
of market selection factors for selecting target markets, the bulk of the decision making

information may be obtained from a limited number of key factors.

CHAPTER 5 CONCLUSION

5.1 Intoduction

Section 5.2 presents the general findings from each of the six research objectives.
This includes information on the characteristics of agri-food exporters, the types of market
selection methodologies agri-food exporters use for selecting target markets, the specific
market selection factors that agri-food exporters utilize to distinguish one target market
form the next, which market selection factors are related to export performance, a
comparison of the different types of agri-food frrms based upon the total mix of market
selection factors that these firms utilize for selecting target markets, and a comparison of
the findings of this study with the literature on manufacturing firms. Section 5.3 discusses
the limitations of the data. Because this thesis utilized the PIERS data set for surveying
firms that actively participate in the selection of their export markets, two forms of bias
have been intoduced into this study. Section 5 .4 provides several recommendations for
future research, and Section 5.5 provides several suggestions for agri-food firms. This
includes which market selection methodology should be utilized, and the approximate
number of market selection factors that agri-food firms should use for selecting target

markets. Finally, Section 5.6 makes some concluding remarks about this study.

102

103
5.2 Findings

The primary goal of this thesis was to help small- and medium-sized agri-food
companies develop new export markets and enhance their overall business opportunities and

export performance. This was accomplished by meeting several research objectives.

5 .2.1 General Characteristics

The first research objective of this study was to identify the general characteristics
of agri-food exporters. This study found that the vast majority of participants fall into the
small- and medium-sized category of having less than 150 employees or less than $150
million in gross annual sales. The most commonly exported product by the respondents is
apples, closely followed by pears, dry beans, peaches, corn, and carrots. The average
company exports 3.3 different commodities. While these commodities can be exported in
many different forms, the majority are exported fresh or dried. Fewer exporters deal with
frozen, canned, or processed commodities. This study also found that the majority of
respondents have been exporting for more than 5 years. The largest group of exporters has
been exporting between 10 and 20 years.

The percentage of a company’s export sales abroad is used as an experience
measure. The results found by this study were unexpected because the distibution of
responses was much flatter than originally anticipated. This makes it difficult to identify a
typical firm based upon the percentage of a company’s export sales abroad.

Many different marketing channels have been suggested by the export marketing
literature. Many firms use a combination of these marketing channels. While it was

originally believed that many exporters may also ship through organizations such as Cherry

104
Cental in northern Michigan, this study found that few exporters ship through cooperatives

or commodity associations. The most frequently used market for agri-food firms is the
Pacific Rim, followed closely by Western Europe and Canada. The two least important
markets, probably because they lack the ability to pay, are Eastern Europe and Africa. The
average company exports to approximately 4.7 different markets. Overall, the survey

respondents were highly experienced exporters.

5.2.2 Market Selection Methodologies

The second research objective of this study was to identify which types of market
selection methodologies agri-food exporters use for selecting target markets. The type of
market selection methodology utilized by a firm ultimately dictates which target market is
selected. Non-systematic market selection methodologies may never consider the most
promising target markets. Two of the most commonly mentioned non-systematic market
selection methodologies are the nearest neighbor and psychological nearness approaches.
These approaches select markets based upon their relative proximity and their degree of
similarity in macroeconomic, political, sociological, and cultural taditions. While
Cavusgil (1984) found that there are no differences in the types of markets selected by new
exporters, active exporters, or fully committed exporters, Cooper and Kleinschmidt ( 1985)
found that older firms with more export experience tend to use a “world orientation
approach”. This study found that the majority of experienced agri-food firms do not select
their target markets based upon the nearest neighbor or psychological nearness
methodologies. While a stong attraction to similar markets cannot be ruled out entirely

because Western Europe and Canada are important export markets for American agri-food

105
exporters, the large percentage of companies that export to the Pacific Rim also suggests

that many experienced agri-food exporters do not confine themselves solely to a nearest
neighbor or psychological nearness approach for selecting target markets. In fact the
majority of companies state that they typically utilize a market selection methodology

similar to market screening.

5.2.3 Market Selection Factors

The third research objective of this study was to identify the specific market
selection factors that agri-food exporters utilize to distinguish one target market form the
next. The single most important step in the international market selection process is the
identification of appropriate market selection factors. As the whole expanse of market
selection literature is studied, it becomes apparent that every county, every market, and
every customer in the world is unique. These differences make some potential export
markets more attactive than others, however formally measuring and quantifying these
differences in order to compare different markets can be a difficult and time consuming
task.

Macroeconomic factors are used relatively less often by agri-food firms than other
factors. Among the geographic, infrastuctural, and demographic factors, the stage of
development, and the availability of ports, highways, and railroads were the most
commonly utilized factors for selecting new target markets. In general exporters tend to
use tade barrier, legal, and political factors quite frequently. It appears that those factors
that directly affect business activities such as government stability, import tariffs, import

licensing regulations, and phytosanitary regulations are very important to agri-food

106
exporters. However it also appears that those factors which do not directly affect agri-food

exporters are not used by a majority of firms for selecting target markets. These factors
include the level of civil, human, and political rights, type of political system, the political
orientation towards the United States. This study found that agri-food exporters are very
aware of social and cultural factors which have a direct effect upon their marketing
stategies. “Food preparation methods and eating habits” is the fourth most commonly
utilized market selection factor among all exporters, however all of the other social and
cultural factors are not used heavily in the marketing practices of agri-food firms. As with
the macroeconomic factors, manufacturing factors similar to the food and agricultural
factors have been utilized in many econometic studies as a proxy factor for current product
demand. However, unlike the macroeconomic factors, the food and agricultural factors
seem to be heavily used by agri-food exporters. All of the food and agricultural factors are
used by a majority of the respondents. Finally, the most important group of market
selection factors include the marketing factors. This group had the most frequently used
market selection factors of any group.

Of the 46 factors considered, this study found current product demand, customer
preferences, government stability, food preparation methods and eating habits, the total
annual imports of your type of product, import tariffs, and import licensing regulations to
be the seven most frequently utilized market selection factors by all agri-food firms for
distinguishing one market from the next. Twenty-three of the 46 factors were utilized by at
least two thirds of the exporters, while 17 were used by less than 50% of the agri-food

exporters.

107
5.2.4 Export Performance

The fourth research objective of this study was to identify which market selection
factors are related to export performance. The first step in this analysis was to gather
information on the individual performance indicators that will be correlated with the
different types of market selection factors. As expected most exporters (77.5%) feel that
their market selection methods are usually effective or only need some minor
improvements. 73.8% of all exporters in this study state that their export sales have
matched or exceeded their goals. Finally, 73.4% of agri-food firms experience some level
of export growth. Overall the vast majority of agri-food firms in this survey are highly
experienced and successful firms.

The second step in this analysis was to gather information on the importance, ease
of information collection, and the effectiveness of the six main market selection categories.
As expected from the analysis of the individual factors, the marketing group was rated by
exporters as including the most important factors for selecting new target markets. Trade,
legal, and political factors were the next most important category. All of the scores related
to the ease of gathering information on each market selection group were very evenly
distibuted. Most exporters stated that each group was neither easy nor difficult to obtain.
The scores for the effectiveness of each factor group were only slightly more varied. The
marketing group was rated as the most effective group followed by the food and
agricultural group.

The final step in identifying which market selection factors are correlated with
export performance is correlation analysis. One of the most significant findings of this

study was that the market selection factors utilized by experienced agri-food exporters are

108
not correlated with export performance. This was not expected; however, this may be

explained by: (1) the respondents are a relatively homogeneous group - highly
experienced, relatively successful and in fair agreement about the importance, ease of use,
and effectiveness of the various factors, and thus the data may not have exhibited enough
variation to create stong performance correlations, and (2) the factor groups alone are not
a complete model of market selection. It appears that export performance is probably
related to a vast number of factors outside the scope of this study. Further work on an

understanding of cause and effect relationships with performance is clearly needed.

5.2.5 Comparison of Different Types of Agri-Food Firms

The fifth research objective of this study was to compare different types of agri-
food firms based upon the total mix of market selection factors that these firms utilize for
selecting target markets. This was performed with a cluster analysis. This study found that
three different types of agri-food exporters exist based upon the mix of market selection
factors chosen by these firms. There are high frequency factor users, limited factor users,
and moderate frequency factor users of market selection factors. A greater percentage of
the high frequency factor users utilize each market selection factor. The high frequency
factor users use nearly all of the 46 different market selection factors while only six of the
46 factors are used by less than 50% of the members in this cluster. Only seven of the 46
market selection factors are used by at least two thirds of the limited frequency factor users
while 30 are used by less than 50% of the firms in this group. The moderate factor users
fall in-between the limited factor users and the high frequency factor users. Twenty-six of

the 46 different market selection factors are utilized by two thirds of this cluster’s

109
members, while 16 factors are used by less than 50% of the moderate factor users. The

most significant difference between these three groups is the fact that the limited factor
users export to a much smaller number of international markets than both the moderate and
high frequency factor users. Both the moderate factor users and the high frequency factor
users also export a significantly greater number of products. This suggests that firms who
export to a greater number of markets and export a greater number of products tend to
utilize more market selection factors for selecting target markets.

While the overall usage of the market selection factors between each type of agri-
food exporter varies greatly, there are also several important similarities. One of the most
interesting observations is the relative importance of certain market selection factors among
all three groups. These factors are current product demand, government stability, food
preparation methods and eating habits, import tariffs, import licensing regulations,
customer preferences, and the stage of development. An important hypothesis developed
from this finding can be stated as follows: Rather than needing an extensive list of market
selection factors for selecting target markets, the bulk of the decision making information

may be obtained from a limited number of key factors.

5.2.6 Comparison of the Findings with the Market Selection Literature

The sixth research objective of this study was to compare and contast the findings
of this study with the literature on manufacturing firms. Overall much of the conceptual
literature seems to be creawd without considering the needs and constaints that industy
faces. This study has found many large differences between the suggested conceptual

techniques (which typically suggest the use of quantitative/contactible methodologies) and

1 10
how market selection is actually performed by industy (this study found that agri-food

firms typically utilize qualitative/contactible techniques) with the exception of market
screening. While theoretically these techniques are designed to select high potential
markets, the lack of enthusiasm by exporting firms to adopt these techniques is rarely
discussed. The creation of market selection methodologies must be made with the industy
in mind in order to meet their needs.

While many of the general concepts provided by the experiential literature may
apply to agri-food firms, such as the existence of an internationalization process, there also
appears to be important differences between exporters who export industial products and
those who export agricultural commodities. For example, the experiential literature reports
that most industial firms with less than 500 employees tend to be reactive exporters,
however the vast majority of agri-food firms surveyed with less than 500 employees tend to

be active exporters.

Other important differences are as follows:

1. Many of the studies that have surveyed manufacturing firms have found a
high degree of correlation between market similarity and market selection
preferences (Davidson, 1983), however this study found that agri-food firms
do not exhibit a high degree of correlation between market similarity and
market selection preferences.

2. This study also found that the majority of agri-food exporters use qualitative
methods for selecting target markets. This is consistent with Papadopoulos
and Denis’s (1988) suggestion that quantitative market selection
methodologies may be too time consuming and costly for small- and

medium-sized exporters to use.

1 1 1
. Much of the market selection literature suggests the use of many

macroeconomic factors for analyzing target markets, however this study
found that most agri-food firms do not typically utilize macroeconomic
factors. While this may seem surprising at first, it is typically only the
conceptual/quantitative market selection methodologies such as econometric
and cluster analysis that mention the use of macroeconomic factors.

. Several studies have found population figures to be highly correlated with
the consumption of many products (Cavusgil, 1987), however this study
found that less than two thirds of all experienced agri-food exporters utilize
total population or population growth rates for selecting target markets.

. One study states that social and cultural factors may not be included by
many export market researchers in the selection of target markets (Cavusgil,
1987), however this study found that agri-food exporters seem to be very
aware of social and cultural factors which have a direct effect upon their
marketing strategies. “Food preparation methods and eating habits” is the
fourth most commonly utilized market selection factor among all exporters.
. Two of the most commonly mentioned non-systematic market selection
methodologies are the nearest neighbor and psychological nearness
approaches. These approaches select markets based upon their relative
proximity and their degree of similarity in macroeconomic, political,
sociological, and cultural taditions. While Cooper and Kleinschmidt (1985)
found that older firms with more export experience tend to use a “world
orientation approach” for selecting target markets, Cavusgil (1984) found
that there are no differences in the types of markets selected by new
exporters, active exporters, or fully committed exporters. This study found
that the majority of experienced agri-food firms do not select their target
markets based upon the nearest neighbor or psychological nearness
methodologies. The results of this study are more consistent with Cooper

and Kleinschmidt’s finding.

1 12
5.3 Limitations of Data

Because this thesis utilized the PIERS data set for surveying firms that actively
participate in the selection of their export markets, two forms of bias have been intoduced
into this study. The first source of bias is caused by the fact that the data only includes
exporters who have exported between 1978-1991. This means that all of the exporters in
this study have been exporting for at least four years. Few of these exporters would be
considered as new or inexperienced exporters. This has important implications for the
survey results. Experienced exporters through tial and error may have perfected their
market selection methodologies to the point where the variations in performance between
the respondents will be difficult to detect. The variations in performance may be more
pronounced if new exporters could have been identified and included in the survey.
Unfortunately a large number of new-to—exporting firms would be difficult to locate.

The second form of bias intoduced into the survey data is caused by the manner in
which the participants were selected from the first phase of the survey. This survey only
identifies agri-food firms who actively participate in the selection of their target markets. It
does not consider agri-food firms who have exported in the past, but have given up on the
internationalization process. Had this later group been a target of this study more

performance differences might have been observed and linked to market selection issues.

5 .4 Recommendations for Future Research

1. This study identified seven key market selection factors utilized by all types
of agri-food firms regardless of firm size, the number of products exported,
or the number of markets exported to. These factors include current

product demand, government stability, food preparation methods and eating

1 13
habits, import tariffs, import licensing regulations, customer preferences,

and the stage of development. The importance of these seven key market
selection factors led to the hypothesis that rather than needing an extensive
list of market selection factors for selecting target markets, the bulk of the
decision making information may be obtained from a limited number of key
factors. This hypothesis should be empirically tested by future research.

. It is not surprising that factors such as current product demand and
customer preferences are important market selection factors. However, this
study did not address how agri-food firms measure these factors. Future
research sough identify how firms quantify and measure these factors as
well as the relationship between a firm’s ability to utilize these factors and
performance.

. It appears that many firms may utilize a nearest neighbor or psychological
nearness approach during the first phases of the internationalization process,
but as they progress they may become more sophisticated and utilize a
methodology similar to market screening. Future research should test the
validity of the internationalization process for agri-food firms.

. Finally, a large portion of the market selection literature is devoted to the
development of quantitative market selection methodologies. While
quantitative factors are typically easier to compare than qualitative factors,
this study found that the majority of agri-food exporters prefer to use
qualitative factors for selecting target markets. While this is consistent with
Papadopoulos and Denis’s (1988) suggestion that quantitative market
selection methodologies may be too time consuming and costly for small-
and medium-sized exporters to use, this hypothesis should be empirically
tested.

114
5.5 Suggestions to Agri-Food Firms

Much of the market selection literature suggests that inexperienced firms select
target markets with an expansive methodology. Expansive market selection techniques,
such as ethnic affinity, nearest neighbor, and psychic distance start from the home market
and “expand” outwardly during the market selection process. This type of market selection
methodology is inferior to contractible methodologies because it does not consider all
export opportunities available to the exporter. Contactible market selection methods, such
as econometic analysis, cluster analysis, and market screening, start with the total number
of possible export markets and through various screening or market grouping techniques,
systematically narrow down a large number of possible markets to the most attractive
market. The least attractive markets are systematically eliminated, and those markets which
remain may be analyzed in-depth. For this reason agri-food firms should utilize a
contactible market selection methodology. However, econometic analysis and cluster
analysis normally depend heavily upon quantified macroeconomic and “social and cultural”
factors. This study found that macroeconomic and “social and cultural” factors are not
frequently used by agri-food firms. The findings of this study also seem to be consistent
with Papadopoulos and Denis’s ( 1988) suggestion that quantitative market selection
methodologies (like econometic and cluster analysis) may be too time consuming and
costly for small- and medium-sized exporters to operationalize. For these two reasons
market screening, a contactible/qualitative methodology, is probably recommended as
being the most beneficial methodology for agri-food exporters to use. Because the majority
of agri-food firms already utilize a methodology similar to market screening, this method

would probably be the most acceptable to agri-food firms as well. It offers an efficient

1 15
methodology for continually assessing the world’s export markets through a step-by-step

filtering process. This filtering process eliminates inappropriate markets from a large
number of possible alternatives. The least attactive markets are systematically eliminated,
and those markets which are ultimately left after several screenings can be analyzed in-
depth. Market screening also offers the advantage of being quicker, cheaper, and easier to
administer than many of the more complex statistical methods for international market
selection.

The evidence from this study also suggests that firms may be able to focus on
several key market selection factors rather than waste time and resources on collecting
information on a vast number of market selection factors. By focusing limited resources on
collecting and analyzing a more limited set of key selection factors, it appears that firms can
efficiently analyze all potential markets in less time with fewer resources without giving up
much in the way of potential performance. This study found these key factors to be current
product demand, government stability, food preparation methods and eating habits, import

tariffs, import licensing regulations, customer preferences, and the stage of development.

5.6 Concluding Remarks

Very little market selection research has been devoted to how agri-food firms select
and develop new international markets. Most studies on market selection have been
devoted to the study of manufacturing firms. This thesis fills this void and provides useful
information on how agri-food firms select new international markets. It provides a solid

foundation for future research which was not previously available. This includes

1 16
information on the general characteristics of agri-food exporters. It also identifies what

types of market selection methodologies agri-food exporters use for selecting target
markets, the specific market selection factors that agri-food exporters utilize, and compares
different types of agri-food firms based upon the total mix of market selection factors that
these firms utilize for selecting target markets.

Perhaps the most important contibution of this thesis is the hypothesis that: Rather
than needing an extensive list of market selection factors for selecting target markets, the
bulk of the decision making information may be obtained from a limited number of key
factors. This suggests that exporters can focus their limited resources on collecting and
analyzing a more limited set of key selection factors without giving up much in the way of

potential performance.

APPENDIX A

SURVEY QUESTIONNAIRE

PHASE I

1 17
FIGURE A-l SURVEY POSTCARD

Does your company export a food or agricultural product?

How do you export? (Please check all that apply for your company.)

Direct . ..................................... [ ]
Through a cooperative ............................ [ ]
Through an export agent. ......................... [ ]
Through a freight forwarder ........................ [ ]
Through another food, fruit, or vegetable shipper .......... [ ]
Through a commodity association. ................... [ ]
Other . . . .[ ]

 

Does your firm actively participate in the selection of any of its export markets?
Who would be the primary contact for export markets within your company?

Name and Position

YESII

YESI]

 

Company

 

Address

 

City, State, Zip

 

N01]

N01]

1 18
FIGURE A-2 FIRST MAILOUT

January 25, 1995

Company
Address
City, State Zip

Dear Colleague,

In the wake of NAFTA, GATT, and the increasing globalization of food and agricultural
markets, businesses are asking for our help to validate the effectiveness of market selection
processes and to develop new, more effective processes to help them improve export
opportunities.

We need your help. We are developing a mailing list for a study about International Market
Selection. Your company is one of 500 exporting firms we may want to survey by mail.

Please complete and return the self-addressed, stamped postcard by February 3, 1995. This
should only take a minute, and your contibution could help us provide you with important
export information.

Thank you for your cooperation.

Sincerely,

Dr. Chris Peterson
Professor and Project Director
(517) 355-1813

Enclosure: Self addressed, stamped postcard.

APPENDIX B

SURVEY QUESTIONNAIRE

PHASE II

 

1 19
FIGURE B-l PHASE II SURVEY

 

 

Michigan State University
Department of Agricultural Economics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This International Market Selection Study is a project designed to discover how
international marketing factors effect the market selection process of food and agricultural
exporters.

Your opinion is important to us.

Please use the enclosed self-addressed envelope to return the completed questionnaire.

Thank you for your time and effort.

 

 

 

Instructions For Questions 1 Through 6.

When choosing an export market, many factors may play an important role in the decision
making process. We would like to know which foreign market characteristics have been
important for your company when analyzing potential export markets. In questions 1
through 6, please indicate how effective the various suggested market selection factors
have been for screening out inappropriate markets and selecting new export markets.

 

 

 

120
FIGURE B-l CONTINUED

TARGET COUNTRY MACROECONOMIC FACTORS

1. What specific Macroeconomic Factors do you use to select new export markets? (Please check the appropriate
box in each case.)

 

 

Gross Domestic Product per capita ....... YES [ ] NO [ ]
Exchange rate fluctuations ............ YES [ ] NO[ ]
Inflation rate ..................... YES [ ] NO [ ]
Income Distribution ................. YES [ ] NO[ ]
Balance of Payments ............... YES [ ] NO[ ]
Rate of Unemployment ............... YES [ ] NO [ ]
Other (Please list)

Other

Other

 

A. On a scale from 1 to 5, how important are Macroeconomic Factors in your selection of a new export market?
(Please circle one number)

Not Important Somewhat Important Very Important

1 2 3 4 5

B. How easy has it been to gather this macroeconomic information? (Please circle one number)

Very Difficult to Obtain Neither Difficult Nor Very Easy to Obtain
Easy to Obtain
1 2 3 4 5

C. How effective has this information been in helping you select a new export market? (Please circle one number)
Not Effective Somewhat Effective Very Effective

1 2 3 4 5

121
FIGURE B-l CONTINUED

TARGET COUNTRY GEOGRAPHIC, IN FRASTRUCTURAL, AND DEMOGRAPHIC FACTORS

2. What specific geographic. infrastructural. and demographic factors do you use to select new export markets?
(Please check the appropriate box in each case.)

 

DistancefromtheUnitedStates ...................... YES[] NO[]
Stage of development (c. g. first. or third world country,

availability of electricity. water. etc.) ................ YES [ ] NO [ ]
Availability of ports, highways, and railroads ............. YES [ ] NO [ ]
Total population or population growth rate ............... YES [ ] NO [ ]
Age composition of country ........................ YES [ ] NO [ ]
Average family size .............................. YES [ ] NO [ ]
Other (Please list)
Other

 

A. On a scale from 1 to 5, how important are geographic, infrastructural. and demographic factors in your
selection of a new export market? (Please circle one number)

Not Important Somewhat Important Very important

1 2 3 4 5

B. How easy has it been to gather this information? (Please circle one number)

Very Difficult to Obtain Neither Difficult Nor Very Easy to Obtain
Easy to Obtain
1 2 3 4 5

C. How effective has this information been in helping you select a new export market? (Please circle one number)

Not Effective Somewhat Effective Very Effective

1 2 3 4 5

122
FIGURE B-l CONTINUED

TARGET COUNTRY TRADE BARRIERS, LEGAL, AND POLITICAL FACTORS

3. What specific Trade Barrier, Legal, and Political Factors do you use to select new export markets? (Please
check the appropriate box in each case.)

 

Type of Political System .............................. YES [ ] NO [ ]
Government Stability ................................ YES [ ] NO [ ]
Local contract and sales regulations ..................... YES [ ] NO [ ]
Level of Civil. Human, and Political Rights ................ . YES [ ] NO [ ]
Ability to enforce contracts ............................ YES [ ] NO [ ]
Phytosanitary regulations ............................. YES [ ] NO [ ]
Labeling and packaging regulations ..................... YES [ ] NO [ ]
Import tariffs ..................................... YES [ ] NO[ ]
Taxes or fees ..................................... YES[ ] NO[ ]
Import licensing regulations ........................... YES [ ] NO [ ]
Customs paper work ............................... . YES [ ] NO [ ]
Political Orientation Towards the US (e.g., friendly or hostile). . . . YES [ ] NO [ ]
Other (Please list)

Other

 

A. On a scale from 1 to 5. how important are trade barriers, legal. and political factors in your selection of a new
export market? (Please circle one number)

Not Important Somewhat Important Very Important

1 2 3 4 5

B. How easy has it been to gather this information? (Please circle one number)

Very Difficult to Obtain Neither Difficult Nor Very Easy to Obtain
Easy to Obtain
1 2 3 4 5

C. How effective has this information been in helping you select a new export market? (Please circle one number)

Not Effective Somewhat Effective Very Effective

1 2 3 4 5

123
FIGURE B-I CONTINUED

TARGET COUNTRY SOCIAL AND CULTURAL FACTORS

4. What specific social and cultural factors do you use to select new export markets? (Please check the appropriate

box in each case.)

 

 

Whether English is the primary language spoken ...... YES [
The number of languages spoken ................. YES [
The number and types of religions ................ YES [
The number of different racial groups .............. YES [
Food preparation methods and eating habits .......... YES [
Whether country is culturally similar to the US ...... YES [
Social customs ............................. YES [
Other (Please list)

Other

Other

 

A. On a scale from 1 to 5, how important are social and cultural factors in your selection of a new export market?

(Please circle one number)

Not Important Somewhat Important

1 2 3

HHHHHHH

NO[
NO[
NO[
NO[
NO[
NO[
NO[

B. How easy has it been to gather this information? (Please circle one number)

Very Difficult to Obtain Neither Diffith Nor
Easy to Obtain
1 2 3

C. How effective has this information been in helping you select a new export market? (Please circle one number)

Not Effective Somewhat Effective

1 2 3

Very Important

Very Easy to Obtain

Very Effective

124
FIGURE B-l CONTINUED

TARGET COUNTRY FOOD AND AGRICULTURAL FACTORS

5. What specific food or agricultural factors do you use to select new export markets? (Please check the appropriate
box in each case.)

 

Total annual food or agricultural imports from US ........ YES [ ] NO [ ]
Total annual food or ag. imports from all sources .......... YES [ ] NO[ ]
Total annual imports of your type of product ............. YES [ ] NO[ ]
Total annual imports of similar products. ............... YES [ ] NO[ ]
Growth rate of agricultural or food imports from US ...... YES [ ] NO[ ]
Growth rate of food or ag. imports from all sources ........ YES [ ] NO [ ]
Local production of your product ..................... YES [ ] NO [ ]
Local production of similar products .................. YES [ ] NO[ ]
Other (Please list)

Other

 

A. On a scale from 1 to 5. how important are the target country's food and agricultural factors in your selection of
a new export market? (Please circle one number)

Not Important Somewhat Important Very Important

1 2 3 4 5

B. How easy has it been to gather this information? (Please circle one number)

Very Difficult to Obtain Neither Difficult Nor Very Easy to Obtain
Easy to Obtain
1 2 3 4 5

C. How effective has this information been in helping you select a new export market? (Please circle one number)

Not Effective Somewhat Effective Very Effective

1 2 3 4 5

125
FIGURE B-l CONTINUED

TARGET COUNTRY MARKETING FACTORS

6. What specific Marketing Factors do you use to select new export markets? (Please check the appropriate box in
each case.)

 

CurrentProductDemand ..................... YES[ ] NO[ ]
Overseas Shipping Costs ..................... YES [ ] NO [ ]
Number of local competitors ................... YES [ ] NO [ ]
Average local prices of your product ............. YES [ ] NO [ ]
Customer preferences (e. g. Preferences for a

particular variety, sweetness, crispness. etc.) ...... YES [ ] NO [ ]
Availability of import trading partners ............. YES [ ] NO[ ]
Reliability of import trading partners .............. YES [ ] NO [ ]
Other (Please list)
Other

 

A. On a scale from 1 to 5, how important are Marketing Factors in your selection of a new export market? (Please
circle one number)

Not Important Somewhat Important Very Important

1 2 3 4 5

B. How easy has it been to gather this information? (Please circle one number)

Very Difficult to Obtain Neither Difficult Nor Very Easy to Obtain
Easy to Obtain
l 2 3 4 5

C. How effective has this information been in helping you select a new export market? (Please circle one number)

Not Effective Somewhat Effective Very Effective

1 2 3 4 5

126

FIGURE B-l CONTINUED

10.

11.

12.

How satisfied has your company been with its achievements in exporting? (Please check the most appropriate
box.)

a) Our export sales have exceeded our goals ......... [ ]
b) Our export sales have matched our goals ......... [ ]
c) Our export sales have been below our goals ....... [ ]

How many years has your company been exporting? (Check one)

a) 0-2 Years ................ [ ]
b) 3-5 Years ................ [ ]
c) 5-10 Years ............... [ ]
(I) 10-20 Years .............. [ ]
c) More than 20 Years ......... [ ]

Check the geographical areas that your company has exported to during the last 5 years. (Check all that apply)

a) Canada .................. [ ]
b) Mexico ................. [ ]
0) Western Europe ........... T 1]
(1) Eastern Europe ............ [ ]
e) South and Central America. . . . [ ]
0 Australia ................ I ]l
g) Pacific Rim Countries ........ [ ]
b) Other Asian Countries ........ |[ ]|
i) Africa ................... I ]
Approximately what percentage of your company’s sales come from export markets? (Check one)
a) 0—5% ............. [ ]
b) 6—15% ............ [ ]
c) 16—25% ........... [ ]
(I) 26-50% ........... [ ]
e) 51-75% ........... [ ]
1) 76-100% .......... [ ]

Over the past 5 years what has been your company’s average annual growth rate for total export sales? (Check
one)

a) Declining ................ [ ]

b) Stable .................. [ ]

c) 1-5% Growth ............. [ ]

d) 6-10% Growth ............. [ ]

e) More than 10% growth ...... [ ]

When selecting new export markets, does your company typically: (Please check ONE most appropriate box.)

a) Consider a relatively small number of countries that are

geographically close ............................ [ ]
b) Consider a relatively small number of countries that have
culturally similar markets to those you serve in the US . . . . [ ]

c) Consider a relatively large number of countries, narrowing
them down to one or two target markets ............... [ ]

FIGURE B-l

127
CONTINUED

13. Export marketing managers often have different methods for choosing new export markets.

Qualitative methods tend to utilize information gathered from news reports, expert Opinion, or the
marketing manager’s personal views and experiences about a particular country.

Quantitative methods for market selection tend to rely mone heavily upon purely statistical information,

such

as GDP per capita or market size.

How would you describe your methods for choosing export markets? (Please check the most appropriate box.)

a) Only qualitative methods are used ........................... [ ]
b) Mostly qualitative methods are used .......................... [ ]
c) An equal mix of qualitative and quantitative methods are used ........ [ ]
d) Mostly quantitative methods are used ......................... [ ]
e) Only quantitative methods are used .......................... [ ]

14. Overall how would you rate the effectiveness of your methods for selecting foreign markets? (Please check the
most appropriate box.)

a) Our methods need substamial improvement ....... [ ]
b) Our methods need some minor improvements ...... [ ]
c) Our methods are usually effective .............. [ ]
d) Our methods are nearly always effective .......... [ ]

15. in what form are your food or agricultural products typically shipped? (Check all that apply)

a)
b)
c)
d)
e)

0

Fresh ............ [ ]
Frozen ........... [ ]
Dried ............ [ ]
Canned ........... [ ]
Processed ......... [ ]
Other

 

16. Please check the fruit or vegetable products that your company has exported during the past 5 years. (Please

 

 

check all that apply)

Apples .......... [ ] Corn ............ [ ]
Dry Beans ....... [ ] Carrots ........... [ ]
Tart Cherries ..... [ ] Cucumbers ........ [ ]
Blueberries ....... [ ] Peaches ........... [ ]
Pears ........... [ ] Potatoes ........... [ ]
Other . Other

Processed Food Product

 

17. How many employees does your company employ? (Check One)

a)
b)
c)
d)
6)

Less than 10 .............. [ ]
11-25 ................ [ ]
26-100 ................ [ ]
101-150 ................ [ ]
More than 150 ............. [ ]

FIGURE B-l

128
CONTINUED

18. Approximately what is your company's gross annual sales level? (Check One)

a)
b)
C)
d)
6)

Less than $10 million ........ [ ]
$11-$25 million ............ [ ]
$26-$50 million ............ [ ]
351-150 million ............ [ ]
More than $150 million ....... [ ]

If you would like to share additional comments on the market selection process. please write on this page.

You are finished with this survey. Your opinion on each question counts a great deal.

Please fold this survey lengthwise, place it in the self addressed envelope. and send it back to us.

Thank you very much for your cooperation.

129
FIGURE B-2 PHASE II COVER LETTER

Febnrary 20, 1995

Name

Title

Company
Address

City, State Zip

Dear Mr. Name:

We want to thank you for returning our lntemational Market Selection postcard. Enclosed you
will find the follow-up survey mentioned in the original letter.

This is the first study that analyzes the specific export market selection practices of food and
agricultural firms. Therefore, the results are of particular importance for food and agricultural
exporters and for those of us in universities who wish to assist you. The usefulness of our results
depends upon how accurately we are able to describe the export market selection process.

Your answers to the survey questions will be kept confidential and used only in combination with
the answers of others who complete this survey. To ensure confidentiality, your names and
addresses will never be placed on the survey. The questionnaire has an identification number
used for mailing purposes only. Simply stated, your privacy will be guaranteed. Finally, you
indicate your voluntary agreement to participate in this research project by completing and
returning the enclosed survey.

When you have completed this survey, please fold it lengthwise and return it in the self
addressed-stamped envelope. If you would like a free summary of the survey results, please
write “copy of the results requested” on the back of the retum envelope and print your name and
address below it. To ensure your privacy, please do not put this information on the questionnaire
itself.

If you have questions about the survey, please feel free to write or call us at the telephone
number listed below. We would be happy to answer your questions.

Thank you for your participation.

Sincerely,

Dr. Chris Peterson
Professor and Project Director
(517) 355-1813

130
FIGURE B-3 POSTCARD REMINDER

March 6, 1995

Dear Mr. Name:

Two weeks ago you received a questionnaire asking for your insights on how food and agricultural
exporters select their international markets.

If you have already completed and returned the questionnaire, please accept our sincere thanks. If not,
please do so today. Because this study involves a small, representative sample of food and agricultural
exporters, it is extemely important that your answers be included if the results are to accurately represent
the opinions of America’s food and agricultural exporters.

If by some chance you did not receive the questionnaire, or it was misplaced, please call me now at (517-
355-1813), and I will mail another one to you today.

Sincerely,

Dr. Chris Peterson
Professor and Project Director

APPENDIX C

MARKET SELECTION FACTORS BY CLUSTERS

131

TABLE C-1 MARKET SELECTION FACTORS RANKED BY CLUSTER 1
Market Selection Factors Ranked by

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cluster 1 3

Factor All Groups Cluster 1 Cluster 2 Cluster 3

Current Product Demand 97.5 100.0 89.5 100.0
Customer Preferences 91.4 100.0 68.4 92.9
Reliability of Import Trading Partners 81.5 97.6 57.9 71.4
Total Annual Imports of Your Type of Product 86.3 95.1 63.2 92.9
Local Production of Your Product 82.5 95.1 57.9 85.7
Number of Local Competitors 80.2 92.7 52.6 71.4
Phytosanitary Regulations 75.0 92.7 26.3 85.7
Food Preparation Methods and Eating Habits 86.3 90.2 78.9 92.9
Average Local Prices of Your Product 82.7 90.2 63.2 78.6
Total Annual Imports of Similar Products 78.8 90.2 47.4 92.9
Local Production of Similar products 76.3 90.2 42.1 85.7
Import Tariffs 85.5 87.8 78.9 85.7
Ability to Enforce Contracts 77.6 85.4 52.6 85.7
Growth Rate Of Agricultural or Food Imports from US 67.5 85.4 15.8 92.9
Availability of Import Trading Partners 66.7 85.4 26.3 71.4
Import Licensing Regulations 82.9 82.9 73.7 92.9
Government Stability 86.8 80.5 89.5 100.0
Overseas Shipping Costs 77.8 80.5 63.2 92.9
Availability of Ports, Highways, and Railroads 73.7 80.5 52.6 78.6
Taxes or Fees 75.0 78.0 57.9 85.7
Local Contract and Sales Regulations 72.4 78.0 47.4 85.7
Labeling and Packaging Regulations 69.7 78.0 31.6 92.9
Growth Rate of Food or Ag. Imports from all Sources 61.3 73.2 15.8 100.0
Stage of development 72.4 68.3 68.4 100.0
Total Annual Food or Agricultural Import from the US 57.5 68.3 5.3 100.0
Social Customs 30.0 68.3 5.3 100.0
Total Annual Food or Ag. Imports from all Sources 60.0 65.9 15.8 100.0
Exchange Rate Fluctuations 55.1 63.4 21.1 71.4
Customs Paper Work 60.5 61.0 42.1 78.6
Total Population or Population Growth Rate 59.2 61.0 36.8 58.7
Income Distribution 46.2 46.3 26.3 78.6
Political Orientation Towards the US 48.7 36.6 36.8 100.0
Type of Political System 42.1 34.1 36.8 78.6
Distance from the United States 35.5 34.1 31.6 50.0
Inflation Rate 34.6 34.1 5.3 71.4
Gross Domestic Product per Capita 38.5 24.4 42.1 78.6
Balance of Payments 24.4 19.5 10.5 50.0
Whether English is the Primary Language Spoken 15.0 14.6 5.3 35.7
Rate of Unemployment 16.7 9.8 5.3 57.1
Whether Country is Culturally Similar to the US 1 1.3 9.8 5.3 28.6
The Number Of Different Racial Groups 10.0 9.8 0.0 28.6
The Number of Languages Spoken 8.8 9.8 0.0 21.4
Level of Civil, Human, and Political Rights 17.1 4.9 10.5 64.3
Age Composition of Country 13.3 4.9 5.3 50.0
The Number and Types of Religions 6.3 2.4 5.3 21.4
Average Family Size 7.9 0.0 5.3 35.7

 

 

 

 

 

132

TABLE C-2

MARKET SELECTION FACTORS RANKED BY CLUSTER 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Market Selection Factors Ranked by
Cluster 2 .

Factor All Groups Cluster 1 Cluster 2 Cluster 3

Current Product Demand 97.5 100.0 89.5 100.0
Government Stability 86.8 80.5 89.5 100.0
Food Preparation Methods and Eating Habits 86.3 90.2 78.9 92.9
Import Tariffs 85.5 87.8 78.9 85.7
Import Licensing Regulations 82.9 82.9 73.7 92.9
Customer Preferences 91.4 100.0 68.4 92.9
Stage of development 72.4 68.3 68.4 100.0
Total Annual Imports of Your Type of Product 86.3 95.1 63.2 92.9
Average Local Prices of Your Product 82.7 90.2 63.2 78.6
Overseas Shipping Costs 77.8 80.5 63.2 92.9
Local Production of Your Product 82.5 95.1 57.9 85.7
Reliability of Import Trading Partners 81.5 97.6 57.9 71.4
Taxes or Fees 75.0 78.0 57.9 85.7
Number of Local Competitors 80.2 92.7 52.6 71.4
Ability to Enforce Contracts 77.6 85.4 52.6 85.7
Availability of Ports, Highways, and Railroads 73.7 80.5 52.6 78.6
Total Annual Imports of Similar Products 78.8 90.2 47.4 92.9
Local Contract and Sales Regulations 72.4 78.0 47.4 85.7
Local Production of Similar products 76.3 90.2 42.1 85.7
Customs Paper Work 60.5 61.0 42.1 78.6
Gross Domestic Product per Capita 38.5 24.4 42.1 78.6
Total Population or Population Growth Rate 59.2 61.0 36.8 58.7
Political Orientation Towards the US 48.7 36.6 36.8 100.0
Type of Political System 42.1 34.1 36.8 78.6
Labeling and Packaging Regulations 69.7 78.0 31.6 92.9
Distance from the United States 35.5 34.1 31.6 50.0
Phytosanitary Regulations 75.0 92.7 26.3 85.7
Availability of Import Trading Partners 66.7 85.4 26.3 71.4
Income Distribution 46.2 46.3 26.3 78.6
Exchange Rate Fluctuations 55.1 63.4 21.1 71.4
Growth Rate of Agricultural or Food Imports from US 67.5 85.4 15.8 92.9
Growth Rate of Food or Ag. Imports from all Sources 61.3 73.2 15.8 100.0
Total Annual Food or Ag. Imports from all Sources 60.0 65.9 15.8 100.0
Balance of Payments 24.4 19.5 10.5 50.0
Level of Civil, Human, and Political Rights 17.1 4.9 10.5 64.3
Total Annual Food or Agricultural Import from the US 57.5 68.3 5.3 100.0
Inflation Rate 34.6 34.1 5.3 71.4
Social Customs 30.0 68.3 5.3 100.0
Rate of Unemployment 16.7 9.8 5.3 57.1
Whether English is the Primary Language Spoken 15.0 14.6 5.3 35.7
Age Composition of Country 13.3 4.9 5.3 50.0
Whether Country is Culturally Similar to the US 1 1.3 9.8 5.3 28.6
Average Family Size 7.9 0.0 5.3 35.7
The Number and Types of Religions 6.3 2.4 5.3 21.4
The Number of Different Racial Groups 10.0 9.8 0.0 28.6
The Number of Languages Spoken 8.8 9.8 0.0 21.4

 

 

 

 

 

 

 

133

TABLE C-3 MARKET SELECTION FACTORS RANKED BY CLUSTER 3
Market Selection Factors Ranked by

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cluster 3 .:

Factor All Groups Cluster 1 Cluster 2 Cluster 3

Current Product Demand 97.5 100.0 89.5 100.0
Government Stability 86.8 80.5 89.5 100.0
Stage of development 72.4 68.3 68.4 100.0
Growth Rate of Food or Ag. Imports from all Sources 61.3 73.2 15.8 100.0
Total Annual Food or Ag. Imports from all Sources 60.0 65.9 15.8 100.0
Total Annual Food or Agricultural Import from the US 57.5 68.3 5.3 100.0
Political Orientation Towards the US 48.7 36.6 36.8 100.0
Social Customs 30.0 68.3 5.3 100.0
Customer Preferences 91.4 100.0 68.4 92.9
Total Annual Imports of Your Type of Product 86.3 95.1 63.2 92.9
Food Preparation Methods and Eating Habits 86.3 90.2 78.9 92.9
Import Licensing Regulations 82.9 82.9 73.7 92.9
Total Annual Imports of Similar Products 78.8 90.2 47.4 92.9
Overseas Shipping Costs 77.8 80.5 63.2 92.9
Labeling and Packaging Regulations 69.7 78.0 31.6 92.9
Growth Rate of Agricultural or Food Imports from US 67.5 85.4 15.8 92.9
Import Tariffs 85.5 87.8 78.9 85.7
Local Production of Your Product 82.5 95.1 57.9 85.7
Ability to Enforce Contracts 77.6 85.4 52.6 85.7
Local Production of Similar products 76.3 90.2 42.1 85.7
Phytosanitary Regulations 75.0 92.7 26.3 85.7
Taxes or Fees 75.0 78.0 57.9 85.7
Local Contract and Sales Regulations 72.4 78.0 47.4 85.7
Average Local Prices of Your Product 82.7 90.2 63.2 78.6
Availability of Ports, Highways, and Railroads 73.7 80.5 52.6 78.6
Customs Paper Work 60.5 61.0 42.1 78.6
Income Distribution 46.2 46.3 26.3 78.6
Type of Political System 42.1 34.1 36.8 78.6
Gross Domestic Product per Capita 38.5 24.4 42.1 78.6
Reliability of Import Trading Partners 81.5 97.6 57.9 71.4
Number of Local Competitors 80.2 92.7 52.6 71.4
Availability of Import Trading Partners 66.7 85.4 26.3 71.4
Exchange Rate Fluctuations 55.1 63.4 21.1 71.4
Inflation Rate 34.6 34.1 5.3 71.4
Level of Civil, Human, and Political Rights 17.1 4.9 10.5 64.3
Total Population or Population Growth Rate 59.2 61.0 36.8 58.7
Rate of Unemployment 16.7 9.8 5.3 57.1
Distance from the United States 35.5 34.1 31.6 50.0
Balance of Payments 24.4 19.5 10.5 50.0
Age Composition of Country 13.3 4.9 5.3 50.0
Whether English is the Primary Language Spoken 15.0 14.6 5.3 35.7
Average Family Size 7.9 0.0 5.3 35.7
Whether Country is Culturally Similar to the US 1 1.3 9.8 5.3 28.6
The Number of Different Racial Groups 10.0 9.8 0.0 28.6
The Number of Languages Spoken 8.8 9.8 0.0 21.4
The Number and Types of Religions 6.3 2.4 5.3 21.4

 

 

 

 

 

 

APPENDIX D

TWO TAILED T-TEST FOR STATISTICAL DIFFERENCE BETWEEN THE MEANS

 

134

TABLE D TWO TAILED T-TEST

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Two Tailed T~Test for Statistical Difference Between the F39“ 0* .

Significance '

Means ;:
Clusters V Clusters I Cluster

1x2 1x3 2x3

Exports Direct 0.317 0.983 0.468
Exports through a Cooperative 0.336 0.065 0.035
Exports through an Agent 0.079 0.401 0.521
Exports through a Freight Forwarder 0.335 0.301 0.886
Exports through another Fruit or Vegetable Shipper 0.014 0.708 0.089
Exports through a Commodity Association 0.336 0.409 N/A
#7 How Satisfied have you been with export sales? 0.727 0.246 0.480
#8 How many years has your company been exporting? 0.946 0.904 0.955
Exports to Canada 0.077 0.826 0.134
Exports to Mexico 0.007 0.954 0.029
Exports to Western Europe 0.002 0.561 0.074
Exports to Eastern Europe 0.025 0.492 0.195
Exports to Latin America 0.007 0.787 0.065
Exports to Australia 0.403 0.032 0.011
Exports to Pacific Rim 0.312 0.289 0.095
Exports to Other Asian Countries 0.079 0.947 0.151
Exports to Africa 0.220 0.622 0.068
Number of Export Markets 0.000 0.607 0.002
#10 What percentage of sales come from exports? 0.910 0.504 0.674
#1 1 What is annual growth rate in export sales? 0.529 0.870 0.722
Export Methodology (Expansive vs. Contractible) 0.586 0.391 0.254
Export Methodology (Quantitative vs. Qualitative) 0.776 0.495 0.487
#14 How effective are your methods for market selection? 0.634 0.923 0.822
Exports Fresh Products 0.321 0.947 0.409
Exports Frozen Products 0.067 0.880 0.226
Exports Dried Products 0.414 0.494 0.967
Exports Canned Products 0.052 0.536 0.350
Exports Processed Products 0.244 0.271 0.967
Exports Seed Products 0.336 0.409 N/A
Exports Apples 0.232 0.825 0.261
Exports Dry Beans 0.992 0.458 0.521
Exports Tart Cherries 0.045 0.443 0.419
Exports Sweet Cherries 0.423 0.753 0.748
Exports Blueberries 0.517 0.150 0.085
Exports Pears 0.034 0.401 0.012
Exports Corn 0.31 1 0.383 0.980
Exports Carrots 0.394 0.086 0.033
Exports Cucumbers 0.950 0.250 0.389
Exports Peaches 0.201 0.094 0.012
Exports Potatoes 0.586 0.545 0.909
Exports Onions 0.164 0.233 N/A
Exports Nectarines 0.336 0.250 0.095
Exports Apricots 0.501 0.095 0.095
Exports Oats 0.578 0.564 0.399
Exports Nuts and Almonds 0.233 0.983 0.250
Number of different products. 0.018 0.224 0.008
#17 How many employees does your company employ? 0.974 0.091 0.121
#18 What are your gross annual sales? 0.257 0.602 0.198

 

 

 

 

 

APPENDIX E

MARKET SELECTION FACTORS IN THE LITERATURE

135

TABLE E MARKET SELECTION FACTORS IN THE LITERATURE

 

 

Amador and Starbird, 1989

 

|M acrceccnomie Factors

IBauerschmidt, Sullivan, and Gillespie, 1985

ICavusgiI, 1987

1Gomez-Mejia, 1988

jsistntz, 1992

ILiander et al., 1967

JSeringhaus, 1993

 

[Ease Domestic Product per Capita

X

X IBartsIs, 1963

X lCooka, 1972

>< lHisey and Caves, 1984

>< lNigh, 1984

>< lScholIhammer and Nigh. 1983

 

[Exchange Rate Fluctuations

XX

x X [Salvacruz and Reed, 1993

 

Ilnflation Rate

 

Ilncome Distribution

 

Balance of Payments

X X X x x lOttum and Semenik, 1993

 

Rate of Unemployment

XXX

XXX

 

 

Geographic, InfrastructuraI, and Demographic Factors

 

Distance from the United States

 

Stage of development

 

Availability of Ports, Highways, and Railroads

 

Total Population or Population Growth Rate

XXX

XX

 

Age Composition of Country

XX

 

Average Family Size

XXXXX

 

 

Trade Barriers, Legal, and Political Factors

 

Type of Political System

 

Government Stability

 

Local Contract and Sales Regulations

XXX

XXX

 

Level of Civil. Human, and Political Rights

 

Ability to Enforce Contracts

 

 

Phytosanitary Regulations

 

Labeling and Packaging Regulations

 

lm port Tariffs

 

Taxes or Fees

 

Im port Licensing Regulations

 

Customs Paper Work

XXXXXXX

 

[Political Orientation Towards the US

 

 

[Social and Cultural Factors

 

IWhether English is the Primary Language Spoken

 

[The Number of Languages Spoken

XX

 

[The Number and Types of Religions

 

IThe Number of Different Racial Groups

XXX

 

IFood Preparation Methods and Eating Habits

 

IWhether Country is Culturally Similar to the US

 

ISocial Customs

 

 

[Food and agricultural factors

 

Total Annual Food or Agricultural lm port from the US

 

Total Annual Food or Ag. Im ports from all Sources

XX

 

Total Annual Imports of Your Type of Product

 

Total Annual Imports of Similar Products

 

Growth Rate of Agricultural or Food Imports from US

 

Growth Rate of Food or Ag. lm ports from all Sources

 

Local Production of Your Product

 

Local Production of Similar products

XXXX

 

 

 

M arksting Factors

 

[Current Product Dam and

 

Everseas Shipping Costs

 

[Number of Local Competitors

 

[Average Local Prices of Your Product

 

[Eratomer Preferences

XXXXX

 

IAvailability of Import Tradianartners

 

lReliabiIity of lm port Trading Partners

 

 

 

 

XXXXXXX

 

 

 

 

 

 

 

 

 

 

 

 

BIBLIOGRAPHY

136

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Albaum, G. (1983), “Effectiveness of Government Export Assistance for US Smaller-Sized
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Amador, R. E. and Starbird, S. A. (1989), “The Evaluation of International Agribusiness
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Amine, L. S. and Cavusgil, S. T. (1986), “Export Marketing Strategies in the British
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Bartels, R. (1963), “Outline for Comparative Marketing Analysis”, in Bartels, R. (Ed.),
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Bauerschmidt, A., Sullivan, D. and Gillespie, K. (1985), “Common Factors Underlying
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