Zambezia (2003), XXX (i)Relationships Between Firm Characteristicsand Export Constraints in SME ExportersZORORO MURANDABusiness Studies Deportment, University of ZimbabweAbstractThis article presents results of an exploratory nationwide survey of 124manufacturing companies in Zimbabwe involved in exporting all over the worldthat ivas undertaken during the last quarter of 1999 and first quarter of 2000. Itfocuses on the relationship between firm characteristics of manufacturing exportersand constructs that define factors constraining export growth and competitiveness.Zimbabwe's export growth has fallen by 7.2% over the past two years because of apolitically induced economic crisis. The study concludes that Zimbalnue's exportersare essentially small to medium and that size, experience, and risk aversion are thecharacteristics that strongly contribute to perceived constraints. It observes fiveconstructs underpinning the current constraints to growth and competitiveness.These are inadequate experiential knozvledge, inadequate technical skills,uncompetitive pricing, operational capacity, and an unsupportive businessenvironment. Scrutiny of the constraint constructs shows tliat organisationalcharacteristics explain both exporter -weaknesses and their strategic shortfalls. Thestudy concludes that, while a politically induced economic crisis has significantlycontributed to the current decline in exports, corporate weaknesses and strategicinflexibility worsen the poor performance.IntroductionExporting is one of several ways in which a company can internationaliseits operations. The commonest external market entry option for companiesin less developed countries (LDCs), in comparison with other alternatives,is to export from the home factory. Other alternatives of internationalisingoperations involve establishing sales offices in export destinations,establishing strategic partnerships or joint ventures with companies intarget foreign markets, taking advantage of the familiarity they alreadyhave with their markets, establishing subsidiaries in target markets, ormoving entire production processes into the target markets. While thelatter three strategic options are not common for Zimbabwe's exportingcompanies, the first two approaches are commonly in use. It is argued herethat, in order to overcome factors constraining exports in a depressedeconomy, there is need to understand two fundamental issues, namely:a. how organisational and behavioural characteristics influence exportconstraints; and8990 Firm Characteristics and Export Constraintsb. the level and depth at which organisational and behaviouralcharacteristics interact with factors constraining export growth andcompetitiveness.Literature ReviewMotivating factors to enter or expand exports are different for each company,depending on export behaviour, commitment, and the priorities of differentexporters. In addition, organisational characteristics play a significant rolein determining the success or failure of a company's export efforts. Therelationship between size and export performance is one of manyrelationships that have been extensively studied, although there has notbeen any definitive conclusion on the issue (Moini 1995). Bonarcossi (1992)notes that there is a clear and strong explanation for the relative weaknessof small firms in international markets. Most companies that export soonafter establishment have been found to be small. According to a study ofZimbabwe's textile and clothing exporters, newly established manufacturersstart exporting early in their life, as opposed to large established companiesthat have a strong domestic presence (Muranda 1999).Export experience has also been noted in defining behavioural tendenciesamong exporters. Kaynakand Kothari (1984) and Karafakioglu (1986) haveobserved that domestic market orientation is a major obstacle to a firm'sinvolvement and commitment to exporting. Similarly Madsen (1989)concluded that there is a negative relationship between the attractiveness ofthe domestic market and export growth. Nevertheless, with increasingexport experience, firms are likely to be less uncertain in their exportactivities, have a better understanding of foreign market mechanisms,develop a network of personal contacts and customer relationships abroad,and, consequently, design and implement effective export marketingprogrammes. In Katsikeas and Piercy's (1990) view, where there is anopportunistic and non-methodical approach to exporting, there is likely tobe an adverse effect on development of experiential knowledge on exporting.Research has noted that both structural and psychological barriers inhibitcompanies from exporting. For example, Leibold (1984) observed thisphenomenon in South African exporters. In a review of factors consideredbarriers to exporting by Brazilian firms, Da Rocha and Christensen (1994)grouped these factors into five categories: national export policies,comparative marketing costs, lack of export commitment, exogenouseconomic constraints, and competitive rivalry. They went on to concludethat obstacles to exporting tended to be related to stages in the exportadoption process.Agrawal and Kamakura (1999) have noted that country of origin has asignificant influence on consumers' evaluations of products. Consumershave been observed to use country of origin as an extrinsic cue to makeZ. Muranda 91decisions about quality of products. If consumers hold a positive (negative)product country image for a given product and country, this image couldlead to a generalised positive (negative) evaluation and attitude towards allthe brands associated with a country. In their observation such a country oforigin-based equity might even extend to other product categories due tostereotypical bias.Research has also noted that gray marketing presents both opportunitiesand constraints to exporters. Gray marketers are brokers who buy goods inan alternative market where there is a price advantage, either from amanufacturer or an authorized dealer, and import them into a countrywhere prevailing prices are higher (Cavusgil and Sikora 1988). Gray marketimporting takes several forms, all with nearly the same effect. Commoneffects are reduced or cannibalised sales for the manufacturer in countrieswhere prices are higher, and jeopardized relationships with authoriseddistributors who possess contractual rights for their markets (Assmus andWiese 1995). Myers (1999) observes that gray markets thrive on wide spreadsin effective prices between markets. They also thrive on improvedinformation exchange, which has become increasingly affordable and allowsdistributors to take advantage of arbitrage situations between markets(Assmus and Wiese 1995, Duhan and Sheffet 1988). Suppliers also sometimestake advantage of gray markets to increase export sales. As Da Rocha andChristensen (1994) observed, it is not so much a matter of which obstaclesare perceived as important by exporters, but rather a question of whether itis possible to affect managers' perceptions of barriers to exporting and howthose changes affect future export performance.MethodologyThis article is a result of a sectorial survey covering manufacturing exportersin Zimbabwe that was conducted during the last quarter of 1999 and early2000. Study variables tested in this research were derived from relevantliterature based on export studies and common experiences in other countriesand Zimbabwe.Significance of This StudyThis study addresses one of the most significant areas in relation to thefuture economic development of Zimbabwe. For a long time, businesses inZimbabwe have focused on the domestic market, paying little regard toopportunities in international markets. The manufacturing sector is nodifferent. Consequently, the sector has seriously suffered loss of domesticmarket due to depreciating purchasing power yet ironically some firmshave remained intransigent in the face of losses.92 Firm Characteristics and Export ConstraintsSamplingAll managers interviewed in this study were from Zimbabwe'smanufacturing sector. The purpose behind selecting a single industry wasto minimise sample heterogeneity, which could significantly diminish thepower of empirical findings and study implications. The general populationwas 461 firms. The sampling frame was derived from the Zimtrade1 database.For a firm to be part of the sample it had to fulfil the following criteria:i. A manufacturing firm exporting directly to its client(s) in another countryor countries; and/orii. A manufacturing firm exporting through an agent and/or distributorand/or some such other intermediary to another country or countries;and/oriii. A manufacturing firm with a subsidiary in a foreign country or is in ajoint venture with a manufacturing partner, or has a sales office in aforeign country through which it exports.When the above criteria were applied to the 461 companies, only 200companies emerged as the target population. Although all 200 companiesinvolved in exporting at the time of the study had been targeted as thestudy sample, only 124 participated in the study. The response rate in thisstudy was therefore 62%. The other 38% advanced various reasons such ascompany policies on nondisclosure in their refusal to participate.Data CollectionA structured questionnaire was used to collect data. Interviews wereconducted over a period of four months, with each interview lastingapproximately 45 minutes to one hour. Companies interviewed were locatedin different towns in the country. Respondents interviewed in the studywere either chief executives officers or marketing executives involved withexport operations of the company. On a few occasions, interviewees wereexecutives in production or finance who were in control of export operations.Attention was paid to identifying the most knowledgeable individual inthe firm to provide the required information. First, questionnaires weresent to the companies to be involved in the study. This was followed by atelephone call to each company, seeking an appointment. Secondary sourcesprovided substantial background information for the study.ModelThe model used was as shown in Figure 1 below.Zimtrade is Zimbabwe's export promotion agency. Government and the privalsector jointly finance it. All exporters in Zimbabwe are registered with the agenc}Z. Muranda93Figure 1: ModelPerceptions onpolicy-inducedconstraintsOrganisationalCharacteristicsPerceptions oncorporate-relatedconstraintsExport strategychoices andalternativesPerformancePerceptions onexternalmarkets-inducedconstraintsThe model postulates that organisational characteristics influenceperception on policy-induced constraints and external markets-inducedconstraints. Both policy-induced and external markets-induced constraintstend to shape and influence formation of corporate perception of whatconstraints affect its performance. It is the perceived corporate constraintsthat directly influence export strategic choices and behaviour in the market.The outcome of direct influence by corporate-perceived constraints isdetermination of performance. The thesis in this model is that organisationalcharacteristics underpin a convergence of policy-induced and externalmarkets-induced constraints. The convergence shapes corporate perspectiveson constraints, determines strategies to deal with the constraints thusdetermining export performance. Indeed in LDCs where most exporters aresmall by global standards and constraints to exporting abound both athome and in the end markets, this model attempts to reflect that scenario.Analysis and PresentationAnalysis of results in this article is mostly focused at firm level withgeneralisations at sector-level and utilises a two-stage approach that usesboth qualitative and quantitative approaches. The first stage is a qualitativeanalysis of organisational characteristics, while the second stage uses FactorAnalysis (Principal Components Method) in analysing constructsunderpinning factors constraining export growth and competitiveness.Results from the two approaches are combined in discussing conclusions,practical implications, and suggested future research direction.94 Firm Characteristics and Export ConstraintsResults and DiscussionOrganisational and Behavioural CharacteristicsFirm SizeSmall-scale manufacturers dominate the size composition of Zimbabwe'smanufacturing exporters. Such dominance has not been reflected in policyprioritisation, leaving smalf manufacturing exporters subject to the sametreatment as the large manufacturer despite obvious differences in capacityto respond and adapt. Although Zimbabwe's manufacturers export a widediversity of products, such diversity is still not fully reflected in value-addition. Up to 25% of manufacturing exporters in this study report thatthey export unfinished products. Exporters admit exporting unfinishedproducts is less profitable but better than turning down the orders. In thecurrent study, 62.1 percent of exporting manufacturers are small (<49 - 249employees) when employment levels are used as the size parameter (SeeTable 1). The size distribution of the exporters also shows an unbalancedtriad dominated by small manufacturing exporters (See Figure 2).Figure 2: The Size TriadSMALL MANUFACTURING EXPORTERS(62.1%)(<49-249 employees)MEDIUM SIZE / \ LARGE MANUFACTURINGMANUFACTURERS (21.7%)/ \ EXPORTERS (16.2%)(250-500 employees) / \(>501 employees)While in the past there has been clear duality in size distribution, suchduality seems to be disappearing into a three-way scenario, which calls forpolicy sensitivity to the emerging situation. Medium size manufacturersseem to be sparsely distributed between the small and large manufacturerswhich implies their response to policy initiatives may not be as pronouncedas that of the other two groups yet still they need an extra push to graduateinto the large manufacturing and possibly^arge exporter group in future. Itis worth noting that the largest number of exporters, constituting 22.6%(modal group), is in the category with 50-99 employees, emphasizing thedominance of small manufacturers in Zimbabwe's manufactured exports.Table 1Employment level<4950-99100-149150-199200-249250-299300-349350-399400-449450-500501 >Total Sample (n) = \2Z. Muranda: Company Sizes Based onNo. of Companiesin category14281613611D61420,4Employment Sizes%11.322.612.910.54.88.94.04.80.83.216.295SizecategorySMALL(62.1%)MEDIUM(21.7%)LARGE(16.2%)EstablishmentThe establishment pattern of manufacturing companies in Zimbabwe istestimony to the necessity of urgently stabilizing the current economicsituation and push for goal-oriented policies. In this study, the oldestmanufacturer was established in 1898. While it is justifiable to concludethat the overall establishment pattern has tended to be associated withrelative political and economic stability in the country, specific periods andconcentrations have different explanatory backgrounds. Establishments of1945-1951 are associated with the end of the Second World War andsubsequent investment. Establishments of 1957-1960 were more a result ofrelative economic stability during that period. Although 1971-1979 was apolitically unstable period, the industrial policy of import substitutionboosted the establishment of manufacturing companies. There is, therefore,a great amount of motivating influence in policy, provided there is a clearlycalculated outcome in the policy. The last distinct period that had relativelymany establishments was 1986-1990. This period had an average economicgrowth rate of at least 4%, which could explain the many new companiesthat were established.Experience58.1% of manufacturing exporters in this study had less than 10 yearsexporting experience, while up to 33.1% had been exporting in the last six96 Firm Characteristics and Export Constraintsto ten years. By implication, a large proportion of exporters are still toacquire adequate experience in the export business. The pattern of lowexperience appears to have been influenced by the period of establishment.A large proportion of manufacturing exporters with less than 10 yearsexperience was established during the late eighties and early nineties.These young manufacturers, unlike old manufacturers, immediatelyventured into exporting. There is, thus, some preparedness to take risks bymanagement in newly established manufacturing companies. Secondly,the loss of markets for imports that occurred in the early 1990s could haveforced young companies to venture into exporting.Meanwhile, management in well-established companies has remainedsceptical of the viability of exporting. There is, therefore, low motivationand commitment to service the export market among well-establishedcompanies, compared to the young companies. Proactive decisions andmotivation to export are associated with and observed more in themanagement of young companies than in old companies.Table 2: Exporting ExperienceExperience (Years)<11-56-1011-1516-2021-2526-3031-3536-4041-50>51Total Sample = 124No. of Companies328412013751330%2,422.633.116.110.55.64.00.82.42.40OwnersliipThe pattern in Zimbabwe's manufacturing sector shows dominance offamily ownership. Family ownership constitutes 31.5% of the sample in thisstudy, making it the largest category. While all other forms of ownershipshow no peculiar trends in terms of company size, 26.6% of familymanufacturing exporters are small enterprises. Family owned companiesare not prepared to lose their investment through engaging in externalmarkets.Z. Muranda 97At least, 48.4% of companies in the study have changed ownership atsome point in their life span. Of interest, however, is the fact that, of the 57companies that reported change of ownership, in 43 cases (75% of cases thatreported ownership change), change was in the last ten years, i.e. 1989-1999. Close observation shows that change of ownership is closely associatedwith new attitudes and perception to exporting. Most of the companies thatchanged ownership in the last ten years entered exporting soon after thechange, although exporting had not been a priority prior to the change.Risk AversionResults in this study show that the engagement of new management, witha clear mandate to venture into exports, has, in most cases, producedpositive results. Assessment of risk associated with exporting appears todiffer depending on length of time management has been in charge of thefirm(s). Old management, used to operating in the domestic market, tendsto be averse to risk. If anything, one of the commonest comments made bymanagement during the conduct of this study is that long-serving managersare a serious internal impediment to seeking export business. This riskaversion tendency has seen companies with "old stock" management failingto seek export opportunities. For instance, in 45% of the respondingcompanies, export operations were directly under the control of the ChiefExecutive. This situation arose more out of a lack of trust and confidence injunior managers rather than because junior managers lacked the necessaryexpertise.There is a consistent pattern by Zimbabwe's manufacturing exporters totarget markets of comparable size disproportionately, especially Africanmarkets or economically weaker markets. Apparently, this is a deliberatestrategy based on the assumption (or rather perception) that manufacturedexports stand a better chance of penetrating or establishing long-termmarkets in par or weaker destinations. Of the top ten most frequentedmarkets by Zimbabwean manufacturing exporters, only Kenya and theUnited Kingdom are not within the Southern Africa DevelopmentCommunity (SADC) regional block or close neighbours. This is despite thefact that, in terms of revenue, the neighbouring markets are no moreimportant than the few commonly frequented developed markets. Ininterviews, managers were asked whether, if given a choice, they wouldprefer focusing on developed markets or developing markets or balancetheir choice of destinations. Responses show that 40.3% preferred developingmarkets, while 21% preferred developed markets. The remaining 38.7%preferred to balance their market portfolio.Reasons given for preferring developing markets were that: (a) developingmarkets are more lucrative than developed markets; and (b) targeted98 Firm Characteristics and Export Constraintsdeveloping markets are closer to home. On the first reason, a perceptionprevalent among exporters in Zimbabwe is that buyers from developecmarkets believe in buying their products cheaply. The approach of buyersfrom developed markets is that local exporters are "inferiors ' and, therefore,can be pressured to reduce their prices considerably. The power relationshipin the negotiating process is, therefore, in favour of buyers. Because of thepower imbalance, management in exporting companies avoid such clientele.The second reason is based on the belief in psychological distance betweenthe exporters and export destination. Exporters believe there is more businessand security in exporting to close markets. Hence the common insistence byZimbabwe's exporters that they would like the South African market to bemore open for their products. This attitude appears to be a product of lackof confidence than lack of viable alternative markets. It also shows the riskaversion tendency observed above.Groiuth and Competitiveness ConstraintsPrincipal Components Anah/sisCalculation of correlation coefficients among the 21 export constraints testedindicated no strong correlation among individual factors thus warrantingproceeding to the next stage without eliminating factors at this stage.Principal components analysis with varimax rotations was used toinvestigate the underlying constructs among the factors. Analysis led to1extraction of five factors. Varimax rotation uses a conservative method forestimating commonality by means of the square multiple correlation in thediagonal of the correlation matrix. The five extracted factors account for57.3% of the variance in these factors. Selection of factors was based on aneigenvalue of al. Cronbach's alpha was computed as the measure of internalreliability of the constraint items. All scales had a Cronbach alpha greaterthan 0.50, which corresponds to Nunally's (1967) threshold level of acceptablereliability for exploratory research. Table 3 presents results of principalcomponents analysis.Factor 1 clustered five items, i.e. lack of knowledge in generating exports,lack of knowledge on potential markets, lack of knowledge on assistance orincentives available, lack of knowledge on distribution channels, and lackof expertise/untrained staff. The construct underpinning the five variablesappears to be inadequate export experience. Factor 1 will be labelled"experiential knowledge". Inadequacy of experience is observed in the factthat most exporters have only been into exporting in ten or less years. Thisconstruct strongly corroborates results on experience above. The constructexplains important behavioural tendencies among Zimbabwe'smanufacturing exporters that need review. As explained under risk aversion,the current profile of Zimbabwe's export destinations shows 57% areZ. Muranda99Table 3: Factor Analysis Table on Constraints to ExportingConstraintsHigh tariff, non tariff barriersLack of governmentassistance/incentivesRestrictions on rules oforigin of inputsHigh risks involved inselling abroadInsufficient production capacityLack of top management commilLack of capital/credit tofinance exportsSatisfaction with domesticmarketDifficulty with handlingdomestic marketLack of knowledge ongenerating exportLack of knowledge onpotential marketsLack of knowledge onassistance availableLack of knowledge ondistribution channelsLack of expertise/untrainedexport staffInability to offer aftersales serviceInability to offer competitiveprices abroadHigh transport/shipping costsStrong foreign competitionDifferences in languageculture with marketDifferent product standardswith marketPoor technologyEigenvalues\ ot variance explainedCoefficient alphaFl.08428.09592.40090.45982.29093:ment .20520.12243.12543.11714.65744.80801.74556.70576.66729.49736- 0136512235203o84358830792.4058432.0F2.25958-.17266-.03284.16234.28553.48308.20801.58670.63439.50739.15378-.00817-075ol.33869.3001929363-.04228348073052942071.387566.715488.28293FactorsF3.22359.23163.40264.13910.28981.01308.04809.11111.10420.13903.13156.04971.01695.14929.06837.64796.77283.5835-.2839-.12767.421941.716776.6.6184F4.19130.09165.39712.15547.58830.53694.74014.25433.11154.01926.00944.29901.39120-.00845.18643.17075.00756.03407-.21627.06726.213061.392745.4.6677F5.58990.72690.22805.31002-.18554.10921.25364.11748-.00777-.02739.00884.09531.14726.12982.17597.20111.11321.30326.44418.41563Ł.22S361.138045.1.6514Commonality.050906.62944.53363.37742.63068.5758867270.45078.43953.71012.69400.65689.67883.59920.40788.57585.62690.59514.60791.46544.590501.0647257.3.5201a. Principal components analysis with varimax rotation, converging in 12 iterations.b. Items with factor loadings >.5O were used to represent each dimension of export constraint.c. Number of factors in Table is 21.d. Items in the table were rearranged to place close to each other under the appropriate factor those itemswith factor loadings greater than or e^ual to 0.50. The arrangement in the Table is therefore not the onethat was in the questionnaire.Factor namesFactor 1= Experiential knowledge Factor 4= Operational capacityFactor2= Technical skills Factor 5= Operating environmentFactor 3= Pricing100 Firm Characteristics and Export Constraintsdeveloping countries, while 43% are developed countries. There is a highertransaction frequency between Zimbabwe and other developing countries,although a larger proportion of exporters' revenue in terms of total valuecontribution comes from developed countries. The apparent contradictionor inverse relationship between higher transaction frequency withdeveloping economies but lower revenue receipts from the same marketblock is a result of transaction sizes and quality of transactions. While thereis higher export/import frequencies between Zimbabwe and its developingcountry counterparts, the transactions are much lower in size than withdeveloped market clients.Developing countries that are currently being targeted by Zimbabwe'sexporters are mainly neighbouring markets or otner distant destinations ofcomparable size. Most finished exports are destined tor developing markets,while semi-finished exports are destined tor developed markets. Potentialmarkets for products with appreciable product value addition commonlytargeted by manufacturers are developing markets. Most exporters seem tobe deliberately limiting their focus to only these markets thus creating aknowledge and experience gap on opportunities in potential markets. Resultsin the study reveal a strong tendency toward preferring direct exporting bymanufacturers. Nineteen percent of the respondents have sales offices intheir export markets. Table 4 shows the distribution of sales offices in theexport markets.Table 4Country Count %29.322.017.112.212.24.92.4Source: Survey resultsResults show a trend in which higher export business is generated inmarkets hosting more sales offices. As Table 4 shows, more manufacturershave sales offices in South Africa than any other market. Apparently nomanufacturing exporters maintain sales offices outside the SADC regionalmarket. Fifty-three percent of Zimbabwe's manufacturing exporters useagents and distributors as market channels. An analysis of the markets inSouth AfricaMalawiZambiaBotswanaMozambiqueNamibiaTanzania12975521Z. Muranda 101which exporters use agents and distributors shows similar trends ofconcentrating marketing effort on neighbouring markets. Use of agents anddistributors shows Zambia, Malawi, South Africa, Botswana, andMozambique constituting 66.4% of the responses. While there are no salesoffices located in developed markets, agents and distributors are widelyused in UK, Germany, USA, Australia, France and Sweden. A negligibleproportion of exporters deal directly with the end users and this is confinedto exporters of very expensive equipment. One of the difficulties disclosedby exporters in this study is selecting and retaining trustworthy agents anddistributors. Sometimes agents and distributors have abandoned exportersor enforced contract terminations without a convincing explanation.The discussion of Factor 1 above shows inadequate export experientialknowledge is a multifaceted construct that is strongly loaded on lack ofknowledge of potential markets and the opportunities. However, whenconsideration is made of the fact that most of Zimbabwe's manufacturingexporters are small-to-medium and most entered exporting soon afterestablishment, then it becomes clear why there exists such a knowledgegap-Factor 2 links three items, i.e. satisfaction with domestic market, difficultyin handling export documentation, and once more lack of knowledge ongenerating export business. It appears the clustering centres aroundinsufficient technical know-how essential for exporting. Factor 2 will belabelled " technical skills". Although not directly captured in this factor,exporters also reported inadequate knowledge and resources to conductmarket research. As a result of inadequacies in the above areas, exportershave sometimes been hesitant to enter some markets despite there beingopportunities. Market entry with inadequate knowledge can result in atwo-fold scenario, i.e. either the company takes a lot of flogging fromcompetitors without being fully prepared to respond resulting in unplannedwithdrawal and heavy losses or the company embraces wrong partnershipsin the market, especially unscrupulous agencies or distributors leading tocostly terminations of contracts and losses. Due to various types of risksthat accompany external trade, it is essential that the exporter conducts duediligence to assess potential markets in terms of revenue, profitability,competition, risks, distribution networks, pricing, etc. Use should be madeof information databases in the country to assess viability of markets beforecommitting resources. Use should also be made of facilitating agencies, e.g.Zimtrade, customs, and foreign missions to sharpen exporters, technicalskills related to export operations in specific markets. Lack of technicalknowledge appears to be a constraint common with small-to-mediumexporters. In this study the constraint appears to have been mainly reportedby this group of exporters. In addition there are large inexperienced exporterswho also reported the problem. The difference in these two groups lies in102 Firm Characteristics and Export Constraintsthe fact that large inexperienced exporters engage forwarding agencies tohandle paperwork especially customs documentation while the smallexporter does it alone.Factor 3 links high transport/shipping costs, inability to offer competitiveprices, and strong foreign competition. This factor will be labelled "pricing".Zimbabwe's manufactured exports have recently become uncompetitive asa result of inflationary pressures (as at October 2000 inflation stands at55%), high labour costs due to frequent increases in salaries and wages, adepreciating currency, and difficulties associated with sourcing foreigncurrency. Although most export supply contracts fix prices for periods oftwelve months and above with little or no room for unilateral adjustments,whenever adjustments take place exporters have had to increase prices.Frequent fuel price increases have also meant increases in price of theexport products. Zimbabwe is land-locked. As a result shipping to ports inMozambique and South Africa is an important cost factor in the final pricequoted to the buyer. Lack of competitiveness in export prices has also beena result of poor credit terms. Reserve Bank of Zimbabwe requires remissionof CD1 (a form for declaring export proceeds to the Central Bank) within 90days, which implies exporters have to give terms of 60 days or less. In mostinstances exporters have had to demand cash or letters of credit to thedetriment of establishing long-term relationships. The Central Bank demandsremission in such a short period due to foreign currency shortages. In thisstudy 52.4% of exporters associate their competitive weaknesses to the poortrading terms and lack of economies of scale. Competitors' economies ofscale are seen mainly as a result of better technology and well-establishedexport markets.Uncompetitive prices have also been a result of tight competition inforeign markets. Exporters report strong competition from other exporterstargeting similar markets mainly as a result of different product standards,unknown brands or labels, and low value-addition. Sixty percent ofmanufacturers in this study report they either export own manufacturersbrands or unbranded products. Although in circumstances where exportersare targeting other developing markets as destinations, there has beenconsiderable success in market penetration. Such success has not beenforthcoming in developed markets where buyers are exposed to a widerrange of foreign products also seeking to establish themselves. Productswith well-publicised brand names or labels therefore stand a better chance.Unlabeled exports cannot earn the exporter a market reputation as much asthe branded product. Profitably pricing the unknown brand or theunbranded product is quite difficult hence the uncompetitive prices.Factor 4 clusters three items, i.e. insufficient production capacity, lack oftop management commitment, and lack of capital or credit to financeexport. The factor will be labelled "operational capacity". The constructZ. Muranda 103centres on inadequate finance and production capacity, which apparentlyinfluences commitment. Lack of management commitment keeps exportinterest depressed. Due to a combination of lack of export incentives fromgovernment and high interest rates (60% and above as at October 2000),exporters have now virtually stopped using external financial resources tofinance export operations. Well before finance became too expensive forexporters, the problem of inadequate production capacity had alreadybecome a serious constraint. Large buyers especially from developed marketswere using Zimbabwe as the 'filler' for orders that could not be filled bysuppliers such as those from Asia. Such a scenario implies two things: a)that Zimbabwe's manufacturing exporters have remained too small to makeany meaningful impact outside the traditional neighbouring markets; andb) that they appear not to be seeking long-term markets for their exports.They off-load little extra production into the export market without a clearvision on the kind of business relationship they are seeking. At timesinadequate production for export has been a result of insufficient inputs.Due to rules of origin that have to be observed especially if intending toexport to the regional market, some companies have had to do without themost appropriate inputs in order not to go beyond the limited value ofinput in the export product. Foreign currency shortages also meaninadequate inputs for the exporters.As a result of inadequate financial and production capacity, negativeattitudes and perceptions toward exporting appear to contribute as a seriousimpediment to export growth among manufacturers in Zimbabwe. Aninward looking organisational and management culture has developedwhere exports are regarded as 'an extra load'. Results from this study showthat when trade liberalisation was adopted in 1990, small and mediummanufacturers responded better than large manufacturers to exporting.There was a large surge into exporting by the small and mediummanufacturers in the late eighties and early nineties. Despite all this theoverall prevalent culture and attitude (48.4%) of companies in Zimbabwe isthat exporting is riskier than domestic operations. Responses show that upto 42.7% of top management assess commitment to exporting in theircompanies as moderate to non-existent. Such a high proportion of non-commitment reveals the seriousness of attitudinal issues. Anotherdemonstration of divided commitment by Zimbabwe's exportingmanufacturers is that 57.3% report they do not have a designated exportmanager in the company. Three reasons are commonly advanced for thisanomaly: i) the manager who handles the domestic market is supposed toalso handle the external market; ii) the company generates inadequateexport business to assign a manager to focus on exports; and iii) the companyconsiders itself too small to appoint an export manager. Reasons presentedabove pose one irony: that all companies that responded to this study104 Firm Characteristics and Export Constraintsregard exporting as an essential source for future profitability and survivalas regionalisation and globalisation take root, yet they have no properstructures in place. Corporate structural reforms in terms of recruiting ortraining staff in the area of exporting is therefore essential. Part of theinfluence of noncommittal attitudes and perceptions to exporting is observedin slow reaction to external market opportunities. This could be associatedwith risk perception, which appears to be consistently negative.Factor 5 links two items, i.e. high tariff/non-tariff barriers, and lack ofgovernment assistance or incentives. This factor will be labelled "operatingenvironment". Zimbabwe is a signatory to an array of bilateral andmultilateral trade agreements and protocols regionally and globally yetlittle is known by exporters as to how such agreements open opportunitiesfor their exports. There is serious lack of information on how theseagreements and protocols could be used to avoid some tariffs and non-tariffs.Lack of meaningful incentives has also been a serious impediment to thedevelopment of Zimbabwe's export sector. What the authorities have notrecognised is that export incentives are a competitive support tool especiallyfor small to medium exporters who in the main are still inexperienced.Since the dropping of a 9% export incentive in 1994, there has not been ameaningful export incentive scheme to stimulate export growth andcompetitiveness. The last incentive scheme introduced in 1998 whereexporters are supposed to achieve a 20% real growth in foreign earnings inorder to earn tax credits presupposes existence of high growth yet theopposite holds. For a start the major proportion of exporters are in essencesmall-to-medium enterprises. A 20% growth in foreign earnings would inactual fact be phenomenal growth in local earnings that would only comewith heavy investments in extra production and marketing facilities. Withlittle experience and risk aversion common with most of the exporters, itappears the unsupportive environment compounds export constraints.ConclusionA number of conclusions can be drawn from this study. First is theobservation that Zimbabwe's manufacturing exporters are essentially smallto medium exporters. Their perception of export constraints is highlyinfluenced by the size factor among other variables. Although 16.2% of theexporters are classified in this study as large, it is the export behaviour ofsmall to medium exporters in the sample that appears to define behaviouraltrends. Because the economy is currently depressed, response of the exportersto a non-performing domestic economy is observed in constricted growthand lack of product and price competitiveness.Secondly, due to low experience, perception on constraints is alsoinvariably influenced by the intervening variable on lack of exportZ. Muranda 105knowledge. Lack of experiential knowledge clusters more variable itemsthan any other constructs observed in this study. This implies experientialknowledge should be analysed as a multivariate concept. It is inadequate interms of research to create a single variable labelled experiential knowledgeto be measured on a single dimension. A compound measure appears moreappropriate.Functionally experiential knowledge can be summarised as follows:Experiential knowledge = f (kge, kpm, ka, kdc, st)where:kge is knowledge on how to generate exports;kpm is knowledge on potential markets;ka is knowledge on assistance available to exporters;kdc is knowledge on distribution channels; andst is staff training.Thirdly, there is a high-risk aversion observed among Zimbabwe'smanufacturing exporters. The tendency has constrained pursuit of exportsleading to targeting of less lucrative and unsustainable developing markets.The same risk aversion tendency does not appear to be supported withadequate research and assessment of target markets thus leaving theexporters still exposed despite the risk consciousness. The issue of riskaversion is directly related to size and low export experience.Export prices charged by Zimbabwe's exporters are more exogenouslythan endogenously determined. Because of the inflationary character of theZimbabwean economy, more attention is now being paid to pricing thanother marketing mix elements. This imbalance in mix adjustment is likelyto continue showing in product non-competitiveness when the inflationarytendencies subside because other mix elements are suffering lack of attention.Implications for Policy and Managerial PracticeRecovery, growth, and competitiveness of Zimbabwe's manufacturingexport sector is going to depend on some of the following factors: First isimplementing policy, which recognizes that small-to-medium manufacturingexporters' needs may in essence be the same but different in scale andstructure to those of large manufacturing exporters. Policy should alsorecognize that small to medium exporters lack the capacity to strategicallyrespond and influence external markets. What it therefore practically impliesis that there should be a policy mechanism to monitor and assist small-to-medium exporters adjust to external market changes.Secondly, is the need for exporting companies to reform structurally,attitudinally, and perceptually toward exporting. Export competitivenessis not only a question of correctly manipulating marketing mix elements106 Firm Characteristics and Export Constraintsbut also a function of commitment of resources and attitudes. It is especiallythe latter form of commitment, which is not being given adequate attentionby management. What it therefore implies is that until such attitudinalchanges take place, growth and competitiveness in exports will remainconstricted.Future ResearchFuture research in the area of export growth and competitiveness in LDCsand in particular in Zimbabwe need to address the following researchquestions:i. Which organisational characteristics have the highest contribution tothe perception that exporting is risky?ii. .What competitive advantages do the small to medium exporters inLDCs have in current export markets?iii. Are current perceptions to constraints associated with the exporter'sstage in the internationalisation process?iv. What strategic focus could produce a competitive edge in currentmarkets?Indeed these questions are not exhaustive. Because LDC exporters stillcontribute a very small proportion to global exports, little is still knownabout how they can strategise to increase market penetration andcompetitiveness against established exporters and multinationalcorporations. This explanatory contribution is being sought on thebackground of continued general poor economic performance in mostdeveloping economies, with particular reference to countries such asZimbabwe where trade liberalisation did not bring much difference, if any,to export performance.ReferencesA. H. MOINI 1995 'An inquiry into successful exporting: An empiricalinvestigation using three stage model', Journal of Small Busitiess Management,33 (iii): 9, 17.A. BONACCOKSI 4th Quarter 1992 'On the relationship between firm size andexport intensity', journal of International Business Studies, 23: 33-46.Z. MURANDA 1999 'Export entry decision and organisational characteristics oftextile and clothing firms: Analysis of Zimbabwean firms', Zambezia: TheJournal of Humanities of the University of Zimbabwe, 26 (ii): 183-209.E. KAYNAK AND V. KOTHARI 1984 'Export behaviour of small and medium-sized manufacturers: Some policy guidelines for international marketers',Management International Review, 24 (ii): 61-69..M. KARAFAKIOGLU 1986'Export activities of Turkish manufacturers', InternationalMarketing Review, 3: 34-43.Z. Muranda 107T. K. MAD5FN 1989 'Successful export marketing management: Some empiricalevidence', International Marketing Review, 6 (iv): 41-57.C. S. KATSIKLAS AND N. F. PIERCY 1990 'The relationship between Greek exportmanufacturers and UK importers: The dimension of exercised power',journal of Marketing Management, 6 (iii): 239-56.M. LEIBOI D 1984 'The Foreign Orientation of Management as a Key Variable inExport Commencement', Research Report No.1, Bellville: University ofWestern Cape.A. DA ROCHA AND C. H. CHRISTENSEN 1994 'The exporting experience of adeveloping country: A review of empirical studies of export behaviour andthe performance of Brazilian firms', Advances in International Marketing, 6:111-142.J. AGRAWAI. ANP VV. A. KAMAKUKA 1999 'Country of origin: A competitiveadvantage', International journal of Research in Marketing, 16: 155-267.S. T. CAVUSGIL AND E. SIKORA Nov/Dec. 1988 'How multinationals cancounter gray market imports', Columbia Journal of World Business: 27-33.G. ASSMUS AND C. WlESE Spring 1995 'How to address the gray market threatusing price coordination', Sloan Management Review: 31-41.M. B. MYERS First Quarter 1999 'Incidents of gray market iictivity among USexporters: Occurrences, characteristics, and consequences,' Journal ofInternational Business Studies, 30 (i): 105-126.D. DUHAN AND M. J. Si IEEFET 1988 'Gray markets and the legal status of parallelimportation', Journal of Marketing, 52 (Hi): 75-83.J. C. NUNNALY 1967 Psychometric Theory, New York: McGraw-Hill.