Analysis of Successful Hungarian Exporter Companies From a Strategic Perspective PDF
Preview Analysis of Successful Hungarian Exporter Companies From a Strategic Perspective
Behind the Exporters’ Success: Analysis of Successful Hungarian Exporter Companies From a Strategic Perspective AnnamariaKazaiOnodi CorvinusUniversityofBudapest,Hungary [email protected] KrisztinaPecze CorvinusUniversityofBudapest,Hungary [email protected] Thepurposeofthestudyistoprovideanoverviewofexportsuccessfrom astrategicmanagementperspective.Thepaperempiricallytestedtherela- tionshipsbetweenthefirm’sexportperformance,strategicthinking,adap- tationtothechangingenvironmentandcompanies’capabilities.There- searchisbasedontheHungarian CompetitivenessResearchdatabaseof 2013 that consists of 300 firms. Cluster analysis differentiated successful export-oriented and stagnant companies. Both of them had high export intensity(higherthan75),butsignificantdifferencescouldbeobserved in export volume and profitability. More than 90 of total export rev- enuebelongedtothesuccessfulexport-orientedcluster.Successfulexport- orientedcompaniesprovedtobemoreproactiveandinnovativethanstag- nant,thustheywerecapableofadaptingtothechangingenvironmentbet- ter.Thestudyhighlightedthatappropriatestrategicthinkingcouldplaya significantroleinimprovingexportsuccess.Theimplicationofthestudy isthatstagnantcompaniesneedtodeveloptheirforecastabilities,flexibil- itytoadapttothechangingenvironmentandoperationalefficiency.Stag- nantcompanies lagged behindsuccessful exporters concerning industry forecast,productionlevel,numberofinnovations,competitivepricesand employeequalifications. KeyWords:internationalisation,export,performance, HungarianCompetitivenessResearchSurvey,strategy jel Classification: c38, l21, m16 Introduction Overthepastfewdecades,exportinghasbeenoneoftheeconomictopics tobeexplored.Itisacommonviewamongstresearchersthatexporting firms’competitivenesshasastrongeffectonnationalexportcompetitive- ness(Porter1990).Inaddition,thereisanincreasingattentiontoglobal ManagingGlobalTransitions12(4):325–346 326 AnnamariaKazaiOnodiandKrisztinaPecze competition in the foreign marketsby researchersas well as practition- ersparticularlywithrespecttodeterminantsofexportsuccess.Exporting canbeanenginefortheindividualfirm’sgrowthandprofitability,andfor thegrowthofnationaleconomies(HatemiandIrandoust2001;Wolffand Pett2000). Theanalysisofexportperformanceisaveryimportantissueincaseof Hungary as well. Studying the Hungarian firms’ export performance in a small open economy better contributesto the improvement of export competitiveness on a national level. Several researches were concluded onamacroeconomiclevelinHungary(Munkácsi2009)intermsofhow exportcompetitivenesscanbeimproved.Theanalysisfromamicroeco- nomicperspectiverevealingexporterfirms’characteristicscanservesig- nificant information to export development implications (to economic policymakersinthegovernmentaswellasacademicresearcherstoo).In this paper, we analyse the export success from a strategic management pointofviewandintendtorevealfactorsbehindthesuccess. Themainideaofthisanalysisisthatexportperformancecanbeanin- dicatoroffirms’internationalcompetitivenessandthatexportsuccessis boostedbythegrowthofinternationalmarketsanddiminishedbyfactors dominatingintheyearsoftheeconomicrecession.However,competitive and non-competitive firms are not equally influenced by the economic situation: less competitive firms’ export activity will be much more in- fluencedbynegativeeffects,measurableonexportvolume,exportprices and/orprofitability. Muchoftheresearchinexportperformanceanalysishascategorized firms into stages of export development, distinguishing exporters from non-exporters,analysingvariablesofhowexportersperceivevariousas- pectsoftheirorganization,market,environment,resources,strategy,etc. (Dean,Mengüc,andMyers2000;KorandMesko2013).Wealsousedthe methodofdistinguishingfirmsbasedondifferentcharacteristics.Inour study,oneofthemainquestionsiswhatthedifferencebetweensuccessful andnon-successfulexportercompaniesis.Thisstudyfocusesonstrategic capabilitiesofsuccessfulexportersandintendstorevealindepthwhatis behindtheirsuccess. AReviewofRelevantLiteratureandHypotheses Theexportperformanceoffirmshasbeenstudiedinawiderangeoflit- erature. Due to this, our research focus was to identify the relationship betweenfirms’strategyandexportperformance.Inthispaper,wepresent theliteraturerelatedtostrategicmanagementapproach.Wepresentthree ManagingGlobalTransitions BehindtheExporters’Success 327 strategictheories,theindustrialorganization-basedtheory,theresource- basedviewoffirms,especiallythedynamiccapabilities-basedtheory,and contingencytheory. firm’s strategy and performance Afundamentalaxiomofstrategicmanagementandindustrialorganiza- tionaleconomicsistherelationshipsbetweenstrategyandperformance. Industrial organization theory views that economic competitiveness is basedonitsenterprises.Aconsiderableamountofliteraturehasfocused on the relationship between strategy and performance and emphasized the importance of a distinctive strategy in determining the firm’s eco- nomicperformance(Porter1980;1990). Thereisnoconsensusintheliteratureontheimportanceofthemany variables that have been identified as determinants of export success. The literature reports on the correlations of export performance that arebothinternalandexternaltofirms.Themostanalysedinternalfac- torsaremanagerialexperience,marketingstrategy,organizationalstruc- ture,productandmarketdiversificationandresources.Industrycompet- itiveness, business environment or product characteristics are linked to export performance as external variables (Barney 1991; Barney, Wright, andDavid2001;Leonidou,Katsikeas,andSamiee2002).Calantoneetal. (2006) concluded that export performance is positively linked with the level of product adaptation strategy and organizations’ openness to in- novation.Thismayimplythatthecoststoadaptproductsarerecouped throughimprovedexportperformance. Casestudymethodisalsousedasaqualitativesurveyinunderstanding the determinants of export success. Ábel and Czakó (2013) emphasised theimportanceofmanagement/ownerrole,organisationalresourcesand capabilities and learning process based on analysing ten case studies of exportercompanies. Therelevantliteraturesuggeststhatexportdevelopmentandinterna- tionalizationarecomplexphenomena.Insteadoffocusingonaparticu- laraspectofexportactivity,thisresearchmeasuresseveralorganizational dimensionsincludingfirmcharacteristics,firmcompetency,perceptions andstrategy.Acompleteviewontherelationshipbetweenexportperfor- manceandfirms’strategiccharacteristicsislikelytobegiven. Themainideabehindthisanalysisisthatexportperformancecanbe anindicatoroffirms’internationalcompetitivenessandthatexportsuc- cess is boosted by the growth of international markets and diminished byfactorsdominatingintheyearsoftheeconomicrecession.However, Volume12·Number4·Winter2014 328 AnnamariaKazaiOnodiandKrisztinaPecze competitiveandnon-competitivefirmsarenotequallyinfluencedbythe inward and outward economic situation. Competitive firm operations are characterised by strong strategic thinking that shows itself in con- sciousgoalorientation,valuableanddynamiccapabilitiesandgood/deep knowledgeoftheexternalenvironment.Lesscompetitivefirmsarechar- acterisedbythelackoftheseabilitiessotheirexportactivitywillbemuch moreinfluencedbynegativeeffects,measurableonexportvolume,export pricesand/orprofitability.Itisthereforehypothesizedthat: h1 Thereissignificantconnectionbetweenstrategicthinkingandexport performance. Basedonpreviousresearchweassumethatbehindtheexportperfor- mancethereisamoreconsciousstrategicthinkingsuchasstrategicplan- ningandimplementation.Inastrategicmanagementapproach,itmeans therealisationofthelong-termobjectives,improvingthefirm’svaluethus increasingshareholdervalue. the firm’s strategy and its context/environment Oneofthetheoriesusedinstrategicmanagementliteratureisthecontin- gency-basedapproach.Itpositsthatthefirm’sexportperformanceisde- pendentonthecontextinwhichthefirmoperates.RobertsonandChetty (2000) adopted a conceptual model of export performance in their re- search,basedoncontingencytheory.Theyanalysedtherelationshipbe- tweenexportperformanceandstrategicorientationinadifferentexternal environment.Thestudyemphasisedthatexportingisadynamicprocess becausethecontextofafirmchangescontinuallythroughoutitsexport- ingventures.Exportstrategyresearchusuallyplacesitsstartingpointat the analysis of the relationships between the firm and its environment. Asit issuggested by KnudsenandMadsen(2002)thetheoreticalback- groundofexportstrategyresearcheshastobecompletedwithdynamic capabilitiesapproach. h2 Thereisasignificantconnectionbetweenthefirms’abilitytoadapt tothechangingenvironmentandexportsuccess. firm’s strategy and capabilities The researches examining export performance from capabilities are groundedintheresource-basedview(rbv)ofthefirm(Wernerfelt1984) anditsextensionsasknowledge-based(Grant1996)view.The rbv em- phasises unique resources and capabilities of a firm for sustained com- petitiveadvantage.Wecontendthatknowledgeisakeystrategicresource ManagingGlobalTransitions BehindtheExporters’Success 329 andafirm’scapabilityinintegratingandexploitingknowledgeinexport- ing is a source of competitive advantage (Dhanarajand Beamish 2003). AconceptualmodelpresentedbyHaahtietal.(2005)proposesthatex- portmarketknowledgeaccumulatedfromvarioussourcesconstitutesa valuable ‘entrepreneurial resource’ and that both domestic and foreign cooperativestrategiesdirectlyinfluenceexportperformance.Thesyner- gistic effect of export on performance will also be multiplied when the exportactivityiswellutilizedunderaproperselectionoforganizational strategy in the case of firm, product, market and technology (Lee and Habte-Giorgis2004). According to Reid (1981) we emphasise that exporting must be con- sidered as a dynamic process, because the context of a firm changes continually throughout its exporting ventures. This idea is connected tothedynamiccapabilitiesperspective(dcp).Themostimportantissue of dcp is to explore the way the firm comes to terms with the contin- uous emergence of novel circumstances caused by rapid technological changes(Teece,Pisano,andShuen1997).Thus,thefirm’scentralstrate- gicproblemistocreatenewproductiveknowledgeandtocoordinatethe cumulativeprocessofknowledgedevelopmentandcreation.Theframe- workdevelopedbyTeece(2014)explainshowstrategyanddynamicca- pabilitiestogetherdeterminefirm-levelsustainedcompetitiveadvantage in a global environment. The internalization models complemented by exportperformanceanalysisseektounderstandwhysomefirms’export activitiesaresuccessfulwhileothers’fail.Hence,weadvancethefollow- inghypothesis: h3 There is a significant connection between the firms’ resources and capabilitiesandexportsuccess. Numerous authors of export performance studies compare the ex- porters’ characteristics in an attempt to reveal the factors that make a difference between success and failure in foreign market activities. In thispaperweintendtoidentifythedistinctivefactorsofexportsuccess and based on these findings develop better practice-related suggestions forfirmswithlowperformance. MethodofResearch The phrased three hypotheses were tested on the Hungarian Compet- itiveness Research database of 2013. The connection between export performanceandtheselectedinfluencingfactors(strategicthinking,re- Volume12·Number4·Winter2014 330 AnnamariaKazaiOnodiandKrisztinaPecze table1 ClusterCentrePoints Category () () Exportintensity(–scale) . . Exportvolume(–scale) . . Changeinexportvolume(–scale) . . Profitabilitycomparedindustryaverage(–scale) notes ()successful(n=40),()stagnant(n=34). sourcesandcapabilities)couldbeanalysedbyseveralstatisticalmethods. One of the key elements of the research was measuring export success. Since four export performance metrics were used cluster analysis was conductedtodifferentiatesuccessfulexportersfromnon-successful.In- dependent sample t-test was applied to compare the characteristics of successfulandnon-successfulfirmsandthroughthismethodwetriedto obtainadeeperinsightintotheinfluencingfactorsofexportsuccess. database TheresearchisbasedontheHungarianCompetitivenessResearchdataba- seof2013,whichwaslaunchedbytheCompetitivenessResearchCentre, Institute of Business Economics of Corvinus University of Budapest. It containsfourquestionnaires(morethan60pagesaltogether):topman- agement, marketing, production, finance, which enables us to make a complexanalysisaboutcompanies’environment,strategicandfunctional areas.Generally,thesurveytargetedincorporatedcompanieswithmore than 50 employees to build a corporate sample, as well as keeping an eye on representativeness (in terms of staff size, geographical location, industry).Thefinaldatabaseconsistsof300firms. Firms in the sample operated in different industries, except the fi- nancial sector. Processing industry dominated (45), following it, the proportionofservicesectorwas34.7,constructionindustrywas7.7, agriculture was 8. 72.7 of the firms was medium-sized, the propor- tion of large firms was 16.7. In terms of ownership structure, the do- mestic owned companies dominated (71.3), the proportion of foreign companies was 23 and the rate of state owned was 5.7. The major- ity (53) of firms had export activities, and this rate characterised the small and medium sizes companies, which is significantly higher than the average rate in Hungary (22.5 according to Szerb-Márkus, 2008). Averyhighexportconcentrationcanbeobservedinthesample,which ManagingGlobalTransitions BehindtheExporters’Success 331 table2 TheCompositionofSuccessfulExport-OrientedandStagnantCompanies byExportRevenuein2013 Category () () Undermiohuf . . –miohuf . . –miohuf . . –miohuf . . –miohuf . . Overmiohuf . . Total notes ()successful(n=40),()stagnant(n=34).Inpercent. reflectedthe high Hungarian export concentration (Kállay and Lengyel 2008;Munkácsi2009).Inthesamples,theshareoflargeforeignowned companiesfromtotalexportrevenuewas79.38,foreignownedcompa- nies’90,domesticcompanies’10.(Forthedescriptionsofthesamples ofthequestionnairesurveyof2013,seeMatyusz2014.) cluster analysis – identifying successful and stagnant export-oriented companies In our previous researches, we used cluster analysis to study firms’ ex- port performance, since we preferred using more than two export per- formancemetricsandmoreobjectivegrouping.Forclusteranalysis,we used financial data as well as managerial self-evaluation. The generally usedmetricswereappliedformeasuringexportperformance(Leonidou, Katsikeas,andSamiee2002),theseareexportintensity,exportrevenue, exportsalesgrowth.Thefourthfactorinclusteranalysiswasprofitability, we used managerial self-evaluation of companies’ return of investment comparedto industry average. The applied k-meanscluster analysis re- sulted in four clusters: successful export-oriented companies, stagnant companies,leadingminorexportersandexporters.Theexportintensity ofleadingminorsandminorswasunder20sointhisresearchweonly concentratedoncomparingsuccessfulandstagnantcompanies(table1) Sinceourhypothesis,testingwasbasedoncomparingsuccessfuland stagnant companies it is crucial to describe the main features of the two clusters. The successful export-oriented companies could be char- acterised by high export revenue, high export intensity and high prof- itability.Allofthemhavemorethanonebillion huf exportrevenueper Volume12·Number4·Winter2014 332 AnnamariaKazaiOnodiandKrisztinaPecze table3 TheCompositionofSuccessfulExport-OrientedandStagnantCompanies byExportIntensityin2013 Category () () Under . . – . . Over . . Total notes ()successful(n=40),()stagnant(n=34).Inpercent. table4 TheCompositionofSuccessfulExport-OrientedandStagnantCompanies bySizein2013 Category () () Small . . Medium . . Large . . Total . . notes ()successful(n=40),()stagnant(n=34).Inpercent. table5 TheCompositionofSuccessfulExport-OrientedandStagnantCompanies byOwnerStructurein2013 Category () () State . . Domestic . . Foreign . . Total . notes ()successful(n=40),()stagnant(n=34).Inpercent. year. 75 of them had more than 75 export intensity (tables 2 and 3). Thesuccessfulexport-orientedfirmsrepresentedaboutthequarterofex- portersinthesample,buttheireconomicpowerwassignificantlyhigher, morethan90oftotalexportrevenuebelongedtothisgroup(table6). Theirprofitabilitywasoverindustryaverageaccordingtoself-evaluations (table7). Morethanhalfofthem(52.5)belongedtomedium-sizedcompanies, theproportionoflargecompanieswaslower(45),butcomparedtothe averagerate(16.7)inthesample,itcouldbeseenthatthelargecompa- niesarestilloverrepresentedinthiscluster(table4). Morethan75offirmswereactiveintheprocessingindustrydueto ManagingGlobalTransitions BehindtheExporters’Success 333 table6 ShareofClusters Cluster () () Shareofclusterfromtotalexportrevenues . . Shareofclusterfromtotalexporters . . Shareofclusterfromtotalnumberofcompanies . . Shareofclusterfromtotalemployees . . notes ()successful(n=40),()stagnant(n=34).Inpercent. table7 ProfitabilityRelativetoIndustryAverageAccordingtoManagerial Self-Evaluation Category () () Returnonsales . . Returnsoninvestment . . notes ()successful(n=40),()stagnant(n=34).-pointLikertscale,–best,– underaverage. the characteristics of the samples, but there were some representatives offoodindustryandservicestoo.Foreignownedcompaniesdominated (72.5)(table5).Eachofthemhaddominantowners,66.7ofthemhad owners with 75 share or more. The proportion of subsidiaries is 65. Strong owner control could be observed in about 10 of firms. 15 of themhadownerswithmorethan70sharefromrevenue. Companiesbelongingtothestagnantclusterslaggedbehindsuccess- fulexport-orientedcompaniesinregardofexportperformanceandcom- panyprofitability.Althoughtheyhadhighexportintensity(76),itwas significantly lower than the average rate of successful export-oriented firms(84).60ofthemhadmorethan75exportintensity(table3). Their export revenue was significantly lower than the revenue of suc- cessfulcompanies.Therewerenocompanieswithover5billion huf ex- portrevenue(table2).Although22ofexportersbelongedtothisclus- ter, their share from total export revenue was under 5 and their share fromtotalemployeeswas8.5incontrastwiththefactthatsuccessfulex- porters’sharewas34.4(table6).Theirprofitabilitywasunderindustry averageaccordingtoself-evaluations(table7). 77ofthefirmswasactiveintheprocessingindustryduetothechar- acteristics of the samples, followed by it the rate of service companies (22.9). The majority of them was medium-sized (80) and domestic owned (74.3).The proportion of large companieswas only 11.4. The Volume12·Number4·Winter2014 334 AnnamariaKazaiOnodiandKrisztinaPecze table8 FundamentalPurpose Fundamentalpurpose () () Satisfyingcustomerneedsasmuchaspossible . . Gainingmoreprofit . . Increasingshareholdervalue . . Survivingcrisesandpreservingtheabilityoffuturedevelopment . . notes ()successful(n=40),()stagnant(n=34).-pointLikertscale,–nottrue atall,–perfectlytrue. table9 FinancialGoals Financialgoals () () Liquiditypreservation,improvement . . Compliancewithpaymentcommitments,deadlines . . Salesrevenueincrease . . Costreduction . . Increaseinreturnonsales(profitability) . . Increaseinreturnonassets(profitability) . . Increaseinreturnoninvestment(profitability) . . Highowner(shareholder)return . . Paymentofhighrewards . . Paymentofhighdividends . . Regulardividendpayments . . notes ()successful(n=40),()stagnant(n=34).-pointLikertscale,–nottrue atall,–perfectlytrue. table10 SalesOpportunitiesin2013Relativeto2009 Salesopportunities () () Indomesticmarket . . Inexportmarket . . notes ()successful(n=40),()stagnant(n=34).-pointLikertscale,–become unfavourableinlargeextent,–becamefavourableinlargeextent. proportionofforeignownedcompanieswasmuchlower(25.7)inthis clusterthaninthecaseofsuccessfulexport-orientedcompanies(72.5) (tables4and5).Theownershipconcentrationishigh(only5.7ofthem hadnodominantowner)butlowerthansuccessfulexport-orientedcom- panies’.31ofthemaresubsidiaries.Theroleofownersascustomersis ManagingGlobalTransitions
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