Yvonne Brodrechtova IUFRO Division 5 Conference Forest Products Marketing & Business Management

2 Albert-Ludwigs-University Freiburg Institute of Forest and Environmental Policy Markets and Marketing Section Tennenbacher Str Freiburg Germany Model of Export Marketing Strategies in Transition Countries – the Case of Slovakia Yvonne Brodrechtova*, Michel Becker and Heiner Schanz European Union

Problem statement Many countries around the world are more closely integrating their economies into global trade Challenges are more far-reaching in Europe’s transition economies, which are trying to assimilate themselves into an international economic order Recent challenges have had effect on all companies including forest products companies and their exporting activities 3

Research study justification and aim Little attention has been given to the driving forces of export marketing strategies Coherent theoretical elaboration and empirical evidence on export marketing strategies is lacking  Model of export marketing strategies which can still explain and predict the reality when studying transition countries in general and forest products industries in particular 4

Slovakia – the geographical center of Europe Slovakia founding 2004 EU accession GDP 47,42 billions US$ 5.4 million inhabitants

Case study on Slovakia 6  Unlike Hungary and Poland, prior to 1989 Czechoslovakia had no significant experience of any market reforms ‘within a planning system’ and in addition had autocratic and corrupted regimes until 1998  Due to Slovakia’s self-sufficiency in relation to wood resources (40 % forest cover*), even then forest products were considered to be ‘hard currency earning’ commodities  The export of forest products is still an important part of the whole Slovakian forest products sector today, accounting for 80.4 % of the income generated by the sector and as much as 6.6 % of the total national exports* *The Ministry of Economy of the Slovak Republic, 2006

Quality of products Technical and other services Customer relationship Marketing channels Efficient marketing Advantageous price Freedom in price policy Market share Brand name Export Marketing Strategy* CustomersProductsGeographical limits of market areaCore competencies Conceptual framework *Juslin and Hansen,

Markets-as-network perspective* Conventional business studies* Institutional theory* 8 Resource-based view of firm* 1. Company goals 2.Organization structure 3.Production structure 3. Export motivation 1. Human resources 2. Human capabilities 3. Firm resources 4. Firm capabilities 5. Product related capabilities 1. Relationship with foreign customers, suppliers and competitors 2. Relationship with domestic customers, supplies and competitors 3. The role and importance of the company in the network 3. Relationship with technology development 1. Domestic formal and informal institutions 2. Foreign formal and informal institutions Conceptual framework Transaction cost theory* *Barney, 2001; Makadok, 2001; Ireland et al., 2003; Williamson, 1999; Johanson & Mattson, 1988; Ritter et al., 2004; North,1991; etc.

Methodology 1. Complete inventory with all exporting forest products companies (254) in Slovakia 2. Enquiry method: Structured phone interviews with individual decision makers* 3. Measurement: 5-Point Likert scale (kNN - nearest neighbor method used to fix the point 6 = I do not know answer) 4. Quantitative data analysis with the help of SPSS 14.0 software: Cluster analysis and Multinomial logistic regression* 9 *Schnell et al., 1995; Bacher, 1994; Bühl, 2006; Hosmer and Lemeshow, 2000

Markets-as-network perspective Conventional business studies Institutional theory 4. Foreign direct investment 5. Financial resources for export business 6. Entrepreneurial drive and quality of management 7. Product and/or production innovation 8. Means of company establishment (company history) 9. Relationship with foreign customers 10. Economic situation in Slovakia The significant factors and elements 10 Resource-based view of firm 1. Company goals 2. Production type (sub sectors) 3. Export motivation/ dependence EXPORT MARKETING STRATEGY 1. Product 2. Customer 3. Market area 4. Price 5. Channels of sale 6. Channels of Promotion 7. Market share 8. Quality

EMS types (i=1-5)Influencing factors (k=1-10) EMS 1 (Product oriented) Company goals Production type EMS 2 (Product-Customer- Channels of promotion oriented) Export motivation and/or dependence Foreign direct investment EMS 3 (Price-Channels of sale oriented) Financial resources for export business Entrepreneurial drive and quality of management EMS 4 (Price-Quality oriented) EMS 5 (Product-Customer-Market share) Product and/or production innovation Means of company establishment Relationship with foreign customers Economic situation in Slovakia Model of export marketing strategies (EMS) 11 Where  = the constant of the equation and,  = the coefficient of the predictor variables

Means of company establishment (company history) 12 Figure 1: Probabilities plot of “Means of company’s establishment” on the five EMS types EMS type 1 = Product oriented EMS type 2 = Product-Customer- Channels of promotion oriented EMS type 3 = Price-Channels of sale oriented EMS type 4 = Price-Quality oriented EMS type 5 = Product-Customer- Market share oriented No LittleNeutral StrongVery strong influence

Preliminary conclusions (1/2) 13 Model building is more complex compared to marketing strategies  Various export marketing strategy types with distinct focus on ownership and production type Driving forces more complex compared to driving forces in comparable studies  Institutions and path dependency show the main discrepancy when compared with comparable studies done on developed western countries  Relevant driving forces consist of competitive assets and institutions

Preliminary conclusions (2/2) The elaboration of a coherent model of export marketing strategy through one theoretical perspective is not possible, particularly in the transition context Results are valid for transition country like Slovakia, however, they do not have to be valid for all transition countries in general The potential of this model lies in its ability to shed more light and contribute to the theories 14

Further steps Additional empirical studies and greater scrutiny are required before it will be possible to arrive at a conclusive set of driving forces of export marketing strategies in transition countries in general, and pertaining to the forest products sector in particular 15

Thank you!

Methodology Exploratory phase  Problem identification  Development of the research concept: exploratory interviews with 13 informants and 3 experts Qualitative phase  30 semi-structured in-depth personal interviews with individual decision makers of exporting forest products companies (FDC)  Verification of proposed conceptual framework  Identification of influencing factors and elements of export marketing strategy Quantitative phase  138 structured phone interviews with individual decision makers of FDC  Taxonomy of export marketing strategy types as a medium for the implications of influencing factors  Construction of model of export marketing strategy

Summary of findings Qualitative phase (deductively derived factors): 13 identified elements of export marketing strategy thematically reduced to 8 45 identified influencing factors statistically reduced to values thematically coupled into 4 new influencing factors Quantitative phase (taxonomy and model building): 8 elements describing export marketing strategies further statistically tested: Taxonomy resulted in five strategy types, which served as a medium for identification of most significant influencing factors 23 influencing factors further statistically tested: The majority of the ten factors derived are of the internal character (business studies & resource-based view); however, relationships (market-as-network perspective), and domestic institutions (institutional theory) are relevantly significant

Methodology (Qualitative phase) 1. Stratified sampling and random selection of 34 exporting forest products companies 2. Enquiry method: Semi-structured problem centered interviews with open questions 3. Qualitative data analysis with MAXqDA2 software: Content analysis: Content structuring technique and Summarization technique, Thematic coding 4. Quantitative data analysis with SPSS 14.0 software: Contingency tables with χ2, Cramers‘ V * Thomson, 1992; Schnell, et al., 1995; Lammnek, 1995; Mayering, 2002; Flick, 2002; Everitt, 1992 ; Norusis, 2005

Markets-as-network perspective Business studiesInstitutional theory 4. Foreign direct investment 5. Financial resources for export business 6. Entrepreneurial drive and Quality of management* 7. Product and/or production innovation 8. Way of company establishment* 9. Physical resources 10. Market knowledge 11. Export experience 12. Market orientation 13. Foreign language knowledge 14. Perceived export success 15. Relationship with foreign customers 16. Relationship with domestic customers 17. Role among competitors 18. Economic situation in Slovakia 19. Political situation in Slovakia 20. EU accession 21. Current development in state forest enterprise 22. Governmental support of sector* 23. Activities of professional and industry associations* The relevant factors (results of qualitative phase) Resource-based view of firm * Factors based on inductive thematically coupled values 1. Company goals 2. Production type- industry sub sectors 3. Export motivation/ dependence

Results (Quantitative phase – the most significant factors) Model Fitting Criteria Likelihood Ratio Tests AIC of BIC of -2 Log Likelihood Reduced ModeReduced Model of Reduced Model Chi-Square df Sig. Intercept461,601730,908277,6014,7664,312 RBV140459,942729,249275,9423,1074,540 Foreign language knowledge RBV150463,602732,909279,6026,7674,149 Market orientation RBV190470,859740,166286,85914,0244,007 Financial resources for export support RBV200461,272730,579277,2724,4374,350 Physical resources RBV220459,015728,323275,0152,1804,703 Market knowledge RBV230458,429727,736274,4291,5944,810 Export experience RBV240465,346734,653281,3468,5114,075 Product and production innovation CCH260467,419736,726283,41910,5844,032 Foreign direct investment SG320466,916736,224282,91610,0814,039 Export motivation/dependence MN520464,805734,112280,8057,9704,093 Relationship with foreign customers MN530457,216726,523273,216,3814,984 Relationship with domestic customers MN570457,958727,265273,9581,1234,891 Role among competition SG340465,942735,250281,9429,1074,058 Company goal I610457,307726,614273,307,4724,976 EU accession I630460,784730,091276,7843,9494,413 Political situation in Slovakia I640466,519735,827282,5199,6844,046 Economic situation in Slovakia I650463,201732,508279,2016,3664,173 Current developments in state owned enterprise EMS390CON 482,211751,519298,21125,3774,000 Product/Production type NEW100467,226736,533283,22610,3914,034 Entrepreneurial drive and quality of management NEW200478,965748,272294,96522,1304,000 Means of company’s establishment NEW300464,342733,649280,3427,5074,111 Governmental support NEW400462,140731,448278,1405,3054,257 Professional and industry associations CCH310462,372731,680278,3725,5374,236 Perceived export success p<=0,05 Significant (Bühl, 2006) Multinominal Regression Analysis: Likelihood Ratio Tests

Probabilities plots of influencing factors from the model on the five EMS types EMS type 1 = Product oriented EMS type 2 = Product-Customer-Channels of promotion EMS type 3 = Price-Channels of sale oriented EMS type 4 = Price-Quality oriented EMS type 5 = Product-Customer-Market share oriented