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1.1 Background to the Study
International trade and sales activities in the world has gradually expanded the market boundaries within which a firm operates irrespective of its scale or target market. Exporting business activities is progressively seen as a prospect for corporate growth, expansion and improved profitability among small and medium scaled firms in various industries (Amira, 2006). Whorapot (2009) assert that exporting has traditionally been the most common approach of international market access, chosen exclusively by small and medium-sized firms. It tends to be associated with less risk, minimal financial, human, and other resource commitments; exporting is a feasible means of global engrossment for the small and medium scale enterprises (Levi, Martin & Justus, 2010).
Internationalization procedure of many small and medium sized (SMEs) firms in Nigeria is still in the primitive stages, with exporting being the prominent mode of their foreign market involvement ( John & Nicholas, 2007). Over the years, the participation of small & medium scale enterprises in the international market has extensively been under scrutiny. This powerful inspection has been against the backdrop of stumpy performance and competitiveness in exportation that characterised small and medium scale enterprises predominantly in evaluating its role in international business and foreign market participation. The export market has become more of a matter of endurance than choice for many small and medium sized firms (Odularu, 2010). Firms that seek to participate in the international markets employ specific strategies to attract international buyers of their goods. The competitive strategies adopted by firms comprise of productivity strategy, export strategy, follower strategy and differentiation strategy (Odularu, 2010). Export strategy is the most adopted foreign market penetration strategy by small and medium sized firms (Levi, Martin & Justus, 2010).
Export strategy is a tool through which companies can respond to the mutual effects of the internal and external factors for obtaining their export goals. It requires low resources, low exposure to business risks, and high strategic flexibility. Small and medium sized Firms within a certain industry adopt different export strategies and the strategies adopted influence the firm’s growth and performance (Amira, 2006). Smile & Danile (2014) assert that adopting the right export strategy is presumed to be a success factor for the SMEs’ in the International markets.
Davide & Erdal (2012) affirmed that the business managers are responsible for making decisions that form the essential features of their firms’ exporting strategy development and implementation in terms of strategy selection, market segmentation, period of exporting, export market selection, degree of export dependence, designing and execution of export strategies in order to overcome a perceived impediment to exporting and attempt to maximise export objective function. Smile & Danile (2014) had earlier affirmed that international experience and entrepreneur orientation of owner/manager of business plays a key role in their firms’ export strategies development and firms’ export performance. Their managerial judgment consequently determines the performance of firms in the international market.
Export strategies in Nigeria remain unclear for the SMEs’ and their international business performance remains less than satisfactory in light of the potential such firms hold (John & Nicholas, 2007). Over the years, the Nigerian government have devised and implemented a number of export strategies and polices to foster SMEs’ export involvement, competitiveness, corporate growth and performance level in the international market. In 1976, The Nigerian Export Promotion Council (NEPC) was vested with a major role for export development and promotion strategy. In 1991, The Nigerian Export-Import Bank (NEXIM) was established under the Structural Adjustment Program as an Export Credit Agency to promote export Trade (Isaac, 2012). Despite the public policy instruments in the Nigerian economies, progressively geared to actively internationalize the SMEs’ and compete in foreign markets, international market penetration remains a major challenge for most SMEs’ in Nigeria. There is a high percentage of SMEs’ in Nigeria that remains small without realizing their growth potentials or appropriate strategies for international market penetration (Isaac, 2012).
1.2 Statement of the Problem
The strategies adopted by most SMEs’ and their managerial judgement in the formation of their export business activities has remained ineffective without yielding the expected multiplying effects on the performance of SMEs’ in the international market. Most SMEs’ do not seek for or acquire adequate information and knowledge about foreign markets and how to manage foreign activities while formulating their exporting strategies (Mwebaze & Hisali, 2013). This has really hampered the export involvement, competitiveness, performance level and corporate growth of the SMEs’. The exportation portion of these companies against their production is low with overall poor export performance (Tongesai & Shylet, 2013).
SMEs’ are characterized with repeated inabilities to effectively respond to the frequent changes in consumer preferences and innovation development due to their smallness nature. Hence, some SMEs’ pursue an agreement with other firms as a strategy to complement their weaknesses in terms of sharing resources to earn a competitive advantage and achieve common objectives (Amira, 2006). Often, the cooperative agreement between the firms is also associated with uncertainty regarding a partner future behavior and the absence of superior authority to ascertain compliance, poor stability with overall poor performance which later results into collapse of the formed partnership (Rosemary, 2007).
Huawei (2013) observed that the cooperative agreement and partnerships are associated with high failure rates because they neither achieved the parent companies goals or the common objective behind the motive of cooperation. There is a high rate of termination of cooperative agreements which later results into the destruction of shareholder value. Identifying the appropriate export strategies for international market entry remains a big obstacle for most small and medium sized firms in Nigeria. Most SMEs’ do not seek to participate in the international market for business expansion, while the potential exporters are discouraged as a result of non-availability of export business information and strategies for targeted countries (Mwebaze & Hisali, 2013).
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