A decision support model for the planning and assessment of export promotion activities by government export promotion institutions--the Belgian case

A decision support model for the planning and assessment of export promotion activities by government export promotion institutions--the Belgian case
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  See discussions, stats, and author profiles for this publication at: A decision support model for the planningand assessment of export promotionactivities by government export...  Article   in  International Journal of Research in Marketing · July 1995 DOI: 10.1016/0167-8116(94)00021-F CITATIONS 31 READS 387 4 authors:Some of the authors of this publication are also working on these related projects: Identifying realistic export opportunities for products and markets   View projectLudo CuyversUniversity of Antwerp 146   PUBLICATIONS   662   CITATIONS   SEE PROFILE Patrick De PelsmackerUniversity of Antwerp 143   PUBLICATIONS   2,686   CITATIONS   SEE PROFILE Glenn RaypGhent University 75   PUBLICATIONS   1,247   CITATIONS   SEE PROFILE Irene RoozenUniversity of Leuven 31   PUBLICATIONS   254   CITATIONS   SEE PROFILE All content following this page was uploaded by Ludo Cuyvers on 11 January 2017. The user has requested enhancement of the downloaded file. All in-text references underlined in blue are added to the srcinal documentand are linked to publications on ResearchGate, letting you access and read them immediately.  ,~ : ~ • ,. i/z] ELSEVIER Intern. J. of Research in Marketing 12 (1995) 173-186 nternational Journal of esearch in Marketing A decision support model for the planning and assessment of export promotion activities by government export promotion institutions - the Belgian case L. Cuyvers, P. De Pelsmacker , G. Rayp, I.T.M. Roozen Faculteit T.E. W., Dienst Marketing, Middelheimlaan 1, 2020 Antwerpen, Belgium Accepted December 1994 Abstract This model enables the planning and assessment of export promotion activities. The model consists of four consecutive filters that are constructed using and applying a set of selection and decision rules. Information related to country and product category is brought together, and realistic export opportunities for Belgian are finally filtered out. Keywords: International marketing; Export promotion; Decision model I. Introduction In most countries of the world, export promo- tion activities are performed by public or private institutions. These institutions are gathering rele- vant information on foreign markets, competitors and their products, barriers to entry, etc., dissem- inating this information through their libraries, abstract services, publications, etc. to exporters. Furthermore, they organise (multi)sectoral eco- nomic missions to foreign countries, they provide exhibition space at international trade fairs, and they often give incentives to exporters to partici- pate in these fairs. Many of these institutions have trade officers in important markets for help- ing exporters in marketing research, prospection * Corresponding author. and penetration, or they try to bring exporters from their home country in contact with potential customers in the foreign country. It is clear that both public and private export promotion institutions face a double allocation problem, i.e. how to devote their scarce resources to activities in various export markets, and how to allocate the resources to alternative export pro- motion instruments. To that end, a decision sup- port system is needed, that provides data on export markets and export promotion efficiency, and data processing procedures to derive appro- priate actions in relevant export markets. This paper will focus on the part of the deci- sion support model related to the selection of promising export markets. The objective is to construct and implement a model that will enable a government export promotion department to devote its scarce resources to activities in a lim- 0167-8116/95/$09.50 © 1995 Elsevier Science B.V. All rights reserved SSDI 0167-8116(94)00021-2  174 L. Cuyvers et al. / Intern. J. of Research in Marketing 12 1995) 173-186 ited number of markets in which the export pro- motion efforts are likely to be most effective. It is not intended to support the allocation of these resources between the selected countries, nor is it constructed to facilitate the allocation to alterna- tive export promotion activities, although the out- put of the model enables a thorough discussion on this issue, improving the rationality of the choices that have to be made, and enhancing the possibilities for coordination with the other insti- tutions in the home country that are providing export promotion services. The proposed model is a screening procedure that involves collecting relevant information on world markets, and screening or filtering out market opportunities that should be priorities for export promotion. The final objective is to con- struct a limited list, a choice set , of excellent opportunities in world markets, and to derive export promotion priorities and the appropriate promotion strategies for different categories of markets, from the point of view of a governmen- tal export promotion department. The purpose of the model is normative, i.e. it prescribes a more limited field of action for the government depart- ment. Although the objective of the modelling effort may seem limited, it is nonetheless highly rele- vant. Numerous government export promotion departments are currently basing their decisions on the allocation of export promotion resources on suboptimal criteria (Cuyvers and Rayp, 1993), such as the lobbying effort of private companies, and scarce and unstructured information of vari- ous sources. The construction of a decision sup- port system that provides the department with a limited list of export promotion priorities, screened out on the basis of a well-structured model, and based on measurable and objective economic data, has the virtue of at least drawing the attention to markets that have been ignored, and indicating the economic irrelevance of a number of promotion activities. Furthermore, the model will provide some guidelines as to the differentiation in promotion strategy according to the nature of the export market opportunity. Fi- nally, it will provide a tool to assess the economic relevance of past export promotion activities. Given the limited purpose of the model and the limited availability of data, it would be unwise to rest all export promotion decisions upon the model alone. Other considerations have to be taken into account. Export promotion is an activ- ity that is very often only effective in the long run. Since the model that will be developed is to a large extent short term in scope, and is based on historical economic data, some of the current export activities will be labelled as suboptimal , although, from a long term point of view, it would be a wrong decision to discontinue them. Addi- tionally, export promotion is sometimes based on other than economic criteria. Diplomatic and po- litical arguments can lead a government not to support the export to economically promising markets, or to devote its attention to markets for other than economic reasons. The model will at least make clear the difference between economi- cally and politically induced actions. Finally, ex- port promotion is just one part of the governmen- tal and private effort to stimulate a country's presence on world markets. An export promotion department will therefore have to comply with the actions taken by private companies and or- ganisations and other government bodies, such as international investment promotion institutes. All efforts will have to be coordinated, leading to the allocation of resources in markets that, from a short term economic point of view, do not seem to be priorities. For the above-mentioned reasons, the model should be considered as a tool to facilitate and structure government decisions, rather than a fundamental contribution to building decision making models. The model is conceptualised from the Belgian point of view. Nevertheless, it is generally applicable, and its implementation for other export-oriented countries is straightfor- ward. In Section 1, the underlying principles and the structure of the model are discussed. Sections 2, 3 and 4 deal with the filtering out of market opportunities. In Section 5, strengths and weak- nesses of the Belgian export activities are as- sessed. Section 6 presents export promotion strategies for different types of markets. Section 7 concludes with an illustration of the assessment  L. Cuyvers et al. / Intern. J. of Research in Marketing 12 1995) 173-186 175 Filter 1 Macro Level Research Rejected - Prellmlnary Opportunities Filter 2 Countries General Market Relating to the Product Possible Opportunities Filter 3 Micro Level Research (Specific factors affecting the product) Probable Opportunities Filter 4 Target Markets (Relative strength in each country) Country Priority Listing ~ource: R. Wayne Walvoord (1980). Fig. 1. A model for the selection of foreign market opportunities. of export promotion activities, given the results of the model 1 2. Model structure A number of studies, investigating the problem of companies entering international markets, are available (Liander, 1967). Most of these studies are based on the analysis of secondary data, and most of them are aimed at obtaining a rank order of countries that are priorities for further investi- gation of export opportunities (e.g. Douglas et al. 1972; Prakash, 1971). Some of them analyze into more detail the competitive structure of foreign markets (Ayal and Zif, 1978). The specific pur- pose of the model that is being built in this paper, implies a number of model building criteria that should be kept in mind (Naert and Leeflang, 1978, 99-118). The model is intended to be a government decision support system. This implies that the traditional focus of the fore-mentioned models, i.e. the construction of a list of countries that are priorities for international market entry by a 1 An extensive overview of the procedure and of the statis- tical material can be found in: Roozen, et al. (1992). This research was conducted for the Flemish Minister of Foreign Trade. Financial support from the Flemish Executive is grate- fully acknowledged. company with a prespecified product range, is largely irrelevant in this case. An open, export- oriented country should start from the assump- tion that all world markets, i.e. the markets for all products in all countries, are potential opportuni- ties for the exporter, and should enter the screen- ing procedure. The unit of analysis is the prod- uct/country combination, hereafter referred to as market . The purpose of the model is not necessarily to provide a ranking of opportunities, but rather to provide a choice set of interesting markets. The model has to be constructed in a user- friendly way. Moreover, export opportunities change over time. The model has to be conceived in such a way that the selection of a choice set of economically interesting export markets can eas- ily be repeated and updated. This implies a clear model structure that comprises the essential ele- ments of the problem, is adaptive, and can be manipulated according to changing needs by deci- sion makers and/or by decision support staff. It also implies the use of a limited number of easily accessible secondary data for a large number of markets. The use of extensive, detailed and hard- to-find information should be confined to those parts of the model in which they are most useful. Given these limitations, it should be kept in mind that the screening process should avoid on the one hand the premature elimination of inter- esting market opportunities, and on the other  176 L. Cuyvers et al. / Intern. J. of Research in Marketing 12 1995) 173-186 hand, the collection too detailed information on obviously uninteresting markets. Taking the above-mentioned considerations into account, the framework of the analysis is based on the model of international market re- search, proposed by Walvoord (1980) in which relevant information on markets is lead through a screening process of four filters. The basic idea is that, after every filter, a number of opportunities are qualified as uninteresting, and therefore not considered further (Fig. 1). In every filter of the process, a number of criteria can be used, the degree of detail and specification of which increase further down the filtering process. The rationale behind this princi- ple is to quickly eliminate uninteresting markets on the basis of general macro-indicators, to be able to concentrate in detail on a more limited set of preliminary opportunities. These indicators will in most instances be macro-economic, but can also be geographic or political. In Filter 1, markets that lack a sufficient general potential are eliminated. In Filter 2, the market potential of a product group is assessed in a more specific way, using product-related criteria of market potential. The purpose of Filter 2 is to eliminate markets that do not constitute an interesting opportunity for the exporting companies or considered products. In Filter 3, the remaining possible opportunities are studied in more detail. The objective of this filter is to eliminate markets that, although inter- esting from the point of view of market potential, are not easily accessible, or for which the profit potential is too limited and/or too uncertain. In this filter, barriers to entry and competitive struc- ture are taken into account. After completion of Filter 3, a list of probable opportunities is ob- tained: markets with enough potential that is relatively easy to exploit profitably. In Filter 4, the company assesses its own strengths and weaknesses vis-a-vis the markets in the list of probable opportunities. Markets for which the company has obvious strengths will be on top of the list of priorities to concentrate international marketing efforts upon. In fact, the whole procedure is an analysis of opportunities, threats, strengths and weaknesses. In the first three filters, various levels of opportu- nity are defined, and markets are labelled accord- ing to their degree of opportunity; in Filter 4 a strengths and weaknesses analysis is carried out. The result is that the company will only concen- trate on good opportunities for which it has the capabilities of exploiting them profitably. Although the framework can also be used for filtering out priorities for export promotion, it evidently has to be modified for this particular purpose. The first three filters can be used in a similar way though: gradually filtering out prelim- inary, possible and probable opportunities on the basis of the fore-mentioned data categories. The data and selection criteria will, however, have to be defined for all product categories that consti- tute an export basis for the country rather than the company. The fourth filter has to be designed to asses the strength of each productgroup for the country. As a result, the first three filters can be virtually the same for any export-promoting coun- try, while the fourth one is country specific. Al- though, on the basis of Filter 4, and similar to a company analysis, it could be concluded that an export promotion institute should concentrate on markets for which the exporters have a strong position, this would be a wrong conclusion. It is more correct to assess the success of the exports in probable markets, and to adapt export promo- tion strategies to export success in these markets. This is the stand that will be taken in this paper. Therefore, Filter 4 is not a filter in the real sense of the word, but a categorisation of export mar- kets in function of the strength of the country's exports to these markets. It should be clear that the Filters 1-3 are following a process of sequential elimination. Such a procedure has its drawbacks. A market that does not pass a specific criterion is no longer considered in the next stage, and the specific criterion used gets a 100% weight in the elimina- tion process. Nevertheless the procedure is war- ranted, and even efficient, given the specific ob- jectives of the model. The elimination of coun- tries that do not present a sufficient general level of market opportunities on the basis of macro data is, in terms of data collection efficiency, a necessary decision. Their is a danger of wrongly
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