Determinants of Export Success : the case of Thai food industry

Abstract

International trade governs world economic growth. Nations are becoming economic interdependence with other nations through complex flow of goods, capital, and technology. Export has become an important component of Thai economy. The proportion of export to the country’s GDP has been higher than 30 percent since 1994. Loss in international competitiveness of Thai products reflected in negative growth in export, which is one of the factors lead to the country’s economic crisis. It is necessary to enhance and upgrade export products in order to secure Thailand’s position in international market, so to achieve economic stability and growth. The objectives of this study were (1) to verify the applicability of Porter’s Competitive Advantage of Nations Model in explaining the export success of Thai food industry, (2) to identify the extent to which the attributes of Diamond Model contribute to the level of export success of Thai food industry, (3) to identify other factors governing the export success of Thai food industry, and (4) to suggest means to improve export performance of Thai food industry. The scope of the study was to analyse companies’ export performance, export performance attributes, and external environment effecting the export performance. The conceptual framework was developed from Porter’s Diamond Model. The four attributes studied were (i) factor conditions, (ii) demand conditions, (iii) company’s strategy, structure, and rivalry, and (iv) related and supporting industries. The two external environment factors were chance events, and government roles and policies. The study empirically obtained and analysed data through a designed questionnaire. Sampling frame was food exporting companies in Thailand listed in the Kompass Direct for Food and Beverage g e 1998. There were 135 usable returned questionnaire. Response rate was 12.47 percent of the total population. The study shown factors contribute to the Thai food export success were factor conditions, company's structure and strategy, and related and supporting industries. Domestic market conditions, include both demand condition and competitive level, were not directly related to export performance. Respondents viewed basic factors, raw material and labor attributes as more important than company’s strategy, and advanced factors which were human resources and production and technology attributes. The data analysis shown important attributes were company’s human resources, production and technology, and followed by company's strategy. The findings suggest that export companies should improve short-term performance through strategies related to sales plan, customer plan, and quantity and quality control. More attentions should be concentrated on creating long-term competitiveness. Effort should be put on human resources development through building strong R&D personnel, improve employees’ competencies, and provide employees’ training. Investments are required on production and technology through product technology development and product innovation. Government supports are required through institutional R&D supports in food production, process, and productivity improvement projects. Government should also provide production and trade information on both domestic and international market. The study also suggests ideas for further research in the area.