Many theories on internationalization such as the Uppsala theory consider exporting as the first stage for firms wanting to enter international markets (Johanson & Vahlne, 1977). Typically, this decision has been initiated by some form of external stimuli, such as responding to either domestic exporters or foreign firms to supply lower-order products, unsolicited orders from potential customers, firms and agents in foreign countries, or strategic opportunities in foreign countries arising due to an event.
The decision can also be due to certain internal stimuli such as location advantages, price benefits, and technological advantages or due to licensing or patent related differentiation benefits. Exporting as a mode of foreign entry is commonly associated with the entry of small firms into foreign and unfamiliar countries and as a result much of the literature on exporting assumes that small firms that do fit this category only have one major decision maker that makes all the decisions.
Exporting is generally the first step at the time of internationalization because of the lower levels of risk involved due to comparatively lower costs of operations and also minimal requirements on the behalf of the exporting firm towards understanding the foreign culture and economy. Despite this, exporting activity may still involve an “evolutionary” element as suggested by Ohmae (1990) whose six level, taxonomic model has exporting activity starting with an “unwillingness to export” moving toward being an “experienced exporter exploring additional markets.
” However, whilst the view of increasing export involvement is more widely shared (Omar, 2005) such a taxonomic view is not shared by all (Ohmae, 1995). Some researchers believed that export entry has a specific pattern and according to Reid (1981) export-led expansion process can be represented systematically as a five-stage hierarchy: awareness of the export related activities, intention of entering the export business, trials conducted, evaluation of the strategies, and finally formal acceptance and adaptation of the strategy.
Consequently, this and other generalizations before it, led Markusen (2002); to divide and summarize all literature to date on the topics of export development process and firm export behaviour in three phases. These are: pre-engagement period, initial period and advanced period. The pre-engagement period is the period which defines the conditions immediately before which a company actually begins export activities. The Initial period is when a company just begins the export activity and is considering various entry options.
The advanced phase is when a companies are regularly involved in exports and have the propensity to increase their export activities, leading to higher marginal returns or withdraw from selling abroad totally. There are four basic approaches for exporting, which can be used by a company either alone or in combination with other approaches. These are as below (Piercy, 1981): Passively filling orders from domestic buyers who then export the product
Seeking out domestic buyers who represent foreign end users or customers Exporting indirectly through intermediaries Direct exporting A key benefit of exporting put forward by McDonald and Burton (2002) is exporting as a form of innovative behaviour. A study by Samiee et al (1993), for example, suggested that innovative export behaviour can lead to being better organised in export activity, as well as having an increased ability to manage future export activity.
Whilst Clerides et al. (1998) argued that exporting can offer the potential for firms to learn about its new market, potentially improving productivity growth, McDonald and Burton (2002) argued that before embarking upon the process of exporting, various companies engage a market research primarily to identify their marketing opportunities and constraints within individual foreign markets and also to identify and find prospective buyers and customers.
Results of the market research inform the firm of the largest market for its product, the fastest growing markets, market trends and outlook, market conditions and practices, and competitive firms and products. For this reason, many MNCs prefer not to employ exporting as a market entry mode, preferring those that provide greater control over their internationalization process. In the case of developing countries, McDonald and Burton (2002) highlighted that exports can be a problem if the host government has placed restrictions, such as high tariff barriers, on certain imports.
Over a period of time however, the exporting firm gains knowledge of the market and country environment and this is the period when the firm begins its next step for consolidation of business in the country. It goes without saying that export literature, is important to the topic of entry strategies, and it plays a defining role in this research, as entering into the Nigerian Pharmaceuticals industry through this mode is feasible