Print Edition - 2015-04-03 | MONEY
World, here we come
- Nepali exporters have to realise that it’s a whole other country out there
Apr 2, 2015-
Discussions on how to promote Nepal’s trade in the global market always revolve around policy matters. This is because government policy is the key to building an enabling environment to ensure incentives and support services to enhance trade. They include the government’s assurance of direct subsidies, infrastructure and easy access to trade finance, information and training. The constraints to trade promotion cannot be removed without the government’s intervention in these support services.
The private sector’s competence and capability to engage in global marketing also depends on government policies that lead to efficient and effective trade related business services. Similarly, firms involved in international marketing also need to have a global perspective to make effective decisions and be competitive in the world arena. This is why government policy and company strategy must go hand in hand to get the most out of globalization. But this is not happening in Nepal.
Economic and trade policies in Nepal have undergone massive changes with the wave of globalization. It has unilaterally reformed economic policies that liberalized a restricted trading regime to conform to new regional and multilateral rules and regulations. However, it did not respond well to market failure and the poor performance of the private sector in the country. As a consequence, the private sector lagged behind in catching up with globalisation and it was unable to build strategies to exploit opportunities at the global level.
That being said, business firms without a global perspective or a strong orientation towards external markets cannot exploit opportunities worldwide. It is the global orientation of doing business that allows even small and medium enterprises (SMEs) to operate globally without the support of intensive policy measures. Business firms with global management orientation can exploit strengths gained in one country or market to establish their position in other countries and markets.
One of the reasons that has prevented Nepali firms from being proactive in the global context is their ethnocentric business orientation. Instead of considering the global market differently, they see similarities between domestic and foreign markets with regard to marketing plans and policies. In management terms, their marketing management is myopic. They assume that the products and practices that have succeeded in Nepal will be successful everywhere.
This preconception has inhibited export firms from adapting to global market traits and expanding marketing opportunities. This kind of ethnocentrism leads firms to view foreign markets as being subordinate to the domestic market. This is why most export firms in Nepal are reluctant to build business plans and strategies to properly fit each global market. This is one of the biggest internal threats that exporting firms in the country have been facing.
In contrast to ethnocentrism, firms can be polycentric and consider each global market as being unique. The underlying assumption is that there are so many differences in cultures and economic factors among external markets that it is virtually impossible to attempt to transfer experience across national borders. So firms build separate business and marketing strategies for each global market. Successful companies have decentralized marketing management to adapt to the external environment in each targeted market. Deterred by higher marketing costs and the extra efforts needed for each market-specific strategy, Nepali exporters are rarely polycentric due to their small volume of worldwide export transactions.
As an alternative to the polycentric approach, regio-centric and geo-centric tactics can be pursued as the preferences of global consumers have been converging with the wave of globalization. Regio-centric firms view regions as a unique market and seek opportunities for a coordinated and concentrated marketing programme. They develop integrated strategies for different regions which are geographically or culturally homogenous.
For example, the product development strategy for markets under the EU or Nafta (North American Free Trade Area) has a regional view. A Nepali carpet exporter who has been successfully marketing products with a modest design, light colours, simple patterns and moderate quality for European consumers needs to develop a different product development strategy to be successful in the US market as American consumers prefer traditional designs, dark colours, jazzy patterns and high quality. Regio-centric firms, therefore, seek to strengthen their competitiveness at the regional level instead of responding directly to a global perspective to adjust to a competitive environment.
As globalization has been fast paced, firms can become geo-centric and go for a global orientation. Geo-centric firms consider the entire world as a potential market and develop integrated world market strategies. They represent a mixture of ethnocentrism and polycentrism. This is why they see similarities and differences in external markets and seek to create a global strategy that is fully responsive to local needs and wants. Firms can develop standardized products with minor adjustments in the marketing mix strategies in order to comply with local conditions. Thus, the analysis of the environment of geo-centric firms is comprehensive and integrative.
The point being made is that exporting firms in Nepal can respond well to global market opportunities provided they change their management assumptions about the nature of global markets. It is important to have a global perspective in decision-making, not only for profits but also for survival. After all, national trade policies are already globally oriented.
(Shakya specializes in the economic and trade interests of Nepal and LDCs)
Published: 03-04-2015 09:24