Description
There has been a significant increased in the quantity and quality of international and export marketing research with respect to effective solutions towards export performance. However, an investigation on the impact of marketing strategy and export performance in a single industry is lacking. In addition, the influence of environmental factors to moderate the relationship between export marketing strategy and export performance has received little agreement.
Jurnal Kemanusiaan bil.11, Jun 2008
Impact of environmental factors as moderator on export marketing
performance in wooden furniture industry
Azaze @ Azizi Hj. Abdul Adis
[email protected]
School of Business and Economics
Universiti Malaysia Sabah
Samsinar Md. Sidin
Graduate School of Management
Universiti Putra Malaysia
Abstract
There has been a significant increased in the quantity and quality of international and export
marketing research with respect to effective solutions towards export performance. However,
an investigation on the impact of marketing strategy and export performance in a single
industry is lacking. In addition, the influence of environmental factors to moderate the
relationship between export marketing strategy and export performance has received little
agreement. This research aims to investigate the relationship between export marketing
strategy and export performance in Malaysian wooden furniture industry, as well as the
influence of moderating role of environmental factors on the relationship between export
marketing strategy and export performance. Personal interview, mail and phone interview
methods were used to measure export marketing strategy, newly developed environmental
factor variables which consists of global economic situation and certification, as well as
export performance. The findings showed that there were no direct relationship between
export marketing strategy and export performance. Uniquely, the moderating effect of
certification appeared to moderate a few relationships between product and promotion
adaptation, distribution strategy, design strategy and target market specification on export
performance. Managerial implications and suggestions for future research were also
discussed.
Introduction
The importance of marketing strategy to achieve organizational profits has been proven in
determining the company performance effectively. Many industries have formulated
aggressive strategies by implementing creative strategies on their products or services in order
to increase organizational profits and sustainable competitive advantage. Global competition
has put great pressure on export-based companies to set new and effective strategies in order
to compete in the world market. However, some of the strategies implemented are not as
successful as expected. Therefore, the need to focus on export marketing strategy on export
performance in a single industry would give better understanding, whilst adding new insights
into international marketing literature.
Besides expanding business operations into global market, firms also need to consider external
factors that might affect their business internationally. These external or environmental factors
cannot be controlled by the firms. Therefore, the impact of environmental factors to export-
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
based companies to enter export ventures would give significant influence to their
performance.
This study attempts to investigate export performance in the Malaysian wooden furniture
industry by examining the impact of export marketing strategy and the moderating effect of
environmental factors on the relationship between export marketing strategy and export
performance. The study contributes to add new insight of the moderating factors influenced
the export marketing performance in Malaysia furniture industry.
Furniture industry in Malaysia
The Malaysian furniture industry has been on a steady upsurge since 1998. After experiencing
a 14% drop that year, furniture production fuelled by export demands reached an estimated
USD1,828 million in 2000. There are an estimated 750 furniture manufacturing and export
companies in Malaysia, with another 1,500 smaller concerns playing a supporting role. Under
the government’s second Master Plan (1996-2005), the Malaysian furniture industry has been
identified as a "target industry" and is now one of the new growth sectors of the economy. In
2000, the Malaysian Industrial Development Authority gave the go ahead to a total of 34
furniture and fixtures investment projects and 21 wood investment projects. Collectively,
these investments are worth RM356.5 million.
A study by Bojei et al., (2002) on global marketing strategies in the Malaysian wooden
furniture industry, the marketing strategies used by the wooden furniture companies, either
original equipment manufacturing (OEM), own design manufacturing (ODM) or own brand
name (OBM), the most important factors influencing the success of those strategies were
firm’s primary characteristics, decision maker’s expectation of exporting and global marketing
strategy.
Literature review
Export Marketing Strategy
In the international marketing research, there were several dimensions used by the researchers
to indicate marketing strategy. Previous researchers acknowledged firm strategy (Aaby and
Slater, 1989), export marketing strategy (Julian, 2003; Akyol and Akehurst, 2003; Zou and
Stan, 1998; Cavusgil and Zou, 1994; Koh, 1991), export strategy (Aulakh et al., 2000; Chetty
and Hamilton, 1993), business strategy (Baldauf et. al, 2000) or strategy (Cicic et al., 2002;
Thirkell and Dau, 1998). However, all of these dimensions are based on marketing mix
(product, price, promotion, distribution) and some researchers add few variables in order to
make it more meaningful dimensions in their studies.
Export strategy was found as one of the most frequently used variable previously (Chetty and
Hamilton, 1993). Other studies in export marketing area have focused on the relationship
between export performance and firm strategies toward export activities (O’Cass and Julian,
2003; Julian, 2003; Akyol and Akehurst, 2003, Cicic et al., 2002; Steward and McAucley,
2000; Aulakh et al., 2000). In the international marketing literature, there were a number of
empirical studies emphasizing on marketing strategy in export marketing with several
constructive results. Studies done by Thirkell and Dau (1998), Cavusgil and Zou (1994), Koh
(1991), and Madsen (1989) suggested that export marketing strategy has significant influence
on export performance.
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Jurnal Kemanusiaan bil.11, Jun 2008
Since export marketing strategy has been considered as one of the key determinants on export
performance (Cavusgil and Zou, 1994), not all of the marketing strategy elements will affect
the export performance simultaneously. Study by Koh (1991) on the relationships among
organizational characteristics, marketing strategy and export performance has found that only
export pricing, direct buyer, and channel strategies of marketing strategy variations have
effects on export performance. However, adapting marketing mix variables to the specific
needs of developed country markets would enhance export marketing performance (Aulakh et
al., 2000). In contrast, a study by Julian (2003) to identify the key factors influencing export
marketing performance found that export marketing strategy has no effect on the Thai firm’s
export marketing performance.
Shoham and Kropp (1998) investigated international performance in the United States has
found a negative impact between marketing mix on export performance except channel
support. Product adaptation strategy (product design, quality, auxiliary services, breadth, and
depth of lines) improve export performance (Shoham, 1999) and little or no adaptation of
product in foreign markets will contribute to the failure of export ventures (Ogunmokun and
Li, 1999). Zou and Stan (1998) suggested in their meta analysis approach of 50 studies that
product adaptation and strength, promotion intensity, channel relationship and price adaptation
were the key determinants of export marketing strategy. Based on past literature, hence:
H1: There is a significant relationship between export marketing strategy and export
performance.
Environmental factors
The emergence of environmental concern as one of the critical factors in strategic business
planning indicates the growth of environmental movement in the market place (Menon et al.,
1999). Both internal firm processes and external market and government policy factors affect
firm and industry competitiveness (Hoff et al., 1997).
A study by Kotha and Nair (1995) on strategy and environment as determinants of
performance in the Japanese machine tool industry indicated that profitability and growth of
performance were influenced significantly by the environment. Besides that, only
environmental variables were related with firm growth of firm performance. Recent study by
O’Cass and Julian (2003) showed that environmental characteristics have significant impact
on overall export marketing performance.
In contrast, Baldauf et al., (2000) found that the effect of the environmental dimensions on the
organizations was viewed relatively unimportant by the managers in their study. Additionally,
perceived environmental effects did not appear to have a strong impact on export
performance. However, export sales have significant effect on the importance placed on the
political environment. Furthermore, lower perceived influences of political environment were
associated with the higher export sales which indicated negative relationship. On the other
hand, Abdul-Aziz et al. (2000) found that certification especially ISO certfification will ensure
the promotion adaptation into higher standard. Thus, the proposed hypotheses are:
H2a: Global economic situation moderates the relationship between export marketing
strategy and export performance.
H2b: Certification moderates the relationship between export marketing strategy and
export performance.
26
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
Figure 1 indicates the research framework of the impact of export marketing strategy on
export performance in the Malaysian wooden furniture industry.
EXPORT MARKETING
STRATEGY
• Product adaptation
EXPORT
PERFORMANCE
• Promotion adaptation
• Distribution strategy
• Design strategy
• Price competitiveness
• Support to foreign
distributors
• Target market
specification
ENVIRONMENTAL
FACTORS
• Global economic
situation
• Certification
Figure 1: Research framework
Methodology
A questionnaire was developed and tested in order to ensure the relevancy, clarity and
applicability to the furniture industry. A total of 215 respondents consisted of wooden
furniture firms in Malaysia were selected as the sample for this study. From 215 export-
oriented furniture firms, only 67 participated with 31.16% response rate but only 64 responses
were usable to be analyzed for the study. Face to face, mail and phone interview methods were
used to measure export marketing strategy (Cavusgil and Zou, 1994), environmental factors,
and export performance (Cavusgil and Zou, 1994; and Julian, 2003). Unit analysis for this
study was the export oriented furniture firms.
Export marketing strategy was measured based on Cavusgil and Zou (1994) and Julian (2003),
which comprised of seventeen items including newly developed item for design strategy. This
instrument consist of product adaptation (?=0.56), promotion adaptation (?=0.56), support to
foreign distributor/subsidiary (?=0.83), price competitiveness, distribution strategy (?=0.54),
design strategy (?=0.66) and target market specification (?=0.71). This instrument was
measured using six-point Likert scales ranging from 1 (none/vague/modest/few/not
competitive) to 6 (substantial/clear/high/ many/considerable/extremely competitive).
Environmental factors were newly developed for the purpose of this study by using four
items. It consists of global economic situation (2 items) and certification (2 items). The six-
point Likert scales were used ranging from 1 (none) to 6 (substantial). Reliability test was
conducted and resulted in 0.88 cronbach’s alpha for global economic situation and 0.63 for
certification measurements.
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Jurnal Kemanusiaan bil.11, Jun 2008
Export performance measurement was adopted by using Cavusgil and Zou (1994) and Julian
(2003) composite scale on strategic objective. Respondents were asked to indicate the relative
importance attached to each objective by allocating a constant sum (100 points) to the
individual objectives proportional to their importance. Respondents also were asked to
indicate whether these objectives were met. The extent to which the initial strategic objectives
were achieved was then computed as the weighted sum of the importance of initial strategic
objectives. Then, perceived success of the export venture on a 10-point Likert scale ranging
from 1 (unsuccessful) to 10 (successful) was determined. Annual export sales growth rates
over the five year period of the venture and whether the venture is profitable in each of the
five years were asked to the potential respondents. Average annual sales growth rates as well
as the overall profitability over the five years of the venture were computed to capture the
measure of export marketing performance. For measuring export performance, these four
indicators then were summed into a composite scale (Cavusgil and Zou, 1994; Julian, 2003).
The statistical analysis used in this study consists of frequency analysis to determine the
company profile. Correlation and multiple regression analyses were used to examine the
relationship between the export performance and the factors of export marketing strategy and
the variables of environmental factors in the Malaysian wooden furniture industry. Finally,
intercooled stata was used to determine whether the moderating variables are the major
contribution to the model.
Research results
Respondent profile
This study has indicated that 26 (40.6%) furniture manufacturers have less than 100 of total
number of employees, 18 (28.1%) firms have between 100 to 300 employees, 11 (17.2%)
firms have between 300 to 500 employees, 5 (7.8%) and 4 (6.3%) for the firms who have the
total employees between 500 to 700 and 700 to 1000 employees respectively. About 50% (32)
of the respondents were experienced in international market around 5 to 10 years, 28.1% (18)
have experienced within 11 to 24 years in international market, 11 companies (17.2%)
experienced less than 5 years, and 3.1% (2) and 1.6% (1) for those companies who have
experienced within 25 to 39 years and more than 40 years respectively. More than half or 35
companies (54.7%) have served 6 to 24 countries, 31.3% or 20 companies served between 1 to
5 countries in export market. Five companies or 7.8% have served between 40 to 59 countries,
two companies (3.1%) have served between 25 to 39 countries, and finally, only two
companies served more than 60 countries.
Correlation Analyses
Table 1, shows the correlations between the dependent of export performance (EXPERF),
independent of product adaptation (PDTADAP), promotion adaptation (PROMO), price
competitiveness (PRICE), target market specification (TGTMKT), support to foreign
distributors (SUPPDIST), distribution strategy (DISTSTRA), design strategy (DESIGN) and
the moderating effect of environmental factors (EF).
The result indicated that only product adaptation and distribution strategy were correlated with
export performance at 0.05 significant level. Promotion adaptation, target market specification
and distribution strategy were found correlated with product adaptation at 0.01 significant
level. Besides that, target market specification and distribution strategy were correlated with
promotion adaptation at 0.01 significant level while design strategy correlates with promotion
28
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
adaptation at 0.05 significant level. Finally, target market specification was correlated with
distribution strategy at 0.01 significant level and at 0.05 significant level with environmental
factors.
Table 1: Correlation analyses between export marketing strategy, environmental factors
and export performance
VARIABLES MEAN sd 1 2 3 4 5 6 7 8
EXPERF 15.4813 3.0500 1.00
PDTADAP 14.0625 2.382998 0.257* 1.00
PROMO 14.2500 2.09307 0.187 0.780** 1.00
PRICE 4.5781 0.97272 -0.039 0.238 0.115 1.00
TGTMKT 4.9063 1.06486 0.208 0.428** 0.459** 0.237 1.00
SUPPDIST 6.8438 4.49768 0.132 0.004 0.11 0.199 -0.023 1.00
DISTSTRA 9.3125 2.29475 0.262* 0.391** 0.416** 0.124 0.636** 0.216 1.00
DESIGN 13. 4375 2.77675 0.061 0.137 0.284* 0.087 0.213 0.095 0.319* 1.00
EF 23.8438 3.77636 -0.173 0.140 0.013 0.194 0.261* 0.055 0.145 0.144
*Correlation is significant at the 0.05 level (2-tailed)
**Correlation is significant at the 0.01 level (2-tailed)
The impact of export marketing strategy on export performance
As can be seen from Table 2, multiple regression analyses is used to see whether there are
relationships between product adaptation, promotion adaptation, price competitiveness,
distribution strategy, support to foreign distributors, target market specification and design
strategy on export performance in Malaysian wooden furniture industry. The results have
shown that there is no statistically significant relationship between export marketing strategy
and export performance. Thus, proposition 1 was rejected.
Table 2: Regression analyses between export marketing strategy
and export performance
Parameter B Std. Error t p-value
Constant 11.711 3.681 3.182 0.002
Product adaptation 1.145 0.780 1.467 0.148
Promotion adaptation -0.337 0.824 -0.409 0.684
Distribution strategy -0.138 0.663 -0.209 0.835
Design strategy -0.176 0.667 -0.264 0.793
Price competitiveness -0.497 0.420 -1.182 0.242
Support to foreign distributors 0.321 0.274 1.169 0.248
Target market specification 0.753 1.527 0.493 0.624
F 1.326 (p-value = 0.255)
R² 0.142
The moderating effect of environmental factors
From Table 3, it shows that global economic situation has not found to moderate the
relationship between export marketing strategies on export performance. Furniture
manufacturers are not concern on the global economic situation due to their confident level of
furniture products in terms of quality and design are very competitive in the world market.
Thus, proposition 2a was rejected.
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Jurnal Kemanusiaan bil.11, Jun 2008
Table 3: Regression analyses between export marketing strategy and the moderating
effect of global economic situation on export performance
Parameter B Std. Error t p-value
Constant 10.465 3.706 2.824 0.007
Product adaptation -4.325 3.907 -1.107 0.274
Promotion adaptation 5.154 4.348 1.186 0.242
Distribution strategy -3.123 3.115 -1.002 0.321
Design strategy 2.760 3.238 0.852 0.398
Price competitiveness -4.903 3.730 -1.314 0.195
Support to foreign distributors 0.749 1.208 0.620 0.538
Target market specification 8.797 8.443 1.042 0.303
Product adaptation* Global
economic situation
1.203 0.780 1.542 0.129
Promotion adaptation* Global
economic situation
-1.168 0.840 -1.391 0.170
Distribution strategy* Global
economic situation
0.589 0.622 0.946 0.349
Design strategy* Global economic
situation
-0.559 0.646 -0.866 0.391
Price competitiveness* Global
economic situation
0.807 0.699 1.155 0.253
Support to foreign distributors*
Global economic situation
-0.086 0.243 -0.352 0.726
Target market specification* Global
economic situation
-1.555 1.612 -0.965 0.339
F 1.723 (p-value =
0.081)
R² 0.330
Table 4 shows contradicting result from Table 3. It shows that certification has been found to
moderate the positive relationships between product adaptation (p=0.061), distribution
strategy (p=0.003) and design strategy (p=0.003), while certification has moderate negative
relationships between promotion adaptation (p=0.016) and target market specification
(p=0.003) on export performance in Malaysian furniture industry. However, the relationships
between price competitiveness and support to foreign distributors were not moderated by
certification. Thus, it provides partial support to proposition 2b.
30
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
Table 4: Regression analyses between export marketing strategy and the moderating
effect of certification on export performance
Parameter B Std. Error t p-value
Constant 12.205 3.593 3.397 0.001
Product adaptation -5.161 3.456 -1.493 0.142
Promotion adaptation 7.236 3.494 2.071 0.044**
Distribution strategy -8.424 2.760 -3.052 0.004**
Design strategy -7.314 2.530 -2.891 0.006**
Price competitiveness 2.293 1.807 1.269 0.211
Support to foreign distributors 2.003 1.165 1.719 0.092*
Target market specification 19.002 6.036 3.148 0.003**
Product adaptation* Certification 1.426 0.743 1.920 0.061*
Promotion adaptation* Certification -1.803 0.724 -2.492 0.016**
Distribution strategy* Certification 1.949 0.620 3.141 0.003**
Design strategy* Certification 1.566 0.510 3.071 0.003**
Price competitiveness* Certification -0.536 0.377 -1.423 0.161
Support to foreign distributors*
Certification
-0.361 0.234 -1.539 0.130
Target market specification*
Certification
-4.243 1.341 -3.165 0.003**
F 2.890 (p-value = 0.003)
R² 0.452 **=0.05, *=0.10
This result has shown that the moderating role of certification gives a major contribution to
the model of this study by using additional F-test formula:
( )
( ) df R
df R R
F
new
old new
2
2 2
1 ?
?
=
( )
( ) model new in the parameter of 1
regressor new of
2
2 2
number n R
number R R
F
new
old new
? ?
?
=
Since in the first model the R-squared value is 0.142 (n=64) and in the second model after
including the entire moderator the R-square increase to 0.404 (n=64). Using the above
formula, the additional F-value for moderator effect can be calculated as below;
( )
( ) 14 64 452 . 0 1
7 142 . 0 452 . 0
? ?
?
= F
04 . 4 = F (Additional F-value for moderating variable)
The critical value for F-test at 5% (1%) alpha level with 7 and 50 for numerator and
denominator degree of freedom is 2.2 (3.02)
F
0.05;7,50
= 2.2
F
0.01;7,50
= 3.02
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Jurnal Kemanusiaan bil.11, Jun 2008
Since the Additional F-value is greater than the F-critical value, then enough evidence to say
that the contributions of certification as a moderating variable in the model is significant.
Discussion and implications
The objective of the research is to examine the impact of export marketing strategy and the
moderating effect of environmental factors on export performance in Malaysian wooden
furniture industry. This study found that all export marketing strategies have no direct
relationship with export performance in Malaysian wooden furniture industry. Julian (2003)
has supported this result which suggested that export marketing strategy has no effect on the
Thai firm’s export marketing performance. Majority of Malaysian furniture manufacturers are
using the same strategy in their marketing activities implementation. Most of strategies
implemented are similar domestically and internationally. They do not consider foreign
market requirements as well as their needs. In addition, this study also shows that the
moderating effect of global economic situation has not moderate the relationship between all
export marketing strategies on export performance. The fluctuation of global economic
situation would not influence Malaysian furniture exporters to strategize aggressive marketing
programme for global market. Export marketing strategy do not very much depend on what
happen in the global economic.
This study shows interesting findings whereby certification moderates the positive relationship
between product adaptation, distribution strategy and design strategy on export performance.
If product adaptation set by furniture firm emphasis on certification, performance will be
increased in export market. Most of foreign buyers tend to look for environmental friendly
furniture products which have been certified by certain bodies locally before exporting. This is
to maintain buyer’s requirements and increase the value-added of furniture products.
Furthermore, this result is slightly similar to Cavusgil and Zou (1993) which found that legal
environment is the most important factor in a firm’s decisions to adapt their products upon
entry. An established and efficient distribution system will ensure the security of good sales in
export performance. Currently, global markets are more environmental conscious. For
instance, ‘greening of industry’ places emphasis on business responsibility and accountability
to variety of stakeholders (Morris and Dunne, 2003). This will contribute into high quality in
terms of wood materials and design of furniture products. This is consistent with Lee and
Zhou (2000) in their study which suggested that there is a significant association between
quality practices and strategy, which eventually influence business practices and performance.
Uniquely, this study also found that certification moderates the negative relationship between
promotion adaptation and target market specification on export performance for Malaysian
wooden furniture industry. This means that, if the promotion adaptation set by furniture firms
emphasizes on certification, export performance will be decreased. Aggressive promotion
programmes implemented by the furniture exporters will give an opportunity to the
competitors to take advantage from the promotion efforts to offer their products in export
market. Sales will be broken down into smaller percentage among suppliers, which inherently
cause the first exporter’s performance to fall. However, this result was contradicted with
Abdul-Aziz et al. (2000) which suggested that ISO certification will ensure that the promotion
adaptation is on high standard.
In addition, longer process of certification, which means more stringent of licensing approval,
documentation and high government bureaucracy will adversely affect promotion adaptation
and target market specification in that particular country which directly resulted in low
performance of export market. A study by Jensen and Pompelli (2000) suggested that product
32
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
promotion, advertising, and market research are perceived as the most important modes of
assistance, in locating and identifying potential buyers for products. However, stringent
certification process hinders the success of promotion strategy in achieving high performance
for export market in the Malaysian wooden furniture industry.
The result also shows that certification do not moderate the relationship between price
competitiveness and support to foreign distributors on export performance. Normally, in
marketing strategy, the need to certify the pricing is very minimal especially in furniture
industry which most of the prices given were based on cost of raw material. Similarly, support
to foreign distributors is based on manufacturers or exporters tolerance.
Therefore, certification process should be shortened in order to facilitate smooth
implementation of marketing programmes in the international market. In addition, product
quality must be maintained in order to enhance promotion adaptation activities. This
contention was supported by Lee and Zhou (2000) who noted that firms which are more likely
to do business globally and link officially with foreign firms tend to be more quality-
conscious. These firms are concerned more on product identity compared to traditional firms.
The influence of unstable global economic situation may affect the promotion of furniture
products to the foreign buyers. If the global economy is facing unstable situation, promotion
adaptation programme will be less effective and result in low export performance.
Other aspects that need to be focused in furniture manufacturing are the improvements of
marketing support systems, efficiency of marketing operations such as market research, direct
order entry systems, prospect qualification systems and communications with existing clients.
The production of environmental friendly and value-added furniture will also help Malaysian
manufacturers to penetrate international market.
Conclusion
Overall, this study has shown that export marketing strategy has no direct relationship on
export performance in Malaysian wooden furniture industry. In addition, global economic
situation does not moderate the relationship between all export marketing strategy variables
and export performance. Uniquely, certification does moderate positive relationship between
product adaptation, distribution strategy and design strategy on export performance. In
addition, it also moderate negative relationship of promotion adaptation and target market
specification on export performance in Malaysian wooden furniture industry. These findings
add new insight on the export marketing literature especially on the moderating role of
environmental factors as a major contribution to this study. It is hoped that for future research,
the need to consider other industries as well as cross sectional industries will be fruitful to
examine the generalizability of the results. Also, in addition of environmental factors into
other dimensions such as government roles will give meaningful findings to export marketing
area. Finally, the scales that have been used in export performance need to be standardized in
order to increase the quality of data.
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impact of environmental factors as moderator on export
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Shoham, A. (1999). Bounded rationality, planning, standardization of international strategy,
and export performance: a structural model examination, Journal of International
Marketing, 7(2): 24-50.
Shoham, A. and Kropp, F. (1998). Explaining international performance: marketing mix,
planning, and their interaction, Marketing Intelligence & Planning, 16(2): 114-123.
Shoham, A., Evangelista, F. and Albaum, G. (2002). Strategic firm type and export
performance, International Marketing Review, 19(3): 236-258.
Stewart, David B. and McAuley, A. (2000). Congruence of domestic and export marketing
strategies: an empirical investigation of its performance implications, International
Marketing Review, 17(6): 563-585.
Thirkell, P. C. and Dau, R. (1998). Export performance: success determinants for new zealand
manufacturing exporters, European Journal of Marketing, 32(9/10): 813-829.
Zou, S. and Stan, S. (1998). The determinants of export performance: a review of the
empirical literature between 1987 and 1997, International Marketing Review, 15(5):
333-356.
35
doc_465059847.pdf
There has been a significant increased in the quantity and quality of international and export marketing research with respect to effective solutions towards export performance. However, an investigation on the impact of marketing strategy and export performance in a single industry is lacking. In addition, the influence of environmental factors to moderate the relationship between export marketing strategy and export performance has received little agreement.
Jurnal Kemanusiaan bil.11, Jun 2008
Impact of environmental factors as moderator on export marketing
performance in wooden furniture industry
Azaze @ Azizi Hj. Abdul Adis
[email protected]
School of Business and Economics
Universiti Malaysia Sabah
Samsinar Md. Sidin
Graduate School of Management
Universiti Putra Malaysia
Abstract
There has been a significant increased in the quantity and quality of international and export
marketing research with respect to effective solutions towards export performance. However,
an investigation on the impact of marketing strategy and export performance in a single
industry is lacking. In addition, the influence of environmental factors to moderate the
relationship between export marketing strategy and export performance has received little
agreement. This research aims to investigate the relationship between export marketing
strategy and export performance in Malaysian wooden furniture industry, as well as the
influence of moderating role of environmental factors on the relationship between export
marketing strategy and export performance. Personal interview, mail and phone interview
methods were used to measure export marketing strategy, newly developed environmental
factor variables which consists of global economic situation and certification, as well as
export performance. The findings showed that there were no direct relationship between
export marketing strategy and export performance. Uniquely, the moderating effect of
certification appeared to moderate a few relationships between product and promotion
adaptation, distribution strategy, design strategy and target market specification on export
performance. Managerial implications and suggestions for future research were also
discussed.
Introduction
The importance of marketing strategy to achieve organizational profits has been proven in
determining the company performance effectively. Many industries have formulated
aggressive strategies by implementing creative strategies on their products or services in order
to increase organizational profits and sustainable competitive advantage. Global competition
has put great pressure on export-based companies to set new and effective strategies in order
to compete in the world market. However, some of the strategies implemented are not as
successful as expected. Therefore, the need to focus on export marketing strategy on export
performance in a single industry would give better understanding, whilst adding new insights
into international marketing literature.
Besides expanding business operations into global market, firms also need to consider external
factors that might affect their business internationally. These external or environmental factors
cannot be controlled by the firms. Therefore, the impact of environmental factors to export-
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
based companies to enter export ventures would give significant influence to their
performance.
This study attempts to investigate export performance in the Malaysian wooden furniture
industry by examining the impact of export marketing strategy and the moderating effect of
environmental factors on the relationship between export marketing strategy and export
performance. The study contributes to add new insight of the moderating factors influenced
the export marketing performance in Malaysia furniture industry.
Furniture industry in Malaysia
The Malaysian furniture industry has been on a steady upsurge since 1998. After experiencing
a 14% drop that year, furniture production fuelled by export demands reached an estimated
USD1,828 million in 2000. There are an estimated 750 furniture manufacturing and export
companies in Malaysia, with another 1,500 smaller concerns playing a supporting role. Under
the government’s second Master Plan (1996-2005), the Malaysian furniture industry has been
identified as a "target industry" and is now one of the new growth sectors of the economy. In
2000, the Malaysian Industrial Development Authority gave the go ahead to a total of 34
furniture and fixtures investment projects and 21 wood investment projects. Collectively,
these investments are worth RM356.5 million.
A study by Bojei et al., (2002) on global marketing strategies in the Malaysian wooden
furniture industry, the marketing strategies used by the wooden furniture companies, either
original equipment manufacturing (OEM), own design manufacturing (ODM) or own brand
name (OBM), the most important factors influencing the success of those strategies were
firm’s primary characteristics, decision maker’s expectation of exporting and global marketing
strategy.
Literature review
Export Marketing Strategy
In the international marketing research, there were several dimensions used by the researchers
to indicate marketing strategy. Previous researchers acknowledged firm strategy (Aaby and
Slater, 1989), export marketing strategy (Julian, 2003; Akyol and Akehurst, 2003; Zou and
Stan, 1998; Cavusgil and Zou, 1994; Koh, 1991), export strategy (Aulakh et al., 2000; Chetty
and Hamilton, 1993), business strategy (Baldauf et. al, 2000) or strategy (Cicic et al., 2002;
Thirkell and Dau, 1998). However, all of these dimensions are based on marketing mix
(product, price, promotion, distribution) and some researchers add few variables in order to
make it more meaningful dimensions in their studies.
Export strategy was found as one of the most frequently used variable previously (Chetty and
Hamilton, 1993). Other studies in export marketing area have focused on the relationship
between export performance and firm strategies toward export activities (O’Cass and Julian,
2003; Julian, 2003; Akyol and Akehurst, 2003, Cicic et al., 2002; Steward and McAucley,
2000; Aulakh et al., 2000). In the international marketing literature, there were a number of
empirical studies emphasizing on marketing strategy in export marketing with several
constructive results. Studies done by Thirkell and Dau (1998), Cavusgil and Zou (1994), Koh
(1991), and Madsen (1989) suggested that export marketing strategy has significant influence
on export performance.
25
Jurnal Kemanusiaan bil.11, Jun 2008
Since export marketing strategy has been considered as one of the key determinants on export
performance (Cavusgil and Zou, 1994), not all of the marketing strategy elements will affect
the export performance simultaneously. Study by Koh (1991) on the relationships among
organizational characteristics, marketing strategy and export performance has found that only
export pricing, direct buyer, and channel strategies of marketing strategy variations have
effects on export performance. However, adapting marketing mix variables to the specific
needs of developed country markets would enhance export marketing performance (Aulakh et
al., 2000). In contrast, a study by Julian (2003) to identify the key factors influencing export
marketing performance found that export marketing strategy has no effect on the Thai firm’s
export marketing performance.
Shoham and Kropp (1998) investigated international performance in the United States has
found a negative impact between marketing mix on export performance except channel
support. Product adaptation strategy (product design, quality, auxiliary services, breadth, and
depth of lines) improve export performance (Shoham, 1999) and little or no adaptation of
product in foreign markets will contribute to the failure of export ventures (Ogunmokun and
Li, 1999). Zou and Stan (1998) suggested in their meta analysis approach of 50 studies that
product adaptation and strength, promotion intensity, channel relationship and price adaptation
were the key determinants of export marketing strategy. Based on past literature, hence:
H1: There is a significant relationship between export marketing strategy and export
performance.
Environmental factors
The emergence of environmental concern as one of the critical factors in strategic business
planning indicates the growth of environmental movement in the market place (Menon et al.,
1999). Both internal firm processes and external market and government policy factors affect
firm and industry competitiveness (Hoff et al., 1997).
A study by Kotha and Nair (1995) on strategy and environment as determinants of
performance in the Japanese machine tool industry indicated that profitability and growth of
performance were influenced significantly by the environment. Besides that, only
environmental variables were related with firm growth of firm performance. Recent study by
O’Cass and Julian (2003) showed that environmental characteristics have significant impact
on overall export marketing performance.
In contrast, Baldauf et al., (2000) found that the effect of the environmental dimensions on the
organizations was viewed relatively unimportant by the managers in their study. Additionally,
perceived environmental effects did not appear to have a strong impact on export
performance. However, export sales have significant effect on the importance placed on the
political environment. Furthermore, lower perceived influences of political environment were
associated with the higher export sales which indicated negative relationship. On the other
hand, Abdul-Aziz et al. (2000) found that certification especially ISO certfification will ensure
the promotion adaptation into higher standard. Thus, the proposed hypotheses are:
H2a: Global economic situation moderates the relationship between export marketing
strategy and export performance.
H2b: Certification moderates the relationship between export marketing strategy and
export performance.
26
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
Figure 1 indicates the research framework of the impact of export marketing strategy on
export performance in the Malaysian wooden furniture industry.
EXPORT MARKETING
STRATEGY
• Product adaptation
EXPORT
PERFORMANCE
• Promotion adaptation
• Distribution strategy
• Design strategy
• Price competitiveness
• Support to foreign
distributors
• Target market
specification
ENVIRONMENTAL
FACTORS
• Global economic
situation
• Certification
Figure 1: Research framework
Methodology
A questionnaire was developed and tested in order to ensure the relevancy, clarity and
applicability to the furniture industry. A total of 215 respondents consisted of wooden
furniture firms in Malaysia were selected as the sample for this study. From 215 export-
oriented furniture firms, only 67 participated with 31.16% response rate but only 64 responses
were usable to be analyzed for the study. Face to face, mail and phone interview methods were
used to measure export marketing strategy (Cavusgil and Zou, 1994), environmental factors,
and export performance (Cavusgil and Zou, 1994; and Julian, 2003). Unit analysis for this
study was the export oriented furniture firms.
Export marketing strategy was measured based on Cavusgil and Zou (1994) and Julian (2003),
which comprised of seventeen items including newly developed item for design strategy. This
instrument consist of product adaptation (?=0.56), promotion adaptation (?=0.56), support to
foreign distributor/subsidiary (?=0.83), price competitiveness, distribution strategy (?=0.54),
design strategy (?=0.66) and target market specification (?=0.71). This instrument was
measured using six-point Likert scales ranging from 1 (none/vague/modest/few/not
competitive) to 6 (substantial/clear/high/ many/considerable/extremely competitive).
Environmental factors were newly developed for the purpose of this study by using four
items. It consists of global economic situation (2 items) and certification (2 items). The six-
point Likert scales were used ranging from 1 (none) to 6 (substantial). Reliability test was
conducted and resulted in 0.88 cronbach’s alpha for global economic situation and 0.63 for
certification measurements.
27
Jurnal Kemanusiaan bil.11, Jun 2008
Export performance measurement was adopted by using Cavusgil and Zou (1994) and Julian
(2003) composite scale on strategic objective. Respondents were asked to indicate the relative
importance attached to each objective by allocating a constant sum (100 points) to the
individual objectives proportional to their importance. Respondents also were asked to
indicate whether these objectives were met. The extent to which the initial strategic objectives
were achieved was then computed as the weighted sum of the importance of initial strategic
objectives. Then, perceived success of the export venture on a 10-point Likert scale ranging
from 1 (unsuccessful) to 10 (successful) was determined. Annual export sales growth rates
over the five year period of the venture and whether the venture is profitable in each of the
five years were asked to the potential respondents. Average annual sales growth rates as well
as the overall profitability over the five years of the venture were computed to capture the
measure of export marketing performance. For measuring export performance, these four
indicators then were summed into a composite scale (Cavusgil and Zou, 1994; Julian, 2003).
The statistical analysis used in this study consists of frequency analysis to determine the
company profile. Correlation and multiple regression analyses were used to examine the
relationship between the export performance and the factors of export marketing strategy and
the variables of environmental factors in the Malaysian wooden furniture industry. Finally,
intercooled stata was used to determine whether the moderating variables are the major
contribution to the model.
Research results
Respondent profile
This study has indicated that 26 (40.6%) furniture manufacturers have less than 100 of total
number of employees, 18 (28.1%) firms have between 100 to 300 employees, 11 (17.2%)
firms have between 300 to 500 employees, 5 (7.8%) and 4 (6.3%) for the firms who have the
total employees between 500 to 700 and 700 to 1000 employees respectively. About 50% (32)
of the respondents were experienced in international market around 5 to 10 years, 28.1% (18)
have experienced within 11 to 24 years in international market, 11 companies (17.2%)
experienced less than 5 years, and 3.1% (2) and 1.6% (1) for those companies who have
experienced within 25 to 39 years and more than 40 years respectively. More than half or 35
companies (54.7%) have served 6 to 24 countries, 31.3% or 20 companies served between 1 to
5 countries in export market. Five companies or 7.8% have served between 40 to 59 countries,
two companies (3.1%) have served between 25 to 39 countries, and finally, only two
companies served more than 60 countries.
Correlation Analyses
Table 1, shows the correlations between the dependent of export performance (EXPERF),
independent of product adaptation (PDTADAP), promotion adaptation (PROMO), price
competitiveness (PRICE), target market specification (TGTMKT), support to foreign
distributors (SUPPDIST), distribution strategy (DISTSTRA), design strategy (DESIGN) and
the moderating effect of environmental factors (EF).
The result indicated that only product adaptation and distribution strategy were correlated with
export performance at 0.05 significant level. Promotion adaptation, target market specification
and distribution strategy were found correlated with product adaptation at 0.01 significant
level. Besides that, target market specification and distribution strategy were correlated with
promotion adaptation at 0.01 significant level while design strategy correlates with promotion
28
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
adaptation at 0.05 significant level. Finally, target market specification was correlated with
distribution strategy at 0.01 significant level and at 0.05 significant level with environmental
factors.
Table 1: Correlation analyses between export marketing strategy, environmental factors
and export performance
VARIABLES MEAN sd 1 2 3 4 5 6 7 8
EXPERF 15.4813 3.0500 1.00
PDTADAP 14.0625 2.382998 0.257* 1.00
PROMO 14.2500 2.09307 0.187 0.780** 1.00
PRICE 4.5781 0.97272 -0.039 0.238 0.115 1.00
TGTMKT 4.9063 1.06486 0.208 0.428** 0.459** 0.237 1.00
SUPPDIST 6.8438 4.49768 0.132 0.004 0.11 0.199 -0.023 1.00
DISTSTRA 9.3125 2.29475 0.262* 0.391** 0.416** 0.124 0.636** 0.216 1.00
DESIGN 13. 4375 2.77675 0.061 0.137 0.284* 0.087 0.213 0.095 0.319* 1.00
EF 23.8438 3.77636 -0.173 0.140 0.013 0.194 0.261* 0.055 0.145 0.144
*Correlation is significant at the 0.05 level (2-tailed)
**Correlation is significant at the 0.01 level (2-tailed)
The impact of export marketing strategy on export performance
As can be seen from Table 2, multiple regression analyses is used to see whether there are
relationships between product adaptation, promotion adaptation, price competitiveness,
distribution strategy, support to foreign distributors, target market specification and design
strategy on export performance in Malaysian wooden furniture industry. The results have
shown that there is no statistically significant relationship between export marketing strategy
and export performance. Thus, proposition 1 was rejected.
Table 2: Regression analyses between export marketing strategy
and export performance
Parameter B Std. Error t p-value
Constant 11.711 3.681 3.182 0.002
Product adaptation 1.145 0.780 1.467 0.148
Promotion adaptation -0.337 0.824 -0.409 0.684
Distribution strategy -0.138 0.663 -0.209 0.835
Design strategy -0.176 0.667 -0.264 0.793
Price competitiveness -0.497 0.420 -1.182 0.242
Support to foreign distributors 0.321 0.274 1.169 0.248
Target market specification 0.753 1.527 0.493 0.624
F 1.326 (p-value = 0.255)
R² 0.142
The moderating effect of environmental factors
From Table 3, it shows that global economic situation has not found to moderate the
relationship between export marketing strategies on export performance. Furniture
manufacturers are not concern on the global economic situation due to their confident level of
furniture products in terms of quality and design are very competitive in the world market.
Thus, proposition 2a was rejected.
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Jurnal Kemanusiaan bil.11, Jun 2008
Table 3: Regression analyses between export marketing strategy and the moderating
effect of global economic situation on export performance
Parameter B Std. Error t p-value
Constant 10.465 3.706 2.824 0.007
Product adaptation -4.325 3.907 -1.107 0.274
Promotion adaptation 5.154 4.348 1.186 0.242
Distribution strategy -3.123 3.115 -1.002 0.321
Design strategy 2.760 3.238 0.852 0.398
Price competitiveness -4.903 3.730 -1.314 0.195
Support to foreign distributors 0.749 1.208 0.620 0.538
Target market specification 8.797 8.443 1.042 0.303
Product adaptation* Global
economic situation
1.203 0.780 1.542 0.129
Promotion adaptation* Global
economic situation
-1.168 0.840 -1.391 0.170
Distribution strategy* Global
economic situation
0.589 0.622 0.946 0.349
Design strategy* Global economic
situation
-0.559 0.646 -0.866 0.391
Price competitiveness* Global
economic situation
0.807 0.699 1.155 0.253
Support to foreign distributors*
Global economic situation
-0.086 0.243 -0.352 0.726
Target market specification* Global
economic situation
-1.555 1.612 -0.965 0.339
F 1.723 (p-value =
0.081)
R² 0.330
Table 4 shows contradicting result from Table 3. It shows that certification has been found to
moderate the positive relationships between product adaptation (p=0.061), distribution
strategy (p=0.003) and design strategy (p=0.003), while certification has moderate negative
relationships between promotion adaptation (p=0.016) and target market specification
(p=0.003) on export performance in Malaysian furniture industry. However, the relationships
between price competitiveness and support to foreign distributors were not moderated by
certification. Thus, it provides partial support to proposition 2b.
30
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
Table 4: Regression analyses between export marketing strategy and the moderating
effect of certification on export performance
Parameter B Std. Error t p-value
Constant 12.205 3.593 3.397 0.001
Product adaptation -5.161 3.456 -1.493 0.142
Promotion adaptation 7.236 3.494 2.071 0.044**
Distribution strategy -8.424 2.760 -3.052 0.004**
Design strategy -7.314 2.530 -2.891 0.006**
Price competitiveness 2.293 1.807 1.269 0.211
Support to foreign distributors 2.003 1.165 1.719 0.092*
Target market specification 19.002 6.036 3.148 0.003**
Product adaptation* Certification 1.426 0.743 1.920 0.061*
Promotion adaptation* Certification -1.803 0.724 -2.492 0.016**
Distribution strategy* Certification 1.949 0.620 3.141 0.003**
Design strategy* Certification 1.566 0.510 3.071 0.003**
Price competitiveness* Certification -0.536 0.377 -1.423 0.161
Support to foreign distributors*
Certification
-0.361 0.234 -1.539 0.130
Target market specification*
Certification
-4.243 1.341 -3.165 0.003**
F 2.890 (p-value = 0.003)
R² 0.452 **=0.05, *=0.10
This result has shown that the moderating role of certification gives a major contribution to
the model of this study by using additional F-test formula:
( )
( ) df R
df R R
F
new
old new
2
2 2
1 ?
?
=
( )
( ) model new in the parameter of 1
regressor new of
2
2 2
number n R
number R R
F
new
old new
? ?
?
=
Since in the first model the R-squared value is 0.142 (n=64) and in the second model after
including the entire moderator the R-square increase to 0.404 (n=64). Using the above
formula, the additional F-value for moderator effect can be calculated as below;
( )
( ) 14 64 452 . 0 1
7 142 . 0 452 . 0
? ?
?
= F
04 . 4 = F (Additional F-value for moderating variable)
The critical value for F-test at 5% (1%) alpha level with 7 and 50 for numerator and
denominator degree of freedom is 2.2 (3.02)
F
0.05;7,50
= 2.2
F
0.01;7,50
= 3.02
31
Jurnal Kemanusiaan bil.11, Jun 2008
Since the Additional F-value is greater than the F-critical value, then enough evidence to say
that the contributions of certification as a moderating variable in the model is significant.
Discussion and implications
The objective of the research is to examine the impact of export marketing strategy and the
moderating effect of environmental factors on export performance in Malaysian wooden
furniture industry. This study found that all export marketing strategies have no direct
relationship with export performance in Malaysian wooden furniture industry. Julian (2003)
has supported this result which suggested that export marketing strategy has no effect on the
Thai firm’s export marketing performance. Majority of Malaysian furniture manufacturers are
using the same strategy in their marketing activities implementation. Most of strategies
implemented are similar domestically and internationally. They do not consider foreign
market requirements as well as their needs. In addition, this study also shows that the
moderating effect of global economic situation has not moderate the relationship between all
export marketing strategies on export performance. The fluctuation of global economic
situation would not influence Malaysian furniture exporters to strategize aggressive marketing
programme for global market. Export marketing strategy do not very much depend on what
happen in the global economic.
This study shows interesting findings whereby certification moderates the positive relationship
between product adaptation, distribution strategy and design strategy on export performance.
If product adaptation set by furniture firm emphasis on certification, performance will be
increased in export market. Most of foreign buyers tend to look for environmental friendly
furniture products which have been certified by certain bodies locally before exporting. This is
to maintain buyer’s requirements and increase the value-added of furniture products.
Furthermore, this result is slightly similar to Cavusgil and Zou (1993) which found that legal
environment is the most important factor in a firm’s decisions to adapt their products upon
entry. An established and efficient distribution system will ensure the security of good sales in
export performance. Currently, global markets are more environmental conscious. For
instance, ‘greening of industry’ places emphasis on business responsibility and accountability
to variety of stakeholders (Morris and Dunne, 2003). This will contribute into high quality in
terms of wood materials and design of furniture products. This is consistent with Lee and
Zhou (2000) in their study which suggested that there is a significant association between
quality practices and strategy, which eventually influence business practices and performance.
Uniquely, this study also found that certification moderates the negative relationship between
promotion adaptation and target market specification on export performance for Malaysian
wooden furniture industry. This means that, if the promotion adaptation set by furniture firms
emphasizes on certification, export performance will be decreased. Aggressive promotion
programmes implemented by the furniture exporters will give an opportunity to the
competitors to take advantage from the promotion efforts to offer their products in export
market. Sales will be broken down into smaller percentage among suppliers, which inherently
cause the first exporter’s performance to fall. However, this result was contradicted with
Abdul-Aziz et al. (2000) which suggested that ISO certification will ensure that the promotion
adaptation is on high standard.
In addition, longer process of certification, which means more stringent of licensing approval,
documentation and high government bureaucracy will adversely affect promotion adaptation
and target market specification in that particular country which directly resulted in low
performance of export market. A study by Jensen and Pompelli (2000) suggested that product
32
impact of environmental factors as moderator on export
marketing performance in wooden furniture industry
promotion, advertising, and market research are perceived as the most important modes of
assistance, in locating and identifying potential buyers for products. However, stringent
certification process hinders the success of promotion strategy in achieving high performance
for export market in the Malaysian wooden furniture industry.
The result also shows that certification do not moderate the relationship between price
competitiveness and support to foreign distributors on export performance. Normally, in
marketing strategy, the need to certify the pricing is very minimal especially in furniture
industry which most of the prices given were based on cost of raw material. Similarly, support
to foreign distributors is based on manufacturers or exporters tolerance.
Therefore, certification process should be shortened in order to facilitate smooth
implementation of marketing programmes in the international market. In addition, product
quality must be maintained in order to enhance promotion adaptation activities. This
contention was supported by Lee and Zhou (2000) who noted that firms which are more likely
to do business globally and link officially with foreign firms tend to be more quality-
conscious. These firms are concerned more on product identity compared to traditional firms.
The influence of unstable global economic situation may affect the promotion of furniture
products to the foreign buyers. If the global economy is facing unstable situation, promotion
adaptation programme will be less effective and result in low export performance.
Other aspects that need to be focused in furniture manufacturing are the improvements of
marketing support systems, efficiency of marketing operations such as market research, direct
order entry systems, prospect qualification systems and communications with existing clients.
The production of environmental friendly and value-added furniture will also help Malaysian
manufacturers to penetrate international market.
Conclusion
Overall, this study has shown that export marketing strategy has no direct relationship on
export performance in Malaysian wooden furniture industry. In addition, global economic
situation does not moderate the relationship between all export marketing strategy variables
and export performance. Uniquely, certification does moderate positive relationship between
product adaptation, distribution strategy and design strategy on export performance. In
addition, it also moderate negative relationship of promotion adaptation and target market
specification on export performance in Malaysian wooden furniture industry. These findings
add new insight on the export marketing literature especially on the moderating role of
environmental factors as a major contribution to this study. It is hoped that for future research,
the need to consider other industries as well as cross sectional industries will be fruitful to
examine the generalizability of the results. Also, in addition of environmental factors into
other dimensions such as government roles will give meaningful findings to export marketing
area. Finally, the scales that have been used in export performance need to be standardized in
order to increase the quality of data.
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impact of environmental factors as moderator on export
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