E-commerce and Export Performance By Munib Karavdic

Several studies concluded that product adaptation is an important determinant of export sales, profits, and growth (McGuinness and Little 1981; Jain 1989; Cavusgil et al. 1993; Szymanski et al. 1993; Cavusgil and Zou 1994). Firms with a high proportion of exports are willing to adapt products for exporting (Tookey 1964). This is explained by the fact that an adapted product can satisfy foreign consumers’ needs and preferences better, and that a strong product allows a firm to transfer it more easily to the foreign markets.

However, other studies found insignificant effects of product adaptation and product strength on export performance; a few studies reported negative effects. The negative correlations may be caused by the cost of adaptation (Kaynak and Kuan 1993). The recent introduction of new technologies enables a greater level of flexibility which in turn makes it possible to adapt products at a significant cost reduction.

Some studies found that product strength in terms of cultural specificity, product uniqueness, and product packaging helps firms gain competitive advantage in overseas markets (Louter et al. 1991). Cultural specificity of product relates to the extent to which the product is made available to meet the needs of a specific culture or subculture (Cavusgil et al. 1993: p. 488). Product uniqueness is defined as the degree to which the product is designed to satisfy unique needs or to be used for unique purposes (Cavusgil et al. 1993: p. 487). Several studies have found that if a product meets only unique needs, greater adaptation will be required to meet other product use conditions (Hill and Still 1984; Cavusgil and Zou 1994).

Product strategy has become more important because of the introduction of advanced manufacturing systems such as computer-aided manufacturing, computer-aided design, flexible manufacturing, and the emergence of e-commerce (Shoham 1999). These latest developments bring economies of scale to batch production which enables firms to match the costs of mass production while producing many product variations (Sriram and Gupta 1991). Such systems provide benefits beyond production cost reduction in that firms can market consistently high quality products. Through improved technology, mass customisation enables firms to create and sustain competitive advantage over mass production rivals. These advantages accrue as firms adopting these technologies narrow the gap between their offering and the needs of customers (Gilmore and Pine 1997).