National policy vital to protect local industries

Continued from last week
 

by Hemal Dias

International marketing is getting increasingly complicated but the scope is huge and it needs extensive knowledge and experience in export markets. It's no easy task to identify strategies for entering new international markets or to decide which countries to do business with. Many firms simply go with what they know and fall far too short of their goals. There are several reasons for this.

One significant reason is technological advancements particularly in improved manufacturing, transportation and communication opportunities. Today, international marketing and selling our products is more practical. Thus, consumers and businesses now have access to the very best products from many different countries.

Lack of knowledge

Failure to keep pace with changes in the production process technology was often reflected in uncompetitive costs of the production and/or deficiencies in product quality. Some food manufacturing companies in Sri Lanka who are successful locally as well as internationally have made timely investments in modern technologies which paved the market leadership positions in many ways, higher penetration levels, profitability and higher rates of return on investments (ROI), new International markets are great achievements.

At the same time there are many old established firms who have made initial investments in labour-based production processes to take advantage of relatively low labour costs. However, the state of technology changed and such methods could not provide the quality and precision now required in finished products.

In today's manufacturing sectors especially in the food manufacturing the investment in more automated production methods is very necessary. Those firms that failed to make these investments lost their markets because they could not meet the product quality demands of export markets and very unfortunately they lost the market share even in our very own domestic markets.

Several factors

There are several factors which inhibited investments in improved technologies. The majority of local companies do not have search mechanisms, market intelligence for information on changing technological and market conditions and did not keep abreast of the technological trends in their industries.

Today almost all the manufacturing companies are complaining of the high cost of production (COP) due to lack of new technology, wastage, increasing energy cost and to a certain extent non availability of skilled labour? this has resulted in our products not being competitive in export markets.

This gap had not been filled by any institutional arrangements initiated by Governments or Industry Associations. Some firms had not made any investments in improved technology for lack of foreign exchange. Such firms had either accumulated losses or had failed to generate profits for a long time.

Some firms had suffered from the effects of rigid price competition in export and domestic markets. Firms which had been in financial problems for a long time had eroded their capacity to make any significant investments in capital equipment, training and innovations. Investment in general had been low or stagnant and there were so many failures we have witnessed during the last decade.

Some firms were found to be putting considerable effort into improving their competitiveness but the results in terms of export performance do not seem to be adequate compared to their efforts. Two categories of reasons were identified in our country.

First, it was found that the efforts these firms were making were blunted by the inadequacy of infrastructural and institutional support, which ordinarily originates from outside the firms. Second, the basic limitations in the technologies the firms were using were not being tackled.

Changing market conditions

Employment of high technology may be a necessary condition but it is by no means sufficient. Faulty marketing strategy and failure to develop marketing capabilities have led to disaster in spite of having invested in modern and advanced technology.

Finding the basic information pertaining to export markets is an absolute nightmare in this country and no institution is in a position as to assist or guide our manufacturers with regard to market information, new technology advancements, most importantly quality standards and certifications.

The interaction with export markets, which are more demanding, was particularly effective in this respect.

Linkages with marketing intelligence agencies, market reports are vital among exporting firms which are not largely available and enough to afford any investments in building their marketing capabilities.

Recently I have contacted one of the leading market research companies based in Singapore to obtain insightful assessment of the key export markets and supply chain analyses and that report will be costing US$ 111,000 (over Rs. 10 million) and its very unlikely that, any of our small and medium scale companies can afford to go for a such an important market analysis report?

But this information is very vital for a new company who has absolute potential in international markets and these reports must be available for our manufacturing companies for their references.

The biggest irony here that, all these market intelligence reports are freely available for our closest competitors in Thailand, Malaysia, Indonesia and now in Vietnam and those countries always thought that the R&D work and Market Research is an investment for the country and beneficial for their manufacturers and marketers. But still we are arguing and arguing till the cows come home?

Operational problems

Various problems of infrastructure can be identified as obstacles to the attainment and maintenance of competitiveness in export markets. Supportive infrastructure is an important prerequisite for successful exporting.

Lack of information, expensive technology, high energy cost and managerial skills, sporadic and unreliable transport are some serious impediments to the exporters in this country and add unnecessary costs to the operations of the firms. In the end our products are not very competitive in export markets.

Some logistics issues faced by our manufacturers and exporters are pathetic, and recently a leading live tropical fish exporter, raised issues of non-availability of air cargo space, inadequate facilities in the airport cargo terminal for perishable and highly sensitive cargo like live fish particularly when delays in the airport cargo village.

This situation has created many obstacles with their exports of live tropical fish to export markets. Some days they were asked to bring the cargo early in the morning and by the time the cargo was loaded on to the aircraft it was late in the evening, now who has missed out the basic fundamentals of handling of sensitive cargo like this? In the end who has to bare the loss of dead fish?

Sri Lanka is a well known destination for roses and companies such as Mascons Agro Tech, and the project is based on the latest technology of growing roses in a state-of-the-art computer controlled Green houses.

Even though these companies have invested heavily in modern technology today they are going through numerous logistics issues such as inadequate air transport facilities, sudden increases in air freight charges and quarantine issues.

Unfortunately we are yet to identify the issues faced by these industries and implement a substantial program so as to help these manufacturers and earn much needed foreign exchange? The reason for all these failures are due to lack of coordination, commitment and more than anything, we do not make any efforts to help our own people, our own industries, and our country?

In the context of new manufacturing technologies, consumer behaviour and the rapidly changing world market conditions, the process of restructuring for export orientation poses a challenge to our country. Constraints are bound to arise but opportunities could also emerge for our economy as they set out to restructure and develop the agriculture and industrial sectors towards export orientation.

The protection of the local manufacturing firms is the need of the hour and we must have a 'National Policy' as to safeguard the interests of our local industries and support them to be more competitive in international markets.