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To cite this document:
Florence Olu Ogunrin Anthony U Inegbenebor , (2015),"Distribution channels and internationalization
in a developing-country clothing industry", Journal of Research in Marketing and Entrepreneurship,
Vol. 17 Iss 2 pp. 130 - 148
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JRME
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Anthony U. Inegbenebor
Department of Business Administration,
Faculty of Social and Management Sciences, Benson Idahosa University,
Benin City, Nigeria
Abstract
Purpose The purpose of this paper is to examine the distribution channels used by a Nigerian
sample of apparel producers and investigate the association between the channels in use and the
samples export involvement. In this era of sophisticated computer- and internet-mediated marketing
practices, the larger proportion of entrepreneurs in developing economies still deploy largely informal
marketing practices. Countries indeed have adopted the marketing revolution to varying degrees,
consistent with prevailing level of development.
Design/methodology/approach A structured interview schedule was used in collecting data from
111 apparel entrepreneurs.
Findings Most of the respondents were domestic market-focused haute couture producers or
low-volume producers of ready-to-wear (r-t-w) clothing who supply institutions or boutiques, using
direct channels. Only a few export, mainly through ethnic-commercial networks involving
overseas-based family/friends.
Practical implications For now, current distribution channels seem adequate for the personal and
business goals of these entrepreneurs. However, large-volume clothing exporting through formal global
distribution channels is what drives industrialization and development. These apparel entrepreneurs
therefore require institutional assistance to link up with formal global marketing channels. It is only
then that the industry would serve similar development roles as witnessed in other emerging economies
which have climbed the development ladder through export of labour-intensive manufactures like
clothing.
Originality/value The study confirmed earlier observations about apparel exporting in Nigeria,
such as prevalent use of informal channels, and also draws attention to less-known details, including the
existence of fledgling local trade intermediaries, disappointed exporters and an emerging group (yet
miniscule) of exporters who utilize more formalized channels.
Keywords Nigeria, Apparel exporting, Distribution channels and markets,
Exporting-led development, Internationalisation process, Trade intermediaries
Journal of Research in Marketing
and Entrepreneurship
Vol. 17 No. 2, 2015
pp. 130-148
Emerald Group Publishing Limited
1471-5201
DOI 10.1108/JRME-03-2014-0006
The authors are sincerely grateful to the editor and two anonymous reviewers for their extremely
helpful comments on an earlier draft of this paper.
Introduction
In this era of globalization, enterprises and, indeed, economies which would thrive must
be active participants in the globalization process (Thoburn, 2000; Burns, 2011). Out of
all the avenues available to participating firms, namely, exporting, direct foreign
investments, joint ventures or acquisitions, exporting is the most suited to the needs of
resource-constrained smaller firms (Mittelstaedt et al., 2003; Pett and Wolff, 2003;
Rasheed, 2005). Exporting is further simplified for the smaller firm by availability of
opportunities to export through inter-firm cooperative relations with larger firms
(Dhanaraj and Beamish, 2003). One such inter-firm cooperative arrangement that is
particularly relevant for clothing firms in developing countries is the global commodity
chain (GCC), also referred to as the global value chain (GVC) for clothing. Within the
GCC for clothing, an expansive array of low-wage developing countries supply
garments to developed-country retailers (Delahanty, 1999; Gereffi and Memedovic,
2003).
Asian enterprises were the earliest participants in the GVC for clothing (Gereffi,
1999; Gereffi and Memedovic, 2003). To qualify for involvement in GVCs, firms must
possess requisite firm-level competencies. Previous research indeed indicates that
enterprise performance in general and export performance, in particular, is
determined by a mix of endogenous and exogenous factors (Westhead et al., 2001;
Cooney, 2012). This study considered a set of endogenous (firm-level) variables,
specifically, the distribution channels in use, as possible determinants of
clothing-exporting performance, in an attempt to respond to the observed need for
more empirical studies that detail the strategies used by enterprises in developing
countries in participating in global trade networks (Gereffi, 1999; Gereffi and
Memedovic, 2003; Mangieri, 2004).
Although an extensive literature exists on Asian apparel industries, this thins out
when it comes to African clothing enterprises. In the case of Nigeria, the most readily
available information are broad-based official surveys of small and medium enterprises
(SMEs) (see for instance, Raw Materials Research and Development Council [RMRDC],
2003); Denzers (1995) seminal work on the evolution of tailoring in Nigeria, which was
followed by a 2003 study on up-ward shift in tailors status to that of elitist fashion
designers, both conducted from a social history perspective; Forrests (1994) timeless
text which featured business and biographical profiles of the larger garment
entrepreneurs in Aba town in south-Eastern Nigeria; and Meaghers (2006) study of
informal networks within Abas garment (and shoe-making) clusters.
The present study therefore sought to extend existing clothing scholarship by
examining two research questions: how well are garment enterprises in Nigeria
performing in exporting clothes and is the export performance of these enterprises a
function of the distribution channels in use? The study was conducted within the third
of four perspectives of marketing/entrepreneurship research interface identified by
Hansen and Eggers (2010), in that we examined marketing issues (distribution channels)
within an entrepreneurship framework (SME internationalization). Being
industry-specific, the study hopefully should offer insights towards improving the
performance of the identified industry along the parameters investigated. Clothing as
used in this study refers to coverings for the torso and limbs and is interchanged with
clothes, garments and apparel (Horn, 1975; Kaiser, 1997).
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channels
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Theories of internationalization
Internationalization activities of SMEs have been examined from basically two research
perspectives: the export development process itself and determinants of export success
(Mittelstaedt et al., 2003). To explain the export development process, several theoretical
models have been proposed, and they include Product Life Cycle Model by Vernon
(1966), Uppsala Model or Stage Theory by Johanson and Vahlne (1977) and
Innovation-related Internationalization Model (I Model), which is an alternative stage
model proposed by Bilkey and Tesar (1977) and Cavusgil (1980). Dicken (1998) also
viewed internationalization as a sequential process, as did Leonidou and Katsikeas
(1996). Other internationalization models include Monopolistic Advantage Theory by
Hymer (1976), Oligopolistic Theory or Oligopolistic Reaction Theory by Knickerbocker
(1973), Network Theory by Thorelli (1986), Internationalization Theory, Transaction
Cost Theory, the Eclectic Theory of International Production and Strategic Choice
Theory (Gankema et al., 2000; Westhead et al., 2001; Crick, 2002; Prater and Ghosh, 2005;
Burns, 2011).
Most internationalization theories are more applicable to larger firms, except for
stage theories which are applicable to SMEs (Gankema et al., 2000). Stage theories
propose an incremental process of internationalization from the non-exporting, to
successful exporting stage, whereby firms gradually expand international activities, as
they gain experience in the international arena (Gankema et al., 2000; Westhead et al.,
2001; Prater and Ghosh, 2005). For example, Cavusgils (1980) stage theory, as cited in
Gankema et al. (2000, p. 17), specifies five stages comprising a domestic marketing stage,
a pre-export stage, an experimental involvement stage, an active involvement stage and
a committed involvement stage. At Stage 1, export intensity (EI) (yearly export sales/
yearly total sales ratio) is 0; at Stage 2, it is at or near 0; at Stage 3, it is 0-9 per cent; at
Stage 4, it is 10-39 per cent; and at Stage 5, it is 40 per cent or more.
Despite their applicability to SMEs, stage theories have been critiqued for
overlooking the possibility that firms may skip stages in situations where they are led
by experienced managers (Gankema et al., 2000). Even then, this criticism is attenuated
by the clause that while longitudinal data often fail to establish a linear
export-development process, cross-sectional data tend to confirm that firms do fall into
different stages (Burns, 2011). Perhaps for firms which skip stages because of the
presence of experienced managers if the earlier careers of these managers are reckoned
as part of the export development process, an incremental process might be
approximated.
Stage theories reflect the way enterprises learn by doing (Burns, 2011) and are
therefore compatible with the GVC hypothesis, which conceptualizes a production and
exporting hierarchy specifically for the garment industry. Within this hierarchy, firms
commence exporting serving as contract suppliers to overseas lead firms, with
knowledge of only the production aspects. Overtime, they acquire design and marketing
skills in addition to production skills and, ultimately, progress to producing own
brand-name apparel. This participation gradually exposes them to international best
practices, improves their production capabilities and promotes them from one rung of
the global production and supply hierarchy to the next higher rungs (Gereffi, 1999;
Gereffi and Memedovic, 2003).
Besides examining the export development process, internationalization studies also
investigate export success determinants, and hundreds of determinants have been
Distribution
channels
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identified (Dhanaraj and Beamish, 2003). In this study, distribution channels are the
determinants to be examined, because the major dilemma for nascent clothing exporters
in developing economies is how to link up with lead firms within GVCs.
Distribution channels or place: an element of the marketing mix
Gaining a foothold in the global apparel industry (Textile and Garment Industry in
Vietnam [TGIV], 1998; Thakoor, 2003), requires appropriate marketing practices
(Barber et al., 2004). Writing about the Namibian clothing industry, Ndishishi (2005,
p. 5), noted that:
[] the termination of the ATC will not threaten [] further development of the textiles and
garments sector in Namibia []. Other problems such as adequate supply of water and
electricity are not insurmountable. However, market access is one of the critical elements [].
In this study, marketing is taken as the marketing mix, also referred to as elements of
marketing or the four Ps product, price, promotion and place or distribution. The
marketing mix model was conceptualized in 1960 by McCarthy to denote those actions
and tactics that an enterprise deploys to stimulate demand (McCarthy, 1960, cited in
Needham, 1996; Kotler et al., 2009). In contemporary times, however, writers have added
several other Ps, such as positioning and people, to address the peculiarities of services
and make the model more consumer-centric (The Economic Times, 2014).
Distribution may be viewed as a process, in which case it is the process of making
goods or services available for use, or making a product available at a place which the
consumer can conveniently access (Needham, 1996). It can also be viewed as the specific
place where commercial exchange occurs, that is the point of sale for a product (The
Economic Times, 2014). Further, distribution is effected through distribution channels,
also referred to as channel of distributions or marketing channels, which are the paths
through which goods and services move from the producer or supplier to the end-user.
A distribution channel may be as short as a direct exchange between the producer and
user, or it may involve layers of trade intermediaries (WebFinance, Inc., 2014). The
nature of distribution evolves, as nations progress from rural-agrarian to industrialized
and service economies (Mentzer et al., 1989). In developing economies, distribution
channels tend to be more direct, shorter or simpler (Encyclopaedia Britannica, Inc.,
2014).
Issues related to distribution channels are very important in firms exporting efforts.
In this regards, intending exporters usually complain of not having any contact that
could link them to foreign markets (Carrier, 1999; Westhead et al., 2001). With regards to
clothing exporting in particular, the distribution channels available to nascent African
apparel exporters involve supplying industrialized country retailers, large volumes of
mass-produced mainstream (standard or basic) garments or of Afro-centric garments
for the benefit of the African market segment in these countries. Another distribution
channel involves suitcase importers and exporters, that is individuals who combine
vacationing with business (Biggs et al., 1994a, 1994b).
In the Nigerian experience, official surveys describe the garment sub-sector as
lacking well-defined marketing channels, with retail trade (possibly bespoke
production) constituting about 95 per cent of the distribution mechanism, while sales of
r-t-w clothing through department stores account for the remaining 5 per cent (RMRDC,
2003). A second stream of literature however describes significant albeit informal
garment exporting, involving in the main apparel firms in Lagos and Aba. With regards
to Lagos a city in southwestern Nigeria, existing studies describe how local garment
entrepreneurs working from small factories link up with relations who own boutiques in
overseas countries and in this manner informally export high-fashion garments that
blend African fabrics with European clothing styling (Biggs et al., 1994b; Denzer, 2003).
Aba on its part is acknowledged for significant exporting of Western-styled (basic)
garments. Overseas buyers submit designs which are made with their generic labels
(Forrest, 1994). In the opinion of Meagher (2006), however, exporting of Aba-made
garments is still undertaken largely through wide-ranging informal Igbo commercial
Diaspora. Distribution via the GVC is insignificant (Ogunrin, 2013).
This study therefore set out to verify the distribution channels used by study
participants in exporting clothing and to test the proposition that those distribution
channels will be related to the firms export performance.
Methodology
The target population for this study comprised apparel enterprises of all sizes that
operate in Nigeria, as literature evidence suggests that even ventures with only one
worker may export indirectly by contracting with bigger firms (De Chiara and
Minguzzi, 2002; Hutchison, 2004; Scarborough, 2013). To ensure manageable sample
size, however, we drew participants from Aba, Benin and Lagos three southern
Nigerian cities that host well-known clothing enterprises (Forrest, 1994; Denzer, 1995,
2003; Meagher, 2006). Due to non-availability of reliable official statistics on Nigerian
private enterprises (Forrest, 1994; RMRDC, 2003), the sample was selected using
non-probability purposive and snowballing sampling techniques. Purposive sampling
describes the process of choosing sample elements on the basis of assumptions of what
and where typical elements are (Asika, 1991; Hutchison, 2004).
We visited the foremost non-oil exports promotion agencies in the country, namely,
the export promotion council and export processing zones authority, in hope of
obtaining lists of garment-exporting firms. Due to unavailability of the needed lists, we
resorted to the pragmatic strategy of scouring major streets and markets, in low-,
middle- and high-income localities within the three cities, in search of garment
enterprises. Each entrepreneur who consented to participate in the study was implored
to direct us to their counterparts who export clothing, in line with snowballing sampling
technique (Babbie, 2001). Enterprises which were mentioned in earlier studies were
purposely incorporated, in the hope that these might have commenced exporting.
Following repeated referral to already-recruited enterprises, and attainment of a sample
size of one hundred and eleven (111), which was adequate for our proposed statistical
techniques, we concluded that we had an adequate sample.
Measurement of variables
A structured interview schedule was used in collecting necessary data. Background
data were collected in regards to the entrepreneurs as well as their enterprises. The
studys dependent variable, that is export performance, was operationalized as EI (De
Chiara and Minguzzi, 2002; Dhanaraj and Beamish, 2003). Respondents indicated their
annual export sales by choosing one of seven alternatives that ranged from not yet
exporting to above 500,000. Respondents likewise indicated their monthly total sales
revenues by selecting one of five interval figures that ranged from less than 20,000 to
Distribution
channels
135
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136
above 200,000. For ease of analysis, naira equivalent was sought, as several foreign
currencies were involved. Currently, US $1 exchanges for 164.46. The figures reported
were transformed into yearly sales by multiplying with a factor of 12. On the overall,
sales figures were under-stated in view of entrepreneurs well-known reluctance in
disclosing financial information (Dhanaraj and Beamish, 2003; Pett and Wolff, 2003),
due to fear of taxation or mandatory purchase by the state, of exporting-generated
foreign currencies (TGIV, 1998).
Respondents also rated regularity of use of 13 distribution channels, that is the
studys independent variables (regularly 3, sometimes 2 and not yet 1). The
13 ranged from the shortest and most direct to the farthest channel, and from
domestic-market to external-market channels, as we lacked prior knowledge of the
samples exporting behaviour.
Methods of statistical analysis
To evaluate the relationship between export performance and distribution channels, a
series of quantitative analyses was undertaken, starting with exploratory factor
analysis (EFA), which was used in identifying latent trends within the distribution
channels. An orthogonal rotation was carried out to ensure that each of the original
distribution channels correlated highly with only one component. Multiple criteria that
entailed examining items within each factor against literature evidence, eigenvalues of
1 and the value of factor loadings, guided the selection of factors and variables under
each factor. More specifically, Items with factor loadings 0.4 and above were retained
within the factor on which they loaded, while items that loaded on several factors with
factor loadings 0.4 and above were dropped from further analysis. For this reason,
two distribution channels were dropped, leaving 11 on the final 7 factors that emerged.
Following EFA, factor scores for each of the seven factors as computed and identified by
the computerized statistical package were regressed against EI, to establish any
existing relationships (De Vaus, 1993; Hair et al., 1995).
Data analyses and presentation
Background variables
Out of the 111 study participants, the majority (81) founded their ventures when they
were between 20 and 30 years of age. They were mostly men (63), married (86) and
Nigerians (110) the only foreigner being a female Dutch married to a Nigerian. Most
(99/111; 89.2 per cent) acquired garment-making skills through apprenticeship; three
(2.7 per cent) acquired formal training from recognized Nigerian polytechnics or
universities; another three were trained in foreign fashion schools, while six (5.4 per
cent) lacked formal training. Educational qualification varied widely, in that 10 (9.0 per
cent) of the sample lacked formal education, 3 (2.7 per cent) were home-tutored, 40 (36.0
per cent) possessed only primary education, 29 (26.1 per cent) completed secondary
education and 23 (20.7 per cent) and six (5.41 per cent) had tertiary and post-graduate
education, respectively. In total, 29 of the enterprises were micro-, 78 were small-, 3
medium- and only 1 was large-sized, judging by the size categorization adopted in the
(2007) national policy on non-agricultural and non-oil MSMEs prepared by the United
Nations Development Programme/Small and Medium Enterprises Development
Agency of Nigeria (UNDP/SMEDAN, 2007). This policy reckons a micro enterprise as
employing less than 10 workers, a small-scale enterprise as engaging 10-49 workers, a
medium-sized enterprise as one that employs 50-199 and a large venture as one
employing 200 workers.
The surveyed enterprises produced diverse kinds of clothing, encompassing basic as
well as Afro-centric apparel for men, women and children. Only two interviewees (1.8
per cent) produced significantly large volumes; the rest produced very low volumes of
clothing.
Dependent variable
Borrowing from the EI values specified in Cavusgils stage model, 84 of the 111 firms
(75.7 per cent) engaged solely in domestic marketing (Stage 1; EI 0). Only a minority
(27 or 24.3 per cent) was involved in exporting. Out of this sub-set, 19 were at the
experimental stage (EI 0-9 per cent), 7 were at the active exporting stage (EI 10-39
per cent) and only 1 was at the stage of committed exporting (EI 42 per cent).
Distribution
channels
137
Distribution channels
Making clothes for people in my neighbourhood
Making clothes for senior government officials
and professionals
Making clothes for celebrities
Making brides and bridal wear
Making uniforms for schools, companies,
national contingents and so on
Producing and selling r-t-w in personal
boutique
Producing and supplying r-t-w to other
boutiques in town
Producing and supplying r-t-w to boutiques in
other Nigerian towns
Sending r-t-w Afro-centric garments
abroad through friends/relatives
Supplying r-t-w to specific stores abroad
Supplying west African (ECOWAS)
countries
Supplying African countries
Supplying beyond Africa
Regularly
(3) (%)
Frequency of responses
Sometimes
(2) (%)
Not yet (1) (%)
95 (85.6)
9 (8.1)
7 (6.3)
55 (49.5)
16 (14.4)
33 (29.7)
38 (34.2)
27 (24.3)
13 (11.7)
18 (16.2)
68 (61.3)
65 (58.6)
24 (21.6)
16 (14.4)
71 (64.0)
23 (20.7)
8 (7.2)
80 (72.1)
29 (26.1)
23 (20.7)
59 (53.2)
31 (27.9)
5 (4.5)
75 (67.6)
32 (28.8)
12 (10.8)
22 (19.8)
10 (9.0)
57 (51.4)
89 (80.2)
4 (3.6)
4 (3.6)
9 (8.1)
1 (0.9)
4 (3.6)
10 (9.0)
106 (95.5)
103 (92.8)
92 (82.9)
Table I.
Bold variables and values in table signify non-domestic (export-market) distribution channels and Descriptive statistics:
distribution channels
corresponding frequencies
for finished garments
Source: Authors field work, 2012
Table II.
Distribution channels
of garments: varimax
rotated component
matrix
0.032
0.299
0.227
0.178
1.376
0.050
0.037
2.184
16.8
35.9
0.700
0.748
2.484
19.1
19.1
10.59
46.49
0.048
0.181
0.219
0.008
0.006
0.051
0.088
0.103
0.247
0.796
0.171
0.112
0.076
0.690
0.078
0.028
0.230
0.908
0.679
0.248
0.035
0.850
9.68
56.17
0.241
0.189
1.258
0.817
0.172
0.076
0.199
0.675
0.044
0.089
0.056
0.122
0.017
0.113
0.009
0.111
0.017
0.023
0.544
0.268
0.297
0.059
8.45
64.62
0.343
0.112
1.098
0.025
0.114
0.036
0.018
0.025
0.159
0.228
0.006
0.105
0.577
0.863
7.29
71.91
6.53
78.43
0.126
0.230
0.848
0.183
0.070
0.223
0.225
0.132
0.188
0.948
0.856
0.333
0.102
0.304
0.103
0.142
0.030
0.277
0.031
0.121
0.129
0.071
0.127
0.449
0.906
0.019
0.048
0.044
0.753
0.730
10.196
0.822
0.775
0.797
0.752
0.853
0.683
0.793
0.844
0.758
0.800
0.838
Extraction
communalities
Note: a These two items were dropped from further analysis because they loaded on several factors with factor loadings 0.4; bold variables in table
signify non-domestic distribution channels. Bold values indicate factor loadings equal or above 0.4
Source: Authors field work, 2012
12
13
10
11
3
4a
5
6
1a
2
138
Item
number
Variables
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17,2
0.796
0.748
0.700
2.484
19.1
0.850
0.679
2.184
16.8
139
Factor loadings
Distribution
channels
0.908
0.690
1.376
10.59
0.817
1.258
9.68
0.863
1.098
8.45
0.906
0.948
7.29
0.856
0.848
6.53
Table III.
Factors for
distribution
channels: results of
principal component
analysis with
varimax rotation
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140
Four of the seven factors (Factors 2, 3, 5 and 6) supplied the domestic market.
Specifically, the second (personal boutique channel) describes the direct channel of
retailing r-t-w and/or rendering bespoke tailoring services in boutiques and ateliers. The
third (local boutique channel) refers to indirect sale of r-t-w to independently-owned
boutiques, nationwide. The fifth factor, namely, elitist upper-end channel, pertains to
sale of high-end fashionable clothing to fashion-conscious elites. The sixth (uniformed
institutions channel) refers to the supply of promotional T-shirts and uniforms of all
sorts to schools, hotels, the armed forces and other corporate entities.
There were three foreign-market distribution factors (Factors 1, 4 and 7). Factor 1
(opportunistic international channel) pertains to channels through which clothing is
supplied wherever trading opportunities arise, in West African countries such as Benin
Republic, Togo, Liberia and Senegal; other African countries like Gabon, Congo, Cameroun,
Libya and South Africa; and in France, Italy, Austria, Germany, the UK and USA. The fourth
factor, namely, overseas boutique channel, describes supply of apparel to specific overseas
boutiques, beyond Africa. The seventh factor, ethnic-commercial overseas channel, refers to
sale of clothing through friends/relatives in foreign countries. There were firms that supplied
both the local and foreign markets, and several exported to more than one foreign market.
Out of these seven distribution factors, step-wise multiple regression analysis picked the
seventh factor as the only significant (positive) predictor of EI (Table IV).
Discussion of findings
The finding that the highest EI of the sample was 42 per cent connotes that almost 60 per cent
of output are supplied to market segments within the local market. Further, only one firm
exported this much. This performance level, as proxy for the entire industry, is low, more so
when considered alongside the findings that majority of the exporters were involved in
experimental exporting, where exporting is intermittent and marginal (Cavusgil, 1980, as
cited in Gankema et al., 2000). It seems then that clothing exporting is still under-developed
within this sample and the industry as a whole. This observation is further buttressed by
regression results which indicated that the much exporting that takes place is undertaken
largely through informal ethnic-commercial overseas-based social networks involving
friends and family who travel frequently between their second foreign homes and Nigeria.
Through this channel, exporters target as peak sales periods, Black festivals such as the
Black History Month, which is celebrated every 28th February, as previously noted by Biggs
et al. (1994b). A less popular festival similarly targeted for annual exports of Afro-centric
wears was the Anambrarian Day, which is celebrated on 10th September by Nigerians of
Anambra State origin resident in the USA.
Table IV.
Result of regression
analysis: factor
analysis-generated
distribution factors
against export
intensity
Models
Variable
1.
Factor
Constant
Factor
Ethnic-commercial overseas channel
Note: * p 0.01
Source: Authors field work, 2012
Standardised
coefficients B
0.263
t value
p
value
0.739
0.461
2.851
0.005*
Partial
correlations
0.263
However, subsumed among users of the fourth channel (overseas boutique channel),
which failed to predict EI, is a miniscule number of enterprises that supply clothing
directly to foreign buyers. The largest enterprise and exporter in this study (EI 42 per
cent) produces and exports large volumes of vests and T-shirts, sportswear (track-suits),
uniforms for hotel maids and airline flight attendants, among others. The company was
the first local garment firm to export apparel under the African Growth and Opportunity
Act (AGOA), beginning in 2002. In sum, the sampled garment ventures appear to be 30
to 40 years behind apparel industries in Asian economies and Mauritius. The sample
appears to be at the stage where the Bangladeshi industry was up to the early 1970s. At
that time, Bangladeshi tailors made garments according to specifications provided by
individual customers who also supplied the fabrics (Siddiqi, 2005).
Role of formal institutions in transforming local tailors into global exporters
The question then is: what factors facilitated the transformation of local tailoring outfits
in these other developing economies into participants in the GVC for clothing? The
literature points to several facilitators, including international trade pacts, activities of
quota-seeking foreign investors who relocated to or sub-contracted with firms in
quota-surplus least-developed economies (LDCs) during the era of the multi-fibre
arrangements (MFA), as well as deliberate government policies. Looking at the role of
foreign investors for example, quota-seeking Indian investors were the catalyst in the
commencement of active apparel exporting in Nepal in the early 1980s (Adhikari, 1997).
Foreign investors contribute equipment, organisational and marketing skills, as well as
contacts with developed-country retail chains (Thoburn, 2000).
Purposeful government incentive schemes that target the garment industry
encouraged these types of foreign direct investments, as borne out by the experience of
Bangladesh, where the state accorded the industry high priority and instituted support
measures such as cash export incentives, export processing zone facilities, among others
(Siddiqi, 2005). Apparel exporting was similarly spurred in Mauritius by the timely
construction of an export processing zone in 1970, which later became a hub for Hong
Kong garment entrepreneurs (Brutigam, 1998; Thakoor, 2003). Another form of
institutional assistance which facilitated foreign market entry for apparel enterprises
elsewhere is sponsorship to foreign trade fairs. These are exhibitions that help buyers
find new suppliers (Biggs et al., 1994a, 1994b).
However, virtually, all of these facilitators, especially industry-specific
institutional support measures, are missing in the context of the present study. For
example, rather than attracting quota-hopping foreign apparel investors, the industry
witnessed divestment by foreign investors in response to the Indigenization Decree of
1972 and 1977 (Adenikinju, 2005). Two decades passed before the enactment of a
counteracting investment promotion decree in 1995, which permits foreign investors to
set up businesses in virtually any sector, with 100 per cent ownership (World Trade
Organisation, 2005). Likewise, institutional ineptitude detracts from the usefulness of
overseas trade fairs as promotional tools. Yearly, changes are made in the set of firms
that are sponsored to these fairs, whereas what is needed is that a particular set of
qualified apparel firms be sponsored to the same fairs several times until they
successfully build relationships with potential buyers through long-term learning
(Biggs et al., 1994a; Jerome, 2005). Existing export-promoting schemes are also plagued
with inadequate funding and inefficiencies such that entrepreneurs are discouraged
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from even formally applying and are compelled to limit operations to levels which
personal resources can support (Kinyanjui and McCormick, 2002; Adenikinju, 2005;
Onugu, 2005; WTO, 2005; Briggs, 2007).
Role of informal institutions in transforming local tailors into global exporters
Granted that there are gaps in formal institutional support for the internationalization of the
sampled garment ventures, private support systems or social capital could have substituted
for the weak public institutions (Biggs and Shah, 2006). Private support systems take
different forms such as formal co-operative relations among SMEs organized in business
associations (BAs) or clusters (Biggs and Shah, 2006), or informal social networks between
entrepreneurs and family members, friends, colleagues or similar enterprises (Copp and Ivy,
2001; BarNir and Smith, 2002; Tambunan, 2005; Meagher, 2006). The next question then is:
how could formal networks such as BAs have facilitated the internationalization of these
apparel firms? Elsewhere, BAs support member enterprises through standardization and by
organizing conferences and educational programmes that broaden the knowledge and skills
of members (Definitions.uslegal.com, 2014; Wikipedia.org, 2014). For instance, the American
Apparel Manufacturers Association is known for establishing voluntary quality standards
for the industrys products, with a view to avoiding legislative actions (Horn, 1975).
Regrettably, there is no unifying, umbrella garment producers association in the
Nigerian context. The industry is heterogeneous in enterprise size, product and market
supplied, being dominated by micro enterprises often described as fashion designers that
render largely bespoke tailoring services (RMRDC, 2003; UNDP/SMEDAN, 2007). The few
medium-sized enterprises (Forrest, 1994; Denzer, 1995, 2003), including the only garment
firm that is listed on the second-tier Stock Exchange, supply well-secured market niches
comprising elitist middle- to high-income earners or uniformed institutions (Ogunrin, 2013).
Relatively large ventures prefer membership of macro or peak associations such as
the chambers of industries and the Manufacturers Association of Nigeria. Smaller
apparel ventures join membership of the Fashion Designers Association of Nigeria
(FADAN) and other break-away local tailors associations. In all, conflict of interest,
constant fissures, limited capabilities for organizing, suspicions on the part of members
that trade associations only serve the political and economic interest of the organizers
with attendant low membership density, limit the ability of these formal producers
associations in facilitating growth and internationalization in ways in which similar
associations elsewhere have (Hamalai, 1999; Biggs and Shah, 2006; Meagher, 2006).
These inadequacies of formal business associations force individual enterprises to
continue to rely on informal personal networks to solve operational problems (Hamalai,
1999), as borne out by the present study. Regrettably, as invaluable as informal social
networks are in helping SMEs acquire crucial resources, including entry into foreign
markets in the absence of formal support institutions (Biggs and Shah, 2006; Meagher,
2006), informal networks are not quite as helpful as formal networks. For example,
despite the immense contributions of the expansive Igbo socio-cultural and commercial
informal networks, Aba apparel ventures have been unable to establish significant
sub-contracting links with the formal sector, or penetrate formal export markets
(Meagher, 2006). As shown by Copp and Ivy, (2001), over-reliance on informal networks
could easily result in a lack of innovation, among other limitations.
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144
associations in Asia and Africa, to learn trade association organizing, so that formal
business networks can emerge to supplement existing informal age-old social networks.
They require training through seminars and workshops towards upgrading product
quality so as to achieve international competitiveness, able to supply global apparel
chains. Although the sample was highly delimited, the insights obtained from the study
underscore the usefulness of industry- and context-specific studies in understanding
how SME performance can be improved within particular contexts. Moreover, by using
quantitative techniques in configuring the channels deployed by the sampled
enterprises in supplying global markets, the study enriches existing qualitative
investigations. Further investigations are however needed concerning the PROs,
overseas stores/boutiques and disappointed exporters mentioned in this study.
This study is part of a larger investigation into determinants of clothing exporting in
Nigeria. In the primary study, the impact of seven sets of firm-level and four sets of
environmental determinants was examined. This paper presents findings in respect of
one set of marketing determinants: distribution channels.
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About the authors
Florence Olu Ogunrin is a Senior Lecturer in the Department of Business Administration, Faculty
of Management Sciences at University of Benin, with research interests in small business
management, entrepreneurship and general management. Florence Olu Ogunrin is the
corresponding author and can be contacted at: bunmiakindele@googlemail.com
Anthony U. Inegbenebor is a Professor of Management at Benson Idahosa University, Benin
City, with research interests in entrepreneurship, small business management and general
management.
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