Factors constraining exporting from Lesotho based manufacturing enterprises

Abstract

Exporting is a popular mode of internationalisation for a variety of reasons. For instance, many enterprises prefer exporting because it permits them to learn from competition with minimum resources committed by the enterprise. However, it is noted in literature that enterprises face various constraints when exporting. Earlier studies, mostly conducted in developed countries, have documented several exporting constraints. The studies do not agree on the grouping of factors constraining exporting and elements that form such groupings. Also, it is acknowledged in literature that generalising findings from developed countries to developing countries would not necessarily be appropriate, hence studies in developing countries such as Lesotho are necessary and, to the researcher’s knowledge, this study is the first to be conducted in Lesotho. This formal study, therefore, was carried out to test the hypotheses developed from literature regarding factors that constrain exporting. Lesotho is land locked, being completely surrounded by the Republic of South Africa. It is believed that Lesotho’s setting can bring insights into exporting as the country becomes a popular destination for export-oriented investors. Although enterprises operating in Lesotho had been exporting prior to 2000, there was a major boost of exports at the beginning of 2000 when Lesotho became eligible for exports to the United States, Canada and European markets under the agreement in the African Growth Opportunity Act (AGOA). The AGOA agreement brought a flow of Asian export-oriented investors into Lesotho. Lesotho’s exports are concentrated in the apparel and textile industries and are destined to a few countries, predominantly South Africa and the United States. The literature review covers the globalisation of the business environment. Further, the international entry modes are discussed along with the theories that explain the decision of the enterprises to initiate the internationalisation process. Finally, the exporting mode of internationalisation is discussed detailing the constraints that enterprises face when engaging in exporting. A questionnaire was used to collect data. The instrument first underwent a rigorous evaluation by experts who are knowledgeable about the subject. The experts proposed changes that were adopted prior to conducting a pilot study. A judgemental sampling approach was used where manufacturing enterprises located in seven of ten industrial areas in Lesotho, who agreed to participate in the study, were issued one questionnaire each. The questionnaires were distributed to key informants who were regarded as managers directly responsible for international operations. Alternatively, chief executive officers were approached in situations where enterprises did not employ international operation’s managers. A response rate of 94.7 percent was obtained. The study revealed that exporting constraints are internal to the enterprises and that three factors, as opposed to the five that were hypothesised, constrain exporting. The study further revealed that perceived exporting constraints varied according to the size of the enterprise as well as the ownership structure thereof. Recommendations were made relating to actions aimed at minimizing exporting constraints. Lastly, future areas of research were identified. The study will be beneficial to enterprises as they will be able to adopt suitable measures to overcome or reduce the impact of exporting constraints. Also, the study will inform policy makers in Lesotho with regards to areas where appropriate assistance should be provided. In addition, the study would inform business educators regarding areas of training for exporters, which will address the training needs of exporters. Lastly, researchers interested in exporting will find other avenues that can be researched in order to build the field of exporting.