Position of exporting firms in the world market

Type of product

The position of firms in the market is influenced by the type of product they produce. Many firms' exports are primarily common products differentiated largely by the use of brand names. Except for the subsidiaries of multinational enterprises, very few firms design and develop their own products. Most products are imitations of foreign products, usually products which were being imported and are now manufactured' following the logic of import substitution. Competition in the product market is largely based on price and quality.

Types of target markets

The exporting firms have mainly targeted regional markets, with smaller volumes being exported to international markets. Firms which target international markets are mainly resource-based manufacturers, deriving their initial comparative advantage from access to natural resources. This observation in the case studies corroborates earlier case studies in which it was noted that manufactured exports have tended to be dominated by processed goods destined for the markets outside Africa (Riddell, 1990. p. 35). If major primary processed exports are excluded then the much smaller remainder is mostly destined for neighbouring markets.

While some exporters started as export-oriented enterprises (EOEs), targeting export markets right from their inception, others started as import substitution enterprises (ISEs), targeting the domestic market and later moved into export markets. Firms took various routes in shifting or extending from domestic markets to export markets. Two categories can be identified. Some firms moved from the domestic markets to regional markets and later penetrated international markets. Others developed from domestic to regional markets and stayed there or have not penetrated international markets as yet.

The transition from domestic markets to regional markets has been influenced by the similarity between these markets. Two types of exporting firms were found to have taken advantage of this phenomenon. First, there are exporters who have found the regional market no more demanding in terms of product quality than the domestic market (e.g. steel products). Exporting based on this feature is likely to be short-lived at best, considering that quality requirements are likely to rise as economies in the region become more open. Export opportunities based on lower product quality are unlikely to be sustainable in the face of imports from elsewhere. Such less demanding export markets may produce only limited learning by exporting.

Second, opportunities in the regional markets have been tapped on the basis of product quality and appropriateness to the specific conditions in the region. For instance, regional exports in agricultural machinery and other farm implements were found to be based on products which had been developed to suit agro-economic conditions in the region. Zimbabwean firms exporting agricultural machinery had developed products which suited the soil and climatic conditions in the region. Their competitiveness was a result of many years of continuous investment in searching and learning, as indicated by their R&D activities. The firms started by copying imported designs and made efforts, in response to demands from farmers, to make innovations to suit the specificities of the region. The development of agricultural machinery suited to the conditions of Southern Africa was encouraged by the domestic demand for such innovations from the large-scale farming community. The specificity of the technological adaptations gave the firms natural protection from international competition. Because of the appropriateness of these products to the specific soil conditions in the region, they could even sell at higher prices than their imported counterparts.

However, even where there appears to be a natural monopoly, intra-regional competition has to be faced at some point, as the case of agricultural machinery from Zimbabwe and South Africa has shown. Natural protection is tenable up to a point, beyond which there is danger of losing markets to competitors from other regions. Even if imported products are not as suitable to local conditions, competitors from outside the region have sometimes penetrated the regional market by supplying their products at lower prices or by supplying products whose quality of finish looks better. Thus specific local markets can be lost to others if continuous efforts are not made to develop competitiveness in terms of quality and price.

In some cases competitors from other regions have made products specifically for the African regional market. Kangas coming from some Asian countries (e.g. India and China) or African prints from Europe have been manufactured specifically to suit the demand in the African markets. There are signs that such products are taking a share of the market from firms in the region. The evidence indicates that the specificity of regional markets may make the competition for various products less intense but it does not guarantee a monopoly. The need to exert continuous effort to attain and maintain competitiveness in such markets does not seem to be obviated by any specific characteristics of regional demand.