Effectiveness of Trade Promotion Activities in Promoting International Trade

This research proposal proposes the research of trade promotion in a different context. While existing literature focuses trade promotions on a more internally oriented basis i.e. it focuses on promoting manufacturer / distributor relationship, the proposed research on trade promotion activities will be mostly externally oriented, though some of the activities provided by the trade promotion organisations do gear for internal purposes (Givovannucci, 2001).

The team “trade promotion organisation” used in this proposed research will adhere to those organisations known to International Trade Centre as promoting trade on a national basis. International Trade Centre’s directory covers national trade promotion organisations and other trade-support institutions both public and private owned operating on either a regional or interregional basis, while this category includes organisation such as ministries involved in international trade; export promotion organisations, import promotion offices, chambers of commerce and industry, trade associations and operational trading points (ITC Website).

The fact that potential importers are not located in home country has prompted the establishment of foreign offices in host countries with greater trade opportunity. Not only this, the main functions of these foreign offices summarized by Marchers (1987) can be illustrated as follows:

• Creating a general awareness of the home country as trading partner, this is especially useful when the country does not have either an embassy or a commercial body in the target market
• Promote existing goods and new products to both new and existing importers in the host country
• Suggest product adaptation measures to home manufacturers for improvement on the marketability of exports
• Provide general market information and trade inquiries to producers at home to facilitate market and product development
• Implementing trade promotion programmes

The recent changes in global economy over the past two decades indicated that trade and investment do not behave as independent variables. KOTRA, for instance recognizes both trade and investment are symbiotic, the notion of trade brings investment and investment creates trade opportunities has prompted the KOTRA reform in 1997. The reform completed with the increased service coverage and change of name from Korea Trade Promotion Agency to the Korea Trade-Investment Promotion Agency.

Considering the changing nature of trade promotion from the traditional exporting promotion mechanism to the incorporation of investment promotion activities such as those in KOTRA, the trade promotion activities in this research context is defined as “activities conducted by trade promotion organisation to promote international trade (export and import) and investment”.

Trade shows are generally industry or trade specific, it gives the organisation the chance to show how they compare with the competitors who are often present at the same event. As the budget for such participation can be quite substantial, participants usually plan their involvement well ahead coupled with communication to the potential customers prior to the event (Adcock et al., 1993). The significance and number of trade shows, exhibitors and visitors is becoming increasingly important. Cologne trade fairs for instance bring together 28,000 exhibitors from 100 countries with 1.8 million buyers from 150 countries (Jobber, 2001).

Organisation Background

KOTRA is a non-profit government-owned trade promotion organisation established in 1962 in Seoul, Korea. The main objective of the company is to meet the national policy goals of promoting trade and investment together with technology cooperation assistance to member companies.

With the increasing trend of globalisation, KOTRA currently operates 115 foreign offices in 79 countries. KOTRA, Kuala Lumpur was established in 1973 to promote bi-lateral trade and investment between Malaysian and Korean companies.

Situated in the middle of the city centre of Kuala Lumpur, KOTRA is managed by a mixture of 5 Korean expatriates and 8 local employees alleged to have sufficient local knowledge about the business condition in Malaysia.

The services provided by KOTRA Kuala Lumpur can be largely divided into 3 main categories:

3.1 Events: Trade promotion activities as mentioned earlier to promote bi-lateral trade. KOTRA Kuala Lumpur engages extensively in the participation and sub-hosting of trade fairs (e.g. Seoul International Food Technology Exhibition and Seoul Electrical and Electronics Products Trade Week), organising trade missions (both incoming and outgoing), business meeting and trade matching programmes.

3.2 Inquiries: KOTRA Kuala Lumpur handles business inquiries from both Korean and Malaysian companies. A substantial part of KOTRA’s human resources is exhausted in conducting local market survey requested by Korean companies in Korea. This part of the inquiry is where the local knowledge of the local staff is most comprehended.

3.3 Other Services: Resource centre open to the public with compilation of brochures of Korean companies and product display facilities.

4. Rationale for the Chosen Topic

In this research it is decided to research on the proposed topic due to my past working experience in Korea Trade-Investment Promotion Agency (KOTRA) based in Malaysia. My position as a Trade and Research Executive had exposed me to the trade promotion activities that KOTRA provides to promote bi-lateral trade between Malaysian and Korean companies.

In the course of my service in KOTRA, I noticed that the agency has no formal evaluation system to assess the performance for most of its trade promotion activities. There was only ad-hoc evaluation in the form of follow-up when requested by the companies, which the initial inquiry was made.

As some of this trade promotion activities require substantial financial and human resources, it will be beneficial if evaluation can be carried out. The result of the evaluation will also be advantageous to the Agency for designing future promotion programs.

Research Questions

Essentially, this research proposed the examination of one basic question:

How successful are trade promotion activities in promoting international trade?

Prior to obtaining the answer for research question, it raises additional questions such as:

Why does government establish trade promotion abroad?

How does trade promotion organisation contribute towards promoting international trade?

How does the entrepreneur perceive the above type of trade promotion activities?

In what way trade promotion organisation can do provide greater benefits to the businesses?

Research Objectives

The ultimate objective of this research is to critically evaluate the impact of trade promotion activities conducted by government-owned trade promotion organisations. In the process of such evaluation, this research will seek to gain an insight as to how entrepreneur perceives a particular form of trade promotion activity; subsequently lead to the generation of recommendations by which trade promotion organisations can provide greater benefits to corporations.

As a summary of the above, the research objectives are enlisted below:

1. To critically evaluate the impact of trade promotion organisation in promoting international trade.
2. To explore the perception in businessman towards the usefulness of such trade promotion activities.
3. To recommend conditions in which trade promotion organisation can provide greater benefit towards promoting international trade.

Literature Review

The research of trade promotion in the context of this proposal has been conducted by scholars such as Czinkota (2002), Seringhaus and Rosson (1998), Seringhaus (1989), Zafal et al., (2002) and Wilkinson and Brouthers (2000). The list of literature however, is not conclusive, as more will be reviewed as the research progresses.

Some authors use the term export promotion program when referring to the trade promotion activities conducted by trade promotion organisations (Zafar et al., 2002, Czinkota, 2002). Even though export promotion program is the main agenda of the trade program in most developing countries, the endeavour of some trade promotion organisations in promoting international investment and assisting importers should not be neglected.

The measures for evaluating trade promotion activities are effectiveness, efficiency and impact (Nyberg, 1987). Most of the research conducted to date focuses on the evaluation of the aspect of effectiveness and efficiency. Wilkinson and Brouthers (2000) established a linkage between trade promotion activities (such as trade show, trade mission, computer generated trade leads) and export performance, Seringhaus and Rosson (1998)’s work is more activities specific whereby analysis to a single trade promotion activity such as trade fair is focused upon. Similarly, the research of trade missions is documented by Seringhaus (1989).

Zafar et al., (2002) analyse the export promotion programme in Malaysia by differentiating the functions of public and private trade promotion organisation, the finding of the research indicated that more need to be done especially by the Malaysian government in developing international trade and create awareness of such promotion programmes among SMEs.

A theoretical framework indicated by these literatures claimed that: the tendency of firm seeking information on export promotion programs and the awareness of the availability of these information vary according to the firm’s demographics and level of prior exporting experience. The framework is illustrated as follow:

Figure 1: Firm Demographic / Export Characteristics and Information Seeking / Export

(Source: Zafar et al., 2002)

Another source of literature pertaining trade promotion activities is available from International Trade Centre (ITC). ITC functions under the United Nations Conference on Trade Development (UNCTAD) and World Trade Organisation (WTO). It incorporates more than 1000 trade promotion organisation in its database. Being a neutral organisation with the ultimate goal of individual trade promotion organisation, ITC seeks to establish guiding principle to which trade promotion organisation is to perform to achieve their objective (Nyberg, 1987), (Moreira, 1990) and (Melchers, 1987). ITC’s quarterly magazine International Trade Forum is a very informative source for the proposed research topics.

Methodology

The nature of this proposed research is exploratory, rather than explanatory, as not much literature has been publicized on the issue of trade promotion activities by trade organisation. As such, the research will adopt a grounded theory approach developed by Glaser and Strauss (1967). According to them, grounded theory is the discovery of theory from data and that is systematically obtained from research. The theory developed is derived from data and then illustrated by the characteristics examples of the data. In other word, the theory is inductively derived from the study of the phenomenon it represents (Strauss and Corbin, 1997).

The research proposes the use of methodological triangulation concept developed by Denzin (1978) to overcome the potential bias and susceptible of using one particular method of data collection. The original term “triangulation” refers to a surveying / nautical process in which two points (and their angles) are used to determine the unknown distance of a third point (Tashakkori and Teddlie, 1998).

A combination of data collection method of in-depth interview, semi-structured interview and participant observation will be used in the proposed research. An in-depth interview or unstructured interview is an informal type of interview aimed to explore in depth a general area such as trade promotion activities. The interview will be conducted without any predetermined list of questions, although a clear ideal area to explore need to be established prior to the interview. In such data collection method, interviewee is given the opportunity to talk freely about trade promotions, the behaviour and belief with regards to the topic area (Saunders, Lewis and Thornhill, 2003). This phenomenon is sometime known as the informant interview as it is the interviewee perception that guides the conduct of the interviewer (Robson, 2002).

Participant observation is where “the researcher attempts to participate fully in the lives and activities of subjects and thus becomes a member of their group, organisation or community. This enables the researcher to share their experience by not merely observing what is happening but also feeling it” (Gill and Johnson, 1997). Even though participant observation has been used much less in management and business, it can indeed be a very valuable tool especially when the research is adopting triangulation approach (Saunders, Lewis and Thornhill, 2003).

Data Collection Methods

The research proposes the commencement of in-dept interview with the Assistant Director of KOTRA to obtain an in-depth exploration of the trade promotion activities in a broader context. The interview(s) will be conducted by telephone in which the whole conversation will be tape-recorded. Given the disadvantages of conducting interview through telephone, the lack of personal contact and trust establishment will be compensated by the speed of data collection and lower costs associated with long-distance access.

The interview(s) is estimated to last between half an hour to an hour, a schedule of questions will be prepared in advance to ensure the clear idea of areas to be covered in the conversations. However, the interview will not adhere to the schedule of questions strictly considering the nature of informant interview discussed earlier.

The participant observation will be conducted in UK. The research proposes to adopt the role of “participant as observer” developed by Gill and Johnson (1997). In “participant as observer”, the role of researcher will be revealed, both the researcher and subjects are aware of the fact that it is a fieldwork relationship (Ackroyd and Hughes, 1992). It is believed that the divulgement of researcher’s identity will enable to ask questions of the research subject for the enhancement of understanding.

It is very likely that the workshop participants are new users to the trade promotion activities. The data collected from these participants will help to generate theory on the perception of non-user on trade promotion activities.

Data Analysis

This research proposes to use a combination of qualitative and quantitative data analysis approach. Data obtained through in-depth interviews and participant observation will be analysed using the set procedures from grounded theory approach of open coding, axial coding and selective coding (Strauss and Corbin, 1998). Grounded theory approach is considered as structured and systematic. The advantage of the approach is that data analysis can be conducted in a less formalised and proceduralised manner while maintaining a systematic and rigorous approach to arrive at a theory (Saunders, Lewis and Thornhill, 2003).

In addition to this, the research will also make use of the data management and statistical analysis software such as Statistical Package for the Social Sciences (SPSS). The software is accessible from the Management Centre that is of great use for the presentation of graphical findings.

Resource Requirement

The review of literature will be obtained largely from the library facilities (for published copies) and Learning support Services (for electronic copies).

The commencement of the fieldwork will assume the extensive usage of telephone and Internet facilities. This is mainly due to the long-distance access into KOTRA and samples provided by the organisation. Subsequent interviews on non / new users of trade promotion activities as a result of participating the workshop will also be conducted by telephone or Internet depending on the interviewees’ preference.

A trip to Trade Partners UK in London for the workshop will be arranged either in beginning of November or December. During the trip, a visit to the Malaysian Trade Commission in London will also be organised. The Commission requires an appointment with prior to the visit.