The Round Table

Vol. 96, No. 390, 347 – 363, June 2007

Competitiveness of Small Enterprises:

Insights from a Developing Economy
DENSIL A. WILLIAMS
Department of Management Studies, University of the West Indies, Kingston, Jamaica

ABSTRACT The rapid liberalization of the world’s trading system has obliged all firms (micro,
small, medium and large) to participate in the international trading system. The competitiveness
of these enterprises is very important if developing economies are to secure their economic
survival in this era of rapid market liberalization and erosion of trade preferences. This paper
seeks to provide some insights into the competitiveness of a group of firms that have received very
little attention in the debate on competitiveness and economic development. It draws on the case
study method to analyse export-marketing strategies of eight small firms from Jamaica to help us
analyse their ability to compete internationally and, by extension, to draw out lessons for other
similar enterprises in the economy. The results reveal that the export-marketing strategies used
by Jamaican small enterprises to expand exports are unsophisticated and unsustainable. The
strategies pursued leave these enterprises hostage to foreign buyers, thus making their export
capacity quite fickle. This therefore threatens their long-term survival and by extension the
Jamaican economy. Taking greater control of the export-marketing mix is the only way these
enterprises can develop sophisticated strategies that will ensure their survival in an increasingly
inhospitable international trading environment.

KEY WORDS: Liberalization, small firms, competitiveness, strategy

Introduction
Jamaica’s future economic survival will rest on the competitiveness of the enterprises
that operate in that economy, especially given the erosion of trade preferences for
key agricultural exports to Europe. The competitiveness of these enterprises will,
however, depend on the sophistication of their export marketing strategies and
operations in this rapidly globalizing world. For small economies such as Jamaica,
and because of the liability of size, exports will be a powerful engine for national
development compared with internal markets (Wint, 2003). This study will therefore
report on the export marketing strategies used by a sample of small Jamaican
enterprises to compete internationally. The paper will address the main question:
how competitive are Jamaican small enterprises in an increasingly liberalized trading
environment? To critically appraise this question, the paper follows a similar method

Correspondence Address: Densil A. Williams, Department of Management Studies, University of the West
Indies, Mona, Kingston, Jamaica. Email: densilw@yahoo.com

ISSN 0035-8533 Print/1474-029X Online/07/030347-17 Ó 2007 The Round Table Ltd

DOI: 10.1080/00358530701463840
348 D. A. Williams

to that of the Porter’s (2004) business competitiveness index. It analyses both the
quality of the microeconomic business environment in which the firms operate and also
the level of sophistication of their operations and strategies. The level of competitive-
ness which firms achieve is determined by the quality of the microeconomic business
environment and their internal operations (Barclay, 2005). Indeed, in an increasingly
liberalized trading environment, developing countries can benefit by developing
internationally competitive industries (Girvan, 2000). This study will highlight some of
the key considerations that must be taken on board in developing such industries.

Competitiveness at the Enterprise Level

The contention over competitiveness is very much vibrant. Krugman (1994) for
example argues that obsession with competitiveness at the national level is wrong
and dangerous, while Porter (2004) sees competitiveness as the major tool for
economies to benefit from market liberalization. Both scholars agree, however, that
it is firms that compete and not nations. Indeed, if an economy is to create wealth for
its citizens, it is the companies that operate there that must do so and not the
government. The macroeconomic and institutional environments will not bear fruit
unless the microeconomic environment within which the firms operate is strong and
sophisticated (Porter, 2004). It is this idea that will guide our analysis of the
competitiveness of Jamaican enterprises in order to highlight some of the challenges
that will confront the country in this increasingly liberalized trading environment.
Competitiveness at the enterprise level according to Wint (2003) and Porter (2004)
can be operationalized as:

. the ability of enterprises to export to an array of countries without preferential

treatments;
. the ability of enterprises to engage in foreign direct investment (FDI) using assets
and skills developed at home;
. the ability of enterprises to operate at internationally accepted standards in terms
of cost, service level, business processes, etc.;
. the ability of enterprises to earn above-average returns in a competitive market.

Not all Jamaican enterprises will be able to meet all the above criteria, especially
given that we are focusing on small, resource-poor firms. Therefore the ability to
export to an array of countries is the major criterion that is used to select competitive
enterprises. The soundness of the firm’s competitiveness is also determined by the
level of sophistication of its marketing plans, the availability of capital, especially
venture capital, the level of competition in the local economy and also the quality of
local suppliers. These factors will determine how sustainable the firm’s export
marketing strategy is compared with that of their rivals in the international market.
Although competitiveness at the enterprise level is important, it is acknowledged
that it cannot happen without a strong macroeconomic and institutional environ-
ment. Indeed, these factors are necessary for creating an enabling environment
within which firms can operate and reduce production costs. It is in this light that we
will analyse the enabling environment in the Jamaican economy in order to gain a
better understanding of the competitiveness of the enterprises that operate there.
 Competitiveness of Small Enterprises 349

This will also help us to better identify the factors that are critical for Jamaica’s
economic survival in this increasingly liberalized trading environment.

The Microeconomic Business Environment for Competitiveness

In the 1950s to 1970s Jamaica practised an economic management strategy that
could best be defined as an inward strategy. During this period there was heavy state
involvement in the commanding heights of the economy. The government was the
major owner of the means of production. This crowded out the entrepreneurial spirit
of private individuals. As a result, the number of small and medium-sized enterprises
was virtually non-existent. Large multinationals that came into the economy to
produce goods and services that were once imported were given high levels of
protection and as such could provide massive employment. There was no strong
motivation therefore for small enterprises to get involved in the productive sector
and provide a source of employment. However, with the rapid liberalization of the
world trading system, especially since the 1980s, this economic management strategy
changed drastically.
The post-1980s saw a shift in economic management strategy in the Jamaican
economy. This new strategy moved away from the sort of protectionism and state-
run economy of the 1970s to one where the domestic economy had greater
interaction with the international economy. This led to government relinquishing
control of the commanding heights of the economy and giving more latitude to
private individuals to have ownership of productive assets.1 During this period there
was a rise in the number of small and medium enterprises. Furthermore, successive
governments since then have promoted the need to develop more small enterprises.
The rationale is that these have a more national reach and thus can provide a
stronger source of employment. Indeed, because trade liberalization has resulted in
the erosion of trade preferences, the result is that some firms that were once
protected have had to exit business operations altogether or find cheaper locations to
produce their outputs. This has resulted in increased levels of unemployment. Policy
makers have recognized this and have moved to support the small enterprise sector,
which is seen as a major sector for creating employment in this highly liberalized
trading environment. This sector contributes over 30% of the total employed labour
force in the Jamaican economy and has received over J$1 billion in funding in 2004
(PIOJ, 2004).
Today the Jamaican economy is characterized by low growth, but having a stable
macroeconomic environment. GDP growth between 2000 and 2005 averaged around
1.7%, average inflation was around 9%, the average Treasury Bill rate was around
17% and average exchange rate depreciation was around 8%. Moreover, since the
rapid liberalization of the economy in the 1990s, there have been some improvements
in the physical infrastructure and industry structure as well. In terms of infra-
structure, there has been a massive expansion at the country’s major seaports and
airports. There is also a massive road network project underway. There is a new
highway under construction that aims to connect the most western parish to the
most eastern parish. This is referred to as the North Coast High Way. Expenditure
on this project at the end of 2004 was around US$69 million. There is also another
road project (Highway, 2000) which connects the capital city to the most western
350 D. A. Williams

parish. Both road networks are aimed at providing the most efficient and reliable
means of transportation to reduce transportation and ultimately production costs.
Trade liberalization has also changed the nature of the industry structure in many
sectors of the economy. Before 2001 there was only one telecommunication provider
on the island. Today the island boasts three major providers of mobile telephony
services and a large number of internet service providers as well. This sector has seen
some of the fiercest competition in marketing and distribution. Indeed, Porter argued
that competition is one factor that can drive innovation and ultimately competi-
tiveness. This is quite evident in the Jamaican telecommunications sub-sector of the
communications industry. Mobile customers grew from 1.4 million in 2003 to 2.2
million in 2004. This aggressive growth in the market is largely the result of the level
of competition that exists there. What is noteworthy about the liberalization process
is that it has opened up opportunities for more small and medium-sized enterprises
to do business. For example, in the communications sector, of the 74 licences issued
for telecommunications services in 2004, over 40% were taken up by small domestic
firms.
In terms of the social sector policy makers continue to make efforts to improve
outputs in key areas, so as to better facilitate economic development in light of the
changing nature of the world’s trading system. In the area of education a number of
initiatives has been developed in order to improve quality, access and equity in the
system. There is the new E-learning project that was developed to equip schools with
computer laboratories. Also, there was investment of J$77 million to implement
school improvement plans so that more students can have a place in the school
system. The transformation of the education system is seen as a vital step if
Jamaica’s economic survival is to be ensured. One of the country’s most valuable
resources is its human capital. Therefore, in order to gain a competitive advan-
tage from it, it must be trained and ready to meet the challenges of the knowledge
economy. Through education there will be greater innovation and more sophisti-
cated consumers, both of which are factors necessary for improving the competi-
tiveness of any nation and firm (Porter, 1990).
The current structure of the Jamaican economy is vastly different from what it was
two decades ago. There is a higher level of competition in industries (e.g.
communications, financial services), better infrastructure (in some cases), economic
stability, etc. However, the country’s export sector is still not diversified enough.
Traditionally endowed resources (bauxite, sugar) still account for over 50% of
export revenue. Nevertheless, both the government and the private sector are playing
their role in ensuring Jamaica’s economic prosperity beyond the loss of the country’s
preferential market access to Europe and North America. In this regard Jamaica has
concluded bilateral agreements with a number of non-Caricom countries such
as the USA, Canada, Hungary, Nigeria and Norway. The government also signed
agreements to undertake regional and hemispheric trading. In the Caribbean region
it has agreed to be part of the Caricom Single Market and Economy (CSME) and in
the Americas it has agreed to be part of the Free Trade Area of the Americas
(FTAA). Recently the country signed up to the General Agreement on Trade in
Services (GATS), which will see full liberalization of its services sector.
Although the Jamaican economy is transforming to ensure its survival in the post-
preferential trading era, there are still worrying signs about the country’s level of
 Competitiveness of Small Enterprises 351

international competitiveness. Indeed, in an integrated world economy, competi-

tiveness becomes the major tool by which to judge success. Competitiveness can be
looked at both at the level of macro and micro economy. Most discussions however
take it from the macro level. Taken from this perspective, the picture for Jamaica is
not very encouraging. Jamaica has seen a decline in its competitiveness as measured
by its share of exports in the world market. The country’s share of the world’s
merchandise exports declined from a level of 0.030 in 1994 to 0.024 in 2001
(UNCTAD, 2001). It is our interpretation that this decline in competitiveness is a
manifestation of what is happening at the micro (firm) level. It is therefore relevant
for us to highlight issues that relate to the competitiveness of the firm. This paper will
address these issues in the context of small firms in the Jamaican economy. The focus
on the small enterprises will be explored in the subsequent section.

Research Strategy and Data Collection

There is a dearth of literature from the South, and especially the Caribbean, on the
competitiveness of enterprises that operate there. Moreover, the problem is
exacerbated when competitiveness is looked at from the perspective of the small
enterprises which are the most dominant players in these economies. This has
therefore seriously impeded our ability to analyse the future economic survival of
these developing economies, especially in light of the erosion of preferential
treatment for the goods and services they trade. As a result, this research attempts to
serve as a first step in improving our understanding of these issues from a small
developing country in the Caribbean region. The Caribbean represents a region of
the world that comprises a number of small countries with divergent economic
performance within a relatively small geographic space. The region is well studied in
terms of its politics, culture and economic structure. However, very little is known
about the competitiveness of the region and its enterprises in this highly liberalized
trading environment. Although this study is confined to a single country in the
region, we expect the lessons learnt can be applied to other similar countries until
context-specific studies are carried out.
This study reports on the export competitiveness, i.e. the export marketing
strategies of small firms in the Jamaican economy. Because very little is known about
this issue in the Jamaica context, it was deemed relevant to carry out an exploratory
study using the case study design (Hakim, 1987; Yin, 2003). This technique helps
researchers to unravel phenomena that would not otherwise be observed when a
hypothetical-deductive method of explanation is used (Andersen, 1995; Curran and
Blackburn, 2001). Furthermore, because this area is not well researched in this
geographical context, our research question is somewhat unstructured; thus the case
study design provides a good tool for analysing an unstructured question.
The data used for this study were collected from eight small firms in the Jamaican
economy. Other studies (e.g. Wint, 2003) have focused on the competitiveness of
much larger enterprises in the Jamaican economy. These enterprises employ over 100
employees and are located in only a few geographical locations (mainly in the
capital) across the country. However, as Porter (2004) points out, to ensure sustained
economic survival, firms will have to create wealth so that the majority of the citizens
of a country can benefit. The rapid distribution of wealth therefore can only come
352 D. A. Williams

from small entrepreneurial firms because they have a greater national reach than
large or multinational firms. Moreover, the majority of firms in Jamaica are small
and employ fewer than 100 persons. It is therefore important that, if we are to
understand the microeconomic foundation of economic competitiveness and
survival, we focus on these small firms. Until now no study of the Jamaican
economy has devoted attention to these enterprises. This study will therefore make a
significant contribution to this area. The small firms studied are all involved in
international business and are all wholly-owned Jamaican enterprises. This last
criterion is critical, since small firms that are part of a larger enterprise have a
stronger bias towards developing competitive operations than those that are not
(Leonidou and Katsikeas, 1996).
The sample frame used for this study was drawn from the Jamaica Promotions
(JAMPRO) directory of exporters. This directory has the most comprehensive list
of exporters in Jamaica. At the time of the study it listed 415 enterprises. Of
this number, 86% employed 100 people or fewer. Therefore our sample frame is
narrowed down to 356 small businesses in the Jamaican economy that are involved
in international business. A random sample of 60 firms was selected for interviewing.
Each firm was called and asked about their interest in the study. Of the firms
contacted, eight responded positively. Others were either not reachable or could not
participate because of lack of time or unwillingness to provide confidential
information.
Direct face-to-face interviews using a semi-structured questionnaire were carried
out with the eight firms that responded positively to the request for interviews. The
questionnaire had a structured section looking at the profile of the owners of these
companies and the profile of the company, and a semi-structured section looking at
the firms’ operation and strategy for international business operation. All interviews
were held with the owner/manager and lasted for an average of 90 minutes. Table 1
presents a general profile of the firms studied in this research.
All firms are located in the agriculture and manufacturing sectors, two major
export sectors in the Jamaican economy. Their activities range from coffee brewing,
book publishing and printing, garment manufacturing and manufacture of cups and
plates to pharmaceuticals. The average firm age as measured by the legal date it
started operation is 19 years. The major mode for international business is exporting,
with many firms using foreign distributors to sell their products. The majority of
firms export their products to North America (mainly the USA) and other Caricom
countries, with only a few selling to the rest of the world.

Data Analysis and Discussion

Our aim in this research is to critically appraise the competitiveness and export
marketing strategy of small enterprises from a developing country in light of the
increasingly liberalized trading regime under which they have to operate. To achieve
this, the sophistication of the firm’s operations and strategies for international
business were assessed. The assessment focused on areas such as: the firm’s use of
professional management to develop strategies, the extent to which they have control
over the export-marketing mix, the degree of customer orientation and the extent of
training given to staff.
 Competitiveness of Small Enterprises 353

Table 1. Characteristics of firms

No. of Country of initial Education level

Age employees Sector export of owner
Firm 1 16 yrs 30 Manufacturing Other Caribbean BSc
Firm 2 28 yrs 20 Manufacturing USA BSc
Firm 3 14 yrs 14 Manufacturing USA BSc
Firm 4 10 yrs 18 Manufacturing USA Vocational training
Firm 5 10 yrs 2 Agriculture Other Caribbean BSc, MSc
Firm 6 22 yrs 16 Agriculture Rest of the Vocational training
World—Japan
Firm 7 20 yrs 50 Agriculture Other Caribbean BSc
Firm 8 34 yrs 40 Manufacturing Other Caribbean Diploma

In addition, aspects of the firm’s microeconomic business environment were

analysed. These included the degree of local competition, the quality of infra-
structure, the availability of human, capital and physical resources and the level of
openness of the economy. This analysis will help us to identify some of the challenges
that confront Jamaica in this era of rapid trade liberalization where competitiveness
of the economy and enterprises is the major driving force for economic survival.
Indeed, because of the limitations of size, international competition is very important
for economies such as Jamaica. If firms are to develop the level of productivity that
can ensure that all citizens benefit from higher wages, better quality jobs, etc., they
will have to operate beyond the local market. Having a sophisticated export-
marketing strategy and operation is therefore quite critical for survival of both the
firm and, by extension, the economy.

Reasons for Internationalization

The extant literature is mired with inconclusive conclusions regarding the motivations
for firms (especially small firms) to get involved in international business (e.g. Bilkey,
1978; Miesenbock, 1988; Vernon, 1966). Moreover, there is very little literature on the
motivation for small firms from less developed countries to enter international
markets (Dominguez and Sequeira, 1993; Christensen et al., 1987). This section will
provide some insights into the latter.
Researchers contend that small firms are motivated to enter foreign markets as a
result of stimuli present in both their internal and external environment (Leonidou,
1998). Internal stimuli such as management foresight and motivation for growth
(Albaum et al., 1989), excess production capacity (Keng and Jiuan, 1989), possession
of a unique product (Moen, 1999) and advanced and sophisticated technology
(Moen and Servias, 2002) are all important. External stimuli such as government
restrictions in the foreign market (Christensen et al., 1987), a saturated domestic
market (Leonidou, 1998), unsolicited orders from customers abroad (Leonidou,
1998) and movement of local customers to overseas markets (O’Farrel et al., 1998)
are also critical.
For smaller firms the owner/manger is seen as the most important figure in making
the decision to enter exporting (Miesenbock, 1988; Aaby and Slater, 1989). Stimuli,
354 D. A. Williams

it is argued, will trigger the owner’s attention and s/he will then make a decision as to
whether to react positively or negatively (Williams, 2006). A positive reaction will
result in the firm entering export markets while a negative reaction will result in it
remaining focused on the domestic market. This reaction to export stimuli, however,
will be based on a number of subjective and objective factors that shape how the
owner thinks (Eshgi, 1992). From a pragmatic perspective the most important factor
appears to be whether or not the decision adds to the firm’s profit margin. Others
argue that the decision may not add to the firm’s profitability instantly, but gives the
firm the necessary exposure in the foreign market and the ability to gain a
competitive advantage in the future (Oviatt and McDougal, 1994).
Some of the factors that drive firms to internationalize that are reported in the
extant literature are also found to be relevant in the Jamaican context. For example,
unsolicited orders from overseas customers appeared to be a strong factor
motivating Jamaican firms to be involved in international business. The extant
literature points to this factor as one of the major reasons for smaller firms getting
involved in exporting, especially their initial involvement (Bilkey, 1978; Leonidou,
1995). The firms in this study stated that they did not go out directly to seek export
business; instead it was the customers who inquired and so they got involved in
exporting. Another important factor that drives Jamaican firms to internationalize is
the perception that they possess a unique product. Their products, they opine,
possess unique Jamaican qualities such as taste, aesthetic appeal, etc. Therefore
exporting abroad can help them to earn super-normal profit. Exporting, they
argue, can also result in some prestige in the local market, thus giving them a
competitive edge over non-exporters. Firms also internationalize in order to offset
seasonal demand locally. Exporting is seen as a way of ensuring revenue for the
entire year and thus provides a more sustainable business and long-term employment
for staff.
The most interesting observation from the above analysis is the pattern of
internationalization in these small firms. Although they have a limited stock of
resources, they do not necessarily internationalize gradually, as is suggested by
scholars of the incremental stage orientation (e.g. Johanson and Vahlne, 1977;
Cavusgil, 1980). The majority of small firms started their initial exporting outside the
Caribbean, while a few exported to other Caribbean countries on their debut. It is
worth mentioning that it is mainly the smallest firms that initiated exporting outside
the Caribbean region. This observation seriously contradicts the process (stage)
theory of internationalization, which argues that firms start their internationaliza-
tion quest in markets that are very similar before they enter more distant markets
(Johanson and Vahlne, 1977). Not all Jamaican small firms seem to follow a
sequential process towards internationalization. This pattern of internationalization
will indeed have implications for the sophistication of their operations and export-
marketing strategies. As firms move into more distant markets geographically and
culturally, it is expected that their strategy for competing will become more
sophisticated if they are to survive international competition (Bell et al., 2004). For
example, because of the lack of economies of scale resulting from the size of these
small firms, when they expand their operations into mainstream markets they cannot
afford to compete on price. They will have to develop more innovative strategies,
such as differentiation based on quality, service, etc. The sophistication of their
 Competitiveness of Small Enterprises 355

export-marketing strategies will determine the success or failure of these enterprises

in the international market.

Export Marketing Strategies

Unravelling the strategy used by Jamaican small firms to compete in the
international market place was not an effortless task. These firms were not
participants in global production chains, a strategy used successfully by East Asian
firms to compete on the export market (Wortzel and Wortzel, 1981). Instead, they
have entered export markets independently. They are involved in a range of activities
such as manufacture of dolls, garment production, coffee brewing, manufacture of
cups and plates, book publishing and printing and the export of condoms. Their
involvement in exporting averages around 10 years. The competitive strategies used
by these firms are heavily influenced by their stage of export-market development.
The literature argues that the main tool for small firms to have a competitive
advantage in international markets is their ability to develop unique products and
their flexibility in adopting new technology (Moen, 1999). These attributes allow
them to operate in niche markets rather than compete directly with large or
multinational firms. Because of size, these firms are not able to gain economies of
scale in production. Therefore it becomes almost impossible to compete on the basis
of price. Researchers argue, however, that small firms use price as a major
competitive tool (Barclay, 2005; Christensen et al., 1987). Further, empirical
evidence suggests that firms from developing countries that are at an early stage of
their export development have less control over critical elements of their export-
marketing mix, and thus they do not have control over retail price (Wortzel and
Wortzel, 1981). Small firms also try to be very sophisticated in their export business
by building dedicated departments for exports and working closely with agents and
distributors in the international market place to gain competitive advantage (Demick
and O’Reilly, 2000). The firms in this study, however, did not show any evidence of
this form of sophistication in building their export business. Exporting was mainly
based on an importer pull model (Worztel and Wortzel, 1981), where firms merely fill
an order brought to it by a foreign buyer.
Importantly it is argued that the export success of less developed country firms will
depend on their ability to initiate and implement unique competitive strategies
(Aulakh et al., 2000). One such strategy is the use of networks (Bonaccorsi, 1992;
Ellis, 2000; Johanson and Vahlne, 2003). Because of limited resources, forming
strategic alliances with other small firms or larger and multinational firms is one
method by which poorer firms can get their products into international markets at
minimum cost. This strategy of networking seems to work well for small firms,
especially those from the less developed countries (Beamish, 1987). In addition, the
role of clusters is very important in improving the firm’s competitiveness (Porter,
2004). Firms in a cluster have more efficient access to material, information and
training than isolated firms. This increased access to specialized material will no
doubt help these firms to become more innovative and efficient at what they do, thus
improving their competitiveness vis à vis more isolated firms.
Social networks were critical in aiding most of the firms studied to develop their
export business. This was evident through their relationship marketing strategy. It is
356 D. A. Williams

noteworthy that it is difficult to identify competitive strategies used by Jamaican

small firms. The lack of clearly defined strategies appears to be a result of their
unplanned internationalization and/or a lack of understanding of the increasingly
competitive nature of the international market place. These factors will become
clearer in the subsequent discussion.

Loyalty. The common drivers among all firms in this study for initiating exports
were unsolicited orders and the motivation for increased profits. There was no
serious market research undertaken before firms considered filling fortuitous export
orders. Because the initial order was successful, this motivated the firms’ owners to
start thinking about exporting as a business option. It was at this stage that they
would carry out basic market research. However, the research in most cases did not
go beyond an internet search for population size, location and some economic and
demographic data. There was no critical engagement of professional management
thinking nor in-depth strategic planning involved before firms entered new markets.
Developing competitive strategies based on thorough research and direction from
professional management strategists and consultants is not deemed critical for
success in export markets by owners in these small firms. Because they interpret their
present customer base as being secure, exporting only takes place when there is an
unsolicited order. These orders, firm owners contend, provide a strong source of
revenue and therefore there is no need to expand beyond the ‘secure’ customer base.
The response from one toy manufacturer sums up this general sentiment:

Well, I export whenever my customers send for an order. I met my customers

while I was working on Wall Street and they have consistently bought my
product. Actually, they are the ones that motivated me to get into this business.
I usually make toys and bring it to them as gifts.

Another owner stated unequivocally that: ‘‘If our customers stop buying from us,
then we will have to stop selling in the overseas market because the cost of seeking
new business would definitely make us uncompetitive’’.
Loyalty seems to be the major driving force that allows these firms to survive in
the export market. The majority of owners state that they have a good relationship
with their customers and as such are in ‘no hurry’ to seek new business in export
markets. Interestingly these firms do not pursue serious efforts to market their
products in the export market in order to attract new business. New business is
derived mainly from meeting customers at trade fairs, from social networks (school
reunions or family ties), or from enquiries (internet or by word of mouth) from other
customers. In some cases managers see going to trade fairs as beneficial not only in
the short run but also for the future. This is captured in the words of one owner/
manager: ‘‘Going to a trade fair may not bring new business immediately, but it will
sow the seeds for future business with foreign customers’’.

Extent of marketing. The majority of firms sell their products through foreign
distributors rather than developing their own distribution channels. Foreign
distributors in most cases initiate the export order. They contact the firm and
request to sell their products in the export market. Again, because of the perception
 Competitiveness of Small Enterprises 357

of higher return from foreign sales, these owners willingly accept distributors’ offers
in most cases without going through professional negotiation channels. This leaves
the distributors with tremendous power over the marketing and sale of the product.
However, the owners in these firms seem not to be perturbed by this once they
receive payments for their products.

Extent of price competition. Contrary to what the literature posits, these firms do not
compete on low price. Instead, they charge a premium price for their products in the
export markets. This occurs in most cases because they operate in niches where there
is a heavy Jamaican presence. These high prices are also a reflection of the owners’/
managers’ perceptions about product quality and their relationship with customers.
What was evident from the cases is that the high price obtained was not a result of
product differentiation or higher quality. It was merely based on loyalty.
Interestingly most of these firms do not have quality control beyond the minimum
required to enter international markets. They do not carry out research and
development to improve their products, nor do they have external agencies that do
the job for them. Any improvement in products is initiated by feedback from
customers and not through their own initiatives. This lack of innovativeness is
manifested in the fact that a large number of these enterprises still produce the same
product that they started their businesses with over two decades ago. It is important
to note that very few adjustments are made to the products before selling them in the
export market, especially those that are sold to other Caricom countries. Firms will
generally change packaging, labelling, and sometimes size of containers in order to
meet international market standards. This standardization is deemed necessary
because of the cost of adaptation.

Sophistication of strategies. Survival in the international business environment for

firms from our sample appears to rely heavily on the goodwill of their customers and
distributors rather than on any proactive strategies developed using professional
management and strategic thinking. In an increasingly liberalized trading environ-
ment, where the competitiveness of the enterprise is of greatest importance, this
approach to international business involvement raises the question: can these small
Jamaican enterprises remain viable in an increasingly liberalized trading environ-
ment without preferential treatment? Clearly, if these firms remain at this basic stage
(importer pull) of their export-market development, their future prospects appear
untenable. They will be held hostage to the activities of foreign buyers. If these
buyers decide to move operations, they will just have to wait for the next order that
comes along or recede from the export market. To avert this fickle export capacity,
firms will have to move to take greater control over the export-marketing mix of
price, place, promotion, production. This will ensure more sophisticated strategies,
which will lead to firms improving their level of competitiveness. An appraisal of the
strategies used by these Jamaican enterprises will reveal whether or not they can
remain viable in this highly competitive trading environment.
In an increasingly competitive market place the ability to gain economies of scale
in production becomes an important tool. Having gained economies of scale in
production, firms will be able to lower their cost structure and sell outputs at lower
prices. Therefore, in the international market place where most customers are price
358 D. A. Williams

sensitive, they will buy the cheaper product. This will result in small firms which sell
similar products at a higher price loosing customers; these will eventually have to
retreat from the export market. This was evident, for example, in one case in this
study. One firm stated that thanks to the influx of cheaper products from China, it
had lost one of its customers in the Caribbean market. Because these firms are in
sectors such as agriculture and manufacturing that generally require economies of
scale to compete, they will have to find ways of differentiating their products if they
are to remain viable in this highly competitive market place. Size precludes them
from competing on price because of the inability to generate economies of scale in
production. Clearly, not having a differentiated product but having a high price in
the export market is an unsustainable strategy. Further, this speaks to the
production challenges that these firms face in designing and developing products
for the export market.
Another important element of the firm’s strategy is the relationship with foreign
distributors. Because these firms rely heavily on foreign distributors to sell their
products abroad, this reduces their bargaining power in the negotiation process. It
therefore puts them at very high risk. Giving ultimate power to distributors to sell
their products takes away their control over marketing, quality and distribution.
This can result in loss of control over where and how the products are distributed,
loss of profit and also loss of opportunity to develop a competitive advantage in
marketing. It may also result in loss of reputation, an important asset in an
increasingly competitive trading environment. Where price competition is not
possible, the reliance on reputation as a differentiator is very important. Therefore,
having ultimate control over where, how and when the product is distributed is of
critical importance in a firm’s quest for gaining international competitiveness.
Jamaican small firms’ dependence on the loyalty of foreign buyers as the major
tool for surviving in the international market is untenable in an increasingly
liberalized trading environment. There is nothing sophisticated about this strategy.
In the language of competitive strategy, there is nothing rare, imperfectly imitable or
non-substitutable about loyalty. Resource-based theorists argue that, for a strategy
to provide sustained competitive advantage, it has to possess the above attributes
(Barney, 1991). With these attributes lacking from the strategies pursued by
Jamaican small firms, it is clear that they cannot maintain a sustained competitive
advantage. Indeed, there will have to be some level of sophistication in their export-
marketing strategies if these firms are to remain viable internationally. There will
have to be a strong emphasis on producing differentiated products with which the
large Fordist-type MNCs cannot compete. This is the only way that these small firms
will be able to sustain the high price they currently charge for their products.
Importantly, to become more sophisticated in their operations, these firms will have
to pay serious attention to marketing and branding to improve international
competitiveness. This will come when there is greater control over the export-
marketing mix (Wortzel and Wortzel, 1981).
To develop sophisticated export-marketing strategies, firms will have to rely on
strong professional management, do rigorous marketing of products, have highly
trained staff to both produce and sell their products and also sell to an array of both
international and regional markets. From looking at the strategies used by the firms
in our sample, a lot of these elements are missing from the strategy development
 Competitiveness of Small Enterprises 359

process. One clear sign is their haphazard approach to market research. There was
no reliance on professional strategists to help in designing methods for competing
internationally, no serious marketing of products abroad, and most of the sales are
with diaspora markets rather than in mainstream markets, with a heavy reliance on
foreign distribution channels rather than locally owned channels. This makes the
strategy for expanding in export markets quite fragile.

Conclusions and Implications of the Findings

Jamaica’s future economic survival will no doubt rest on the competitiveness of the
enterprises which operate there. It is strongly believed that an economy cannot be
successful unless the companies (whether domestic or foreign subsidiaries) operating
there are competitive. For the companies to be competitive, however, there has to be
a high-quality microeconomic business environment and sophisticated operations
and strategies at the firm level. Further, export competitiveness requires an accurate
assessment of buyers’ needs and the ability to produce products that can meet these
needs and also deliver them in the correct quantities and on time (Wint, 1995). If this
is not achieved, the future export prospects of the country and the firm will be very
fickle. Indeed, to achieve export competitiveness, developing country firms will have
to move their export development from a merely importer pull stage to more
advanced stages (Wortzel and Wortzel, 1981). This will give them greater control
over the management of the export-marketing mix, thus allowing them to develop
more sustainable export-marketing strategies. This, however, will require a
considerable amount of financing. The availability of finance in the Jamaican
environment will thus probably pose serious challenges to the sophistication of the
strategies pursed by these firms to gain export competitiveness.
This research has made an attempt to analyse the sophistication of the operations
and strategies of small enterprises in Jamaica in order to highlight some of the
challenges that will confront Jamaica in the global market place and also to
determine whether the current strategies will ensure the future survival of these
enterprises in an increasingly liberalized trading system. The aim here is not to
extrapolate the findings for the competitiveness of the Jamaican economy as a whole.
Instead, the research hopes to provide insights into sophisticated firm-level strategies
that can improve enterprise export competitiveness. By adopting these strategies
more Jamaican enterprises will be able to improve their productivity and therefore
improve the overall competitiveness of the Jamaican economy. Both the current
microeconomic business environment in Jamaica and the sophistication of strategies
at the enterprise level have been critically appraised.
Jamaica can be considered to be at the factor-driven stage of its national
competitive development (Porter, 1990). The dominant sources of competitive
advantage and exports are natural resources, manufacture of simple products and, in
some cases, low-cost labour. Firms from this economy therefore are more prone to
compete on price in order to gain international competitiveness. Price competition
will require economies of scale in production. Jamaica’s small size limits the ability
of firms to gain economies of scale in production. This means that price competition
is not sustainable in an increasingly liberalized trading environment. The entry of
larger rivals that can easily gain economies of scale will make price competition quite
360 D. A. Williams

vulnerable. Moreover, because the dominant exports are in commodities, the overall
economy is highly sensitive to changes in business cycles and exchange rate
fluctuations. This means that, for companies to improve their productivity and
eventually improve the competitiveness of the Jamaican economy, they will have to
pursue more sophisticated strategies than price competition and dependence on
consumer loyalty. The evidence from this research shows that firms are charging a
premium price for their goods in the export market but that there is no sustainable
basis for this. There is no serious differentiation of products, product quality is not
always high and the aesthetic appeal is not always outstanding. Therefore, this
premium price in the long run will not be sustainable.
Having recognized the fickleness of the factor-driven stage of national competitive
development, policy makers and businesses alike seem to be charting a new course to
move to an investment-driven stage of national competitive development. There is
heavy investment in creating efficient infrastructure at the major sea- and airports
and also in the building of highways to reduce transportation and ultimately
production costs. Further, there is a greater effort to create a business friendly
environment through the enactment of laws that encourage investments, as well as
the upgrading of intellectual property rights. There is also strong investment in
schools to improve the quality of factor condition and to create more sophisticated
and demanding consumers. The establishment of a regulatory body to oversee the
non-bank financial sector is a forward-looking step in trying to create a more stable
financial sector and improve access to the capital which is so vital for productivity,
and to ensure greater control of the export-marketing mix. The opening up of the
Jamaican economy to encourage more investment and reduce the level of
government controls on investments and production is a manifestation of the
creation of a business-friendly environment. Overall the enabling environment for
doing business in Jamaica is improving, although there is still a long way to go. A
troubling sign, however, is that firms seem not to be taking advantage of this
improved business environment. When we analysed their strategies for international
competition, it was evident that a lot of them still had not grasped the reality of the
increasingly global trading environment.
The dominant factor that firms from our sample use to compete internationally is
the loyalty of foreign buyers. This is where they depend on buyers or distributors to
seek out and buy their products rather than on any serious efforts to market
products abroad. These firms do not use professional management strategists to help
them build generic strategies for competing abroad. There is no serious effort at
product differentiation, improving quality, aesthetic appeal of the products or
seeking the most efficient distribution channels for selling abroad. Moreover, most of
these firms do not sell outside the diaspora markets in the countries in which they do
business. There is no serious effort to break into mainstream markets. The general
conclusion one could draw is that the strategies pursued by these enterprises are
highly unsophisticated and are not sustainable in an increasingly liberalized trading
environment.
The majority of Jamaica’s exports go to the USA and the UK (Harris, 1997). The
diaspora and ethnic markets in these economies are small compared with the
mainstream market. Thus, if these firms are to survive in this post-preferential trade
era, they will have to start thinking about entering mainstream markets. This will
 Competitiveness of Small Enterprises 361

require a new approach to operation, strategy development and access to resources.

Jamaican enterprises will have to start expanding their efforts at marketing overseas;
they will have to start using more professional management strategists to help them
design effective and sophisticated competitive strategies. There will also need to be
greater efforts at staff training so that they can get the best quality human resources,
which is the key to improving productivity and competitiveness in the firm. Moving
to more advanced stages of their export development will be critical, as this will give
them greater control over elements of the export marketing mix.
It may be argued that, because these firms are small, they may not have the
resources to develop sophisticated operations and strategies. This may be true:
however, in an increasingly liberalized trading environment the market will not be
hospitable to this limitation. National governments will have to play a role in helping
firms to overcome this resource constraint. Indeed, the success of the economy that
they operate in will depend on the success of the firms that operate there. National
governments will thus have to improve the factor conditions so that firms can have
access to the highest quality human, capital, technological and physical resources.
Besides access, firms will also need to acquire resources at a competitive cost. It
therefore means that macroeconomic, social and political stability will have to be a
priority of national governments. These factors do affect the cost of operation. For
example, an unstable macro environment will lead to higher cost of capital, which
will affect the productivity of firms and their ability to compete abroad.
In summary, this research has shown that the present strategies used by small
enterprises in Jamaica to compete in the global marketplace are unsophisticated and
unsustainable. Export-marketing strategy is heavily reliant on relationships with
foreign buyers, a most fickle manner in which to expand exports abroad. If Jamaica
is to ensure its economic survival beyond the post-preferential trade era, enterprises
in the economy will have to develop more sophisticated operations and strategies.
This study represents a small sample of firms in the economy. However, if the
findings can be generalized, the future survival of the Jamaican economy is not
guaranteed. What this study has done is to show that remaining at the importer pull
stage of export development makes firms and the country within which they operate
very vulnerable.

Note
1. For a comprehensive discussion on trade liberalization in Jamaica see King (2001) and Davies and
Witter (1989). These discussions will take the reader through the various stages of liberalization of the
Jamaican economy. Our discussion in this paper focuses on the nature of the economy today.

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