Distribution Channels and Internationalization in a Developing-country Clothing Industry

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Journal of Research in Marketing and EntrepreneurshipDistribution channels and internationalization in a developing-country clothing

industryFlorence Olu Ogunrin Anthony U Inegbenebor

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To cite this document:Florence Olu Ogunrin Anthony U Inegbenebor , (2015),"Distribution channels and internationalizationin a developing-country clothing industry", Journal of Research in Marketing and Entrepreneurship,Vol. 17 Iss 2 pp. 130 - 148Permanent link to this document:http://dx.doi.org/10.1108/JRME-03-2014-0006

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Distribution channels and

internationalization in adeveloping-country clothingindustry

Florence Olu Ogunrin Department of Business Administration, Faculty of Management Sciences,

University of Benin, Benin City, Nigeria, and

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 Nigeriansample of apparel producers and investigate the association between the channels in use and thesample’s export involvement. In this era of sophisticated computer- and internet-mediated marketingpractices, the larger proportion of entrepreneurs in developing economies still deploy largely informalmarketing 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 from111 apparel entrepreneurs.

Findings – Most of the respondents were domestic market-focused haute couture producers orlow-volume producers of ready-to-wear (r-t-w) clothing who supply institutions or boutiques, usingdirect channels. Only a few export, mainly through ethnic-commercial networks involvingoverseas-based family/friends.

Practical implications – For now, current distribution channels seem adequate for the personal andbusiness goalsof these entrepreneurs. However, large-volume clothing exportingthrough formal globaldistribution channels is what drives industrialization and development. These apparel entrepreneurstherefore require institutional assistance to link up with formal global marketing channels. It is onlythen that theindustry would serve similar development roles as witnessedin other emerging economieswhich have climbed the development ladder through export of labour-intensive manufactures like

clothing.Originality/value – The study conrmed earlier observations about apparel exporting in Nigeria,such as prevalent use of informal channels, andalso draws attention to less-known details, includingtheexistence of edgling local trade intermediaries, “disappointed exporters” and an emerging group (yetminiscule) of exporters who utilize more formalized channels.

Keywords Nigeria, Apparel exporting, Distribution channels and markets,Exporting-led development, Internationalisation process, Trade intermediaries

Paper type Research paper

The authors are sincerely grateful to the editor and two anonymous reviewers for their extremelyhelpful comments on an earlier draft of this paper.

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/1471-5201.htm

JRME17,2

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Received28 March 2014Revised 25 September 2014Accepted 29 September2014

Journal of Research in Marketingand EntrepreneurshipVol. 17 No. 2, 2015pp. 130-148© Emerald GroupPublishing Limited1471-5201DOI 10.1108/JRME-03-2014-0006


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IntroductionIn this era of globalization, enterprises and, indeed, economies which would thrive mustbe active participants in the globalization process ( Thoburn, 2000; Burns, 2011 ). Out of

all the avenues available to participating rms, namely, exporting, direct foreigninvestments, joint ventures or acquisitions, exporting is the most suited to the needs of resource-constrained smaller rms ( Mittelstaedt et al., 2003; Pett and Wolff, 2003;Rasheed, 2005 ). Exporting is further simplied for the smaller rm by availability of opportunities to export through inter-rm cooperative relations with larger rms( Dhanaraj and Beamish, 2003 ). One such inter-rm cooperative arrangement that isparticularly relevant for clothing rms in developing countries is the global commoditychain (GCC), also referred to as the global value chain (GVC) for clothing. Within theGCC for clothing, an expansive array of low-wage developing countries supplygarments to developed-country retailers ( Delahanty, 1999; Geref and Memedovic,2003 ).

Asian enterprises were the earliest participants in the GVC for clothing ( Geref,1999; Geref and Memedovic, 2003 ). To qualify for involvement in GVCs, rms mustpossess requisite rm-level competencies. Previous research indeed indicates thatenterprise performance in general and export performance, in particular, isdetermined by a mix of endogenous and exogenous factors ( Westhead et al., 2001;Cooney, 2012 ). This study considered a set of endogenous (rm-level) variables,specically, the distribution channels in use, as possible determinants of clothing-exporting performance, in an attempt to respond to the observed need formore empirical studies that detail the strategies used by enterprises in developingcountries in participating in global trade networks ( Geref, 1999; Geref andMemedovic, 2003; Mangieri, 2004 ).

Although an extensive literature exists on Asian apparel industries, this thins outwhen it comes to African clothing enterprises. In the case of Nigeria, the most readilyavailable information are broad-based ofcial surveys of small and medium enterprises(SMEs) (see for instance, Raw Materials Research and Development Council [RMRDC],2003 ); Denzer’s (1995) seminal work on the evolution of tailoring in Nigeria, which wasfollowed by a 2003 study on up-ward shift in tailors’ status to that of elitist fashiondesigners, both conducted from a social history perspective; Forrest’s (1994) timelesstext which featured business and biographical proles of the larger garmententrepreneurs in Aba town in south-Eastern Nigeria; and Meagher’s (2006) study of informal networks within Aba’s garment (and shoe-making) clusters.

The present study therefore sought to extend existing clothing scholarship byexamining two research questions: how well are garment enterprises in Nigeriaperforming in exporting clothes and is the export performance of these enterprises afunction of the distribution channels in use? The study was conducted within the thirdof four perspectives of marketing/entrepreneurship research interface identied byHansen and Eggers (2010), in that we examined marketing issues (distribution channels)within an entrepreneurship framework (SME internationalization). Beingindustry-specic, the study hopefully should offer insights towards improving theperformance of the identied industry along the parameters investigated. Clothing asused in this study refers to coverings for the torso and limbs and is interchanged withclothes, garments and apparel ( Horn, 1975; Kaiser, 1997 ).

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Distributionchannels


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Review of the literatureClothing scholarshipAn extensive literature exists on the clothing industry, written from various levels of

analysis. Many of these studies, such as those commissioned by internationaldevelopment institutions (IDIs) like the World Bank, take a global or regional look athow nations are integrated in producing and trading in clothing, within global clothingvalue chains. Other studies have a national focus, describing the apparel sector inparticular economies. Examples include studies of the Mauritian ( Thakoor, 2003 ) andKenyan ( Mangieri, 2004 ) clothing sub-sectors. Clothing studies also differ in their frameof reference, being conducted by innumerable disciplines because of the inherentlyall-encompassing nature of clothes. The evolution of garment-making began with homesewing, then custom tailoring and, nally, factory production of ready-to-wear (r-t-w)clothing, rst for local markets then for export. In contemporary times, almost allcountries export clothing to varying degrees ( Horn, 1975; Kaiser, 1997 ).

Importance of clothing exportsEmpirical evidence from the newly industrializing Asian economies indicates thatenterprises and, indeed, economies which would thrive in the present globalized worldeconomy are those that are internationalizing operations ( Thoburn, 2000; Burns, 2011 ).Internationalization describes the geographic spread of economic activities acrossnational borders ( Geref, 1999; Geref and Memedovic, 2003 ). More importantly, of allthe avenues available for internationalizing operations, exporting is the most suited tothe needs of resource-poor small rms ( De Chiara and Minguzzi, 2002; Mittelstaedt et al.,2003; Pett and Wolff, 2003; Rasheed, 2005 ), which predominate the business sector worldwide ( Hansen and Eggers, 2010 ).

Exporting of clothing in particular is regarded as a “kick-starter” of industrializationand development in emerging economies, because clothing, alongside commodities likeshoes and toys, are the earliest exportable manufactures for which these countriesacquire industrial capabilities ( Biggs et al., 1994b; Delahanty, 1999; Barber et al., 2004;Ndishishi, 2005; Rahman, 2011 ).

This notion of the “kick-starter” potential of apparel exporting has beenconceptualized in the GVC hypothesis which posits that national economic developmentthrough the pathway of exports-led industrialization requires participating in GVCs byworking with overseas lead rms as apparel suppliers ( Geref, 1999; Geref andMemedovic, 2003 ). In the process, supplier-rms gain fast-tracked indirect access tointernational markets at lower costs than they would if they attempted market entry ontheir own ( Verhees and Meulenberg, 2004; Směliková, 2007 ). In the process also, supplierrms achieve industrial upgrading. In the context of the GVC for clothing, “lead rms”are apparel designers, retailers, branded manufacturers and discount chains andspecialty stores in developed economies ( Geref, 1999; Geref and Memedovic, 2003 ).Through this export channel, clothing exports have grown to high percentages of totalexports in many developing economies such as Cambodia – 82 per cent, Lesotho – 82 percent and Mauritius – 54 per cent ( Kamau, 2005 ). Indeed, the question has been posed: if a developing economy cannot competitively export clothing, one of the mostlabour-intensive products, what can that economy expect to export ( Murray, 1995, ascited in Delahanty, 1999, p. 20)?

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Theories of internationalizationInternationalization activities of SMEs have been examined from basically two researchperspectives: the export development process itself and determinants of export success

( Mittelstaedt et al., 2003 ). To explain the export development process, several theoreticalmodels have been proposed, and they include Product Life Cycle Model by Vernon(1966), Uppsala Model or Stage Theory by Johanson and Vahlne (1977) andInnovation-related Internationalization Model (I Model), which is an alternative stagemodel proposed by Bilkey and Tesar (1977) and Cavusgil (1980). Dicken (1998) alsoviewed internationalization as a sequential process, as did Leonidou and Katsikeas(1996). Other internationalization models include Monopolistic Advantage Theory byHymer (1976), Oligopolistic Theory or Oligopolistic Reaction Theory by Knickerbocker(1973), Network Theory by Thorelli (1986), Internationalization Theory, TransactionCost Theory, the Eclectic Theory of International Production and Strategic ChoiceTheory ( Gankema et al.,2000; Westhead et al., 2001; Crick, 2002; Prater and Ghosh, 2005;

Burns, 2011 ).Most internationalization theories are more applicable to larger rms, except for

stage theories which are applicable to SMEs ( Gankema et al., 2000 ). Stage theoriespropose an incremental process of internationalization from the non-exporting, tosuccessful exporting stage, whereby rms gradually expand international activities, asthey gain experience in the international arena ( Gankema et al., 2000; Westhead et al.,2001; Prater and Ghosh, 2005 ). For example, Cavusgil’s (1980) stage theory, as cited inGankema etal. (2000, p. 17), species ve stages comprising a domestic marketing stage,a pre-export stage, an experimental involvement stage, an active involvement stage anda 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 foroverlooking the possibility that rms may skip stages in situations where they are ledby experienced managers ( Gankema et al., 2000 ). Even then, this criticism is attenuatedby the clause that while longitudinal data often fail to establish a linearexport-development process, cross-sectional data tend to conrm that rms do fall intodifferent stages ( Burns, 2011 ). Perhaps for rms which skip stages because of thepresence of experienced managers if the earlier careers of these managers are reckonedas part of the export development process, an incremental process might beapproximated.

Stage theories reect the way enterprises learn by doing ( Burns, 2011 ) and are

therefore compatible with the GVC hypothesis, which conceptualizes a production andexporting hierarchy specically for the garment industry. Within this hierarchy, rmscommence exporting serving as contract suppliers to overseas lead rms, withknowledge of only the production aspects. Overtime, they acquire design and marketingskills in addition to production skills and, ultimately, progress to producing ownbrand-name apparel. This participation gradually exposes them to international bestpractices, improves their production capabilities and promotes them from one rung of the global production and supply hierarchy to the next higher rungs ( Geref, 1999;Geref and Memedovic, 2003 ).

Besides examining the export development process, internationalization studies alsoinvestigate export success determinants, and hundreds of determinants have been

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identied ( Dhanaraj and Beamish, 2003 ). In this study, distribution channels are thedeterminants to be examined, because the major dilemma for nascent clothing exportersin developing economies is how to link up with lead rms within GVCs.

Distribution channels or place: an element of the marketing mixGaining a foothold in the global apparel industry ( Textile and Garment Industry inVietnam [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 andgarments 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. Themarketing mix model was conceptualized in 1960 by McCarthy to denote those actionsand tactics that an enterprise deploys to stimulate demand ( McCarthy, 1960, cited inNeedham, 1996; Kotler et al., 2009 ). In contemporary times, however, writers have addedseveral other Ps, such as positioning and people, to address the peculiarities of servicesand 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 makinggoods or services available for use, or making a product available at a place which theconsumer can conveniently access ( Needham, 1996 ). It can also be viewed as the specicplace 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 pathsthrough 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 anduser, or it may involve layers of trade intermediaries ( WebFinance, Inc., 2014 ). Thenature of distribution evolves, as nations progress from rural-agrarian to industrializedand service economies ( Mentzer et al., 1989 ). In developing economies, distributionchannels tend to be more direct, shorter or simpler ( Encyclopaedia Britannica, Inc.,2014 ).

Issues related to distribution channels are very important in rms’ exporting efforts.In this regards, intending exporters usually complain of not having any contact thatcould link them to foreign markets ( Carrier, 1999; Westhead et al., 2001 ). With regards to

clothing exporting in particular, the distribution channels available to nascent Africanapparel exporters involve supplying industrialized country retailers, large volumes of mass-produced mainstream (standard or basic) garments or of Afro-centric garmentsfor the benet of the African market segment in these countries. Another distributionchannel involves “suitcase importers and exporters”, that is individuals who combinevacationing with business ( Biggs et al., 1994a, 1994b ).

In the Nigerian experience, ofcial surveys describe the garment sub-sector aslacking well-dened marketing channels, with retail trade (possibly bespokeproduction) 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 signicant albeit informal

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garment exporting, involving in the main apparel rms in Lagos and Aba. With regardsto Lagos – a city in southwestern Nigeria, existing studies describe how local garmententrepreneurs working from small factories link up with relations who own boutiques in

overseas countries and in this manner informally export high-fashion garments thatblend African fabrics with European clothing styling ( Biggs et al., 1994b; Denzer, 2003 ).Aba on its part is acknowledged for signicant 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-madegarments is still undertaken largely through wide-ranging informal Igbo commercialDiaspora. Distribution via the GVC is insignicant ( Ogunrin, 2013 ).

This study therefore set out to verify the distribution channels used by studyparticipants in exporting clothing and to test the proposition that those distributionchannels will be related to the rms’ export performance.

MethodologyThe target population for this study comprised apparel enterprises of all sizes thatoperate in Nigeria, as literature evidence suggests that even ventures with only oneworker may export indirectly by contracting with bigger rms ( De Chiara andMinguzzi, 2002; Hutchison, 2004; Scarborough, 2013 ). To ensure manageable samplesize, however, we drew participants from Aba, Benin and Lagos – three southernNigerian cities that host well-known clothing enterprises ( Forrest, 1994; Denzer, 1995,2003; Meagher, 2006 ). Due to non-availability of reliable ofcial statistics on Nigerianprivate enterprises ( Forrest, 1994; RMRDC, 2003 ), the sample was selected usingnon-probability purposive and snowballing sampling techniques. Purposive samplingdescribes 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 rms. Due to unavailability of the needed lists, weresorted to the pragmatic strategy of scouring major streets and markets, in low-,middle- and high-income localities within the three cities, in search of garmententerprises. Each entrepreneur who consented to participate in the study was imploredto direct us to their counterparts who export clothing, in line with snowballing samplingtechnique ( Babbie, 2001 ). Enterprises which were mentioned in earlier studies werepurposely 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 statisticaltechniques, we concluded that we had an adequate sample.

Measurement of variablesA structured interview schedule was used in collecting necessary data. Backgrounddata were collected in regards to the entrepreneurs as well as their enterprises. Thestudy’s dependent variable, that is export performance, was operationalized as EI ( DeChiara and Minguzzi, 2002; Dhanaraj and Beamish, 2003 ). Respondents indicated theirannual export sales by choosing one of seven alternatives that ranged from “not yetexporting” to “above 500,000”. Respondents likewise indicated their monthly total salesrevenues by selecting one of ve interval gures that ranged from “less than 20,000” to

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“above 200,000”. For ease of analysis, naira equivalent was sought, as several foreigncurrencies were involved. Currently, US $1 exchanges for 164.46. The gures reportedwere transformed into yearly sales by multiplying with a factor of 12. On the overall,

sales gures were under-stated in view of entrepreneurs’ well-known reluctance indisclosing nancial information ( Dhanaraj and Beamish, 2003; Pett and Wolff, 2003 ),due to fear of taxation or mandatory purchase by the state, of exporting-generatedforeign currencies ( TGIV, 1998 ).

Respondents also rated regularity of use of 13 distribution channels, that is thestudy’s independent variables (“regularly” 3, “sometimes” 2and“notyet” 1). The13 ranged from the shortest and most direct to the farthest channel, and fromdomestic-market to external-market channels, as we lacked prior knowledge of thesample’s exporting behaviour.

Methods of statistical analysis

To evaluate the relationship between export performance and distribution channels, aseries of quantitative analyses was undertaken, starting with exploratory factoranalysis (EFA), which was used in identifying latent trends within the distributionchannels. An orthogonal rotation was carried out to ensure that each of the originaldistribution channels correlated highly with only one component. Multiple criteria thatentailed examining items within each factor against literature evidence, eigenvalues of 1 and the value of factor loadings, guided the selection of factors and variables undereach factor. More specically, Items with factor loadings 0.4 and above were retainedwithin the factor on which they loaded, while items that loaded on several factors withfactor loadings 0.4 and above were dropped from further analysis. For this reason,two distribution channels were dropped, leaving 11 on the nal 7 factors that emerged.

Following EFA, factor scores for each of the seven factors as computed and identied bythe computerized statistical package were regressed against EI, to establish anyexisting relationships ( De Vaus, 1993; Hair et al., 1995 ).

Data analyses and presentation Background variablesOut of the 111 study participants, the majority (81) founded their ventures when theywere between 20 and 30 years of age. They were mostly men (63), married (86) andNigerians (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 percent) lacked formal training. Educational qualication varied widely, in that 10 (9.0 percent) of the sample lacked formal education, 3 (2.7 per cent) were home-tutored, 40 (36.0per cent) possessed only primary education, 29 (26.1 per cent) completed secondaryeducation and 23 (20.7 per cent) and six (5.41 per cent) had tertiary and post-graduateeducation, respectively. In total, 29 of the enterprises were micro-, 78 were small-, 3medium- 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 UnitedNations Development Programme/Small and Medium Enterprises DevelopmentAgency of Nigeria ( UNDP/SMEDAN, 2007 ). This policy reckons a micro enterprise asemploying less than 10 workers, a small-scale enterprise as engaging 10-49 workers, a

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medium-sized enterprise as one that employs 50-199 and a large venture as oneemploying 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 (1.8per cent) produced signicantly large volumes; the rest produced very low volumes of clothing.

Dependent variableBorrowing from the EI values specied in Cavusgil’s stage model, 84 of the 111 rms(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 theexperimental stage (EI 0-9 per cent), 7 were at the active exporting stage (EI 10-39per cent) and only 1 was at the stage of committed exporting (EI 42 per cent).

Independent variables – distribution channelsTable I depicts relative use of the 13 distribution channels. These channels weregrouped by factor analysis into seven factors ( Table II ). The last two factors wereretained because the per cent of variance each accounted for was greater than 5 per centand their eigenvalues (0.948 and 0.848, respectively) were close to 1 per cent. Based on anexamination of the variables with higher loadings within each factor, the seven factors

Table I.Descriptive statistics:distribution channelsfor nished garments

Distribution channels

Frequency of responsesRegularly

(3) (%)Sometimes

(2) (%) Not yet (1) (%)

Making clothes for people in my neighbourhood 95 (85.6) 9 (8.1) 7 (6.3)Making clothes for senior government ofcialsand professionals 55 (49.5) 38 (34.2) 18 (16.2)Making clothes for celebrities 16 (14.4) 27 (24.3) 68 (61.3)Making brides’ and bridal wear 33 (29.7) 13 (11.7) 65 (58.6)Making uniforms for schools, companies,national contingents and so on 24 (21.6) 16 (14.4) 71 (64.0)Producing and selling r-t-w in personalboutique 23 (20.7) 8 (7.2) 80 (72.1)Producing and supplying r-t-w to otherboutiques in town 29 (26.1) 23 (20.7) 59 (53.2)Producing and supplying r-t-w to boutiques inother Nigerian towns 31 (27.9) 5 (4.5) 75 (67.6)Sending r-t-w Afro-centric garments

abroad through friends/relatives 32 (28.8) 22 (19.8) 57 (51.4)Supplying r-t-w to specic stores abroad 12 (10.8) 10 (9.0) 89 (80.2)

Supplying west African (ECOWAS)countries 4 (3.6) 1 (0.9) 106 (95.5)

Supplying African countries 4 (3.6) 4 (3.6) 103 (92.8)Supplying beyond Africa 9 (8.1) 10 (9.0) 92 (82.9)

Bold variables and values in table signify non-domestic (export-market) distribution channels andcorresponding frequenciesSource: Author’s eld work, 2012

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Table II.Distribution channelsof garments: varimaxrotated componentmatrix

I t e m

n u m b e r V a r i a b l e s

V a r i m a x r o t a t e d c o m p o n

e n t s

E x

t r a c t i o n

c o m m u n a l i t i e s

1

2

3

4

5

6

7

1 a

M a k i n g c l o t h e s f o r p e o p l e i n m y n e i g h b o u r h o o d

0 . 2

9 7

0

. 5 4 4

0 . 0

1 7

0 . 0

5 6

0

. 5 7 7

0 . 0

4 8

0 . 2

7 7

0 . 8

0 0

2

M a k i n g c l o t h e s f o r s e n i o r g

o v e r n m e n t o f c i a l s

a n d p r o f e s s i o n a l s

0 . 0

5 9

0 . 2

6 8

0 . 0

2 3

0 . 1

2 2

0

. 8 6 3

0 . 0

4 4

0 . 0

3 1

0 . 8

3 8

3

M a k i n g c l o t h e s f o r c e l e b r i t i e s

0 . 0

1 7

0 . 6

7 9

0 . 2

1 9

0 . 1

9 9

0 . 1

5 9

0 . 1

2 7

0 . 3

0 4

0 . 6

8 3

4 a

M a k i n g b r i d e s ’ / b r i d a l w e a r

0 . 1

1 3

0 . 2

4 8

0 . 0

0 8

0 . 6

7 5

0 . 2

2 8

0 . 4

4 9

0 . 1

0 3

0 . 7

9 3

5

M a k i n g u n i f o r m s f o r s c h o o l s , c o m p a n i e s , e t c .

0 . 0

0 9

0 . 0

3 5

0 . 0

0 6

0 . 0

4 4

0 . 0

0 6

0 . 9

0 6

0 . 1

4 2

0 . 8

4 4

6

P r o d u c i n g a n d s e l l i n g r t - w i n p e r s o n a l

b o u t i q u e

0 . 1

1 1

0 . 8

5 0

0 . 0

5 1

0 . 0

8 9

0 . 1

0 5

0 . 0

1 9

0 . 0

3 0

0 . 7

5 8

7

P r o d u c i n g a n d s u p p l y i n g r - t - w t o b o u t i q u e s i n

t o w n

0 . 0

2 8

0 . 0

7 8

0 . 9

0 8

0 . 0

7 6

0 . 0

2 5

0 . 0

7 1

0 . 1

0 2

0 . 8

5 3

8

P r o d u c i n g a n d s u p p l y i n g r - t - w t o b o u t i q u e s i n

o t h e r N i g e r i a n t o w n s

0 . 2

3 0

0 . 2

9 9

0 . 6

9 0

0 . 0

7 6

0 . 0

1 8

0 . 1

2 9

0 . 3

3 3

0 . 7

5 2

9

S e n d i n g r - t - w A f r o - c e n t r i c g a r m e n t s

a b r o a d t h r o u g h f r i e n d s / r e l a t i v e s

0 . 1

7 1

0 . 1

1 2

0 . 0

3 2

0 . 0

7 0

0 . 0

3 6

0 . 1

2 1

0 . 8

5 6

0 . 7

9 7

1 0

S u p p l y i n g r - t - w t o s p e c i c s t o r e s a b r o a d

0 . 2

4 7

0 . 0

8 8

0 . 0

4 8

0 . 8

1 7

0 . 0

2 5

0 . 2

2 3

0 . 1

8 3

0 . 8

2 2

1 1

S u p p l y i n g W e s t - A f r i c a n c o u n t r i e s

( E C O W A S )

0 . 7

9 6

0 . 1

0 3

0 . 1

8 1

0 . 1

7 2

0 . 1

1 4

0 . 2

2 5

0 . 0

7 0

0 . 7

7 5

1 2

S u p p l y i n g A f r i c a n c o u n

t r i e s

0 . 7

0 0

0 . 0

5 0

0 . 2

2 7

0 . 2

4 1

0 . 3

4 3

0 . 1

3 2

0 . 1

2 6

0 . 7

5 3

1 3

S u p p l y i n g b e y o n d A f r i c

a

0 . 7

4 8

0 . 0

3 7

0 . 1

7 8

0 . 1

8 9

0 . 1

1 2

0 . 1

8 8

0 . 2

3 0

0 . 7

3 0

E x t r a c t i o n s u m o f s q u a r e s o f c o m p o n e n t

l o a d i n g s ( e i g e n v a l u e s )

2 . 4

8 4

2 . 1

8 4

1 . 3

7 6

1 . 2

5 8

1 . 0

9 8

0 . 9

4 8

0 . 8

4 8

1 0 . 1

9 6

P e r c e n t o f v a r i a n c e

1 9 . 1

1 6 . 8

1 0 . 5

9

9 . 6

8

8 . 4

5

7 . 2

9

6 . 5

3

C u m u l a t i v e p e r c e n t o f v a r i a n c e

1 9 . 1

3 5 . 9

4 6 . 4

9

5 6 . 1

7

6 4 . 6

2

7 1 . 9

1

7 8 . 4

3

N o t e : a

T h e s e t w o i t e m s w e r e d r

o p p e d f r o m f u r t h e r a n a l y s i s b e c a u s e t h e y l o a d e d o n s e v e r a l f a c t o r s w i t h

f a c t o r l o a d i n g s

0 . 4 ; b o l d v a r i a b l e s i n t a b l e

s i g n i f y n o n - d o m e s t i c d i s t r i b u t i o n

c h a n n e l s .

B o l d v a l u e s i n d i c a t e f a c t o

r l o a d i n g s e q u a l o r a b o v e 0 . 4

S o u r c e : A u t h o r ’ s e l d w o r k ,

2 0 1

2

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were named opportunistic international channel, personal boutique channel, localboutique channel, overseas boutique channel, elitist upper-end channel, uniformedinstitutions channel and ethnic-commercial overseas channel ( Table III ). These seven

factors explained 78.43 per cent of the variance in the responses of the garmentproducers. The KMO for the data set was 0.601 and the Bartlett’s test of sphericityyielded a chi-square of 271.883 at p 0.001.

Table III.Factors for

distributionchannels: results of

principal componentanalysis with

varimax rotation

Factor title and items Factor loadings

Opportunistic international channel Supplying West-African countries (ECOWAS) 0.796Supplying beyond Africa 0.748Supplying African countries 0.700Eigenvalue 2.484Percentage variance 19.1

Personal boutique channel Producing and selling r- t-w in personal boutique 0.850Making clothes for celebrities 0.679Eigenvalue 2.184Percentage variance 16.8

Local boutique channel Producing and supplying r-t-w to boutiques in town 0.908Producing and supplying r-t-w to boutiques in otherNigerian towns

0.690

Eigenvalue 1.376

Percentage variance 10.59

Overseas boutique channel Supplying r-t-w to specic stores abroad 0.817Eigenvalue 1.258Percentage variance 9.68

Elitist upper-end channel Making clothes for senior government ofcials andprofessionals

0.863

Eigenvalue 1.098Percentage variance 8.45

Uniformed institutions channel Making uniforms for schools, companies, etc. 0.906Eigenvalue 0.948Percentage variance 7.29

Ethnic-commercial overseas channel Sending r-t-w Afro-centric garments abroadthrough friends/relatives 0.856Eigenvalue 0.848Percentage variance 6.53

Source: Author’s eld work, 2012

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Four of the seven factors (Factors 2, 3, 5 and 6) supplied the domestic market.Specically, 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-ownedboutiques, nationwide. The fth factor, namely, elitist upper-end channel, pertains tosale of high-end fashionable clothing to fashion-conscious elites. The sixth (uniformedinstitutions channel) refers to the supply of promotional T-shirts and uniforms of allsorts 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 issupplied wherever trading opportunities arise, in West African countries such as BeninRepublic, Togo, Liberia and Senegal; other African countries like Gabon, Congo, Cameroun,Libya and South Africa;and inFrance,Italy,Austria, Germany, the UKand USA.The fourthfactor, namely, overseas boutique channel, describes supply of apparel to specic overseas

boutiques, beyond Africa. The seventh factor, ethnic-commercial overseas channel, refers tosaleof clothing through friends/relatives in foreign countries. Therewere rms that suppliedboth 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 theseventh factor as the only signicant (positive) predictor of EI ( Table IV ).

Discussion of ndingsThendingthatthehighestEIofthesamplewas42percentconnotesthatalmost60percentof output are supplied to market segments within the local market. Further, only one rmexported this much. This performance level, as proxy for the entire industry, is low, more sowhen considered alongside the ndings that majority of the exporters were involved in

experimental exporting, where exporting is intermittent and marginal ( Cavusgil, 1980, ascited in Gankema et al., 2000 ). It seems then that clothing exporting is still under-developedwithin this sample and the industry as a whole. This observation is further buttressed byregression results which indicated that the much exporting that takes place is undertakenlargely through informal ethnic-commercial overseas-based social networks involvingfriends 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 theBlack HistoryMonth,which is celebratedevery 28th February,as previously noted by Biggset al. (1994b). A less popular festival similarly targeted for annual exports of Afro-centricwears was the Anambrarian Day, which is celebrated on 10th September by Nigerians of Anambra State origin resident in the USA.

Table IV.Result of regressionanalysis: factoranalysis-generateddistribution factorsagainst exportintensity

Models VariableStandardisedcoefcients B t value

pvalue

Partialcorrelations

1. Constant 0.739 0.461Factor

Factor Ethnic-commercial overseas channel 0.263 2.851 0.005* 0.263

Note: * p 0.01Source: Author’s eld work, 2012

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However, subsumed among users of the fourth channel (overseas boutique channel),which failed to predict EI, is a miniscule number of enterprises that supply clothingdirectly 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 ight attendants, among others. The company wasthe rst local garment rm to export apparel under the African Growth and OpportunityAct (AGOA), beginning in 2002. In sum, the sampled garment ventures appear to be 30to 40 years behind apparel industries in Asian economies and Mauritius. The sampleappears to be at the stage where the Bangladeshi industry was up to the early 1970s. Atthat time, Bangladeshi tailors made garments according to specications provided byindividual customers who also supplied the fabrics ( Siddiqi, 2005 ).

Role of formal institutions in transforming local tailors into global exportersThe question then is: what factors facilitated the transformation of local tailoring outts

in these other developing economies into participants in the GVC for clothing? Theliterature points to several facilitators, including international trade pacts, activities of quota-seeking foreign investors who relocated to or sub-contracted with rms inquota-surplus least-developed economies (LDCs) during the era of the multi-brearrangements (MFA), as well as deliberate government policies. Looking at the role of foreign investors for example, quota-seeking Indian investors were the catalyst in thecommencement of active apparel exporting in Nepal in the early 1980s ( Adhikari, 1997 ).Foreign investors contribute equipment, organisational and marketing skills, as well ascontacts with developed-country retail chains ( Thoburn, 2000 ).

Purposeful government incentive schemes that target the garment industryencouraged these types of foreign direct investments, as borne out by the experience of

Bangladesh, where the state accorded the industry high priority and instituted supportmeasures such as cash export incentives, export processing zone facilities, among others( Siddiqi, 2005 ). Apparel exporting was similarly spurred in Mauritius by the timelyconstruction of an export processing zone in 1970, which later became a hub for HongKong garment entrepreneurs ( Bräutigam, 1998; Thakoor, 2003 ). Another form of institutional assistance which facilitated foreign market entry for apparel enterpriseselsewhere is sponsorship to foreign trade fairs. These are exhibitions that help buyersnd new suppliers ( Biggs et al., 1994a, 1994b ).

However, virtually, all of these “facilitators”, especially industry-specicinstitutional support measures, are missing in the context of the present study. Forexample, 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 acounteracting investment promotion decree in 1995, which permits foreign investors toset up businesses in virtually any sector, with 100 per cent ownership ( World TradeOrganisation, 2005 ). Likewise, institutional ineptitude detracts from the usefulness of overseas trade fairs as promotional tools. Yearly, changes are made in the set of rmsthat are sponsored to these fairs, whereas what is needed is that a particular set of qualied apparel rms be sponsored to the same fairs several times until theysuccessfully build relationships with potential buyers through long-term learning( Biggs et al., 1994a; Jerome, 2005 ). Existing export-promoting schemes are also plaguedwith inadequate funding and inefciencies such that entrepreneurs are discouraged

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from even formally applying and are compelled to limit operations to levels whichpersonal 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 exportersGranted that there are gaps in formal institutional support for the internationalization of thesampledgarment ventures, private support systems or social capital could have substitutedfor the weak public institutions ( Biggs and Shah, 2006 ). Private support systems takedifferent forms such as formal co-operative relations among SMEs organized in businessassociations (BAs) or clusters ( Biggs and Shah, 2006 ), or informal social networks betweenentrepreneurs 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 rms? Elsewhere, BAssupport memberenterprises through standardization andbyorganizing conferences and educational programmes that broaden theknowledgeand skillsof members ( Denitions.uslegal.com, 2014; Wikipedia.org, 2014 ). Forinstance, theAmericanApparel Manufacturers Association is known for establishing voluntary quality standardsfor the industry’s products, with a view to avoiding legislative actions ( Horn, 1975 ).

Regrettably, there is no unifying, umbrella garment producers’ association in theNigerian context. The industry is heterogeneous in enterprise size, product and marketsupplied, being dominated by micro enterprises often described as fashion designers thatrender largely bespoke tailoring services ( RMRDC, 2003; UNDP/SMEDAN, 2007 ). The fewmedium-sized enterprises ( Forrest, 1994; Denzer, 1995, 2003 ), including the only garmentrm 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. Smallerapparel ventures join membership of the Fashion Designers’ Association of Nigeria(FADAN) and other break-away local tailors’ associations. In all, conict of interest,constant ssures, limited capabilities for organizing, suspicions on the part of membersthat trade associations only serve the political and economic interest of the organizerswith attendant low membership density, limit the ability of these formal producers’associations in facilitating growth and internationalization in ways in which similarassociations elsewhere have ( Hamalai, 1999; Biggs and Shah, 2006; Meagher, 2006 ).

These inadequacies of formal business associations force individual enterprises tocontinue to rely on informal personal networks to solve operational problems ( Hamalai,1999 ), as borne out by the present study. Regrettably, as invaluable as informal socialnetworks are in helping SMEs acquire crucial resources, including entry into foreignmarkets 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 commercialinformal networks, Aba apparel ventures have been unable to establish signicantsub-contracting links with the formal sector, or penetrate formal export markets( Meagher, 2006 ). As shown by Copp and Ivy, (2001), over-reliance on informal networkscould easily result in a lack of innovation, among other limitations.

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Incidental ndings: commercial customers and discouraged exportersIn the course of eld work, we learnt of the activities of local trade intermediaries whominterviewees referred to as “P.R.O”, contractors’, “commercial customers”, “middlemen”

or “designers”. These intermediaries usually supply the fabrics to be made up, and theyspecify the label to be attached. Through their operations, many Aba garmententerprises informally export clothing within Africa and beyond. Many of these PROsdeal in a single clothing item such as shirts for men and women and men’s trouser suits.

While trade intermediaries have facilitated the growth of the export garment sectorsof Nepal ( Adhikari, 1997 ), Fiji ( Cawthorne, 2000 ) and Sri Lanka ( Dent and Tyne, 2001 ),among others, regrettably, these “commercial customers” appear to be sole proprietors,not larger rms with the capability to link local producers with formal global apparelvalue chains, thereby conrming earlier research about the dearth of competentintermediaries within many African clothing sub-sectors ( Biggs et al., 1994a, 1994b ).With an experienced agent, indigenous beauty routines like henna body painting can

and do become international business ( Hassan, 1998 ).It was also observed during eld work, that a few respondents had attemptedexporting but abandoned it because of unofcial levies on the part of customs ofcials.Disappointed non-exporters were earlier described as entrepreneurs whoexported in thepast, later withdrew but plan to resume exporting in future ( Crick, 2002 ). One of theseentrepreneurs elected to focus on the domestic market, supplying own-label high-endchildren r-t-w through own boutique and other prestigious supermarkets nationwide,since this activity does not require export permits. This nding therefore conrmsprevious research that indeed entrepreneurs’ desire to avoid burdensome administrativeobligations is an impediment to the growth and internationalization of Africanindigenous enterprises ( Thoburn, 2000; UNDP/SMEDAN, 2007 ).

Conclusion and policy recommendationsThe present study has examined the relationship between exporting performance and thedistribution channels in use, in a Nigerian sample of apparel producers. We found that thelarger proportion of respondents was domestic market focused. Only a small sub-set exportand they do so largely through ethnic-commercial networks involving overseas-basedfamily and friends. However, a miniscule, yet-to-be-signicant number supply overseasbuyers through formal channels, lling orders placed by these buyers and even exportingunderthe provision of the AGOA trade pact. On the overall, it seems the internationalizationof the apparel industry in this study is behind that of comparable industries by about 40years, due to over-reliance on informal export channels under-girded by informal social

networks, within an environment devoid of effective industry-specic public and privateformal support systems. The study therefore conrmed prior research concerning thelimitations of informal social networks in integrating local rms with globalmarkets andtherelatedness of determinants of exporting success. The overall policy implication is that thestage of development of marketing and entrepreneurial activities in national contexts isconsistent with overall development, and that is why appropriate well-coordinated policiesmust be in place.

Deriving from the study’s ndings, needed policy interventions become self-evident.To start, these apparel entrepreneurs require unremitting trade promotion throughsponsorship to foreign trade fairs, where they will meet with foreign buyers. They willalso benet from interactions with better-developed industries and industry

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associations in Asia and Africa, to learn trade association organizing, so that formalbusiness 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 apparelchains. Although the sample was highly delimited, the insights obtained from the studyunderscore the usefulness of industry- and context-specic studies in understandinghow SME performance can be improved within particular contexts. Moreover, by usingquantitative techniques in conguring the channels deployed by the sampledenterprises in supplying global markets, the study enriches existing qualitativeinvestigations. 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 inNigeria. In the primary study, the impact of seven sets of rm-level and four sets of environmental determinants was examined. This paper presents ndings in respect of

one set of marketing determinants: distribution channels.

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About the authorsFlorence Olu Ogunrin is a Senior Lecturer in the Department of Business Administration, Facultyof Management Sciences at University of Benin, with research interests in small businessmanagement, entrepreneurship and general management. Florence Olu Ogunrin is thecorresponding author and can be contacted at: [email protected]

Anthony U. Inegbenebor is a Professor of Management at Benson Idahosa University, BeninCity, with research interests in entrepreneurship, small business management and generalmanagement.

For instructions on how to order reprints of this article, please visit our website:www.emeraldgrouppublishing.com/licensing/reprints.htmOr contact us for further details: [email protected]

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Distribution Channels and Internationalization in a Developing-country Clothing Industry

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