EXPORT BARRIERS TO THE CHINESE MARKET: INSIGHTS FROM BRITISH COLUMBIA FOREST PRODUCTS FIRMS by ZHENGZHE HE B.A., LIANGNING UNIVERSITY, 1993 THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS NATURAL RESOURCES & ENVIRONMENTAL STUDIES THE UNIVERSITY OF NORTHERN BRITISH COLUMBIA November 2009 © Zhengzhe He, 2009 1*1 Library and Archives Canada Bibliotheque et Archives Canada Published Heritage Branch Direction du Patrimoine de I'edition 395 Wellington Street OttawaONK1A0N4 Canada 395, rue Wellington Ottawa ON K1A 0N4 Canada Your file Votre reference ISBN: 978-0-494-60821 -0 Our file Notre reference ISBN: 978-0-494-60821-0 NOTICE: AVIS: The author has granted a nonexclusive license allowing Library and Archives Canada to reproduce, publish, archive, preserve, conserve, communicate to the public by telecommunication or on the Internet, loan, distribute and sell theses worldwide, for commercial or noncommercial purposes, in microform, paper, electronic and/or any other formats. L'auteur a accorde une licence non exclusive permettant a la Bibliotheque et Archives Canada de reproduire, publier, archiver, sauvegarder, conserver, transmettre au public par telecommunication ou par I'lntemet, preter, distribuer et vendre des theses partout dans le monde, a des fins commerciales ou autres, sur support microforme, papier, electronique et/ou autres formats. The author retains copyright ownership and moral rights in this thesis. Neither the thesis nor substantial extracts from it may be printed or otherwise reproduced without the author's permission. L'auteur conserve la propriete du droit d'auteur et des droits moraux qui protege cette these. Ni la these ni des extraits substantiels de celle-ci ne doivent etre imprimes ou autrement reproduits sans son autorisation. In compliance with the Canadian Privacy Act some supporting forms may have been removed from this thesis. Conformement a la loi canadienne sur la protection de la vie privee, quelques formulaires secondaires ont ete enleves de cette these. While these forms may be included in the document page count, their removal does not represent any loss of content from the thesis. Bien que ces formulaires aient inclus dans la pagination, il n'y aura aucun contenu manquant. 1+1 Canada ABSTRACT Canada's forest products firms have endeavored to develop the Chinese market as their alternative export destination. These needs became even urgent since the US economic recession in 2008. Reducing the export barriers that firms encountered will minimize their losses and enhance their export performance in the Chinese market. Through a questionnaire survey, thirty-four managers in British Columbia's forest products firms identified and evaluated the barriers that hindering their exporting to the Chinese market. The identified nine export obstacles include difficulties in finding business opportunities, skillful personnel and foreign representatives; differences in verbal, nonverbal language and socio-cultural traits, price competition and excessive transportation cost. The findings in this study also indicate that different parameters of firm size have different relationships with export barriers. In addition, different parameters of firm's export experience also show different relationships with export barriers. These findings will facilitate forest policy makers in British Columbia to formulate Chinese market export strategies, especially to target firms with different firm's size and export experience. 11 LIST OF CONTENTS ABSTRACT ii LIST OF CONTENTS iii LIST OF TABLES vi LIST OF FIGURES vii ACKNOWLEDGEMENT viii Chapter One Introduction 1 1.1 Introduction 1 1.2 Research Objectives 4 1.3 Research Questions and the Hypotheses 5 1.4 Thesis Outline 6 Chapter Two Background 7 2.1 China Plays an Important Role in Global Forest Products Market 7 2.2 Factors that Stimulate China's Import Demand 7 2.3 The Development of China's Forest Products Imports 10 2.4 Future Prospects of China's Timber Product Imports 13 2.5 Canada Exports Forest Products to China 16 2.6 British Columbia Exports Forest Products to China 19 Chapter Three Literature Review 23 3.1 Export Barriers 23 3.1.1 Internal Barriers 24 3.1.2 External Barriers 26 3.2 Export Barriers in Export Stages 27 3.3 Factors that Affect the Export Barriers 30 iii 3.3.1 Firm Size 30 3.3.2 Export Experience 31 3.3.3 Industry Type 33 3.3.4 Export Destination 34 3.4 Export Barriers Studies in Forest Industry Chapter Four 35 Methodology 37 4.1 Introduction 37 4.2 The Description of Study Area 37 4. 3 Sample 40 4. 4 Questionnaire Design 42 4. 5 Survey Methodology 43 4. 6 The Internal Validity of the Data 45 4. 7 Preliminary Tests of the Data 45 4.8 Data Analyses Methods 46 Chapter Five Results and Discussion 50 5. 1 Basic Information of the Respondent Firms 50 5.1.1 Organizational Characteristics 50 5.1.2 Globalization Level 52 5.1.3 Situation of Exporting to the Chinese Market 53 Table 5 shows the respondent firms in term of exporting goods to the Chinese market. 5 3 5.2 The Significant Export Barriers 56 5.2.1 Description 56 5.2.2 Discussion 58 5.3 The Relationships between Export Barriers and Firm Size and Export Experience 64 iv 5.3.1 Research Findings 64 5.3.2 Discussion 68 Chapter Six Conclusion and Recommendations 74 6.1 Summary and Conclusions 74 6.2 Contributions 74 6.3 Implications 75 6.4 Limitations and Future Research 76 6.5 Recommendations 78 REFERENCES 80 Appendix A. Survey Questionnaire 91 Appendix B. ANOVA Test for Non-responses Bias 99 Appendix C. T-test for EBs' perceptions in BC Costal and Interior regions 103 Appendix D.l Correlation test of firm size and export barriers 108 Appendix. D.2. Correlation test of export experience and export barriers Ill V LIST OF TABLES Table 1. The survey response in Coastal and Interior BC forest regions 46 Table 2 Recoding firm size and export experience variables to 1-5 value 48 Table 3. Firms' organizational characteristics 51 Table 4. The export situation of the respondents 53 Table 5. The firms' exporting to the Chinese market 54 Table 6. The frequency of the thirty-nine export barriers 56 Table 7. The relationships between export barriers and firm size 65 Table 8. The relationships between export barriers and export experience 67 vi LIST OF FIGURES Figure 1. China's major imported forest products (1997-2007 ) 12 Figure 2. China's imported wood-based panel (1997-2007) 13 Figure 3. Comparison of capita consumption of forest products between China and selected regions and World 15 Figure 4. The major forest products that Canada exported to China (1999-2008) 18 Figure 5. The major wood products that Canada exported to China (1999-2008) 19 Figure 6. Major forest products that BC exported to China (1998-2008) 21 Figure 7. The value-added wood products that BC exported to China ( 1999-2008) 22 Figure 8. The export barriers in a firm's initiative and operational export stages 28 Figure 9. Export Barriers 36 Figure 10. Map of British Columbia forest regions 40 Vll ACKNOWLEDGEMENT I would like to thank Dr. Christopher Opio for his encouragement, patience and guidance. Thank you to Dr. Jing Chen and Dr Baotai Wang for their help and insights. Thanks to Dr. Peter MacMillan for his suggestions. A special thank to Heath de la Giroday and Crystal McRae for their editions and attention to details. I would also like to thank my friends and family, in particular my mother for supporting and inspiring me to stick to my dreams. Vlll Chapter One Introduction 1.1 Introduction As the world's largest forest product exporter, every year Canada exports nearly 80% of its forest products to the United States (US). This heavy dependence on a single export market has raised widespread concerns regarding Canada's national economic security and stability. The softwood lumber dispute in 2001 further emphasized the needs to diversify Canada's wood product export markets. As the largest forest products producer and exporter among Canada's provinces, the forestry industry in British Columbia (BC) was severely affected in the softwood dispute in 2001. Moreover, BC is facing some critical challenges according to exporting forest products. The economic recession in the US market results in a decreased demand for BC wood products, the appreciation of the Canadian dollar hinders the exports, and the epidemic of mountain pine beetle further influences BC's timber product exports. Numerous mills have shut down, and thousands of workers in forest sector have lost their jobs under these circumstance. BC forest firms are eager to expand their exports to other overseas markets in order to compensate for losses in exports to the US market, As the world second largest importer and consumer of various forest products, China has successfully attracted attentions of Canadian governments, trade promotion associations, and forest product firms. Canada's federal government has implemented a series promotional strategies geared towards exporting forest products to China during the past seven years (Natural Resource Canada, 2007). Besides actively participating into the series of trade promotion activities that hosted by the federal government, BC provincial government has also funded its own market initiative programs in 2003, in order to formulate market promotion 1 policies and expand provincial forest product exports to the Chinese market. Under these efforts, the forest product exports from BC to China have grown significantly in past years. By 2007, China has become BC's second largest export destination for various forest products. However, the exports of Canadian forest products only account for 6% of China's total forest products import in 2007 (Statistics China, 2007). Many studies have been conducted to identify the export opportunities of Canadian wood products to the Chinese market in order to expand the exports. For example, Gaston and Mapleden (2003) studied the potential application of Canadian structural wood in the Chinese market, and Wahl (2004) evaluated opportunities of applying the BC lumber in China's re-manufacture industries. Similarly, Dickson Hall Associations (2006) investigated the potential market opportunities for BC's whitewood in China. These studies, though useful, only address the export opportunities of specific wood products in China. Ding (2007) even extended the typical range of research by investigating the attitudes of Chinese customers in regard to Canadian wood products. He found that high price, a lack of Canadian wood knowledge, different grading rules, and slow delivery were the main problems hindering the Chinese customers from purchasing and using BC forest products. However, so far, no study has ever measured the problems that Canadian forest firms perceive or encounter when they export timber products to the Chinese market. Exporting is one of the most important methods for a firm to conduct overseas markets operation; however, firms always encounter various problems during their export procedures. These problems include identifying markets and collecting the relative information of the intentioned market in firms' exporting initiative stage (Bell, 1997). Export problems also include barriers such as firms' unable to provide the proper products to the desired market or 2 hard to collect payment from overseas customers which usually occur during export operation stages (Leonidou, 2004). Researchers also found that firms with export activities would encounter various export hindrances during their export procedure. Firms which do not conduct export would also perceive certain export barriers, which impede their further export market exploration. Both the real and perceived export barriers (EBs) restrict firms' export intensions, weaken their financial gains, and delay their globalization progression. The EBs may even cause a company temporarily or permanently withdraw from the overseas markets (Welch & Wiedersheid-Paul, 1980). Leonidou (1995) defined the EBs as all those "attitudinal, structural, operational and other constraints that hinder the firm's ability to initiate, develop, or sustain international operations" (p. 31). Extant researches normally focus on identifying and weighing EBs in various nations and industries. The findings denoted that EBs identified in literature vary according to the geographic locations and industry sectors (Leonidou, 2004). These conceptual and empirical studies on EBs have identified approximately fifty EBs. By eliminating the geographic specific obstacles, thirty-nine barriers were found to be the relevant, meaningful and common that hindered firms from exporting (Leonidou, 2004). In the EBs literature, efforts also conducted at exploring factors that affect EBs perceived by firms' managers. Past studies found that firm's organizational characteristics and firms' globalization affect the managers' perceptions of EBs. Some existing research results indicated that larger firms perceived less EBs than those smaller ones (Da Silva & Da Rocha, 2001; Katsikeas & Morgan, 1994; Leonidou, 2000). Firms with more export experience also regard certain EBs less impeditive than firms with less or no export experience (Bell, 1997, Leonidou, 2000). These can be explained as larger firms have advantage at human, financial resources, 3 and production capacity than those smaller one (Baldauf, Cravens, & Wagner, 2000), which made them easily to overcome some EBs. Moreover, firms with more export experience consider export problems to be more manageable and also more flexible at handling those export obstacles than those firms with less export experience (Madsen, 1989). Previous studies, although insightful, have certain limitations. Firstly, most past studies concentrate on exploring EBs that US firms faced but other countries, firms in Canada received less attention. Chinese market as a new orientated export destination also got less attention. Also, little emphasis has been given to the problems faced by single industry exporters to single export destination, which may result a hasty and uncritical application of the generalized finding to other research contexts (Karelakis, Mattas, & Chryssochoidis, 2008). Moreover, in the limited studies connecting the firm size in relation with EBs, number of employees as a firm size parameter was widely examined, but other parameter of firm size, such as sales turnover received less attention. Similar limitations have existed when testing export experience influencing EBs perception. Many studies have applied years of exporting in representing a firm's export experience but did not define the term of years of exporting. Katsikeas and Morgan (1994) and Da Silva and Da Rocha (2001) regarded number of years exporting as the number of years that a firm exported to a specific destination market in their studies, while the rest studies refer the number of exporting years to a firm's years of total exporting. So far, no study has compared the difference of the two parameters in relation with EBs. 1.2 Research Objectives Given the importance of the Chinese market for BC's forest product exports, this study is designed to examine the EBs encountered/perceived by BC forest products firms according to 4 export to the Chinese market. Moreover, this study also intend to compare the correlation of two firm size parameters, number of employees and sales turnover in relation with the EBs, as well as two parameters of firm export experience, number of years exporting to all overseas markets and number of years exporting to the Chinese market, in relation with EBs as well. The purposes of the study are: First, to identify and evaluate the EBs that BC forest products firms encounter in regard to exporting to the Chinese market. Secondly, to compare and contrast the relationships between EBs and different parameters of firm's size and export experience. Thirdly, to expand the geographic coverage in export barrier's literature. 1.3 Research Questions and the Hypotheses The research questions and hypotheses are as follow: Q1: What export barriers are perceived to hinder British Columbia forest products firms from exporting to the Chinese market? Q2: Do different firm size parameters have the same relationships with export barriers? Q3: Do different export experience have the same relationships with export barriers? Two hypotheses: H 1: Two parameters of firm size, number of employees and sales turnover, correlate differently with EBs. H 2: Two export experience parameters, firm's total exporting years and firm's exporting years to the Chinese market, correlate differently with EBs 1.4 Thesis Outline There are six chapters in this thesis. Following the first introduction chapter, Chapter Two provides a review regarding China's present and future demand for forest product imports, the current situation of BC exports forest products to the Chinese market. Chapter Three includes the literature of EBs, as well as the factors that affect the EBs that firms encountered. Chapter Four outlines the research methodology employed in this study. The results and analyses are then presented in Chapter Five. Finally, general conclusions, the implications, and the limitations of this study are presented in Chapter Six. 6 Chapter Two Background 2.1 China Plays an Important Role in Global Forest Products Market China plays a dominant role in the global forest products market as the world's largest consumer, producer, exporter, and second largest importer (White et al., 2006). China's growing demand for forest product imports has greatly influenced the national economies and environments, especially those of forest product exports dependant countries and regions. Within a mere two decades, China has transformed from a self-sufficient nation to a country heavily reliant on importing forest products to support its continuously growing economy (Qin, 2007). The value of its total forest products imports rose from $6.4 billion US Dollar (USD) in 1997 to $25.1 billion USD (FAOSTAT, 2009). The major forest products that China imports include pulp, logs, lumber, and wood fibre (Tian & Xiao, 2007). Presently, China is the world's largest importer of softwood and hardwood logs, and fiber products. Countries exporting forest products to China include Russia, the US, Canada, New Zealand, Malaysia, and Indonesia, etc. (UNCED, 2008). 2.2 Factors that Stimulate China's Import Demand Several factors contribute to China's burgeoning demand for forest products; however, China's astonishing economic growth is the main contributor (White et al., 2006). Since China conducted economic reform, its national economy has experienced unprecedented growth. China has maintained an annual gross domestic product (GDP) growth rate of over 9% since 1990, ranking as the fastest growing economy in the world. The rapidly expanding economy has diminished the nation's poverty, and stimulated the domestic demand for forest products. The burgeoning demand for wood applying in construction and interior decoration, as well as 7 demand for various paper products account for nearly 80% of China's total wood consumption (Sun, Wang, & Gu, 2004). In response to the increasing domestic requirement, the central government of China has encouraged the development of wood related industries since the 1990s. As a result, the wood manufacturing in China has gained significant growth, with both the largest number of wood processing corporations and the employees in the world (UNCED, 2008). For example, in 2003, China's plywood manufacturing capacity exceeded the US, becoming the world's largest plywood base. China also becomes the world's second largest paper/paperboard producer (White et al., 2006), accounting for more than 50% of the world paper and paperboard production growth rate annually (He & Barr, 2004). The value-added wood products that made in China, such as furniture and plywood, have attracted not only the domestic consumption, but also tremendous demand from overseas markets. Demand has increased from both developed and developing countries for China's inexpensive wood products (White et al., 2006). Between 1997 and 2007, the export value of China's various value-added wood products rose from 3.7 billion USD to 10.8 billion USD (FAOSTAT, 2009). Moreover, in 2007, China's furniture exports value surpassed those of Italy, making China the largest furniture exporter in the world (Tian & Xiao, 2007). Beside the economic factors, China's environmental protection concerns also stimulate its forest product imports. Even though China is the fifth largest country in terms of forested area, it is still a forest resource-scarce country relative to its 9.6 million square kilometer of the territory and over 1.3 billion habitants. The 6th Chinese National Forest Resources Survey (1999-2003) indicated that China has a total of 1.75 million square kilometers of forest area, however, its average forest coverage rate is 18.21%, 61.52% of the world average. China's proportion of forest coverage ranks the 130th globally, even lower than many developing 8 countries. The per capita forest area in China is less than one-fourth of the world average, and the per capita forest reserves only account for less than one-sixth of the world's average (The State Forestry Administration of China, 2005). Since the 1990s, China's domestic forests have not provided sufficient materials to meet China's growing demand for forest products in terms of both quality and quantity. Furthermore, the deforestation caused by over-harvesting in many forest regions was regarded as the main cause of severe flooding in China during the summer of 1998. In order to protect China's national forest resources and restrict the over harvesting, in 1998, China's central government implemented the Natural Forest Protection Program (NFPP) to restrict forest annual allowed cut, protect national ecological system, and encourage the forest plantation development in China. The NFPP has successfully protected the remaining forest resources in China, and regulated domestic harvesting practices. However, this program widened the gap between China's demand and supply in forest products (Bull & Nilsson, 2004; Zhao, Shao, Zhang, & Bai, 2000). As a result, China depended heavily on importing forest products to sustain its domestic demand and to meet export requirements for manufactured wood products (White et al., 2006). Starting in 1990s, China's central government has gradually liberalized trade restrictions to encourage forest product imports and to prepare for entry into the World Trade Organization (WTO) (Hammett, Sun, & Barany, 2001). Between 1995 and 2007, the central government has totally reduced or eliminated import tariffs on 249 types of forest products (Tian & Xiao, 2007). The nation's policy supports combined with the economic growth, export orientation, and forest resources protection concerns have resulted the growing and continuing demand for imported forest products in China. 9 2.3 The Development of China's Forest Products Imports China has maintained an average of 22% annual import growth rate in forest products imports during the past decade (Jiang, 2007). In addition, the composition of the major imported forest products has shifted gradually from value-added and finished wood products (wood-based panel, paper products etc.) to forest raw materials (logs, lumber, pulp and waste papers etc). This transformation is indicative of China's increasing capacity for timber manufacturing. Today, logs, lumber, paper pulp, and waste paper imports make up 65% of China's forest product imports (Jiang, 2007). Logs and Lumber Logs (roundwood), both softwood and hardwood, are China's major imported timber product, making China the world's largest roundwood importer. Most of these imported logs were processed into lumber, wood-based panels, and other value-added wood products to supply China's domestic market and export globally. The value of China's roundwood imports quintupled from $1.27 billion to $5.88 billion USD between 1997 and 2007, a jump from 10% to 23% of China's total forest product imports value (FAOSTAT, 2009). China imports forest products from all over the world, but Russia is China's main supplier of forest products. In 2006, over half of China's overall timber product imports were from Russia, accounting for two-thirds of China's log imports (Northway & Bull, 2007)). Nevertheless, the roundwood supply is shrinking in the world forest market. The export tariff of Russia's logs has increased gradually since 2007, causing a decrease of Chinese demand on industry roundwood imports in both 2007 and 2008. In addition, other countries that export industry roundwood to China, such as Malaysia, Indonesia, and Papua New Guinea, were also either reduced their log export volumes or added restrictions to their raw log exports due to the 10 insufficient domestic resources in these countries and the reduction of illegal log exports concerns. Moreover, the increasing global transportation costs have made the importing roundwood less cost-effective (Lankin, 2007). As a result, China has slowly shifted its imports focus from logs to lumber. Compared to logs, the price of lumber remained stable in the global forest market. The price of imported logs increased an average of 24%, while the price for imported lumber grew only 5.6% in 2008. As a result, Chinese customers' preference shifted from importing roundwood to importing lumber. China's lumber (sawnwood) imports have experienced stable growth over the past decade, growing from $1.36 billion in 1997 to $2.38 billion USD in 2007. Russia and the US were China's major sawnwood suppliers in 2007, making up 27% and 15% of China's total lumber supply respectively, followed by Canada, Thailand, and Malaysia (ITTO 2008). Pulp and Paper Products China's imports of wood fibre products have experienced continual growth since 1997. Between 1997 and 2007, the value of wood pulp imports increased from $1.26 billion USD to $5.9 billion USD, and the import volume increased from 2.56 billion tonnes to 9.28 billion tonnes (FAOSTAT, 2009). In contrast, imports of paper and paperboard decreased from 10.6 billion tonnes to 7.82 billion tonnes during the same period. In 1997, paper and paperboard imports accounted for 50% of China's total forest product imports; however, it dropped to only 20% of the total in 2007 (Figure 1). J W W 25000 20000 —• Roundwood + — • •— • Sawnwood + 15000 — A — wood pulp and wast paper —a 10000 Panels — 0 — Paper and Paperboard + —• 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Forest Products 2007 Data source: Extracted from FAOSTAT, January 2009. Figure 1. China's major imported forest products (1997-2007 ) Wood-Based Panels China's imports of wood-based panels has also experienced rapid growth before 2003 but diminished quickly because of China's increasing manufacture capacity at wood-based panels. In 1997, the total import of wood-based panels reached $2.15 billon USD, accounting for 17% of China's total forest products imports in 1997. However, in 2007, the import of wood-based panels decreased to $1.26 billion USD, accounting for only 5% of China's total imports of forest products (FAOSTAT, 2009). The sharp decline of wood-based panel imports displays China's fast development in China's wood processing industry. Nowadays, there are over 6000 wood-based panel factories in China, and China is the top producer of plywood, hardboard, and MDF. It has surpassed the US to become the largest plywood exporter in the world (Dai, Liu, & Yu, 2007) (see Figure 2). 12 China forest products irrports 1997-2007 6000 X 5000 / 4000 / 7J f ~3000 - 2 - - ^ ~ ~ ^ ) ^ ^ ~*~~ R>undwxxl - * " SawiwxxJ F&nel s ~-/~ Vttodpul p ~*~Vttste paper "^""naner nroducts 2000 Z/^ / /" 1000 / „.--* ,/-" ~ -»- -^^"""^ / .., 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Data source: (FAOSTAT 2009 January) Figure 2. China's imported wood-based panel (1997-2007) 2.4 Future Prospects of China's Timber Product Imports Past studies have forecasted that China's demand for importing forest product would continually grow in the next two decades because of China's economic growth, export demand (Sun, Wang, & Gu, 2004; White et al., 2006; Zhang & Buongiorno, 1997), and the insufficiency of domestic forest resources (Bull & Nilsson, 2004; Zhao, et. al, 2000). China has maintained an annual forest products consumption rate of 10 million m3 over the past two decades meanwhile China's average GDP growth rate was over 9% per year (Tian & Xiao, 2007). The International Monetary Fund (2005) forecasted that China's national 13 economic growth rate would remain at 8-9% over next decade, although lower than the previous two decades. The urbanization rate in China has increased from 20% to 40% between 1979 and 2001. The World Bank (2005) has predicted this rate will reach 60% by 2020 if China continues the expected economic growth rate. These predictions indicated that China would continue its consumption of forest products for housing construction, interior decoration, and various types of paper and paperboard. Figure 3 shows that by 2003, Chinese per-capita consumption of forest products was 0.162 m3, while the per-capita forest products consumption in the US, Japanese, Europe and world averages were 2.248 m3, 1.427 m3, 0.905 m3, and 0.364 m3 respectively. Jiang (2007) predicted that the consumption of forest products would increase to 0.204 m3 and 0.304 m3 per capita by 2010 and 2020 respectively, nevertheless, the per capita consumption of forest products in China is still be lower than the world averages and lag behind the present consumption of those developed countries. Therefore, the long-term demand for wood will remain strong in China (Jiang, 2007). 14 225 2 1.75 1.5 125 ©2003 • 2 010 O2020 1 • .75 0.5 Q 25 D U.S.A. Japan Europe Wbrid Crura Unit: m 3 /capita Data source: (Jiang, 2007) Figure 3. Comparison of capita consumption of forest products between China and selected regions and World Several factors indicate that China will continue exporting low-cost and value-added wood products worldwide. First, during China's urbanization, the untapped rural labor force will flow into the big cities, which will provide sufficient low-cost labor for China's wood processing industries (Dai et al., 2007). The low-cost labor force will guarantee China's competitiveness in the global wood trade market by maintaining the inexpensive value-added wood products. Second, the Chinese government encounters constant pressures to provide sufficient jobs for its populous residents in order to maintain social stability and reduce the unemployment rate. The labor-intensive wood-processing industries well meet this demand (Yang, Leone, & Alden, 1992; Zhang & Gan, 2007). In addition, China has to maintain the capacity of its wood processing industries to provide value-added wood products for both domestic and overseas demand. 15 Even though the Chinese government implemented the forest plantation program to supplement China's domestic resources, researchers predicted that China domestic wood supplies are still insufficient (Bull & Nilsson, 2004; 2007; Jiang, 2007; White et al., 2006). In order to increase China's wood supply and transform China into a self-sufficient forest nation, China has invested $1.7 billion USD to establish a fast-growth and high-yielding trees plantation, which would be the world largest silvicultural program with 13.33 million hectares forested land (Bull & Nilsson, 2004; 2007; White et al., 2006). However, even with this plantation, Bull and Nilsson (2004) predict that China's domestic supply still cannot meet its demand in the next two decades (Kunshan et al., 1997; Poyry, 2001; Xu & White, 2004). Northway and Bull (2007) further forecast that over the next 25 years, China's forest products supply is expected to reach a maximum of 245 million m3, triple the volume recorded in 2005. Nevertheless, the domestic forest demand is predicted to reach 952.8 million m3 by 2030 (including pulp and recycled paper products), however, only less than half of this demand will be met by China's domestic forest production. Jiang (2007), and Tian and Xiao (2007) applied different methods to forecast China's forest demand in 2010, 2015, and 2020, and the results coincident with those of Northway and Bull (2007). All these studies suggest that China will continually depend on importing forest products to fill the gap between its domestic demand and supply. 2.5 Canada Exports Forest Products to China Canada's forest products industry plays an important role in the national economy. The forest sector provides over 340,000 jobs, and over 300 communities are economically dependent it. Canada is also the world's largest forest product exporter, with nearly 80% of 16 exported forest products being shipped to the US annually. This heavy dependence on a single export market has raised widespread concerns from federal and provincial governments, commerce organizations, and the public regarding national economic security stability (Goldfarb, 2006). These concerns were highlighted by the 2001 softwood lumber dispute between Canada and the US. Moreover, recently Canada forest products industry encountered aggressive competition from other low-cost lumber exporters, and the profits from forest products industry diminished. In order to respond to these challenges, Natural Resources Canada and the Canadian forest products industry have worked together effectively since 1999 to diversify the export markets in order to increase the stability and competitiveness of Canada's forest products industry in the global forest market (Natural Resources Canada, 2007). Of the many market promotion activities, Canada Wood Export Program (CWEP) is one of the largest integrated programs that tasked with expanding and diversifying Canadian wood product exports. In 2001, sponsored by federal government, Natural Resources Canada initiated the CWEP to respond to the challenges confronting the forest sector. By 2007, CWEP has invested a total of $35 million Canadian dollar (CAD) to brand Canada's wood products, increase product knowledge and acceptance, and improve the access of Canada's wood products to the offshore markets (Natural Resources Canada, 2003). The CWEP not only encourages the maintenance Canada's traditional export markets such as the US, Japan, and Europe countries, it also promotes to explore the emerging markets like China, Korea, Taiwan, and India (Natural Resources Canada, 2007). These efforts have resulted in a substantial increase of forest product exports to China. China has surpassed Japan and the European Unions in 2003, becoming Canada's second 17 largest forest products export market. The exports of forest products value tripled from $424.11 million USD in 2001 to $1557.22 million USD in 2008. The exports of pulp and waste paper remained Canada's leading forest product exported to China, increasing from $381.51 million USD in 2001 to $1317.54 million USD in 2008. The exports of paper and paperboard remain stable, increasing slightly from $21.92 million to $31.14 million between 2001 and 2003, and then decreased to $20.56 million USD in 2008. The diminishing of paper and paperboard products reflects the growth in China's paper manufacturing capacity in the past decades (See Figure 4). 1200 1000 - oo / / // -HS 44-Wood and Articles of Wood (Incl. Wood Charcoal) oo SMiIlionsUSD / \ —m // HS 47 - Pulp of Wood and The Like; Waste and Scrap of Paper or Paperboard JUS 400 HS 48 - Paper, Paperboard and Articles Made From These Materials 200 "i 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Data source: Industry Canada, Extracted in May 2009. Figure 4. The major forest products that Canada exported to China (1999-2008) The value of lumber exports to China rose from $16.61 million USD in 2001 to $189.51 18 million USD in 2008, demonstrating a ten-fold increase in the past seven years. The value of exports raw wood products also grew from $1.20 million to $21.42 million USD from 2001 to 2008. In addition, exports of wood-based panels, which include veneer, particleboard, fiberboard and plywood increased from $2.21 million USD in 2001 to $5.95 million USD in 2008 (See Figure 5). "HS 4407+4409Lurrber+Lurrber Shaped "US 4403 - V D D I N T I - q RCLGH "HS 4408 + 4410 + 4411+ 4412- Veneer + Part i cl e board + Fi breboard + Plywood HS 4418 - WNXJ*, D0CR3, SH NGLES AND SHAKES, PANELS AND OTHER BULDERS JONERS AND CARPENTRY CF TOCD & 4 # # ^ # <£> > Figure 5. The major wood products that Canada exported to China (1999-2008) 2.6 British Columbia Exports Forest Products to China BC's forest products industry plays a more important role than in any other province in terms of provincial economy. Over two-thirds of BC's land is forested, and the forest related industries have traditionally accounted for one-third of provincial revenue. The forest product industry was the single major industry for BC before 1980s. However, the impact of BC's 19 forest industries to the provincial economy has diminished over the last several decades (Natural Resources, 2006). As Canada's largest forest product exports province, BC government is interested in diversifying its forest product exports to overseas markets, especially to the Chinese market. Beside actively participated into CWEP, the provincial government also initiated a Forest Investment Initiative (FII) program in 2003, endeavouring at reducing its export dependence on the U.S. market and expanding its forest product exports to other overseas markets. Through the continue efforts, the exports of BC forest products to China has shown remarkable increase. The value of exports forest products to China increased from $308.56 million USD in 2001 to $1039.26 million USD in 2008. Specifically, exports of pulp and wast paper lead the growth, rising from $271.92 USD to the top of $960.39 million USD in 2007, this value, however, dropped to $836.15 million USD in 2008. The total exports value of BC forest products to China tripled over the past seven years. Exports value of raw wood products rose continually from $14.90 million USD to $192.81 million USD. The export values of paper and paper products decreased from $13.79 million USD in 2001 to $10.31 million USD in 2008 (See Figure 6). In regard to wood products exports to China, lumber products showed the fastest growth, exports value increasing from $13.86 million USD to $168.93 million USD from 2001 to 2008, ten times increased in the past seven years. The raw wood exports also gained significant growth, raised from $0.21 million USD in 2001 to $19.67 million USD in 2008. The aggregate value of exports wood-based panels also grew slightly, increasing from $0.49 million USD in 2001 to $3.22 USD. The exports of secondary wood products, such as windows and doors, increased from $0.27 million USD in 2001 then decreased to $0.18 million in 2008 (see Figure 20 7). - HS 44 - Wood and Articles of Wood (Incl. Wood Charcoal) -HS 47-Pulp of Wood and The Like; Waste and Scrap ofPaperorPaperboard HS 48 - Paper, Paperboard and Articles Made From These Materials 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Data source: Industry Canada, May, 2009. Figure 6. Major forest products that BC exported to China (1998-2008) 21 -HS 4409+4407 "HS 4408+4410+ 4411+4412 1000 5 Sales turnover ($Million <1 1 CAD) 1-10 2 11-50 3 51-100 4 >100 5 0 1-5 6-10 11-20 Over 20 0 1-5 6-10 11-20 Over 20 1 2 3 4 5 1 2 3 4 5 A firm's total years of exporting A firm exporting years to China The Spearman rank correlation coefficients is defined by: 6Yd2 A> = 1 — n - h . n\n -1) di=Xi-Yi [1] Where Xi and Yi represent the value of the two variables; di=Xi-Yi represents the difference between the ranks, and n represents the number of values in each data set; p represents the degree of the correlation of the two variable, ranging between -1 and 1, indicating the negative and positive correlations respectively. The closer the | p| value to 1 , the stronger correlations of the two tested variables. A probability value of p = .05 was regarded as the significant value for the correlation tests. If the p < .05, two tested variables were considered as significance. 49 Chapter Five Results and Discussion 5.1 Basic Information of the Respondent Firms In this study, quantitative data analyses were conducted to address the research objectives and test the hypotheses stated in Chapter 1 (p. 5). This section identifies the profile of the sample respondents (Table 3, 4 and 5). These tables summarize the information collected in the first section of the survey questionnaire, which show the organizational characteristics and levels of globalization of the respondent BC forest products firms. 5.1.1 Organizational Characteristics Table 3 displays the respondent firms' organizational characteristics. Information in this table summarizes the types of products that each firm produced, its geographic location, numbers of years in operation, number of employees, and sales turnover. Table 3 shows that 52.9% (n = 18) of the respondent firms were lumber producers, and the remaining 47.1% (n = 16) of the firms were other wood related manufacturers, such as pulp and paper companies, log producers, and value-added wood producers etc. Geographically, 55.9% (n = 19) of the firms were from the Coastal region, and the rest 44.1% (n = 15) were from the Interior region. In viewing of firm's years of operation, 73.5% (n = 25) of firms had more than 20 years of operational experience, 11.8% (n = 4) of the firms had more than 10 years but less than 20 years of operational experience. Only 5.9% (n = 2) of the firms reported that they had less 5 years of operational experience. Table 3. Firms' organizational characteristics Production Location Years of operation * Number of employees* Sales turnover ($Million CAD)* Range N Percentage Lumber 18 52.9 Others 16 47.1 Coastal 19 55.9 Interior 15 44.1 1-5 2 5.9 11-20 4 11.8 >20 25 73.5 <50 15 44.1 50-99 8 23.5 100-499 6 17.6 500-999 1 2.9 >1000 4 11.8 <1 1 2.9 1-10 7 20.6 11-50 5 14.7 51-100 5 14.7 >100 9 26.5 Note: Missing data exist in this category and were not listed in this table. In total, 44.1% (n = 15) of the surveyed firms had less than 50 employees. Firms with more than 50 but less than 99 employees accounted for 23.5% (n = 8) of the sample. Firms with more than 99 but less than 499 employees accounted for 17.6% (n = 6) of the total firms. Firms with over 1000 employees accounted for 11.8% (n = 4) of the total respondents. There was only one firm in the 500-999 employee category, was least common.. Between 2002 and 2007, firms with over $100 million CAD in sales turnovers accounted for 26.5% (n = 9) of the total sample. Firms with sales turnover ranging from 51 $1-10 million CAD accounted for 20.6% (n = 7) of the whole sample. Sales turnover ranging from $10-50 million CAD and $50-100 million CAD had five firms each, and each group made up 14.7% of the total sample respectively. One firm claimed that its sales turnover was less than one million CAD. 5.1.2 Globalization Level Table 4 summarizes the globalization levels of the surveyed firms, which includes their exporting experience, number of exporting markets, and export intensity from 2002 to 2006, as well as, export intensity for 2007. Approximately, half of the firms had over 20 years of exporting experience. Another 17.6% (n = 6) of the firms had over 10 years but less than 20 years of exporting experience. The numbers of firms with export experiences ranging from 6 to 10 years were equal with firms that had 1 to 5 years of exporting experience, and each accounted for 5.9% (n = 2) of the respondents. The remaining 8.8% (n = 3) of firms did not have any exporting experience by 2008. Approximately, half of the surveyed firms exported to more than three foreign countries and regions. Another 41.2% (n = 14) of firms exported to three or less overseas markets. The remaining 11.8% (n = 4) of firms did not respond to this question. Between 2002 and 2006, 50% of the respondent firms (n = 17) stated that exports accounted for over 40%) of their sales turnover. However, this ratio decreased 10% (n = 15) in 2007. Firms with an export intensity ranged from 10%- 40% accounted for 17.6% (n = 6) of the total sample from 2002 - 2006. By contrast, in 2007, this ratio increased 9% (n = 9). Firm with export intensity ranging from 1-10% was 5.9% (n = 2) of the total sample from 2002-2006, however, this ratio dropped to 2.9% (n = 1) in 2007. 52 Table 4. The export situation of the respondents Export experience (years)* Number of exporting countries * Intensity of exporting 2002-2006* Intensity of exporting 2007* Range N Percentage 0 3 8.8 1-5 2 5.9 6-10 2 5.9 11-20 6 17.6 >20 16 47.1 NA 4 11.8 1-3 14 41.2 >3 16 47.0 NA 3 8.8 1-10% 2 5.9 11-40% 6 17.6 >40% 17 50.0 NA 4 11.8 1-10% 1 2.9 11-40% 9 26.5 >40% 15 44.1 Note: *: Miss data exist in this category and were not listed in this table; NA: not applicable 5.1.3 Situation of Exporting to the Chinese Market Table 5 shows the respondent firms in term of exporting goods to the Chinese market. 53 Table 5. The firms' exporting to the Chinese market Range N Percentage 0 16 47.1 1-5 9 16.5 6-10 3 8.8 11-20 3 8.8 >20 1 2.9 0% 14 41.2 1-10% 14 41.2 0 13 38.2 1 - 10 % 11 32.4 11 - 40 % 2 5.9 Most important 10 29.4 Somewhat important 8 23.5 Less important 8 23.5 Not important at all 2 5.9 No not know 4 11.8 Does firm have a strategy to Yes 7 20.6 export to China No 24 70.6 No not know 3 8.8 Years of exporting to China* Intensity of exporting to China 2002 - 06 Intensity of exporting to China 2007 Perceived the importance of exporting to the Chinese market Note: *: Miss data existed in this category and were not listed in this table; NA: not applicable The table includes information about the number of years that the firm had been exporting to the Chinese market, the intensity of their exporting to the Chinese market, the 54 importance of their exports to China, and whether or not the firms had exports strategies to the Chinese market. At the time the survey was conducted, 47.1 % (n = 16) of the firms had never exported to the Chinese market, and 26.5% (n = 9) of firms had exported to China for less than 5 years. Together, these two groups accounted for 71.6% of the total sample. Firms with export experiences ranging from 6-10 years and 11 - 20 years accounted for 8.8 % (n = 3) of the total respondent firms respectively. Only one company had exported to the Chinese market for more than 20 years, which accounted for 2.9% of the total respondent firms. From 2002 - 2006, 41.2% (n = 14) respondent firms indicated that they had no sales generated from exporting to China. Another 41.2% (n = 14) of the surveyed firms 1-10% of their sales were from exporting to China. None of the respondent firms' exports to China exceeded this range during 2002-2006. In 2007, one firm started exporting and the no exports gained from exporting to China decreased to 38.2 % (n = 13). The intensity of which thefirmsexported to China ranging 1-10% of their total sales turnover also decreased to 32.4%) (n = 11). As two of these firms indicated that the ratio of their sales to China increased, accounting for 11-40% of their sales turnover in 2007. In evaluating the importance of the Chinese market, 29.4% (n = 10) respondents identified that the Chinese market was most important. For 23.5% (n = 8) of the respondent firms viewed the Chinese market was somewhat important, and the same amount of firms (n = 8) viewed the Chinese market as less important. Another 5.9% (n = 2) of the respondent firms believed that the Chinese market was not important at all. The remaining firms, 11.8% (n = 4), identified that they do not know. In total, 70.6%) (n = 24) of the respondent firms indicated that they did not have an export strategy to the Chinese market at all, and 20.6% (n = 7) of the respondent firms stated that they had such a strategy. The remaining 8.8% (n = 3) of respondents indicated 55 that they did not know if their firms had an export strategy. Now compare the fact that 70.6% did not have a strategy but that 38.3% report exporting and 23.5% did not report degree of exports 5.2 The Significant Export Barriers 5.2.1 Description Table 6 summarizes the frequency of the thirty-nine EBs that identified by the surveyed firms. In descending order of the mean value, the thirty-nine EBs were ranked as follow. Table 6. The frequency of the thirty-nine export barriers Export barriers Mean Median Mode Hard to identify business opportunities in China (in) 3.52 4 5 Problematic communication with Chinese customers (ex) 3.35 4 5 Excessive transportation or insurance costs (in) 3.33 3 5 Can not offer satisfactory prices to customers (in) 3.17 3 5 Inability to contact overseas customer (in) 3.05 3 5,3* Verbal or nonverbal language differences (ex) 3.00 3 5,3* Inadequate or untrained personnel (in) 2.96 3 5,3* Hard to obtain reliable foreign representation (in) 2.89 3 5,3* Different sociocultural traits (ex) 2.94 3 4 Different foreign customer habits or attitudes 3.12 3 3 Keen competition in the Chinese market 2.56 3 3 Complexity of distribution channels 2.65 2 2 Unfamiliar with Chinese business practices 2.94 3 Unable to grant credit facilities to foreign customers 2.88 3 Limited information 2.87 3 Lack of managerial time 2.84 3 Difficulty in matching competitor's prices 2.70 3 56 Unfamiliar with China's exporting procedures or 2.67 2 Unreliable data 2.59 2.5 Unfavorable home rules and regulations 2.53 2 Slow payments collection from Chinese customers 2.50 2 Hard to offer technical support or after-sales service 2.44 2 Hard to access export distribution channels 2.35 2 Need to adjust export promotional activities 2.35 2 Lack of Canadian government assistance or incentives 2.25 1.5 High tariff and non-tariff barriers 2.25 2 Hard to develop new products 2.20 2 Strict exporting rules and regulations in China 2.20 2 Lack of excessive production capacity 2.16 1 Hard to control over Chinese middlemen 2.11 1.5 Need to adapt new design and style 2.10 2 Hard to supply inventory to China 2.06 1.5 Foreign currency exchange risks 2.00 2 Unable to meet quality standards or specifications 1.92 1 Political instability in the Chinese market 1.87 1 Short of working capital to finance exports 1.79 1 Poor or deteriorating economic conditions in China 1.71 2 Unavailability of warehouse facilities 1.59 1 Unable to meet package or labeling requirements 1.44 1 1 paperwork * More than one value in this variable, and the same amount of respondents evaluated this EB as 5 and 3; In: Internal barriers; Ex: External barriers A total of nine barriers were identified as the significant barriers (mode > 4, and mean > 2.5). The first four EBs were evaluated by the respondents as the most significant export obstacles that hindered firms from exporting (mode = 5, and mean > 3.2). These four EBs were business opportunities are difficult to identify, problematic communication with 57 Chinese customers, excessive transportation or insurance cost, and cannot offer satisfactory prices to customers. The same number of respondents weighed the next four barriers as the most significant and do not know (mode = 3, mean > 2.9) in an equal manner. These four barriers were defined as moderately significant barriers, which included inability to contact overseas customer, verbal or nonverbal language differences, inadequate or untrained personnel, and hard to obtain reliable foreign representation. Different sociocultural traits barrier was also identified to be a significant obstacle because respondents evaluated this barrier as somewhat significant (mode = 4, mean > 2.5). 5.2.2 Discussion The surveyed BC forest products firms identified the barrier of business opportunities are difficult to identify (mode = 5, mean = 3.52) as the most significant obstacle that hindered their Chinese market exploration. As an internal barrier (Leonidou, 2004), this barrier is closely related to firms' uncertainty regarding overseas markets. This barrier plays a significant role to a firm that intends to export to countries with greater psychological distance of their original country (Johanson & Wiedersheim-Paul, 1975). Compared with Canada's traditional trade partners, such as the US and the European Union, the Chinese market possesses many different social, cultural and political characteristics. In this study, although nearly half of the respondents reported that they had at least 20 years of export experience, and had exported to at least three international markets, apparently such experience did not significantly help them overcome their obstacles when facing the Chinese market. The hard to find business opportunities in the overseas market obstacle poses some information obstacles for managers. Bell (1997) also identified that a lack of foreign market information occurs frequently in a firm's initiative export stage, and can cause a firm give up the efforts of exploring an overseas market at the very beginning. This barrier was also identified as 58 important in studies by Kedia and Chhokar (1986), Cheong and Chong (1988), and Morgan and Katsikeas (1997). This result also indicates that forest products firms in BC are still in theninitiative stage. The difficulty in getting the market information they need is still the top one exporting problems hindering their exporting to the Chinese market. Problematic communication with Chinese customers was the second most significant barrier hindering BC forest products firms' exporting to the Chinese market (mode = 5, mean = 3.35). Communication difficulty, as an external problem, is a crucial deterrent obstructing firm's market expansion. This EB was also found to be significant in studies by Kaynak et al. (1987), and Morgan and Katsikeas (1997). Excessive transportation or insurance cost was the third most important barrier by the respondents, indicating that high cost of transportation or insurance plays a negative role in BC forest products exporting to China. By comparing to exporting to the US market, exporting to the Chinese market imposes some additional shipping costs, which inevitably increases the sale price of Canadian timber products in the Chinese market. The high price of Canadian forest products is less competitive, which presents further business challenges in the Chinese market because China is a price-sensitive country (Cohen, 2002). Yet, it should be recognized that this survey was performed in the summer of 2008, a period when global petroleum prices were increasing. Therefore, the perception of transport costs may have been skewed. As such, this internal logistics barrier identified in this study could simply be a function of a general obstacle for all overseas markets rather than a specific obstacle for the Chinese market. Bodur (1986), Katsikeas and Morgan (1994), Ramaseshan and Soutar (1996), Sullivan and Bauerschmidt (1990), and Leonidou (1995) found this EB also to be significant in their EBs studies. BC forest products firms ranked inability to offer satisfactory prices to the overseas 59 customers as another most significant obstacle for exporting to China. This indicates that price competition poses a serious handicap to a firm's export endeavours (Leonidou, 1995b). This impediment shows the severe competition in the Chinese forest products import market. This impediment, as Leonidou (1995b) indicated, is a common internal barrier among companies that lack previous export experience. Inexperienced firms tend to underestimate the competitiveness of products, and overemphasize the price function in the foreign markets. My findings support the previous research by Barrett and Wilkinson (1985), Dichtl, Koeglmayr, and Mueller (1989); Keng and Jiuan (1989); Rao, Erramilli, and Ganesh (1990) and Leonidou (2004), which rated this barrier as one of the most significant obstacles to exporting overseas. My findings also corresponded with a prior study by Cohen and Lee (2000), indicating that China is a price sensitive nation with intense competition in its forest products supply market. Inability to contact overseas customers, as the classification of Leonidou (2004), is another internal difficulty that firms confronted in both identifying and communicating with overseas' customers. This barrier also closely related to verbal and cultural difficulties barrier because such barrier also hinders firms from contacting and communicating with customers. This barrier also relates to difficulties in obtaining information from overseas customers, which is the top one most significant barrier in this study, indicating that a lack of capacity to contact overseas markets impedes firms from getting perceptual, first-hand knowledge from their customers, and further impeding their decision-making. The Verbal or nonverbal language differences barrier impedes the interpretation and understanding of the culture, society and customers' requirements in overseas markets. This external sociocultural EB also hinders firms' information gathering and market evaluation abilities. It further imposes communication difficulties on overseas customers (Leonidou, 2004). In addition, this barrier affects a firm's marketing strategy in regard to 60 branding, packaging and advertising (Terpstra, Sarathy, & Laverie, 1987). This barrier were also identified in previous studies by Barker and Kaynak (1992), Gripsrud (1990), Katsikeas and Morgan (1994). Export barrier literature indicates that inadequate or untrained personnel barrier is an internal barrier impeding firms' intrinsic export capacity. Moreover, smaller firms frequently identify this barrier as significant because they usually lack experienced managers and employees, especially when they encounter a new export destination (Barker & Kaynak, 1992; Moini, 1997; Naidu & Rao, 1993; Tseng & Yu, 1991). Lacking export personnel may result the misinterpretation of the available export information, an overemphasis of EBs, and eventually a loss of export opportunities (Julian & Ahmed, 2005). In this study, 85% respondents are small and medium sizefirms(less than 500 employees); therefore, it is not surprising that this barrier was evaluated as one of the moderately significant barriers in the Chinese market exploration. The Hard to obtain reliable foreign representation external barrier hinders firms' operations in overseas markets. This barrier normally occurs at firms' export entry stages (Bell, 1997). After the export destination has been targeted, firms often encounter difficulties in securing suitable market representation. Again, this problem is frequently exacerbated by extant resource constraints and by a lack of management expertise, particularly in the case of smaller firms (Cheong & Chong, 1988). This barrier was also found crucially in other studies (e.g. Cavusgil, 1984a; Diamantopoulos et al., 1990; Tesar & Tarleton, 1982; Yaprak, 1985). Different sociocultural traits is another external barrier that was frequently found in the early phases of export involvement (Bell, 1997). This barrier involves differences according to values, attitudes, manners, customs, aesthetics, and education between a firm's original country and its export destinations (Cateora, Graham, & Ghauri, 1993). This 61 barrier is particular import for Canadian exporters because not only social and cultural differences exist in the bilateral trade of China and Canada, but also a diverse range of cultural differences exist in each sub-region of China. It is critical for Canadian firms to recognize this variety before they can export successfully. Similar findings were also found in studies of Cavusgil (1984a), Diamantopoulos et al. (1990), and Rao et al. (1990). Among these nine identified EBs, six barriers are internal barriers and three are external barriers according to Leonidou's (2004) classification. This ratio indicates that two thirds of the EBs identified in this study are intrinsic problems, implying that BC forest products firms could overcome most of these export problems internally. Moreover, the three external barriers, problematic communication with Chinese customers, verbal or nonverbal language differences, and different sociocultural traits could also be overcome by recruiting experienced managers, personnel, and gathering social and cultural information of the Chinese market. Except for the excessive transportation or insurance costs barrier, the remaining eight barriers identified in this study are problems that were found frequently occur in a firm's export initiative stag (Bell, 1997). This stage, as Leonidou (1995b) noted, is a critical stage because failure to understand and surpass the EBs in this stage would not only reduce the profits of firms in the export markets, but may also cause firms to withdraw from the intentioned export markets. The findings of my study show both similarities and differences to Leonidou (2004) in regard to the significant of EBs. Leonidou (2004) analyzed thirty-two previous empirical studies of EBs, and ranked the barriers into five categories: very high impact, high impact, moderately impact, low impact and very low impact. Three most significant, and one moderately significant barriers to BC forest products firms in my study were also viewed as having very high impact to firms' performance at overseas markets in Leonidou's (2004) 62 study. The three most significant barriers are business opportunities are difficult to identify, excessive transportation or insurance cost, and cannot offer satisfactory prices to customers; while the moderately significant barrier is inability to contact overseas customers. In addition, problematic communication with Chinese customers, which was evaluated as the significant barrier, and inadequate or untrained personnel together with different sociocultural traits, which were rated as moderately significant in my study, were found to have a moderate impact by Leonidou (2004). Nevertheless, verbal or nonverbal language differences, and hard to obtain reliable foreign representation, which were identified as moderately significant EBs in my study, were perceived as low impact and high impact respectively by Leonidou (2004). The inconsistency between the present results and previous conclusions highlights the importance of situation-specific factors, such as environmental conditions, industrial types, organizational characteristics and export experience in terms of how a firm perceives EBs. The EBs found in this study also partly correspond with Ding's study (2007), which investigated the problems that hindered Chinese customers from purchasing and utilizing Canadian wood products. Ding (2007) identified that items like high price of Canadian forest products, business opportunities difficulties identifying, language barriers, and different business regulations, which significantly hindered Chinese customers, are also significant influenced BC firms from exporting to China. On the other hand, problems such as a lack of knowledge about Canadian forest product specification, different grading rules of Canadian wood products and the slow delivery of BC forest products, which were identified by the Chinese customers, are seldom realized by Canada's forest products firms. The different perceptions from the two sides of bilateral trade highlights the need to explore both perspectives of Canadian and Chinese firms in order to engage in a successful business relationships. 63 5.3 The Relationships between Export Barriers and Firm Size and Export Experience The Spearman rho correlation coefficient was used as the method of analysis to test the two hypotheses in this study and answer the Research Questions Two and Research Question Three. Research Question Two is: Do different firm size parameters have the same relations with export barriers? The hypothesis for Research Question Two is: Two firm size parameters: number of employees and sales turnover correlate differently with EBs. Research Question Three is: Do different export experience have the same relations with export barriers? And the hypothesis for This research question is: Two export experience parameters, a firm's total export years and a firm's exporting years to the Chinese market, correlate differently with EBs (P. 5). In this study, the analysis involved two parts. These are: the Spearman rho correlation analysis was conduced between two parameters of firm size, number of employeesand sales turnover, and the thirty-nine EBs in order to examine the relation of each firm size parameter with EBs. The correlation results are shown in Appendix Dl. A probability value p < .05 was considered statistically significant. The EBs that are significantly correlated with number of employees and sales turnover are displayed in the Table 7. The Spearman rho correlation analysis tests were also conducted to examine the relationships between export barriers and a firm's export experience and the results are listed in Appendix D2. The EBs that are significantly correlated with the specific exporting years to China and a firm's total exporting years two export experience parameters are displayed in Table 8. 5.3.1 Research Findings The Correlation between Firm Size and Export Barriers 64 Table 7. The relationships between export barriers and firm size Export Barriers Number ol Sales turnover employees 2002-200'l P P P P -.880 .000 -.798 .001 -.724 .000 -.651 .003 Hard to control overseas Chinese middlemen (In) -.647 .012 Slow collection of payments from China (Ex) -.629 .012 Strict exporting rules and regulation in China (Ex) -.553 .040 Unavailability of warehouse facilities (In) -.528 .035 Lack of excessive production capacity (In) -.519 .043 Hard to supply inventory to China (In) -.517 .034 Inadequate or untrained personnel (In) -.445 .043 Verbal or nonverbal language (Ex) Different sociocultural traits (Ex) -.594 .012 Unreliable data (In) Inability to contact overseas customers(In) -.637 .003 Cannot offer satisfactory prices to customers (In) -.477 .021 Hard to obtain reliable foreign representation (In) -.521 .022 Problematic communication with Chinese -.559 .020 Different foreign customer habits or attitudes (Ex) -.514 .035 Unfamiliar Chinese business practices (Ex) -.731 .001 customers (Ex) Notes: p = correlation degree; p = probability, 2 tailed. Ex: external barriers; In: internal barriers Spearman's rho correlation coefficient tests were conducted among thirty-nine EBs and firm size regarding to number of employees. Table 7 displays the seven EBs that were found to have significant correlation with number of employees. Ranked in descending order of the correlation degree, these seven EBs are: unfamiliar Chinese business practice (p = -.731, p = .001), inability to contact overseas customers (p = -.673, p = .003), different sociocultural traits (p = —.594, p = .012), problematic communication with 65 Chinese customers (p = -.559, p = .020), hard to obtain reliable foreign representation (p = -.521, p = .022), different foreign customer habits or attitudes (p = -.514, p = .035), and cannot offer satisfactory prices to customers (p = —.477, p = .021). Same tests were also conducted among thirty-nine EBs and firm size according to sales turnover. Table 7 also displays the eleven EBs that were found to have significant correlation with firm size according to the sales turnover. Ranked by a descending order of the correlation degree, these eleven EBs were: verbal or nonverbal language differences (p = -.880, p = .000), different sociocultural traits (p = -.798, p = .001), unreliable data (p = -.724, p = .000), inability to contact overseas customers (p = -.651, p = .003), hard to control over Chinese middleman (p = -.647, p = .012), slow collection of payments from Chinese customers (p = -.629, p = .012), strict exporting rules and regulations in China (p = -.553, p = . 040), unavailability of warehouse facilities (p = -.528, p = .035), lack of excessive production capacity (p = _ .519, p= .016), hard to supply inventory to China (p = —.517, p = .034), and inadequate or untrained personnel (p = —.445, p = .043). The Correlation between Firm Export Experience and Export Barriers Spearman rho correlation coefficient tests were computed to assess the relationships between EBs and a firm's export experience. Two parameters of export experience, general export experience and specific export experience to China were tested. A probability value of p < 0.05 was considered statistically significant; results are shown in Table 8. 66 Table 8. The relationships between export barriers and export experience Number of Export Barriers years exporting to China P P Lack of Canadian government assistance (Ex) -.620 .004 Lack of managerial time ( In) -.589 .002 Inadequate or untrained personnel (In) -.568 .004 Foreign currency exchange risks (Ex) -.555 .021 Verbal or nonverbal language (Ex) -.554 .017 Unfamiliar Chinese business practices (Ex) -.545 .029 Different sociocultural traits (Ex) -.525 .029 Hard to obtain reliable foreign representations (In) -.515 .024 Different foreign customer habits or attitudes (Ex) -.486 .048 Slow collection of payments from Chinese Customers -.477 .045 Number of years exporting P P -.591 .013 -.487 .047 Need to adapt new design and style (In) -.575 .006 Unavailability of warehouse facilities (In) -.552 .022 Hard to offer technical or after-sale service (In) -.536 .032 Short of working capital to finance exports (In) -.533 .019 (Ex) Notes: p = correlation degree; p = probability, 2 tails. Ex: external barriers; In: internal barriers (according to Leonidou, 2004 classification) Spearman rho coefficient correlation tests indicate that ten EBs perceptions have significant negative correlation with a firm's specific export experience to China. Ranked in descending order of correlation degree, these ten EBs are: lack of Canadian government assistance (p = -.620, p = .004), lack of managerial time (p = -.589, p = .002), inadequate or untrained personnel (p = -.568, p = .004),foreign currency exchange risks (p = -.555, p = .021), verbal or nonverbal language differences (p = -.554, p = .017), unfamiliar Chinese business practices (p = -.545, p = .029), different sociocultural traits (p = -.525, p 67 = .029), hard to obtain reliable foreign representation (p = —.515, p = .024), different foreign customer habits or attitudes (p = -.486, p = .048), and slow collection of payments from Chinese customers (p = —All, p = .045). Spearman correlation tests were also computed to assess the relation among a firms' general export experience and the thirty-nine EBs. Six EBs show significant correlation with the general export experience. Ranked in descending order of the correlation degree, these six EBs are: foreign currency exchange risks (p = -.591, p = .013), need to adapt new design and style (p = -.575, p = .006), unavailability of warehouse facilities (p = -.552, p = .022), hard to offer technical or aftersales service (p = —.536, p = .032), short of working capital to finance exports (p = .533, p = .019), and different foreign customer habits or attitudes (p = —.487, p = .047). 5.3.2 Discussion The parameters of firm size, number of employees and sales turnover have negative correlations with certain EBs. Number of employees parameter correlate with seven EBs, with four external barriers and three internal barriers. The research results can be interpreted as larger firms with more employees have more advantage in personal, financial and products capacity, thus they view three internal barriers of contact overseas customers, offer satisfactory prices to customers, and obtain reliable foreign representation as less problematic. However, firms with fewer employees regard these three barriers as more problematic when exporting to overseas markets. Moreover, firms with more employees also possess more capacity to understand social and cultural traits, and foreign customer' habits/attitude in overseas markets. They also have the personnel advantage in overcoming external barriers, which hinder them to understand Chinese business practices, and to communicate with customers., for example. 68 The sales turnover firm size parameter has negative correlation with eleven EBs, with four external and seven internal EBs. These results indicate that larger firms with more sales turnover have more advantages over firms with less sales turnover according to obtain overseas markets' information, contact overseas customers, and control overseas middlemen. Larger firms also possess more capacity to provide warehouse facilities, production, and supplying inventory as well as to overcome the problems related with inadequate or untrained personnel. It is easy to understand that, unlike smaller firms, larger firms with more sales turnover may overcome verbal or nonverbal language and sociocultural issues with greater ease. Moreover, larger firms also consider problems such as slow collection of payments, and strict exporting rules and regulation these external problems to be less significant than smaller firms with less sales turnovers do. Both parameters of firm size, firms' sales turnover and number of employees, are both negatively correlated with two EBs, different sociocultural traits, and inability to contact overseas customers. However firm's sales turnover shows closer correlation with the two EBs than the number of employees does according to the correlation degree. The correlation degree between different sociocultural and sales turnover is -.798, while the correlation degree between this EB and number of employees is -.594. Similarly, the correlation degrees of inability to contact overseas customers with sales turnover and number of employees are -.651 and -.637 respectively. Larger firms as defined by Inumber of employees and sales turnover view the significant EBs impeditive to a less degree. Moreover, number of employees and sales turnover correlated with EBs differently. Except for two EBs, the two firm size parameters, number of employees and sales turnover, correlated with EBs differently in both the items and amount of EBs they related. Moreover, the comparison results indicate that a firm's sales turnover is more strongly correlated with EBs than the number of employees 69 parameter. This is especially the case with internal barriers. The hypotheses that firm's EBs vary according to the number of employees and sales turnover were tested and the null hypotheses were rejected. Similarities and differences exist in comparing my research results and other previous research, which explored the effects of a firm's organizational characteristics on EBs. Katsikeas and Morgan (1994), and Leonidou and Theodosiou (2004) found that firm size affected thirteen EBs and four EBs respectively based on number of employees. Similar to Katsikeas and Morgan (1994) and Leonidou and Theodosiou (2004), who found different foreign customer habits or attitudes, and hard to obtain reliable foreign representation were perceived significantly by smallerfirms,we also found these two EBs had a negative correlation with smaller firms' with less employees. The rest of the EBs identified in this study differ in numbers and type compared to the findings of Katsikeas and Morgan (1994), and Leonidou and Theodosiou (2004). Leonidou and Theodosiou (2004) also examined sales turnover in relation with EBs, and found that eleven EBs were related by smaller companies according to sales turnover. Four the EBs were found in both Leonidou and Theodosiou (2004) and this study. These four EBs are verbal or nonverbal language, different sociocultural traits, unreliable data and inadequate or untrained personnel. However, the remaining seven EBs in these two studies are different. Through the Spearman rho correlation tests, both the two parameters of export experience, a firm's general export experience and its specific export experience to China negatively correlated with some of the tested EBs, but, not all of them. Firms with more general export experience regarded the export problems, such as adapt new design and style, and offer technical or after-sale service, as less impeditive. They also have plenty experience at financing exports and providing warehouse facilities to support exports. 70 Their abundant export experiences also effectively help them reduce foreign currency exchange risk, and understand as well as diminish the difference of foreign customer habits and attitude. These results can be explained as firms with more export experience to the Chinese market are more familiar with government assistance programs, Chinese sociocultural traits, Chinese customer's habits and attitudes. They also possess advantages at overcome problems such as foreign currency exchange, verbal or nonverbal problems, foreign currency exchange risks, and slow payments issue. Additionally, the firms with more export experience with China also stated they felt less problematic regarding internal barriers, such as a lack of managerial time, inadequate or untrained personnel and a lack of reliable foreign representation, etc. This can be explained as they had already obtained human capacity to support their Chinese market export activities. The two parameters of firm's export experience both negative correlated with two external EBs, foreign currency exchange risks and different foreign customer habits or attitudes. The correlation degree between these two EBs and the two parameters of export experience were slightly different from the firm's general export experience, which displayed a higher correlation degree with the two EBs than the firm's specific export experience to China did. More specifically, the correlation degree between foreign currency exchange risks and general export experience is -.591 while with specific Chinese market export experience is -.555. The correlation degree of different foreign customer habits or attitudes with general and specific export experience are -.487, -.486 respectively. In general, the hypothesis that firm's EBs vary according to the two export experience parameters was tested and null hypothesis were rejected. The two Spearman correlation tests indicated that firm's export experience displays negative correlation with some tested EBs. The more export experience, the less they view the upon EBs as export obstacles. 71 Moreover, firm's general export experience and specific export experience to China correlated with EBs differently. Except the two export experience variables both correlated with two mentioned EBs, general export experience and specific export experience correlated with EBS differently at both the item and the amount of EBs they correlated. Moreover, the comparison results indicate that firms' specific export experience parameter correlates with more EBs than the general export does, especially more on external barriers. My findings also show the consistency with previous studies, which indicated that the firms with less general export experience have disadvantage at overcoming encountered barriers during their exportation activities than more experienced firms (e.g., Katsikeas & Morgan, 1994; Leonidou, 2000; Da Silva & Da Rocha, 2001). In contrast, Leonidou (2000) tested twenty EBs and found firm's general export experience negative affected fifteen EBs. In Leonidou's (2000) research, different foreign customer habits or attitudes, unavailability of warehousefacilities and Short of working capital to finance exports three EBs significant hindered less export experienced companies, with consistent with findings of this study. However, the remaining EBs identified in my study differed with those described by Leonidou (2000) in numbers and type. In according to EBs with special export experience, Katsikeas and Morgan (1994) found specific export experienced negatively affected four EBs in Greek food-manufacturing firms on exporting to Germany. Except barriers of lack of government's assistance was found in both Katsikeas and Morgan (1994) and my study, the remaining EBs identified in these two studies were different in both numbers and type. The results implied that economic, political, social-cultural and geographic locations as well as industry sectors significantly affect EBs thatfirmsconfronted (Leonidou, 2004; Katsikeas & Morgan, 1994; Da Silva & Da Rocha, 2001). In summary, both firm size and export experience negatively correlate with firms' EBs. Specifically, sales turnover correlates with more EBs than number of employees 72 parameter does. Moreover, firms' specific exporting experience correlated with more EBs than firms' general export experience does. These results imply that larger firms view less EBs impeditive than smaller firms. So did firms with more export experience to the specific export destination than firms with general export experience. 73 Chapter Six Conclusion and Recommendations 6.1 Summary and Conclusions This study explored the EBs that forest products firms in BC encountered or perceived in exporting to the Chinese market, as well as the different parameters of firm size and export experience in relation with the EBs. Through a website/telephone survey questionnaire, nine EBs were identified as the significant obstacles that impeded firms' Chinese market exports. Ranked in descending order of the significant degree, these nine barriers are; hard to identify business opportunities, problematic communication with Chinese customers, excessive transportation or insurance cost, can not offer satisfactory prices to customers, inability to contact overseas customer, verbal or nonverbal language differences, inadequate or untrained personnel, hard to obtain reliable foreign representation, and sociocultural traits differences. This study also displayed that two firm size parameters, number of employees and sales turnover, have different relations with EBs, with sales turnover displaying a higher correlation with EBs than number of employees parameters does regarding both the amount of EBs they correlated and the correlation degree. Moreover, a firm's export experience to the Chinese market and the firm's general export experience have different relations with EBs, with specific export experience displaying higher correlation with EBs than the specific export experience does in regard to both the amount of EBs it related. 6.2 Contributions This study contributed to the literature in the following three aspects: First, this study extend the EBs literature by extending the geographic coverage of EBs research. Canada's forest industry has previously received less attention in the export barrier literature, likewise the Chinese market as an export destination in past studies. Moreover, my concentration on a single industry sector and one export destination helps me to reduce the sample heterogeneity, and thus increase the power of empirical conclusion and theoretical implications. This study design helps firms better understand the single market, and to formulate the export strategies targeting at the Chinese market. Second, this study applied a combination research method to replace the traditional mail survey method. In the first time, this study combined website survey and telephone survey in order to provide a prompt, convenient and up-to-date research method in future EBs marketing research. Third, for the first time, this research examined and compared the relations of the EBs with two firm size parameters, the number of employees and sales turnover, in relation with EBs. Moreover, this study distinguished the export experience into a firm's general export experience and specific export experience in order to test the relation of EBs with these two parameters of export experience. The results supplement the literature of EBs, and provide the theory base on further analyzing different factors in affecting firm's export practice. 6.3 Implications The study will inform the BC government, forest products managers, policy makers, and trade associations with better knowledge of the present trade situation with China situation and further perspective. The identification of the EBs will also guide managers and policy makers to aware the problems that firms encountered/ perceived in order to search for proper methods to overcome these impediments. Moreover, this study demonstrates that two-thirds of the significant obstacles identified by the surveyed firms are internal barriers, which indicating 75 that many of these barriers could be overcome internally. Firms can overcome certain problems within the firm as within the province by recruiting trade experts who are familiar with Chinese market business traits and language, and accessing the trade assistance programs etc. The results acknowledge that the complexities and difficulties confronted by exporting firms are manageable issues rather than insurmountable obstacles (Morgan & Katsikeas, 1998). Finally, this study supports Bell's (1997) and Leoniodu's (2004), claims that the barriers found frequently occurr in the initiative stage of a firm's exporting stage. These research findings indicate that most of the BC forest firms are still in their market entry stage of exporting to China. They currently struggle in identifying market opportunities and overcomeing the conversation barriers to the Chinese market. Leonidou (1995b) stated that this initial stage of exporting is of critical for the successfulness of exporters according to the overseas market entry. Failing to deal with EBs at this stage may cause a firm's permanent withdrawal from the overseas markets (Welch & Wiedersheim-Paul, 1980). The results of this study can provide both corporate and public policy makers with valuable EBs identification to formulate suitable export marketing strategies and national export assistance programs respectively. More specifically, these results will assist managers and policy makers to design and tailor programs, especially according to the sizes and the export experiences of the firms. 6.4 Limitations and Future Research The study's findings and implications should be viewed in the light of certain limitations. First, this research is limited to a single industry sector and a unique export destination. Concentrating on one nation can eliminate the social, economic, cultural and geographic 76 differences caused by confounding variables that exist in each unique foreign market (Gripsrud, 1990; Lenidou, 1995). Moreover, focusing on a single industry also guarantees that the identified EBs are specific to a single industry, and, furthermore, provides a more concentrated assessment of EBs than would have been achieved by examining multiple industries simultaneously. As Leonidou (2004) and Katsikeas and Morgan (1994) argued, limiting research to a single industry and a specific export destination can minimize sample heterogeneity and increase the accuracy of the results. Such a research design limits the transferability of the results to other industries and destinations but, in doing so, ensures the power of empirical conclusions and theoretical implication is not compromised (Bilkey, 1978; Cavusgil, 1984a; Sullivan & Bauerschmidt, 1988) by the results being "attributable, at least partially, to industry type" (Silva & Rocha, 2001, p. 593). The geographic limitation of this study means that caution should be paid in attempting to draw generalized conclusions or applying these findings to other geographic locations and other export destinations. Also due to time and cost constraints, a particular limitation lies in the sample collecting procedures and the sample size. This study would be more representative had it contained more samples. Finally, only implicit inferences were made from the correlation tests between parameters of firm size and export experience and the EBs. Further research should apply a more sophisticated statistical method to analyze the relationships between EBs, and factors that affect them. Finally, future research endeavors should consider a long-term study design to track the development and the change of EBs that firms encountered in exporting to the Chinese market. 77 6.5 Recommendations This study forms the basis for recommendations with respect to BC provincial government, trade promotion associations, and forest firm mangers. Both government and trade promotion associations should continue their Chinese market promotion endeavours. Specifically, efforts should also conduct to minimize the EBs that firms encounter regarding human and financial resources. Forest product exports policy makers and export strategy designers should pay special attention to assist smaller firms and firms, which have few or no export experience to initiate export activities and mitigate their EBs. Forest trade associations and other trade promotion agencies should also ensure that their services are flexible, and customized to fit demands of firms with various organizational characteristics and export experiences. They should also assist their memberships at initiating business trips and forest trade shows in China to improve firms' competitiveness in the Chinese market. In addition, these organizations should provide workshops, technical support, and personnel assistance to improve managers' knowledge of socio-cultural differences between China and Canada. Meanwhile, these organizations should assist firms at gaining market information, market representatives, and skilled personnel. Managers in forest firms should continually upgrade their knowledge, and understand the opportunities and obstacles that exist in the Chinese market. 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The information gathered will help our research group to have a better understand of the export barriers that B.C. forest firms are facing, as well as the assistances that forest firms need in the Chinese market exploration. Your comments and perspectives are of great importance to develop a comprehensive understanding of current situation and further perceptions of BC's forest firms in developing China's market. Your participation is important for the accomplishment of this project, and it is greatly appreciated. The information collected in this survey will be absolutely anonymous and confidential. Information of you and your company will not be shown in any publications or be released to any other parties. If you want to get more information or need more clarifications about this study, please contact of the following investigators: Zhengzhe He at UNBC, Tel: $250-960-5741$, email: hez@unbc.ca; or Chris Opio at UNBC, Tel: $250-960-5868$ Thank you Sincerely yours, ZhengZhe He 91 2. Consent form for participants Natural Resources & Environmental Studies University of Northern British Columbia (UNBC) Room: 4-323, 3333 University Way, Prince George, BC, Canada, V2N 4Z9, Tel: 250-960-5741 A team of researchers from the University of Northern British Columbia (UNBC) are conducting a research study on developments and prospects of British Columbia forest products export to China. The objective of this research is to acquire a comprehensive understanding of Canadian forestry exports to China, the export barriers BC faced in Chinese market exploration and the effective help and assistance expected from governments in further fostering Chinese market export development. The research results will help the Canadian forestry industry to better understand the present situation and barriers that hindered forest firms in China market development. Moreover, the findings from this study will help government \& export associations to better understand the existing questions and form better market promotion activities to help Canada forest products on exporting to China. If you have any questions or concerns about the research, please feel free to contact the research leader Dr. Chris Opio at 250-960- 5868 or Dr. Jing Chen at 250-960-6480. Any complaints can be directed to reb@unbc.ca or Office of Research at 250-960-5820. Purpose of the study The purpose of the study is to study the development trends and prospects of forest products exports to China. The opportunities and barriers to exporting will be identified for BC forestry firms. Another purpose is to find the aids that BC forestry firms expect for further exporting to the Chinese market. Procedure for participating in the Survey If you agree to participate in this study, you will be asked to give your comments on 92 developing the Chinese market for BC forest products exports. There is a $3-page$ questionnaire which will take approximately 10-15 minutes to complete You can fill out either an online or paper version of the survey. If you prefer the paper version questionnaire, please inform the principal investigator. A copy of the consent form will be given to those who participate on paper version. If you chose to complete the survey online a copy of your consent form will be emailed to you within $2-3$ days. Risks and Discomforts Statement The information collected in this survey will not be used for any business purpose and participants' information will remain anonymous. There are no risks or discomforts to the participants. Potential Benefits to Subjects and/ or to Society The study results will offer a comprehensive review of BC forestry products exports to China, export development trends and the future opportunities and barriers that BC forestry firms faced on exporting to China market and the help and assistances that firms need on later market diversification. The opinions and preferences provided by the participants will enhance our knowledge on the existing problems Canadian forestry firms faced when they export to China market. The findings of the study have serious implications for both public and company policy makers. Policy makers may use this research results as a guide to developing proper export promotion programs and sound export marketing strategies. Confidentiality Your identity will be kept anonymous, and any information that is obtained in connection with this research will remain confidential. Information obtained from this survey is solely for education and research purposes. Only the principal investigator, co- supervisors, and research assistants will have access to the given information. The collected information will be stored at the survey website or locked area with research access only. The data collected will be kept for duration of 2-5 years after completion survey period. Afterwards the information collected will be shredded or deleted from the computer. 93 Rights of research subject As a volunteer participant you participation is completely voluntary, you may choose to answer only the questions you wish and can withdraw at any time. Once you withdraw, you information will be withdrawn as well. If you want to withdraw after the survey completion, please contact the researcher Zhengzhe He within 2 weeks to discontinue participation at 250960-5741, or hez@unbc.ca. For any questions, inquiries or copy of results you can contact zhengzhe He at hez@unbc.ca , 250-960-5741 or Dr. Chris Opio at opio@unbc.ca , 250-960-5868. Complaints may be addressed to the Office of Research, UNBC, 250-960-5820, or reb@unbc.ca. Signature of Research Subject I understand the information provided for the study "The Perception of export barriers to China by Canadian Forest firms" as described herein. My questions have been answered to my satisfaction, and I and the firms I belonged voluntarily agree to participate in this study. My firm and I have been given a copy of this form. Researchen(Print) Participant :(Print)_ Signature: Signature: Date: Date: 94 tiamm oi'EvpwiiifiK The Barriers That Forest Firms Experience or Perceive on Exporting to China I. Which of these products does yair i r a pfeitiee, flooring, «Binct» «!e,) - Slow nuny errtploj ees, dje* your tirat currc percent so 40 percent {not including 10 percent) Oover 40 percent 11; What percentage of your finn>sa!c turnoverwasita ON A (0 percent) O 0 to 1 o percent (not including 0) 0 1 0 percent to 40 percent (not including 10 percent). O over* percent 32. I low important is the development of the Chinese matfet to your firm? OMost important O Sorfieuhul important O Less important O Net important at all ODo not know 13, Does your firm have a Chinese market export strategy? OV*« ONo tae:»H£ KxpatitHg 14. The following factors arc export harriers. Please select and rank these barriers that your firm has experienced or you perceived during the. Chinese markets expansion. Please rank from 1 (-least significant) u> 5 (- most significant) Internal Barriers to Exporting Limited information to locate or analyze the China* market fafoimatkwiaJ Barriers o 0 Inability to contact overseas customers in China o o 0 o o o o 0 0 o o o o 0 o o o 0 o o o o 0 0 o 0 o o 0 0 o 1/aek of excess production capacity Shortage of working capital to finance exports Hani to develop new products for the Chinese market Mead to adapt export product's design or style Unable to meet export product quality standards or species in the Chinese market Unable to meet export package or labelling re-quiremeisls Hard to offer technical or aitersales service t .art not offer satisfactory prices to customers Prices Marketing: Barriers Difficult}' in matching competitors' prices Unable to grant credit facilities to foreign customers Complexity of distribution channels Hard to access expert distribution channels Distribution Hard to obtain reliable foreign representation Difficulty in supplying inventory to China Logistics Promotion i o o 0 o o o o 0 o o 0 o o 0 o Business opportunities in China are ditTicull to identify tadecjuate or untrained personnel Products z 0 0 0 0 0 0 Inconsistent and unreliable international market data from China Lack of managerial time to deal with Chinese e>cports Functional Barriers i 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Excessive transportation or insurance costs 0 o o |o o r , '.'•li'i'i-i'.i' \ . V '•iiiii. \^.r .ipjf i»e> i.v.i.r|\..v.Mi\ Procedural Barriers Problematic communication with Chinese customers Slow collection of payments from Chinese customers Governmental Barriers Task Barriers Lack of Canadian government assistance or incentives t Infavorable home rules and regulations Different foreign customer habits or attitudes Keen competition in the Chinese market Economic Poor or deteriorating economic conditions in China Foreign currency exchange risks Political instability » t h e Chinese market 8W