No need of a Blue Ocean strategy for SL exports!

In the recent past I have seen many news releases and articles on the declining export industry of Sri Lanka. But, in my view, highlighting issues does not get anywhere. We need to speak to the industry and ask what they require to change the direction with just small meaningful changes.

Blue Ocean?

Blue Ocean Strategy was conceptualised by Chan Kim and Ranee Mauborgne. In simple words, what it means is that one way to win in the current entrenched competitive market place of today is by creating a product to move into an uncontested market place and making competition irrelevant. This in my mind require strong investments on R&D as well a good sense of driving the market place with strong advertising and communication. But in my view we do not need these high flying theories give the reality we are up against.

Reality: Last week there was a forum organised by the private sector on this issue of declining exports and the findings were just simple key initiatives. Let me capture some of them.

1) Clear VAT refund issue – builds positivity

One of the key cries of the private sector is to clear the backlog and reduce the time lag on the VAT refunds. Many exporters last week went on to say that they do not need any handouts but just to get the VAT refunds due to them can ease out the working capital issues they are up against given the high interest rates that they are contracted to pay.

This clearly dawned on many of us that exporters are on survival mode given the economic down turn in Europe and a slowing down in the US. It had nothing to do with technological investments or mindboggling Blue Ocean strategies that we see people writing on.

The question is, how can this be worked out given that reports in the media mention the cash crunch in the system?

2) EDRS scheme – to support winners

A point mentioned here was that whilst noting that the scheme was discontinued in 2009, there were payments due to exporters prior to discontinuation of the scheme, which have been invested by the exporters.

I feel such issues need to be corrected and thereafter maybe a cost benefit analysis needs to be done if this scheme should be introduced. The logic being I visited a South Korea export board and they mentioned that the country was clear on their policy. Winners were selected and supported by the government rather than a blanket approach of financial schemes.

3) Streamline the TIEPS scheme

There were many claims and counter claims on gaps in procedure that are making the TIEPS scheme a hassle rather than an enabler. Given that technology is developing rapidly, there is no option but move to driving this online. It will bring in a positive vibe given that anyway it will have to be paid on a later date. The question is the cash flow available to make the online strategy feasible.

4) Fixed freight charges

An interesting point that was raised. Many exporters claimed that the regular ad hoc freight charges change affects the overall pricing strategy of the products. Apparently a policy is in the process of being introduced. If this can be firmed up we can give some stability of price to the export industry. This does not require Blue Ocean strategies for sure but some aggressiveness to get the job done.

5) Industrial zone linkage

Given that almost 73% of exporters are SMEs, a point highlighted was that all trade fair participation as well as any technology transfer training to be informed to the industrial zone coordinators in the country. Apparently there are 47 industrial estates in the country that house around 18-20 SMEs. This once again does not require innovation but a simple email that goes out to the respective focal points and then some degree of facilitation that can be done by the chambers.

6) Ceylon Tea campaign

With the tea sector closing in on the two billion dollar mark, a key strategy requested was the launch of an aggressive Ceylon Tea campaign with a focal advertising agency at the helm. If one examines the exports in 2012, in volume and value Sri Lanka has declined. In quality by -0.85% and in value -5.30% whilst the key markets that have performed are Turkey at +16.7% and Libya at +118.4%, Ukraine at +14.3% but key markets like Russia have declined by 19% in the tea packets, Syria too at -23% and UAE at -30%. A point highlighted by the private sector was that we must ensure a sustainable process in the activation of the campaign so that it can be replicated later on. The availability of funding for the campaign that was directed by the private sector is a case in point for other industries to follow suit. This can include rubber and cinnamon at the inception.

7) Drive ICT – growing at 34%

More focus must be given to the ICT sector given that it is growing very strongly. This includes software development, network management, web application, the BPO business, designing and quality checking, data mining, embedded system designing, e-publication, ICT consultancy, KPO, customer care and call centre support, just to name a few. Maybe at the outset an analysis must be done on the current status of the industry and then look at complex things like branding this sector given the gaps of collecting the data. This sure does not require Blue Ocean strategies or thinking in my view.

8) SL-India FTA – 10 sectors

Given that exports into India have declined by almost 21% in the first quarter of 2013, maybe an option could be is to identify some key sectors and drive ruthlessly to drive business. Apparel is growing by 24% into India. Insulated wire and cables are up by 9% to almost 10 million dollars as at March 2013. Boat building and cloves is also on a positive trend. Glass and glass ware, pepper, woven fabrics, toys and sports requisites are also doing well together with a strong performance in the boat building segments, which are interesting categories though most of them are unbranded in nature. Rather trying to drive strategies like Blue Ocean, maybe a better option is to identify the bottlenecks like certification requirements, tests, etc., and see how we can move the overall export number to achieve last year’s performance by end of third quarter 2013 from the current -21%.

9) Drive cess to the industry

Even though many State organisations support the export sector, the fact remains that the cess collections by statute must be directed to the relevant agency that must invest on R&D and systemic development of the industry. This is what was happening and must happen given the experience of countries that have developed their export base.

10) Export bank

Have a dedicated export industry led bank that can channel development finance targeting the SME sector. This can also drive in strategies like the Export Oriented Investment Support System (EOISS) which will be on the incremental export earnings. This mechanism can also ensure the export trade brings the money earned into the country. Interesting thought though it may not be very popular.

IPL spirit to business

In simple terms, let’s try to drive business by correcting the current anomalies from a simple aggressive frame of reference rather than trying to drive new things in the short term. Just like the IPL we must bring in this culture into Private-Public Partnerships. Things will pick up for sure.

(The author is an expert on export strategy development and an award-winning marketer. He was the eighth Chairman of the Sri Lanka Export Development Board and first Executive Director of the National Council for Economic Development. He currently serves on many private and public sector boars. The thoughts are strictly his personal thoughts.)