PAKISTAN A MARKETING CHALLENGE
By Mohammed Murad
Dec 13 - 19, 1999
The fading shadows of this century blossoms the dawn of a new
millennium. A Millennium, which brings with it, new hopes, fervor, enthusiasm,
opportunities and challenges. At Micro level, companies and individuals will strive to
compete and avail new opportunities, explore new ideas and new products. The stage is set
to break the shackles of certainty, and achieve the unachievable. The Macro front may
witness countries performing to the best of their abilities and available resources.
Performances instilled with creative instincts, professional enthusiasm, technological
support and expertise, keen observation and adaptation. To top it all, these performances
will be based upon a vision, a strong and clear-cut, vision.
In the midst of such performances, in the globally competitive arena,
Pakistan faces strong challenges. It has all that it needs to compete in this competitive
environment. All it needs now, is someone who can use its resources with wisdom, devotion
and determination. Someone, believing in the true potential of Pakistan. In this paper, I
will try and list a few areas of concentration, apply a few theories and give a few humble
suggestions. This forum is open for all of those who care for, and believe in, Pakistan.
The global arena presents some strongly competitive forces. The West
may show an aggressive stance through collaboration and consolidation. The European Union
is there to safeguard their interests. United they stand against a much divided East.
Then, there are other Unions and Groups of countries and states. They have formed an
Alliance, a Cartel to attain a stronger position against their competitors. If one country
lacks in some resource the other plugs in. Pakistan needs to consider the prospects of
such strategic alliances and collaborations.
We may find two distinct competitive segments. The first, comprising of
countries resourcefully developed with sound financial and technological backing. While
the other, specifically focusing on emerging markets, comprises of countries progressing
towards growth and development. At instances, there may appear to be another segment, a
segment involving the under-developed countries showcasing their lusty resources and cheap
A Country's economic development is more or less dependent upon its
Trade. List of products being imported or exported? In which area/product does it maintain
a competitive position? Intensity of Trade! Is it importing more than exporting or vice
versa. Then, we must analyze the Customer Base. Who are they? Where are they? What is
their respective financial standing and Trade Pattern? Countries throughout the world have
adopted different trade policies and theories. Some, calling for an influencing
governmental role, while others, limiting it.
Adam smith in his book, in 1776, 'The Wealth of Nations', said,
"the real wealth consisted of the goods and services available to a country's
citizens." In his theory of Absolute Advantage he said, "different countries
produce some goods more efficiently than others." This, is where a country gets its
competitive edge from, it focuses its resources in producing specialized goods and
services, thereby securing an edge over its competitors and a dominant position in the
overall International Market.
Smith and Ricardo gave favoring theories. According to them, these
practices would lead producers to efficient production of goods. There are many economic
theories available, dealing with Land -Labor Relationships, Labor-Capital Relationships,
Factors-Production-Theory etc. Our analysis would be based on a recent study made by
Michael E. Porter, under the title of, "The Competitive Advantage of Nations."
It is one of the most highly regarded theories being applied in today's world.
Exports vs imports
Nowadays we hear a lot about deficits and surpluses. Exports or Imports
both have their pros and cons. By exporting more we can make use of our excess capacity
and reduce our opportunity costs. Bulk exports can reduce the cost per unit and help us
attain economies of scale. Exporters can get high markup ratios from international markets
as compared to their local, domestic shares. At the same time governments can also gain
from these markup receivables. The cautious exporter may reduce his risk by spreading it
over different demand conditions thereby, if demand of a particular item falls in one
country it rises in another.
Imports on the other hand are not bad altogether. Through imports we
can get cheaper and better quality goods. For example, Japan imports rice because, its
locally produced rice is relatively more expensive. We can increase our supplies and make
additions in our product line. By choosing the right mix, we can achieve a harmonious
blend. Where, we get the fruits of both, the exports and the imports.
Factors, creating a difference
There are many factors that help and hinder in making a country
competitively attractive. Some countries have access to natural resources or climatic
conditions like Sri Lanka producing Tea and Rubber. In the same way Pakistan's overall
climate is good for growing Cotton, Wheat, Rice etc. Natural Resources may also include
certain acquired resources like, skilled labor, which can make that little bit of
difference that hangs between a developed, and an underdeveloped country.
Technology, in today's business, occupies a prominent position, as
products are becoming more and more sophisticated and economies of scale, all the more
important. Creating efficiency in resource utilization is important. At the same time,
favorable conditions are also necessary to meet your objectives. There are times, when a
country's size play an important role in providing a variety of resources. In the same way
economic sizes can be crucial to a country's exports. These are some of the factors
involved in aiding and facilitating a country. In reality, however, there are hundreds of
factors affecting either directly or indirectly. The law and order condition in Karachi
can be a factor. In the same way rapidly changing governments and their policies can be
another. These factors tend to create the foundation of all development and that is why we
need to sharpen our focus on them.
'The Porter diamond
Porter, a Harvard Business School professor, conducted a comprehensive
study of 10 Nations to learn about the factors leading to a Country's success; published
in "The Competitive Advantage of Nations". He has introduced four key
determinants of National Competitive Advantage termed as, 'The Porter Diamond'.
NECESSARY FACTOR CONDITIONS:
Factor conditions, involving inputs which are used in factors of
production such as; Land, Labor, Natural Resources, Capital, Infrastructure. According to
Porter, there are other factors too, vitally important in making a country, competitively
strong. Porter calls them, 'Advanced Factors' (Communications infrastructure, skilled
labor, research facilities and technological education). According to him basic factors
such as land, labor, raw materials can easily be accessed and duplicated, it is the
specialized factors, which create the difference and thus a competitive advantage.
For example, apples are most commonly grown in Balochistan and other
tribal areas of Pakistan. Their produce is internationally competitive, not only in price
but also in quality. They have introduced and adopted an appealing variety of apples. The
only thing lacking, is a solid infrastructure. The resource needs protection from the
Government. It needs hi-tech equipment for its packaging and polishing. It needs storage
houses to save the freshness of this tender produce, and roads for a speedy and timely
transportation. This is just one example, there are numerous other areas which need to be
considered as favorable investment opportunities. We just need to pick the right ones. The
Ones, giving us maximum returns. Try plugging these holes in!
LAB ASSIGNMENT: If we apply this to other countries we may find
a pattern. Holland is world's top flower exporter because it maintains a list of
sophisticated factors like, Research Institutions, Packaging, Cultivation and Shipping
Infrastructure. Denmark, on the other hand, has hospitals concentrating on studies and
treatments of diabetes and thus it exports Insulin. In Pakistan, we have agricultural
institutes, Leather and cotton research centers. As regards the sophisticated labor needs,
our planners and policy makers are trying to boost the country's computer literacy. Our
recent government had been involved in giving incentives to companies for transferring
technology so that our labor can have a hands-on experience of present day hi-tech
equipment and machinery. To fulfill the need for a stronger communication infrastructure,
heavy investments of time, money and efforts have been made. According to the '9th Five
-Year Plan' an amount of Rs.100 Billion had been allocated for the development of new
roads and highways. Pakistan is in dire need of a new port. In this regard International
Consultants have conducted a feasibility study for the 'Gavader' deep-water port. It is
high time for Pakistan to grow strong from inside and face the hostile challenges of the
PAKISTAN'S DILEMMA: Pakistan is blessed with abundance of
resource. Our skilled or sophisticated workforce is one of these blessings. Let's consider
this workforce as our (Pakistan's) product or offering. Now, we know that every product
has a 'Product Life Cycle'. It is, at, about the maturity stage that you can expect to get
maximum returns from your product. If we apply this cycle to our skilled labor resource,
we will see that, at the stage where value is added the product is taken away from us.
Skilled workforce, leave Pakistan. Pakistan is adding value to their skills and others are
reaping the fruits. Pakistan invests in them, help them go through the initial growth
stage and when the momentous point is reached these finished value-added products are
shipped out. What does Pakistan get out of this? Who would remain behind if these
intelligent brains are exported, Unskilled workers!, or those, who stayed back because of
some mishap or catastrophe.
Pakistan does get some of this resource back but only after it has been
milked out of its golden years of excellence. A stage where, the Product's Life has
reached its decline, where the product no more contains the magic of vim, vigor and
At the same time, we cannot deprive these young enthusiasts of making
their destiny, a chance for them to grow and excel. When you don't get opportunities at
home you go out in search for them and that is what they have been and are, doing. This is
truly a dilemma for Pakistan.
Home Market's demand patterns help in shaping a company's
responsiveness towards buyer needs. Nations can gain a competitive edge if sophisticated
and demanding buyers provide a clear picture of their needs and wants, thus preparing the
ground for innovation, product development and improvement. For example a French
Multinational, Danone, who specializes in Biscuits and Bottled water, is rated amongst the
top biscuit manufacturers. It owes a lot to its local buyers who molded Danone into a
We maintain a large portfolio of products. In Value added or Export
industries we have Leather, Textile, Footwear, Surgical and Sports Goods, Carpets, Frozen
Concentrated Citrus, Juices, Sea -food, Marble.
According to Porter's demand theory these excellent products are a
result of pressures placed on producers by the buyers to innovate, secondly through
sophisticated domestic buyer needs ending up in economies of scale. In this respect local
demands occupy the foundations of these high quality, internationally marketable products.
Is Pakistani buyer sophisticated? In Pakistan sophistication varies from segment to
segment. It is not necessary that all exporting entities sell locally, and that, their
exports originated from local selling. The goods they are offering to the local market can
be comparatively, of a lower quality than the goods they are exporting. This lagging in
sophistication and sophisticated demand may be attributable to lack of education,
financial problem or social and environmental influences. It is a general perception in
Pakistan that if a product is made locally, it has the tendency of being subjected to
adulteration. Even drugs, made by foreign companies in Pakistan, fall in this category.
Local brands have tarnished their image of being a credibly strong provider of value.
Developing an image of trust and quality may take a long time, but destroying it won't.
Developing a venerable image is rather easy than maintaining it.
That is the primary reason of not being able to compete
Internationally. Porter found that in New Zealand the British "stiff upper lip"
attitude prevented complaints. These Complaints can become the root cause of innovation,
product enhancement and development. How are we going to achieve the targets of Demand
Conditions? Firstly, our local buyers are progressing towards the point where they display
sophisticated demand and responsive behavior. Secondly, the base for innovation, product
improvement and quality maintenance is coming from Foreign Markets. Many exporting
companies have been barred because of their sub-standard products. For them, getting a
quality assurance certificate is the first step and maintaining it is another. Pakistan
has now become aware of the need for such credible quality assurances. Pakistan Standard
And Quality Control Authority (PSQCA) has been established and according to the Board of
Investment's recent report, the establishment of ISO-9000 certification body within PSQCA
is underway. This will not only help in reducing costs but also, in ensuring a speedy
RELATED AND SUPPORTING INDUSTRIES:
Next, on Porter's priority list is the existence of nearby related and
supporting industries. These industries work as back-up operators providing timely raw
material according to requirements. Porter found that, in Italy shoe manufacturers learn
about new textures and colors of leather from leather manufacturers. While leather
manufacturers learn about new trends and styles. In a nut -shell, strong bonding may help
in providing chances for innovation at all levels of the value-added chain. Porter refers
to these industries as 'clusters'. In Pakistan industries like Leather, Cotton, Marble
etc. have related and supporting industries present within the proximity helping the final
manufacturer in reducing its transportation costs and at times adding value to finished
FIRM STRATEGY, STRUCTURE AND RIVALRY:
Strong domestic competition, allow companies to innovate and formulate
winning strategies. Those who win their domestic battles are most likely to win their
global ones too. Take the examples of Japan, Germany, Italy and the US, where, intense
domestic competition in PC markets have provided the means to grow by innovation and
up-gradation. In Pakistan, there are cartels and alliances, which block the entry of new
and independent firms, thus, making it difficult for smaller firms to enter and grow in
the domestic market.
Applying the diamond strategy
Porter's Diamond works in an integrated fashion. Every factor leading
to and supporting for, the other. Countries play a vital role in providing favorable
conditions for companies to grow and flourish domestically, as for these, are the players
who directly participate in International Trade. Thus, strong domestic rivalry can spur a
wave of innovation thereby creating specialized and skill labor resources. It may lead to
more demanding and sophisticated customers and at the back, we may see the supplying
industries flourish. This will lead to a compact structure of industries including
finished product manufacturers, supporting firms and a specialized pool of labor resource.
If we apply this system to Pakistan, we may find a few gray areas and a few bright and
shiny ones. There is hope and there is despair. Regarding the first part, which demands
additional sophistication like research facility, skilled labor, technological knowledge
etc, government has provided infrastructure for the availability of these resources. As a
result there is an abundance of skilled resource but at the same time, due to the lack of
domestic opportunities these resources are being shipped out of Pakistan. Scholars,
Researchers, Marketers, Computer Wizards are going to the land of opportunity. Why?
Because two of the four factors are not fulfilled, lack of related and supporting
Industries and the absence of firm strategy and rivalry. Take the example of India, where
the presence of these factors has helped in flourishing their computer Industry.
What about the Infrastructure! Can our government make heavy
investments in it? Is it earning sufficient revenues to invest in such projects? How good
are we in collecting taxes? Are we facing a surplus or a deficit? Our recent Government
made some plans of improving the overall export environment in Pakistan, whether, the
plans matured for implementation or not is another story. The creation of Free Industrial
and Free Trade Zones, is a favorable task. The criteria set for these zones states,
"the unit should be 100% export-oriented"(Board Of investment), which suits well
for companies with dispersed manufacturing. Like, 20% of the product is made in Pakistan,
10% in India, 60% in China, and so on. This proves to be in-line with the act of locating
productive activities where they can be performed most efficiently thus enabling, value
adding industries to prosper. At the same time suppliers in the form of facilitators, will
be located nearby to fulfill all the requirements of supporting industries. Another
commendable criteria set for these trade zones is that, these Zones are required to employ
"skilled manpower" from within the country, thus, helping to ease the burden of
unemployment of skilled labor. Marble, Textile, Leather, Sports Goods, Surgical
Instruments all succeeded because of the availability of all the key factors.
Here, we revert back to Porter, who says that, National Policies can
deeply affect a firms International strategies and opportunities. According to him,
Governments should focus on specialized factor creation, limit direct cooperation among
Industry rivals thereby curbing the congenial environment of alliances and mergers. Every
Country must strategically invest its resources, forgo something, to gain something. Not
one country has leadership in all areas. Italy has it in Shoes and Tiles, Japan in
Automobiles and Electronics, Switzerland in Watches and Scientific Instruments, US in PC's
etc. This is the strength of a competitive strategy, doing something, which cannot be
copied or duplicated by rivals!
Limitations of the diamond
No single theory promises to give prosperity to, and solve all the
problems of, this world. The mere existence of favorable conditions is not sufficiently
enough to promise industrial growth. The absence of any of the four conditions in the
domestic environment may hinder a company's ability of being competitive in the global
arena. Furthermore, this model is devoid of predictive attributes and limits itself to a
small number of variables. For example, it does not include the effects of International
Quotas and Biases. What struck Pakistan recently? Sanctions! The recent government's
decision of going Nuke was retaliated by International Community through bans and
sanctions. Now, the change of Power will have its own consequences. What about these macro
factors! Where can we put issues like, child labor, which has deeply affected our Carpet
and Sports goods industries. There are so many factors and variables involved in such a
huge study, that it is quite difficult to devise a simple theory suitable to all. However,
this theory works wonderfully well in creating and erecting a basic structure and
foundation of a Nation's ability to win and compete globally.
Controlling the uncontrollable
Throughout this analysis we have talked about different factors and the
role of governments in making these factors and conditions suitably available for
businesses. One important aspect of this analysis is, that, governmental policies should
remain uniform and for that reason the government should remain intact throughout its
period of reign. Porter's Diamond assumes the presence of such strong and stable
environments, conducive to progress and prosperity. Unfortunately, in Pakistan, this is
not the case. Governments come and go, likewise, their policies change too. We need a
stable Government, one who can put up a stable system of policy and structural reforms.
Today as we see it, foreign companies are hesitant in investing under such hostile and
volatile environments. We have a competition on our hands. Rival countries are posing to
be an attractive investment opportunity and in this shaky economic and political system of
ours, we may find it difficult to compete. To attain a competitive position, we need to
put control on these threatening factors, we need to control, the uncontrollable!
Come to Pakistan:
Year 2001 has officially been declared as 'The Travel Year of
Pakistan'. These travelling tours can create good prospects for foreign investment. Sri
Lanka exports its services through foreign tourists. If these tourists find attractive
investment opportunities in Pakistan they are surely going to avail them. Foreign
interest, is what those Trade /Export Zones require. Pakistan wants value additive
companies to populate these zones and tourism, besides other factors, can help.
Pakistan, is our product! We all need to provide favorable conditions
to make this product marketable. Factors, whether Micro or Macro both, are important. At
Micro level, companies and individuals play their part, and at the Macro stage, government
and its agencies. Factors show interrelated dependencies. When we are marketing our
products globally, we are Marketing Pakistan and if Pakistan gets marketed, we get
marketed. Not one can survive without the other. Porter's theory may not define each and
every factor applying on each and every country and condition. Exceptions are there.
Still, it is one of the most highly regarded and practically sound theories being
implemented in the world. I have made an attempt of writing something for my country. It
started with a thought, just like Pakistan was. When we acted upon our thoughts, we
achieved Pakistan. Before acting we need to clear our thoughts, our vision. We need to see
a clear picture. Picture, of an excellently superior, successful and dominant Pakistan.
Picture it, we might get it!!!!