Gobbee, Jose E.

Hagen, James M.

English

Research Papers in Economics

Responding to Foreign Market Opportunities:
A Survey of U.S. Dairy Manufacturers
JOS6E. Gobb4e and James M. Hagen
Survey Background
During the Summer of 1999, a mail survey
of dairy manufacturers was conducted to gauge
manufacturers’ interest in serving foreign mar-
kets. Through secondary sources, supplemented
with interviews, 131 ftrms were identified as re-
portedly being involved in foreign activities.
From this list, trading firms and subsidiaries of
foreign firms were eliminated, leaving a total of
82 fins. The largest 112 U.S. dairy firms, not
already on our list, were added for a final sample
of 200 U.S. dairy manufacturers. Of this sample,
93 responses were received for a response rate of
47 percent.
Findings-Summary
Among dairy manufacturers, there is a
widely held belief that the future competitive-
ness of the U.S. dairy industry will require that
U.S. manufacturers increasingly serve foreign
markets. Somewhat fewer fms (but still more
than one-half of our sample) expressed interest
in starting or increasing their participation in
foreign markets with motivations including slow
growth in the U.S. markets, the need to follow
customers to foreign markets, and competitive
pressures as domestic r~gulation aud trade barri-
ers fall world-wide. The strategy that was most
mentioned in commencing foreign activity was
indirect export. Very few firms expressed inter-
est in licensing, co-packing, or foreign direct in-
vestment though a huge majority of those in-
tending to start or to expand foreign operations
were interested in alliances with international
food retailers, foreign competitors,
non-dairy firms having international
in that order of preference.
and U.S.
networks,
Jose E. Gobbee isamaster’s degreecandidate, andJames A.
Morgan is assistant professor, Department of Agricultural,
Resource, and Managerial Economics, Cornell University,
Ithaca, NY. Requests for tiulher information maybe directed
to Sharon Wyllie at (607) 255-1622 or <srw2@comeH.c&>.
Findings-Detail
Expectations Within the Industry of Future
Expansion into Foreign Markets
l
l
l
Forty-one percent of the respondents said
that their U.S. dairy operations were threat-
ened by foreign competition.
Seventy-two percent said that, in order to
remain competitive, the U.S. dairy industry
should increase its foreign involvement.
The explanations given for this need to in-
crease foreign involvement included in-
creasing opportunities caused by market de-
regulation and the likelihood of foreign
competitors entering the U.S. market.
Motivation for Participation in Foreign Markets
l
l
In reference to their own firms’ strategies, 61
respondents (65 percent) said that their firms
were interested in starting or increasing for-
eign activities. A decrease in growth rates of
U.S. demand for some dairy products and the
need to follow customers abroad were the
most important factors they gave.
The motivation for firms’ interest in foreign
markets was influenced by their product spe-
cialization.The most common motivatorswere:
-ice cream and fluid milk fins-slow domes-
tiC demand grOWth;
-cheese firms-need to supply customers
abroa& answer unsolicited orders, and es-
cape from domestic competition; and
-ingredients firms-fall of trade barriers.
Foreign Market Entry and Expansion Strategies
l Firms interested in starting foreign activities
were interested in indireet exports (exports
through U.S. intermedities). Most of theseGobbee,JoseE. andJamesM. Hagen RespondingtoForeignMarketOpportunities.. . 119
flrrns were interested in starting strategic alli- followed by a foreign competitor (34 firms) and
antes with firms that have international by a U.S. firm not in the dairy industry but hav-
knowledge and networks. Strategic alliances ing international networks (27 firms). Co-
were particularlyprefaed by iirms expressing
a lack of internationalmarketing knowledge.
packing arrangements with foreign fms (such
that the foreign fm would manufacture the
l The most desired type of alliance partner product by contract for the U.S. firm) accounted
was international food retailer (40 fins), for 38 firms.

RESPONDING TO FOREIGN MARKET OPPORTUNITIES: A SURVEY OF U.S. DAIRY MANUFACTURERS

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