An empirical investigation on factors influencing on exporting medicinal plants

Article history: Received January 22, 2013 Received in revised format 26 April 2013 Accepted 20 May 2013 Available online May 26 2013 During the past few years, there have been growing interests on developing medicinal plant industry. This paper presents an empirical study on important factors influencing medicinal plant for developing exports in Iran. The proposed study of this paper designs a questionnaire and distributes it among 310 regular customers who are involved in this industry in city of Tehran, Iran. Cronbach alpha has been calculated as 0.802. In addition, Kaiser-Meyer-Olkin Measure of Samplng =KMO test was also computed and it was about 0.66, which is above the minimum acceptable limit of 0.5. The study uses Scree plot to determine important factors and there are eight factors including environmental issues, export supportive issues, potentials for export, business plan, export plan, structural barriers, competition capability and strategy. © 2013 Growing Science Ltd. All rights reserved.


Introduction
Exports in Iran are made up of two parts: oil exports and non-oil exports and oil based products are functions of oil prices determined by global economy.Many people believe selling natural resources does not necessarily improve the economy of developing countries since this would become a barrier on having more innovative ideas.Therefore, many people believe that developing countries must concentrate on more knowledge based products and do not depend on their natural resources (Krugman, 1997).
Expectedly, the role of exports in economic performance of developing countries has become one of the most intensive areas of research in recent years.The major impetus for most studies on this relationship is the export-led growth (ELG) hypothesis, which interestingly represents a dominant explanation in this context.The ELG hypothesis states that the growth of exports has a favorable effect on economic growth.However, the empirical evidence on the causal relationship between exports and growth is mixed.In particular, available time series studies fail to provide uniform support for the ELG hypothesis while most cross-sectional studies provide empirical evidences in support of the hypothesis (Leonidou, 2004).Pinho and Martins (2010) identified some of the major barriers that may hinder potential exporters and non-exporters from exporting their products.They used both parametric and semi-parametric binary choice models to study the data to assess important barriers for SME's exports.They reported that lack of knowledge of potential markets, lack of qualified export personnel, lack of technical suitability, degree of competition in the sector, lack of financial assistance (governmental and financial institutions), and lack of qualified human resources were the main export barriers.As Panagariya et al. (1995) stated, we may learn from export attempts accomplished from other countries and build necessary infrastructures.
According to Kumar and Janagam (2011) significant amount of foreign exchange can be earned by exporting medicinal plants to other countries.For instance, in India there are 880 medicinal plants species involved in all India.The Ministry of Environment and Forests, Government of India, revealed that there were over 8000 species of medicinal plants grown in the country.About 70 percent of these plants could be detected in the tropical forest; spread across the Western and Eastern Ghats.Export marketing is an essential economic development tool, because marketing activities are usually detected with economics of abundance associated with the function of guiding production purposefully toward maximum consumer satisfaction and value for money.When a nation generates far above the subsistence requirements, it has the task of encouraging the consumption of the output of commodities and services from its economy across its national frontier.The essential role of optimizing economic growth process can therefore, be credited to export marketing and or marketing.This is because marketing was instrumental in laying the groundwork necessary for rapid development of most developed nations.
A medicinal plant is any kind of plant, which contains substance implemented for therapeutic purposes, or it is used for synthesis of useful drugs.Medicinal plant has created new dimension in the field of Agriculture since it can create value added products.The medicinal plant industry puts together different aspects of this multidisciplinary industry and its global interest (Kumar & Janagam, 2011).They play substantial role in providing primary health care services to rural people and serve as therapeutic agents as well as important raw materials for the manufacture of traditional and modern medicine.Substantial amount of foreign exchange can be earned by exporting medicinal plants to other countries.In this way, indigenous medicinal plants play significant role on an economy as well.Julian and Ali (2009) examined the effect that different incentives to export have on the export marketing performance of Australian export market ventures and reported that Australian export market ventures would positively be influenced by the export incentive of the chance to diversify into new markets.
According to Babakhani and Haji (2011), exporting commodities and services play essential role on economy of developing countries.There are many countries in the world whose economy depends on exporting raw materials such as oil and gas.Many believe that countries cannot develop their economy as long as they rely on exporting one single group of raw materials.Therefore, there is a need to help other sectors of industries build good infrastructure for exporting diversified products.Babakhani and Haji (2011) performed an empirical analysis to determine the critical success factors on exporting different goods.

The proposed study
This paper presents a study to find important factors influencing on development of medical plant for developing exports.The study is performed among medical plants' producers and exporters in Iran.The sample size for the questionnaire has been determined as follows, where N is the sample size, q p  1 represents the probability, 2 /  z is CDF of normal distribution and finally  is the error term.For our study we assume and e=0.99, the number of sample size is calculated as N=310.We have designed a questionnaire to verify the over performance of the questionnaire and Cronbach alpha was calculated as 0.802, which is well above the minimum acceptable limit.In addition, Kaiser-Meyer-Olkin Measure of Samplng =KMO test was also computed and it was about 0.66, which is above the minimum acceptable limit of 0.5.Table 1 demonstrates details of the questionnaire and some basic statsistics.As we can observe from the results, there is no need to reduce any question from the survey.

Table 1
The results of some basic statistics

The results
Before, we perform factor analysis, we need to find out about the number of clusters.Fig. 1 demostrates the summary of our scree plot.  2 summarizes the results of our factor analysis investigation.Based on the results of Table 2, we extract eight clusters as follows,

Table 3
The summary of clustering Now, we are able to describe each category described in Table 3.

The first factor: Environmental issues
Table 4 summarizes the results of our analysis for the first factor.Based on the survey, "Lack of attention to cultural issues" is the most important factor followed by "Weak support from financial firms".Cronbach alpha = 0.699

The second factor: Export support issues
Table 5 demonstrates the summary of our investigation on the second factor.According to the results of Table 5, "Weak technology" is number one priority followed by "Poor investment", "Poor advertisement" and "Insufficient production".

The third factor: Potentials for export
Table 6 demonstrates the summary of our investigation on the third factor.According to the results of Table 6, "Weak technology" is number one priority followed by "Poor investment", "Poor advertisement" and "Insufficient production".

The fourth factor: Business plan
The next issue is associated with business plan related factors and Table 7 demonstrates the summary of our investigation on the fourth factor.According to the results of Table 6, "Weak technology" is number one priority followed by "Poor investment", "Poor advertisement" and "Insufficient production".

The fifth factor: Export plan
The next issue is associated with export plan related factors and Table 8 demonstrates the summary of our investigation on this factor.According to the results of Table 7, "Lack of access to an specialist for marketing planning" is number one priority followed by "Poor marketing planning and studies", "Poor advertisement" and "Inappropriate image from the country of destination".

The sixth factor: Structural barriers
The next issue is associated with structural barriers (Helpman & Krugman, 1985) and Table 8 shows the summary of our investigation on this factor.According to the results of Table 8, "Insufficient coordination between different ministries" is number one priority followed by "Uncertainty on currency", "Poor advertisement" and "Lack of knowledge on world's needs".

The seventh factor: Competition capability
Another issue is related to sufficient capability for competition with four factors and Table 9 shows the summary of our investigation on this factor.According to the results of Table 9, "Weak transportation" is number one priority followed by "High price", "Lack of management commitment" and "Weak infrastructure".

The seventh factor: Strategy
The last issue is associated with strategy with four factors and Table 10 demonstrates the summary of our investigation on this factor.

Table 9
The summary of extracted items for the competition capability According to the results of Table 9, "Lack of a reliable dealer" is number one priority followed by "Poor packaging", "Government policy" and "Embargo and political sanction".

Conclusions
In this paper, we have presented an empirical study to find important factors influencing medicinal plants for the purposes of export.The study has implemented factor analysis and determined eight important factors based on scree plot.The factors are environmental issues, export supportive issues, potentials for export, business plan, export plan, structural barriers, competition capability and strategy.

Fig. 1 .
Fig. 1.The results of Scree plot According to the results of Fig. 1, we can extract nine factors and Table2summarizes the results of our factor analysis investigation.

Table 2
The summary of statistical observations Extraction Method: Principal Component Analysis.Rotation Method: Varimax with Kaiser Normalization.

Table 4
The summary of extracted items for the first factor

Table 5
The summary of extracted items for the second factor

Table 6
The summary of extracted items for the third factor

Table 7
The summary of extracted items for the fourth factor

Table 7
The summary of extracted items for the export plan

Table 8
The summary of extracted items for the structural barriers

Table 9
The summary of extracted items for the competition capability