An export-oriented strategy is a business approach that focuses on producing goods and services for sale in foreign markets. This strategy involves targeting international markets for a company's products and services and often involves exporting these products and services directly to customers in other countries.
There are several reasons why a company may choose to adopt an export-oriented strategy. One reason is that it allows a company to tap into new markets and reach a larger customer base. This can be particularly beneficial for companies operating in small or mature domestic markets, where growth opportunities may be limited. Exporting can also help a company to diversify its customer base, reducing its reliance on any one particular market.
Another reason for adopting an export-oriented strategy is the potential for increased profits. In some cases, a company may be able to sell its products and services at higher prices in foreign markets, particularly if they are in high demand or if the company has a strong brand reputation. Additionally, exporting can help a company to take advantage of favorable exchange rates, which can increase the profitability of its sales.
However, there are also challenges associated with an export-oriented strategy. One challenge is that a company may need to navigate complex regulations and customs procedures in order to sell its products and services in foreign markets. Additionally, a company may need to adapt its products or services to meet the needs and preferences of foreign customers, which can be a time-consuming and costly process.
Finally, an export-oriented strategy can also be risky, as it can be affected by changes in foreign exchange rates, political instability, and other factors beyond a company's control. Companies that rely heavily on exports may be vulnerable to shifts in global economic conditions, which can impact their sales and profitability.
Overall, an export-oriented strategy can be a valuable way for a company to expand its operations and increase its profits. However, it is important for companies to carefully consider the potential risks and challenges associated with exporting, and to develop strategies to mitigate these risks in order to achieve long-term success.
Export Oriented Strategies Analysis
Read also Strengths And Weaknesses Of Multidimensional Indicators Of Poverty There exists, also, real success stories backed by export oriented policies. Consequently, the demand for exports grows, thus, increasing the local production. Jun 2007 , in a study involving 81 countries with data from 1960 to 2003, established that the bi-directional relationship between exports and growth was positive and even stronger for the causal flow form output to exports. Exporters have to compete on international markets against experienced competitors. Innovations taking place on the eastern side of the globe, e. Cointegration testing and estimation technique were employed. Similarly, Jung and Marshall 1985 studied the export-growth nexus in 37 developing countries.
Meaning: The strategy of export-led growth considers exports an additional or alternative source of demand, which would initiate accelerated domestic economy. Read also Causes Of Inflation Across Developed And Developing Countries Economics Essay In contrast with the above theories and empirical evidence, some studies reject the export expansion hypothesis. There exists, hence, a reciprocal causal relationship between the two variables. This is because, it is individual firms that innovate and harness technological change and compete in the world market Suranovic, 2002. Empirical results suggested that exports granger caused economic growth. He also argued, for a trade policy to function effectively, developing countries have to make sure that, this policy is well integrated with their industrial policy. Since the mercantilists, classical economists saw that trade stimulated growth in mainly two ways.
Export Oriented Industrialization In Developing Countries
Setting your goals The answers to the questions above will enable you to develop objectives or goals for your export business. Herzer 2010 , similarly, challenged the common view that exports expansion lead to an increase in economic growth. The trade liberalisation process employed by the Spanish authorities over four decades was successful. Export expansion is seen by theorists as an instrument to achieve economic growth. Thus, in a world of growing protectionism it is not quite logical to think of smooth and uninterrupted expansion of all types of exports from India to the developed countries of the world. Henceforth, in developed as well as developing countries, the subject is a still highly debated one. Opponents of the theory suggest that relying on the export of a commodity constitute a development trap and that the theory held only for countries rich in resources.
All these theories interpreted the relationship to some extent but ignored that the international environment is complex and rule-less. As from the late 1940s, extant literature increasingly criticised the gains from international trade. As far as the export-expansion hypothesis is concerned, three researchers have undertaken a meta-analysis in the field, namely, R. To them, Balaguer and Jorda 2001 , also, investigated the dynamics of growth in the European Union. As long as there is a ready market for these products, export oriented economies can keep on humming. Economic growth was, thus, achieved. Critics, however, treat exports as an essential component determined by domestic growth.
Using cross sectional data and ordinary least squares, researchers, have found that exports is a strong determinant of economic growth. However, the benefits that proponents of the import-substitution strategy expected- high employment rate, reduced imports and favourable exchange rate- never materialised. However, this strategy is risky compared to manufactured goods. To them, Balaguer and Jorda 2001 , also, investigated the dynamics of growth in the European Union. Hence, economic growth is not fostered by an expansion in exports.
Capital and labour will flow in the country and productivity will increase. In a World Bank report of 1987, exports-orientation is said to have shaped the development of a number of countries as well as policies of the World Bank itself. The principle of comparative advantage, which prescribe countries to specialize as to their factor endowment, first described by David Ricardo, forms the theoretical basis for traditional trade theory and provides the rationale for free trade. Mookerjee 2006 and Martins and Yang 2009 and Tingwall and Kungwall 2010. Standard of living in countries prone to export expansion is improved. It was viewed as the most important way for developing Asian countries to gain economies of scale. Developing a good export business strategy starts with the same process of sales and marketing planning and preparation as any other business activity.
Export expansion contributed to economic growth in various ways. Empirical research was much centred on this aspect of the export expansion hypothesis. Krugman 1979 stated that the increase in demand for output of a country through the growth of exports allows the exploitation of economies of scale for an economy. Another study investigating the hypothesis in Spain by Balaguer and Jorda 2002 indicated a long-run steady relationship from exports to growth. In small open countries, for example Singapore and Israel, development of manufacturing industries and exports accompanied and reinforced each other in achieving economic growth. Moreover, if the international forces tend to determine the location and spread of industries it will be difficult to achieve the two main plan objectives: a Equitable distribution of income, and b Reduction of regional inequalities.
Nevertheless, neoclassical trade theory put forth that economic growth may itself granger-cause exports in contrast with the normal export-led growth. In the 1920s, as Canada attained economic growth by exporting primary products such as fish, minerals, fur, lumber amongst other, Macintosh and Innis propounded the staple growth theory. According to the World Bank 1993 , agreement on export-led growth emerged amongst economists due to the success of free-market and export policies of the East Asian Tigers. The long-run effect was generally negative. It is a necessary condition, because newly emerging firms in developing countries need some policy to help them grow strong and to safeguard them from intrusion of foreign firms in their market, that have a negative effect on their growth.
Exports did not spur economic growth at all. Empirical research was much centred on this aspect of the export expansion hypothesis. Eusuf and Ahmed 2008 stated that An error correction model was applied to data from South East Asian countries: Pakistan, India, Sri Lanka, Bhutan, Nepal, Maldives and Bangladesh. Unsuitability of the Policy in India: However, several economists have noted that, though justifiable on theoretical grounds, the policy of export-led growth is not suitable for India. Infant industries in developing countries can mainly be protected through import tariff mechanism, which reduce imports from the rest of the world and raises demand and production of domestic product. A causality test to establish the short run linkage, nevertheless, ascertained that economic growth granger caused exports in Nigeria.
And in addition to these, developing countries have to get support from advanced countries, through reduced import tariffs for goods from developing countries and by giving developing countries a chance to protect their industries and to get easy access to international market. These tariffs helped protect fledgling industries from competition with more efficient firms in Britain and may have been the necessary requirement to stimulate economic growth Suranovic 2002 Bairoch also analyzed data and concluded that the different the effect of free trade on developed and developing countries is. Get Help With Your Essay If you need assistance with writing your essay, our professional essay writing service is here to help! In this manner, exports served to promote economic growth. This was prevalent mainly in less developed countries. The Johansen cointegration showed no long run relationship between the variables. Those provided the material basis for economic development. Countries owning advanced technologies would through exports, gradually, transfer their technologies and allow others to utilise them.