EXPORT STRATEGY FRAMEWORK

Export Strategy Framework

Export Strategy Framework

This is a Broad paper which would be mainly addressing towards development of proposed export strategy. This export strategy is made mainly to be addressed to Board of Directors of ECCO for adopting and implementing the export strategy. This paper is made to highlight over an analysis of the proposed strategy over the titled issues. (Prahalad, 1990, 79)

International trade theory: Why and how firms engage in international trade

Firms engage in international trade as they view a market potential of their products or services also required in cross border countries. Another factor is that the firm has developed such as brand image of its name in international market that its products and services are exported abroad. Although a growing number of historically oriented studies (Abu-Lughod, 1989) have shown that trade has been a salient issue among empires, states, and cities for centuries, it has become such a critical contemporary issue because countries' economies are now, more than ever, open to trade flows. Technological progress has resulted in dramatically falling transportation and communication costs, whereas various liberalization policies have freed the exchange of goods and services from various tariff and nontariff barriers. (Field 2007, 147)

However, firms engage in exporting for a variety of reasons and a number of theories have attempted to explain this activity. There is a consensus, however, among experts that firms, particularly small- and medium-sized ones, often engage in exporting reactively rather than pursuing a proactive and conscious strategic thrust intended to make them international (Leonidou, Katsikeas, Palihawadana and Spyropoulou 2007).

Approaches used by firms to adhere/avoid/bypass instruments of trade protection or to benefit from trade promotion and investment tools (at national, regional and global levels)

A country does not have to be highly developed or technologically advanced to reap the benefits of the global economy. To see how this works, consider the example of the United States and Mexico described before. In this case, the United States is absolutely better at producing each good. (Stalk 1992, 57)s

However, relative productivities differ across the countries. In the United States, making one computer takes twice as long as harvesting a bushel of corn. So for each computer produced, the United States must forgo production of two bushels of corn. This trade-off between the outputs of each good is known as the opportunity cost of production. (Allan 2002,14)

National level

So while the United States has the absolute advantage in producing both goods, Mexico is relatively better at making corn (e.g., they do not have to give up as many computers for each unit of corn produced). We say that the United States has the comparative advantage in computers, and Mexico has the comparative advantage in corn.

Both countries can benefit if they specialize based on comparative advantage. Sticking with this example, suppose that each country has 120 person hours available for production. This means that the United States can produce at most 60 computers or 120 bushels of corn. U.S. producers will most likely do something in between, say, dividing ...