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Step 1: Considering exporting

You are here:Step 1: Considering exporting >The various environments you will encounter abroad >The economic environment > Degree of government intervention



Degree of government intervention


The export marketing strategies that you will put in place will almost certainly differ depending on whether the target country/market is oriented towards a free market system or whether there is considerable government intervention in the target country's economy.

Under a free market system, the volumes and values of goods and services are determined by the forces of supply and demand. Proponents of a free market system or free trade thus emphasis the capacity of the competitive market system to automatically allocate resources efficiently, i.e. goods should be able to move freely, without any manipulation of their market-related prices or the exchange rates involved. If Taiwan, for example, can produce an article more cheaply than the United States, the US consumer should be able to purchase that article at the lower price.

Proponents of such a system argue that trade restrictions such as tariffs (see below), which make imported items relatively more expensive, serve only to protect the more inefficient local industries, thereby removing the element of competition. Free market economies are thus highly competitive with a strong emphasis on value for money. Product quality is of prime importance.

A tariff is a schedule of customs duties levied on traded goods or commodities as they pass over a national boundary.

Without foreign competition, local producers are not as motivated to improve the efficiency of their operations. In general, free traders hold that government decision-making is bureaucratic, inefficient and harmful, and that centralised government control interferes with people's freedom.

In the past, centrally planned economies tended to emphasise self-sufficiency and regarded international trade as a necessary evil to obtain the goods and services they could not provide for themselves. In practice, much of the trade conducted by centrally planned economies was (and in some cases still is) on an ad hoc basis - goods were imported to meet unexpected shortages or specific requirements, while exports were the result of unplanned surpluses or the need to earn foreign exchange.

The radical changes that have taken place in eastern Europe and the former USSR, for example, were prompted by the economic hardship resulting from the strict centralised control of factors of production and trading relationships. The current move towards the creation of free market systems in many African countries is also indicative of a growing awareness of the need for less government intervention in all spheres of economic activity.

Today, no country practices entirely free trade, nor is there any one country whose trade is entirely controlled by the state. Nearly all countries impose some limited restrictions on the free flow of international trade. Besides tariffs, countries can impose a number of non-tariff barriers as a way of restricting trade, e.g. quotas, (i.e. direct quantitative restrictions on the amount of an item allowed to be imported or exported), foreign exchange controls - as is the case in South Africa - and health, technical and safety regulations. The extent and nature of these restrictions depend largely on whether a country is orientated towards a free market or a centrally planned economy.

The World Trade Organisation (WTO) came into existence on 1 January 1995 as a result of the Uruguay Round of Trading Negotiations (under the auspices of GATT). Most of the World's trading nations belong to it. The notable exception is China. It is a rules-based system designed to promote the expansion of trade. These rules give enterprises certain rights - exporters, in some cases, have the right to defend their foreign markets and countries have fewer opportunities to impose restrictions.

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Step 1: more information

Step 1: Considering exporting
      The various benefits of exporting
      The various drawbacks to exporting
      The difference between domestic and export marketing
      The various environments you may encounter
            The sociocultural environment
            The legal environment
            The economic environment
                  Gross Domestic Product (GDP)
                  Disposable income
                  Demographic factors
                  Competitive and complementary products
                  Industrialised vs developing countries
                  Degree of government intervention
                  Trading blocs
                  International trade agreements
            The political environment
            The technological environment
            The physical environment
      The various barriers you may face

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More information on Step 1
Learning to export...
The export process in 21 easy steps
Step 1: Considering exporting
Step 2:Current business viability
Step 3:Export readiness
Step 4:Broad mission statement and initial budget
Step 5:Confirming management's commitment to exports
Step 6: Undertaking an initial SWOT analysis of the firm
Step 7:Selecting and researching potential countries abroad
Step 8: Preparing and implementing your export plan
Step 9: Obtaining financing for your exports
Step 10: Managing your export risk
Step 11: Promoting the firm and its products abroad
Step 12: Negotiating and quoting in exports
Step 13: Revising your export costings and price
Step 14: Obtaining the export order
Step 15: Producing the goods
Step 16: Handling the export logistics
Step 17: Export documentation
Step 18: Providing follow-up support
Step 19: Getting paid
Step 20: Reviewing and improving the export process
Step 21: Export Management
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