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Exports have a positive effect on nation's growth

IN GENERAL the expansion of a nation's exports has positive effects on the growth of the economy as a whole as well as on individual firms.

Exporting is of vital economic importance to countries and their firms. Exports boost profitability, improve capacity utilisation, provide employment, and improve trade balances.

A common objective in most countries today is to find ways to increase exports. This can be achieved either by encouraging exporting firms to export more or by inducing non-exporters to begin exporting.

Non-exporters are those who have never exported before and thus have very little knowledge about exporting processes and, therefore, have no experience with export barriers.

Active exporters have mastered the technicalities of exporting, have learnt that exporting is an important means for achieving organisational goals.

One of the most important issues in international business is why some firms export and others don't?

An explanation offered is that non-exporters perceive considerable barriers to exporting.

Thus, before non-exporters can export, a 'threshold fear' must be overcome.

Some of the major problems preventing firms exporting have been the existence of intense competition in foreign markets, lack of knowledge of exporting and inadequate understanding of export payment procedures.

Non-exporters' perceptions have been associated more with future involvement issues - relating mainly to information needs, foreign contacts and management policy - while active exporters encountered problems that were more closely connected with export procedures, such as a lack of working capital to finance exports, confusing product specifications and too much red tape.

Non-exporters placed greater importance on problems associated with initiation of export activity, like their preoccupation with the domestic market, whereas exporters' actual problems were market-based, like difficulties in matching foreign competitors' prices, promoting products, establishing distribution networks overseas, deteriorating economic conditions in foreign markets, and transport difficulties.

Non-exporters generally perceived higher costs of exporting while exporters indicated that such costs were either the same or moderately higher compared to the domestic market.

In order to get exporters to export more and to get non-exporters to start exporting these barriers need to be overcome.

Topics:  economy exports opinion scu



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