Comparative Analysis of Economic Growth Models and Trade Strategies

This assignment delves into the intricacies of economic growth models, specifically focusing on import-substitution industrialization (ISI) and export-led growth strategies. It provides a comprehensive overview of export selling and marketing, emphasizing the importance of understanding target markets and adapting marketing mixes. The document explores organizational export activities, from initial reluctance to global market penetration, and examines national policies governing exports and imports, including government programs like tax incentives, subsidies, and free trade zones. It also discusses governmental actions to discourage imports, such as tariffs and non-tariff barriers, and analyzes various tariff systems and customs duties. Furthermore, the assignment details key export participants, organizational structures for exporting in both the manufacturer's and market countries, trade financing methods, and crucial export and import issues like sourcing decisions. The content is a valuable resource for understanding the complexities of international trade and economic growth strategies.

CAPITULO 8.
Models of Economic Growth:
Import-substitution industrialization (ISI): model of trade and
Economic growth where a country reduces its share of imported
goods by locally producing as much as it can.
Export-led growth: A country specializes completely or substantially in
export production of goods that usually the country has a
comparative advantage in.
Most low and middle-income free trade countries have higher
economic growth and governments that advocate ISI began
liberalizing trade. However, economists warn it should not be applied
in periods of economic depression.
China opened 4 special economic zones and from 2011 to 2015
exports as a % of the GDP has grown by 22.6%. Plus, Asian share in
world trade increased from 13% in 1960 to 32% in 2014.
Export Selling and Export Marketing
Export selling: The “place” is the only element that varies from the
Marketing Mix (4 Ps), it means the country where it will be sold. It
mostly works for unique products or with no international competition
Export Marketing: The product, prices and communication tools are
modified as needed to meet the preferences of international target
markets. “Is the integrate marketing of goods and services that are
destined for customers in international markets” It requires:
1. Understanding of the target market.
2. Use of marketing research and identification of market
potential.
3. Decisions concerning the marketing mix.
Personal visit to the export market: takes place and should do the
following.
1. Confirm or contradict assumptions regarding the potential
market
2. Gather additional data to reach a go or no go decision.
3. Develop a marketing plan in cooperation with the local agent or
distributor
Trade show or a state or federally sponsored trade mission: In these
events company representatives can conduct market assessment,
develop or expand markets, find distributors or agents and locate
potential end users. Most importantly, they should learn about
competitors’ technology, pricing and depth of market penetration.
Organizational Export Activities
Stages of exporting: The firm…
1. Is unwilling to export, not even filling an unsolicited export
order.
2. Fills unsolicited export order but doesn’t pursue them. Is an
export seller.
From 2 to 3: depends on if exporting is attractive and if the firm is
able to compete internationally.
3. Explores the feasibility of exporting.

From 3 to 4: Receive and respond to unsolicited export orders.
4. Exports to one or more markets on a trial basis.
5. Is an experienced exporter to one or more markets.
6. Pursues country or region focused marketing based on certain
criteria (i.e. ENG speaking)
7. Evaluates global market potential before selecting the “best”
target markets. All are plausible
Reaching 7: Mature, geocentric enterprise that relates global
resources to global opportunity
National Policies Governing Exports and Imports
China has grown significantly, even faster now that it has joined the
World Trade Organization (WTO). Before this, it protected local
producers by imposing double-digit tariffs.
National policies toward exports and imports are CONTRADICTORY:
Nations encourage exports but the flow of imports is generally
restricted.
Government Programs that support exports: Governments concerned
with trade deficits should educate firms about the benefits of
exporting and also remove bureaucratic obstacles. They usually use 4
activities to support them:
1. Tax incentives. Treat earnings from exports preferentially by
lowering their rates or refunding the already paid ones. (i.e.
Foreign sales corporation (FSC), American exporters could
obtain a 15% exclusion on earnings from international sales)
2. Subsidies. Direct or indirect financial contributions or incentives
that benefit producers. (i.e. Common Agricultural Policy (CAP),
subsidies paid to US farmers)
3. Export assistance. Government information concerning location
of markets and credit risk and also they set up trade fairs and
trade missions.
4. Free trade zones. Entities that offer manufacturers simplified
customs procedures, operational flexibility and a general
environment of relaxed regulations.
Governmental Actions to discourage Imports and block Market
Access: There is a growing trend to remove all such restrictive trade
barriers
Tariffs: 3 R’s – rules, rate schedules and regulations of individual
countries. They can be an enormous burden, firms have to familiarize
themselves with their classifications and use them correctly.
Nontariff barriers (NTB): any measure that is not a tariff and is an
obstacle to the sale of products in a foreign market. They include:
1. Quotas. Government imposed limit on the number of units or
total value of a particular product or product category that can
be imported.
2. Discriminatory procurement policies. Government rules, laws or
administrative requiring that goods or services be purchased
from domestic companies.
3. Restrictive customs procedures. Antidumping, product size and
safety and health regulations. Some of these to keep out
foreign goods and others toward legitimate domestic objectives.

4. Arbitrary monetary policies.
5. Restrictive regulations.
Tariff Systems
Single Column tariff: Schedule of duties in which the rate applies to
imports from al countries on the same basis.
Two column tariff: tariff system which has two different duty rates for
a particular product. Here, the import tax on the product depends on
the country of its origin.
Preferential tariff: reduced tariff rate applied to imports from certain
countries.
Customs Duties: They may be calculated either as a percentage of
the value of the goods (ad valorem duty), as a specific amount per
unit (specific duty) or as a combination of both.
Other Duties and Import Charges:
1. Antidumping duties. Special additional import charges to
mitigate unfair prices.
2. Countervailing duties (CVDs). Additional duties to
counterbalance subsidies.
3. Variable Import Levies. If prices of imported products affect
domestic ones, these levies balance them out.
4. Temporary Surcharges.
Key Export Participants
Foreign purchasing agents. They operate on behalf of an overseas
customer, who is generally a large user of the material, know as a
principal.
Export broker. Receives a fee for bringing together the seller and the
overseas buyer
Export Merchants. Marketing intermediaries that identify market
opportunities in one country or region and make purchases in others
to fill these needs.
Export management company (EMC). Independent marketing
intermediary that acts as a export department for 2 or more
manufacturers whose product lines do not compete with each other.
Manufacturer’s export agent (MEA). Acts as an export distributor or
as an export commission representative but doesn’t as an export
department.
Export distributor. Assumes financial risk and usually represents
several manufacturers.
Export Commission representative. Assumes no financial risk and the
manufacturer assigns some or all foreign markets to the commission
representative and carries all accounts.
Cooperative exporter. Export organization of a manufacturing
company retained by other independent manufacturers to sell their
products in foreign markets.
Freight forwarders. Licensed specialists in traffic operations, customs
clearance and shipping tariffs and schedules, like travel agents for
freight.

Organizing for Exporting in the Manufacturer’s Country
Depending on the company size responsibilities may be incorporated
into an employee’s domestic job or handled as part of a separate
division. The possible arrangements for handling exports include:
1. Part—time activity performed by domestic employees
2. Through an export partner affiliated with the domestic
marketing structure that takes possession of the good before
they leave the country
3. Through an export department that is independent of the
domestic marketing structure
4. Through an export department within an international division
5. For multidivisional companies each of the preceding options is
available
How to organize it effectively?
Depends on 2 things: company’s appraisal of the opportunities in
export marketing and its strategy for allocating resources to markets
on a global basis.
Export responsibility as part of a domestic employee’s job
description: low cost arrangement requires no additional personnel
but it could only work if who is assigned is competent in terms of
product and customer knowledge, and the competence is applicable
to the target international markets.
Organizing for Exporting in the Market Country
To what extent do we rely on direct market representation as
opposed to representation by independent intermediaries?
Direct representation: Better Control and communications, it enables
decisions to be implemented unilaterally and if it’s not yet stablished
special efforts to achieve sales will be undertaken. Possibilities of
feedback from the market are much greater.
Indirect or Independent representation: Special offers are not
forthcoming.
Trade Financing and Methods of Payment
Factors to be considered:
 Currency availability in the buyer’s country
 Creditworthiness of the buyer
 Seller’s relationship to the buyer
Because of the financial crisis, smaller banks have become more risk
averse and cutting their exposure to trade financing and trade finance
was drying up in key emerging markets
The export sale: begins when the exporter-seller and the importer-
buyer agree to do business
Pro forma in-voice: spells how much and by what means the exporter-
seller wants to be paid.
Methods of payment:
 Documentary Credit. Aka Letters of credit are widely used. It is a
document stating that a bank has substituted its
creditworthiness for that of the importer-buyer.

 Documentary Collections. Uses a bill of exchange (aka a draft)
written order from one part (the drawer) directing a second party
(the drawee) to pay to the order of a third party (the payee).
Transfers all the risk of nonpayment to exporter-seller.
 Cash in Advance. Exporter requests cash payment in whole or in
parts in advance of shipment
 Sales on Open Account. Paid after delivery.
 Additional Export and Import Issues. i.e. initiatives to ensure
cargo cannot be used for terrorism, duty drawback, among
others.
Sourcing
Sourcing decision: Whether a company makes or buys its products
and where it makes or buys them
Outsourcing: shifting production jobs to other companies to educe
costs
Depends on factor like:
 Management vision. Opinion of chief executives.
 Factor costs and conditions. Factor costs include land, labor and
capital costs
 Customer needs. There’s more to it than low prices.
 Public Opinion.
 Logistics. Usually a greater distance means greater time of
delivery and transportation costs.
 Country infrastructure. A country’s infrastructure must be
sufficiently developed to support manufacture and distribution.
 Political Environment. Political risk is deterrent to investment in
local sourcing.
 Exchange rates.