Exports act as an engine of economic growth of a nation. Discuss

International Marketing is necessary for developed & developing nations. / Exports act as an engine of economic growth of a nation. Discuss

Ans:   Exports are important for all countries, whether developed or not. The need and importance of exports for a nation is explained as follows:

            1.      Foreign Exchange:

Exports enable a nation to earn valuable foreign exchange. The foreign exchange can be utilised for:

•        Import of consumer goods.

•        Import of raw materials, spares, and component.

•        Import of capital goods and technology.

•        Servicing of external debt

            2.      International Relations:

Exports help to develop international ties with importing countries due to the following reasons:

•        The international trade brings together the exporters and importers of various countries.

•        Trade talks take place between nations at international forums like WTO.

•        Also, trade agreements are signed between Governments of participating                             countries.

            3.      Employment:

Exports help to generate employment in the country. Export facilitates:

•        Direct employment in the export sector.

•        Indirect employment in the supporting sectors such as banking, insurance, transport, etc.

            4.      Optimum Use of Resources:

Exports facilitate optimum use of resources in the country such as:

•        Physical resources such as materials, machines, etc.

•        Capital resources

•        Manpower.

For instance, Gulf countries have excess supply of petroleum, which is exported, thereby making optimum use of resources.

            5.      Standard of Living:

Exports increase demand, which leads to higher production and distribution. Increase in production and distribution generates more employment. Increase in employment leads to higher purchasing power with the people. Therefore, people can enjoy new and better products, which improves standard of living.

Also, due to export trade, a nation can import quality products, and therefore, people can enjoy good quality imported items, which add to their standard of living.

            6.      Economic Growth:

Exports contribute to the economic growth of a nation. Due to exports, the demand increases. Increase in demand leads to higher production. Higher production increases the GDP of a nation.

            IMPORTANCE OF EXPORTS FOR A FIRM

The importance of exports for a firm is as follow:

            1.      Reputation:

Exports bring reputation to the export firm in the international market as well as in the domestic market. Generally, it is assumed that export firms produce quality products, and therefore, they get reputation. Some of the world famous firms include:

•        Microsoft for software.

•        Nike for sports wear.

•        Sony for electronics, etc.

            2.      Spreading of Risks:

At times, a firm may suffer a loss in the domestic market. The loss may be due to recession or some other problems. However, it can cover up that loss from the profits that it can make from the export markets.

            3.      Research and Development:

Export firms need to maintain and improve quality standards in the overseas markets. Therefore, firms undertake market research, research and development, technological upgradation and other activities to improve quality standards. Therefore, the improvement in product standards benefits the exporting firm as well as the customers.

            4.      Liberal Incentives:

Exporters get liberal incentives from the government. The incentives include:

•        Duty Drawback

•        Octroi Exemption.

•        VAT Exemption.

•        Excise Duty Exemption/Refund.

            5.      Economies of Scale:

Exporters can get economies of large scale production and distribution. Exports generate higher demand. Therefore, exporters get the economies of scale:

•        Economies of large scale production, such as discount on bulk purchase of materials.

            6.      Higher Prices:

Exports can fetch better prices as compared to domestic markets. For instance, prices of oil and petroleum products in the home markets of Gulf countries are comparatively less than what they earn from the foreign markets.