What is Export Trading Company ETC?
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Today's export promotion strategies must reflect the changing nature of the international trade environment, if they are to have an impact. Change in the past several years has taken many forms. In addition, three major issues have recently emerged that influence export promotion: The export potential of small and medium-sized firms has been a growing subject of interest. Why should today's export promotion strategies focus on SMEs, rather than on large or micro enterprises?
The current trend export trading company definition strongly towards a sustained growth in this share, supported by expanding output and employment. Recognizing their growth potential, most governments in developing countries are giving priority to SMEs through policy support and other incentives. The WTO Agreement has created a framework for a more open global trading system, which has implications for smaller firms.
An appropriate export strategy could provide the corresponding internal framework to enable smaller businesses to engage more successfully in external trade and meet international competition. By reducing tariff and non-tariff barriers and ensuring non-discriminatory treatment export trading company definition foreign markets, the smaller exporters have been offered the same market access that was previously available to larger companies with resources to set up local operations to beat the tariff walls.
Technological developments in communications and reduced international transport costs make it easier for smaller firms to enter international markets. An export promotion strategy could facilitate market entry by assisting smaller firms to acquire technical know-how and familiarize themselves with new cost-saving innovations. SMEs, who have no in-house servicing facility, benefit significantly in terms of lower overall trade service cost and higher competitiveness.
Globalization of trade, investment and production has substantially altered comparative advantages between large and small firms. The smaller enterprises that have responded flexibly and adapted to the new environment-often linking with new partners and forming new alliances-are positioned for strong growth.
These types of smaller firms generally enjoy advantages over large enterprises: The constant market pressure to stay competitive also spurs them to be inventive, innovative and flexible in their business operations. This makes it much easier for them to adjust quickly to changing economic conditions and market requirements.
In other words, small enterprises may be better positioned to adapt to changes in the s than larger enterprises. In the United Republic of Tanzania, successful new product lines have emerged due to trade liberalization, including oil presses and expellers, water pumps, storage tanks and drill presses.
Similarly, small export trading company definition producers in Sri Lanka have become more export-oriented in response to trade liberalization measures initiated inthrough the planned development of skills and institutions, which has improved product quality.
Large enterprises are more likely to have the means to promote their own activities; most have resources to establish marketing channels, trade information systems and trade representation offices. A trade support institution will probably make only export trading company definition marginal contribution. Furthermore, some large companies regard government-supported promotional activities as interference with their business decisions and may therefore be unwilling to cooperate.
SMEs, on the other hand, are almost entirely dependent on outside trade service providers. The impact of easily accessible and efficient services at affordable cost is correspondingly greater for them. This is crucial at the stage of initial market development efforts when SMEs need to commit scarce financial resources in advance without any guarantee of returns.
An export promotion strategy needs export trading company definition define how best to help smaller firms exploit these opportunities and to overcome some of their constraints. Among export trading company definition most formidable challenges to those seeking to develop new export promotion measures are the need to improve infrastructure, access to finance, and marketing.
A review of the past trading performance of small firms has shown that these deficiencies are major obstacles to export success. Setting up infrastructure like export industrial export trading company definition, export export trading company definition zones, and bonded production centres can provide a real boost to export development.
In the least developed countries LDCs the problems are at a more basic level such as electrical power, water, roads, ports, shipping and export trading company definition. Restricted access to finance for small firms which lack collateral and are considered high-risk borrowers puts a cap export trading company definition production expansion. Many small enterprises are unable to market their goods effectively in existing markets. Small firms continue to lack knowledge of marketing channels and fail to establish marketing networks, or have not entered into strong market relationships with existing customers.
Several options are worth exploring to improve SME marketing channels. Some trading houses have been effective channels between small producers and the market in areas such as packaging, shipping, financing, insurance, quality management, publicity and delivery, as can be seen in the box above.
Joint marketing consortia have also been successful in certain cases. Another option to stimulate SME export development is provided by subcontracting from large enterprises to small enterprises, as can be seen from the box below. The primary responsibility for SME competitiveness, of course, is with the firm's management.
There is ample need, however, for trade promotion support. Some private sector and SME associations, which played mainly an advocacy role in the past, have gradually introduced market information and training services that complement public sector efforts.
They can and should do more, as businesses are receptive to their generally market-driven approach. Many governments have set up technical support institutions for management training, product design, quality control, packaging, loan guarantees and trade promotion. Their success is often contingent upon the degree of their commercial orientation, to well-trained staff, equipment and financial resources. Public authorities need also to bear in mind that delays, poor services and high costs for infrastructure will cut the competitive edge of their SMEs.
The general weakness of trade promotion and export development of SMEs in many countries in all developing regions is a pervasive concern that demands sustained attention.
Institutions that design export promotion strategies face a critical choice: With few exceptions, national trade promotion organizations have chosen to adopt a broad approach in the past. With their resources spread too thinly, this approach has reduced the effectiveness of many export promotion programmes. The changing trade environment demands a second look at the prevailing trade promotion strategies for SMEs.
Paul Cook of the Institute for Development Policy and Management, University of Manchester, United Kingdom, was a major contributor to this portion which served as a basis for this article, along with several ITC staff.
SMEs are becoming increasingly aware of the growing competition at home and abroad. They especially require information on markets, buyers, suppliers, prices, trade regulations and business procedures in the target market. For most SMEs this turns out to be a tall order. This calls for expertise that is in short supply everywhere, especially in developing countries. Most SMEs do not possess quality control laboratories nor have quality control specialists.
Target market regulations export trading company definition overseas buyers may demand higher quality or technical specifications. Packaging should be seen as a powerful marketing tool. New packaging regulations are being introduced to protect the environment. Improving productivity and reducing cost is thus an important preoccupation.
SMEs in developing countries could use advice for competitive costing and pricing techniques. Few SMEs in developing countries, however, have developed the skills to achieve this level of economy. Many are content with traditional suppliers and large inventory that keep import costs unnecessarily high. Many old technologies are also highly polluting. Sooner or later these SMEs will face exclusion from the market.
While opportunities for academic qualifications proliferate, SMEs in developing countries have little access to practical training they really need. The most successful ones help increase the response capacity of small enterprises to make them more attractive to large firms as suppliers for exports. Part of the secret of success is that all three countries have strong coordinating agencies to provide support: Intra-country measures to attract subcontracting links and direct foreign investment have proved beneficial in creating a wider network of inter-firm linkages in Japan and the Republic of Korea.
It permitted firms in the latter country to penetrate international markets. These arrangements were supported by government screening of export trading company definition technology transfer process from foreign investment, ensuring that local small firms benefited.
Some larger companies export trading company definition developed models that benefit SME development. The creation of associated trading companies and trading houses by large enterprises has facilitated export marketing for SMEs. Several large company groups in Brazil, India and Turkey have created their own trading export trading company definition to act as their exporting and importing arms.
While their priority is to manage trade for products of the companies within the group, they may also act as the marketing channel for a large number of SMEs. Similarly, trading houses have been established in Japan. These export trading company definition houses are not involved in production, but often act as intermediaries between small enterprises and world markets.
Governments have encouraged links with SMEs, by setting up publicly funded financial incentives tax breaks, concessionary finance for trading companies that measurably demonstrate SME export promotion. Called NEEDSME, this on-line needs and demand assessment system helps consultants rapidly assess a firm's problems in various business management areas. NEEDSME can combine the evaluations of several enterprises to generate group profiles by sector, country or other categories.
It export trading company definition enterprise-level needs for management assistance by assessing a firm's existing achievements in marketing, production and finance. Field testing is nearly complete in the United Republic of Tanzania and Southern Africa for debugging and improvements.
The final format will be available in CD-Rom. For more information, contact O. If you have developed a similar assessment tool or would like further information, contact Kai Bethke, Expert, Institutional Capacity Development for SMEs, at bethke intracen. The post development agenda 50 years of trade and development Trade in services Trade facilitation.
New Challenges for Trade Promotion. Good strategies can help SMEs reach export markets. This article takes a closer look at one of those issues, export trading company definition promotion for SMEs. Forging a Strategy An export promotion strategy needs to define how best to help smaller firms exploit these opportunities and to overcome some of their constraints. Challenges of a Global Market Export trading company definition are becoming increasingly aware of the growing competition at home and abroad.
Trade competitiveness and the development dimension. Cutting dwell time to boost trade. A trade facilitation agreement to increase LDC exports. Trade facilitation, international supply export trading company definition and SME competitiveness.