Export barriers during the periods of growth and recession the major factors and propositions

Export barriers during the periods of growth and recession the major factors and propositions

 

Sigitas Urbonavičius, Vytautas Dikčius

 

Keywords: Export, Barriers for Development of export, Recession

 

Summary The majority of academics and practitioners agree that the international activities of companies are very important for the companies themselves as well as for their countries. However, only a rather small part of Lithuanian companies sell their products abroad. Export is influenced by a number of factors, all of which can be grouped into three categories: external factors, company-related factors and manager-related factors. These groups of factors were researched by the survey of Lithuanian companies that were engaged in export in 2006. The questionnaire included 70 questions that dealt with possible barriers for development of export activity. The survey identified the most important groups of factors as well as individual factors that limit the willingness of companies to be engaged in export activities. According to the survey, shortage of qualified workers appears to be the most important individual factor. Other important factors included a shortage of qualified employees with specific skills – qualified export managers and sales agents, as well as a lack of qualified managers. The following two important factors were low awareness of the company’s brands in foreign markets and limited financial resources for advertising its products. The management of the companies admitted that “insufficient support from Lithuanian government” and “ineffective program for export support” were also two significant factors which did not help companies to cope with the aforementioned problems. In addition, lack of relevant information was indicated as a serious problem for export development. 

     The survey was performed during a period of stable economic development and growth. However, currently the situation is the opposite – the country is in a recession or even in a crisis. Companies lack working capital; they are under the necessity to reduce a number of employees. Wakasugi Ryuhei from the Institute of Economic Research, Kyoto University noticed that the financial crisis has widened from monetary and financial issues to problems in the real economy – notably reduced consumer spending and private investment outlays. All this is spilling over into the labour market. A weak employment market tends to induce protectionist actions as government seeks to shield the domestic market from foreign competition. C. Fred Bergsten, director of the Peterson Institute for International Economics, predicted a risk that the world trade would fall sharply and produce a downward spiral of global growth. That could create all types of trade distortions: increased import barriers, higher export subsidies, domestic subsidies that discriminate against foreigners, structures on international lending. According to Dr. Vo Dai Luoc, the former Head of the Economics and Politics Research Institute, in a crisis exporters compete with each other mostly in terms of prices, while brand name, quality, design, and distribution networks become less important at this moment. Therefore, one of the big barriers might be the foreign exchange rate. 

     It is obvious that Lithuanian companies will face all or some of the problems in their attempts to export their products during the nearest period. Though extensive research data from the current time period is not yet available, the findings from the previous research can be put against theoretical and practical evidence of recession, which makes it possible to develop some scientific propositions. 

 

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