Trade Promotion Strategies

Claude Cellich

• Publisher: Business Expert Press
• Year: 2012
• Print ISBN: 9781606492291
• eBook ISBN: 9781606492307
• Topic: Business
• Subtopic: International Marketing
• Index: Business

New opportunities are emerging constantly, as part of the globalization process creating new markets, with new players and challenging current business practices. Creating or exploiting opportunities on an individual basis is not the best practice: it is much more productive (and much less risky) to participate in national Trade Promotion Programs designed and implemented with government assistance. In recent years, Trade Promotion Institutions have developed national strategies and new tools to support the business sector, helping enterprises to find new markets and trade opportunities. What are these national strategies, how are they designed and implemented? Special attention is given to evaluation tools created to assess results and provide justification for investment expenditures. Best practices will be considered and reviewed on the basis of selected countries having introduced innovative national trade promotion programs, such as Finland, Mauritius, Mexico, New Zealand and Singapore.

Part I

Trade Promotion Principles and Review of Key Strategic Functions

Chapter 1

Why Develop Trade Promotion Strategies, and Who Is Concerned?*

For all trade parties concerned, public or private, one key fact governs the national and international landscape: Progressive liberalization of markets with the consequent globalization of world trade. As a result, local firms as well as governments are likely to face increased competition at home as well as in the international market place, with diminishing possibilities to protect their country’s economy and their businesses from outside challenges.

Now more than ever, the competitive advantages that any firm or country has achieved are becoming smaller and less durable. At the international level, executives are therefore facing several strategic challenges:

• Becoming globally competitive (or at least improving their ability to do so)

• Pursuing new business opportunities (in line with market liberalization)

• Maintaining their business as usual based on the perception that, for the time being, they still enjoy comparative advantages or national protection, with inevitably diminishing sales and/or profit

At the national level, the long-term implications are also significant. The country—more specifically, the government—has to establish and maintain a favorable business environment in an increased global competition, where best national practices are copied promptly if they are found replicable (e.g., the success of free trade zone areas).

Such a trade environment should

• encourage local entrepreneurs to invest in new technologies, markets, and products or services (home or abroad);

• help increase employment (local or indirectly through outsourcing);

• generate specialized skills (adapting and skill training);

• help generate innovation and new technologies in order to maintain and increase competitive advantages (as is the case in China over the past decade); and

• ultimately generate profits (fairly taxed, with proper incentives to reinvest “at home”).

If the previous points are not taken into account, the business sector will inevitably suffer, gradually losing market shares abroad as well as in the domestic market. It should be noted that this affects small and medium-sized enterprises (SMEs) and multinational corporations, with greater concern for SMEs.

This is a particularly challenging scenario for the public-sector planner and strategy maker in a developing or transition economy. In such economies, the private sector may be vulnerable, with more day-to-day survival concerns than long-term development considerations, making these economies unprepared and unable to take any kind of leadership role in response to the requirements of new global competition.

Therefore the national challenge consists of formulating and managing a national export strategy that is effective and can be implemented by all concerned parties. Establishing an export strategy requires addressing the following:

• How to proceed in the national context

• How to identify and apply success principles

• How to benefit from best practices examples

From a “mission statement” point of view, the following key areas should also be considered:

• What should a national export development strategy (NEDS) encompass in the dynamics of today’s international markets?

• To what extent should it focus on market development, improving traditional promotional instruments—such as trade fair participation—trade missions, and commercial representation services in foreign markets?

• Can it identify new avenues, even nontraditional ones, as some successful countries/exporting industries are testing and implementing (e.g., South Korea, Mauritius, and some strategic sectors in India)?

Once the idea of defining a national trade promotion strategy is adopted, the next step has to consider the following issues:

• Identify key principles.

• Analyze examples of best practices.

A National Export Development Strategy (NEDS) gives priority to market development and improved traditional promotional instruments. It may also concentrate on the delivery of more efficient public-sector services addressing the obstacles found in new or nontraditional markets, overriding the difficulties met by enterprises considering exports. Such difficulties may involve collecting and purchasing trade-related information, covering initial market contacts and other research costs. These difficulties, if not overcome, lead to a kind of self-limitation to invest in new opportunities, preferring well-established traditional networks with known consequences on the company’s competitiveness.

A NEDS may mix promotional initiatives, both traditional and nontraditional, organized on behalf of existing enterprises, with on-profile supporting programs. Such programs would be designed to generate new export capacities rather than to strengthen existing links.

The starting point would be, of course, to assume that there is a need for the local business community to come close to international standards of competitiveness, which could be considered as a subjective rather than an objective process. Such initiatives consist of setting up an expanded export strategy to address all the factors reducing the cost of the export transaction by

• improving forward and backward linkages within and among local industries and, to some extent, integrating the production process, generating higher value-added production capacities (i.e., an assessment of the value-added chain to address the weaker points);

• helping the companies involved in the value chain acquire new technologies;

• building new, export-oriented competencies for these value chains.

However, to be effective, such a process must be integrated into the overall economic-planning framework. This has a clear implication: It should not simply deal with one-time foreign market development and promotion but establish a national competitiveness framework, creating an export culture and national consensus, thereby developing new export industries. There are many cases of new exporting industries showing such development strategies in developing countries or economies in transition in specific sectors, like apparel in Sri Lanka, cotton manufactures in Egypt, software industries in India, and high-quality branded wine in Chile and South Africa. Each of these export sectors should be screened to reveal the underlying building process.

Of course, this building process implies a clear policy statement: Such a choice is obvious for small or limited-resource countries (e.g., Singapore, Sri Lanka) but not so for the larger ones (e.g., Brazil, Indonesia, United States), for which exports represent a less significant share of gross domestic product (GDP). In short, the export strategy should address the issue of present and future international competitiveness throughout the country’s supply chain.

This leads to the conclusion that two of the most important factors need to be reassessed in the process of managing an export development strategy:

• The direct and substantive involvement of all relevant parties beyond the private sector, namely ministries concerned with strategy-management processes and building infrastructures—industry, agriculture, public transportation and utilities, labor, education, foreign affairs, and of course, finance

• Integrated interministerial consultations and coordination at the highest level of decision making

Public-Private Partnership Concept

To become effective, the private sector is a key if not the key player. To illustrate this point, there were cases in ex-socialist countries in eastern Europe or central Asia where the state trading corporations had to implement trade promotion abroad in partnership with the public sector. Most of them had difficulties expanding their business outside their borders with nontraditional exports. It seemed that it was more difficult for them to build public-private partnerships, while these are well accepted and practiced in many open-market economies.

The private sector, therefore, must be fully involved in the overall process—not just consulted, but involved. The private sector must “buy in” and feel responsible for the success or failure of the strategy.

The Partnership Process

To initiate the strategy development process, it is necessary to consider the question of leadership and ownership:

• Should strategy management be a top-down responsibility (i.e., government directed) or a bottom-up exercise (i.e., business led)?

• Should the initiative shift as the strategy moves through the design, implementation, and evaluation/refinement phases? What are the institutional implications?

To start the process, it is necessary to define the meaning and implications of a trade promotion strategy for all the parties, the strategic goals involved, and ways to manage such a strategy. This will be reviewed in chapter 2.

*This chapter has been inspired and adapted from conclusions drawn after a symposium organized by the International Trade Centre (ITC), entitled “Executive Forum on National Export Strategies,” at the third World Conference of Trade Promotion Organizations in Marrakech, Morocco (October 25–27, 2000). The symposium findings have been summarized and reproduced in the ITC publication, Redefining Trade Promotion: The Need for a Strategic Response (out of print).

Chapter 2

Defining Trade Promotion and Strategic Goals

Before considering trade promotion programs, it is necessary to define the term and its implications, with the following goals:

• The continuing changes in the international trading environment suggest that trade strategy needs to be reassessed and constantly redefined. This should be done by public-sector strategists.

• The use of the Internet and new technologies for information and communications (NTIC) can drastically improve traditional trade promotion activities like trade missions abroad or participation in professional trade fairs. NTIC may even substitute them with virtual conferences or bids on the Internet through networking, web presence, and so on.

• Similarly, new trade support services are being introduced to increase international competitiveness (e.g., profile market testing online).

This means that new trade promotion programs have to be (re)designed to develop new export capacities, included in the national approach to trade promotion, with all its institutional implications. The method would then be to analyze the need for trade promotion services as a starting point. Such needs assessment, however, may lead to conflicting results. Obviously, needs and priorities may differ, depending on who is being consulted.

Strategic Goals

At that point, some key concerns have to be considered before and during the process of trade promotion–strategy building.

Strategic Goal 1: Awareness Building

From the public-sector perspective, awareness building, development of a national export culture, skills development, and the stimulation of international entrepreneurship are the components of a national export development strategy (NEDS). In reality, it is not very easy to establish a balance between the perceived needs and decide on the proper priorities—for instance, deciding whether to put resources in new markets exploration or in the expansion of existing ones or whether to support newcomers or strengthen existing ones.

Strategic Goal 2: Prioritize Needs Versus Demand

Needs assessment also becomes more complex when the distinction is drawn between actual demand within the business sector for specific trade promotion services and effective need. For instance, it may appear that some services are perceived as most beneficial (e.g., banking services, information on potential buyers, freight forwarding services, potential agents, or distributors) while others are not so essential (e.g., general information on doing business in the country, on trade missions, on export training, or even counseling).

In fact, the export-oriented entrepreneur or manager considers the need for trade promotion services in terms of his or her “demand” for specific types of information and facilitating services. The exporter does not generally perceive the need for trade promotion services in terms of the company’s own structural or operational shortcomings—for example, the company may not be able to use commercial intelligence effectively or to correctly manage the export process. Indeed, many exporters are not conscious of their weaknesses in the export business and are not willing to require specific remedial services, even if they are offered.

Consequently, the challenge is how to satisfy the business sector’s demand for immediate solutions while concurrently developing higher levels of managerial competency over the long term and the company’s capacity to achieve international standards of competitiveness.

A mix of proposed services may be the best option, which could address trade promotion issues in terms of

• development objectives (e.g., gaining a significant market share in the target country),

• meeting existing demand within the business sector for promotion and trade support services,

• building longer-term competitiveness (e.g., increasing comparative cost advantage).

Strategic Goal 3: Targeting the Client

The m...

Table of contents

• Title Page
• Copyright Page
• Abstract
• Contents
• List of Abbreviations
• Preface
• Introduction
• Part I: Trade Promotion Principles and Review of Key Strategic Functions
• Part II: Best Practices: Tools, Functional Cases, and Sectoral Cases
• Part III: National Trade Promotion Cases
• Appendix: International Trade Organizations and National Trade Promotion Organizations on the Web
• Notes
• References
• Announcing the Business Expert Press Digital Library