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1: Considering exporting > The various environments you
will encounter abroad > The economic environment |
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The economic environment
Surveys have shown that the economic environment
tends to receive the greatest amount of attention from
export planners. The primary concern in analysing the economic
environment is to assess opportunities for marketing the
company's products abroad or possibly for locating some
of the company's production and distribution facilities
outside of South Africa. Indeed, when striving to identify
potential countries to focus on, one of the major differentiating
factors will be the differences in the economic environments
that exist between potential target countries.
Decisions about how much of a product people
buy and which products they choose to buy are largely influenced
by their purchasing power. If a large portion of a country's
population is poor, the market potential for many products
maybe lower than it would be if they were reasonable prosperous.
If a country is expected to enjoy rapid economic growth
and large sectors of the population are expected to share
in the increased wealth, sales prospects for many products
would clearly be more promising than if the economy were
stagnating.
Thus, if you are comparing potential countries
to focus your export efforts on, you must consider factors
such as the general economic outlook, employment levels,
levels and distribution of income, growth trends, etc.
It should be borne in mind, however, that when income levels
drop, people will generally cut back on their purchases
of luxury items before they cut back on necessities. Thus,
poor countries which are allocating scarce foreign exchange
reserves only to necessities (e.g. cheap clothing, simple
agricultural tools, etc.) may prove to be more reliable
markets than rich countries for certain export products.
Below are some of the economic factors which
should be of interest to the exporter. To learn more about
these factors, please follow the corresponding links:
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