The Impact of Darawan's Development Policy
Armando Suarez, CEO of Industrias Globales, and Pedro Garcia, the firm's director of international operations, are discussing a statement made today by the secretary of the treasury in Galawi.
Suarez: Pedro, did you listen to the secretary's comments today about the proposed change in development strategy?
Garcia: Yes, I did, and I'm concerned. We have spent considerable time and money planning our entry into the Galawi market, and if the government proceeds with the new economic strategy, we've got to change our plant design, plan to produce different product lines, and completely change our marketing plans.
Suarez: This apparently is more serious than I thought. How can a change in their development strategy from import substitution to export promotion affect us?
Garcia: Hang on to your chair, Chief, and I'll explain each strategy and how the change will affect our entire start-up program in Galawi. Oh, and by the way, our Galawi competitors are going to have to make changes, too.
Imagine you are Pedro Garcia.
1. Describe the two strategies for the CEO.
2. Explain how the change in development strategy will affect the firm in many ways.
3. What changes in its entry plans will the firm have to make?
The Impact of Galawi's Development Policy
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The Impact of Galawi's Development Policy
Import substitution emphasizes that the country produces goods that it would normally import from other countries (McEachern, 2018). In doing so, the government places restrictions on imports to protect local industries from competition from foreign firms. Galawi has been using this strategy, and Industrias Globales made its entry plans based on this strategy. Export promotion emphasizes that the country enhances exportation activities and develops its export market. It involves producing goods that serve the export market (McEachern, 2018). In doing so, the Galawi economy will be shifting from trade restriction and adopting a trade expansion approach. In this form of development strategies, producers in Galawi will be forced to be more efficient and effective in their production processes to ensure they are competitive in the international market.
If Galawi goes through its shift from import substitution to export promotion, Industrias Globales will have to change its marketing plan to incorporate an export marketing strategy. As Wang et al. (2017) reveal, when an export promotion policy is put in place, firms operating in the country must develop an export marketing strategy that will increase the firm's visibility in the international market. In addition, Industrias Globales will have to refocus on its product lines because now the firm has to produce marketable products in the international market. As a result, the products will meet the needs of Galawi consumers and those of the consumers in the international market. This is because there will be more incentives to sell products in the international market (Catanzaro & Teyssier, 2020). Also, the shift to export promotion means that firms operating in Galawi will have strong export capabilities. Industrias Globales will be forced to match these capabilities upon entry into the Galawi market. H...