foreign market,foreign companies may transfer manufactunngtri to that country to avoid the loss of a lucrative or potential market.
Diveersification Export prices of many primary products such as oil and coffee, fluctuate business cycles abroad affecting demand-can wreak havoc on economies that depend on the export of primary products. This is especially true for many developing countries that must rely on only one or a few commodities.frequently, they are caught in a feast-or-famine cycle as it were: able to afford foreign luxuris one year but unable to find ther funds for replacement parts for essential equipment the next. Contrary to expectforeign market companies manufactunng tri that owntry to wwned a ot potertial market D routien Eeport prices or rnatm prilnuty products, such oil and coffee, fluctuate h as weather affectitig buxiness cycles abroad affecting demand am wnetk havoc on uremies he export t prima oducts This is e pedaliv tru tot many developing countnes that munt nely on onlvone a ught in a feast of famini cyde. commodities quently, they re were able to afford foreign luxuris one stur but urcable to find thin funds for replace merit parts for essential equipment the mert Gontrary to opextatons, a uter dependence veri liioition ol export earring The populaton manufacturing does not guarantre di many developing economies is a movr to mariufactunng may hift dependence from one or agricultural commodities to on two inanufactured prtducto which fac com petitive risks and potential obsolesc mor Go ds Thon quantity oimparts that a given quannty of a coun trys exports can how many bananas Country must sell to Country to purcha one tefrigerator from Country B is tetemed to as terms of trade Historically, t prices raw material and agricultural commoditiis have not risen as fast as thowe of finish d prod ucts although they have risen ta inr duringshort periods over time therelore, it takes morr low nced primary products to buy the same amount of high-priced manufactured goods In addition, the quantity of priniaty products demanded does not rise as tapidly a manu and due patty to spending lower o n food as their rise and partly to raw mater saving technologiei Further. because commtidities ate nard to differentiate producer must compete on price, whereas the prices of manufactured products can stay high because competition is based more on differentiation mport substitution and Export Led bevelop ment Traditionally, developing countries promoted industrialization by restricting imports in order to boost local production and con umption of products they would athenvise import However, if the protreted industries do not become efficient-an al too frequent outcome-local consurners may have to support them by paying higher prices or taxes In contrast, some countries, such as laiwan and South Korea, have achieved rapid economic growth by promoting the development of industries with export potential, an approach known as export-led development tea it's not easy to distinguish between import substitution and export led development industrialization may result initially in import substitution, yet export development of the same products may be feasible later Nation Building There may be a strong relationship between industrialization and aspects of the nation- building process. Industrialization helps countries build infrastructure, advance rural development, and boost workforce skills. Ecuador and Vietnam maintain that industri- alization has helped them move frorn feudal economies suffenng chronic food shortages to nations with improved food security and budding export competitiveness ECONOMIC RELATIONSHIPS WITH OTHER COUNTRIES Every nation monitors its absolute economic welfare, compares its performance to that of other countries, and enacts practices aimed at improving its relative position. Among these many practices. four stand out making balance of trade adjustments, gaining comparable access to foreign markets, using restrictions as a bargaining tool, and controlling prices Balance-of Trade Adjustments A trade deficit creates roblems for nations with low f exchange reserves-th that help finance the purchase of priority foreignatons, a uter dependence veri liioition ol export earring The populaton manufacturing does not guarantre di many developing economies is a movr to mariufactunng may hift dependence from one or agricultural commodities to on two inanufactured prtducto which fac com petitive risks and potential obsolesc mor Go ds Thon quantity oimparts that a given quannty of a coun trys exports can how many bananas Country must sell to Country to purcha one tefrigerator from Country B is tetemed to as terms of trade Historically, t prices raw material and agricultural commoditiis have not risen as fast as thowe of finish d prod ucts although they have risen ta inr duringshort periods over time therelore, it takes morr low nced primary products to buy the same amount of high-priced manufactured goods In addition, the quantity of priniaty products demanded does not rise as tapidly a manu and due patty to spending lower o n food as their rise and partly to raw mater saving technologiei Further. because commtidities ate nard to differentiate producer must compete on price, whereas the prices of manufactured products can stay high because competition is based more on differentiation mport substitution and Export Led bevelop ment Traditionally, developing countries promoted industrialization by restricting imports in order to boost local production and con umption of products they would athenvise import However, if the protreted industries do not become efficient-an al too frequent outcome-local consurners may have to support them by paying higher prices or taxes In contrast, some countries, such as laiwan and South Korea, have achieved rapid economic growth by promoting the development of industries with export potential, an approach known as export-led development tea it's not easy to distinguish between import substitution and export led development industrialization may result initially in import substitution, yet export development of the same products may be feasible later Nation Building There may be a strong relationship between industrialization and aspects of the nation- building process. Industrialization helps countries build infrastructure, advance rural development, and boost workforce skills. Ecuador and Vietnam maintain that industri- alization has helped them move frorn feudal economies suffenng chronic food shortages to nations with improved food security and budding export competitiveness ECONOMIC RELATIONSHIPS WITH OTHER COUNTRIES Every nation monitors its absolute economic welfare, compares its performance to that of other countries, and enacts practices aimed at improving its relative position. Among these many practices. four stand out making balance of trade adjustments, gaining comparable access to foreign markets, using restrictions as a bargaining tool, and controlling prices Balance-of Trade Adjustments A trade deficit creates roblems for nations with low f exchange reserves-th that help finance the purchase of priority foreign