Analyzing the structural framework of Iran's exports
January 22, 2001
From Masoud Kavoossi's The
Globalization of Business and the Middle East : Opportunities and Constraints
(2000, Quorum Books). Dr Kavoossi is a professor of international business
at Maryland University.
The essence of formulating an export strategy is in relating the country's
national and industrial resources, capabilities and constraints to develop
its core export competencies. Relating core competencies towards the achievement
of competitive advantage leading to competitive export strategies.
Although the identification of competitive advantage is broad, encompassing
social as well as economic forces, the key aspect is in fully understanding
the nature of the global competitive environment as it relates to trade.
Forces outside the country are significant. While these forces affect all
countries and industries, the key is in Iran's ability to relate its competencies,
industrial, national and otherwise, by taking advantage of the global opportunities.
The chapter analyzes the structural framework of Iran's exports.
This chapter will also assess Iran's foreign trade in the post revolution
era in three major dimensions: the growth in the volume of trade and variations
in the balance of trade, changes in the composition of trade, and shifts
in the direction of trade. Problems and prospects of foreign trade of non-oil
products receives particular attention. Moreover the chapter will examine
the changing international environment. Including, political, cultural,
and economic scene as it relates in determining trends and potential export
Since slashing imports in 1994 Iran has been running large surpluses
on its balance of payments. The trade surplus averaged about $6 billion
in the past two years and the current account surplus averaged well above
$4 billion. By March 20, 1997 (1375), the trade surplus was around $6.5
billion and they have allowed for easy foreign debt services of about $5
billion per year. Non-oil goods export revenues, which were expected to
reach well over $4 billion per year, have since fallen by about one quarter.
The largely unilateral move towards trade liberalization in Iran observed
since the end of the Iran-Iraq war represents an effective shift in development
strategy from import substitution (self sufficiency) to an export oriented
(export promoting) framework which has been partially responsible for higher
growth rates. At the same time requiring a well defined export strategy
in a competitive environment.
STRATEGIC DIMENSIONS OF IRAN'S EXPORTS
The country specific advantage that Iran's export strategies can concentrate
on must include a holistic strategic posture along the following dimensions:
1. Strategy as a means of establishing the country's objectives in terms
of it's long term goals and resource allocation. Only a change internally
or externally (in the environment) can call for a reexamination of the
objectives and subsequent adjustment of the strategy. An erratic change
of strategic direction would be extremely distractive to everyone involved,
the export firms, the workers and managers. It is crucial to align, the
country's bureaucracy, human resources, financial, legal, technological
and physical resources with the goals and objectives.
2. Identification of the country's export competitive advantage(s):
a. What can the country export well
b. What areas it should not commit any resources
c. What export activities should the country be in that it currently is
d. What is it that the country is likely to benefit from exporting
e. What resources should be invested in heavily, the labor force? Technology?
3. Strategy as a way to define the tasks to be performed by the government,
private sector and others. Harmonization and coordination between appropriate
government agencies and business.
4. Strategy as a response to external competition, treats and attacks.
As well a external opportunities and internal strengths and weaknesses
to achieve export competitiveness.
5. Strategy as away to define and deal with the allocation of success.
How will the country allocate the benefits of a successful export oriented
From these dimensions, the strategy becomes a fundamental framework
through which the country can assert itself in a changing geo-economic
global environment. The only way to make all of the competing elements
to become consistent and cooperative is to establish a sense of permanent
strategic direction, with a sense of strategic intent.
In determining Iran's competitive position in non-oil, non-commodity,
manufacturing or service industries, such as auto, petrochemicals, textile
and steel and decorative tile and stone and software, one must be aware
of the global nature, firm's position in the industry, the industry's stage
of development as well as the product's particular state in its life cycle.
This must be analyzed, both globally, as well as regionally or country-specifically,
depending on the firm's strategic approach and desire to take advantage
of economies of scale or scope. Competition in any one of these global
industries is intense.
The firm and industry's ability to respond to the intensity of rivalry
relies on a sound evaluation of the industry structure, identification
of important players in the industry, the role and position of different
players, capabilities, tangible and intangible resources available to them
as well as the strategic outlook of the key players and trends in the industry.
In addition, general tradability of product, which is often influenced
by the industry or local responsiveness determines the process.