outward and inward strategiesWhy is an outward-oriented development strategy likely to allocate resources more efficiently than in inward-oriented strategy?

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e-martin's profile pic

e-martin | College Teacher | (Level 1) Educator Emeritus

Posted on

If we are focusing on companies and not countries, we can say that outward-oriented strategies are more likely efficiently allocate funds than inward-oriented strategies for several reasons. One reason would be that every new outward allocation or expenditure is, at first, non-essential and will be thoroughly vetted and analyzed upon being implemented and before being continued.

For instance, if a company decides to hire an outside agency to clean the facility, that agency will be monitored closely for efficiency and cost. This is an outward strategy, a form of out-sourcing.

If the company instead chose to focus on improving the efficiency of the current janitorial staff, more internal staff would be required to work both on and in the janitorial department. Increasing the effectiveness and decreasing the costs of an existing department will be logistically more difficult, and may present fewer options for improvement.

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litteacher8 | High School Teacher | (Level 3) Distinguished Educator

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Outward always implies growth. Whether we are talking about economies or companies, there will always be more growth related to expanding, exporting, or selling. Inward strategies are not creating growth. They might make a company more efficient.
accessteacher's profile pic

accessteacher | High School Teacher | (Level 3) Distinguished Educator

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Outward strategies clearly force interaction and engagement with the globalised world as a market, which means that whatever elements of a company or country that engages in such strategies have to be competitive and efficient in order to be able to compete. #2 does make a great point that both outward and inward strategies should complement each other, however.

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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My understanding is that this question is not about individual firms but about whole economies.  Outward-oriented strategies are ones (like China's) that are based on exporting.

One reason why export based strategies would be more efficient is because firms in the developing country would presumably be subject to more competition when exporting.  Economists hold that competition leads to efficient allocation of resources.  A development policy focused on domestic markets would not expose the firms to the competition needed to make them efficient.

readerofbooks's profile pic

readerofbooks | College Teacher | (Level 2) Educator Emeritus

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Great question. One of the reasons why an outward based strategy is better for a company is because this is most likely where money is going to be made. Moreover, the inward areas of a company should support the outward strategies of the company.  For this to happen, the company needs to look outward and plan accordingly.  If a company is only inward, it will not make any money and it will cease to exists. Moreover,  if a company has great business plans, there will be plenty of times to build inwardly.

junepinto00's profile pic

junepinto00 | (Level 1) eNoter

Posted on

Outward-oriented development strategies focus on producing manufactured products for export. On the other hand, inward-oriented development strategies focus on developing a domestic manufacturing sector to produce goods that can substitute for imported manufacturing goods.

Thus, growth rates of outward-oriented economies are significantly higher than those of inward- oriented economies.

 

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