A Proposal on International Trade and Bank Performance
OBJECTIVES OF THE STUDY
- To find out the performance of commercial banks in international trade in Ghana.
- To find out the performance of merchant banks in international trade in Ghana.
- To find out the performance of development banks in international trade in Ghana.
- And equally to find out the performance of community banks in international trade in Ghana.
- And equally to find out the performance of people’s banks in international trade in Ghana.
LITERATURE REVIEW
Theoretical foundation
The more perspectives we can comprehend behavior from, the more effectively we can analyze and solve problems using it (Kothari, 2004). Three key theories will form the foundation of this investigation. They are the Keynesian theory, Porter’s theory of the Diamond model, and Transaction Cost Theory. These are shown below.
Transaction Cost Theory
In his 1937 book, Ronald Coase tries to explain why businesses exist, why they grow, or why they outsource work to the outside world. The transaction cost theory postulates that businesses want to reduce the costs associated with exchanging resources with the environment as well as the administrative costs associated with internal exchanges. As a result, international merchants balance the administrative expenses of carrying out tasks internally against the costs of exchanging resources with the environment (in this case, the banks). According to the thesis, markets and institutions both have the potential to organize and coordinate economic interactions.
A corporation grows when external transaction costs are greater than internal bureaucratic costs because it can carry out its operations more affordably than if they were carried out in the market. However, the corporation shrinks and commercial banks take over the responsibilities of facilitating and promoting international trade if the administrative costs for coordinating the activity are higher than the external transaction costs.
According to Coase (1937), any business expands as long as its operations can be carried out more affordably there rather than contracting with other providers in the market. Williams (1997) asserts that when a good or service is moved across a technologically separated interface, a transaction cost takes place. Transaction costs thus appear each time a good or service is moved from one stage to another, where new technological capabilities are required to provide the good or service.
The following elements, such as environmental uncertainty, opportunism, hazards, constrained rationality, and core firm assets, may reflect the transaction costs associated with the exchange of resources with the external environment. These characteristics could raise the price of external transactions, making it more expensive for a corporation to manage them. Therefore, it might be more cost-effective to keep the work in-house so that the business won’t have to spend money on supplier contracts, meetings, oversight, etc. As a result, businesses who see environmental uncertainty as high may decide against outsourcing or exchanging resources with the bank. Therefore, the idea aids banks in determining fair prices for their services provided to businesses operating abroad, such as foreign exchange rates and fees associated with processing international payments.
Porter’s theory of Diamond model
Michael Porter provided a framework for analyzing why some states and certain industries within those jurisdictions are more competitive than others. In this approach, Porter’s diamond model of national competitiveness was identified as a tool for evaluating the sources of competitive advantages of an industry in a specific nation and as a tool for realizing a country’s competitive position in the context of international competition. These four national factors—factor circumstances, demand conditions, linked and supporting industries, as well as firm strategy, structure, and rivalry—are what make up this model of competitive advantage. According to Porter’s thesis, these elements combine to create the circumstances for innovation and competitiveness.
In his book “Competitive Advantage of Nations,” published in 1990, Porter sought to make a connection between the academic literatures in strategic management and international economics and provide the groundwork for developing national competitiveness policies.
RESEARCH METHODOLOGY
Research Design
Research design refers to how data collection and analysis are structured in order to meet the research objectives through empirical evidence (Cooper and Schindler, 2006). The study will adopt descriptive research design. Mugenda and Mugenda (2003) describes descriptive research design as a systematic, empirical inquiring into which the researcher does not have a direct control of independent variable as their manifestation has already occurred or because the inherently cannot be manipulated.
The study will use a case study design as well in determining the strategic planning and implementation practices. Kothari (1990) describes a case study as a form of qualitative analysis that involves a careful and complete observation of a social unit. He further describes a social unit as a person, family or institution. The researcher will adopt a case study because of its contribution to the knowledge of individual, group, organizational, social and political phenomena.
A Case study has been a common research strategy in business (Ghauri & Gronhaug, 2002) and community planning. The distinct need for case studies arises out of the desire of the researcher to understand the complex social phenomena. Case study method will allow the researcher to retain the holistic and meaningful characteristics of the real life events (Robert, 2002).
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