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Multinational Market Regions and Market Groups

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State sovereignty, one of the most cherished possessions of any nation, is ... economically feasible to enter new markets and employ new marketing strategies. ... – PowerPoint PPT presentation

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Title: Multinational Market Regions and Market Groups


1
10
Chapter
  • Multinational Market Regions and Market Groups

2
Chapter Learning Objectives
  • Reason for economic union
  • Patterns of international cooperation
  • Evolution of the European Union
  • Strategic implications for marketing in Europe
  • Evolving patterns of trade as eastern Europe and
    former Soviet states embrace free-market systems
  • Trade linkage of NAFTA and South America and its
    regional effects
  • Trade development within the Asia-Pacific Rim

3
Global PerspectiveMight Free Trade Bring Peace
to the Middle East?
  • Multinational Market Regions groups of countries
    that seek mutual economic benefit from reducing
    trade and tariff barriers.
  • Most important global trends today
  • World is awash in economic cooperative agreements
    as countries seek economic alliances to expand
    access to free markets.
  • Governments and businesses worry that the EU,
    NAFTA, and other cooperative trade groups will
    become regional trading blocs without trade
    restrictions internally but with borders against
    outsiders.

4
La Raison d Etre
  • Economic union requires favourable economic,
    political, cultural, and geographic factors for
    success.
  • Advantages of economic union must be clear-cut
    and significant, and the benefits must greatly
    outweigh the disadvantages before nations forgo
    part of their sovereignty.
  • In the past, a strong threat to a nations
    economic or political security spurred
    cooperation.

5
Economic Factors
  • Markets enlarged through preferential tariff
    treatment for participating members, common
    tariff barriers against outsiders, and both.
  • Nations with complementary economic bases are
    least likely to encounter frictions in developing
    and operating a common market unit.
  • For survival, an economic union must have
    agreements and mechanisms in place to settle
    disputes.
  • The demise of the Latin American Free Trade
    Association (LAFTA) was economically stronger
    members not allowing for weaker ones needs.

6
Political Factors
  • State sovereignty, one of the most cherished
    possessions of any nation, is relinquished only
    for a promise of significant improvement of the
    national position through cooperation.
  • The importance of political unity to fully
    achieve all the benefits of economic integration
    has driven EC countries to form the European
    Union.

7
Geographic and Temporal Proximity Cultural
Factors
  • Geographic and temporal proximity
  • Recent research demonstrates that more important
    than physical distance are time zones
    differences.
  • Trade tends to travel more easily in north-south
    directions then it did in ancient times.
  • Countries widely separated geographically have
    major barriers to overcome in attempting economic
    fusion.
  • Cultural factors
  • The more similar the culture, the more likely a
    market is to succeed because members understand
    the outlook and viewpoints of their colleagues.

8
Patterns of Multinational Cooperation
  • Regional cooperation groups
  • Governments agree to participate jointly to
    develop basic industries beneficial to each
    economy.
  • Free trade area
  • Two or more countries agree to reduce or
    eliminate customs duties and nontariff trade
    barriers among partner countries while
    maintaining individual tariff schedules for
    external countries.
  • Customs union
  • Enjoys free trade areas reduced or eliminated
    internal tariffs and adds a common external
    tariff on products imported from countries
    outside the union.

9
Patterns of Multinational Cooperation (contd)
  • Common market
  • Eliminates all tariffs and restrictions on
    internal trade, adopts common external tariffs,
    and removes all restrictions on the free flow of
    capital and labour among member nations.
  • Political union
  • Complete political and economic integration,
    either voluntary or enforced.
  • Commonwealth a voluntary organisation providing
    the loosest possible economic integration.
  • New political unions in the 1990s
  • The Commonwealth of Independent States (CIS)
  • The European Union (EU)

10
Global and Multinational Market Groups
  • Important to view market potential regionally
    rather than country by country
  • The globalisation of markets
  • The restructuring of the Eastern European bloc
    into independent market-driven economies
  • The dissolution of the Soviet Union into
    independent states
  • The worldwide trend toward economic cooperation
  • Enhanced global competition

11
Brief History of European Integration
  • Of all multinational market groups, most secure
    in cooperation and economically is the European
    Union.
  • Historically, standards have effectively limited
    market access.
  • The Single European Act

12
Brief History of European Integration (continued)
  • EU Institutions
  • Form of federal pattern with executive,
    parliamentary, and judicial branches
  • European Union uses three legal instruments
  • Regulations bind member states directly and have
    the same strength as national laws
  • Directives also bind member states but allow them
    to choose the means of execution.
  • Decisions addressed to a government, an
    enterprise, or an individual, bind the parties
    named.

13
Brief History of European Integration (continued)
  • European Free Trade Association and European
    Economic Area
  • For European nations unwilling to join the EEC
    but wanting to participate in a free trade area.
  • EFTA will most probably dissolve as its members
    join either the European Economic Area (EEA) or
    the EU.
  • European Economic Area a single market with
    free movement of goods, services, and capital.
  • The EEA is governed by a special Council of
    Ministers composed of representatives from EEA
    member nations.

14
European Union
  • Ratification of the Maastricht Treaty (1992)
  • Economic and Monetary Union
  • Treaty of Amsterdam
  • Expansion of the European Union

15
Strategic Implications for Marketing in Europe
  • Multinational groups spell opportunity in bold
    letters through access to greatly enlarged
    markets with reduced or abolished
    country-by-country tariff barriers and
    restrictions.
  • World competition will intensify as businesses
    become stronger and more experienced in dealing
    with large market groups.
  • Opportunities
  • Economic integration creates large mass markets
  • Market barriers
  • The initial aim of a multinational market is to
    protect businesses that operate within its
    borders.
  • Reciprocity
  • If a country does not open its market to an EU
    firm, it cannot expect access to the EU market.

16
EU Marketing Mix Implications
  • In the past, companies often charged different
    prices in different European markets.
  • As long as products from lower-priced markets
    could not move to higher-priced markets, such
    differential price schemes worked.
  • Beddedas Shower Gel
  • In addition to initiating uniform pricing
    policies, companies are reducing the number of
    brands they produce to focus advertising and
    promotion efforts.

17
The Commonwealth of Independent States
  • Remaining 12 USSR republics after aborted coup
    against Gorbachev and Baltic States formation.
  • CIS is a loose economic and political alliance
    with open borders but no central government.
  • 12 CIS members share a common history of central
    planning. Their close cooperation could make the
    change to a market economy less painful, but
    differences over economic policy, currency
    reform, and military control may break them
    apart.

18
North American Free Trade Agreement
  • NAFTA ratified and became effective in 1994, a
    single market of 360 million people with a 6
    trillion GNP emerged.
  • NAFTA requires the three countries to remove all
    tariffs and trade barriers over 15 years, but
    each country will have its own tariff
    arrangements with nonmember countries.
  • The elimination of trade and investment barriers
    among Canada, Mexico, and the United States
    creates one of the largest and richest markets in
    the world.
  • NAFTA has its detractors, and there has been
    constant turmoil since its inception.
  • 1996 presidential election
  • Job losses have less drastic than feared, partly
    because companies established maquiladora plants
    in anticipation of NAFTA benefits.

19
Southern Cone Free Trade Area (Mercosur)
  • Mercosur (including Argentina, Bolivia, Brazil,
    Chile, Paraguay, and Uruguay) is the
    second-largest common-market agreement in the
    Americas after NAFTA.
  • Mercosur has become the most influential and
    successful free trade area in South America.
  • Success due to the willingness of the regions
    governments to confront tough issues caused by
    dissimilar economic policies.
  • Negotiations underway since 1999 for a free trade
    agreement between the EU and Mercosur, the first
    possible region-to-region free trade accord.

20
Latin American Economic Cooperation
  • Almost every country in Latin America has signed
    some type of trade agreement or is involved in
    negotiations.
  • Latin American Integration Association
  • Caribbean Community and Common Market (CARICOM)
  • NAFTA to FTAA or SAFTA?

21
Association of Southeast Asian Nations
  • Goals of ASEAN
  • Economic integration and cooperation through
    complementary industry programs
  • Preferential trading, including reduced tariff
    and nontariff barriers
  • Guaranteed member access to markets
  • Harmonised investment incentives
  • Four major events account for vigorous ASEAN
    economic growth
  • ASEAN governments commitment to deregulation,
    liberalisation, and privatisation of their
    economies.
  • Decision to shift economies from commodities to
    manufacturing.
  • Decision to specialise in manufacturing
    components in which they have a comparative
    advantage.
  • Japans emergence as a major provider of
    technology and capital to upgrade manufacturing
    capability and develop new industries.

22
Far Eastern Market Group
  • Insert Exhibit 10.9

23
Asia-Pacific Economic Cooperation (APEC)
  • Formed in 1989
  • A formal structure for the governments to discuss
    mutual interests in open trade and economic
    collaboration.
  • Includes all major economies of the region and
    the most dynamic, fastest-growing economies.
  • Common goal and commitment to
  • Open trade
  • Increase economic collaboration
  • Sustain regional growth and development
  • Strengthen the multilateral trading system
  • Reduce barriers to investment and trade without
    detriment to other economies.

24
Africa
  • Little economic integration because of political
    instability and unstable economic base.
  • The Economic Community of West African States
    (ECOWAS) and the Southern African Development
    Community (SADC)
  • ECOWAS continues to have financial problems,
    group conflict, and inactivity by some members.
  • Southern African Development Community is the
    most advanced and viable African regional
    organisations.

25
Middle East
  • Less aggressive in forming successfully
    functioning multinational market groups.
  • A long history of border disputes and persisting
    ideological differences to overcome.
  • Economic Cooperation Organization (ECO)
  • Organization of the Islamic Conference (OIC)
  • 60 countries and over 650 million Muslims
  • The member countries vast natural resources,
    substantial capital, and cheap labor force are an
    OIC strength.

26
Regional Trading Groups and Emerging Markets
  • Two opposing views regarding future global trade.
  • World is dividing into major regional groups such
    as the EU, NAFTA, and ASEAN that are and will
    continue to be the major markets.
  • Global economic power may shift from traditional
    industrial markets to the developing world and
    its emerging markets.
  • Many experts predict that over the next 50 years
    the majority of global economic growth will be in
    the developing world, principally in emerging
    markets.

27
Summary
  • Marketing efficiency effected through development
    of mass markets, greater competition, higher
    personal income, and various psychological
    factors.
  • Production efficiency derives from
    specialisation, mass production for mass markets,
    and free movement of factors of production.
  • Regardless of the marketers location,
    multinational market groups provide great
    opportunity for creative marketers who wish to
    expand volume.

28
Summary (continued)
  • Market groupings make it economically feasible to
    enter new markets and employ new marketing
    strategies.
  • Market groupings intensify competition by
    protectionism within a market group but may
    foster greater protectionism between regional
    markets.
  • Mercosur and ASEAN3 suggest the growing
    importance of economic cooperation and
    integration.
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