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Multinational Market Regions and Market Groups


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

  • Multinational Market Regions and Market Groups

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

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

La Raison d Etre
  • Economic union requires favourable economic,
    political, cultural, and geographic factors for
  • 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

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
  • The demise of the Latin American Free Trade
    Association (LAFTA) was economically stronger
    members not allowing for weaker ones needs.

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

Geographic and Temporal Proximity Cultural
  • Geographic and temporal proximity
  • Recent research demonstrates that more important
    than physical distance are time zones
  • 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
  • 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.

Patterns of Multinational Cooperation
  • Regional cooperation groups
  • Governments agree to participate jointly to
    develop basic industries beneficial to each
  • 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.

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)

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

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

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

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.

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

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
  • 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
  • Reciprocity
  • If a country does not open its market to an EU
    firm, it cannot expect access to the EU market.

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.

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

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.

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.

Latin American Economic Cooperation
  • Almost every country in Latin America has signed
    some type of trade agreement or is involved in
  • Latin American Integration Association
  • Caribbean Community and Common Market (CARICOM)

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
  • Decision to shift economies from commodities to
  • Decision to specialise in manufacturing
    components in which they have a comparative
  • Japans emergence as a major provider of
    technology and capital to upgrade manufacturing
    capability and develop new industries.

Far Eastern Market Group
  • Insert Exhibit 10.9

Asia-Pacific Economic Cooperation (APEC)
  • Formed in 1989
  • A formal structure for the governments to discuss
    mutual interests in open trade and economic
  • 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.

  • 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

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.

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

  • Marketing efficiency effected through development
    of mass markets, greater competition, higher
    personal income, and various psychological
  • 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.

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