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Chapter10 Multinational Market Regions and Market Group1
Chapter10 Multinational Market Regions and Market Group1
Global Perspective Might Free Trade Bring Peace to the Middle East?
z Multinational Market Regions those groups of countries that seek mutual economic benefit from reducing trade and tariff barriers. {Most important global trends today z The world is awash in economic cooperative agreements as countries look for economic alliances to expand access to free markets.
Global Perspective Might Free Trade Bring Peace to the Middle East?
z 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 protected from outsiders.
La Raison d Etre
zSuccessful economic union requires favorable economic, political, cultural, and geographic factors as a basis for success. zThe advantages of economic union must be clear-cut and significant, and the benefits must greatly outweigh the disadvantages before nations forgo any part of their sovereignty.
La Raison d Etre
zIn the past, a strong threat to the economic or political security of a nation was the impetus for cooperation.
Economic Factors
zMarkets are enlarged through preferential tariff treatment for participating members, common tariff barriers against outsiders, or both. zNations with complementary economic bases are least likely to encounter frictions in the development and operation of a common market unit.
Economic Factors
zFor an economic union to survive, it must have agreements and mechanisms in place to settle economic disputes. zThe demise of the Latin American Free Trade Association (LAFTA) was the result of economically stronger members not allowing for the needs of the weaker ones.
Political Factors
zState sovereignty is one of the most cherished possessions of any nation and is relinquished only for a promise of significant improvement of the national position through cooperation. zThe importance of political unity to fully achieve all the benefits of economic integration has driven EC countries to form the European Union.
{Countries that are widely separated geographically have major barriers to overcome in attempting economic fusion.
European Union
zRatification of the Maastricht Treaty (1992) zEconomic and Monetary Union zTreaty of Amsterdam zExpansion of the European Union
z Job losses have not been as drastic as once feared, in part because companies have established maquiladora plants in anticipation of the benefits from NAFTA.
zMercosur (including Argentina, Bolivia, Brazil, Chile, Paraguay, and Uruguay) is the second-largest common-market agreement in the Americas after NAFTA. zSince its inception, Mercosur has become the most influential and successful free trade area in South America.
zThe success can be attributed to the willingness of the regions governments to confront some very tough issues caused by dissimilar economic policies. zNegotiations have been under way since 1999 for a free trade agreement between the EU and Mercosur, the first region-to-region free trade accord.
Africa
z There has been little actual economic integration because of the political instability that has characterized Africa in recent decades and the unstable economic base on which Africa has had to build.
Africa
z The Economic Community of West African States (ECOWAS) and the Southern African Development Community (SADC) are the two most active regional cooperative groups.
{ ECOWAS continues to be plagued with financial problems, conflict within the group, and inactivity on the part of some members.
z The Southern African Development Community is the most advanced and viable of Africas regional organizations.
Middle East
zThe Middle East has been less aggressive in the formation of successfully functioning multinational market groups. zA long history of border disputes and persisting ideological differences will have to be overcome.
Middle East
zEconomic Cooperation Organization (ECO) zCreation of the Organization of the Islamic Conference (OIC)
{Represents 60 countries and over 650 million Muslims worldwide {The member countries vast natural resources, substantial capital, and cheap labor force are seen as the strengths of the OIC.
Summary
zMarketing efficiency is effected through the development of mass markets, encouragement of competition, improvement of personal income, and various psychological market factors.
Summary (continued)
z Production efficiency derives from specialization, mass production for mass markets, and the free movement of the factors of production. z Regardless of the location of the marketer, multinational market groups provide great opportunity for the creative marketer who wishes to expand volume.
Summary (continued)
zMarket groupings make it economically feasible to enter new markets and to employ new marketing strategies. zMarket groupings intensify competition by protectionism within a market group but may foster greater protectionism between regional markets.
Summary (continued)
zMercosur and ASEAN+3 suggest the growing importance of economic cooperation and integration.