CONTROLES DE LECTURA

Control de Lectura 1. Chapter 1. Libro International Business Competing in the

Global Marketplace.
Control de Lectura 2.
a Estrategias de insercin / integracin
Integration Strategies-Corporate Level
Vertical Integration (forward, backward)
Horizontal integration (acquisition, merger, strategic alliance)
1. Vertical integration
It takes place when two companies of different levels on the distribution chain
merge. Examples could be, when a supplier merges with a wholesaler/tour
operator or a tour wholesaler merges with a retail agent.
We speak of backward vertical integration, when a wholesaler merges with or
buys an airline or with a hotel. With this move a greater control over the source
of supply is desired.
We speak of forward vertical integration, when a tour wholesaler merges or
buys a travel agency. In this case greater control over the distribution network
is wanted. (Lubbe 2000)

2. Horizontal integration
It means that tour wholesalers/ tour operator merges on the same level of
distribution. For example a tour wholesaler buys another tour wholesaler to
improve their market share and reduce competition. In general, horizontal
integration always leads to economics of scale, in functions such as human
resources, purchasing, and thus to cost savings and price reductions. Through
cost savings an organisation may become more cost effective, allowing them to
develop a better range of products and to achieve better quality control.
(Lubbe 2000)
http://es.slideshare.net/manumelwin/integration-strategies-corporate-level-
strategies-strategic-management-manu-melwin-joy

Following World War II, theres been a shift in thinking toward trade. Nations
have moved away from thinking that trade was a zero-sum game of either win
or lose to a philosophy of increasing trade for the benefit of all. Additionally,
coming out of a second global war that destroyed nations, resources, and the
balance of peace, nations were eager for a new model that would not only
focus on promoting and expanding free trade but would also contribute to
world peace by creating international economic, political, and social
cooperative agreements and institutions to support them. While this may
sound impossible to achieve, international agreements and institutions have
succeededat a minimumin creating an ongoing forum for dialogue on trade
and related issues. Reducing the barriers to trade and expanding global and
regional cooperation have functioned as flatteners in an increasingly flat world.
(we can understand this, as international or global integration).
In the postWorld War II environment, countries came to realize that a major
component of achieving any level of global peace was global cooperation
politically, economically, and socially. The intent was to level the trade playing
field and reduce economic areas of disagreement, since inequality in these
areas could lead to more serious conflicts. Among the initiatives, nations
agreed to work together to promote free trade, entering into bilateral and
multilateral agreements. The General Agreement on Tariffs and Trade (GATT)
resulted from these agreements.
Regional economic integration enabled countries to focus on issues that are
relevant to their stage of development as well as encourage trade between
neighbors.

Pros

The pros of creating regional agreements include the following:

Trade creation. These agreements create more opportunities for

countries to trade with one another by removing the barriers to trade
and investment. Due to a reduction or removal of tariffs, cooperation
results in cheaper prices for consumers in the bloc countries. Studies
indicate that regional economic integration significantly contributes to
the relatively high growth rates in the less-developed countries.

Employment opportunities. By removing restrictions on labor

movement, economic integration can help expand job opportunities.

Consensus and cooperation. Member nations may find it easier to

agree with smaller numbers of countries. Regional understanding and
similarities may also facilitate closer political cooperation.

Cons

The cons involved in creating regional agreements include the following:

Trade diversion. The flip side to trade creation is trade diversion.

Member countries may trade more with each other than with
nonmember nations. This may mean increased trade with a less efficient
or more expensive producer because it is in a member country. In this
sense, weaker companies can be protected inadvertently with the bloc
agreement acting as a trade barrier. In essence, regional agreements
have formed new trade barriers with countries outside of the trading
bloc.

Employment shifts and reductions. Countries may move production

to cheaper labor markets in member countries. Similarly, workers may
move to gain access to better jobs and wages. Sudden shifts in
employment can tax the resources of member countries.
 Loss of national sovereignty. With each new round of discussions and
agreements within a regional bloc, nations may find that they have to
give up more of their political and economic rights. In the opening case
study, you learned how the economic crisis in Greece is threatening not
only the EU in general but also the rights of Greece and other member
nations to determine their own domestic economic policies.

Global and regional economic integration

Global economic integration is one of the most pronounced developments of
the late 20th century. The liberalization of domestic economies, the co-operate
regimes in international trade and finance and de transationalization of
corporate structures has contributed to this phenomenon. However, the various
regions of the global economy should manifest distinct patterns of integration.
Geographical proscimity is the likely starting point of Global integration. Unless
there is a forbidding enmity between peoples, one trades with ones
neighbours firs before moving further afield. Shared historical experiences, the
cultural affinities which facilitate commerce are more likely with neighbouring
peoples than with those from afar. The EU is one example of these processes.
Other regional integration processes elsewhere in the world economy are.
NAFTA, APEC, ASEAN that are co-operative economic integration projects base
on free trade. These regional processes have accompanied important
international co-operative measures which involve integration at the global
level.

Regionalism and Global Economic Integration: Europe, Asia , and the Americas
Escrito por William Donald Coleman,Geoffrey R. D. Underhill
b Etapas de la integracin
Chapter 9. Globalization,International Business Competing in
the Global Marketplace.Charles W.L.Hill

Economic integration, as defined here, can take several forms that represent
varying degrees of integration. These are a free-trade area, a customs union, a
common market, an economic union, and complete economic integration. In a
free-trade area, tariffs (and quantitative restrictions) between the participating
countries are abolished, but each country retains its own tariffs against
nonmembers. Establishing a customs union involves, besides the suppression
of discrimination in the field of commodity movements within the union, the
equalization of tariffs in trade with nonmember countries. A higher form of
economic integration is attained in a common market, where not only trade
restrictions but also restrictions on factor movements are abolished. An
economic union, as distinct from a common market, combines the suppression
of restrictions on commodity and factor
movements with some degree of harmonization of national economic policies,
in order to remove discrimination that was due to disparities in these policies.
Finally, total economic integration presupposes the unification of monetary,
fiscal, social, and countercyclical policies and requires the setting-up of a
supra-national authority whose decisions are binding for the member states
Economic Integration:
a process by which the firms and economies of separate states merge in
larger entities
discriminatory removal of all barriers of economic cooperation

Levels of Economic Integration

Free trade area.- all barriers to the trade of goods and services among member
countries are removed. The biggest examples are EFTA (European Free Trade
Association-1960 Norway, Iceland, Liechtenstein and Switzerland) and NAFTA.
Customs Union.- eliminates trade barriers between member countries and
adopts a common external trade policy. Example Andean Community.
Common Market.- has no barrier to trade among member countries, include a
common esternal trade policy, and allows factors of production to move freely
among members. Labor and capital are free to move. There are no restrictions
on immigration, emigration or cross-border flows of capital. It demas a
significant degree of harmony and cooperation on fiscal, monetary, and
employment policies. The European Union functioned in this way for years.
Mercosur is trying to move beyond this stage.
Economic Union.- involves the free flow of products and factors of production
among membr countries and the adoption of a common external trade policy,
but also requires a common currency, tax rates, and a common monetary and
fiscal policy. It demands to give a significant amount of national sovereignty to
a bureaucracy. The EU is a economic union, but it is imperfect because not all
members adopted the euro. There are differences in tax rates and regulations
among countries, and there are sectors that are not fully deregulated such as
the energy.
Political Union.- in which a central political apparatus coordinates the
economic, social, and foreign policy of the member states. The EU is the only
one that is on the road toward at least partial political union.
The case for regional integration
 1 The economic case.- economic theories suggest that
free trade and investment is a positive-sum game, in
which all participating countries stand to gain. Given
this, the theoretical ideal is an absence of barriers to
the free flow of goods, services, and factors of
production among nations. However, in a world of
many nations and many political ideologies, it is very
difficult to get all countries to agree to a common set
of rules. Regional economic integration is an
alternative to global agreements. It is easier to
establish a free trade and investment regime among
a limited number of adjacent countries.
2 The political case.- Linking neighboring economies
and making them increasingly dependent on each
other create incentives for policial cooperation
between states. Example. Europe.
Impediments to integration
Despite of the economic and political arguments in support, integration has
never been easy to achieve for two main reasons: certain groups suffer as a
consequence of this process and nations have to give up to some part of
national sovereignty.

Control de Lectura 3. Overview of the International Integration Process:

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