Multinational Market

Regions and Market Groups

Chapter 10
Multinational market regions
Defined:
• “Those groups of countries that seek mutual economic
benefit from reducing interregional trade and tariff
barriers”
Having the following common factors help to
create a more successful economic union
amongst countries:
1. Economic unity
2. (Comparable) Political unity
3. Geographic Proximity
4. Cultural similarities
Patterns of Multinational
Cooperation
5 Groupings for regional economic
integration:
1. Regional Cooperation Groups
• (RCD- regional cooperation development, Joint ventures)
2. Free Trade Area (NAFTA)
• Reduces or eliminates tariffs amongst trading members
3. Customs Union
• Adds a common external tariff to countries outside union
4. Common Market (EEC)
• Unified economy that lacks political unity (EEC)
5. Political Union (EU)
• Unified economically and politically
Global Markets and
Multinational Market Groups
Europe (1st “triad region”)
European Community
– See exhibit 10.1 & 10.2 pg. 284 and pg. 285
– Stages and development of the European Union
(ex. 10.3 pg. 286)
• Single European Act (1987)
– The “White Paper”
– “Harmonization”
• EC institutions
– The European Commission, The Council of Ministers,
The European Parliament, The European Court of
Justice
Europe
European Free Trade Association (EFTA) and
European Economic Area (EEA)
– EFTA
– Countries that wish to participate in a free trade area,
but not willing to join the ECC (Iceland, Liechtenstein,
Norway, and Switzerland)
– EFTA will most likely dissolve and its members will join
either EU or EEA.
– EEA
– Countries that wish to also participate in free trade
area, except when it comes to their domestic farm
policies.
Europe
European Union
• Economic and Monetary Union (EMU)
– Maastrict Treaty in 1992
– Goal of treaty was to create economic and political
unity (including foreign policy) in European member
countries.
– Euro
– Common currency for EU
– Central bank was created to fix rates of conversion,
print and circulate euro banknotes and coins, and
cancel member states previous banknotes and coins.
• Treaty of Amsterdam (1997)
– Laid the foundation for developing a single currency and
enlarging the EU into Central and Eastern Europe.
Europe
European Union Expansion
• 6 Countries waiting for acceptance in 2006
– Czech Republic, Hungary, Poland, Estonia, Slovenia and
Cyprus
• EU needs to address significant issues before countries
will be admitted
– Illegal immigrants; cheap labor; integration of agricultural
industries; human rights; impact on legislative process
Marketing in Europe
• Opportunities
• Market Barriers
• Reciprocity
Europe
Marketing Mix Implications
• Companies will have to adjust their marketing strategies in the
European market by:
– Standardizing their prices across countries to avoid the problem of
parallel imports
– Using the internet to market products and services
– Reducing the number of brands offered
The Commonwealth of Independent States (CIS)
• 12 former republics of Russia formed after the dissolution of
Russia
• Exhibit 10.6 pg. 295
Central European Free Trade Area (CEFTA)
• Same 6 countries requesting admittance into EU
• Economically has been successful
Global Markets and
Multinational Market Groups
The Americas (2nd Triad)
• U.S., Canada, Central America, South America
NAFTA
• Originally Canada and U.S. joined together under (CFTA) to eliminate
tariffs and other barriers to trade
• Mexico sought the same agreement with U.S. and Canada and formed
NAFTA in 1994.
– Requires all 3 countries remove all tariffs and barriers to trade over 15
years; but allows each country to determine tariff arrangements with non-
member countries
• Benefits to each of the countries include
– Canada has an advanced industrial economy, rich resources but needs more
markets to sell (consumers)
– U.S. also has an advanced economy, but needs resources (oil) , more
market opportunity and cheaper labor
– Mexico needs investment, technology, exports and other economic
reinforcements to infuse their economy
The Americas
NAFTA:
• Key Provisions of NAFTA (ex. 10-7, pg. 298)
• What is happening with NAFTA and other Latin America
groups?
– Chile was to be the first country to enter, then membership
would extend south to the Free Trade areas of the
Americas by 2005
– Issues that need to be addressed first include:
common tariffs, U.S. seeking to integrate foreign
policies
• Success or Failure with NAFTA (somewhat mixed)
– Measurable positive effects include:
– Trade amongst countries has grown by nearly 75%,
foreign direct investment has increased; job creation
has increased in all 3 countries
The Americas
SCFTA or “Mercosur”
• Brazil, Argentina, Chile, Bolivia…
• Treaty signed in 1991 to create a common market to
allow free movement of goods, capital, labor and
services amongst members
• Second largest common market in Latin-America
• Most influential and successful free trade area in South
America
Other Latin America Market Groups
• CACM, CARICOM, LAIA,
– (see exhibit 10.8 pg. 302)
Global Markets and
Multinational Market Groups
Asian Pacific Rim (3rd “triad region)
Trade Groups
• 1. Association of Southeast Asian Nations
(ASEAN)
• 2. Asia-Pacific Economic Cooperation (APEC)
Global Markets and
Multinational Market Groups
Africa
1. Economic Community of West African States
(ECOWAS)
2. Southern African Development Community
(SADC)
• See exhibits 10.10 pgs. 308-309
Middle East
• Arab Common Market
• Economic Cooperation Organization (ECO)
• Organization of the Islamic Conference (OIC)