Multinational Market Regions and Market Groups Chapter 10

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. 2. 3. 4. Economic unity (Comparable) Political unity Geographic Proximity 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 (1 st “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

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.

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.

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 (2 nd 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 nonmember 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 (3 rd “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)