Multinational Market Regions and Market Groups Chapter 10 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. PowerPoint presentation prepared by: Alfred Lowey-Ball Associate Professor of Marketing UBI-United Business Institutes Brussels, Belgium Chapter Learning Objectives 1. The reasons for economic union 1. The reasons for economic union 2. Patterns of international cooperation 2. Patterns of international cooperation 3. The evolution of the European Community to the European Union 3. The evolution of the European Community to the European Union 4. Strategic implications for marketing in Europe 4. Strategic implications for marketing in Europe Chapter Learning Objectives 5. Evolving patterns of trade as Eastern Europe and the former Soviet states embrace the free-market system 5. Evolving patterns of trade as Eastern Europe and the former Soviet states embrace the free-market system 6. The trade linkage of NAFTA and South America and its regional effects 6. The trade linkage of NAFTA and South America and its regional effects 7. The development of trade within the Asia- Pacific Rim 7. The development of trade within the Asia- Pacific Rim Introduction • The evolution and growth of multinational market regions— those groups of countries that seek mutual economic benefit from reducing interregional trade and tariff barriers—are the most important global trends today • Organizational form varies widely among market regions, but the universal goal of multinational cooperation is economic benefit for the participants • Political and social benefits sometimes accrue, but the dominant motive for affiliation is economic. • The world is awash in economic cooperative agreements as countries look for economic alliances to expand access to free markets. Traits of Successful Economic Unions 1. Economic Compatibility (similar economic systems) 2. Political Compatibility (similar political systems) 3. Cultural Compatibility 4. Geographic factors 5. Weakness in some must be balanced by strengths in others Patterns of Multinational Cooperation 1. Regional Cooperation Groups 2. Free Trade Areas 3. Customs Unions 4. Common Markets and Economic Unions 5. Political Unions • There are five fundamental groupings for regional economic integration as follows: • There are five fundamental groupings for regional economic integration as follows: • Viewed on a spectrum, each requires greater levels of cooperation among member nations and include: • Viewed on a spectrum, each requires greater levels of cooperation among member nations and include: Regional Cooperation Groups • A group of countries that have agreed to participate in basic industries beneficial to each or jointly develop joint ventures that benefit both countries, e.g., Colombia and Venezuela built a hydroelectric dam on the Orinico river which both share Free Trade Areas • Examples of Free Trade Areas: NAFTA, and European Free Trade Area (EFTA) between Iceland, Liechtenstein, Norway, and Switzerland • A group of countries that have agreed to reduce drastically (but not eliminate) all trade barriers such as customs duties and non- tariff barriers (standards) • A group of countries that have agreed to reduce drastically (but not eliminate) all trade barriers such as customs duties and non- tariff barriers (standards) • Member countries can have different trade policies for other external countries • Member countries can have different trade policies for other external countries Customs Unions • Examples of Customs Unions: East African Customs Union between Ethiopia, Kenya, Sudan, Tanzania, Uganda, and Zambia • In addition to drastically reducing trade barriers from FTA identified previously, a group of countries that have agreed to eliminate customs duties levied among member countries • In addition to drastically reducing trade barriers from FTA identified previously, a group of countries that have agreed to eliminate customs duties levied among member countries • Also establishes common external barriers like imposing a common tariff on goods imported from countries out of the association. • Also establishes common external barriers like imposing a common tariff on goods imported from countries out of the association. Common Markets • Latin America boasts three common markets: the Central American Common Market (CACM), the Andean Common Market, and the Southern Cone Common Market (MERCOSUR). • The three have roughly similar goals and seek eventual full economic integration. • In addition to drastically reducing trade barriers, and eliminating customs duties levied from FTA and Customs Unions identified previously, a common market is a group of countries that allow:  the free flow of capital and labor (engineers, doctors, and lawyers can work without recertification) among members  a common currency  a common central bank; and  common policies on transportation, agriculture, social services, welfare, and taxes • In addition to drastically reducing trade barriers, and eliminating customs duties levied from FTA and Customs Unions identified previously, a common market is a group of countries that allow:  the free flow of capital and labor (engineers, doctors, and lawyers can work without recertification) among members  a common currency  a common central bank; and  common policies on transportation, agriculture, social services, welfare, and taxes . reducing interregional trade and tariff barriers—are the most important global trends today • Organizational form varies widely among market regions, but the universal goal of multinational. common market is a group of countries that allow:  the free flow of capital and labor (engineers, doctors, and lawyers can work without recertification) among members  a common currency  a common. common market is a group of countries that allow:  the free flow of capital and labor (engineers, doctors, and lawyers can work without recertification) among members  a common currency  a common