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 unity2. (Comparable) Political unity3. Geographic Proximity4. 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.

EuropeEuropean 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

EuropeMarketing 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 AmericasNAFTA:

• 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

Africa1. 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)