International marketing exam 1 pt 2

Ch 10 & 11

Economic integration

countries cooperate to reduce trade barriers, expand markets, encourage economic growth, and promote peaceful relationships

Four factors that influence successful economic union

Economic- shared financial benefits and larger markets.

Political- compatible political goals and willingness to cooperate.

Geographic- proximity and convenient transportation.

Cultural- similarities in language, religion, and values can help cooperation

Five types of regional cooperation

1. Regional Cooperation for Development (RCD)- countries jointly finance projects and share output

2. Free Trade Area (FTA)- removes/reduces internal trade barriers; each country keeps own external tariffs

3. Customs Union- internal trade barriers are reduced; members share a common external tariff

4. Common Market- common external tariff plus free movement of goods, services, labor, and capital

5. Political Union- economic and political integration

Four major EU institutions

• European Commission- initiates policy and oversees compliance with EU rules

• Council of Ministers- plays a central role in EU decision-making

• European Parliament- passes and amends legislation and has budgetary powers

• European Court of Justice (ECJ)- interprets EU law

3 legal instruments

1. Regulation- directly applicable and binding

2. Directive- sets a required result but allows flexibility in implementation

3. Decision- binding on the specific parties to whom it is addressed

Brexit

UK’s withdrawal from the EU, officially effective Jan 31, 2020

• created additional trade complications and uncertainty for businesses

Important reforms of Eastern Europe and former Soviet Union

Privatization- transferring state-owned assets to private ownership

Free-market pricing- allowing supply and demand to influence prices.

Relaxed import controls- reducing restrictions on foreign goods.

Encouraging private enterprise- allowing businesses to operate more freely

Estonia

implements reforms quickly, including privatization and an open trading regime

CIS

Commonwealth of Independent States- loose alliance of former Soviet republics, distinct from the more institutionally integrated EU

Opportunities of Africa

• economic growth and foreign investment

• natural resources and developing consumer markets

• telecommunications and infrastructure development

• potential for long-term business expansion

Challenges for Africa

• poverty and low purchasing power in many markets

• political instability and corruption

• infrastructure limitations

• uneven economic development

Important regional organizations

ECOWAS- West Africa

SADC- Southern Africa

EAC- East Africa

African Union (AU)- Continental cooperation

Middle East and North Africa (MENA)

The region has significant economic potential but faces political instability, conflict, sanctions, and trade barriers

Important organizations of MENA

GAFTA- Greater Arab Free Trade Area; promotes freer trade among participating Arab countries

Arab League- A relatively loose, quasi-political organization

ECO- Economic Cooperation Organization; focuses on infrastructure and reducing trade barriers

OIC- Organization of Islamic Cooperation; promotes cooperation among Islamic countries

Political disputes and conflict can prevent countries from fully benefiting from economic cooperation

Marketing implications of economic integration

Benefits:

• larger markets and more potential customer

• more efficient production and distribution

• potentially lower prices for consumers

• greater opportunities for investment

Challenges:

• stronger competition

• trade barriers that disadvantage companies outside the region

• different consumer incomes and infrastructure

• need to adapt to local regulations and market conditions

3 market metrics to remember

1. Standards of living: Income, household possessions, and access to resources

2. Infrastructure: Transportation, energy, telecommunications, and education

3. Consumer purchases: Household spending on products and services

Marketing mix effects

Pricing: greater price transparency encourages price standardization

Products: companies may standardize products across markets

Distribution: reduced trade barriers can improve efficiency

Competition: companies face more competitors across a larger market

Parallel importation

products enter a market through channels outside the manufacturer's officially designated distribution network

• this can pressure companies to reduce price differences between countries

Economic growth in Asia

• one of the fastest growing economic regions in the world

• Asia proves new technology, products, investment opportunities, and large consumer markets

• 1996 Asian financial crisis caused major economic problems

Two separate political units of Greater China

People’s Republic of China (PRC)- most important national market aside from U.S

Taiwan or Republic of China (ROC)- Mainland-Taiwanese economic relations improved when both entered the World Trade Organization

4 explanations for Japan’s slow economy

1. Faulty economic policies: Risky investments and excessive borrowing

2. Political problems: Bureaucracy and ineffective government responses

3. Global circumstances: Natural disasters, COVID-19, declining purchasing power, and an aging population

4. Cultural explanations: Difficulty adapting after achieving its postwar economic goals

India’s business challenges

• high tariffs

• corruption and bribery

• too much bureaucracy

• weak intellectual property protection

• anti-business attitudes in parts of the government

India’s five-point reform agenda

1. Improve the investment climate

2. Develop a WTO strategy

3. Reform agriculture and small industries

4. Reduce red tape

5. Improve corporate governance

Four Asian Tigers

1. Hong Kong

2. South Korea

3. Singapore

4. Taiwan

They experienced rapid economic growth and became major industrialized economies

Vietnam economy

• War damaged Vietnam's economy and infrastructure

• Trade agreements with the United States reduced tariffs

• International trade, a motivated workforce, and government support helped its economy grow

Bottom-of-the-Pyramid Markets (BOPMs)

• Introduced by C. K. Prahalad

• Refers to markets made up of very low-income consumers

• Businesses historically ignored these consumers because they assumed they could not afford products

• These markets can create opportunities for companies that offer affordable, useful products

Market metrics

Helps businesses decide whether a country is a good market for their products

3 categories of market metrics

Standard of living- income, health care, and household possessions

Infrastructure- roads, railways, electricity, phones, and education

Consumption patterns- what consumers spend money on

Countries in Asia have different incomes, resources, and consumer needs. Businesses must research each market before entering

Asia Pacific trade agreements

ASEAN- promotes cooperation among Southeast Asian countries

ASEAN+3- ASEAN countries plus China, Japan, and South Korea

APEC- promotes trade and economic cooperation around the Pacific Rim

AFTA

ASEAN Free Trade Area

• supports freer trade among members

CPTPP

trade agreement formed by 11 countries after the U.S. withdrew from the original Trans-Pacific Partnership

Why are trade associations important?

they help countries increase trade, reduce barriers, attract investment, and cooperate economically

Diversity within China

China is not one uniform market. Its regions have different industries, incomes, and business opportunities

Important regions of China

• Northeast China- traditional industrial center; steel and heavy manufacturing

• Beijing–Tianjin- government, research, and technology

• Shanghai and Yangtze River Delta- finance, trade, automobiles, and high-tech industries

• Pearl River Delta- manufacturing, technology, & international trade

Marketing of China

companies need different strategies for different Chinese regions

• large population does not mean every consumer can afford or access a product