chapter 10 & 11 international marketing

patterns of multinational cooperation

• regional cooperation groups

• free trade area

• customs union

• common market

• political union 

regional cooperation groups

• the most basic economic integration and cooperation

• governments agree to participate jointly to develop industries beneficial to each economy, participate in financing and purchase share of the output (venezuela and colombia)

free trade area

• requires more cooperation and integration than the RCD

• an greement between two or more countries to reduce or eliminate customs duties and nontariff trade barriers among partner countries while members maintain individual tariff schedules for external countries

customs union

• represents the next stage in economic cooperation

• benefits from a free trade area’s reduced or eliminated internal tariffs and adds a common external tariff on products imported from countries outside the union

common market

agreement that eliminates all tariffs and other restrictions on internal tradem adopts a set of common external tariffs, and removes all restrictions on the free flow of capital and labor among member nations

political union

• the most fully integrated form of regional cooperation

• it involves complete political and economic integration, either voluntary or enforced 

reasons to view market potential in tegional context

• globalization of markets

• restructuring of eastern european bloc into independent market-driven economies

• dissolution of soviet union into independent states

• worldwide trend toward economic cooperation

• enhanced global competition

marketing mix implications

• in the past: companies charged different prices in different countries such as VAT for automobiles

  • non-tariff barriers between member countries supported such price differentials

• companies adjusted their marketing mix strategies to reflect anticipated market change in the “single” market

eastern europe & the baltic states

• most eastern european countries are privatizing state-owned enterprises, establishing free market pricing systems, relaxing import controls and wrestling with inflation

  • czrch republic, hungary, poland, romania

• estonia, latvia, and luthuania

  • the most significant hurdle for US trade and investment has been government bureaucracy, corruption, and organized crime, found in Latvia and Lithuania

africa and middle east

• gdp growth average 4.5% (in the past 5 years)

• ethiopia, angola, malawi; 8% annual growth rate

• little actual economic integration

  • charcaterized by political instability in recent decades

  • unstable economic base

• middle east has been less aggressive in the formation of successfully functioning multinational market groups

  • MENA, GAFTA

definition of emerging economies

• are low-income, rapid-growth countries using economic liberalization as their primary engine of growth

  • satisfy two conditions:

    • a rapid pace of economic development

    • government policies favoring economic liberalization and the adoption of a free-market system

challenges in emerging economies

• macroeconomic instability

• economic and political shocks increase risks and uncertainty

• missing institutional features (e.g., shortage of skilled labor, infracstructure)

• lack of well-defined property rights

• lack of strong legal frameworks and hence opportunism, bribery, and corruption