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Chapter10Europe,Africa,andtheMiddleEast©McGraw-HillEducation.Allrightsreserved.Authorizedonlyforinstructoruseintheclassroom.
NoreproductionorfurtherdistributionpermittedwithoutthepriorwrittenconsentofMcGraw-HillEducation.LearningObjectives10-1 Thereasonsforeconomicunion10-2 Patternsofinternationalcooperation10-3 TheevolutionoftheEuropeanUnion10-4 EvolvingpatternsoftradeaseasternEuropeandtheformerSovietstatesembracefree-marketsystems10-5 Strategicimplicationsformarketingintheregion10-6 ThesizeandnatureofmarketingopportunitiesintheEuropean/African/MiddleEastregionsMultinationalMarketRegionsGroupofcountriesthat:SeekmutualeconomicbenefitandassociatedpeaceReduceinterregionaltradeandtariffbarriersEconomiccooperativeagreementsFreetradetheultimategoalAlliancesconcernsomeFearofbeingexcludedLaRaisond’Etre1of5EconomicUnionSuccessrequiresfavorableeconomic,political,cultural,andgeographicfactorsMajorflawsinonefactorcoulddestroyunionunlessotherfactorsstrongenoughtooffsetweaknessNationsmustgiveuppartofsovereigntyAdvantagesofunionmustbeclear-cutandsignificantBenefitsmustgreatlyoutweighthedisadvantagesLaRaisond’Etre2of5EconomicFactorsEveryunionsharesdevelopmentandenlargementofmarketopportunitiesasbasicorientationPreferentialtarifftreatmentforparticipantsCommontariffbarriersagainstoutsidersStimulatesinternaleconomicdevelopmentforallStrongunionscansettleeconomicdisputesAgreementsandmechanismsmustbeinplaceBenefitsmustoutweighcostofindividualdifferencesLaRaisond’Etre3of5PoliticalFactorsEquallyimportantaseconomicfactorsAlthougheconomicfactorsarethebasiccatalystforformationofunionParticipatingcountriesmustbegenerallycompatibleSimilaraspirationsimportantCountrieswon’tsurrenderpartofnationalsovereigntyifnotUnionstypicallyformedinresponsetoexternalthreatsLaRaisond’Etre4of5GeographicandTemporalProximityNotimperative,butfacilitatesfunctioningofmarketTransportationnetworksmoredevelopedinclosecountriesDistanceacrosstimezonesmostimportantTradetendstotravelmoreeasilyinnorth-southdirectionsthanitdidinancienttimesIssuesoflegalandillegalimmigrationimportantPromoteseconomicintegrationamongclosercountriesLaRaisond’Etre5of5CulturalFactorsCulturalsimilarityeasesshockofeconomiccooperationMembersunderstandoutlookandviewsofcolleaguesAgreementsbetweensimilarcountriesmostlikelytosucceedCurrentagreementsextendbeyondculturalboundariesNAFTAandDR-CAFTAEuropeanUnionveryculturallydiverseLanguagenotasmuchofabarrierasexpectedReligionstillseemstobeanissuePatternsofMultinationalCooperation1of6RegionalCooperationGroupsFreeTradeAreaCustomsUnionCommonMarketPoliticalUnionPatternsofMultinationalCooperation2of6RegionalCooperationGroupsAlsocalledregionalcooperationfordevelopment(RCD)MostbasiceconomicintegrationandcooperationEachcountrymakesadvancecommitmentParticipateinfinancinganewjointventurePurchaseaspecifiedshareoftheoutputoftheventureHelpsdevelopmutuallybeneficialindustriesPatternsofMultinationalCooperation3of6FreeTradeArea(FTA)AgreementtoreduceoreliminatecustomsdutiesandnontarifftradebarriersMembersmaintaintariffschedulesforexternalcountriesProvidesmemberswithamassmarketwithoutbarrierstoimpedeflowofgoodsandservicesRequiresmorecooperationandintegrationthantheRCDPatternsofMultinationalCooperation4of6CustomsUnionNextstageineconomiccooperationafterFTAEnjoysFTA’sreducedoreliminatedinternaltariffsAddscommonexternaltariffonimportsfromoutsideofunionCountrieswithcustomsunionsFranceandMonaco,ItalyandSanMarino,SwitzerlandandLiechtensteinTheEuropeanUnionwasacustomsunionatonepointPatternsofMultinationalCooperation5of6CommonMarketAllinternaltariffsandrestrictionseliminatedfullyAdoptssetofcommonexternaltariffsFreeflowofgoods,services(labor),andcapitalEconomyunified,buteachmembernationmaintainspoliticalsovereigntyPatternsofMultinationalCooperation6of6PoliticalUnionMostfullyintegratedformofregionalcooperationCompleteeconomicandpoliticalintegrationEithervoluntaryorenforcedIfvoluntary,theunionisreferredtoasacommonwealthTwopoliticalunionscametoexistenceinthe1990sCommonwealthofIndependentStates(CIS)EuropeanUnion(EU);threatedbyrecentBrexitGlobalMarketsandMultinationalGroupsReasonstoviewmarketpotentialinregionalcontextGlobalizationofmarketsRestructuringofeasternEuropeanblocintoindependentmarket-driveneconomiesDissolutionofSovietUnionintoindependentstatesWorldwidetrendtowardeconomiccooperationEnhancedglobalcompetitionEurope1of8EuropeanIntegrationEverytypeofmultinationalmarketgroupingexistsNoothergroupmoreimportantthantheEuropeanUnionMadeprogresstowardcompleteeconomicandpoliticalunionEconomicgrowthprevailsevenafterU.K.’sexitAlotofdiversitytoovercomeLanguageandculturaldifferencesIndividualnationalandpoliticaldifferencesCenturies-oldrestrictionstoprotectlocalnationalmarketsExhibit10.2TheEuropeanEconomicArea:
EU,EFTA,andAssociatesJumptolongdescription.Europe2of8EuropeanUnionInstitutionsEuropeanCommissionInitiatespolicyandsupervisesitsobservancebymemberstatesCouncilofMinistersThedecision-makingbody;determineswhichproposalsoftheSingleEuropeanActtoacceptasbindingtomembersTheEuropeanParliamentPassesandamendslegislationCourtofJusticeTheSupremeCourtoftheEuropeanUnionTheEuropeanParliamentEachmonththeEuropeanParliamentmeetsforthreeweekshereinBrussels,Belgium,andthenmovesforoneweektomeetinStrasbourg,France.TheinconvenienceofthefourthweekmovewasaconcessiontoFrenchpride—orperhapsthecheeseisbetterthere?©JohnGrahamEurope3of8EconomicandMonetaryUnion(EMU)ProvisionoftheMaastrichtTreatyEstablishedcreationandimplementationoftheeuroAcommoncurrencyforallEUmembersEstablishedcentralbankHelpedfixconversionratesCompletedcirculationofeurobanknotesandcoinsLedto12memberstatesemployingtheeuro
startingin2001SpreadoftheEuroIttooksomesellingfortheGreekstoadopttheeuroinsteadofthe2,500-year-olddrachma.ThetruckseenhereinAthens’sSyntagmaSquarewasequippedwithvideoprojectorsandeuroinformationstandsandtraveledto40Greektowns,informingfolksaboutthenewcurrency.Circa2012,therehasbeenmuchtalkofreturningtothedrachma;weshallsee.©AFPPhoto/LouisaGouliamaki/NewscomEurope4of8ExpansionoftheEuropeanUnionEnlargementoncemostimportantitemonEU’sagendaManywouldagreethatEUhasbeensuccessfulFourcategoriesoflong-termchallengesfacingUnionEffectsofBrexit;willitcausemoredisintegration?Improvingunion’seconomicperformanceDecidinghowtolimitpoliticalaspectsofunionDecidingaboutfurtherenlargementEurope5of8EasternEuropeandtheBalticStatesSatellitenationsoftheformerSovietUnionMovingsteadilytowardpost-communistmarketreformsNewbusinessopportunitiesemerging“Chaoticwithbigrisks;excitingplacewithuntoldopportunities”ContinuingtotrytoadjusttochangesPolitical,social,andeconomicrealitiesofshiftfromrestrictedMarxist-socialsystemtoversionoffreemarketandcapitalismEurope6of8EasternEuropeDangeroustogeneralize,eachcountryuniqueEffortsofmostcountriesPrivatizingstate-ownedenterprises,establishingfreemarketpricingsystems,relaxingimportcontrols,combatinginflationDifferentlevelsofprogressduetodifferentpathsMovingquicklytowardfreemarketbeneficialAllowedtransformationtobeguidedmainlybyspontaneityofinnovativemarketsratherthangovernmentplanners,technocratsMostcountriescontinuetomakeprogressMarketinginEmergingEconomiesAsdemandfortobaccodeclinesinmore-developedcountries,manufacturersdirectmoremarketingeffortsinthedirectionofemergingeconomies.Indeed,recentlyPhilipMorrispublishedareportestimatingthecostsavingsfortheCzechgovernmentat$1,227everytimeasmokerdies.Apparently,thecompanydidnotthinkthroughthepublicrelationsimplicationsofthisgrislybitofresearch.©ShujiKobayashi/TheImageBank/GettyImagesEurope7of8TheBalticStatesExemplifythedifferencepolicy-implementationcanmakeEstonia,Latvia,andLithuaniaAllthreecountriesstartedoutwithroughlysamelegacyInefficientindustryandSoviet-stylecommandeconomiesEstoniaactedquicklyDroppedtheruble,privatizedcompaniesandland,letstrugglingbanksfail,adoptedfreesttradingregimeofallthreecountriesResultedingreatereconomicgrowththanotherBalticstatesEurope8of8TheCommonwealthofIndependentStates(CIS)FormedafterdissolutionoftheSovietUnionBalticstatesfirsttoclaimindependence;separateRemaining12republicscalledNewlyIndependentStates(NIS)TheNISregroupedintotheCISLooseeconomic,politicalalliancewithopenbordersbutnocentralgovernmentTiesbetweenSlavicandCentralAsianrepublicstenuousDespitethreats,manynationseconomicallysuccessfulDissolutionoftheUSSRThehammerandsicklelogooftheoldUSSRhasbeenreplacedbysignsoffreeenterpriseinRussia.HereinthemainshoppingdistrictofSt.Petersburg,NikeSportisprominent,alongwithCoca-Colaredumbrellas.©JohnGrahamAfrica1of2GrowthinmanycountriesDespiteeconomic,political,andenvironmentalissuesInpartstimulatedbyincreasingforeigndirectinvestmentParticularlyfromChinaforinfrastructureprojectsGrowthremarkableinsub-SaharancountriesExpectedtocontinueovernextfiveyearsAfricaaparadoxMostlypoorpopulation;landrichwithopportunitiesGrowthinAfricaCellphoneserviceiswidelyavailableeveninAfricancountrieswithpercapitaincomesamongthelowestintheworld.©JohnGrahamAfrica2of2LooselydefinedAfricanUnionComprisedofallcountriesoncontinentbutMoroccoMultinationalmarketintegrationpoorAlthoughmanyorganizations,hinderedbypoliticalinstabilityRegionalCooperativeGroupsECOWAS–EconomicCommunityofWestAfricanStatesSADC–SouthernAfricanDevelopmentCommunityEAC–EastAfricanCommunityMiddleEast/NorthAfrica(MENA)1of2OngoingpoliticalturmoilinregionAcceleratedin2011HasresultedineconomicdisasterforseveralcountriesLong-termconsequencesforinternationalcommerceunknownHopethatdemocracyandfreedomwillincreaseeconomicopportunitiesforallTheArabCommonMarketsetgoalsforfreeinternaltradeNotsuccessfulyetduetodisputesanddifferencesTwoBEMsOldmeetsnewintwobigemergingmarkets.TheGrandBazaarinIstanbulistheoldestandlargestcoveredmarketplaceintheworld,datingbacktothe15thcentury.InmodernIstanbul,itcompetesforcustomerswiththeubiquitousMcDonald’s.FaintinthebackgroundistheBlueMosque,builtin1616.Ofcourse,thepyramidsatGizanearCairoaremucholder.Butnewconstructionmethodsanddevelopmentarecompetingfortheskylinethereaswell.©JohnGraham©AmrNabil/APImagesMiddleEast/NorthAfrica(MENA)2of2EconomicCommunitiesGreaterArabFreeTradeArea(GAFTA)PersianGulf,Egypt,MoroccoInearlystagesofimplementation;2005agreementEconomicCooperationOrganization(ECO)Iran,Pakistan,TurkeyGoaltodevelopinfrastructureandreducetradebarriersOrganizationoftheIslamicConference(OIC)LedbyIran;composedofIslamiccountriesAstrongcommonmarket,buthinderedbyconflictImplicationsofMarketIntegration1of5StrategicImplicationsMultinationalgroupssourceofopportunityforfirmsProduction,finance,labor,marketingdecisionsareaffectedWorldcompetitionwillcontinuetointensifyBusinessesbecomingstrongerandmoreexperiencedRegulationofbusinessactivitiesstronginmultinationalsStrategyimportanttonavigateglobalmarketImplicationsofMarketIntegration2of5OpportunitiesEconomicintegrationcreatesmassmarketsCombinationsofmarketshavenewdimensionsandsignificanceImportanttobusinessesusedtomassproductionanddistributionEconomiesofscaleandmarketingefficienciescanbeachievedBenefitsoftenpassedalongaslowerpricesLeadstogreaterpurchasingpowerMostmultinationalshaveprogramstofostereconomicgrowthImplicationsofMarketIntegration3of5MarketBarriersCreatedtoprotectbusinessesthatoperatewithinmultinationalmarket’sboardersMembersofmarketareadvantagedCompanieswillingtoinvestinproductionfacilitiesinmultinationalmarketsmayalsobenefitfromprot
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