Part 3 Assessing Global Market Opportunities1

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8/28/2011

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I n t e r n a t i o n a l M a r k e t i n g

Developing a GlobalVision Through

Marketing Research

Chapter 8

1 4 t h E d i t i o n

P h i l i p R. C a t e o r aM a r y C. G i l l y

J o h n L . G r a h a m

McGraw -Hil l/Irwi n

Int ernat ional Ma rket ing 14/e Copyright © 2009 by The McGraw -Hill Compani es, Inc. All rights reserved.

8-2

What Should You Learn?

• The importance of problem definition ininternational research

• The problems of availability and use of secondary data

• Quantitative and qualitative research methods

• Multicultural sampling and its problems in less

developed countries• Sources of secondary data

• How to analyze and use research information

8-3

Global PerspectiveJapan – Test Market for the World

• Enterprises with international scope of operations

– Need for current, accurate information magnified

• Marketing research

– The systematic gathering, recording, and analyzing of data toprovide information useful in marketing decision making

• International marketing research involves twocomplications

– Information must be communicated across cultural boundaries

– The environments within which the research tools are appliedare often different in foreign markets



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8-4

Breadth and Scopeof International Marketing Research

• Types of information needed by research

– General information about the country, area, and/or market

– Information to forecast future marketing requirements► By anticipating social, economic, consumer, and industry trends within

specific markets or countries

– Specific market information used to make and developmarketing plans► Product

► Promotion

► Distribution

► Price decisions

8-5

Breadth and Scopeof International Marketing Research

• Unisys Corporation’s planning steps for collecting and assessing the following typesof information

1. Economic

2. Cultural, sociological; and political climate

3. Overview of market conditions

4. Summary of the technological environment

5. Competitive situation

8-6

Top 20 Countries for MarketingResearch Expenditures (millions of dollars)

Exhibit 8.1



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8-7

The Research Process

• Research process steps1. Define the research problem and establish research objectives

2. Determine the sources of information to fulfill the researchobjectives

3. Consider the costs and benefits of the research effort

4. Gather relevant data from secondary or primary sources, or both

5. Analyze, interpret, and summarize the results

6. Effectively communicate the results to decision makers

• Research steps are similar for all countries

– Variations and problems can occur in implementation► Differences in cultural and economic development

8-8

Defining the Problemand Establishing Research Objectives

• The major difficulty is converting a series of often ambiguous business problems into tightlydrawn and achievable research objectives

• The first, most crucial step in research is morecritical in foreign markets because an unfamiliar environment tends to could problems definition

• Other difficulties in foreign research stem fromfailures to establish problem limits broad enoughto include all relevant variables

8-9

Problems of Availabilityand Use of Secondary Data

• U.S. government provides comprehensivestatistics for United States

• Marketing data not matched in other countries

– Quality

– Quantity

– Exceptions are Japan and several European countries

• Continuing efforts to improve data collection

– United Nations

– Organization for Economic Cooperation and Development(OECD)



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8-10

Availabilityand Reliability of Data

• Most countries simply do not have governmental

agencies that collect on a regular basis the kinds of secondary data readily available in the U.S.

• Researchers’ language skills impede access toinformation

– Requires native speaker of language

• Official statistics are sometimes too optimistic, reflectingnational pride rather than practical reality, while taxstructures and fear of the tax collector often adverselyaffect data

– Less-developed countries prone to optimism

– Willful errors

– “Adjusted reporting”

8-11

Comparability of Data

• Issues with data (especially in less developed,countries)

– Data can be many years out of date

– Data collected on an infrequent and unpredictable schedule

• Too frequently, data are reported in differentcategories or in categories much too broad to beof specific value

8-12

Validating Secondary Data• Questions to judge the reliability of secondary data

sources

– Who collected the data?

– Would there be any reason for purposely misrepresenting the facts?

– For what purposes was the data collected?

– How was the data collected?

– Are the data internally consistent and logical in light of known data sourcesor market factors?

• Checking the consistency of one set of secondarydata with other data of known validity

– An effective and often-used way of judging validity

• The availability and accuracy of recorded secondarydata increase with level of economic development



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8-13

Gathering Primary Data –Quantitative and Qualitative Research

• Primary data

– Data collected specifically for the particular research project

• Quantitative research – Usually a large number of respondents

– Respondents answer structured oral or written questions using aspecific response format (such as yes/no) or to select aresponse from a set of choices

– Responses can be summarized in percentages, averages, or other statistics► Toto – a Japanese firm with the premiers quantitative research on bathroom

and toilet technology

8-14

• Qualitative research

– If questions are asked, they are almost always open-ended or in-depth

– Seeks unstructured responses that reflect the person’s thoughtsand feelings on the subject

• Qualitative research interprets people in thesample

• Qualitative research is helpful in revealing theimpact of sociocultural factors on behavior patterns and in developing research hypotheses

Gathering Primary Data –Quantitative and Qualitative Research

8-15

Problemsof Gathering Primary Data

• Hinges on the ability of the researcher to getcorrect and truthful information that addressesresearch objectives

• Problems in international marketing research

– Stem from differences among countries

– Range from inability or unwillingness of respondents tocommunicate their opinions

– Inadequacies in questionnaire translation



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8-16

Ability to Communicate Opinions

• Formulating opinions about a product or concept

– Depends on the respondent’s ability to recognize the usefulnessof such a product of concept

– Product or concept must be understood and used in community

• The more complex the concept, the moredifficult it is to design research that will help therespondent communicate meaningful opinionsand reactions

– Gerber has more experience in trying to understand consumerswith limitations► Babies can neither answer questions or fill out questionnaires

8-17

Willingness to Respond

• Cultural differences provide best explanation for unwillingness or inability of many to respond toresearch surveys

• The role of the male, the suitability of personalgender-based inquiries, and other gender-related issues can affect willingness to respond

• Less direct measurement techniques andnontraditional data analysis methods may alsobe more appropriate

8-18

Sampling in Field surveys• Problems in sampling stem from the lack of

adequate demographic data and available listsfrom which to draw meaningful samples

• Affected by a lack of detailed social andeconomic information

– No officially recognized census information

– No other listings that can serve as sampling frames

– Incomplete and out-of-date telephone directories

– No accurate maps of population centers



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8-19

Language and Comprehension

• The most universal survey research problem inforeign countries is the language barrier

• Literacy poses yet another problem

• Marketers use three different techniques to helpferret out translation errors ahead of time

– Back translation

– Parallel translation

– Decentering

8-20

Multicultural Research –a Special Problem

• As companies become global marketers andseek to standardize various parts of themarketing mix across several countries,multicultural studies become more important

• Multicultural research involves dealing withcountries that have different languages,economies, social structures, behavior, andattitude patterns

• In some cases the entire research design mayhave to be different between countries tomaximize the comparability of the results

8-21

Research on the Internet –a Growing Opportunity

• One billion users in more than 200 countries – One-sixth in U.S.

• International Internet use is growing almost twice asfast as American use

• Uses for Internet in international research

– Online surveys and buyer panels

– Online focus groups

– Web visitor tracking

– Advertising measurement

– Customer identification systems

– E-mail marketing lists

– Embedded research

– Observational research



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8-22

Estimating Market Demand

• To assess current product demand and forecast

future demand – Requires reliable historical data

• When the desired statistics are not available, a closeapproximation can be made

– Using local production figures plus imports, with adjustments for exportsand current inventory levels

• Two methods of forecasting demand

– Expert opinion► The key in using expert opinion to help in forecasting demand is triangulation

– Analogy

► Assumes that demand for a product develops in much the same way in all countries as

comparable economic development occ urs in each country

8-23

Personal Computer and Mobile PhoneDiffusion Rate (per 1,000 people)

Exhibit 8.2

Personal Computer Mobil Phone

8-24

Problems in Analyzingand Interpreting Research Information

• Accepting information at face value in foreignmarkets is imprudent

• The foreign market researcher must possesthree talents to generate meaningful marketinginformation

1. The researcher must posses a high degree of cultural understanding of the market in which research is being conducted

2. A creative talent for adapting research methods is necessary

3. A skeptical attitude in handling both primary and secondary data ishelpful



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8-25

Responsibility for ConductingMarketing Research

• A company in need of foreign market research

can rely on an outside foreign-based agency or domestic company with a branch in that country

• A trend toward decentralization of the researchfunction is apparent

– Local analysts appear to be able to provide information morerapidly and accurately► Control rests in hands closer to the market

– Disadvantage lies in ineffective communications with home-office executives► Unwarranted dominance of large-market studies in decisions about global

standardization

8-26

Responsibility for ConductingMarketing Research

• A comprehensive review of the differentapproaches to multicountry research suggests

– Ideal approach is to have local researchers in each country,

– Close coordination between the client company and the localresearch companies

• Two stages of analysis are necessary

– Individual-country level – Multi-country level

8-27

Communicatingwith Decision Makers

• Gathered information must be given to decisionmakers in a timely manner

• Decision makers should be directly involved notonly in problem definition and questionsformulation, but also in the fieldwork

• Even when both managers and customersspeak the same language and are from thesame culture, communication can becomegarbled in either direction



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8-28

Managing the Cultural Barrier in International Marketing Research

Exhibit 8.3

8-29

Summary

• The basis objective of the market researchfunction is providing management withinformation for more accurate decision making

• Customer attitudes about providing informationto a researcher are culturally conditioned

• Foreign market information surveys must be

carefully designed to elicit the desired data andat the same time not offend the respondent’ssense of privacy

8-30

Summary• Many foreign markets have inadequate or

unreliable bases of secondary information

• Three keys to successful international marketingresearch

– The inclusion of natives of the foreign culture on research teams

– The use of multiple methods and triangulation

– The inclusion of decision makers, even top executives, who muston occasion talk directly to or directly observe customers inforeign markets



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1 4 t h E d i t i o nP h i l i p R. C a t e o r a

M a r y C. G i l l yJ o h n L. G r a h a m


EmergingMarkets

Chapter 9



9-2


• The political and economic changes affecting globalmarketing

• The connection between the economic level of acountry and the marketing task

• Marketing’s contribution to the growth anddevelopment of a country’s economy

• The growth of developing markets and their

importance to regional trade• The political and economic factors that affect stability

of regional market groups

• The NIC growth factors and their role in economicdevelopment

9-3

Global PerspectiveWal-Mart, Tide, and Three-Snake Wine

• China and emerging markets will account for 75%of the world’s total growth next decade and beyond

• New patterns of consumer behavior are emerging

– Countries prosper

– People are exposed to new ideas and behavior patterns viaglobal communication networks

– Old stereotypes, traditions, and habits are cast aside or tempered

– A pattern of economic growth and global trade will extend well intothe 21st century

• Three multinational market regions

– Europe, Asia, and America



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9-4

Marketingand Economic Development

• The stage of economic growth – Affects the attitudes toward foreign business activity – The demand for goods – The distribution systems found within a country – The entire marketing process

• Static economy

• Dynamic economy

• Economic development

– Means an increase in GDP and implies a widespread distribution of increased income

– Economic development presents two challenges► Study of economic development is necessary to gain empathy regarding the economic

climate within developing countries

► Study of state of economic development with respect to market potential, including thepresent economiclevel and the economy’sgrowth potential

9-5

Stages of Economic Development

• The United Nations groups countries into threecategories

– MDCs (more-developed countries)

– LDCs (less-developed countries)

– LLDCs (least-developed countries)

• Newly Industrialized Countries (NICs)

– Countries that are experiencing rapid economic expansion andindustrialization

– Do not exactly fit as LDCs or MDCs

– Have moved away from restrictive trade practices

– Instituted significant free market reforms

9-6

Standards of Livingfor Selected Countries

Exhibit 9.1



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9-7

NIC Growth Factors

• Economic growth factors for NICs

– Political stability in policies affecting their development

– Economic and legal reforms

– Entrepreneurship

– Planning

– Outward orientation

– Factors of production

– Industries targeted for growth

– Incentives to force a high domestic rate of savings and to directcapital to update the infrastructure, t ransportation, housing,education, and training

– Privatization of state-owned enterprises (SOEs) that placed adrain on national budgets

9-8

Information Technology, the Internet,and Economic Development

• New, innovative electronic technologies are key to asustainable future for developed and developing nations

• The Internet accelerates the process of economic growthby speeding up the diffusion of new technologies toemerging economics

• Wireless technologies greatly reduce the need to laydown a costly telecom infrastructure to bring telephone

service to areas not now served• Substantial investments in the infrastructure to create

easy access to the Internet and other aspects of IT arebeing made by governments and entrepreneurs

9-9

Objectives of Developing Countries• Industrialization is the fundamental objective of

most developing countries

• Economic growth is seen as the achievement of social as well as economic goals

– Better education

– Better and more effective government

– Elimination of many social inequities

– Improvements in moral and ethical responsibilities

• Privatization is currently a major economicphenomenon in industrialized as well as indeveloping countries



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9-10

Infrastructure and Development

• Infrastructure represents those types of capitalgoods that serve the activities of many industries

• The quality of an infrastructure directly affects acountry’s economic growth potential and the abilityof an enterprise to engage effectively in business

• The less developed a country is – the less adequatethe infrastructure is for conducting business

• Countries begin to lose economic developmentground when their infrastructure cannot support anexpanding population and economy

9-11

Infrastructure of Selected Countries

Exhibit 9.2

9-12

Marketing’s Contributions• Marketing (or distribution) is not always

considered meaningful to those responsible for planning

• Marketing is an economy’s arbitrator betweenproductive capacity and consumer demand

• The marketing process is the critical element ineffectively utilizing production resulting fromeconomic growth

• Instrumental in laying the groundwork for effective distribution



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9-13

Marketing in a Developing Country

• Marketing efforts

– Must be keyed to each situation

– Custom tailored to each set of circumstances► Must provide for optimum utility

• Marketer must evaluate existing level of marketdevelopment and receptiveness

– The more developed an economy, the greater the variety of marketingfunctions demanded, and the more sophisticated and specialized theinstitutions become to perform marketing functions

• Demand in a developing country

– Three distinct kinds of markets in each country► Traditional rural/agricultural sector

► Modern urban/high-income sector

► Transitional sector usually represented by low-income urban slums

9-14

Evolution of the Marketing ProcessExhibit 9.3

9-15

• Demand in a developing country (continued)

– Tomorrow’s markets will include expansion in industrializedcountries and the development of the t ransitional and traditionalsectors of less-developed nations

– New markets also means that the marketer has to help educatethe consumer

– The companies that will benefit are the ones that invest when itis difficult and initially unprofitable

• Bottom-of-the-pyramid markets

– Bottom-of-the-pyramid markets (BOPMs) – consisting of the 4billion people with incomes of less than $1,200 across the globe

– Most often concentrated in the LDCs and LLDCs

Marketing in a Developing Country



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9-16

Consumption Patternsin Selected Countries

Exhibit 9.4

9-17

Dynamic Transformationof BOPM Clusters

Exhibit 9.5

9-18

Developing Countriesand Emerging Markets

• The U.S. Department of Commerce estimates

– Over 75% of the expected growth in world trade over the next twodecades will come from the more than 130 developing and newlyindustrialized countries

• Big emerging markets share important traits

– Are all physically large

– Have a significant populations – Represent considerable markets for a wide range of products

– Have strong rates of growth or the potential for significant growth

– Are of major political importance within their regions – Are regional economic drivers

– Will engender further expansions in neighboring markets as the grow

• Because many lack modern infrastructure, muchof the expected growth will be in industrial sectors



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9-19

Big Emerging Markets

Exhibit 9.6

9-20

Latin America

• Most countries have moved from militarydictatorships to democratically elected governments

• The trend toward privatization of state-ownedenterprises followed a period in which governmentsdominated economic life for most of the 20th century

• Today many Latin American countries are at roughlythe same stage of liberalization that launched thedynamic growth in Asia during the 1980s and 1990s

• In a positive response to these reforms, investorshave invested billions of dollars

9-21

Eastern Europeand the Baltic States

• Countries that rapidly instituted the broadest free-market policies and implemented the most radicalreforms have prospered most

• Eastern Europe

– Privatizing state-owned enterprises

– Establishing free market pricing systems,

– Relaxing import controls

– Wrestling with inflation

• The Baltic States

– Estonia, Latvia, and Lithuania► All three countries started off with roughly the same legacy of inefficient industry and

Soviet-style command economics

► All three Baltic countries are W TO members and as of 2004, EU members



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9-22

Asia

• Asia has been the fastest-growing area in the worldfor the past three decades

• Asian-Pacific Rim

– Four Tigers (Hong Kong, South Korea, Singapore, Taiwan)

– First countries in Asia to move from a status of developingcountries to newly industrialized countries

• China

– After U.S., most important single market is China

– Two major events that occurred in 2000 are having a profoundeffect on China’s economy► Admission to the WT O

► U.S. granting China normal trade relations on a permanent basis

9-23

Asia

• China (continued)

– China has two important steps to take if the road to economic

growth is to be smooth

► Improving human rights

► Reforming the legal system

– The American embassy in China has seen a big jump in

complaints from disgruntled U.S. companies

– Two Chinas► One a maddening bureaucratic, bottomless money pit

► The other an enormous emerging market

9-24

Asia• Hong Kong

– Hong Kong reverted to China in 1997 when it became a specialadministrative region (SAR) of the People’s Republic of China

– The Hong Kong government negotiates bilateral agreements andmakes major economic decisions on its own

– The keys to Hong Kong’s economic success► Free market philosophy

► Entrepreneurial drive

► Absence of trade barriers

► Well-established rule of law

► Low and predictable taxes

► Transparent regulations

► Complete freedom of capital movement



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9-25

Asia

• Taiwan

– Mainland-Taiwan economic ties are approaching a crossroadsas both countries enter the World Trade Organization

– “Three direct links” must be faced because each country has joined the WTO and the rules insist that members shouldcommunicate over trade disputes and other issues

• India

– Five-point agenda► Improving the investment climate

► Developing a comprehensive WTO strategy

► Reforming agriculture, food processing and small scale industry

► Eliminating red-tape

► Instituting better corporate government

9-26

Newest Emerging Markets

• The U.S. decision to lift the embargo againstVietnam

– If Vietnam follows the same pattern of development as other Southeast Asian countries, it could become another Asian Tiger

• The United Nations’ lifting of the embargo againstSouth Africa

– South Africa has an industrial base that will help propel it into rapid

economic growth – The South African market also has a developed infrastructure

• Vietnam and South Africa’s future development

– Will depend on government action and external investment by other governments and multinational firms

9-27

Strategic Implications for Marketing• As a country develops

– Incomes change

– Population concentrations shift

– Expectations for a better life adjust to higher standards

– New infrastructures evolve

– Social capital investments made

• When incomes rise, new demand is generated at allincome levels for everything from soap to cars

• If a company fails to appreciate the strategicimplications of the $10,000 Club, it will miss theopportunity to participate in the world’s fastest-growing global consumer segment



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9-28

Emerging Competition

• Growing global competition

– Automobile makers in from China, Russia, and India

– Computers

– Space technology

– Appliances

– Commercial aircraft

• Firms in emerging countries making substantialinvestments around world

• Global market will be revitalized and reorganizedby these new corporate powerhouses

9-29

Summary

• Foreign marketers must be able to

– Rapidly react to market changes – Anticipate new trends within constantly evolving market segments

that may not have existed as recently as last year

• As nations develop their productive capacity, allsegments of their economies will feel pressure toimprove

• The impact of these political, social and economictrends will continue to be felt throughout the world

• IT will speed up the economic growth in everycountry

9-30

Summary• Marketers must focus on devising plans

designed to respond fully to each level of economic development

• Big emerging markets may present specialproblems

– But they are promising markets for a broad range of productsnow and in the future

• Emerging markets create new marketingopportunities for MNCs as new market segmentsevolve




MultinationalMarket Regions

and Market Groups

Chapter 10

1 4 t h E d i t i o n

P h i l i p R. C a t e o r aM a r y C. G i l l y

J o h n L . G r a h a m



10-2


• The reason for economic union

• Patterns of international cooperation

• The evolution of the European Union

• Strategic implications for marketing in Europe

• Evolving patterns of trade as eastern Europe and the

former Soviet states embrace the free-market system• The trade linkage of NAFTA and South America and

its regional effects

• The development of trade within the Asia-Pacific Rim

10-3

Global Perspective – Might Free TradeBring Peace to the Middle East?

• Multinational market regions – those groups of countries that seek mutual economic benefit fromreducing trade and tariff barriers

– Most important global trends today

• The world is awash in economic cooperativeagreements as countries look for economic alliancesto expand access to free markets

– WTO – 151 members and 31 observers

• Governments and businesses worry that the EU,NAFTA, and other cooperative trade groups willbecome regional trading blocs without internal traderestrictions but with borders protected from outsiders



10-4

La Raison d’Etre

• Successful economic union

– Requires favorable economic, political, cultural, and geographic factors asa basis for success

• The advantages of economic union must be clear-cutand significant

– Benefits must greatly outweigh the disadvantages before nations forgo anypart of their sovereignty

• In the past, a strong threat to the economic or politicalsecurity of a nation was the impetus for cooperation

• Recent creation of multinational market groups hasbeen driven by the fear that not to be part of a vitalregional market group is to be left on the sidelines

10-5

Economic Factors

• Markets are enlarged through

– Preferential tariff treatment for participating members

– Common tariff barriers against outsiders

• Nations with complementary economic bases

– Least likely to encounter frictions in the development and operation of acommon market unit

• Economic union must have agreements andmechanisms in place to settle economic disputes

• The demise of the Latin American Free Trade Association (LAFTA)

– Result of economically stronger members not allowing for the needs of the weaker ones

10-6

Political Factors• State sovereignty

– One of the most cherished possessions of any nation

– Relinquished only for a promise of significant improvement of thenational position through cooperation

• The importance of political unity to fully achieveall the benefits of economic integration

– Has driven EC countries to form the European Union



10-7

Geographic and Temporal Proximityand Cultural Factors

• Geographic and temporal proximity

– Recent research demonstrates that differences across timezones are more important than physical distances

– Trade tends to travel more easily in north-south directions then itdid in ancient times

– Countries that are widely separated geographically have major barriers to overcome in attempting economic fusion

• Cultural factors

– The more similar the culture, the more likely a market is tosucceed because members understand the outlook andviewpoints of their colleagues

10-8

Patterns of Multinational Cooperation

• Regional cooperation groups

– Governments agree to participate jointly to develop basicindustries beneficial to each economy

• Free trade area

– An agreement between two or more countries► To reduce or eliminate customs duties and nontariff trade barriers among

partner countries

► Members maintain individual tariff schedules for external countries

• Customs union

– Enjoys free trade area’s reduced or eliminated internal tariffs

– Adds a common external tariff on products imported fromcountries outside the union

10-9

Patterns of Multinational Cooperation

• Common market

– Eliminates all tariffs and other restrictions on internal trade,

– Adopts a set of common external tariffs

– Removes all restrictions on the free flow of capital and labor amongmember nations

• Political union

– Involves complete political and economic integration, either voluntary or enforced

– Commonwealth – a voluntary organization that provides for the loosestpossible relationship classified as economic integration

– Two new political unions came into existence in the 1990s

► The Commonwealth of Independent States (CIS)

► The European Union (EU)



10-10

Global and MultinationalMarket Groups

• Market potential needs to be viewed in thecontext of regions of the world rather thancountry by country

– The globalization of markets

– The restructuring of the Eastern European bloc into independentmarket-driven economies

– The dissolution of the Soviet Union into independent states

– The worldwide trend toward economic cooperation

– Enhanced global competition

10-11

European Market Regions

Exhibit 10.1

10-12

European Economic AreaExhibit 10.2



10-13

A Brief Historyof European Integration

• Of all the multinational market groups, none ismore secure in its cooperation or more importanteconomically than the European Union

• Historically, standards have been used toeffectively limit market access

• The Single European Act

– Removed all barriers to trade

– Made the European Community a single internal market

– Proposed a wide variety of new commercial policies, includingsingle European standards

10-14

From the European Coal and SteelCommunity to Monetary Union

Exhibit 10.3

10-15

• EU Institutions

– Form of federal pattern with executive, parliamentary, and judicial branches► European Commission

► Council of Ministers

► European Parliament

► Court of Justice

– European Union uses three legal instruments1. Regulations binding the member states directly and having the same

strength as national laws

2. Directives also binding the member states but allowing them to choosethe means of execution

3. Decisions addressed to a government, an enterprise, or an individual,binding the parties named




10-16

• European Free Trade Association and EuropeanEconomic Area

– Formed by Britain for those European nations not willing to jointhe EEC but wanting to participate in a free trade area

– EFTA will most probably dissolve as its members join either theEuropean Economic Area (EEA) or the EU

– European Economic Area – a single market with free movementof goods, services, and capital

– The EEA is governed by a special Council of Ministerscomposed of representatives from EEA member nations


10-17

European Union

• Ratification of the Maastricht Treaty (1992)

• Economic and Monetary Union

• Treaty of Amsterdam

• Expansion of the European Union

10-18

The EuroExhibit 10.4



10-19

The Commonwealthof Independent States

• Formed after aborted coup against Gorbachev anddissolution of USSR

– Included the remaining 12 republics after the formation of theBaltic States

• The CIS is a loose economic and political alliancewith open borders but no central government

• The 12 members of the CIS share a common historyof central planning

– Their close cooperation could make the change to a marketeconomy less painful

– Differences over economic policy, currency reform, and controlof the military may break them apart

10-20

Commonwealthof Independent States (CIS)

Exhibit 10.5

10-21

North AmericanFree Trade Agreement

• NAFTA – Canada, Mexico, and the United States

– A single market of 360 million people with a $6 trillion GNP

– Ratified and became effective in 1994

– Requires the removal of all tariffs and barriers to trade over 15 years

– All tariff barriers dropped in 2008

– Improves all aspects of doing business within North America

– Creates one of the largest and richest markets in the world

– Job losses have not been as drastic as once feared, in part because

companies have established maquiladora plants in anticipation of the

benefits from NAFTA



10-22

Key Provisions of NAFTA

Exhibit 10.6

10-23

Latin AmericanEconomic Cooperation

• Southern Cone Free Trade Area – Mercosur

– Argentina, Bolivia, Brazil, Chile, Paraguay, and Uruguay► Second-largest common-market agreement in the Americas after NAFTA

► Most influential and successful free trade area in South America

– Free trade agreement between the EU and Mercosur ► Negotiations have been under way since 1999 for the first region-to-region

free trade accord

• DR-CAFTA

• Latin American Integration Association• Caribbean Community and Common Market

(CARICOM)

• NAFTA to FTAA or SAFTA?

10-24

Market Regions of the AmericasExhibit 10.7



10-25

Associationof Southeast Asian Nations

• Goals of the ASEAN – Economic integration and cooperation through complementary i ndustry programs

– Preferential trading, includi ng reduced tariff and nontarif f barriers

– Guaranteed member access to markets throughout the region

– Harmonized investment i ncentives

• Four major events account for the vigorouseconomic growth of the ASEAN countries – The ASEAN governments’ commitm ent to deregulation, liberali zation, and

privatization of their economies

– The decision to shift their econom ies from commodity based to manufacturingbased

– The decision to specializ e in manufacturing components in which they hav e acomparative advantage

– Japan’s emergence as a m ajor provider of technology and capital necessary toupgrade manufacturing capability and develop new industries

10-26

Far Eastern Market Group

Exhibit 10.8

10-27

Asia-Pacific Economic Cooperation• APEC was formed in 1989

– Provides formal structure for major governments to discuss mutualinterests in open trade and economic collaboration

– Includes all major economies of the region and the most dynamic,fastest-growing economies in the world

• Common goal and commitment to:

– Open trade

– Increase economic collaboration

– Sustain regional growth and development

– Strengthen the multilateral trading system

– Reduce barriers to investment and trade without detriment to other economies



10-28

Africa

• Little actual economic integration

– Characterized by political instability in recent decades

– Unstable economic base

• Two most active regional cooperative groups

– Economic Community of West African States (ECOWAS)► Plagued with financial problems, conflict within the group, and inactivity

on the part of members

– Southern African Development Community (SADC)► Most advanced and viable of Africa’s regional organizations

10-29

African Union Countriesand Other Market Groups

Exhibit 10.9

10-30

Middle East• Middle East has been less aggressive in the

formation of successfully functioning multinationalmarket groups

– A long history of border disputes and persisting ideologicaldifferences will have to be overcome

• Arab Free Trade Area (GAFTA)

• Economic Cooperation Organization (ECO)

• Creation of the Organization of the IslamicConference (OIC)

– Represents 60 countries and over 650 million Muslims worldwide

– Member countries’ vast natural resources, substantial capital, andcheap labor force are seen as the strengths of the OI



10-31

Strategic Implicationsfor Marketing in Europe

• Multinational groups spell opportunity – Through access to greatly enlarged markets with reduced or abolished

country-by-country tariff barriers and restrictions

• World competition will intensify – As businesses become stronger and more experienced in dealing

with large market groups

• Opportunities – Economic integration creates large mass markets for the marketer

• Market barriers – Initial aim of a multinational market is to protect businesses

that operate within its borders

• Reciprocity – If a country does not open its market to an EU firm, it cannot expect to

have access to the EU market

10-32

Marketing Mix Implications

• In the past, companies often charged differentprices in different European markets

• As long as products from lower-priced markets couldnot move to higher-priced markets, differential priceschemes worked

– Badedas Shower Gel

• Companies initiating uniform pricing policies

• Reducing the number of brands to focus advertisingand promotion efforts

– Nestle

– Unilever

10-33

Summary• Marketing efficiency affected by:

– Development of mass markets

– Encouragement of competition

– Improvement of personal income

– Various psychological market factors

• Production efficiency

– Derives from specialization

– Mass production for mass markets

– Free movement of the factors of production

• Multinational market groups provide greatopportunity for the creative marketer



10-34

Summary

• Market groupings make it economically feasibleto enter new markets and to employ newmarketing strategies

• Market groupings intensify competition byprotectionism within a market group but mayfoster greater protectionism between regionalmarkets

• Mercosur and ASEAN+3 suggest the growingimportance of economic cooperation andintegration

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Part 3 Assessing Global Market Opportunities1

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