Multinational Market Groups

Background The globalization of markets, the restructuring of East Europe into independent market-driven economies, dissolution of Soviet Russia into independent states, emergence of south-east Asian economies, and the trend towards worldwide economic cooperation has divided the world market into Regional Economic Groups, popularly known as the TRIAD. The Triad represents the marketing areas of Europe, the Americas and the Asian-Pacific Rim. EUROPE European Union is the focus of the European region of the first Triad. European Community Of all the multinational groups, European Community has been the most prominent and successful economically. Earlier known as the European Common Market, the EC was created by the treaty of Rome on January 1, 1958. Despite diversity of languages, varied economic development and existence of other national interests, integration has taken place after 1000 years of economic separatism. The Single European Act (1987) finally removed all barriers to trade to make the European Community into a single internal market by December 31, 1992 and brought EC one step closer to the goal of economic integration.
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The Maastricht Treaty and European Union (Dec 1991). The agreement was ratified by 12 countries to create the European Union by 1994. Denmark and U.K. were the last to ratify. Three more members joined E.U. in 1995. The treaty provided for Economic and Monetary Union (EMU), under the provisions of which a single currency, EURO, was sought to be introduced by 1997, to be administered by the European Central Bank to be established by 1998. The Euro was finally introduced on January 1, 1999 as a parallel currency, and all other individual currencies were withdrawn by January 1, 2002, and the ECB was also established in 2002. U.K. did not join the monetary union and maintains its currency. Treaty of Amsterdam (1997) Brought the single market fully into effect and laid a solid foundation for both the single currency and enlargement of the Union into Central and Eastern Europe. The E.U. comprises 27 members now (2008), with 3 applicants on the threshold. The E.U. exhibits a heterogeneous group, with wide divergences in economic levels, G.D.P., inflation rate and agricultural production. The E.C. Authority The European Communitys institutions form a federal pattern with Executive, Parliamentary and Judiciary branches, which have gained considerable authority over its members over the years.

THE EUROPEAN COMMISSION initiates policy and supervises the execution of its laws and policies. THE COUNCIL OF MINISTERS is the decision-making body of EC, and has representation of one from each member. THE EUROPEAN PARLIAMENT originally had only a consultative role, but it can now amend and adopt legislation. THE EUROPEAN COURT OF JUSTICE is the Supreme Court and is responsible for interpretation or validity of points of EC law. Other European Groups European Free Trade Association (EFTA) was conceived by U.K. with 7 other members, but all joined E.C. subsequently except Iceland, Liechtenstein, Norway and Switzerland. EFTA will either dissolve or merge with another group. European Economic Area Because of success of E.C., five members of EFTA elected to join 12 members of E.C. in 1994 to form the EEA, advocating a single market with free movement of goods, service and capital. The EEA is governed by a special Council of Ministers. Central European Free Trade Area Was organized in 1993 by Poland, Hungary, Slovakia and Czech Republic, and later joined by Slovenia and Romania.

Economically, CEFTA has been a success because the reduction of tariffs and free trade among the members has been achieved since 1997. The Commonwealth of Independent States The CIS is a loose economic and political alliance with open borders, but no central government. The 12 members of the CIS share a common history of central planning, and they are striving towards a free market economy through mutual cooperation, but differences over economic policy, currency reform and control of military continue to be major bottlenecks. THE AMERICAS North American Free Trade Agreement (NAFTA) Despite being the largest trade partners, trade between U.S.A. and Canada was hindered by the existence of tariffs and other trade barriers, which were eliminated through establishment of United States-Canada Free Trade Agreement (CFTA). The scope was expanded subsequently (1994) to include Mexico to form NAFTA, addressing all issues ranging from market access to elimination of tariffs and non-tariff barriers, rules of origin, customs administration, investments etc. South Cone Free Trade Area (MERCUSOR) Argentina, Brazil, Paraguay and Uruguay signed a treaty in 1991 and inaugurated the common market in 1995 to provide free movement of goods, services and capital among members and imposed a common external tariff.
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Latin American Economic Cooperation Sparked by the success of NAFTA and MERCUSOR, there is a wave of optimism in Latin America to remove trade barriers, and with that objective the Latin American Free Trade Association was formed, which has now given rise to: Latin American Integration Association The objective is to establish a Latin American Common Market, but the economies of member countries are plagued with tremendous foreign debt, protectionist economic regimes, tripledigit inflation and over-regulation. Limited success has been achieved, although some reforms have been carried out to lower tariffs and other trade barriers among members. Caribbean Community and Common Market (CARICOM) aims to create a Common Market, but limited success has been achieved, except adoption of a common external tariff in 2001. ASIAN-PACIFIC RIM Countries in the Asian-Pacific Rim constitute the third Triad, with Japan as the central power. Association of Southeast Asian Nations (ASEAN) was established in 1967 with 9 members with the aim of economic integration and cooperation and reduction of tariff and non-tariff barriers.

Most countries of the region having been affected by the Asian financial crisis of 1997-98, led to the creation of ASEAN+3, with the addition of China, Japan and South Korea to the original group of 9. India has also been invited recently as a Special Invitee. Although not much progress has been made towards achievement of its objectives, bilateral negotiations have resulted in partial reduction of tariffs in certain areas. Closer links between Southeast Asia and Northeast Asia are seen as a step towards strengthening Asias role in the global economy and creating a global three-bloc configuration. Asia-Pacific Economic Cooperation (APEC) Formed in 1989, with 18 members, APEC provides a formal structure for major governments of the region, including U.S.A. and Canada to discuss matters of open trade and economic collaboration for mutual benefits. APEC is far from being a free trade area, but each annual meeting seems to advance it another step towards achievement of that goal. South Asian Association for Regional Cooperation (SAARC) [Includes India, Nepal, Bhutan, Pakistan, Bangladesh, Sri Lanka, and Maldives]. The association of 7 countries in the region was created in 1983 with the objectives of promoting Economic growth Social progress Cultural development.
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Hardly any progress has been made towards achievement of the objectives on account of divergent economies, cultures, geography and political regimes. The only achievement has been signing of the SAARC Preferential Trading Arrangement [SAPTA] in the seventh summit in 1993, providing a framework for exchange of tariff concessions and promotion of trade and economic cooperation among member countries. The 15th conference held at Colombo in August 2008 reiterates the resolve of members to work towards achievement of the objectives. AFRICA Two groups exist The Economic Community of West African States (ECOWAS) 15 nations. South African Development Community (SADC) 14 members, with a resolve to phase out all tariffs by 2012. Regional Trading Groups and Emerging Markets Two views have been offered: 1. The world is dividing into major trading groups like E.U., NAFTA and the ASEAN Free Trade Area, and will provide the markets of the future. 2. The global economic power may shift from the traditional industrialized markets to the developing world and its emerging markets.

Strategic Implications for Marketing Goals of all regional cooperations are the same to liberalize trade and promote economic development and integration. Opportunities While multinationals will get stronger through mergers, acquisitions and joint ventures, there are problems of national markets posed by different languages, cultures and even instability. Market Barriers The initial aim of a multinational market is to protect businesses that operate within its borders. The prospect of Europe as one unified market has many countries concerned in terms of the protectionist policies. Reciprocity Reciprocity is an important part of trade policy of multinational groups. Marketing Mix Implications Companies are adjusting their marketing mix strategies to reflect unified market patterns. Price standardization is one of the major achievements of multinational groups. A major benefit from an integrated Europe is competition at the retail level, which may spread to other regions as more integration takes place. **************
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