International Marketing - Chapter 10: Europe, Africa, and the Middle East

Chapter 10Europe, Africa, and the Middle EastInternational Marketing15th edition Philip R. Cateora, Mary C. Gilly, and John L. GrahamGeographic and Temporal Proximity  and Cultural FactorsGeographic and temporal proximityRecent research demonstrates that differences across time zones are more important than physical distancesTrade tends to travel more easily in north-south directions then it did in ancient timesCountries that are widely separated geographically have major barriers to overcome in attempting economic fusionCultural factorsThe more similar the culture, the more likely a market is to succeed because members understand the outlook and viewpoints of their colleagues2Roy Philip Patterns of Multinational Cooperation (1 of 3)Regional cooperation groupsGovernments agree to participate jointly to develop basic industries beneficial to each economyFree trade areaAn 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 countries3Roy Philip Patterns of Multinational Cooperation (2 of 3)Customs unionEnjoys free trade area’s reduced or eliminated internal tariffs Adds a common external tariff on products imported from countries outside the unionCommon marketEliminates all tariffs and other restrictions on internal trade,Adopts a set of common external tariffsRemoves all restrictions on the free flow of capital and labor among member nations4Roy Philip Patterns of Multinational Cooperation (3 of 3)Political unionInvolves complete political and economic integration, either voluntary or enforcedCommonwealth – a voluntary organization that provides for the loosest possible relationship classified as economic integrationTwo new political unions came into existence in the 1990sThe Commonwealth of Independent States (CIS)The European Union (EU)5Roy Philip European UnionRoy Philip 6Economic and Monetary Union (EMU)It established the parameters of the creating of a common currency for the EU, the “Euro” and established a timetable for its implementationIn 2002, a central bank was established, conversion rates were fixed, circulation of Euro bank notes and coins was completed and the legal tender status of participating members’ bank notes and coins was cancelledBeginning January 1, 2001, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, the Netherlands, Portugal, and Spain employed the Euro7Roy Philip Expansion of the European Union - shows the member states of the European UnionTen new countries were added in 2004 and as of today the EU boasts 27 nations with 4 more awaiting membershipIn 2007, the EU celebrated its golden anniversary and most would agree that it has been a tremendous success, delivering peace and prosperity to hundreds of millions of people that previously had lived with frequent wars and accompanying economic and social hardshipsBack8Roy Philip Eastern Europe and the Baltic StatesEastern Europe and the Baltic states, satellite nations of the former Soviet Union, have moved steadily toward establishing postcommunist market reformsNew business opportunities are emerging almost daily, and the region is described as anywhere from chaotic with big risks to an exciting place with untold opportunitiesCountries in both these regions continue to adjust to the political, social, and economic realities of changing from the restrictions of a Marxist-socialist system to some version of free markets and capitalism9Roy Philip Eastern Europe It is dangerous to generalize about eastern Europe because each of the countries has its own economic problems and is at a different stage in its evolution from a socialist to a market-driven economyMost eastern European countries are privatizing state-owned enterprises, establishing free market pricing systems, relaxing import controls and wrestling with inflationThe Czech Republic has fared better than other eastern European countries; Yugoslavia has been plagued with ethnic violence; some countries have become members of the Organization for Economic Cooperation and Development (OECD)10Roy Philip The Baltic StatesEstonia, Latvia, and Lithuania are prime examples of the difference that right policies can make. All three countries started off with roughly the same legacy of inefficient industry and Soviet-style command economiesSince 1991, Estonia’ s economic reform policy has led to a liberalized, nearly tariff-free, open-market economyThe most significant hurdle for U.S. trade and investment has been government bureaucracy, corruption, and organize crime, found in Latvia and LithuaniaAll three countries are members of WTO and, as of 2004, EU membersBack11Roy Philip The Commonwealth of Independent States (CIS)Formed after aborted coup against Gorbachev and dissolution of USSR Included the remaining 12 republics after the formation of the Baltic StatesThe CIS is a loose economic and political alliance with open borders but no central governmentThe 12 members of the CIS share a common history of central planningTheir close cooperation could make the change to a market economy less painfulDifferences over economic policy, currency reform, and control of the military may break them apart12Roy Philip Regional Groups - AfricaEconomic Community of West African States (ECOWAS) – 15-nation groupPlagued with financial problems, conflict within the group, and inactivitySouthern African Development Community (SADC) Most advanced and viable of Africa’s regional organizationsEast African Community (EAC)13Roy Philip OpportunitiesLarge markets are particularly important to businesses accustomed to mass production and mass distribution because of the economies of scale and marketing efficiencies that can be achievedMost multinational groups have coordinated programs to foster economic growth as part of their cooperative efforts so as to take advantage of increasing purchasing power, improving regional infrastructure, and fostering economic development 14Roy Philip Marketing Mix ImplicationsIn the past, companies often charged different prices in different European markets such as Colgate PalmoliveAs long as products from lower-priced markets could not move to higher-priced markets, differential price schemes worked as in the case of Badedas Shower GelCompanies initiating uniform pricing policies are reducing the number of brands to focus on advertising and promotion efforts as with Nestle and Unilever15Roy Philip