Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
ASIA-PACIFIC: The Association of Southeast Asian Nations (ASEAN)
(Learning Objective #5)
The Association of Southeast Asian Nations (ASEAN) was established in 1967 as an
organization for economic, political, social, and cultural cooperation among its member
countries.
The original six members of ASEAN were:
Brunei
Indonesia
Malaysia
the Philippines
Singapore
Thailand
Vietnam became the first Communist nation in the group when it was admitted to ASEAN in
July 1995
Cambodia and Laos were admitted at the organization's thirtieth anniversary meeting in July
1997.
Burma (known as Myanmar by the ruling military junta) joined in 1998.
Individually and collectively, ASEAN countries are active in regional and global trade. ASEAN's
top trading partners include Japan, the United States, the European Union, and China.
Recently, Japan, China, and Korea were informally added to the member roster; some observers
called this configuration “ASEAN plus three.” When the roster expanded again to include
Australia, New Zealand, and India, it was dubbed “ASEAN plus six.”
January 1, 2010, marked the formal establishment of a new China/ASEAN FTA. The New FTA
removes tariffs on 90 percent of traded goods.
In fewer than three decades, Singapore has transformed itself from a British colony to a vibrant,
240-square-mile industrial power.
Singapore has an extremely efficient infrastructure – the Port of Singapore is the world's second-
largest container port (Hong Kong's ranks first) – and a standard of living second in the region
only to Japan’s.
Singapore accounts for more than one-third of U.S. trading activities with ASEAN countries.
Marketing Issues in the Asia-Pacific Region
The ten ASEAN nations are slated to launch an economic bloc called the ASEAN Economic
Community (AEC). ASEAN is not a customs union, so import-export activities are conducted
with different procedures. As a result, goods can languish in ports for weeks while documents
are reviewed and approved.
The Cultural Context Bhutan and GNH (Gross National Happiness)
In this chapter and the last, national income data have been used to measure the total output of
each of the world’s economies. It has been argued, however, that indicators such as GDP and
GNI per capita are inadequate. According to some economists and policymakers, supplemental
indicators that measure things like social progress, quality of life, and sustainability are needed.
Bhutan is a kingdom of 700,000 people in the Himalaya Mountains. Per capita GNI is
approximately $2,030; using this figure as a metric, Bhutan can be assigned to the lower-middle-
income category of nations. However, for the past 40 years, Bhutan has relied on another
measure besides economic growth, namely Gross National Happiness (GNH).).
The GNH Index includes both objective and subjective indicators: psychological well-being,
time use, community vitality, culture, health, education, environmental diversity, living
standards, and governance. Not surprisingly, there is some disagreement among social scientists
regarding the best way to define, track, and measure such intangibles as happiness and quality of
life.
WESTERN, CENTRAL, AND EASTERN EUROPE
The countries of Western Europe are among the most prosperous in the world.
The European Union (EU)
(Learning Objective #6)
The EU began in 1958 with the Treaty of Rome and original members Belgium, France, Holland,
Italy, Luxembourg, and West Germany.
In 1973, Great Britain, Denmark, and Ireland were admitted, followed by Greece in 1981 and
Spain and Portugal in 1986.
The objective of the EU member countries is to harmonize national laws and regulations so that
goods, services, people, and eventually money can flow freely across national boundaries.
The EU encourages a community-wide labor pool and establishes rules of competition patterned
after U.S. antitrust law. Improvements to highway and rail networks are underway.
Finland, Sweden, and Austria joined in 1995
Cyprus, the Czech Republic, Estonia, Hungary, Poland, Latvia, Lithuania, Malta, the Slovak
Republic, and Slovenia became full EU members on May 1, 2004. Bulgaria and Romania joined
in 2007. Croatia, the newest member, joined July 1, 2013.
Today, the 28 nations of the EU represent 450 million people and a combined GDP of more than
$15 trillion (See Figure 3-8).
The 1992 signing of the Maastricht Treaty (Netherlands) set the stage for the creation of an
economic and monetary union with a European central bank and a single European currency, the
euro.
The euro brings the benefits of eliminating currency conversion costs and exchange rate
uncertainty.
In 2002, euro coins and paper money were issued to replace national currencies such as the
French franc.
Marketing Issues in the European Union
The European Commission establishes directives and sets deadlines for their implementation by
legislation in individual nations.
The business environment in Europe has undergone considerable transformation since 1992 with
significant implications for all elements of the marketing mix.
Marketing mix issues must be addressed in Europe's single market (e.g., content and other
product standards that varied among nations must be harmonized). Harmonization means that
content and other product standards that varied among nations have been brought into alignment.
Direct comparability of prices in the euro zone forces companies to review pricing policies; the
marketing challenge is to develop strategies to take advantage of a large, wealthy market.
The enlargement of the EU will further impact marketing strategies and harmonized laws; food
safety laws in the EU are different from those in Central European countries.
Central and Eastern Europe
Because they are in transition, the markets of Central and Eastern Europe present interesting
opportunities and challenges.
Global companies view the region as an important new source of growth, and the first country to
penetrate a country market often emerges as an industry leader.
Exporting has been favored as a market entry mode, but direct investment is on the rise; low
wage rates, below Spain, Portugal and Greece, make this region attractive for low-cost
manufacturing.
January 1, 2015, marked the launch of the Eurasian Economic Union (EEU) integrating Russia,
Belarus, and Kazakhstan. Russian President Vladimir Putin views the EEU as a cornerstone of
Russian economic growth.
A study found a high degree of standardization of marketing program elements; the core product
and brand elements were largely unchanged from those used in Western Europe.
THE MIDDLE EAST
(Learning Objective #7)
The Middle East includes 16 countries:
Afghanistan
Bahrain
Cyprus
Egypt
Iran
Iraq
Israel
Jordan
Kuwait
Lebanon
Oman
Qatar
Saudi Arabia
Syria
The United Arab Emirates
Yemen
The majority is Arab, a large percentage Persian, and a small percentage Jews. The population is
95 percent Muslim and 5 percent Christian and Jewish.
Despite apparent homogeneity, many differences exist. Middle Eastern countries fall into all
categories of the Index of Economic Freedom.
The Middle East lacks a single societal type with a typical belief, behavior, and tradition; each
major city has many social groups, different in religion, social class, education, and wealth.
The price of oil drives business. Bahrain, Iraq, Iran, Kuwait, Oman, Qatar, and Saudi Arabia hold
significant world oil reserves which have widened the gap between rich and poor nations.
In 2011, the region was rocked by demonstrations and protests that have been described as “the
Arab awakening” and “the Arab spring”.
Disparities contribute to political and social instability. Obama lifted some sanctions and named
an ambassador to Syria.
Cooperation Council for the Arab States of the Gulf
The key regional organization is the Gulf Cooperation Council (GCC), which was established in
1981. The six gulf countries hold about 45 percent of the world’s known oil reserves, but
production is only about 18 percent of world oil output (see Figure 3-9 and Exhibit 3-10).
Saudi Arabia and other Middle Eastern countries post account deficits because they import most
goods and services and depend on oil revenues to pay for imports.
The organization provides coordination, integration and cooperation in all economic, social, and
cultural affairs.
GCC committees coordinate trade development, industrial strategy, agricultural policy, and
uniform petroleum policies and prices.
Goals include establishing an Arab Common Market and increasing trade ties with Asia.
In 1989, two other organizations were formed:
Morocco, Algeria, Mauritania, Tunisia, and Libya formed the Arab Maghreb Union
(AMU);
Egypt, Iraq, Jordan, and North Yemen created the Arab Cooperation Council (ACC).
Many Arabs see their new regional groups (GCC, ACC, and AMU) as embryonic economic
communities to foster the development of inter-Arab trade and investment.
Marketing Issues in the Middle East
Connection is a key word in conducting business in the Middle East; developing relationships
with key business and government figures is likely to cut through red tape.
Bargaining is culturally ingrained, and business people should be prepared for haggling;
establishing personal trust, mutual trust, and respect are essential.
Decisions are not made by correspondence or telephone. The Arab businessperson does business
with the individual, not the company.
Women are not usually part of the business or entertainment scene for traditional Muslim Arabs.
AFRICA
(Learning Objective #8)
The African continent is an enormous landmass which a territory of 11.7 million square miles. It
is not really possible to treat Africa as a single economic unit.
The 54 nations on the continent can be divided into three distinct areas:
the Republic of South Africa,
North Africa, and
sub-Saharan or Black Africa.
With 1.3 percent of the world's wealth and 11.5 percent of its population, Africa is a developing
region with an average per capita income of less than $600.
The Arabs living in North Africa are differentiated politically and economically from the rest of
Africa.
The six northern nations are richer and more developed, and several—notably Libya, Algeria,
and Egypt— benefit from large oil resources.
The Middle East and North Africa are viewed as a regional entity “Mena”; the economies of non-
oil, “emerging Mena” (Jordan, Lebanon, Morocco, Tunisia) have performed well in recent years.
Economic Community of West African States (ECOWAS)
The Treaty of Lagos establishing the Economic community of West African States (ECOWAS)
was signed in 1975 to promote trade, cooperation, and self-reliance in West Africa:
Benin
Burkina Faso
Cape Verde,
The Gambia,
Ghana
Guinea
Guinea-Bissau
Ivory Coast
Liberia
Mali
Mauritania
Niger
Nigeria
Senegal
Sierra Leone
Togo
In 1980, members established a free trade area for unprocessed agricultural products and
handicrafts. By 1990, tariffs on twenty-five items had been eliminated, with measures taken to
create a single monetary zone by 1994.
Still, economic development has occurred unevenly in the region.
East African Cooperation
Kenya, Uganda, Tanzania, Rwanda, and Burundi are the five nations that comprise the world’s
newest common market (see Figure 3-10). The East African Community’s origins date back
more than 40 years, but it has only been since 1999 that substantial progress has been made
toward integration and cooperation. Today’s East African Community has evolved through
several of the stages listed in Table 3-2. In 2005, a customs union was implemented.
South African Development Community (SADC)
SADC promotes trade, cooperation, and economic integration; members include:
Angola
Botswana
Democratic Republic of Congo
Lesotho
Malawi
Mauritius
Mozambique
Namibia
South Africa
Seychelles
Swaziland
Tanzania
Zambia,
Zimbabwe
The goal is a fully developed customs union. South Africa joined the community in 1994, and
represents 75 percent of regional income and 86 percent of intraregional exports
In 2000, an 11-nation free trade area was finally established. South Africa and the EU signed a
Trade, Development, and Cooperation Agreement (TDCA) in 2000.
South Africa, Botswana, Lesotho, Namibia, and Swaziland belong to the Southern African
Customs Union (SACU).
Marketing Issues in Africa
In 2000, President George W. Bush signed the African Growth and Opportunities Act (AGOA)
into law. Created with the theme of “Trade, not Aid”, the law is designed to support African
nations that make significant progress toward economic liberalization.
AGOA also represents a formal step toward a U.S.-Africa free trade zone.
TEACHING TOOLS AND EXERCISES
Additional Cases:
"Airwide International" by John Zerio, Samarth Sangal, Tanmay Saraykay, 10/09. HBS: TB 001.
"ASIMCO Technolgoies: 2005" by Xi Liu; Taehoo Kim; Liang Liu; Guangyu Nie; Wanhong
Shao; Xiaotian Xie HBS: 910A01-PDF-ENG.
“Inclusion: The More the Merrier – Why It’s Important in Marketing and Politics” John A.
Quelch, Katherine A. Jocz, HBS 7857BC, Press Chapter.
“Nations: No Quick Fix – Applying Marketing Concepts to How They Compete”, Hohn A.
Quelch, Katherine A. Jocz, HBS 7861BC.
Activity: Students should be preparing or presenting their Cultural-Economic Analysis and
Marketing Plan for their country and product as outlined in Chapter 1.
Video:
This video is an interview with an international marketing consultant discussing different global
marketing strategies. This video can fit well into many of the chapters. It highlights the features
and considerations necessary when developing an international marketing strategy.
Link: http://www.youtube.com/watch?v=iHChY9zVHJ8
Out-Of-Class Reading:
Mejias, Roberto J. and Jose G. Vargohernandez. “Emerging Mexican and Canadian Strategic
Trade Alliances under NAFTA. Journal of Global Marketing 14, no. 4 (2001), pp. 89-
116.
Guest Speakers: Invite a student from a country on the euro (for example, Spain) and another
one from a country not on the euro (such as Brazil). Initiate a class discussion with the two on
the pros and cons of having a common currency.
SUGGESTED READING
Books
Abengunrin, Olayiwola. Economic Dependence and Regional Cooperation in Southern Africa:
SADCC and South Africa in Confrontation. Lewiston, N.Y.: The Edwin Mellen Press,
1990.
Anderson, Kym, and Richard Blackhurst, eds. Regional Integration and the Global Trading
System. New York: Harvester/Wheatsheaf, 1993.
Axline, W. Andrew. The Political Economy of Regional Cooperation. London: Pinter, 1994.
Fallows, James M. Looking at the Sun: The Rise of the New East Asian Economic and Political
System. New York: Vintage Books, 1995.
Letterman, Gregory G. Basics of Multilateral Institutions and Multinational Organizations:
Economics and Commerce. Ardsley, NY: Transnational, 2002.
Odell, John, ed. Negotiating Trade: Developing Countries in the WTO and NAFTA. Cambridge,
England: Cambridge University Press, 2006.
Ohmae, Kenichi. The End of the Nation State: The Rise of Regional Economies. New York: Free
Press, 1995.
Roett, Riordan, ed. Mercosur: Regional Integration, World Markets. Boulder, Colorado: Lynne
Rienner Publishers, 1999.
Articles
Aho, C. Michael. “'Fortress Europe: Will the EU Isolate Itself from North America and Asia?”
The Columbia Journal of World Business 29, no. 3 (Fall 1994), pp. 32-39.
Bakos, Gabor. “After COMECON: A Free Trade Area in Central Europe?” Europe-Asia Studies
45, no. 6 (1993), pp. 1025-1044.
Banks, Philip. “India: The New Asian Tiger?” Business Horizons 38, no. 3 (May 1995), pp. 47-
50.
Bernal, Richard L. “From NAFTA to Hemispheric Free Trade.” The Columbia Journal of World
Business 29, no. 3 (Fall 1994), pp. 22-31.
Czinkota, Michael R. “The World Trade Organization – Perspectives and Prospects.” Journal of
International Marketing 3, no. 1 (1995), pp. 85-91.
Healey, Nigel M. “The Transition Economies of Central and Eastern Europe: A Political,
Economic, Social and Technological Analysis.” The Columbia Journal of World Business
29, no. 1 (Spring 1994), pp. 62-70.
Krum, James R. and Pradeep A. Rau. “Organizational Responses of U.S. Multinationals to EC-
1992: An Empirical Study.” Journal of International Marketing 1, no. 2 (1993), pp. 49-
70.
McQueen, Matthew. “Lomé Versus Free Trade Agreements: The Dilemma Facing ACP
Countries.” World Economy 21, no. 4 (June 1998), pp. 421-444.
Mejias, Roberto J. and Jose G. Vargohernandez. “Emerging Mexican and Canadian Strategic
Trade Alliances under NAFTA.” Journal of Global Marketing 14, no. 4 (2001), pp. 89-
116.
