Time zones do make a difference and it is easier to work with countries and regions in the same/similar time zones. Economic growth and trade is more likely to take place within regions in the same time zone due to the ease of doing business.
Being in Europe is an advantage for trade with Africa and the Middle East, both due to time zones and geographic proximity.
The United States, Germany, and Japan are fully industrialized. Brazil, Russia, and China are rapidly industrializing.
Quiksilver manages its global operations from three bases: California, Avalon, and Australia.
There are major changes forthcoming in world regions, with emerging markets accounting for a majority of the growth in the next 20 years. The liberalization of markets due to transition to capitalist governments or just change in political parties as well as the emergence of many regional trade alliances will bring about many changes.
These and other countries have an ever-expanding and changing demand for goods and services. Luxury cars in China; Avon cosmetics in South Korea; Walmart discount stores in Argentina, Brazil, Mexico, China, and Thailand; McDonald’s Big Macs with chicken patties in India; Whirlpool washers and refrigerators in eastern Europe; Sara Lee food products in Indonesia; and Amway products in the Czech Republic represent opportunities in emerging markets.
The current level of economic development dictates the kind and degree of existing market potential.
Exhibit 9.2 illustrates the differences in income and consumer possessions across the eight most populous American nations.
Exhibit 9.2 summarizes data regarding the standards of living in the most populous American countries that evince a spectrum of development despite their similar sizes. The lowest levels of development often do not collect or report data suitable for international resources such as Euromonitor International or the World Bank. It is interesting to note the differences in income and consumer possessions across the eight most populous American nations.
These NICs have become formidable exporters of many products, including steel, automobiles, machine tools, clothing, and electronics, as well as vast markets for imported products. Brazil provides an example of the growing importance of NICs in world trade, exporting everything from alcohol-based fuels to carbon steel. Brazilian orange juice, poultry, soybeans, and weapons (Brazil is the world’s sixth-largest weapons exporter) compete with U.S. products for foreign markets.
These NICs have become formidable exporters of many products, including steel, automobiles, machine tools, clothing, and electronics, as well as vast markets for imported products. Brazil provides an example of the growing importance of NICs in world trade, exporting everything from alcohol-based fuels to carbon steel. Brazilian orange juice, poultry, soybeans, and weapons (Brazil is the world’s sixth-largest weapons exporter) compete with U.S. products for foreign markets.
Some analysts attribute the faster growth of some to cultural values, others to cheap labor, and still others to an educated and literate population.
Cuba still struggles to regain its foothold in international markets after the demise of its robust trade with the Communist Bloc countries in the 1990s.
Key industries were encouraged to achieve better positions in world markets by directing resources into promising target sectors.
The final factors are large, accessible markets with low tariffs.
To have preferential access to regional trade groups, Chile in 2003 and Central American countries in 2005 signed free trade agreements with the United States.
Brazilian production of coffee has almost always determined world prices for the brew. Now this commercial dominance is being challenged in two ways. First, Vietnam’s burgeoning new production caused world coffee prices to crash in recent years, from a high of $1.85 per pound in 1997 to about $.50 in 2001. Circa 2015 prices are now back to about $2.00 per pound, after peaking at $3.00 in 2010. And Starbucks is changing the global game in retail coffee distribution—including in its store in the heart of São Paulo, the historical center of coffee production in Brazil and the world.
Information technology can jump-start national economies and allow them to leapfrog from high levels of illiteracy to computer literacy.
The Internet accelerates economic growth by speeding up the diffusion of new products and innovations. It allows for innovative services at a relatively inexpensive cost.
Today, foreign investors are seen as vital partners in economic development. Many countries have deregulated industries, opened their doors to foreign investment, lowered trade barriers, and begun privatizing SOEs. The trend toward privatization is currently a major economic phenomenon in industrialized as well as in developing countries.
A country that has the ability to produce commodities for export may be unable to export them because of an inadequate infrastructure. For example, Mexico’s economy has been throttled by its archaic transport system.
Rail: Travel by Rail (passenger-km per capita)
Cars: Passenger Cars/1000 People
Energy: Energy Consumption (tonnes oil equivalent per capita)
Phones: Mobile Phones in Use per 1000
Literacy: Literacy Rate (%)
University Students: % of Eligible within 5 years of High School
The three adaptations are:
1. Rather than adapting global products for local conditions, fusion products may be more appropriate. Example: holistic medicine.
2. Rather than diffusion of innovations, the focus of new product development should be on affordability and accessibility.
3. National brand advantage will be more important than other sorts of country-of-origin advantages.
Exhibit 9.4 (table) is a static model representing an idealized evolutionary process.
Production and consumption patterns vary across the three sectors.
The most frightening trend in 21st century developed countries is the bifurcation of markets into rich and poor.
Commerce researchers predict that imports to the countries identified as big emerging markets (BEMs), with half the world’s population and accounting for 25 percent of the industrialized world’s GDP today, will soon be 50 percent of that of the industrialized world. With a combined GDP of over $2 trillion, BEMs already account for as large a share of world output as Germany and the United Kingdom combined, and exports to the BEMs exceed exports to Europe and Japan combined.
India, China, Brazil, Mexico, Poland, Turkey, and South Africa are prominent examples of countries the Department of Commerce has identified as BEMs. Egypt, the Philippines, Venezuela, and Colombia may warrant inclusion in the near future.
Because many of these countries lack modern infrastructure, much of the expected growth will be in industrial sectors.
The agreement between the United States and Canada was not a customs union like the European Community; no economic or political union of any kind was involved. It provided only for the elimination of tariffs and other trade barriers.
The purpose of NAFTA was to generate income and employment gains and enhance global competitiveness of NAFTA firms. Combined intra-regional trade represents 40 percent of NAFTA exports and 378 million people have a combined GDP of $7.68 trillion. Each member will have its own tariff arrangements with nonmember countries. Mexican exports grew to both the U.S. and Canada. Mexico was expected to grow at 6 percent annually.
Geographic proximity allows Mexicans from Baja, California, to attend Padres baseball games in close-by San Diego. The team maintains this successful store just across the border in Plaza Rio shopping center in Tijuana. And of course, historically, Padre Junipero Serra had visited both places in the late 1700s while establishing the chain of missions in old Spanish California. NAFTA also gave Taco Bell a second shot at making it in Mexico; this store was in Monterrey. The company’s 1992, pre-NAFTA incursion failed. Unfortunately the store pictured here also closed in 2010, simply for lack of patronage.
DR-CAFTA represents another important step toward the ultimate goal of a free trade agreement encompassing all the Americas. The Ease of Doing Business Index 30 is a ranking based on a combination of 10 different measures, such as ease of “starting a business,” “registering property,” and “enforcing a contract.”
Because Mercosur members were concerned about sacrificing sovereign control over taxes and other policy matters, the agreement envisioned no central institutions similar to those of the European Union institutions.
In addition, negotiations have been underway since 1999 for a free trade agreement between the European Union and Mercosur, the first region-to-region free trade accord. Although negotiations will not be easy, Mercosur and the European Union should be able to reach an accord. Mercosur has assumed the leadership in setting the agenda for the creation of a free trade area of the Americas or, more likely, a South American Free Trade Area (SAFTA).
CARICOM continues to seek stronger ties with other groups in Latin America and has signed a trade agreement with Cuba.
For example, members of the middle class in emerging markets do not own two automobiles and suburban homes, and healthcare and housing in some cases are subsidized, freeing income to spend on refrigerators, TVs, radios, better clothing, and special treats. Exhibit 9.5 illustrates the percentage of household income spent on various classes of goods and services.
Emerging markets will be the growth areas of the 21st century.