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Developing global vision through market research Emerging markets and scope for marketing Multinational market regions

& market groups Ranking of markets in terms of relative opportunities

International marketing managers need to constantly monitor the different forces affecting their international operations International marketing research is especially complex

International marketing research is the systematic design, collection, recording, analysis, interpretation, and reporting of information pertinent to a particular marketing decision facing a company operating internationally.

Acquisition analyses Diversification analyses Market-share analyses Export research

Brand preferences Brand attitudes Brands awareness studies Purchase behavior studies Consumer segmentation studies

Concept development and testing studies Brand name generation and testing Product testing Competitive product studies Packaging design studies Test marketing


Import/export analyses Channel performance and coverage Plant/warehouse location studies

Studies of premiums, coupons, and deals Advertising effectiveness research Local media research Studies pertaining to personal selling activities

Sales Force Compensation Tariff Quota Geography/Territory

Studies projecting demand Currency and counter trade studies Studies of inflation rates and pricing Studies of negotiation tactics

Conceptual Equivalence

Concepts have different meanings in different cultural environments Product usage themselves may be having different purposes in different country environments

Functional Equivalence

Availability, Reliability, and Validity

Accuracy of secondary data can be questionable: Published statistics may be unreliable

Sources of reliable data:
- World Bank
- United Nations Development Program - Organization of Economic Cooperation and Development

(OECD) - Euromonitor

Information collected for a specific purpose, to address the problem at hand.

The costs of collecting primary data in foreign markets are likely to be much higher given the lack of an appropriate marketing research infrastructure

Qualitative research has been particularly useful as a first step in studying international marketing phenomena.

Focus Groups Observation

Constraints: Responses can be affected by culture, individuals may act differently if they know they are being observed.

Quantitative research are more structured, involving either descriptive research approaches, such as survey research, or causal research approaches, such as experiments.

Content Analysis Survey Research Experimental Research

Constraints: Respondent factors, infrastructure factors

The Sampling Plan

Sample Unit Sample Size Sampling Procedure

Collect, Analyze, and Interpret Data

A coordinated collection of data, systems, tools, and techniques, complemented by supporting software and hardware designed for the gathering and interpretation of business and environmental data

Sales Force Composite Estimates

Personal observations and expectations of the local sales force Opinions of different experts about future demand
Experts to estimate market performance; findings are aggregated, and experts are queried again, in light of aggregate responses

Jury of Expert Opinion

The Delphi Method

Time Series and Econometric Models

Use data of past performance to predict future market demand Point of Sale Research

Made with the help of store scanners, in markets where they are available

Involve comprehensive store audits

Products have been traded across borders throughout recorded civilization, extending back beyond the Silk Road that once connected East with West from Xian (China) to Rome (Italy). Total world merchandise trade volume grew from $7.6 trillion in 2000 to $16.3 trillion in 2008.

Big Emerging Markets (BEMs): In the next ten to twenty years, BEMs such as the Chinese Economic Area (CEA: including China, Hong Kong Region, and Taiwan), India, South Korea, Mexico, Brazil, Argentina, South Africa, Poland, Turkey, and the Association of Southeast Asian Nations (ASEAN: including Indonesia, Brunei, Malaysia, Thailand, the Philippines, and Vietnam) will provide many opportunities in global business.

Saturation of domestic markets: Domesticmarket saturation in the industrialized parts of the world and marketing opportunities overseas are evident in global marketing. Global competition: Competition around the world and proliferation of the Internet have been on the rise and are now intensifying. Need for global cooperation: Global competition brings global cooperation.

Internet revolution: The Internet and electronic commerce (e-commerce) are bringing major structural changes to the way companies operate worldwide. The term global epitomizes both the competitive pressure and expanding market opportunities. Whether a company operates domestically or across national boundaries, it can no longer avoid competitive pressures from around the world.

Per capita income is an important determinant of consumer buying behavior. When a countrys per capita income is less than $10,000, much of the income is spent on food and other necessities, and very little disposable income remains. As a countrys per capita incomes reaches $20,000, the disposable portion of income increases dramatically. This increased disposable income level results in increased convergent pressures on consumer buying behavior.

People with higher incomes tend to enjoy similar educational levels, desires for material positions, ways of spending leisure time, and aspirations for the future. Globalization does not suffocate local cultures, but rather liberates them from the ideological conformity of nationalism, with consumers becoming more receptive to new things. Consumers also have a wider, more divergent choice set of goods and services to choose from. In other words, the divergence of consumer needs is taking place at the same time.

International trade consists of exports and imports. International business includes international trade and foreign production. Extensive international penetration of companies is called global reach. International trade and foreign production activities are managed on a global basis. Growth of Multinational Corporations (MNCs) and intra-firm trade is a major aspect of global markets.

Who manages international trade?

Intra-firm trade: Trade between MNCs and their foreign affiliates. Comprises 34 percent of world trade. An additional 33 percent of world trade was exports between MNCs and their affiliates. In other words, two-thirds of world trade is managed one way or another by MNCs.

The Multinational Phase Foreign markets could be penetrated easily Since production was often localized, products could be adapted to local markets Multinational Marketing Marketing to different countries with local adaptation of products and promotions The Global Phase The appearance of strong foreign competitors in the U.S. was a major force behind the emergence of the global perspective
Japanese companies had entered the U.S. market with

spectacular success in markets such as autos and consumer electronics

The Antiglobalization Phase

The antiglobalization forces gained steam throughout the year 2000

Questioning of the economic and social benefits of

globalization continued

The antiglobalization arguments involve a mix of economic, political, and social issues
One main complaint is that globalization has failed to lift

the standard of living of many third-world countries while multinational companies have profited significantly

Five stages in the evolution of global marketing:

1. Domestic Marketing (domestic focus; home country customers; ethnocentric orientation). 2. Export Marketing (indirect vs. direct exporting; country choice, exports; ethnocentric orientation; home country customers). 3. International Marketing (markets in many countries; polycentric orientation; use of multidomestic marketing when customer needs are different across national markets).

4. Multinational Marketing (many markets; consolidation on regional basis; regiocentric orientation; standardization within regions). 5. Global Marketing (international, multinational & geocentric orientation; companys willingness to adopt a global perspective; global products with local variations).

Global Marketing refers to marketing activities that emphasize the following:

1. 2. 3.

Standardization efforts. Coordination across markets. Global integration.

Global marketing does not necessarily mean that products can be developed anywhere on a global scale. The economic geography, climate, and culture affect how companies develop certain products. The Internet adds a new dimension to global marketing. E-commerce retailers gain substantial savings by selling online.

International and Global Marketing and Related Fields of Study

International Business

International Marketing Global International Marketing Trade

International Management

International Finance

Comparative Advantage Theory Absolute Advantage or Comparative Advantage Factor Endowment Theory International Product Cycle Theory Economies of Scale (Demand, Supply, Tariff, Quotas on the Foreign Commodities).

Economies of Countries; Developed or Developing Technological Gap Preferences/ Similarities

Stages of International Product Cycle Theory:

Growth Stage

Product standards emerge and mass production becomes feasible.

Maturity Stage

Many U.S. and foreign companies vie for market share in the international markets.
Decline Stage

Companies in the developing countries also begin producing the product and marketing it in the rest of the world.

Country and Firm Specific Advantages

The fundamental aim of business strategy is to create and
sustain competitive advantage
When doing competitive analysis in the global context it is important to identify whether a companys strength is firm-specific or country-specific

If the companys strength is not firm-specific, the competitive advantage is usually less sustainable since the company cannot prevent imitation i.e. copying the original or making a product like an original one.

Comparative and Absolute Advantages

Provides the fundamental rationale for the existence of international trade Free trade between two countries yields economic payoffs to the countries (in terms of higher welfare) provided the countries have different COMPARATIVE advantages It is not important if one country is better than another in producing all kinds of products, i.e. has an ABSOLUTE advantage. It is necessary that trade be free In the absence of free trade, each country has to be more self-sufficient, and less specialization is possible

Four factors determine the competitive advantage of a country Factor Conditions The nations position in factors of production, such as skilled labor or infrastructure, necessary to compete Demand Conditions The nature of the home demand for the industrys product or service Related and Supporting Industries The presence or absence in the nation of supplier industries and related industries that are internationally competitive Firm Strategy, Structure, and Rivalry The conditions governing how companies are created, organized, and managed, and the nature of domestic rivalry

Porters National Diamond

Firm strategy, structure and rivalry

Factor conditions
Related and supporting industries

Demand conditions

Country-of-Origin Effects The effect refers to the impact on customers of a products made-in label or the home country of a brand. Products or services from countries with a positive image tend to be favorably evaluated Products from less positively perceived countries tend to be downgraded

Firm-specific advantages refer to those competitive advantages which are controlled by the individual firm alone. Firm-specific advantages may be of several kinds Examples include a patent, trademark, or brand name or the control of raw materials required for the manufacturing of the product. From a marketing perspective It is important to recognize that the source of a firmspecific advantage can depend on specific market know-how

FSAs in Marketing
1. BRAND Coca Cola, Mercedes Benz, Sony 2. TECHNOLOGY Ericsson, BMW, Canon 3. ADVERTISING Marlboro, Unilever, Absolut Vodka

4. DISTRIBUTION Kodak, Panasonic, Gillette

5. VALUE Toyota, IKEA, Compaq

FSAs and Marketing Strategy

A clear understanding of the FSAs is a key to the

formulation of a successful marketing strategy in a country Differing levels of market acceptance of the firmspecific advantages limits the degree to which a company can be successful abroad The level of acceptance also limits the degree to which the marketing effort can be standardized Not all FSAs can be transferred to foreign markets.

Various factors can make the application of marketing FSAs difficult in other countries These include limits on TV advertising and in-store promotion. There are also limits on what distribution channels are available. In services, a major difficulty in transferring marketing skills abroad is that service skills often represent intangibles, not skills embodied in the product itself (as technology typically is).

In 2008, the annual global merchandise trade amounted to $16.8 trillion. From 1997 to 2007, world GDP grew more than 30 percent. In the same period, total world exports of merchandise increased by more than 60 percent.

According to the World Trade Organization (WTO), the top five merchandise exporting countries in 2008 were:

Germany ($1,530 billion), China ($1,465 billion) United States ($1,377 billion) Japan ($777 billion) France ($630 billion)

The net result of these factors?

Increased interdependence of countries/economies Increased competitiveness Need for firms to keep a constant watch on the international economic environment.

Consumers and companies in the U.S. and Japan are able to find domestic sources for their needs because of their diversified and extremely large economies.

The United States is still relatively more insulated from the global economy than other nations. In 2008, the U.S. economy was about $14.3 trillion and imports about 63% more than it exports.

The larger the countrys domestic economy, the less dependent it tends to be on exports and imports relative to its GDP. The process of specialization due to international trade leads to job creation in both the exporting and importing country. Foreign direct investment (FDI) involves investment in manufacturing and service facilities in a foreign country.

As firms invest in manufacturing and distribution facilities outside their home countries to expand into new markets around the world, they have added to the stock of foreign direct investment. The increase in foreign direct investment has also been promoted by the efforts of many national governments to woo multinationals. Portfolio investment or indirect investment refers to investments in foreign countries that are withdrawable at short notice, such as investments in foreign stocks and bonds.

Examples of severe currency fluctuations are the 1995 Mexican meltdown, and the Asian financial crisis (1997-1999). Unfortunately, the influence of these shortterm money flows are nowadays far more powerful regarding exchange rates than an investment by a Japanese or German automaker. Recent examples of financial crisis occurred in Argentina and Brazil (2002).

Country competitiveness refers to the productiveness of a country, which is represented by its firms domestic and international productive capacity. Country competitiveness is not fixed. The role of human skill resources has become increasingly important as a primary determinant of industry and country competitiveness.

In 2008-9, Singapore was among the worlds top 10 economies. Others were the U.S., Switzerland, Denmark, Sweden, Finland, Germany, Netherlands, Japan and Canada. Taiwan, dropped from #5 to #17 between 2005 and 2008. The U.S. and Switzerland have been the most innovative in the last three decades Other OECD (countries (especially Japan) have been increasingly catching up.. >> OECD (The Organisation for Economic Co-operation and

Development (OECD, international economic organization of 34 countries founded in 1961, France to stimulate economic progress and world trade. It is a forum of countries committed to democracy and the market economy, providing a platform to compare policy experiences, seek answers to common problems, identify good practices, and coordinate domestic and international policies of its members)

Over the next two decades, the big emerging markets (BEMs) will hold the greatest potential for U.S. exports Largest BEMs: Chinese economic area (including China, Hong Kong region, and Taiwan), India, C.I.S. (Russia, Central Asia, and the Caucasus states), South Korea, Mexico, Brazil, and Argentina B.R.I.C.- Brazil, Russia, India, China Each BEM offers opportunities and challenges for local policy makers, businesses and the international business and economic community

Multinational Market Regions and Market Groups

Multinational market regions those groups of countries that seek mutual economic benefit from reducing trade and tariff barriers

Most important global trends today

The world is awash in economic cooperative agreements as countries look for economic alliances to expand access to free markets

WTO 151 members and 31 observers


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

Successful economic union

The advantages of economic union must be clear-cut and significant

Requires favorable economic, political, cultural, and geographic factors as a basis for success

In the past, a strong threat to the economic or political security of a nation was the impetus for cooperation Recent creation of multinational market groups has been driven by the fear that not to be part of a vital regional market group is to be left on the sidelines

Benefits must greatly outweigh the disadvantages before nations forgo any part of their sovereignty


Markets are enlarged through

Nations with complementary economic bases

Preferential tariff treatment for participating members Common tariff barriers against outsiders

Economic union must have agreements and mechanisms in place to settle economic disputes The demise of the Latin American Free Trade Association (LAFTA)

Least likely to encounter frictions in the development and operation of a common market unit

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


Country/ State sovereignty ; Supreme Independent Authority over a Geographic Area

One of the most cherished possessions of any nation Relinquished only for a promise of significant improvement of the national position through cooperation

The importance of political unity to fully achieve all the benefits of economic integration

Has driven EC countries to form the European Union


Geographic and temporal proximity

Recent research demonstrates that differences across time zones are more important than physical distances Trade tends to travel more easily in north-south directions then it did in ancient times Countries that are widely separated geographically have major barriers to overcome in attempting economic fusion
The more similar the culture, the more likely a market is to succeed because members understand the outlook and viewpoints of their colleagues

Cultural factors


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 among member nations

Political union
Involves complete political and economic integration, either voluntary or enforced Commonwealth a voluntary organization that provides for the loosest possible relationship classified as economic integration Two new political unions came into existence in the 1990s

The Commonwealth of Independent States (CIS) The CIS is a loose

association of states and in no way comparable to a federation, confederation or supranational union such as the European Union. It is more comparable to the Commonwealth of Nations. Although the CIS has few supranational powers, it is aimed at being more than a purely symbolic organization, nominally possessing coordinating powers in the realm of trade, finance, lawmaking, and security. It has also promoted cooperation on cross-border crime prevention. Some of the members of the CIS have established the Eurasian Economic Community with the aim of creating a full-fledged common market and political entity and confederation of 27 member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community (ECSC) and the European Economic Community (EEC), formed by six countries in 1951 and 1958 respectively. In the intervening years the EU has grown in size by the accession of new member states and in power by the addition of policy areas to its remit. The Maastricht Treaty established the European Union under its current name in 1993. The latest amendment to the constitutional basis of the EU, the Treaty of Lisbon, came into force in 2009

The European Union (EU) The European Union (EU) is an economic


Market potential needs to be viewed in the context of regions of the world rather than country by country
The globalization of markets The restructuring of the Eastern European bloc into independent market-driven economies The dissolution of the Soviet Union into independent states The worldwide trend toward economic cooperation Enhanced global competition



The European Free Trade Association (or EFTA) is a free trade organisation between four European countries that operates parallel to, and is linked to, the European Union (EU). The EFTA was established on 3 May 1960 as a trade bloc-alternative for European states who were either unable or unwilling to join the then-European Economic Community (EEC) which has now become the EU. The Stockholm Convention, establishing the EFTA, was signed on 4 January 1960 in the Swedish capital by seven countries (known as the "outer seven") 10-67

Of all the multinational market groups, none is more secure in its cooperation or more important economically than the European Union Historically, standards have been used to effectively 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, including single European standards

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 instruments

1. 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 choose the means of execution 3. Decisions addressed to a government, an enterprise, or an individual, binding the parties named

European Free Trade Association and European Economic Area


Formed by Britain for those European nations not willing to join the EEC but wanting to participate in a free trade area EFTA will most probably dissolve as its members join either the European Economic Area (EEA) or the EU European Economic Area a single market with free movement of goods, services, and capital The EEA is governed by a special Council of Ministers composed of representatives from EEA member nations

Formed after aborted coup against Gorbachev and dissolution of USSR

Included the remaining 12 republics after the formation of the Baltic 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


Their close cooperation could make the change to a market economy less painful Differences over economic policy, currency reform, and control of the military may break them apart

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


Goals of the ASEAN

Economic integration and cooperation through complementary industry programs Preferential trading, including reduced tariff and nontariff barriers Guaranteed member access to markets throughout the region Harmonized investment incentives

Four major events account for the vigorous economic growth of the ASEAN countries
The ASEAN governments commitment to deregulation, liberalization, and privatization of their economies The decision to shift their economies from commodity based to manufacturing based The decision to specialize in manufacturing components in which they have a comparative advantage Japans emergence as a major provider of technology and capital necessary to upgrade manufacturing capability and develop new industries


Middle East has been less aggressive in the formation of successfully functioning multinational market groups

A long history of border disputes and persisting ideological differences will have to be overcome

Arab Free Trade Area (GAFTA) Economic Cooperation Organization (ECO) Creation of the Organization of the Islamic Conference (OIC)
Represents 60 countries and over 650 million Muslims worldwide Member countries vast natural resources, substantial capital, and cheap labor force are seen as the strengths of the OI


Multinational groups spell opportunity

World competition will intensify

Through access to greatly enlarged markets with reduced or abolished country-by-country tariff barriers and restrictions As businesses become stronger and more experienced in dealing with large market groups


Market barriers Reciprocity

Economic integration creates large mass markets for the marketer

Initial aim of a multinational market is to protect businesses that operate within its borders

If a country does not open its market to an EU firm, it cannot expect to have access to the EU market


In the past, companies often charged different prices in different European markets As long as products from lower-priced markets could not move to higher-priced markets, differential price schemes worked

Badedas Shower Gel

Companies initiating uniform pricing policies Reducing the number of brands to focus advertising and promotion efforts
Nestle Unilever


Emerging economies

Types of international expansion

There are two types of international expansion that are important in relation to non-triad firms:

internationalization from the triad into non-triad regions; the internationalization of newer MNEs from outside the triad who are looking to access larger economies.

For triad-based MNEs:

Triad firms and emerging economy firms: why the mutual interest?
Triad economies are growing slowly relative to emerging markets both large, like India, China and Brazil and small, like Poland or Malaysia Triad regions also tend to be more expensive, in terms of labour costs, infrastructure, land, materials and supporting industries, relative to non-triad regions. As a result, there are strong incentives for triadbased firms to:
sell products, services, and other outputs into these

growing, non-triad markets; to source inputs, from cheap labour or manufactured components to services, from such places.

Triad firms and emerging economy firms: why the mutual interest? (Continued)

For non-triad-based MNEs:

Large, mature markets like the US, the EU and Japan offer opportunities to sell their products. Many firms also look to these countries to fill gaps in their assets, resources and capabilities, from technological know-how or specialist components, to brands.

FDI inflows, by host region and economy, 19802005 (millions of dollars)

FDI inflows, by host region and economy, 19802005 (millions of dollars)

FDI inflows, by host region and economy, 19802005 (millions of dollars)

FDI from developing countries, 19802005 (billions of dollars)

The top 50 non-financial TNCs from developing economies ranked by foreign assets, 2005a (millions of dollars, number of employees)

The top 50 non-financial TNCs from developing economies ranked by foreign assets, 2005a (millions of dollars, number of employees)

The top 50 non-financial TNCs from developing economies ranked by foreign assets, 2005a (millions of dollars, number of employees)
Note: a All data are based on the annual reports of TNCs (MNEs) unless otherwise stated. b TNI, or Transnationality Index, is calculated as the average of the following three ratios: foreign assets to total sales, foreign sales to total sales, and foreign employment to total employment. d Industry classifications for companies follows the US Standard Industrial classification as used by the US Securities and Exchange Commission (SEC). e In a number of cases, companies reported only partial foreign sales. In a number of cases companies reported sales only by destination. f Foreign sales are based on the origin of the sales. In a number of cases companies reported sales only by destination. g Foreign employment data are calculated by applying the share of foreign employment in total employment of the previous year to total employment of 2006. h Foreign assets data are calculated by applying the share of foreign assets in total assets of the previous year to total assets of 2006. i Foreign sales data are calculated by applying the share of foreign sales in total assets of the previous year to total sales of 2006. j Data were obtained from the company in response to an UNCTAD survey. l Data for foreign activities are outside Asia. m Foreign employment data are calculated by applying the average of the share of foreign employment in total employment of all companies in the same industry (omitting the extremes) to total Employment

Receive 22% of global FDI flows, the most of any non-triad region. 90% of FDI is concentrated in only 10 countries.

China, Hong Kong (China) & Singapore receive the most FDI. The oil rich countries of the Middle East also experience FDI, but this is almost exclusively related to their oil industries.

Many of the countries in the region continue to liberalize their economies and privatize stateowned assets.

Asia-Pacific and the Middle East (Continued)

There are two clear trends that indicate the dynamism of the Asia region.

The growth on intra-regional investment, particularly driven by the regional giants India and China joining countries like Malaysia, South Korea, Taiwan and Singapore as active investors. FDI in services is growing rapidly and now represents over 50% of FDI stock in the Asia region.

36 out of the 50 largest non-financial MNEs from developing countries listed by UNCTAD are from the Asia-Pacific region.

The largest number from any country comes from Hong Kong (China), for example, Hutchison Whampoa (Hong Kong) Others from the region include Singtel (Singapore); Petronas (Malaysia); Samsung Electronics (South Korea); etc.

Despite years of political and economic change, including liberalization, the Central and Eastern European region still attracts a relatively small percentage of global FDI inflows (just over 4%). Poland, the Czech Republic and Hungary receive larger shares of FDI than other countries in the region but have experienced declines in recent years, as has the Russian Federation. These, plus 5 other CEE countries (Estonia, Latvia, Lithuania, Slovenia and Slovakia) joined the EU in May 2004 and all saw FDI inflows shrink recently, but prospects look better from now on.

The largest MNEs in the CEE region are Russian, many of them based on the countrys abundant natural-resources, such as Gazprom, Rosneft and LuKoil.

11% of global FDI went to the Latin America region in 2006. The three largest economies of Argentina, Brazil and Mexico had a difficult decade in terms of economic growth and recession, which stymied FDI inflows. A spate of privatizations during the late 1990s boosted inward FDI for these and other regional economies and as this process came to an end, so did the FDI inflows. Brazil and Mexico still received the highest amounts of FDI and, as we would expect, one-third of all FDI into the region came from the USA. Many Latin American countries now face increased competition for US manufacturing investment from China and the Asian region.

8 of the 50 largest non-financial MNEs from developing countries listed by UNCTAD are from the Latin American region.

Half of them are based in Mexico.

Many of the largest are natural resources based.

These include the largest of all, Cemex (Mexico), Petrobras (Brazil), Companhia Vale do Rio Doce (Brazil), Metalurgica Gerdau (Brazil) and Perez Companc (Argentina).

Less than 4% of total global FDI goes to Africa.

Resource-rich economies (oil, diamonds, gold and platinum)

Home to most of the worlds least-developed countries (LDCs). Africa has always recorded low levels of inward FDI because of its relative lack of political instability, weak infrastructure, poor labour skills and macro-economic fragility.

Only 5 of the 50 largest non-financial MNEs from developing countries listed by UNCTAD are from Africa and they are all South-African. Sappi, Sasol, MTN Group and Barloworld are major players in their respective sectors throughout the region.

FDI into non-triad regions:

Tends to be concentrated in a few countries within each region. Still tends to be related to primary resources. There is a growing volume of manufacturing and service-related FDI.
this is particularly true for a group of emerging markets

or newly-industrializing countries (NICs), which have broken the cycle of underdevelopment to achieve economic growth and wealth-creation, partly through increased integration with other parts of the global economy.

Shifting patterns of comparative and competitive advantage (Continued)

Traditional trade theories can help explain current patterns of growth in emerging markets.

The theory of absolute advantage suggests that each nation should specialize in producing goods it has a natural or acquired advantage in producing. The theory of comparative advantage holds that a relative advantage is all that is necessary for net gains from trade. The factor endowments theory allows us to look at the relative availability of different factors of production (land, labour and capital) and therefore their relative price in each country.

Traditional theories about the MNE tended to view the Triad a source of innovation and nontriad regions as recipients.

The development of national innovation systems have made some emerging economies attractive to R&D FDI from MNEs. This influx of high-technology investment further adds to the importance of emerging economies as sources of, rather than passive recipients of, innovation.

Non-triad nations need both trade and investment with triad nations and also access to the markets of at least one of the triad regions. Access can be subject to complex arrangements with varying degrees of economic trade liberalization and protectionism that are inherent in the institutional and political structures of these regions.

Market access to the triad (Continued)

The focus of business strategy for non-triad nation firms should be to secure inward triad investment and market access for exports to a triad bloc.

Clusters of nations are making such arrangements with triad blocs. Some smaller, non-triad nations may attempt to open the doors to two triad markets.

Direct business contact of a double diamond type. Formal linkages arranged by the governments.

For example, both South Korea and Taiwan have equal trade and investment with the US and Japan. Firms from these countries need two double diamonds.

The End

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