Page 240 - Foundations of Marketing

Reaching Global Markets | Chapter 8 207

Consequently, opportunities for growth in the cell phone market remain strong in Southeast
Asia, Africa, and the Middle East. One opportunity created by the rapid growth in mobile
devices in Kenya is mobile payment services. Approximately 8.5 million Kenyans use their
mobile phones to transfer money. London-based Vodafone has taken advantage of this market
opportunity with its M-PESA money transfer service, the most popular money transfer service
in Kenya. Because banks tend to avoid catering to lower-income populations, such services
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are likely to grow.

REGIONAL TRADE ALLIANCES, LO 3 . Understand several
important international trade
MARKETS, AND AGREEMENTS agreements.

Although many more firms are beginning to view the world as one huge marketplace,
various regional trade alliances and specific markets affect companies engaging in interna-
tional marketing; some create opportunities, and others impose constraints. In fact, while
trade agreements in various forms have been around for centuries, the last century can be
classified as the trade agreement period in the world’s international development. Today,
there are nearly 200 trade agreements around the world compared with only a select hand-
ful in the early 1960s. In this section, we examine several of the more critical regional trade
alliances, markets, and changing conditions affecting markets. These include the North
American Free Trade Agreement, European Union, Southern Common Market, Asia-
Pacific Economic Cooperation, Association of Southeast Asian Nations, and World Trade
Organization.

The North American Free Trade Agreement
(NAFTA)

The North American Free Trade Agreement (NAFTA) , implemented in 1994, effectively
merged Canada, Mexico, and the United States into one market of nearly 460 million con-
sumers. NAFTA eliminated virtually all tariffs on goods produced and traded among Canada,
Mexico, and the United States to create a free trade area. The estimated annual output for
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this trade alliance is more than $ 17 trillion. NAFTA makes it easier for U.S. businesses to
invest in Mexico and Canada; provides protection for intellectual property (of special interest
to high-technology and entertainment industries); expands trade by requiring equal treatment
of U.S. firms in both countries; and simplifies country-of-origin rules, hindering China and
Japan’s use of Mexico as a staging ground for further penetration into U.S. markets.
Canada’s more than 34 million consumers are relatively affluent, with a per capita GDP
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of $ 40,500 . Canada is the single largest trading partner of the United States, which in turn
supports millions of U.S. jobs. NAFTA has also enabled additional trade between Canada
34
and Mexico. Mexico is Canada’s fifth largest export market and third largest import market.
With a per capita GDP of $ 14,700 , Mexico’s more than 114 million consumers are less
35
affluent than Canadian consumers. However, the United States is Mexico’s largest trading
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partner, and Mexico is the third largest trading partner of the United States. The United
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States gets 16 percent of its imports from Mexico. Many U.S. companies, including HP,
IBM, and General Motors, have taken advantage of Mexico’s low labor costs and close prox-
imity to the United States to set up production facilities, sometimes called maquiladoras .
Production at the maquiladoras , especially in the automotive, electronics, and apparel indus-
tries, has grown rapidly as companies as diverse as Ford, John Deere, Kimberly-Clark, and
VF Corporation set up facilities in north-central Mexican states. Moreover, increasing trade
North American Free Trade
between the United States and Canada constitutes a strong base of support for the ultimate
Agreement (NAFTA)
success of NAFTA. An alliance that merges Canada,
Mexico has the potential to become a major player in global business. The country is Mexico, and the United States
growing faster than Brazil and is estimated to soon become one of the top ten biggest global into a single market

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