Economic integration's impact on institutions and supply chain management

Global and Regional Economic Integration

With the increasing globalization of emerging economies, regional and global economic integration is expanding, generating both benefits and challenges. While seeking to sustain global and region-wide economic growth, it is important to create an integrated market for the free flow of trade and investment. Economic integration is not working for the majority of the regional and global parties. In the course of the most recent period of drastic global trade and investment, economic inequality attained its peak both regionally and internationally. According to a report by the UN Development Program, the wealthiest 20% of the global population consumes 86% of the world's resources. In contrast, the poorest 80% are argued to consume a mere 14% (Peng, 2014).

Manufacturers operating under a regional or global bloc may profit from market size (Peng, 2014). In turn, market size is a vital variable that facilitates innovation, the fixed costs of which is felt throughout the consumer base. Similarly, consumers are likely to benefit from intense rivalry in product markets. Such impacts critically rely not just on the creation of a single customer area but also on the removal of obstacles to market access. In this respect, notable progress has been documented in Russia, Kazakhstan and Belarus where corporations have equal access to government procurement contract in all the three nations. Regional and global economic integration play a critical part in this decline. It influences all jobs and economic sectors (Peng, 2014). From the perspective of Wall Street investors and multinational corporations, this integration is possibly seen as a wonderful phenomenon presenting numerous opportunities. However, from the local manufacturers' perspective, the middle class, professional service employees, manufacturing staff and the overall national economic growth, the cons overpower the benefits.

How institutions and resources affect marketing and supply chain management

Institutions refer to the network of suppliers, manufacturers, distributors, and customers that guide how business is conducted. Weak institutions are highly expected to fail in ensuring modest efficiency of markets; thus, foreign investors would not have the ability to depend on markets to access local resources. In such a situation, the acquisition will be prohibitively expensive because of inefficiencies in financial markets. In addition, under such circumstance, it is argued that the resources of an acquired company might be improperly valued, and their integration would be challenging. Therefore, foreign investors pursuing local resources may opt to create a new business by collaborating with a local company (Pedersen et al. 2011). The concept of supply chain management enables the highlighted institutions to integrate their operations thus increasing response time while reducing costs to the consumer. Therefore, the absence of a formal policy to govern SCM inhibits the effectiveness of reverse logistics. This is especially notable when discussing the effect of resources on marketing and supply chain. A commitment of resources might be in the form of training employees on new technology or even information to all departments on what needs to be done. Information support remains crucial to both product routing and resource commitment; it engages the marketing of goods to consumers.

Wrong reasons for expansion

The first reason why most companies fail in a foreign market is choosing the wrong reason for expansion globally. Entering the global market simply because the local market has a tiny or no growth is a poor reason for expansion. Experts warn that such thinking leads to massive costs that do not deliver the value. According to a survey by the University of Michigan on U.S. senior executives, 80% reported that they intended to expand their consumer pool by penetrating new global markets (Pedersen et al. 2011). Despite having a strong allure, companies must approach their global expansion with caution.

Access to local information

Unlike foreign firms, domestic firms enjoy the advantage of local information flows given by local customers, other industry players and national banks. Foreign firms tend to be at a substantial disadvantage against domestic firms in this regard. This is because foreign companies are less embedded in information networks in the overseas locations compared to the local peers (Pedersen et al. 2011). The number of domestic ties a company establishes with domestic counterparts in a nation (major shareholders, stockbrokers, solicitors, financial advisors and auditors) are key indicators of access to domestic information.

Access to domestic resources

Foreign firms are expected to have it rough in accessing resources in the location country. Such resources include local labor and supplies. This is the primary reason for the LOF. While this disadvantage may not apply in all conditions, it appears to be a vital source of the disadvantage of foreign firms. The characteristic attitude in domestic markets emphasizes the "old boys' network" for reasons of recruitments. This served foreign-owned corporations a significant disadvantage over local entities in accessing domestic resources, especially domestic labor (Pedersen et al. 2011). The LOF has been the underlying driving theory behind multinational corporations. Researchers believe that to overcome the LOF and emerge successful in overseas markets. Multinationals must offer their foreign subsidiaries with some company-specific advantage in managerial or organizational capabilities.