Global business strategies and implementation

Global Business Strategies

Vincent

The aftermath of World War II has seen the evolution of economic regionalism as a means for fostering foreign trade thereby economic growth of participating countries. Economic regionalism was a conscious attempt to manage the opportunities and constraints created by international economic tie-ups after World War II through institutional arrangements facilitating free flow of goods and services and coordination of foreign economic policies. It embraced free trade areas, customs unions, common markets and economic unions. On the basis of the level of integration the economic regionalism can be differentiated widely, which can be visualized in the form of creation of free trade areas, custom unions, common markets and economic unions. The member countries practice preferential tariffs levying comparatively lower rates of duty on imports of goods among themselves than that from non-member countries. Free trade among the member countries is protected by a schedule of customs duties charged on imports from the rest of world. The common market ensures free movement of labor and capital among the member countries.

During early 1950's integration of coal and steel industries in some countries of Western Europe led to formulation of European Coal and Steel Community, which later expanded to become European Community. With the removal of all barriers to trade between the member countries especially, coal, coke, steel, iron and also by framing a set of rules to control cartels it is seen that trade in the selected commodities rose dramatically. The European Union was formed by the treaty of Maastricht during 1993 with a view to enhance European political and economic integration by creating single currency, a unified foreign and security policy, common citizenship rights etc. The Outer Seven countries which were not the members of European Economic Community -Austria, Denmark, Norway, Portugal, Sweden, Switzerland and United Kingdom formed European Free Trade Association (EFTA) during 1960. [Regional Economic Integration: a Comparison of NAFTA and the EU] schedule of tariff reduction and quota liberalization for industrial goods among the member countries were committed with the provisions for flexible exclusion if the burden imposed on the domestic economics is proved to be too great. During 1991 the members of EFTA and EEC agreed to establish a free trade zone known as European Economic Area. Being inspired by the European Economic Community and with a view to creating Free Trade bloc among the three largest countries of North America-United States, Canada and Mexico a free trade zone was created through the pact of North America Free Trade Agreement (NAFTA). The main provisions of NAFTA included gradually reduction of tariffs, custom duties, and other trade barriers between the three members. [Regional Economic Integration: a Comparison of NAFTA and the EU]

Greater access in the sphere of banking insurance, advertising, telecommunications among the member countries are ensured along with a duty free access for a vast range of manufactured goods and commodities through the pact. During 1967 the Southeast Asian Nations -Indonesia, Malaysia, Philippines, Singapore and Thailand formed the Association of Southeast Asian Nations with a view to accelerating economic growth social progress and cultural development and to promoting peace and security in Southeast Asia. The pact was for economic cooperation, promotion of trade, joint research and technical cooperation among member countries under the banner of cooperative peace and shared prosperity. [Regional Economic Integration: a Comparison of NAFTA and the EU]

The Latin American republics encouraged by the success of economic integration in Europe established several organizations like Central American Common Market, Latin American Free Trade Association, Andean Group, Caribbean Community and Common Market. The Central American Common Market established by a treaty in 1958 aimed at establishment of free trade area with agreements for industrial integration, reduction of barriers on the regional internal trade and introduction of single custom tariff. The Latin American Free Trade Association (LAFTA) was formed in 1970's on the principles of reciprocity and most favored nation's treatment. The geographical diversity and varying level of economic development of the member nations find the free trade concept as more advantageous. [Regional Integration in Central America]

The political instability and difficult economic situation of the most of areas in South America kept apart many of major investors from allocating resources in South America. The necessity of economic integration in Venezuela, one of the world's largest producers and exporters of petroleum is visualized from the fact that the performance of the economy is directly affected by and vulnerable to the changes in volatile oil business. The oil industry with heavy inflow of foreign exchange gives little scope for other manufacturing industries to sustain. During the 80's, the falling oil exports and radical collapse of the Bolivar from 4.3 per dollar in 1983 to 14.5 in 1988 worsened the situation. In 1989 a policy package based on liberalization of economy, lowering of external tariff, floating exchange rate was launched to obviate the situation During 1990s the oil sector was opened for foreign investment. There was no success. [Venezuela and Regional Integration in South America]

In the early 2000 it is seen that economic integration Brazil and Argentina joining Mercosur is the only way out. Being the member of Andean Group it is not possible on the part of Venezuela to join the Mercosur with the rigid laws of Andean Pact. The integration with Brazil is crucial for Venezuela. It will have direct impact on the Venezelan Oil industry, since Brazil is an importer of Oil. In order to strengthen the mechanism of regional integration of northern states of Brazil incorporating the dynamics of Mercosur, Brazil also agrees for preferential treatment to Venezuela. By joining the Mercousr, the sectors in which Venezuela has comparative advantage like energy, textiles, some agricultural products, and mine will find a great market support in Brazil. The mine reserves in southern part of Venezuela are yet to be developed and the hydraulic resources concentrated in southern part are yet to be exploited. [Venezuela and Regional Integration in South America]

The on going program "Conquest of the South" aiming at development of resources of in the southern part are inhibited by financial and technological resources. Since Venezuela has already opened its market to Colombia, U.S. And Mexico the entry of Brazil in the Venezuelan market would not have any adverse impact in the domestic industry. The investors of international arena are much attracted by the FDI flowing from Brazil. With the cheaper labor, cheap and abundant energy and a weaker monetary unit especially with the advantageous geographic location of Venezuela i.e. The gateway to South America from European and U.S. costs Venezuela will be the crucial part of the integration in America. [Venezuela and Regional Integration in South America]