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INTERNATIONAL ECONOMIC INTEGRATION

COUNTRY EVALUATION AND SELECTION

SUBMITTED BYHITESH SHARMAMBA 1ST SEM.

SECTION-B

SUBMITTED TOProf. A.K. SAHU

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IntroductionA process whereby countries cooperate withone another to reduce or eliminate barriers tothe international flow of products, people or

capital.Definition:- Elimination of tariff and non-tariff barriers to the flow ofgoods, services, and factors-of-production between a group of nations,or different parts of the same nation.

Economic integration is best viewed as a spectrum with the variousintegrative agreements in effect today lying in the middle of thisspectrum

The level of integration defines the nature and degree of economiclinks among countries

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Levels of Economic

IntegrationTrading blocs maytake various

forms: Free trade area

Customs union

Common market

Economic union

Political Union

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Free-Trade AreaRemove all barriers to trade among members, buteach country has own policies for nonmembers.

Customs UnionRemove all barriers to trade among members, andset a common trade policy against nonmembers.

Common MarketRemove all barriers to trade, labor, and capitalamong members; and set a common trade policyagainst nonmembers.

Economic UnionRemove barriers to trade, labor and capital; set a

common trade policy against nonmembers; andcoordinate members economic policies.

Political UnionCoordinate aspects of members economic andpolitical systems.

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Reduced Import PricesWhen a small country imposes atariff on imports, the price of the

goods will typically rise, which willin turn result in lower demand forthe imported goods

When a bloc of countries imposesthe tariff, the fall in demand for theimported goods will be substantial

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Increased CompetitionIntegration increases market sizeand may result in a lower degree

of monopoly in the production ofcertain goods and services.

Certain industries may not be

economically viable in smaller,trade protected countries.

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Economic Integration and Its Effect to the

International Manager

Regional economic integration createsopportunities and challenges for the

international managerEconomic integration may have an impact on acompanys entry mode

Decisions regarding integrating markets must

be assessed from four different perspectivesEffects of change

Strategic planning

Reorganization

Lobbying

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Country Evaluation andSelection

Firms lack sufficient resources to pursue allpotential (international) opportunities, they must.Determine the order of country entry.

Establish the rates of resource allocation acrosscountries.

In selecting geographic sites, firms must decide.Where to market their products.

Where to produce their products.

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To grasp company strategies for sequencing the penetration ofcountries.

To know the methods and problems when collecting andcomparing information internationally.

To comprehend why location decisions do not necessarily

compare different countries possibilities.

To understand some simplifying tools for helping to decidewhere to operate.

OBJECTIVES

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MARKET ATTRACTIVNESS

Market sizepast and present sales data

GDP, per capita income,population size,

population growth rates.

Other factorsprice levels and elasticity

income levels and elasticity

substitutability of products

taste and other cultural factors

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EASE OPERATIONSFirms are attracted to countries that:

Are located nearby

Share a common languageHave market conditions similar to those in theirhome countries

Present few market restrictions

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COUNTRY RISKS The Environmental Climate the possibility of suffering harm or

loss, or a course involving uncertain danger or hazard.

Liability of foreignness the lower survival rate of foreign firms in

their initial years of operation. Competitive Risk

Monetary Risk

Political riskthe expectation that the political climate in a givencountry will change in such a way that a firms operating positionwill deteriorate.

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CONCLUSIONS

Firms use both qualitative and quantitative informationto determine which markets to serve and where tolocate production.

Because each firm has unique competitive capabilitiesand objectives, the factors affecting the countryselection decision will differ for each.

The interdependence of a firms operations may obscure

the real impact of a given operation on overall corporateactivity and profitability.

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THANKING YOU