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Regional Integration. (Levels of Regional Integration (Customs Union (A…
Regional Integration.
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Advantages
Firm:
- Expand Market Size:
- Achieve Economies of Scale + Enhance Productivity:
Country:
- Attract investment
Investment in one gives access to all.
- Acquire Stronger Defensive + Political Posture
Strength in numbers. All for one and one for all
Criticisms
- Loss of national identity: Increased cross border contact can have a long term homogenizing effect.
- Sacrifice of autonomy: Central authority to manage the bloc. Loss of autonomy
- Transfer of power to advantaged firms: ‘Foreign invaders’ from other bloc or outside countries (resources, expertise, brand) - M&A
- Failure of small or weak firms: Foreign competition, lack comparative advantage
- Job loss: Increased competition and restructuring. (Manufacturing)
Managerial Implications.
- Internationalization by firms inside the economic block: Firms first internationalize in bloc countries, then outside
- Mergers and Acquisitions:
Clear regulations for M&A
- Rationalization of operations:
Regional value chain activities, consolidating operations to reduce redundancy, e.g. one central factory, R&D facilities, logistics (one distribution strategy).
- Internationalization by firms from outside the bloc:
FDI in the region.
- Regional products and marketing strategy:
Countries harmonize product standards and regulations – allows for standardization
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