Chapter 11 The Asia Pacific Region

1. International Marketing 15th edition Chapter 11 The Asia Pacific Region Philip R. Cateora, Mary C. Gilly, and John L. Graham

2. The People’s Republic of China (PRC) (1 of 2) • Aside from the United States and Japan, there is no more important single national market than the PRC • The PRC with a dual economic system, embracing socialism along with many tenets of capitalism, has produced an economic boom with expanded opportunity for foreign investment • Its GNP averaged nearly 10% since 1970 and is predicted to be around 8 – 10% in the next 10 to 15 years, equaling that of the US by 2015 Roy Philip

3. The People’s Republic of China (PRC) (2 of 2) • Two major events that occurred in 2000 had a profound effect on China’s economy: • Admission to the World Trade Organization (WTO) • US granting normal trade relations (NTR) to China on a permanent basis (PNTR) • Two steps China must take if its road to economic growth must be smooth: • Improving human rights • Reforming the legal system Roy Philip

4. Hong Kong • After 155 years of British rule, Hong Kong reverted to China in 1997, when it became a special administrative region (SAR) of the PRC • Hong Kong is given a high degree of autonomy. It negotiates bilateral agreements (which are then “confirmed” by the PRC0 and makes major economic decisions on its own • Hong Kong is a free society with legally protected rights as the PRC continues to pursue a generally noninterventionist approach to economic policy that stresses the private sector Roy Philip

5. Taiwan, The ROC • Both Taiwan and China continue to implement WTO provisions between themselves • Taiwan companies have invested over %50 billion in China, and about 250,000 Taiwanese-run factories are responsible for about 12% of China’s exports • Trade helps out both countries: Taiwanese companies face rising costs at home - China offers a nearly limitless pool of cheap labor and engineering talent; China’s SOEs are laying off millions and Taiwan provides plentiful jobs Roy Philip

6. Japan • Japan’s fast growth in the 1970s and 1980s amazed the world. Then came the early 1990s, and Japan’s economy produced a stunning surprise: it slowed, sputtered, and stalled • Four explanatory themes have emerged: • Faulty economic policies • Inept political apparatus • Disadvantages due to global circumstances • Cultural inhibitions Roy Philip

7. Global Circumstances • Japanese population is shrinking faster than the U.S. In 2005, while American baby boomers were at their peak of productivity, the Japanese were about 10 years ahead to population declines and graying hair • Serious disadvantage in the information age: its complex language (three alphabet system) hindered software innovations • With historically low real prices of oil and the U.S. peak consumption level of SUVs, Japan was late to tap this market Roy Philip

8. The Cultural Explanation • The lack of a national goal for Japan plagued them after successfully building themselves from the ruins of World War II • The Japanese management culture such as, lifetime employment, job promotion based not on merit but on length of service, reciprocal contractor/subcontractor loyalties, hindered their adjustment to the new economic era • Japan is expected to continue its slow-growth economy; Toyota’s 2010 quality problems may have disrupted its contributions to the economy Roy Philip

9. India • The following steps have already been taken: • Privatizing state-owned companies ; reducing stake to about 51% • Recasting the telecom sector’s regulatory authority and demolishing the monopolies enjoyed by SOEs • Signing a trade agreement with the U.S. to lift all quantitative restrictions on imports • Maintaining momentum in the reform of the petroleum sector • Planning the opening of domestic long-distance phone services, housing, and real estate and retail trading sectors to foreign direct investment Roy Philip

10. India • India still presents a difficult business environment • Tariffs are well above those of developing world norms • Inadequate protection of intellectual property rights • Anti-business attitudes of India’s federal and state bureaucracies continue to hinder potential investors and plague their routine operations • Delay by policymakers on selling money-losing SOEs, making labor laws flexible, and deregulating banking • Widespread corruption and ingrained bribery Roy Philip

11. India • But India presents a lot of opportunities • Massive market (over 1 billion, second in size only to China) • Cheap and qualified labor • Knowledge of English • Educated middle class numbering 250 million (college graduates, scientists, engineers, etc) • Supplier and exporter of expertise in all areas of information technology • Time zone puts India in a competitive position with their European counterparts (they work while Americans sleep) Roy Philip

12. Asia Pacific Trade Associations • Once a source of inexpensive labor for products shipped to Japan or to third markets, countries in the Asia Pacific region are now seen as viable markets • Three free trade associations in this region: • Association of South East Asian Nations (ASEAN) • ASEAN+3 (ASEAN members plus ministers from China, Japan, and South Korea) • Asia-Pacific Economic Cooperation (APEC) Roy Philip

13. Association of Southeast Asian Nations (ASEAN)(1 of 2) • Goals of the ASEAN • Operating within a free trade area • The ability to sell in an entire region without differing tariff and nontariff barriers • Distribution can be centralized at the most cost-effective point rather than having distribution points dictated by tariff restrictions • Pricing can be more consistent, which helps reduce smuggling and parallel importing • Marketing can become more regionally and centrally managed Roy Philip

14. Asia-Pacific Economic Cooperation (APEC) • APEC was formed in 1989 • Provides formal structure for major governments to discuss mutual interests in open trade and economic collaboration • Includes all major economies of the region and the most dynamic, fastest-growing economies in the world • Common goal and commitment to: • Open trade • Increase economic collaboration • Sustain regional growth and development • Strengthen the multilateral trading system • Reduce barriers to investment and trade without detriment to other economies Roy Philip

15. Marketing Opportunities in Greater China • Across this vast land of opportunity, there are extreme differences in economic wellbeing, cultures, and political structures • The following sectors are great for American exporters: • Automotive components, cleaner coal, construction equipment, education and training services, machine tools, marine industries, healthcare, water and wastewater treatment, rail equipment, renewable energy, and green building • Finally, the influence of national government policies and regulations of marketing will often be minor compared with that of their local counterparts Roy Philip