6 How should a US firm that currently exports only to ASEAN

6. How should a U.S. firm that currently exports only to ASEAN countries respond to the creation of a single market in this regional grouping? 7. How should a firm with self-sufficient production facilities in several ASEAN countries respond to the creation of a single market? What are the constraints on its ability to respond in a manner that minimizes production costs?

Solution

The US Firm exporting to ASEAN region only should be pleased as is one region will give him:

1. Easy access to entire region, he is already in a winning position as he is already present in the region

2. Since he is already in the region he should consolidate his market holdings to expand his existing base and create a new base.

3. He should just be wary of any anti-dumping laws collectively planned by the group or any additional taxes expected

A firm with Production Facilities in ASEAN Countries:

He should:

1. Consolidate and diversify production taking into account scenario of the entire market.

2. He should adapt his buying and sourcing from more economical sources to benefit from one region being created.

3. He can plan on manufacturing one product in one location to get volume benefits and enjoy economies of scale

4. Since he already has huge advantage by knowing each market he can immediately change his business strategy and tactics to benefit from his knowledge by correcting sourcing, advertising, manufacturing, even the human resource can be used in multiple locations and avoid duplication of manpower,

NAFTA\'s tomato war:

Answer 1: Yes fixing a floor price would be against the free trade agreement laid down in NAFTA

Answer 2: The demand for Mexican tomatoes has grown despite the floor pricing due to their good quality product and might also be assigned to the sympathy in favor of Mexican growers.

Answer 3: The consumer benefits primarily from the import of tomatoes from Mexico, they get a good quality product at a lower price. The farmer and middlemen in the USA suffer as they have to reduce prices accordingly to sell their product.