Global Dexterity

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Chapter 3

History and Geography: The Foundations of Culture

Learning Objectives

LO1 The importance of history and geography in understanding international markets

LO2 The effects of history on a country’s culture

LO3 How culture interprets events through its own eyes

LO4 How long-past U.S. international policies still affect customer attitudes abroad

LO5 The effect of geographic diversity on economic profiles of a country

LO6 Why marketers need to be responsive to the geography of a country

LO7 The economic effects of controlling population growth and aging populations

LO8 Communication infrastructures are an integral part of international commerce

Historical Perspective in Global Business

History helps define a nation’s “mission.”

how it perceives it neighbors

how it sees its place in the world

how it sees itself

Knowing the history of a nation helps in understanding:

attitudes about the role of government and business

the relations between managers and the managed

the sources of management authority

attitudes toward foreign corporations

History and Contemporary Behavior

Historical events between nations influence business and history.

Any nation’s business and political culture is shaped by history.

James Day Hodgson, former U.S. Labor Secretary and Ambassador to Japan, suggested that anyone doing business in another country should understand at least the encyclopedic version of the people’s past as a matter of politeness, if not persuasion.

China: Vigilant of Foreign Influence

First Opium War and the Treaty of Nanjing (1839–1842)

British traders forced a gateway into xenophobic China

Second Opium War (1857–1860)

British and French forces destroyed the summer palace in Beijing

Signaled more freedom for foreign traders

Allowed Christian evangelism throughout the country

Taiping Rebellion (1851–1864)

Loss of confidence in the Chinese government

Understanding Japanese Behavior

Japanese went through

seven centuries under the shogun feudal system

isolation before the arrival of Commodore Perry in 1853

threat of domination by colonial powers

rise of new social classes

humiliation of World War II

Confucian philosophy emphasizes the basic virtue of loyalty “of friend to friend, of wife to husband, of child to parent, of brother to brother, but, above all, of subject to lord,” that is, to country. A fundamental premise of Japanese ideology reflects the importance of cooperation for the collective good.

History Is Subjective

Subjective perception of its history is crucial in understanding a nation’s business and political culture.

In the case of U.S.–Mexico relations, perception of history presents two sides:

“Geography has made us neighbors, tradition has made us friends.”

–President John F. Kennedy

“Geography has made us closer, tradition has made us far apart.”–Mexicans

When the U.S. Marines sing with pride of their exploits “from the halls of Montezuma to the shores of Tripoli,” the Mexicans are reminded of how U.S. troops marched to the center of Mexico and extracted as tribute the area that is now known as Arizona, California, New Mexico, and Texas.

Exhibit 3.1 gives an overview of the expansion of U.S. territory from 1783.

Exhibit 3.1 Territorial Expansion of United States from 1783

Source: Oxford Atlas of the World, 18th ed., 2002. Reprinted with permission of Philip Maps.

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Manifest Destiny and the Monroe Doctrine

The basis of U.S. foreign policy in the 19th and 20th centuries

Manifest Destiny means that Americans were a chosen people ordained by God to create a model society.

Referred to the territorial expansion of the United States from the Atlantic to the Pacific

Justified the U.S. annexation of Texas, Oregon, New Mexico, and California, and U.S. involvement in Cuba, Alaska, Hawaii, and the Philippines

The Monroe Doctrine is the cornerstone of U.S. foreign policy, proclaiming that

No further European colonization in the New World

Abstention of the United States from European political affairs

Nonintervention by European governments in the governments of the Western Hemisphere

Roosevelt Corollary

An extension of the Monroe Doctrine stating that not only would the United States prohibit non-American intervention in Latin American affairs, but it would also police the area and guarantee that Latin American nations met their international obligations. Using this in:

1905, the Dominican Republic was forced to accept the appointment of an American economic adviser, who quickly became the financial director of the small state

1903, the Panama Canal Zone was acquired from Colombia

1906, Cuba was forced to accept the formation of a provisional government

Exhibit 3.2 highlights U.S. interventions in Latin America since 1945.

Source: Oxford Atlas of the World, 18th ed., 2002 Preprinted with permission of Philip Maps

Exhibit 3.2 U.S. Intervention in Latin American since 1945

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Geography and Global Markets

Geography

The study of Earth’s surface, climate, continents, countries, peoples, industries, and resources

Includes an understanding of how a society’s culture and economy are affected as a nation struggles to supply its people’s needs within the limits imposed by its physical makeup

Involves the study of:

Climate and topography

Nature and economic growth

Social responsibility and environmental management

Resources

Climate and Topography

Marketers need to be aware of a country’s climatic features that can affect the uses and functions of products and equipment.

Extremes in altitude, humidity, and temperature

Products that perform well in temperate zones may deteriorate rapidly or require special cooling or lubrication to function adequately in tropical zones

Within even a single national market, climate can be sufficiently diverse to require major adjustments

Different seasons between the northern and southern hemispheres also affect global strategies

Mountains, oceans, seas, jungles, and other geographical features can pose serious impediments to economic growth and trade

Marveling in Machu Picchu?

This advertisement provides the only time we have seen a human vomiting to market a product. The product advertised treats altitude sickness. The billboard appears in the Lima, Peru, airport, targeting tourists traveling from sea level to Cuzco and Machu Picchu (pictured in the scenic background). Cuzco, the old Inca capital, is at more than 11,000 feet in altitude, and many foreign tourists visiting there suffer this particular sort of tourista.

Geography, Nature, and Economic Growth

Climate and topography coupled with civil wars, poor environmental policies, and natural disasters push these countries further into economic stagnation.

Without irrigation and water management, droughts, floods, and soil erosion afflict them, often leading to creeping deserts.

Population increases, deforestation, and overgrazing intensify the impact of drought and lead to malnutrition and ill health.

Cyclones cannot be prevented, nor can inadequate rainfall, but means to control their effects are available.

Pollution in Angkor Wat

Two kinds of pollution in Cambodia. The monkey with the Coke can may seem kind of funny, until you think about it as an eyesore on the steps of the pristine Angkor Wat temple grounds. We’d also guess that caffeine, sugar, sharp-edged aluminum cans, and monkeys don’t mix too well. The land mines still in the ground from a decade’s past war are not funny. Here, Germany is helping clean up the deadly mess.

Social Responsibility and Environmental Management

Environmental protection is NOT an optional extra; it is an essential part of the complex process of doing business.

Global issue rather than national

Poses common threats to humankind and thus cannot be addressed by nations in isolation

Ways to stem the tide of pollution and to clean up decades of neglect are special concern to governments and businesses

Exhibit 3.3 shows a comparative analysis of several countries’ rates and pledges for the reduction of greenhouse-gas emissions.

Exhibit 3.3 A Comparison of Greenhouse-Gas Emission Rates and Pledges for Reductions

Source: EuroMonitor International, 2012; Intergovernmental Panel on Climate Change

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In São Paulo, motorists have a choice!

Here in São Paulo, Shell sells two kinds of fuel: alcohol made primarily from sugarcane and gasoline made from dirtier fossil fuels. Flexible-fuel engines in Brazilian cars can burn either kind of fuel or any mixture of the two. Although the price per liter is quite different, so is the mileage per liter. Brazilians make their choice of fuel based on the kind of driving they anticipate, city versus highway.

Resources

A nation’s demand for a particular mineral or energy source does not necessarily coincide with domestic supply.

In the underdeveloped world, human labor provides the preponderance of energy.

The principal supplements to human energy are

animals

wood

fossil fuel

nuclear power

to a lesser and more experimental extent the ocean’s tides, geothermal power, and the sun

Exhibit 3.4 shows Total World Energy Consumption by Region and Fuel Source

Sources: BP Statistics Review of World Energy 2014 and International Energy Outlook 2014, U.S. Department of Energy, both accessed 2015.

Exhibit 3.4

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The Good News

China is beginning to curtail its use of coal in favor of renewable resources as their demand is expected to peak before 2020.

United States and China recently agreed on targets to cut carbon emissions, spurring the global efforts for cutting greenhouse gases.

Countries in Asia and Africa have started using alternative resources for a more sustainable lifestyle.

Use of Alternative Resources (1 of 2)

This Masai woman of Tanzania put to good use both cow dung and urine in building her hut, pictured here in her family village (or boma). The semi-nomadic Masai graze their cattle during the day but enclose them within the acacia bush boma at night to protect them from predators.

Use of Alternative Resources (2 of 2)

Cattle dung, which is used both as farmyard manure and, dried into cakes, as household fuel, is being carried to a local market in India. India’s cattle produce enormous quantities of dung, which some studies suggest provide the equivalent of 10,000 megawatts of energy annually. The Chulha stove described at the beginning of this chapter is designed to safely burn the cattle dung pictured on this fellow’s head.

Global Population

Recent estimates put world population at more than 7 billion people

Expected to grow to about 9.5 billion by 2050

Almost all the projected growth will occur in less developed regions

1.2 billion jobs must be created to accommodate new entrants through 2025

Exhibit 3. 5 shows that 85 percent of the population will be concentrated in less developed regions by 2050.

Exhibit 3.5 World Population by Region, 2014–2050 (millions)

Source: World Population Prospects, The 2014 Revision, United Nations Economic and Social Affairs, http:// www.unpopulation.org, 2012. Reprinted with permission.

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The prerequisites to population control are:

Adequate incomes

Higher literacy levels

Education for women

Universal access to healthcare

Family planning

Improved nutrition

Basic change in cultural beliefs

Procreation is one of the most culturally sensitive, uncontrollable factors.

Controlling Population Growth

Religion and Family Planning

Religion plays a major role in attitudes about family size and family planning.

Many religions discourage or ban family planning and thus serve as a deterrent to control.

Case in Point – NIGERIA

The country has a strong Muslim tradition in the north and a strong Roman Catholic tradition in the east, and both faiths favor large families.

Most traditional religions in Africa encourage large families; in fact, the principal deity for many is the goddess of land and fertility.

Map 7 shows the different religions of the world. Some of those have beliefs hampering the population programs of many governments.

Rural/Urban Migration

1800

3.5% live in urban areas

2015

54% live in urban areas

Desire for greater access to sources of education, healthcare, and improved job opportunities

Tokyo has already overtaken Mexico City as the largest city on Earth, with a population of 38 million, a jump of almost 8 million since 1990

By 2030, 61% of the world’s population will live in urban areas

At least 27 cities will have populations of 10 million or more, 23 of which will be in less-developed regions

Population Decline and Aging

Birthrates in western Europe and Japan have been decreasing since the early or mid-1960s

More women are choosing career over children

Couples are deciding to remain childless

Global life expectancy has grown more in the past 50 years than over the previous 5,000 years

Today, the over-age-65 group is 14%, and by 2030 this group will reach 25% in 30 different countries

The number of “old old” will grow much faster than the “young old”

U.N. Projections for 2050

People Aged 65 to 84

From 400 million to 1.3 billion (3x increase)

85 years and over

From 26 million to 175 million (6x increase)

Over 100 years

From 135,000 to 2.2 million (16x increase)

Exhibit 3.6 illustrates the disparity in aging between more developed and less developed countries.

Source: Adapted from “There Will Soon Be Seven Billion People on the Planet,” National Geographic Magazine, January 2011. p. 51; “A Special Report on Japan,” The Economist, November 10, 2010, p. 4.

Exhibit 3.6 Age Density for World and Japan

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Worker Shortage and Immigration

Free flow of immigration will help ameliorate the dual problems of explosive population expansion in less developed countries and worker shortage in industrialized regions

To keep the worker-to-retiree ratio from falling:

Europe will need 1.4 billion immigrants over the next 50 years

Japan and the United States will need 600 million immigrants between now and 2050

Immigration will not help ameliorate the problem though

if political and cultural opposition to immigration cannot be overcome.

World Trade Routes

Trade routes link people and economies

Bind the world together

Minimize distance

Break natural barriers

Curtail lack of resources

Bridge fundamental differences

As long as one group of people in the world wants something that another group somewhere else has and there is a means of travel between the two, there is trade.

Trading Through the Years

1500 – establishment of trade routes between Europe, Asia, and the Americas

The Spanish empire founded the city of Manila in the Philippines to receive its silver-laden galleons bound for China.

On the return trip, the ship’s cargo of silk and other Chinese goods would be offloaded in Mexico, carried overland to the Atlantic, and put on Spanish ships to Spain.

The same trades routes remain important today and many Latin American countries have strong relationships with Europe, Asia, and the rest of the world.

Map 8 shows these traditional trade routes and the burgeoning trade linkage between the developing nations.

Land Sea Air Internet

Port of Corinth

During ancient times the Port of Corinth was a crucial trading center and port serving Greece and its neighbors.

The isthmus on which the city is built linked central Greece with the Peloponnesian Peninsula by land before the 6-kilometer canal pictured was completed in 1893.

In ancient times ships were unloaded in Corinth and literally dragged across the 6-kilometer isthmus and reloaded, all to save the weeks-long voyage by sail between the Aegean and Ionian Seas.

The Changing Climate

Climate change opens up a new trade route that may compete with the Panama Canal, cutting costly days off the travel time between Western Europe and Asia.

Here a German commercial vessel follows a Russian icebreaker through the proverbial Northwest Passage.

Map 2 shows the changing world climate and how it opens up new avenues for foreign trade.

Communication Links

Telegraph

Telephone

Television

Computer

Mobile Phones

Satellite

Internet

Communication has evolved. Each revolution in technology has had a profound effect on human conditions, economic growth, and the manner in which commerce functions.

Map 5 illustrates the importance of fiber optic cable and satellites in providing global communications.

Summary

A prospective international marketer should be reasonably familiar with the world, its climate, and topographic differences.

Geographic hurdles must be recognized as having a direct effect on marketing and the related activities of communications and distribution.

Many of the peculiarities of a country (i.e., peculiar to the foreigner) would be better understood and anticipated if its history and geography were studied more closely.

The study of history and geography is needed to provide the marketer with an understanding of why a country has developed as it has, rather than as a guide for adapting marketing plans.

History and geography are two of the environments of foreign marketing that should be thoroughly understood and that must be included in foreign marketing plans to a degree commensurate with their influence on marketing effort.