Global Vision through Marketing Research

3Chapter History and Geography: THE FOUNDATIONS OF CULTURE

3Chapter

CHAPTER LEARNING OBJECTIVES

What you should learn from Chapter 3:

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

CHAPTER OUTLINE

Global Perspective: Helping 400 Million People Give up Smoking

Historical Perspective in Global Business History and Contemporary Behavior

History Is Subjective

Manifest Destiny and the Monroe Doctrine

Geography and Global Markets Climate and Topography

Geography, Nature, and Economic Growth

Social Responsibility and Environmental Management

Resources

Dynamics of Global Population Trends Controlling Population Growth

Rural/Urban Migration

Population Decline and Aging

Worker Shortage and Immigration

World Trade Routes

Communication Links

cat29974_ch03_052-093.indd 52cat29974_ch03_052-093.indd 52 24/08/12 8:03 PM24/08/12 8:03 PM

PART TWO

Global Perspective

HELPING 400 MILLION PEOPLE GIVE UP SMOKING More than 1.6 million people die annually due to smoke inhalation from indoor, wood-burning stoves. Philips De- sign came up with an idea to tackle the problem, as part of “Philanthropy by Design,” a program that looks to promote social empowerment through knowledge sharing, creativity, and codesign. An excellent example of what can be achieved by such an approach is the Chulha smokeless stove. Th e story of the Chulha eff ectively began in September 2005, when the Philips Design global community came together in Eindhoven, the Netherlands, for a workshop entitled “A Sustainable De- sign Vision—Design for Sense & Simplicity.” Approximately 80 design ideas emerged. Aft er the workshop, these ideas were fi ltered by criteria, such as compliance with Philips’s corporate strategy, social investment policy alignment, tech- nological feasibility, and Millennium Development Goals fi t (see www.un.org/millenniumgoals). In the end, the proposal deemed most appropriate was a smokeless wood-burning stove, initially intended for rural and semi-urban India. “Th is idea seemed to have the best chance of helping the socially disadvantaged through le- veraging our expertise and capabilities without involving sophisticated and expensive technologies,” says Simona Rocchi, Director of Sustainable Design at Philips Design in Eindhoven. Th e stove would be simple to use and main- tain, locally produced and distributed, relatively cheap, eas- ily made, and able to signifi cantly reduce indoor pollution. Th e last point is a major issue. Respiratory illness aff ects the health of the huge number of people living in developing so- cieties who still cook indoors with biomass fuels (e.g., wood, dung). Over the course of a fi ve-month period, a three-person design team from Philips Design in Pune, India, turned the

initial product idea into two fi eld-tested prototypes. Th is collaborative eff ort involved local nongovernmental orga- nizations (NGOs), entrepreneurs, self-help groups, and a few families. It soon became clear from the research that any successful stove would have to accept diff erent biomass fuels; be widely available in diff erent seasons and locations; adapt to people’s needs when cooking chapatti (bread), steaming rice, boiling water; and be able to hold diff erent, non-standard cooking vessels. A concept defi nition workshop followed with various relevant stakeholders (local NGOs, potential users, and entrepreneurs). Th e main problems associated with the stoves were discussed, along with the design proposals for the Chulha. “For example, people liked the idea of modu- larity and the steamer integrated into the stove,” says Un- mesh Kulkarni, Senior Design/Account Manager at Philips Design, Pune. At the end of the workshop, key concept fea- tures were pinpointed and then depicted in detailed design sketches. Two stoves have since been developed: Th e Sampoorna is an all-in-one unit intended for cooking/boiling with an integrated steamer for preparing rice, lentils, and so on. Th e Saral is a modular system with a basic cooking block that al- lows for the addition of various other accessories. It has been estimated that compared with traditional cooking fi res, the Sampoorna and Saral reduce indoor smoke pollution by up to 90 percent. Th e Sampoorna will cost roughly €8; the Saral €5. “We estimate that approximately 50 percent of the 700 to 800 million people living in rural and semi-rural areas in India who currently cook using biomass fuels could aff ord the stoves at this price,” says Kulkarni.

Source: With permission, http://www.design.philips.com/about/design/ designnews/newvaluebydesign/helping400million_people_give_up_ smoking.page.

cat29974_ch03_052-093.indd 53cat29974_ch03_052-093.indd 53 24/08/12 8:03 PM24/08/12 8:03 PM

54 Part 2 The Cultural Environment of Global Markets

1000 First millennium ends; Y1K problem overblown— widespread fear of the end of the world proved unfounded 1000 Vikings settle Newfoundland 1004 Chinese unity crumbles with treaty between the Song and the Liao, giving the Liao full autonomy; China will remain fractured until the Mongol invasion in the 13th century (see 1206)

1025 Navy of Cholas in southern India crushes the empire of Srivijaya in modern Myanmar to protect its trade with China 1054 Italy and Egypt formalize commercial relations 1066 William the Conqueror is victorious over Harold II in the Battle of Hastings, establishing Norman rule in England and forever linking the country with the continent

1081 Venice and Byzantium conclude a commercial treaty (renewed in 1126) 1095 First of the crusades begins; Pope Urban II calls on Europe’s noblemen to help the Byzantines repel the Turks; the crusaders’ travel, stories, and goods acquired along the way help increase trade across Europe and with the Mediter- ranean and Asia; eighth major

crusade ends—Syria expels the Christians 1100 Japan begins to isolate itself from the rest of the world, not really opening up again until the mid-19th century (see 1858) 1100 China invents the mariner’s compass and becomes a force in trade; wide- spread use of paper money also helps increase trade and prosperity

Here we begin the discussion of the Cultural Environment of Global Markets. Culture can be defined as a society’s accepted basis for responding to external and internal events. To understand fully a society’s actions and its points of view, you must have an appreciation for the influence of historical events and the geographical uniqueness to which a culture has had to adapt. To interpret behavior and attitudes in a particular culture or country, a marketer must have some idea of a country’s history and geography.

Th e goal of this chapter is to introduce the reader to the impact of history and geography on the marketing process. Th e infl uence of history on behavior and attitudes and the infl uence of geography on markets, trade, and environmental issues are examined in particular.

LO1 The importance of history and geography in understanding international markets

Historical Perspective in Global Business History helps defi ne a nation’s “mission,” how it perceives its neighbors, how it sees its place in the world, and how it sees itself. Insights into the history of a country are important for understanding attitudes about the role of government and business, the relations between managers and the managed, the sources of management authority, and attitudes toward foreign corporations.

To understand, explain, and appreciate a people’s image of itself and the attitudes and unconscious fears that are refl ected in its view of foreign cultures, it is necessary to study the culture as it is now as well as to understand the culture as it was—that is, a country’s history. Finally, we must learn that history also infl uences business decisions such as foreign direct investments,1 market entry, and even personnel choices.

Most Americans know the most about European history, even though our major trading partners are now to our west and south. Circa 2008, China became a hot topic in the United States. It was back in 1776 as well. In a sense, American history really begins with China. Re- call the Boston Tea Party: Our complaint then was the British tax and, more important, the British prohibition against Yankee traders dealing directly with merchants in Canton. So it is worthwhile to dwell for a few moments on a couple of prominent points in the history of the fast burgeoning market that is modern-day China. James Day Hodgson, former U.S. Labor Secretary and Ambassador to Japan, suggests that anyone doing business in another country should understand at least the encyclopedic version of the people’s past as a matter of polite- ness, if not persuasion. 2 As important examples we off er a few perhaps surprising glimpses of the past that continues to infl uence U.S.–Asia trade relations even today.

First Opium War and the Treaty of Nanjing (1839–1842). During the early 1800s, the British taste for tea was creating a huge trade defi cit with China. Silver bul- lion was fl owing fast in an easterly direction. Of course, other goods were being traded, too. Exports from China also included sugar, silk, mother-of-pearl, paper, camphor, cassia, cop- per and alum, lacquer ware, rhubarb, various oils, bamboo, and porcelain. Th e British “bar- barians” returned cotton and woolen textiles, iron, tin, lead, carnelian, diamonds, pepper,

History and Contemporary

Behavior

LO2 The effects of history on a country’s culture

1Shige Makino and Eric W.K. Tsang, “Historical Ties and Foreign Direct Investment,” Journal of International Business Studies 42 (2011), pp. 545–57. 2James Day Hodgson, Yoshihiro Sano, and John L. Graham, Doing Business in the New Japan, Succeeding in America’s Richest Foreign Market (Latham, MD: Rowman & Littlefield, 2008).

cat29974_ch03_052-093.indd 54cat29974_ch03_052-093.indd 54 24/08/12 8:03 PM24/08/12 8:03 PM

Chapter 3 History and Geography: The Foundations of Culture 55

1100 Inca Empire in the Andes begins to develop, eventually encompassing about 12 million people until its destruction by the Spanish in 1553; cities specialize in certain farming and trade with others for what they don’t make 1132 Corporate towns in France grant charters by Henry I to protect commerce

1189 German merchants con- clude treaty with Novgorod in Russia 1200 Islam is introduced by spice traders to Southeast Asia 1200 More than 60,000 Italian merchants work and live in Constantinople 1206 Genghis Khan becomes the Great Khan, controlling most of northern China; after his death in 1227, the Khan

clan conquers much of Asia by midcentury and promotes trade and commerce, reviving the ancient Silk Road that linked Chinese and Western traders 1215 The Magna Carta, a pact between the English king and his subjects, is signed by King John, who becomes subject to the rule of law

1229 German merchants sign trade treaty with the Prince of Smolensk in Russia 1252 First gold coins issued in the West since the fall of Rome, in Florence 1269 England institutes toll roads 1270 Venetian Marco Polo and his father travel through Asia and the Middle East, becoming the first European

betel nuts, pearls, watches and clocks, coral and amber beads, birds’ nests and shark fi ns, and foodstuff s such as fi sh and rice. But the tea-for-silver swap dominated the equation.

Th en came the English East India Company’s epiphany: opium. Easy to ship, high value to volume and weight ratios, and addicting to customers—what a great product! At the time, the best opium came from British India, and once the full fl ow began, the tea- caused trade defi cit disappeared fast. Th e Emperor complained and issued edicts, but the opium trade burgeoned. One of the taller skyscrapers in Hong Kong today is the Jardine- Matheson Trading House. 3 Its circular windows are reminiscent of the portholes of its clipper-ship beginnings in the opium trade.

In 1836 some high-ranking Chinese offi cials advocated legalizing opium. Th e foreign suppliers boosted production and shipments in anticipation of exploding sales. Th en the Emperor went the opposite direction and ordered the destruction of the inventories in Canton (now known as Guangzhou). By 1839 the trade was dead. Th e British responded by sinking junks in the Pearl River and blockading all Chinese ports.

Th e “magically accurate” British cannon pointed at Nanjing yielded negotiations there in 1842. Th e Chinese ceded Hong Kong and $21 million pounds to the British. Ports at Xiamen, Fuzhou, Ningbo, and Shanghai were opened to trade and settlement by foreigners. Hong Kong thus became the gateway to a xenophobic China, particularly for the past 50 years. Perhaps most important, China recognized for the fi rst time its loss of great power status.

Ultimately the Opium War became about foreign access to Chinese trade, and the treaty of Nanjing really didn’t settle the issue. A second Opium War was fought between 1857 and 1860. In that imbroglio, British and French forces combined to destroy the summer palace in Beijing. Such new humiliations yielded more freedoms for foreign traders; notably, the treaty specifi cally included provisions allowing Christian evangelism throughout the realm.

Taiping Rebellion (1851–1864). One consequence of the humiliation at the hands of foreigners was a loss of confi dence in the Chinese government. Th e resulting dis- order came to a head in Guangxi, the southernmost province of the Empire. Th e leader of the uprising was a peasant who grew up near Guangzhou. Hong Xiuquan aspired to be a civil servant but failed the required Confucian teachings–based exam. When in Guangzhou for his second try at the exam, he came in contact with Protestant Western missionaries and later began to have visions of God.

Aft er fl unking the exam for a fourth time in 1843, he began to evangelize, presenting himself as Christ’s brother. In the next seven years, he attracted 10,000 followers. In 1851, he was crowned by his followers as the “Heavenly King” of the “Heavenly Kingdom of Peace.” Despite their adopted label, they revolted, cut off their pigtails in defi ance of the ruling Manchus, and began to march north. With the fervor of the religious zealots they were, they fought their way through the capital at Nanjing and almost to Tianjing by 1855.

But then things started to unravel. Chinese opposition forces organized. Because for- eigners appreciated neither Hong’s interpretation of the scriptures, nor his 88 concubines,

3In a very interesting paper, the authors argue that choices made by Jardine’s and Swire’s (trading houses) in Asia today, for example, are an outgrowth of strategic choices first in evidence more than a century ago! See Geoffrey Jones and Tarun Khanna, “Bringing History (Back) into International Business,” Journal of International Business Studies 37 (2006), pp. 453–68.

cat29974_ch03_052-093.indd 55cat29974_ch03_052-093.indd 55 24/08/12 8:03 PM24/08/12 8:03 PM

56 Part 2 The Cultural Environment of Global Markets

traders to establish extensive links with the region 1279 Kublai Khan unites China and creates the Yuan (Origin) dynasty; by the time he dies in 1294, he has created a unified Mongol Empire extending from China to eastern Europe 1300 The early stirrings of the Renaissance begin in Europe as people are exposed to other cul- tures, primarily through merchants and trade; trade fairs are held in numerous European cities

1315 A great famine hits Europe, lasting two years, more widespread and longer than any before 1348 The Plague (the Black Death) kills one-fourth to one-third of the population in Europe (25 mil- lion people) in just three years, disrupting trade as cities try to prevent the spread of the disease by restricting visitors; it likely started in Asia in the 1320s; massive inflation took hold, because goods could only be obtained locally;

serfs were in high demand and began moving to higher wage pay- ers, forever altering Europe’s labor landscape 1358 German Hanseatic League officially forms by the Hansa companies of merchants for trade and mutual protection, eventually encompassing more than 70 cities and lasting nearly 300 years 1375 Timur Lang the Turk conquers lands from Moscow to Delhi

1381 English rioters kill foreign Flemish traders as part of the 100,000-strong peasant rebellion against Richard II, which was led by Wat Tyler in a failed attempt to throw off the yoke of feudalism 1392 England prohibits foreigners from retailing goods in the country 1400 Koreans develop movable-type printing (see 1450)

nor his attacks on Shanghai, they formed another army against him. Hong took his own life just before the fi nal defeat and the recapture of Nanjing.

Estimates of the death toll from the Taiping Rebellion stand between 20 and 40 million people. We repeat: 20–40 million Chinese lives were lost. By contrast, “only” 2 million were killed in the 1949 Communist Revolution. Th e Taiping Rebellion is the single most horrifi c civil war in the history of the world. Surely Hong Xiuquan was insane. Other rebellions also occurred in China during this time; the Muslim one in the northwest is most notable (1862–78). However, based on these events in the mid-1800s, it is easy to see why the Chinese leadership has remained wary of foreign infl uences in general, and religious move- ments in particular, even today. 4

History and Japan. Trade with Japan was a hot topic in the United States in both the 1850s and the 1980s. Likewise, unless you have a historical sense of the many changes that have buff eted Japan—seven centuries under the shogun feudal system, the isolation before the arrival of Commodore Perry in 1853, the threat of domination by colonial pow- ers, the rise of new social classes, Western infl uences, the humiliation of World War II, and involvement in the international community—you will have diffi culty fully understanding its contemporary behavior. Why do the Japanese have such strong loyalty toward their com- panies? Why is the loyalty found among participants in the Japanese distribution systems so diffi cult for an outsider to develop? Why are decisions made by consensus? Answers to such questions can be explained in part by Japanese history (and geography).

Loyalty to family, to country, to company, and to social groups and the strong drive to cooperate, to work together for a common cause, permeate many facets of Japanese behav- ior and have historical roots that date back thousands of years. Historically, loyalty and ser- vice, a sense of responsibility, and respect for discipline, training, and artistry were stressed to maintain stability and order. Confucian philosophy , taught throughout Japan’s his- tory, 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 refl ects the importance of cooperation for the collective good. Japanese achieve consensus by agreeing that all will unite against outside pressures that threaten the collective good. A historical perspective gives the foreigner in Japan a basis on which to begin developing cultural sensitivity and a better understanding of contemporary Japanese behavior.

History is important in understanding why a country behaves as it does, but history from whose viewpoint? Historical events always are viewed from one’s own biases and self- reference criteria (SRC), and thus, what is recorded by one historian may not be what an- other records, especially if the historians are from diff erent cultures. Historians traditionally try to be objective, but few can help fi ltering events through their own cultural biases.

Our perspective not only infl uences our view of history but also subtly infl uences our view of many other matters. For example, maps of the world sold in the United States

LO3 How culture interprets events through its own eyes

History Is Subjective

4N. Mark Lam and John L. Graham, Doing Business in China Now, the World’s Most Dynamic Marketplace (New York: McGraw-Hill, 2007).

cat29974_ch03_052-093.indd 56cat29974_ch03_052-093.indd 56 24/08/12 8:03 PM24/08/12 8:03 PM

Chapter 3 History and Geography: The Foundations of Culture 57

1404 Chinese prohibit private trading in foreign countries, but foreign ships may trade in China with official permission 1415 Chinese begin significant trading with Africa through government expeditions—some believe they sailed to North America as well in 1421 1425 Hanseatic city of Brugge becomes the first Atlantic sea- port to be a major trading center 1427 Aztec Empire is created by Itzcotl; it will encompass

about 6 million people before its destruction in 1519 1430 Portuguese Prince Henry the Navigator explores west African coast to promote trade 1441 Mayan Empire collapses as the city of Mayapán is de- stroyed in a revolt 1450 Renaissance takes hold in Florence, its traditional birthplace 1450 Gutenberg Bible is first book printed with movable type; the ability to mass produce

books creates an information revolution 1453 Byzantine Empire is destroyed as Muhammad II sacks Constantinople (renaming it Istanbul) 1464 French royal mail service established by Louis XI 1470 Early trademark piracy committed by Persians who copy mass-produced Chinese porcelain to capitalize on its popu- larity in foreign countries

1479 Under the Treaty of Constantinople, in exchange for trading rights in the Black Sea, Venice agrees to pay tribute to the Ottoman Empire 1482 English organize a postal system that features fresh relays of horses every 20 miles 1488 Bartolomeu Dias sails around the coast of Africa; this, along with the voyages of Christopher Columbus, ushers in the era of sea travel

generally show the United States at the center, whereas maps in Britain show Britain at the center, and so on for other nations.

A crucial element in understanding any nation’s business and political culture is the subjective perception of its history. Why do Mexicans have a love–hate relationship with the United States? Why were Mexicans required to have majority ownership in most foreign investments until recently? Why did dictator General Porfírio Díaz lament, “Poor Mexico, so far from God, so near the United States”? Why? Because Mexicans see the United States as a threat to their political, economic, and cultural sovereignty.

Most citizens of the United States are mystifi ed by such feelings. Aft er all, the United States has always been Mexico’s good neighbor. Most would agree with President John F. Kennedy’s proclamation during a visit to Mexico that “Geography has made us neighbors, tradition has made us friends.” North Americans may be surprised to learn that most Mexicans “felt it more accurate to say ‘Geography has made us closer, tradition has made us far apart.’ ” 5

Citizens of the United States feel they have been good neighbors. Th ey see the Monroe Doctrine as protection for Latin America from European colonization and the interven- tion of Europe in the governments of the Western Hemisphere. Latin Americans, in con- trast, tend to see the Monroe Doctrine as an off ensive expression of U.S. infl uence in Latin America. To put it another way, “Europe keep your hands off —Latin America is only for the United States,” an attitude perhaps typifi ed by former U.S. President Ulysses S. Grant, who, in a speech in Mexico in 1880, described Mexico as a “magnifi cent mine” that lay waiting south of the border for North American interests.

United States Marines sing with pride of their exploits “from the halls of Montezuma to the shores of Tripoli.” To the Mexican, the exploit to which the “halls of Montezuma” refers is remembered as U.S. troops marching all the way to the center of Mexico City and extract- ing as tribute 890,000 square miles that became Arizona, California, New Mexico, and Texas (see Exhibit 3.1 ). A prominent monument at the entrance of Chapultepec Park recognizes Los Niños Heroes (the boy heroes), who resisted U.S. troops, wrapped themselves in Mexican fl ags, and jumped to their deaths rather than surrender. Mexicans recount the heroism of Los Niños Heroes 6 and the loss of Mexican territory to the United States every September 13, when the president of Mexico, the cabinet, and the diplomatic corps assemble at the Mexico City fortress to recall the defeat that led to the “ despojo territorial ” (territorial plunder).

Th e Mexican Revolution, which overthrew the dictator Díaz and launched the modern Mexican state, is particularly remembered for the expulsion of foreigners—most notably North American businessmen who were the most visible of the wealthy and infl uential entrepreneurs in Mexico.

6When the United Nations recommended that all countries set aside a single day each year to honor children, Mexico designated April 30 as “Dia de Los Niños.” Interestingly, this holiday often coincides with Saint Patrick’s Day celebrations, which include recognition of the San Patricios, the Irish-American battalion that fought with the Mexicans in the Mexican–American War. See Carol Sowers, “El Dia de Los Niños Adds International Touch to Celebration,” Arizona Republic , April 29, 2005.

5For an insightful review of some of the issues that have aff ected relations between the United States and Mexico, see John Skirius, “Railroad, Oil and Other Foreign Interest in the Mexican Revolution, 1911–1914,” Journal of Latin American Studies , February 2003, p. 25.

cat29974_ch03_052-093.indd 57cat29974_ch03_052-093.indd 57 24/08/12 8:03 PM24/08/12 8:03 PM

58 Part 2 The Cultural Environment of Global Markets

Manifest Destiny and the Monroe Doctrine were accepted as the basis for U.S. foreign policy during much of the 19th and 20th centuries. 7 Manifest Destiny, in its broadest inter- pretation, meant that Americans were a chosen people ordained by God to create a model society. More specifi cally, it referred to the territorial expansion of the United States from the Atlantic to the Pacifi c. Th e idea of Manifest Destiny was used to justify the U.S. annexa- tion of Texas, Oregon, New Mexico, and California and, later, U.S. involvement in Cuba, Alaska, Hawaii, and the Philippines. Exhibit 3.1 illustrates when and by what means the present United States was acquired.

Th e Monroe Doctrine , a cornerstone of early U.S. foreign policy, was enunciated by President James Monroe in a public statement proclaiming three basic dicta: no further European colonization in the New World, abstention of the United States from European political aff airs, and nonintervention by European governments in the governments of the Western Hemisphere.

Manifest Destiny and the Monroe

Doctrine

7Some say even into the 21st century. See “Manifest Destiny Warmed Up?” The Economist , August 14, 2003. Of course, others disagree. See Joseph Contreras, “Roll Over Monroe: The Influence the United States Once Claimed as a Divine Right in Latin America is Slipping away Fast,” Newsweek International , December 10, 2007; Daniel Larison, “Gingrich the Historian and the Monroe Doctrine,” The Conservative American, January 26, 2012.

1492 Christopher Columbus “discovers” the New World 1494 Portugal and Spain divide the unexplored world between them with the Treaty of Tordesillas 1500 Rise of mercantilism, the accumulation of wealth by the state to increase power, in west- ern Europe; states without gold or silver mines try to control trade to maintain a surplus and accumu- late gold and silver; Englishman Thomas Mun was one of the great proponents in 1600, who realized that the overall balance

of trade was the important factor, not whether each individual trade resulted in a surplus 1500 Slave trade becomes a major component of commerce 1504 Regular postal service established among Vienna, Brus- sels, and Madrid 1520 First chocolate brought from Mexico to Spain 1521 Mexico is conquered by Hernán Cortés after Aztec ruler Montezuma is accidentally killed 1522 Magellan’s expedition completes its three-year sail

around the world; it is the first successful circumnavigation 1531 Antwerp stock exchange is the first exchange to move into its own building, signifying its importance in financing commercial enterprises through- out Europe and the rising im- portance of private trade and commerce; Antwerp emerges as a trading capital 1532 Brazil is colonized by the Portuguese 1534 English break from the Catholic Church, ending its

dominance of politics and trade throughout Europe, as Henry VIII creates the Church of England 1553 South American Incan Empire ends with conquest by Spanish; the Incas had created an extensive area of trade, com- plete with an infrastructure of roads and canals 1555 Tobacco trade begins after its introduction to Europe by Spanish and Portuguese traders 1557 Spanish crown suffers first of numerous bankruptcies,

The Monumento de Los Niños Heroes honors six young cadets who, during the Mexican– American War of 1847, chose death over surrender. The Mexican–American War is important in Mexican history and helps explain, in part, Mexico’s love–hate relationship with the United States. (© Dave G. Houser/ Corbis)

cat29974_ch03_052-093.indd 58cat29974_ch03_052-093.indd 58 24/08/12 8:03 PM24/08/12 8:03 PM

Chapter 3 History and Geography: The Foundations of Culture 59

Aft er 1870, interpretation of the Monroe Doctrine became increasingly broad. In 1881, its principles were evoked in discussing the development of a canal across the Isthmus of Panama. Th eodore Roosevelt applied the Monroe Doctrine with an extension that became known as the Roosevelt Corollary . Th e corollary stated that not only would the United States prohibit non-American intervention in Latin American aff airs, but it would also police the area and guarantee that Latin American nations met their international obligations. Th e corollary sanctioning American intervention was applied in 1905 when Roosevelt forced the Dominican Republic to accept the appointment of an American economic adviser, who quickly became the fi nancial director of the small state. It was also used in the acquisi- tion of the Panama Canal Zone from Colombia in 1903 and the formation of a provisional government in Cuba in 1906.

Th e manner in which the United States acquired the land for the Panama Canal Zone typifi es the Roosevelt Corollary—whatever is good for the United States is justifi able. 8

discouraging cross-border lending 1561 Via Dutch traders, tulips come to Europe from Near East for first time 1564 William Shakespeare is born; many of his plays are stories of merchant traders 1567 Typhoid fever, imported from Europe, kills two million Indians in South America 1588 Spanish Armada de- feated by British, heralding Brit- ain’s emergence as the world’s greatest naval power; this power

will enable Britain to colonize many regions of the globe and lead to its becoming the world’s commercially dominant power for the next 300 years 1596 First flush toilet is de- veloped for Britain’s Queen Elizabeth I 1597 Holy Roman Empire expels English merchants in re- taliation for English treatment of Hanseatic League 1600 Potatoes are brought from South America to Europe, where they quickly spread to the rest of

world and become a staple of agricultural production 1600 Japan begins trading silver for foreign goods 1600 Britain’s Queen Elizabeth I grants charter to the East India Company, which will dominate trade with the East until its de- mise in 1857 1601 France makes postal agreements with neighboring states 1602 Dutch charter their own East India Company, which will

dominate the South Asian coffee and spice trade 1607 British colony of Jamestown built 1609 Dutch begin fur trade through Manhattan 1611 Japan gives Dutch limited permission to trade 1612 British East India Company builds its first factory in India 1620 Mayflower sails for the New World

Exhibit 3.1 Territorial Expansion of United States from 1783

The United States expanded westward to the Pacific through a series of financial deals, negotiated settlements, and forcible annexations. The acquisition of territory from Mexico began with the Battle of San Jacinto in 1836, when Texas staged a successful revolt against the rule of Mexico and became The Republic of Texas— later to join the Union in 1845. The Mexican War (1846–1848) resulted in Mexico ceding California and a large part of the West to the United States.

Source: Cartography © Philip’s. Reprinted with permission of Octopus Publishing Group

The United States 1783 Louisiana Purchase 1803 West Florida annexation 1810, 1813 East Florida ceded by Spain 1819 Acquired from Britain 1818, 1842

Texas annexation 1845 Oregon Country 1846 Ceded by Mexico 1848 Gadsden Purchase 1853 Date of admission as state

Territorial Expansion from 1783

1837

PACIFIC OCEAN

Gulf of Mexico

ATLANTIC OCEAN

MEXICO

Florida 1845

CANADA Washington

1889

Oregon 1859

California 1850

Nevada 1864

Idaho 1890

Montana 1889

Wyoming 1890

Utah 1896 Colorado

1876

New Mexico 1912

Arizona 1912

North Dakota 1889

(1818)

South Dakota 1889

Nebraska 1867

Kansas 1861

Oklahoma 1907

Texas 1845

Minnesota 1858

Iowa 1846

Missouri 1821

Arkansas 1836

Louisiana 1812

Wisconsin 1848

Illinois 1818

Indiana 1816

Kentucky 1792

Tennessee 1796

Mississippi 1817

Alabama 1819 Georgia

South Carolina

North Carolina

Virginia

West Virginia

1863

Ohio 1803

Pennsylvania

MD DE

NJ

CT RI

MA New York

VT NH

Maine 1820

(1842)

Michigan 1837

8For an interesting discussion of how past U.S. foreign interventions affect attitudes about U.S. involvement in Iraq, see “Anti-Americanism: The View from Abroad,” The Economist, February 17, 2005.

cat29974_ch03_052-093.indd 59cat29974_ch03_052-093.indd 59 24/08/12 8:03 PM24/08/12 8:03 PM

60 Part 2 The Cultural Environment of Global Markets

1620 Father of the Scientific Revolution, Francis Bacon, publishes Novum Organum, promoting inductive reasoning through experimentation and observation 1625 Dutch jurist Hugo Grotius, sometimes called the father of in- ternational law, publishes On the Laws of War and Peace 1636 Harvard University founded 1637 Dutch “tulip mania” results in history’s first boom– bust market crash

1651 English pass first of so- called Navigation Acts to restrict Dutch trade by forcing colonies to trade only with English ships 1654 Spain and Germany develop hereditary land rights, a concept that will help lead to the creation of great wealth in single families and thus to the development of private commer- cial empires 1687 Apple falling on Newton’s head leads to his pub- lication of the law of gravity

1694 The Bank of England is established; it offers loans to private individuals at 8 percent interest 1698 First steam engine is invented 1719 French consolidate their trade in Asia into one company, the French East India Company; rival British East India Com- pany maintains its grip on the region’s trade, however, and the French revert to individual company trading 60 years later

1725 Rise of Physiocrats, fol- lowers of the economic philoso- pher François Quesnay, who believed that production, not trade, created wealth and that natural law should rule, which meant producers should be able to exchange goods freely; move- ment influenced Adam Smith’s ideas promoting free trade 1740 Maria Theresa becomes empress of the Holy Roman Em- pire (until 1780); she ends serf- dom and strengthens the power of the state

According to U.S. history, these Latin American adventures were a justifi able part of our foreign policy; to Latin Americans, they were unwelcome intrusions in Latin American af- fairs. Th is perspective has been constantly reinforced by U.S. intervention in Latin America since 1945 (see Exhibit 3.2 ). Th e way historical events are recorded and interpreted in one culture can diff er substantially from the way those same events are recorded and inter- preted in another. From the U.S. view, each of the interventions illustrated in Exhibit  3.2 was justifi ed. A comparison of histories goes a long way in explaining the diff erences in outlooks and behavior of people on both sides of the border. Many Mexicans believe that their “good neighbor” to the north is not reluctant to throw its weight around when it wants something. Suspicions that self-interest is the primary motivation for good relations with Mexico abound.

History viewed from a Latin American perspective explains how a national leader, under adverse economic conditions, can point a fi nger at the United States or a U.S. multinational corporation and evoke a special emotional, popular reaction to divert attention away from

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

Exhibit 3.2 U.S. Intervention in Latin America Since 1945

PACIFIC OCEAN

ATLANTIC OCEAN

ATLANTIC OCEAN

ARGENTINA

CHILE

URUGUAY

BOLIVIA

BRAZIL PERU

ECUADOR

COLOMBIA

VENEZUELA

GUYANA

GRENADA

SURINAME

PARAGUAY

FRENCH GUIANAPANAMA

COSTA RICA NICARAGUA

EL SALVADOR

HONDURAS

GUATEMALA

MEXICO HAITICUBA DOMINICAN REPUBLIC

1

2

5

3 6

7 8

9

10

11 12

4 Mexico City

Havana

Caracas

Quito

Lima Brasilia

Buenos Aires

Santiago

�

� �

�

�

��

� � �

�

�

�

�

Direct military action by USA Economic and political intervention by USA Direct military action by USSR

US Intervention in Latin America since 1945 �

�

�

1 USA attempts to thwart election of Perón (1946)

2 Popular Revolution neutralized by US economic pressure (1952)

3 CIA-organized invasion overthrows Arbenz (1954) following expropriation of United Fruit Company lands

4 Nationalist revolution (1959) and alliance with USSR (1960). USA declares economic embargo, and CIA organizes failed Bay of Pigs invasion (1961). Cuban Missile Crisis (1962).

5 Covert intervention by USA against elected Marxist government of Popular Unity (1970–73)

6 Military intervention to suppress possible communist influence (1965)

7 Revolution (1979): USA funds counter-revolutionary movement (1980s)

8 Covert intervention by USA to defeat left-wing guerrillas (1980–88)

9 US invasion to restore stable government (1983)

10 US invasion to arrest President Noriega on charges of drug trafficking (1989)

11 "Negotiated" US invasion to restore democracy (1994)

12 North American Free Trade Agreement (1994)

Source: Cartography © Philip’s. Reprinted with permission of Octopus Publishing Group

cat29974_ch03_052-093.indd 60cat29974_ch03_052-093.indd 60 24/08/12 8:03 PM24/08/12 8:03 PM

Chapter 3 History and Geography: The Foundations of Culture 61

the government in power. As a case in point, aft er the U.S. House of Representatives voted to censure Mexico for drug corruption, President Ernesto Zedillo came under pressure to take a hard stand with Washington. He used the anniversary of Mexico’s 1938 expropriation of the oil industry from foreign companies to launch a strong nationalist attack. He praised the state oil monopoly Pemex as a “symbol of our historical struggles for sovereignty.” Union members cheered him on, waving a huge banner that read: “In 1938 Mexico was ‘de- certifi ed’ because it expropriated its oil and it won—today we were decertifi ed for defending

1748 First modern, scien- tifically drawn map, the Carte Géométrique de la France, com- prising 182 sheets, was autho- rized and subsequently drawn by the French Academy; Louis XV proclaimed that the new map, with more accurate data, lost more territory than his wars of conquest had gained 1750 Benjamin Franklin shows that lightning is a form of elec- tricity by conducting it through the wet string of a kite

1750 Industrial Revolution begins and takes off with the manufacture, in 1780, of the steam engine to drive machines—increased productiv- ity and consumption follow (as do poor working conditions and increased hardships for workers) 1760 Chinese begin strict reg- ulation of foreign trade to last nearly a century when they per- mit Europeans to do business only in a small area outside Canton and only with ap- pointed Chinese traders

1764 British victories in India begin Britain’s dominance of India, Eastern trade, and trade routes 1764 British begin numbering houses, making mail delivery more efficient and providing the means for the development of direct mail merchants centuries later 1773 Boston Tea Party symbolizes start of American Revolution; impetus comes from American merchants trying

to take control of distribution of goods that were being controlled exclusively by Britain 1776 American Declaration of Independence proclaims the colonies’ rights to determine their own destiny, particularly their own economic destiny 1776 Theory of modern capi- talism and free trade expressed by Adam Smith in The Wealth of Nations; he theorized that countries would only produce and export goods that they were able to produce more cheaply

Adapting to the local culture is an important aspect of strategy for many products. Understanding a country’s his- tory helps achieve that goal. Microsoft has nine different editions reflecting local “history” to be sure that its Encarta multimedia encyclopedia on CD-ROM does not contain cultural blunders. As a consequence, it often reflects dif- ferent and sometimes contradictory understandings of the same historical events. For example, who invented the telephone? In the U.S., U.K., and German editions, it is Alexander Graham Bell, but ask the question in the Italian edition, and your answer is Antonio Meucci, an Italian- American candle maker whom Italians believe beat Bell by five years. For electric light bulbs, it is Thomas Alva Edison in the United States, but in the United Kingdom, it is the British inventor Joseph Swan. Other historical events reflect local perceptions. The nationalization of the Suez Canal, for example, in the U.S. edition is a decisive inter- vention by superpowers. In the French and U.K. editions, it is summed up as a “humiliating reversal” for Britain and France—a phrase that does not appear in the U.S. edition. Although Microsoft is on the mark by adapting these events to their local historical context, it has, on occasion, missed the boat on geography. South Korean ire was raised when the South Korean island of Ullung-do was placed within Japan’s borders and when the Chon-Ji Lake, where the first Korean is said to have descended from

heaven, was located in China. And finally, an embar- rassed Microsoft apologized to the people of Thailand for referring to Bangkok as a commercial sex center, assuring the women’s activists group that protested that the revised version would “include all the great content that best re- flects its rich culture and history.” Microsoft also bows to political pressure. The govern- ment of Turkey stopped distribution of an Encarta edition with the name Kurdistan used to denote a region of south- eastern Turkey on a map. Hence Microsoft removed the name Kurdistan from the map. Governments frequently lobby the company to show their preferred boundaries on maps. When the border between Chile and Argentina in the southern Andes was in dispute, both countries lobbied for their preferred boundary, and the solution both coun- tries agreed to was—no line. But our fun stories about changes to Encarta must come to an end, because the online encyclopedia has itself become a topic of history. Microsoft folded the en- tire Encarta operation without explanation in 2009; most analysts agree Wikipedia simply did it in. Sources: Kevin J. Delaney, “Microsoft’s Encarta Has Different Facts for Different Folks,” The Wall Street Journal, June 25, 1999, p. A1; “Why You Won’t Find Kurdistan on a Microsoft Map of Turkey,” Geographical , November 1, 2004; Nick Winfield, “Microsoft to Shut Encarta as Free Sites Alter Market,” The Wall Street Journal , March 31, 2009, p. B3.

CROSSING BORDERS 3.1 Microsoft Adapts Encarta to “Local History”

cat29974_ch03_052-093.indd 61cat29974_ch03_052-093.indd 61 24/08/12 8:03 PM24/08/12 8:03 PM

62 Part 2 The Cultural Environment of Global Markets

than could trading partners; he demonstrates that mercantilists were wrong: It is not gold or silver that will enhance the state, but the material that can be pur- chased with it 1783 Treaty of Paris officially ends the American Revolution following British surrender to American troops at Yorktown in 1781

1787 U.S. Constitution ap- proved; it becomes a model document for constitutions for at least the next two centuries; written constitutions will help stabilize many countries and en- courage foreign investment and trade with them 1789 French Revolution begins; it will alter the power structure in Europe and help lead to the introduction of laws

protecting the individual and to limited democracy in the region 1792 Gas lighting introduced; within three decades, most major European and U.S. cities will use gas lights 1804 Steam locomotive intro- duced; it will become the domi- nant form of transport of goods and people until the 20th cen- tury, when trucks and airplanes become commercially viable

1804 Napoleon crowns him- self emperor, overthrowing the French revolutionary govern- ment, and tries to conquer Eu- rope (after already occupying Egypt as a means of cutting off British trade with the East), the failure of which results in the redrawing of national boundar- ies in Europe and Latin America 1807 Robert Fulton’s steam- boat is the first to usher in a

our dignity and sovereignty.” Apparently Venezuelan President Hugo Chavez was listening, based on his more recent nationalization of foreign oil company assets in the Orinoco River Basin 9 and his recent renaming of the country the Bolivarian Republic of Venezuela.

Th ese leaders might be cheered for expropriation or confi scation of foreign invest- ments, even though the investments were making important contributions to their econ- omies. To understand a country’s attitudes, prejudices, and fears, it is necessary to look beyond the surface of current events to the inner subtleties of the country’s entire past for clues. Th ree comments by Mexicans best summarize this section:

History is taught one way in Mexico and another way in the United States—the United States robbed us but we are portrayed in U.S. textbooks as bandits who invaded Texas. We may not like gringos for historical reasons, but today the world is dividing into commercial blocks, and we are handcuffed to each other for better or worse. We always have been and we continue to be a colony of the United States.

10The importance of geography in understanding global challenges that exist today is discussed in Harm J. DeBlij, Why Geography Matters (New York: Oxford University Press, 2005). 11See Philip Parker’s extensive research on the relationship among geography, consumer behavior, and marketing. For example, Philip Parker, Physioeconomics (Cambridge, MA: MIT Press, 2000). 12Elizabeth Holmes, “Hot H&M Targets Cool Climes,” The Wall Street Journal, May 10, 2010, p. B7.

Geography and Global Markets Geography, the study of Earth’s surface, climate, continents, countries, peoples, industries, and resources, is an element of the uncontrollable environment that con- fronts every marketer but that receives scant attention. 10 Th e tendency is to study the aspects of geography as isolated entities rather than as important causal agents of the marketing en- vironment. Geography is much more than memorizing countries, capitals, and rivers. It also includes an understanding of how a society’s culture and economy are aff ected as a nation struggles to supply its people’s needs within the limits imposed by its physical makeup. Th us, the study of geography is important in the evaluation of markets and their environment.11

Th is section discusses the important geographic characteristics a marketer needs to con- sider when assessing the environmental aspects of marketing. Examining the world as a whole provides the reader with a broad view of world markets and an awareness of the eff ects of geographic diversity on the economic profi les of various nations. Climate and to- pography are examined as facets of the broader and more important elements of geography. A brief look at Earth’s resources and population—the building blocks of world markets— completes the presentation on geography and global markets.

Altitude, humidity, and temperature extremes are climatic features that aff ect the uses and functions of products and equipment.12 Products that perform well in temperate zones may deteriorate rapidly or require special cooling or lubrication to function adequately in tropical zones. Manufacturers have found that construction equipment used in the United States requires extensive modifi cations to cope with the intense heat and dust of the Sahara Desert. A Taiwanese company sent a shipment of drinking glasses to a buyer in the Middle

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

Climate and Topography

9“Venezuela: Spirit of the Monroe Doctrine,” Washington Times , June 10, 2007, p. B5; Girish Gupta, “ExxonMobile’s Loss in Venezuela Sobers Investors,” globalpost.com, January 18, 2012.

cat29974_ch03_052-093.indd 62cat29974_ch03_052-093.indd 62 24/08/12 8:03 PM24/08/12 8:03 PM

Chapter 3 History and Geography: The Foundations of Culture 63

new age of transport when his Clermont sails from New York to Albany 1807 French Napoleonic Code issued and eventually becomes a model of civil law adopted by many nations around the world 1807 U.S. President Thomas Jefferson bans trade with Europe in an effort to convince warring British and French ships to leave neutral U.S. trading ships alone

1810 Frenchman Nicolas Appert successfully cans food and prevents spoilage 1810 Following Napoleon’s invasion of Spain and Portugal, Simón Bolivar begins wars of independence for Spanish colonies in Latin America, leading to new governments in Bolivia, Columbia, Ecuador, Peru, and Venezuela

1814 First practical steam locomotive is built by George Stephenson in England, lead- ing to the birth of railroad transportation in 1825 with the first train carrying 450 passen- gers at 15 miles per hour 1815 Napoleon defeated at Battle of Waterloo and gives up throne days later 1815 British build roads of crushed stone, greatly improving

the quality and speed of road travel 1817 David Ricardo publishes Principles of Political Economy and Taxation, in which he proposes modern trade theory: Comparative advantage drives trade; countries will produce and export goods for which they have a comparative advantage as op- posed to Adam Smith’s absolute advantage (see 1776)

East. Th e glasses were packed in wooden crates with hay used as dunnage to prevent break- age. Th e glasses arrived in shards. Why? When the crates moved to the warmer, less humid climate of the Middle East, the moisture content of the hay dropped signifi cantly and shriv- eled to a point that it off ered no protection.

Within even a single national market, climate can be suffi ciently diverse to require major adjustments. In Ghana, a product adaptable to the entire market must operate eff ectively in extreme desert heat and low humidity and in tropical rainforests with consistently high humidity. Bosch-Siemens washing machines designed for European countries require spin cycles to range from a minimum spin cycle of 500 rpm to a maximum of 1,600 rpm: Be- cause the sun does not shine regularly in Germany or in Scandinavia, washing machines must have a 1,600 rpm spin cycle because users do not have the luxury of hanging them out to dry. In Italy and Spain, however, clothes can be damp, because the abundant sunshine is suffi cient to justify a spin cycle speed of 500 rpm.

Diff erent seasons between the northern and southern hemispheres also aff ect global strategies. JCPenney had planned to open fi ve stores in Chile as part of its expansion into countries below the equator. It wanted to capitalize on its vast bulk buying might for its North American, Mexican, and Brazilian stores to provide low prices for its expansion into South America. Aft er opening its fi rst store in Chile, the company realized that the plan was not going to work—when it was buying winter merchandise in North America, it needed summer merchandise in South America. Th e company quickly sold its one store in Chile; its expansion into South America was limited to much larger Brazil.

Mountains, oceans, seas, jungles, and other geographical features can pose serious impediments to economic growth and trade. For example, mountain ranges cover South America’s west coast for 4,500 miles, with an average height of 13,000 feet and a width of 300 to 400 miles. Th is natural, formidable barrier has precluded the establishment of commercial routes between the Pacifi c and Atlantic coasts. South America’s natural bar- riers inhibit both national and regional growth, trade, and communication. Geographic hurdles have a direct eff ect on a country’s economy, markets, and the related activities of communication and distribution in China, Russia, India, and Canada as well. As countries seek economic opportunities and the challenges of the global marketplace, they invest in infrastructure to overcome such barriers. Once seen as natural protection from potentially hostile neighbors, physical barriers that exist within Europe are now seen as impediments to effi cient trade in an integrated economic union.

For decades the British resisted a tunnel under the English Channel—they did not trust the French or any other European country and saw the channel as protection. But when they became members of the European Union, economic reality meant the channel tun- nel had to be built to facilitate trade with other EU members. Now you can take a bullet train through the Chunnel, but even a decade aft er it opened, its fi nances were still a bit shaky, 13 and recently, undocumented workers have tried to walk the underwater route to reach England. 14

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

13Robert Lea, “Chunnel Rail Link Firm Heads for a Multi-Billion Break-Up,” Evening Standard , November 1, 2007, p. 28. 14“Illegals in the Chunnel,” Daily Express , January 4, 2008, p. 39.

cat29974_ch03_052-093.indd 63cat29974_ch03_052-093.indd 63 24/08/12 8:03 PM24/08/12 8:03 PM

64 Part 2 The Cultural Environment of Global Markets

Fog Catchers

When you live in Chungungo, Chile, one of the country’s most arid regions with no nearby source of water, you drink fog. Of course! Thanks to a legend and resourceful Canadian and Chilean scientists, Chungungo now has its own supply of drinkable water after a 20-year drought. Before this new source of water, Chungungo depended on water trucks that came twice a week. Chungungo has always been an arid area, and leg- end has it that the region’s original inhabitants used to worship trees. They considered them sacred because a permanent flow of water sprang from the treetops, pro- ducing a constant interior rain. The legend was right—the trees produced rain! Thick fog forms along the coast. As it moves inland and is forced to rise against the hills, it changes into tiny raindrops, which are in turn retained by the tree leaves, producing the constant source of rain. Scientists set out to take advantage of this natural phenomenon. The nearby ancient eucalyptus forest of El Tofo Hill provided the clue that scientists needed to create an inge- nious water-supply system. To duplicate the water-bearing effect of the trees, they installed 86 “fog catchers” on the top of the hill—huge nets supported by 12-foot euca- lyptus pillars, with water containers at their base. About 1,900 gallons of water are collected each day and then piped into town. This small-scale system is cheap (about one-fifth as expensive as having water trucked in), clean, and provides the local people with a steady supply of drinking water.

PlayPump: Part I

[This material is as we have had it in the last two editions of this book. Make sure you read the update in Part II to come!] In sub-Saharan Africa, inventive folks have come up with a new way to bring water up from wells. A life-changing and life-saving invention—the PlayPump water system—provides easy access to clean drinking water, brings joy to children, and leads to improvements in health, education, gender equality, and economic development in more than 1,000 rural villages in South Africa, Swaziland, Mozambique, and Zambia. The PlayPump systems are innovative, sustainable, patented water pumps powered by children at play. Installed near schools, the PlayPump system doubles as a water pump and a merry-go-round. The PlayPump system also pro- vides one of the only ways to reach rural and peri-urban

communities with potentially life-saving public health mes- sages. Please see the accompanying pictures of a new solution to one of humankind’s oldest problems.

PlayPump: Part II

[Oops! In the last two editions of International Marketing, we made the same mistake many others have made with respect to PlayPumps. We are contrite, but we also see the great value in reporting the complete PlayPump story as it has unfolded. We thanks Laura Freschi for her excellent reporting.] At the primary schools in South Africa, where the first of these merry-go-rounds were installed, kids got a place to play, their communities got free drinking water, and girls and women—who bear much of the burden of collecting water for their families—got time to attend school or pur- sue other activities. Billboards lining the raised water tank brought in advertising revenue to fund the pumps’ main- tenance, as well as spread public health messages about hygiene or safe sex. In 2000, the PlayPumps idea won the World Bank’s Development Marketplace award. In 2006, Laura Bush announced $16 million in funding from USAID/PEPFAR and private foundations, with the goal of raising $45 million more to install 4,000 pumps in Africa by 2010. Jay-Z pitched in with concerts and an MTV documentary. PlayPumps announced plans to expand, first to Mozam- bique, Swaziland, and Zambia, and then into Lesotho, Malawi, Ethiopia, Kenya, Tanzania, and Uganda. The nonprofit launched a sophisticated social networking campaign and successfully raised money for “100 Pumps in 100 Days” on World Water Days in 2007 and 2008. Sadly, somewhere along the way, PlayPumps stopped being a smart homegrown idea and became a donor- pleasing, top-down solution that simply did not fit many of the target communities. In response, the charity WaterAid wrote a position paper on why it did not adopt the PlayPumps technology. For one, it said, PlayPumps are too expensive. At $14,000 each, they cost four times as much as traditional pump systems. The mechanism requires specialized skills to repair and so cannot be fixed with local labor. Spare parts are hard to find and expensive to replace. WaterAid also decried the system’s “reliance on child labour.” A recent critical com- mentary in the Guardian (UK) calculated that children would have to “play” for 27 hours every day to meet PlayPumps’

CROSSING BORDERS 3.2 Innovation and the Water Shortage, from Fog to Kid Power

cat29974_ch03_052-093.indd 64cat29974_ch03_052-093.indd 64 24/08/12 8:03 PM24/08/12 8:03 PM

Chapter 3 History and Geography: The Foundations of Culture 65

stated targets of providing 2,500 people per pump with their daily water needs. An aid worker and engineer in Malawi documented some of these problems in a brilliant series of blog posts. His anec- dotes and pictures give limited but compelling evidence that PlayPumps in his area are not being used as the inventors intended: “Each time I’ve visited a PlayPump, I’ve always found the same scene: a group of women and children struggling to spin it by hand so they can draw water.” He also suggests one reason PlayPumps might be slow to get that crucial feedback: “[A]s soon as the foreigner with a camera comes out (aka me), kids get excited. And when they get excited, they start playing. Within 5 minutes, the thing looks like a crazy success. . . . I’ve always figured that as soon as I leave the excitement wears off and the pump reverts back to its normal state: being spun manually by women and kids.” Does the story of PlayPumps carry a broader lesson about the aid world? Suppose the organization had charged ahead with a Twitter campaign to raise millions for the solution to water problems in Africa, even as reality kept diverging far- ther from the rosy picture. Then PlayPumps would represent

the triumph of bad but photogenic solutions in a broken aid marketplace. But last fall, the CEO announced instead that its inventory would be turned over to the organization Water for People, where PlayPumps would be just one option out of “a portfolio of technologies from which communities can choose.” This seems like the right outcome. We can ask why it took so long to see the flaws in the PlayPumps model. But in contrast to the official aid world, where old, failed solutions keep getting recycled across 60 years, this relatively quick response repre- sents real progress! We forecast (and hope) that the €8 smokeless stoves described at the beginning of the chapter will perform better in the emerging market marketplace than the $14,000 PlayPumps. Stay tuned.

Sources: “Drinking Fog,” World Press Review ; “Silver Lining,” The Economist, February 5, 2000, p. 75; “UNESCO Water Portal Weekly Update No. 89: Fog,” April 15, 2005, http://www.unesco.org/water/news/newsletter/89. shtml; http://www.playpumps.org, 2008; Aliah D. Wright, “Dive into Clean Water,” HRMagazine 54, no. 6 (2009), p. 4.; Laura Freschi, “Some NGOs CAN Adjust to Failure: The PlayPumps Story,” aidwatchers.com, February 19, 2010; Andrew Chambers, “Africa’s Not-so-Roundabout,” guaradian.co.uk, November 24, 2009.

While children have fun spinning on the PlayPump merry-go-round, (1) clean water is pumped (2) from underground (3) into a 2,500-liter tank, (4) standing seven meters above the ground. A simple tap (5) makes it easy for adults and children to draw water. Excess water is diverted from the storage tank back down into the base hole (6). The water storage tank (7) provides rare opportunities to advertise to outlying communities. All four sides of the tank are leased as billboards, with two sides for consumer advertising and the other two sides for health and educational messages. The revenue generated from this unique model pays for pump maintenance. Capable of producing up to 1,400 liters of water per hour at 16 rpm from a depth of 40 meters, it is effective up to a depth of 100 meters. See http://www.playpumps.org. (right: © Frimmel Smith/PlayPump)

51

4 7

6

32

cat29974_ch03_052-093.indd 65cat29974_ch03_052-093.indd 65 24/08/12 8:03 PM24/08/12 8:03 PM

66 Part 2 The Cultural Environment of Global Markets

From the days of Hannibal, the Alps have served as an important physical barrier and pro- vided European countries protection from one another. But with the EU expansion, the Alps became a major impediment to trade. Truck traffi c between southern Germany and north- ern Italy, which choked highways through some of Switzerland’s most treacherous mountain roads and pristine nature areas, was not only burdensome for all travelers but becoming eco- nomically unacceptable. Th e solution, the 21-mile Loetschberg Tunnel, which opened in 2007, burrows under the Alps and trims the time trains need to cross between Germany and Italy from a three-and-a-half-hour trip to less than two hours. By 2014, the 36-mile Gotthard Tun- nel will provide additional rail coverage for the area and be the world’s longest rail tunnel.

Always on the slim margin between subsistence and disaster, less-privileged countries suff er disproportionately from natural and human-assisted catastrophes. 15 Th e slow recovery from the Haitian earthquake disaster of 2010 is perhaps the prominent example, particularly when juxtaposed with the progress of Japan’s recovery from its 2011 earthquake/tsunami/nuclear power plant disaster.16 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, fl oods, and soil erosion affl ict them, oft en lead- ing to creeping deserts that reduce the long-term fertility of the land. 17 Population increases, deforestation, and overgrazing intensify the impact of drought and lead to malnutrition and ill health, further undermining these countries’ abilities to solve their problems. Cyclones cannot be prevented, nor can inadequate rainfall, but means to control their eff ects are avail- able. Unfortunately, each disaster seems to push developing countries further away from ef- fective solutions. Countries that suff er the most from major calamities are among the poorest in the world. 18 Many have neither the capital nor the technical ability to minimize the eff ects of natural phenomena; they are at the mercy of nature.

As countries prosper, natural barriers are overcome. Tunnels and canals are dug and bridges and dams are built in an eff ort to control or to adapt to climate, topography, and the recurring extremes of nature. Humankind has been reasonably successful in overcoming or minimizing the eff ects of geographical barriers and natural disasters, but as they do so, they must contend with problems of their own making. Th e construction of dams is a good example of how an attempt to harness nature for good has a bad side. Developing countries consider dams a cost-eff ective solution to a host of problems. Dams create electricity, help control fl oods, provide water for irrigation during dry periods, and can be a rich source of fi sh. However, there are side eff ects; dams displace people (the Th ree Gorges Dam in China

Geography, Nature, and

Economic Growth

15“Honda Sees Sharp Drop in Profit on Thai Floods,” Associated Press, January 31, 2012; Thomas Fuller, “Floodwaters Are Gone, but Supply Chain Issues Linger,” The New York Times, January 20, 2012. 16 Japan is experiencing longer term problems as well though. See Julie Makinen, “Disasters Add New Th eme to Tokyo Disney: Hardship,” Los Angeles Times, April 5, 2011, pp. B1, B3. 17See Map 2, “Global Climate,” in the World Maps section for a view of the diversity of the world’s climate. Th e climatic phenomenon of El Niño wreaks havoc with weather patterns and is linked to crop failures, famine, forest fi res, dust and sand storms, and other disasters associated with either an overabundance or a lack of rain. 18“Water Shortage Fears in Darfur Camps,” All Africa , December 10, 2007; “Northern Vietnam Likely to Face Water Shortages,” Xinhua News Agency , January 4, 2008.

1821 Britain is first to adopt gold standard to back the value of its currency 1823 U.S. President James Monroe promulgates the doc- trine bearing his name that declares the Americas closed to colonization in an attempt to assert U.S. influence over the region 1837 Reign of Britain’s Queen Victoria begins; she oversees the growth of the British Empire and

Britain’s emergence as an indus- trial power (she dies in 1901) 1837 Electronic telegraph be- gins wide commercial use, trans- mitting information, including production orders, swiftly 1839 Process for recording negative images on paper is in- troduced in England, the precur- sor to modern film technology 1841 Briton David Livingstone begins 30 years of exploring in Africa

1842 Hong Kong ceded to Britain with the Treaty of Nanjing following the Opium War; the city will become a financial and trading center for Asia 1844 Chinese open five ports to U.S. ships 1847 First government-backed postage stamps issued by United States, leading to more certain and efficient communication by post

1848 John Stuart Mill publishes Principles of P olitical Economy, completing the modern theory of trade by stat- ing that gains from trade are reflected in the strength of the reciprocal demand for imports and exports and that gains would come from better terms of trade (see 1817) 1848 The Communist Mani- festo, by Germans Karl Marx and Friedrich Engels, is issued;

cat29974_ch03_052-093.indd 66cat29974_ch03_052-093.indd 66 24/08/12 8:03 PM24/08/12 8:03 PM

Chapter 3 History and Geography: The Foundations of Culture 67

has displaced 1.3 million people 19 ), and silt that ultimately clogs the reservoir is no longer carried downstream to replenish the soil and add nutrients. Similarly, the Narmada Valley Dam Project in India will provide electricity, fl ood control, and irrigation, but it has already displaced tens of thousands of people, and as the benefi ts are measured against social and environmental costs, questions of its effi cacy are being raised. In short, the need for gigantic projects such as these must be measured against their social and environmental costs.

As the global rush toward industrialization and economic growth accelerates, environ- mental issues become more apparent.20 Disruption of ecosystems, relocation of people, in- adequate hazardous waste management, and industrial pollution are problems that must be addressed by the industrialized world and those seeking economic development. Th e prob- lems are mostly by-products of processes that have contributed signifi cantly to economic development and improved lifestyles. During the last part of the 20th century, governments and industry expended considerable eff ort to develop better ways to control nature and to allow industry to grow while protecting the environment. 21

Nations, companies, and people reached a consensus during the close of the last decade: Environmental protection is not an optional extra; it is an essential part of the complex process of doing business. Many view the problem as a global issue rather than a national issue and as one that poses common threats to humankind and thus cannot be addressed

Social Responsibility and Environmental

Management

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 .

19Anita Chang, “China: Th ree Gorges Dam Impact Not Th at Bad,” Associated Press , November 22, 2007. 20Ram Mudambi, “Approaches to Climate Change: Technology and Institutions,” Journal of International Business Studies 42 (2011), p. 974. 21Visit http://www.gemi.org for information on the Global Environmental Management Initiative, an organization of U.S. multinational companies dedicated to environmental protection.

it will become the basis for the communist movements of the 20th century 1851 First international world’s fair held in London, showcasing new technology 1856 Declaration of Paris recognizes the principle of free movement for trade, even in wartime—blockades could only extend along the enemy’s coast; it also establishes the practice of allowing the accession to

treaties of nations other than the original signatories 1857 Russia and France sign trade treaty 1858 Ansei Commercial Treaties with Japan open the formerly closed country to trade with the West (treaties follow “opening” of Japan to the West by American Matthew Perry in 1854)

1860 The Cobden Treaty aims to create free trade by reducing or eliminating tariffs between Britain and France; also leads to most-favored-nation status in bilateral agreements and eventu- ally to multilateral agreements 1860 Passports are introduced in the United States to regulate foreign travel 1866 The principle of the electric dynamo is found by German Werner Siemens, who

will produce the first electric power transmission system 1866 The trans-Atlantic cable is completed, allowing nearly instant (telegraphic) communica- tion between the United States and Europe 1869 Suez Canal completed after 11 years of construction; the canal significantly cuts the time for travel between Europe and Asia, shortening, for example, the trip between

cat29974_ch03_052-093.indd 67cat29974_ch03_052-093.indd 67 24/08/12 8:03 PM24/08/12 8:03 PM

68 Part 2 The Cultural Environment of Global Markets

by nations in isolation. Of special concern to governments and businesses are ways to stem the tide of pollution and to clean up decades of neglect.

Companies looking to build manufacturing plants in countries with more liberal pollu- tion regulations than they have at home are fi nding that regulations everywhere have gotten stricter. Many governments are draft ing new regulations and enforcing existing ones. Elec- tronic products contain numerous toxic substances that create a major disposal problem in landfi lls where inadequate disposal allows toxins to seep into groundwater. Th e European Union, as well as other countries, has laws stipulating the amount and types of potentially toxic substances it will require a company to take back to recycle. A strong motivator is the realization that pollution is on the verge of getting completely out of control.

China is now the world’s top polluter in almost all respects. 22 By 2020 its greenhouse- gas emissions will be more than double the closest rival, the United States. An ex- amination of rivers, lakes, and reservoirs in China revealed that toxic substances polluted 21 percent and that 16 percent of the rivers were seriously polluted with excrement. China has 16 of the world’s 20 most polluted cities. 23 Th e very process of controlling industrial wastes leads to another and perhaps equally critical issue: the disposal of hazardous waste, a by-product of pollution controls. Estimates of hazardous wastes collected annually exceed 300 million tons; the critical issue is disposal that does not simply move the problem elsewhere. Countries encounter- ing increasing diffi culty in the disposal of wastes at home are seeking countries willing to assume the burden of disposal. Waste disposal is legal in some developing countries as governments seek the revenues that are generated by off ering sites for waste disposal. In other cases, illegal dumping is done clandestinely. A treaty among members of the Basel Convention that required

22“Chinese Air Pollution, Clearing the Air?” The Economist, January 14, 2012, pp. 41–42. 23Barbara Demick, “U.S. Tweets Stir Beijing’s Air,” Los Angeles Times, October 30, 2011, pp. A1, A8.

Britain and India by 4,000 miles 1869 First U.S. transcontinental rail route is completed, herald- ing a boon for commerce; first commercially viable typewriter patented; until computer word processing becomes common more than a century later, the typewriter enables anyone to produce documents quickly and legibly

1873 United States adopts the gold standard to fix the international value of the dollar 1875 Universal Postal Union created in Switzerland to provide for an international mail service 1876 Alexander Graham Bell is granted a patent for the tele- phone, which will revolutionize communications 1880 Thomas Edison creates first electric power station, after

inventing the electric light in 1878, which lights New York City and starts a revolution in culture and business— making a truly 24-hour day and paving the way for electronic machines 1881 Zoopraxiscope, which shows pictures in motion, is developed 1884 The basis for establishing standard time and measuring the longitude of any spot in the

world is created with the desig- nation of Greenwich, England,as the prime meridian (0° longitude) 1886 American Federation of Labor founded, becoming a model for workers around the world to unite against manage- ment and gain higher pay and better working conditions 1901 Italian Guglielmo Marconi sends the first radio message; the radio could

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 decades past war are not funny. Here, Germany is helping clean up the deadly mess.

cat29974_ch03_052-093.indd 68cat29974_ch03_052-093.indd 68 24/08/12 8:03 PM24/08/12 8:03 PM

Chapter 3 History and Geography: The Foundations of Culture 69

be said to spark the start of globalization because of the speed with which information is able to be transmitted 1903 First successful flight of an airplane, piloted by Orville Wright, takes place at Kitty Hawk, North Carolina 1904 First vacuum tube is developed by John Fleming, allowing alternating current to become direct current and

helping create widespread use of the radio 1913 Assembly line introduced by Henry Ford; it will revolution- ize manufacturing 1914 The first war to involve much of the world begins with the assassination of Archduke Francis Ferdinand and lasts four years; construction of Panama Canal is completed, making trade faster and easier

1917 Lenin and Trotsky lead Russian revolution, creating a living economic model that will affect trade (adversely) for the rest of the century 1919 First nonstop trans- Atlantic flight completed, paving the way for cargo to be transported quickly around the globe 1920 League of Nations created, establishing a model for

international cooperation (though it failed to keep the peace) 1923 Vladimir Zworykin creates first electronic television, which will eventually help integrate cultures and consumers across the world 1929 Great Depression starts with crash of U.S. stock market 1930 Hawley-Smoot Tariff passed by U.S. Senate, plunging the world deeper into the Great Depression

Tons of CO2 Equivalent

Greenhouse-Gas Emissions Total in Billions of Tons (BOT) and

per Person, 2010

Australia (0.4 BOT)

United States (5.5 BOT)

Japan (1.2 BOT)

EU-27 (3.9 BOT)

China (8.7 BOT)

Brazil (1.9 BOT)

India (1.8 BOT)

0 10 20 30 40

*Intergovernmental Panel on Climate Change

Percent Decrease on 1990 Levels by 2020

Pledged Greenhouse-Gas Emission-Reduction Targets

IPCC* Recommendations

EU-27

Japan

Australia

Developed Country Average

United States

Canada

0 10 20 30 40

Exhibit 3.3 A Comparison of Greenhouse-Gas Emission Rates and Pledges for Reductions Source: EuroMonitor International, 2012; Intergovernmental Panel on Climate Change

prior approval before dumping could occur was later revised to a total ban on the export of hazardous wastes by developed nations. Th e infl uence and leadership provided by this treaty are refl ected in a broad awareness of pollution problems by businesses and people in general. 24

Governments, organizations, and businesses are becoming increasingly concerned with the social responsibility and ethical issues surrounding the problem of maintaining eco- nomic growth while protecting the environment for future generations. However, the com- mitment made by governments and companies varies dramatically around the world. For example, with one of the highest pollution rates on a per capita basis, the United States lags behind almost all major competitors in agreeing to greenhouse emission standards (see Exhibit 3.3 ). 25 Th e Organization for Economic Cooperation and Development, the United Nations, the European Union, and international activist groups are undertaking programs to strengthen environmental policies. In many ways China, because it has the most urgent and greatest pollution problems, is leading the charge in new green technology. 26 Many large multinational companies such as Petrobras, 27 Walmart, and Nike are not only cleaning up their own operations around the world but also pushing their suppliers to do the same.

24For a comprehensive view of OECD programs, including environmental issues, visit http://www.oecd.org. 25“Closing the Gaps,” Th e Economist , December 5, 2009, pp. 18–19. 26Shai Oster, “World’s Top Polluter Emerges as Green-Technology Leader,” Th e Wall Street Journal, December 15, 2009. 27Jose Sergio Gabrielli de Azevedo, “Th e Greening of Petrobras,” Harvard Business Review , March 2009, pp. 43–47.

cat29974_ch03_052-093.indd 69cat29974_ch03_052-093.indd 69 24/08/12 8:04 PM24/08/12 8:04 PM

70 Part 2 The Cultural Environment of Global Markets

1935 Radar developed in Britain; it will allow travel on ships and planes even when there is no visibility, enabling the goods to keep to a transport schedule (eventually allowing the development of just-in-time and other cost-saving processes) 1938 American Chester Carlson develops dry copying process for documents (xerog- raphy), which, among other

things, will enable governments to require that multiple forms be filled out to move goods 1939 World War II begins with German invasion of Poland; over 50 million people will die 1943 The first programmable computer, Colossus I, is created in England at Bletchley Park; it helps to crack German codes 1944 Bretton Woods Confer- ence creates basis for economic

cooperation among 44 nations and the founding of the Interna- tional Monetary Fund to help stabilize exchange rates 1945 Atomic weapons in- troduced; World War II ends; United Nations founded 1947 General Agreement on Tariffs and Trade signed by 23 countries to try to reduce barriers to trade around the world

1948 Transistor is invented; it replaces the vacuum tube, start- ing a technology revolution 1949 People’s Republic of China founded by Mao Zedong, which will restrict access to the largest sin- gle consumer market on the globe 1957 European Economic Community (EEC) established by Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands, the

28Visit http://www.oecd.org, the OECD website, for a directory and complete coverage of sustainable development. 29Visit http://www.webdirectory.com for the Amazing Environmental Organization Web Directory , a search engine with links to an extensive list of environmental subjects. 30Burt Helm, “Nike Goes Green, Very Quietly,” BusinessWeek , June 22, 2009, p. 56. 31“Who Cares?” Th e Economist , December 5, 2009, p. 15. 32“Are U.S. Teenagers ‘Green’ Enough?” Chronicle of Higher Education , November 20, 2009, p. A4. 33Amir Grinstein and Udi Nisan, “Demarketing, Minorities, and National Attachment,” Journal of Marketing 73, no. 2 (2009), pp. 105–22.

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.

Th e issue that concerns everyone is whether economic development and protection for the environment can coexist. Sustainable development is a joint approach among those (e.g., governments, businesses, environmentalists, and others) who seek economic growth with “wise resource management, equitable distribution of benefi ts and reduction of negative eff ects on people and the environment from the process of economic growth.” Sustainable development is not about the environment or the economy or society. It is about striking a lasting balance between all of these. More and more companies are embracing the idea of sustainable develop- ment as a “win–win” opportunity. 28 Responsibility for protecting the environment does not rest solely with governments, businesses, or activist groups; however, each citizen has a social and moral responsibility to include environmental protection among his or her highest goals. 29 Th is idea is particularly a problem in the United States, where consumers are oft en more interested in style than in sustainability, 30 public opinion polls favor growth over the environment, 31 and high school students receive relatively little environmental education. 32 A recent study has also shown that governments with pluralistic constituencies may have relatively more trouble per- suading important minority groups to agree to their environmental eff orts. 33

cat29974_ch03_052-093.indd 70cat29974_ch03_052-093.indd 70 24/08/12 8:04 PM24/08/12 8:04 PM

Chapter 3 History and Geography: The Foundations of Culture 71

precursor to today’s European Union 1961 Berlin Wall is erected, cre- ating Eastern and Western Europe with a physical and spiritual barrier 1964 Global satellite com- munications network established with INTELSAT (International Telecommunications Satellite Organization) 1965 Unsafe at Any Speed published by Ralph Nader,

sparking a revolution in con- sumer information and rights 1967 European Community (EC) established by uniting the EEC, the European Coal and Steel Community, and the Euro- pean Atomic Energy Community 1971 First microprocessor produced by Intel, which leads to the personal computer; com- munist China joins the United

Nations, making it a truly global representative body 1971 United States abandons gold standard, allowing the international monetary system to base exchange rates on perceived values instead of ones fixed in relation to gold 1972 One billion radios on the planet 1973 Arab oil embargo jolts industrial world into

understanding the totally global nature of supply and demand 1980 CNN founded, provid- ing instant and common infor- mation the world over, taking another significant step in the process of globalization started by the radio in 1901 1987 ISO issues ISO 9000 to create a global quality standard 1988 One billion televisions on the planet

A huge offshore discovery has the potential to make Brazil a new major petroleum exporter through its national oil company, Petrobras. 34 ( The New York Times, January 11, 2008, p. C1; © Edro Lobo/ Bloomberg News/Landov)

Th e availability of minerals and the ability to generate energy are the foundations of mod- ern technology. Th e locations of Earth’s resources, as well as the available sources of energy, are geographic accidents. Th e world’s nations are not equally endowed, and no nation’s de- mand for a particular mineral or energy source necessarily coincides with domestic supply.

In much of the underdeveloped world, human labor provides the preponderance of energy. Th e principal supplements to human energy are animals, wood, fossil fuel, nuclear power, and, to a lesser and more experimental extent, the ocean’s tides, geothermal power, and the sun. Of all the energy sources, oil and gas contribute over 60 percent of world energy consump- tion. 35 Because of petroleum’s versatility and the ease with which it is stored and transported, petroleum-related products continue to dominate energy usage. 36 (See Exhibit 3.4 .)

Many countries that were self-suffi cient during much of their early economic growth have become net importers of petroleum during the past several decades and continue to become increasingly dependent on foreign sources. A spectacular example is the United States, which was almost completely self-suffi cient until 1942, became a major importer by 1950, and between 1973 and 2000 increased its dependency from 36 percent to over 66  percent of its annual requirements. If present rates of consumption continue, predic- tions are that by the mid-2000s the United States will be importing more than 70 percent

Resources

34Alexi Barrinuevo, “Hot Prospect for Oil’s Big League,” The New York Times, January 11, 2008, pp. C1, C4. 35Visit http://www.eia.doe.gov and search for “International Energy Outlook (most current year)” for details of production, use, and so forth. 36See Map 3, “Oil and Gas Production and Consumption,” for a global view of the fl ow and uses of petroleum.

cat29974_ch03_052-093.indd 71cat29974_ch03_052-093.indd 71 24/08/12 8:04 PM24/08/12 8:04 PM

72 Part 2 The Cultural Environment of Global Markets

Exhibit 3.4 World Energy Consumption

Energy consumed by world regions, measured in quadrillion BTUs in 2008. Total world consumption was 504.8 quadrillion BTUs. The largest portion of the hydro/other category is hydroelectrical energy. Fuels such as wood, peat, dung, wind, solar, and geothermal account for less than 1.0 quadrillion BTUs in the other portion of the hydro/other category.

Total World Energy Consumption By Region and Fuel (Quadrillion BTU)

Africa  18.8 QBTUs

0 20 40 60 80 100 120 140 160 180

Middle East  25.5 QBTUs

Latin America  27.7 QBTUs

Europe  132.5 QBTUs

Asia  178.8 QBTUs

North America  122.9 QBTUs

Percentage of World Energy Consumption by Energy Sources

5%

34%

Other Natural Gas Coal Nuclear Liquids

10% 23%

28%

Sources: Data compiled from Energy Information Administration (EIA), International Energy Outlook 2011 (Washington, DC, 2012), http://www.eia.doe.gov/ oiaf/ieo.

of its needs, that is, more than 17 million barrels of oil each day. Exhibit 3.4 compares North American domestic energy consumption with other world regions. It is interesting to note that both Asia and Europe consume more energy than North America (as shown in Exhibit 3.4). Also notice that oil is emphasized in North America, coal in Asia, and natural gas in Europe. Although the United States continues to consume the greatest quantities of energy of any country (just below 20 percent of the world total), China is a close second at

1994 The Chunnel (Channel Tunnel) is opened between France and Britain, providing a ground link for commerce be- tween the continent and Britain 1995 World Trade Organiza- tion (WTO) set up as successor of GATT; by 2000 more than 130 members will account for over 90 percent of world trade.

1997 Hong Kong, a world trading and financial capital and bastion of capitalism, is returned to communist Chinese control; Pathfinder lands on Mars, and Rover goes for a drive but finds no one with whom to trade 1999 Euro introduced in 11 European Union nations, paving

1993 NAFTA ratified by U.S. Congress; European Union created from the European Community, along with a framework for joint security and foreign policy action, by the 1991 Maastricht Treaty on European Union; the EEC is renamed the EC

1989 Berlin Wall falls, symboliz- ing the opening of the East to the West for ideas and commerce 1991 Soviet Union formally abandons communism, as most formerly communist states move toward capitalism and the trade it fosters; Commonwealth of Independent States (CIS) estab- lished among Russia, Ukraine, and Belarus

cat29974_ch03_052-093.indd 72cat29974_ch03_052-093.indd 72 24/08/12 8:04 PM24/08/12 8:04 PM

Chapter 3 History and Geography: The Foundations of Culture 73

37Stanley Reed, “Endless Oil,” BusinessWeek , January 18, 2010, pp. 47–49.

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.

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.

more than 17  percent. Indeed, China has become the world’s second-largest oil importer aft er the United States, and demand continues to grow rapidly.

Since World War II, arguments about the limitless availability of seemingly inexhaustible supplies of petroleum have been prominent. 37 Th e dramatic increase in economic growth in the industrialized world and the push for industrialization in the remaining world have put tremendous pressure on Earth’s energy resources. Unfortunately, as countries industrialize, energy sources are not always effi ciently utilized. China, for example, spends three times the world average on energy (all sources) to produce one dollar of gross national product (GNP). In comparison with Japan, possibly the world’s most effi cient user of energy, where less than 5 ounces of oil is needed to generate $1 in GNP, in China, approximately 80 ounces of oil is needed. Th e reasons for China’s ineffi cient oil use are numerous, but the worst cul- prit is outdated technology.

Th e growth of market-driven economies and an increasing reliance on petroleum sup- plies from areas of political instability—the Middle East, the former Soviet Union, and Latin America—create a global interdependence of energy resources. Th e net result is a profound impact on oil prices and on the economies of industrialized and industrializing countries.

2003 United States attacks regime of Saddam Hussein in Iraq 2004 Great Indian Ocean tsunami kills 500,000 people 2006 One billion personal computers on the planet 2008 Beijing hosts the Olympics 2009 Great Recession causes largest decline in world trade since World War II; even so,

almost 4 billion mobile phone subscribers around the globe 2010 Earthquake in Haiti kills more than 200,000 people 2011 Japan earthquake and tsunami; Arab Spring protest and revolutions begin; U.S. exits Iraq 2040 The United Nations’ earli- est estimate for the world popula- tion to begin shrinking due to the global decline of fertility

2000 Second millennium arrives, predicted computer problems are a non-event 2001 September 11 terrorist attack on the World Trade Center in New York City and the Pentagon in Washington, DC; one billion mobile phones on the planet 2002 United States attacks Tal- iban in Afghanistan

the way for the creation of a true trade union and trade bloc 1999 Seattle Round of WTO negotiations attracts the first great protest against globalization 1999 Control of the Panama Canal, a major trade lane, is returned to Panama

cat29974_ch03_052-093.indd 73cat29974_ch03_052-093.indd 73 24/08/12 8:04 PM24/08/12 8:04 PM

74 Part 2 The Cultural Environment of Global Markets

Exhibit 3.5 World Population by Region, 2011–2050, and Life Expectancy at Birth, 2005–2010 (millions)

Source: World Population Prospects, The 2011 Revision , United Nations Economic and Social Affairs, www .unpopulation.org, 2012. Reprinted with permission.

Population (in millions)

Life Expectancy at Birth

Regions

World More developed regions** Less developed regions † Least developed regions ‡ Africa Asia Europe Latin America Northern America Oceania

2011

6,895 1,235 5,659

832 1,022 4,164

738 590 345 37

2050*

8,112 1,157 6,964 1,517 1,931 4,457

632 645 396 39

2005–2010

67.2 77.1 65.6 55.9 54.1 68.9 75.1 73.4 79.3 76.2

* Lowest estimate among three provided. ** More developed regions comprise all regions of Europe and Northern America, Australia, New Zealand, and Japan. † Less developed regions comprise all regions of Africa, Asia (excluding Japan), and Latin America and the regions of Melanesia, Micronesia, and Polynesia. ‡ Least developed regions, as defined by the United Nations General Assembly, include 48 countries, of which 33 are in Africa, 9 in Asia, 1 in Latin America, and 5 in Oceania. They are also included in the less developed regions.

38A book written in 1998 predicted the Great Recession of 2008–2009 ten years in advance, based on demographic projections of consumer demand. For a very interesting read, see Harry S. Dent, The Roaring 2000s (Touchstone: New York, 1998); also see John L. Graham, “2020 Is 23 Years from Now,” UCInsight , Spring 1997, pp. 3, 13 for a similar, demographics-based prediction. 39Patrick Barta and Joel Millman, “Th e Great U-Turn,” Th e Wall Street Journal , June 6, 2009, p. A1. 40See World Population Prospects, Th e 2011 Revisions , United Nations Economic and Social Aff airs, http:// www.unpopulation.org, 2012.

Dynamics of Global Population Trends Current population, rural/urban population shift s, rates of growth, age levels, and population control help determine today’s demand for vari- ous categories of goods. 38 Although not the only determinant, the existence of sheer numbers of people is significant in appraising potential consumer markets. Changes in the composition and distribution of population among the world’s countries will profoundly affect future demand. Moreover, it now appears that demand for goods worldwide can affect migration patterns, in a reversal of the traditional causal rela- tionship. Specifically, the global financial crisis that began in 2008 appears to have caused a (perhaps temporary) reversal of migrations from urban to rural areas within countries and from developed back to developing countries internationally as employ- ment opportunities dry up in response to the decline in demand for goods and services worldwide. 39

Recent estimates place world population at more than 7 billion people, a number expected to grow to about 8 billion by 2050. However, seemingly small diff erences in assumptions about fertility rates can make big diff erences in growth forecasts. One pos- sible scenario put forth by United Nations experts suggests the planet’s population may peak at about 8 billion and then begin to decline aft er 2040. All scenarios agree though that almost all of the projected growth up to 2050 will occur in less developed regions. 40 Exhibit 3.5 shows that 85 percent of the population will be concentrated in less developed

Th e location, quality, and availability of resources will aff ect the pattern of world eco- nomic development and trade well into the 21st century. In addition to the raw materials of industrialization, an economically feasible energy supply must be available to transform resources into usable products. As the global demand for resources intensifi es and prices rise, resources will continue to increase in importance among the uncontrollable elements of the international marketer’s decisions.

cat29974_ch03_052-093.indd 74cat29974_ch03_052-093.indd 74 24/08/12 8:04 PM24/08/12 8:04 PM

Chapter 3 History and Geography: The Foundations of Culture 75

regions by 2050. Th e International Labor Organization estimates that 1.2 billion jobs must be created worldwide to accommodate these new entrants through 2025. Further- more, most of the new jobs will need to be created in urban areas where most of the population will reside.

Faced with the ominous consequences of the population explosion, it would seem logical for countries to take steps to reduce growth to manageable rates, but procreation is one of the most culturally sensitive, uncontrollable factors. Economics, self-esteem, religion, politics, and education all play critical roles in attitudes about family size. All these consid- erations make the impact of China’s long-term enforcement of its one-child policies most remarkable.

Th e prerequisites to population control are adequate incomes, higher literacy levels, education for women, universal access to healthcare, family planning, improved nu- trition, and, perhaps most important, a change in basic cultural beliefs regarding the importance of large families. Unfortunately, minimum progress in providing improved living conditions and changing beliefs has occurred. India serves as a good example of what is happening in much of the world. India’s population was once stable, but with improved health conditions leading to greater longevity and lower infant mortality, its population will exceed that of China by 2050, when the two will account for about 50 percent of the world’s inhabitants. Th e government’s attempts to institute change are hampered by a variety of factors, including political ineptitude and slow changes in cultural norms. Nevertheless, the government continues to pass laws with the intended purpose of limiting the number of births. A novel example was a law that bars those with more than two children from election to the national Parliament and state assemblies. Th is rule would mean that many now in offi ce could not seek reelection because of their family size. 41

Perhaps the most important deterrent to population control is cultural attitudes about the importance of large families. In many cultures, the prestige of a man, whether alive or dead, depends on the number of his progeny, and a family’s only wealth is its children. Such feelings are strong. Prime Minister Indira Gandhi found out how strong when she attempted mass sterilization of men, which reportedly was the main cause of her defeat in a subsequent election. Additionally, many religions discourage or ban family planning and thus serve as a deterrent to control. Nigeria 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.

Family planning and all that it entails is by far the most universal means governments use to control birthrates, but some economists believe that a decline in the fertility rate is a function of economic prosperity and will come only with economic development. Ample anecdotal evidence suggests that fertility rates decline as economies prosper. For example, before Spain’s economy began its rapid growth in the 1980s, families had six or more chil- dren; now, Spain has one of the lowest birthrates in Europe, an average of 1.24 children per woman. Similar patterns have followed in other European countries as economies have prospered.

Migration from rural to urban areas, which can consist of domestic or international moves, 42 is largely a result of a desire for greater access to sources of education, healthcare, and improved job opportunities. In the early 1800s, less than 3.5 percent of the world’s people were living in cities of 20,000 or more and less than 2 percent in cities of 100,000 or more; today, more than 40 percent of the world’s people are urbanites, and the trend is accelerating. Once in the city, perhaps three out of four migrants achieve some economic gains. Th e family income of a manual worker in urban Brazil, for example, is almost fi ve times that of a farm laborer in a rural area.

LO7 The economic effects of controlling population growth and aging populations

Controlling Population Growth

Rural/Urban Migration

41V. K. Paghunathan, “3 Tykes and You’re Out,” Straits Times , April 11, 2003. 42“The Magic of Diasporas,” The Economist, November 19, 2011, p. 13.

cat29974_ch03_052-093.indd 75cat29974_ch03_052-093.indd 75 24/08/12 8:04 PM24/08/12 8:04 PM

76 Part 2 The Cultural Environment of Global Markets

By 2030, estimates indicate that more than 61 percent of the world’s population will live in urban areas (up from 49 percent in 2005, with similar changes across all regions), and at least 27 cities will have populations of 10 million or more, 23 of which will be in the less developed regions. Tokyo has already overtaken Mexico City as the largest city on Earth, with a population of 26 million, a jump of almost 8 million since 1990.

Although migrants experience some relative improvement in their living standards, intense urban growth without investment in services eventually leads to serious problems. Slums populated with unskilled workers living hand to mouth put excessive pressure on sanitation systems, water supplies, and social services. At some point, the disadvantages of unregulated urban growth begin to outweigh the advantages for all concerned.

Consider the conditions that exist in Mexico City today. Besides smog, garbage, and pollution brought about by its increased population, Mexico City faces a severe water shortage. Local water supplies are nearly exhausted and in some cases are unhealthy. Water consumption from all sources is about 16,000 gallons per second, but the under- ground aquifers are producing only 2,640 gallons per second. Water comes from hundreds of miles away and has to be pumped up to an elevation of 7,444 feet to reach Mexico City. Such problems are not unique to Mexico; throughout the developing world, poor sanita- tion and inadequate water supplies are consequences of runaway population growth. An estimated 1.1 billion people are currently without access to clean drinking water, and 2.8 billion lack access to sanitation services. Estimates are that 40 percent of the world’s population, 2.5 billion people, will be without clean water if more is not invested in water resources. Prospects for improvement are not encouraging, because most of the world’s urban growth will take place in the already economically strained developing countries.

While the developing world faces a rapidly growing population, the industrialized world’s population is in decline and rapidly aging. Birthrates in western Europe and Japan have been decreasing since the early or mid-1960s; more women are choosing careers instead of children, and many working couples are electing to remain childless. As a result of these and other contemporary factors, population growth in many countries has dropped below the rate necessary to maintain present levels. Just to keep the population from falling, a na- tion needs a fertility rate of about 2.1 children per woman. Not one major country has suf- fi cient internal population growth to maintain itself, and this trend is expected to continue for the next 50 years.

At the same time that population growth is declining in the industrialized world, there are more aging people today than ever before. Global life expectancy has grown more in the past 50 years than over the previous 5,000 years. Until the Industrial Revolution, no more than 2 or 3 percent of the total population was over the age of 65 years. Today in the developed world, the over-age-65 group amounts to 14 percent, and by 2030, this group will reach 25 percent in some 30 diff erent countries. Furthermore, the number of “old old” will grow much faster than the “young old.” Th e United Nations projects that by 2050, the number of people aged 65 to 84 years worldwide will grow from 400 million to 1.3 billion (a threefold increase), while the number of people aged 85 years and over will grow from 26 million to 175 million (a sixfold increase)—and the number aged 100 years and over will increase from 135,000 to 2.2 million (a sixteenfold increase). Exhibit 3.6 illustrates the dis- parity in aging between more developed countries (that is, North America, Europe, Japan, and Australia) and less developed countries. Countries like Kenya, with a high propor- tion of young people, face high education and healthcare costs, whereas countries like the United Kingdom, with top-heavy population pyramids, face high pension and healthcare costs for the elderly with fewer wage earners to bear the burden.

Europe, Japan, and the United States epitomize43 the problems caused by an increas- ing percentage of elderly people who must be supported by a declining number of skilled workers. Compare the data for Japan in Exhibit 3.6, then contemplate the consequences of its extremely stringent immigration policies. In 1998, Japan crossed a threshold anticipated

Population Decline and Aging

43 Philip Longman, “Think Again, Global Aging,” Foreign Policy, November 2010.

cat29974_ch03_052-093.indd 76cat29974_ch03_052-093.indd 76 24/08/12 8:04 PM24/08/12 8:04 PM

Chapter 3 History and Geography: The Foundations of Culture 77

with fear by the rest of the developed world: Th e point at which retirees withdrawing funds from the pension system exceeded the workers contributing to it. Th e elderly re- quire higher government outlays for healthcare and hospitals, special housing and nursing homes, and pension and welfare assistance, but the workforce that supports these costs is dwindling. Th e part of the world with the largest portion of people over 65 years is also the part of the world with the fewest number of people under age 15 years. Th is disparity means that there will be fewer workers to support future retirees, resulting in an intoler- able tax burden on future workers, more of the over-65 group remaining in the labor force, or pressure to change existing laws to allow mass migration to stabilize the worker-to- retiree ratio. No one solution is without its problems.

For most countries, mass immigration is not well received by the resident population. However, a recent report from the United Nations makes the strongest argument for change in immigration laws as a viable solution. Th e free fl ow of immigration will help ameliorate the dual problems of explosive population expansion in less developed coun- tries and worker shortage in industrialized regions. Europe is the region of the world most aff ected by aging and thus by a steadily decreasing worker-to-retiree ratio. Th e pro- portion of older persons will increase from 20 percent in 1998 to 35 percent in 2050. Th e country with the largest share of old people will be Spain, closely followed by Italy. Recognizing the problem, Spain has changed immigration laws to open its borders to all South Americans of Spanish descent. To keep the worker-to-retiree ratio from falling,

Worker Shortage and Immigration

More Developed World, 2010 Less Developed World, 2010

100+ Japan, 1950

80

60

40

20

0 6 4 62 42– +0

100+ Japan, 2055 Forecast

80

60

40

20

0 6 4 62 42– +0

100+ Japan, 2005

80

60

40

20

0 6 4 62 42– +0

80 and older......

50–54..............

25–29..............

Male

Male Female Male Female Male Female

Female

100 million

100 million

0

80 and older..............

50–54...............

25–29....

100200300 million

100 200 300 million

0

Exhibit 3.6 Age Density for World and Japan

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.

cat29974_ch03_052-093.indd 77cat29974_ch03_052-093.indd 77 24/08/12 8:04 PM24/08/12 8:04 PM

78 Part 2 The Cultural Environment of Global Markets

Europe will need 1.4 billion immigrants over the next 50 years, while Japan and the United States 44 will need 600 million immigrants between now and 2050. Immigration will not help ameliorate the problem though if political and cultural opposition to im- migration cannot be overcome.

Th e trends of increasing population in the developing world, with substantial shift s from rural to urban areas, declining birthrates in the industrialized world, and global popula- tion aging, will have profound eff ects on the state of world business and world economic conditions. Without successful adjustments to these trends, many countries will experience slower economic growth, serious fi nancial problems for senior retirement programs, and further deterioration of public and social services, leading to possible social unrest.

Three converging issues in China have the potential of causing a serious gender imbalance:

• China, the world’s most populous country, has a strict one-child policy to curb population growth.

• Traditional values dictate male superiority and a definite parental preference for boys.

• Prenatal scanning allows women to discover the sex of their fetuses and thereby abort unwanted female fetuses.

The first wave of children born under the one-child policy is reaching marriageable age, and there are far too few brides to go around. The ratio of males to females is unnaturally high, hovering around 118 boys for every 100 girls in 2005. Thus, men in their 20s have to deal with the harsh reality of six bachelors for every five potential brides. So what is a desperate bachelor to do? The shortage has prompted some parents to acquire babies as future brides for their sons. Infants are consid- ered more appealing because they are less likely to run away, will look on their buyers as their own parents, and are cheaper than buying a teenage bride. Buying a baby girl can cost as little as $100 and won’t result in the fines imposed on couples who violate birth control limits. Such fines can equal as much as six years’ income.

Another alternative is to marry a relative. At age 20 years, with his friends already paired off, Liu found himself the odd man out. His parents, farmers in a small back water village, could not raise the $2,000 required to attract a bride for their son. Desperate, Liu’s mother asked her sister for a favor: Could she ask Hai, her daughter, to be Liu’s bride? Young women like Hai are not likely to defy their parents. And so Liu and Hai were wed. Chinese officials are starting to worry about the im- balance and have announced a raft of new programs to reverse the trend. These offers include cash payments for couples who have a daughter and let her live, along with privileges in housing, employment, and job training. Some families with girls will also be exempt from paying school fees. Even though the government staunchly defends its one-child policy, it is experiment- ing with allowing couples whose firstborn is a girl to have a second child. In the meantime and until the new policy results in more girls, today’s 20-year-old men will just have to compete if they want a wife.

Sources: Nicholas Zamiska, “China’s One-Child Policy Gets Wider Enforcement,” The Wall Street Journal Asia , January 8, 2008, p. 10; Mark R. Rosenzweig and Junse Zhang, “Do Population Control Policies Induce More Human Capital Investment?” Review of Economic Studies 76, no. 3 (2009), pp. 1149–74.

44“US Tech Sector Eyes Immigration Bill Revival, Cites Worker Shortage,” Agence France-Presse , June  9, 2007.

CROSSING BORDERS 3.3 Where Have All the Women Gone?

World Trade Routes Trade routes bind the world together, minimizing distance, natural barriers, lack of resources, and the fundamental diff erences between peoples and economies. 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. Early trade routes were over land; later came sea routes, air routes, and, fi nally, some might say, the Internet to connect countries.

Trade routes among Europe, Asia, and the Americas were well established by the 1500s. Th e Spanish empire founded the city of Manila in the Philippines to receive its silver-laden

cat29974_ch03_052-093.indd 78cat29974_ch03_052-093.indd 78 24/08/12 8:04 PM24/08/12 8:04 PM

Chapter 3 History and Geography: The Foundations of Culture 79

As pension systems, healthcare systems, and retirement plans continue to crumble under the weight of Baby Boom numbers, we all will need to rely more on the strength of family ties and remember the fundamental human characteristic of interdependence. The problem is that such remembrance is particularly hard for Ameri- cans, as opposed to all other peoples on the planet. America started with The Declaration of Indepen- dence. On July 4, 1776, the founding fathers broke from the tyranny of England to form a new country. That document and the idea of independence represent the essence of being American and literally the most cel- ebrated notion of the nation. Indeed, the goal of main- stream American parenting is to inculcate this idea into the thinking of children: We ensure they make their own beds, make their own lunches, wash their own clothes, do their own homework, drive their own cars, and so forth. How else can they become independent adults? There are at least three problems with this American obsession with independence. First, it stigmatizes the burgeoning numbers of both boomerang kids and grand- parents living with their grandchildren as families across America smartly reunite. According to the most recent U.S. Census figures, there are 22 million adult children

living with their parents and 6 million grandparents living in three-generation households, and both numbers are growing fast. Second, teaching independence actually hasn’t worked anyway, as we will see next. And third, there is really no such thing as independence anyway. There is only interdependence. This American overemphasis on independence is now being recognized by the most independent-minded of all Americans, CEOs. In Bill George’s wonderful book, Authentic Leadership , he argues that the job of chief ex- ecutive depends on six constituencies. Without surprise, the former CEO of Medtronic lists shareholders, employ- ees, customers, vendors, and the larger community. But what is unique, and perhaps even revolutionary, in his list is his own family. He recognizes that his own success as a CEO in part depended of the quality of his family life. Thus, he organized his executive team and respon- sibilities such that he had time to attend kids’s soccer matches and such. Remarkable! Source: Sharon G. Niederhaus and John L. Graham, Together Again, A Creative Guide to Multigenerational Living (Lanham, MD: Evans, 2007); Sandra Timmerman, “Generational Reciprocity: What Does It Mean in the 21 st Century?” Journal of Financial Service Professionals 63, no. 5 (2009), pp. 25–27; “Boomers: New Social Media Mavins,” Research Brief, Center for Media Research , January 26, 2010.

galleons bound for China. On the return trip, the ship’s cargo of silk and other Chinese goods would be offl oaded in Mexico, carried overland to the Atlantic, and put on Spanish ships to Spain. What we sometimes fail to recognize is that these same trades routes remain important today and that many Latin American countries have strong relationships with Europe, Asia, and the rest of the world that date back to the 1500s. Th e commodities traded have changed between the 1500s and today, but trade and the trade routes continue to be important. Today, instead of offl oading goods in Mexico and carrying them on mule carts overland to the Atlantic, ships travel from the Pacifi c to the Atlantic via the Panama Canal. And ships too large for the canal offl oad their containers onto a railroad that crosses the Isthmus of Panama to be met by another container ship. Th e Panama Canal is now being widened and deepened to handle even larger cargo ships. It will be interesting to see how fast the Arctic ice melts before that 2014 completion date. 45

Trade routes represent the attempts of countries to overcome economic and social im- balances created in part by the infl uence of geography. Th e majority of world trade is among the most industrialized and industrializing countries of Europe, North America, and Asia. It is no surprise that the trade fl ow, as depicted in Map 8 at the end of this chapter, links these major trading areas. We must also note though that the fastest growing trade routes are not the traditional ones—now trade among developing nations is burgeoning as never before.46

CROSSING BORDERS 3.4 History, Geography, and Population Collide in America: Returning to Multigenerational Family Living

45“California’s Ports, The Fickle Asian Container,” The Economist , January 28, 2012, pp. 30–31. 46Simon Kennedy, Matthew Bristow, and Shamim Adam, “Th ere’s a New Silk Road, and It Doesn’t Lead to the U.S.” Bloomberg Businessweek, August 9, 2010, pp. 13–14.

cat29974_ch03_052-093.indd 79cat29974_ch03_052-093.indd 79 24/08/12 8:04 PM24/08/12 8:04 PM

80 Part 2 The Cultural Environment of Global Markets

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.47

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 Agean and Ionian Seas.

Communication Links An underpinning of all commerce is eff ective communications—knowledge of where LO8 Communication infrastructures are an integral part of international commerce

goods and services exist and where they are needed and the ability to communicate instan- taneously across vast distances. Continuous improvements in electronic communications have facilitated the expansion of trade. First came the telegraph, then the telephone, televi- sion, satellites, mobile phones, 48 the computer, the Internet, and combinations of them all. 49

47“Climate Change in the Artic, Beating a Retreat,” The Economist, September 24, 2011, pp. 99–100. 48“Mobil Marvels, A Special Report on Telecoms in Emerging Markets,” The Economist , September 26, 2009, pp. 1–19. 49Rajesh Veeraraghavan, Naga Yasodhar, and Kentaro Toyama, “Warana Unwired: Replacing PCs with Mobile Phones in a Rural Sugar Cane Cooperative,” Information Technologies & International Development 5, no. 1 (2009), pp. 81–95.

cat29974_ch03_052-093.indd 80cat29974_ch03_052-093.indd 80 24/08/12 8:04 PM24/08/12 8:04 PM

Chapter 3 History and Geography: The Foundations of Culture 81

Summary

One British authority admonishes foreign marketers to study the world until “the mere mention of a town, country, or river enables it to be picked out immediately on the map.” Although it may not be necessary for the student of foreign marketing to memorize the world map to that extent, a prospective international mar- keter should be reasonably familiar with the world, its climate, and topographic differences. Otherwise, the important market- ing characteristics of geography could be completely overlooked when marketing in another country. The need for geographical and historical knowledge goes deeper than being able to locate continents and their countries. Geographic hurdles must be rec- ognized as having a direct effect on marketing and the related activities of communications and distribution. For someone who has never been in a tropical rainforest with an annual rainfall of at least 60 inches (and sometimes more than 200 inches), antici- pating the need for protection against high humidity is difficult. Likewise, someone who has never encountered the difficult prob- lems caused by dehydration in constant 100-degrees-plus heat in

the Sahara region will find them hard to comprehend. Indirect ef- fects from the geographical ramifications of a society and culture ultimately may be reflected in marketing activities. 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. Without a historical understanding of a culture, the attitudes within the marketplace may not be fully understood. Aside from the simpler and more obvious ramifications of cli- mate and topography, history and geography exert complex influ- ences on the development of the general economy and society of a country. In this case, 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 market- ing 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 commen- surate with their influence on marketing effort.

Map 5 in the following pages illustrates the importance of fi ber optic cable and satellites in providing global communications. Each revolution in technology has had a profound eff ect on human conditions, economic growth, and the manner in which commerce functions. Each new communications technology has spawned new business models; some existing businesses have reinvented their practices to adapt to the new technology, while other busi- nesses have failed to respond and thus ceased to exist. Th e Internet and mobile phone revo- lutions will be no diff erent; they too aff ect human conditions, economic growth, and the manner in which commerce operates. As we discuss in subsequent chapters, the combina- tion of the Internet and the dramatic increase in mobile phone subscribers worldwide has already begun to shape how international business is managed. However, as the combina- tions of new technologies permeate the fabric of the world’s cultures, the biggest changes are yet to come! 50

Opium Wars Taiping Rebellion Confucian philosophy

Manifest Destiny Monroe Doctrine Roosevelt Corollary

Expropriation Greenhouse-gas

emissions

Sustainable development

Key Terms

1. Define the key terms listed above. 2. Why study geography in international marketing? 3. Why study a country’s history? 4. How does an understanding of history help an international

marketer? 5. Why is there a love–hate relationship between Mexico and the

United States?

6. Some say the global environment is a global issue rather than a national one. What does this mean?

7. Pick a country and show how employment and topography affect marketing within the country.

8. Pick a country, other than Mexico, and show how significant historical events have affected the country’s culture.

9. Discuss the bases of world trade. Give examples illustrating the different bases.

Questions

50Ben Charny, “Steve Jobs Reveals New iPad Device,” The Wall Street Journal , January 27, 2010.

cat29974_ch03_052-093.indd 81cat29974_ch03_052-093.indd 81 24/08/12 8:04 PM24/08/12 8:04 PM

82 Part 2 The Cultural Environment of Global Markets

10. The marketer “should also examine the more complex effect of geography on general market characteristics, distribution systems, and the state of the economy.” Comment.

11. The world population pattern is shifting from rural to urban areas. Discuss the marketing ramifications.

12. Select a country with a stable population and one with a rap- idly growing population. Contrast the marketing implications of these two situations.

13. “World trade routes bind the world together.” Discuss. 14. Discuss how your interpretations of Manifest Destiny and the

Monroe Doctrine might differ from those of a native of Latin America.

15. The telegraph, the telephone, television, satellites, the computer, mobile phones, and the Internet have all had an effect on how in- ternational business operates. Discuss how each of these commu- nications innovations affects international business management.

cat29974_ch03_052-093.indd 82cat29974_ch03_052-093.indd 82 24/08/12 8:04 PM24/08/12 8:04 PM

1 The World

2 Global Climate

3 Oil and Gas Production and Consumption

4 Water

5 Global Communications

6 Global Terrorism

7 Religions

8 Global Economy and World Trade

world maps

cat29974_ch03_052-093.indd 83cat29974_ch03_052-093.indd 83 24/08/12 8:04 PM24/08/12 8:04 PM

1 The World

A T L A N T I C O C E A N

Greenland Sea

Norwegian Sea

North Sea

Strait of Gibraltar

English Channel

A T L A N T I C O C E A N

P A C I F I C O C E A N

3 A.M. 4 A.M. 5 A.M. 6 A.M. 7 A.M. 8 A.M. 9 A.M. 10 A.M. 11 A.M. 12 P.M. 1 P.M. 3 P.2 P.M.

WESTERN SAHARA (Morocco)

MOROCCO

CAPE VERDE

BENIN

TOGO

G H

A N

A

LIBERIA

SIERRA LEONE

GUINEA GUINEA- BISSAU

EQUATORIAL GUINEA

SAO TOME & PRINCIPE

GAMBIA SENEGAL

BURKINA FASO

CÔTE D’IVOIRE

MAURITANIA

ALGERIA

TUNISIA

SPAIN

IRELAND

PORTUGAL

AZORES (Portugal)

SVALBAR (Norway)

CANARY IS. (Spain)

UNITED KINGDOM

FRANCE ITALY

NIGER MALI

NIGERIA

GA

CABINDA (Angola)

GERMANY

SWITZ. AU

CZECH

DEN. NETH.

BELG.

C SLO

N O

RW AY

S W

E D

E N

C A N A D A

UNITED STATES

ALASKA (United States)

M E X I C

O

BAHAMAS

CUBA

HAITI

DOMINICAN REPUBLIC

JAMAICA

BELIZE HONDURAS

GUATEMALA EL SALVADOR

NICARAGUA

COSTA RICA

PANAMA

PUERTO RICO (U.S.)

GUADELOUPE DOMINICA

ST. LUCIA

TRINIDAD & TOBAGO

COLOMBIA

VENEZUELA GUYANA SURINAME

FRENCH GUIANA (France)

ECUADOR

P E R U

B R A Z I L

BOLIVIA

PARAGUAY

URUGUAY

ARGENTINA

GREENLAND (Denmark)

ICELAND

FALKLAND ISLANDS

(U.K.)

C

C

H I

L

E

Mexico City

Sao Paulo

Buenos Aires

Rio de Janeiro

Bogota

Lima

Belo Horizonte

Caracas

Porto Alegre

New York

Los Angeles

Chicago Philadelphia

San Francisco

Miami

Detroit

Dallas

Washington

Boston

Houston

Toronto

Montreal

Reykjavik

Monterrey

Madrid

Lisbon

London

Paris

R

Dublin

Oslo

Berlin W

Stockho

Abuja

Li

Nouakchott

Bamako Dakar

Bissau

Niamey

Casablanca

W

TunisAlgiers

Conakry

Monrovia

C

HAWAII (United States)

cat29974_ch03_052-093.indd 84cat29974_ch03_052-093.indd 84 24/08/12 8:04 PM24/08/12 8:04 PM

Albania Austria Belgium Bosnia and Herzegovina Czech Republic Croatia Denmark Serbia and Montenegro Hungary Macedonia The Netherlands Switzerland Slovakia Slovenia

ALB. AUS. BELG. BOS.–HER. CZECH REP. CR. DEN. SERB-MONT. HUN. MAC. NETH. SWITZ. SLOV. SLOVE.

Barents Sea

Arabian Sea

M oz

am bi

qu e

C ha

nn el

Red Sea

Caspian Sea

I N D I A N O C E A N

P A C I F I C O C E A N

A R C T I C O C E A N

Bay of

Bengal

South China Sea

Philippine Sea

Coral Sea

Tasman Sea

Kara Sea

Laptev Sea

Sea Of Okhotsk

Sea of Japan

(East Sea)

East China Sea

Bering Sea

East Siberian Sea

Aral Sea

Black Sea

Lake Baikal

Persian Gulf

M e d i t e r r a n e a n S e a

M. 4 P.M. 5 P.M. 6 P.M. 7 P.M. 8 P.M. 9 P.M. 10 P.M. 11 P.M. 12 A.M. 1 A.M. 2 A.M. 3 A.M.

DEMOCRATIC REPUBLIC

OF CONGO

CENTRAL AFRICAN REPUBLIC

ZIMBABWE

ERITREA

EGYPT LIBYA

SUDAN

ETHIOPIA

KENYA

UGANDA

CHAD

A

RD

FRANZ JOSEF LAND (Russia)

POLAND

GREECE

BULGARIA

ROMANIA SERB.-MONT.

MOLDOVA U K R A I N E

BELARUS

ESTONIA

GEORGIA

ARMENIA

AZERBAIJAN

LATVIA LITHUANIA

R

A

ABON

A )

ANGOLA

TANZANIA

NAMIBIA

BOTSWANA

SOUTH AFRICA

LESOTHO

MALAWI

MADAGASCAR

ZAMBIA

SWAZILAND

SEYCHELLES

MAURITIUS

RÉUNION (France)

COMOROS

RWANDA

BURUNDI

DJIBOUTI

CYPRUS

Y

S. SLOV.

H REP.

HUN.

ALB.MAC.

BOS.– HER.

CR. OVE.

FIN LA

N D

PALAU

FEDERATED STATES OF MICRONESIA

SINGAPORE

TIMOR-LESTE

Macau

SOLOMON IS.

VANUATU

PAPUA NEW

GUINEA

I N D O N E S I A

M A L A Y S I A

BRUNEI

PHILIPPINESCAMBODIA

LAO S

THAILAND

MYANMAR

BANGLADESH

BHUTAN NEPAL

M O N G O L I A

TAIWAN

NORTH KOREA

SOUTH KOREA

JAPAN

I N D I A

C H I N A

TAJIKISTAN

KYRGYZSTAN

UZBEKISTAN

K A Z A K H S T A N

I R A N

TURKEY

IRAQ SYRIA

SAUDI ARABIA

YEM EN

LEBANON ISRAEL

JORDAN

O M

A N

BAHRAIN

R U S S I A

A U S T R A L I A

NEW ZEALAND

SRI LANKA

UNITED ARAB EMIRATES

QATAR

KUWAIT

OMAN

TURKMENISTAN

VIETN A

M

AF GH

AN

IS TA

N

PA KIS

TA N

SO

M AL

IA

C A

M E

R O

O N

RE P.

O F

C O

N G

O

M O

Z A

M BI

Q UE

Athens

Rome

Warsaw

Moscow

Istanbul

Kiev

Helsinki

olm

Maputo

Luanda

Kinshasa

Nairobi

Mogadishu ibreville

Tripoli

N'Djamena

Joannesburg

Windhoek

Gaborone

Harare

Lilongwe

Lusaka

Kampala

Addis Ababa

Astana

Khartoum

Cairo Alexandria

Antananarivo

Dar es Salaam

Cape Town

Seoul

Taipei

Manila

Melbourne

Sydney

Port Moresby

Wellington

Baghdad

Tehran

Tashkent Beijing

Shenyang

Tianjin

Shanghai

Guangzhou Kolkata

Dhaka

Yangon

Bangkok

Kuala Lumpur

Delhi

Lahore

Chongqing

Ho Chi Minh City

Hong Kong

Mumbai

Hyderabad

Bangalore

Karachi

Ankara

Hanoi

Tokyo

Osaka

Colombo

Chennai

Jakarta Surabaya

cat29974_ch03_052-093.indd 85cat29974_ch03_052-093.indd 85 24/08/12 8:04 PM24/08/12 8:04 PM

2 Global Climate

West Wind Drift West

Wind Drift

South Eq uatorial Current

Peru (H um

b o

ld t) C

u rre

n t

E l N

iño

Equatorial Counter Current

North Eq uato

rial C urrent

North P acifi

c C urr

en t

A laska

Current

Lab rad

o r C

urren t

Gu lf S

tre am

North Equa torial

Cur ren

t

C

an ar

y C ur

re nt

South Equatorial Current

Be ng

ue la

C ur

re nt

Fa lk

la nd

C ur

re nt

Br az

il C

ur re

nt

Nor th A

C alifo

rn ia C

urrent

N O R T H A M E R I C A

S O U T H A M E R I C A

A F

E U R

POLAR EASTERLIES

POLAR EASTERLIES

WESTERLIES

WESTERLIES

WESTERLIES

SOUTHEAST

SOUTHEAST

TRADE WINDS

TRADE WINDS

NO RT

HE AS

T

TR AD

E W IN

DS

NO RT

HE

AS T

TR A

D E

W IN

D S

POLA R

POLAR EASTERLIES

POLAR EASTERLIES

WES TER

LIES

W ES

TE RL

IES

El Niño Up to 30 times in a century, the El Niño effect occurs, when east-to-west trade winds sweeping over the Pacific Ocean become unusually weak, allowing warm water, normally held back by the winds, to flow eastward along the equator. The current creates a warm band of water and an area of low atmospheric pressure with violent storms right across the eastern Pacific. The global weather machine is thrown into chaos; random and unusual weather events, such as hurricanes, heatwaves, freak floods, and droughts, occur around the globe, bringing devastation in their wake.

cat29974_ch03_052-093.indd 86cat29974_ch03_052-093.indd 86 24/08/12 8:04 PM24/08/12 8:04 PM

Climate Zones

Ice cap Tundra Subarctic Highlands Marine west coast Humid continental Humid subtropical Mediterranean Arid Semiarid Tropical wet and dry Tropical wet

Warm current Cool current

West Wind Drift

West Wind Drift

Atlantic Drift

So ut

h Eq

ua tor

ial C urrent

W es

t A

us tr

al ia

n C

u rr

e n t

Equatorial Counter Current

South Equatorial Current

Equ atori

al Cou nter Current

Kur o S

iwo Cu

rren t

N o

rth E

q uatorial Current

R I C A

R O P E

A S I A

A U S T R A L I A

POLAR EASTERLIES

POLAR EASTERLIES

PO LA

R EASTERLIES

WESTERLIES WESTERLIES

WESTERLIES

SO U

TH EA

ST

TRA D

E W IN

D S

NOR THE

AST TR

AD E W

IND S

S O U T H W E S T M O N S O O N ( A P R . – S E P T . )

N O R T H E A S T M O N S O O N ( O C T . – M A R . )

PO LA

R E AS

TE RL

IES AR

EAST ERLIE

S

Winds and currents The winds and currents that circulate across the surface of the planet act as a global heat exchange mechanism, transferring warmth from the tropics, which receive the most heat from the Sun, toward the cold polar regions. If air in one region of the globe is heated above the temperature of the surrounding air, it becomes less dense and rises. Cooler, denser air in another part of the atmosphere sinks—a constant cycle of heat exchange and air circulation, known as the prevailing winds. The surface currents of the ocean, which extend to depths of several hundred meters, are influenced by global wind patterns. The transfer of warm water polewards can have a strong influence on neighboring continents—the warm Gulf Stream in the Atlantic, for example, keeps northwestern Europe free of ice.

cat29974_ch03_052-093.indd 87cat29974_ch03_052-093.indd 87 24/08/12 8:04 PM24/08/12 8:04 PM

A T

L A

N T

IC O

C E

A N

IN D

IA N

O C

E A

N

P A

C IF

IC O

C E

A N

P A

C IF

IC O

C E

A N

kg o

e (k

g o

f o

il e q

u iv

al e n t)

o f

e n e rg

y n e e d

e d

t o

p

ro d

u ce

U S $

1 ,0

0 0 o

f G

ro ss

D o

m e st

ic P

ro d

u ct

(G D

P )

p ro

je ct

e d

1 9 9 6

W o

rl d

a ve

ra g

e : 3 7 0 k

g o

e

2 0

1 0

E N

E R

G Y

I N

T E

N S

IT Y

2 0 0

6 2 0

5 1 0

3 6 0

3 9 0

8 9 0

3 4 0

1 6 0

1 7 6 0

7 4 0

7 7 0

W es

te rn

E ur

op e So

ut h

As ia

Af ric

a

So ut

h an

d Ce

nt ra

l

Am er

ica E as

t A sia

Ce nt

ra l E

as te

rn Eu

ro pe

N or

th A

m er

ica

Au str

ali a,

Ja pa

n,

N ew

Z ea

lan d

fo rm

er U

SS R

Ch in

a M

id dl

e Ea

st

O il

flo w

(m ill

io n s

o f

m e tr

ic t

o n s)

9 5 .5

7 6 .2

2 4 .6

1 1 9 .2

5 5 .5

1 1 4 .7

5 7 .0

2 1 4 .6

3 5 .2

8 7 .3

1 6 1 .1

3 6 .9

3 8 .2

1 8 .8

3 1 5 .5

2 8 .4

1 9 5 .4

2 8 .3

3 8 .9

N O

R T

H A

M E

R IC

A

A F

R IC

A

E U

R O

P E

A S

IA

A U

S T

R A

L IA

S O

U T

H A

M E

R IC

A

3 O

il an

d G

as P

ro d

u ct

io n a

n d

C o

n su

m p

ti o

n

E n e rg

y c

o n su

m p

ti o

n o

il an

d g

as fi

e ld

s O

il an

d n

at ur

al g

as a

cc ou

nt fo

r o ve

r 6 0

p er

ce nt

o f

en er

g y

co ns

um p

tio n

in th

e U

ni te

d S

ta te

s, a

nd

sl ig

ht ly

le ss

th an

th at

fo r t

he re

m ai

nd er

o f t

he w

or ld

. O

il p

ro d

uc tio

n p

ea ke

d in

th e

U ni

te d

S ta

te s

in 1

97 0,

an d

is e

xp ec

te d

to p

ea k

w or

ld w

id e

in th

e ne

xt te

n ye

ar s.

T hu

s, a

s ca

rc ity

p re

m iu

m in

th e

p ric

e of

o il

ob se

rv ed

in 2

00 4

m ay

fo re

te ll

tig ht

er s

up p

lie s

in th

e fu

tu re

if d

em an

d g

ro w

th c

on tin

ue s

un ab

at ed

. N

at ur

al g

as m

ay b

e m

or e

p le

nt ifu

l t ha

n oi

l, b

ut g

as is

co st

lie r t

o tr

an sp

or t,

ot he

r t ha

n b

y p

ip el

in e,

s o

th er

e is

m uc

h le

ss w

or ld

tr ad

e of

it th

an th

er e

is fo

r o il.

Su p

p ly

e st

im at

es h

av e

ris en

in re

ce nt

d ec

ad es

a s

m or

e ef

fo rt

h as

b ee

n m

ad e

to fi

nd a

nd m

ar ke

t na

tu ra

l g as

; a nd

p ric

es w

er e

un ex

p ec

te d

ly lo

w fo

r m

os t o

f t he

1 98

0s a

nd 1

99 0s

. G as

is a

ls o

th e

ch ea

p es

t f ee

d st

oc k

fo r m

ak in

g h

yd ro

g en

, p os

si b

ly

th e

d om

in an

t e ne

rg y

ca rr

ie r o

f t he

fu tu

re .

2 0

1 0

W or

ld e

n e

rg y

us e

11

,7 93

m ill

io n t

o e

2 0

0 0

W or

ld e

n e rg

y us

e

9, 34

8 m

ill io

n to

e

1 9 9 3

W or

ld e

n e rg

y us

e

8, 08

0 m

ill io

n to

e

cat29974_ch03_052-093.indd 88cat29974_ch03_052-093.indd 88 24/08/12 8:04 PM24/08/12 8:04 PM

2 0 5 0

F R

E S H

W A

T E

R A

va ila

b ili

ty p

e r

p e rs

o n p

e r

ye ar

cu b

ic m

e te

rs p

ro je

ct e d

1 9 9 7

b o

rd e rs

1 9 9 8

w at

e r

sc ar

ci ty

: u n d

e r

1 ,0

0 0 c

u b

ic m

e te

rs p

e r

p e rs

o n

ch ro

n ic

w at

e r

sh o

rt ag

e s

im p

e d

e e

co n o

m ic

d

e ve

lo p

m e n t

an d

c au

se e n vi

ro n m

e n ta

l d e g

ra d

at io

n

w at

e r

st re

ss :

1 ,0

0 0 –1

,7 0 0 c

u b

ic m

e te

rs p

e r

p e rs

o n

ch ro

n ic

a n d

w id

e sp

re ad

w at

e r

su p

p ly

p ro

b le

m s

re la

ti ve

w at

e r

su ffi

ci e n cy

: o

ve r

1 ,7

0 0 c

u b

ic m

e te

rs p

e r

p e rs

o n

in te

rm it

te n t

o r

lo ca

liz e d

sh

o rt

ag e s

re la

ti ve

s u ffi

ci e n cy

in 1

9 9 5

al th

o u g

h s

h o

rt ag

e p

re d

ic te

d fo

r 2 0 5 0

N o

te : B

as e d

o n

U N

p o

p u la

ti o

n d

at a

1 9 9 6

C H

IN A

T U

R K

E Y

P O

LA N

D

FIN LAN

D

SW EDE

N

NO RW

AY

IR A

Q

M O

N G

O LI

A

R U

S S

I A

N E

PA L

PA K

IS TA

N

U Z B

E K

IS TA

N

T U

R K

M E

N IS

TA N

A Z E

R .

S Y

R IA

T U

N IS

IA M

A LT

A

G R

E E

C E

B U

LG .

M A

C E

. A

LB .

B .-

H .S

.- M

. R

O M

A N

IA M

O L.

U K

R A

IN E

LI T

H .

B E

LA R

U S

LA T.

E S T.

D E

N M

A R

K

S LO

. H

U N

G .

G E

R M

A N

Y

IT A

LY

F R

A N

C E

IR E

LA N

D

fr e

sh w

at e

r 2

.5 %

sa lt

w at

e r

9 7

.5 % 6 9

% g

la ci

e rs

an d

p e

rm an

e n

t sn

o w

c o

ve r

0 .3

% fr

e sh

w at

e r

la ke

s an

d r

iv e

r flo

w s

0 .9

% o

th e

r, in

cl u

d in

g so

il m

o is

tu re

, g

ro u

n d

ic e

, an

d sw

am p

w at

e r

3 0

% f

re sh

g ro

u n

d w

at e

r

IC E

LA N

D

U .K

. N E

T H

. B

E L. L

U X

.

S W

IT Z .C Z E

C H

.

C R

O .

S LO

V. A

U S .

C Y

P R

U S IS R

A E

L JO

R .

LE B

.

K U

W A

IT B

A H

R A

IN Q

A TA

R U

.A .E

. O M

A N

Y E

M E

N

TA N

Z A

N IA

M A

LA W

I

M O

Z A

M B

IQ U

E B

O T

S W

A N

A

Z IM

B .

N A

M IB

IA

A N

G O

LA CO

NG O

G A

B O

N E

Q G

U IN

E A

T O

G O

C A

M E

R O

O N

B U

R K

IN A

FA S

O

LI B

E R

IA F

R E

N C

H G

U IA

N A

(F r.)

S U

R IN

A M

E

U R

U G

U A

Y

PA R

A G

U A

Y F A

LK LA

N D

IS LA

N D

S (U

.K .)

S IE

R R

A L

E O

N E

P O

R T

U G

A L

G U

IN E

A G

U IN

E A

-B IS

S A

U G

A M

B IA

S E

N E

G A

L

W E

S T

E R

N S

A H

A R

A (M

o ro

cc o

)

C A

P E

V E

R D

E

CÔTE D’ IVOIRE

BENIN

GHANA

Z A

M B

IA

D E

M .

R E

P. O

F T

H E

C O

N G

O

B R

A Z IL

V E

N E

Z U

E LA

M E

X IC

OU .S

.A .

C A

N A

D A

C O

LO M

B IA

E C

U A

D O

R P E

R U

A R

G E

N T

IN A

C H

IL EB

O LI

V IA

C E

N T.

A F

R .

R E

P.S U

D A

N C

H A

D

N IG

E R

IA

N IG

E R

A LG

E R

IA

M O

R O

C C

OSP A

IN

LI B

YA

M A

LI M

A U

R IT

A N

IA

T H

E W

O R

LD 'S

W A

T E

R 1 9 9 3 p

e rc

e n ta

g e s

E G

Y P

T

S W

A Z

IL A

N D

LE S O

T H

O

C O

M O

R O

S

M A

D A

G A

S C

A R

M A

U R

IT IU

S

S R

I L A

N K

A

E R

IT R

E A

K E

N YA

U G

A .

D JI

B O

U T

I

SO M

AL IA

G E

O R

G IA

A R

M .

A F G

H A

N IS

TA N

TA J.

K Y

R G

Y S TA

N

K A

Z A

K H

S TA

N

IN D

IA

IR A

N

S A

U D

I A

R A

B IA

E T

H IO

P IA

S O

U T

H A

F R

IC A

R W

A .

B U

R .

G U

YA N

A

B A

R B

A D

O S

PA N

A M

A

N IC

A R

A G

U A

H O

N D

U R

A S

JA M

A IC

A

C U

B A

D O

M R

E P

H A

IT I

B E

LI Z

E

E L

S A

LV A

D O

R G

U A

T E

M A

LA

C O

S TA

R IC

A

W A

T E

R S

H O

R TA

G E

S p

ro p

o rt

io n o

f w

o rl

d 's

p o

p u la

ti o

n fa

ci n g

w at

e r

sh o

rt ag

e s

1 9 9 5 a

n d

2 0 5 0

re la

ti v e

su ffi

ci e n cy

5 8

%

st re

ss 2

4 %

sc ar

ci ty

1 8

%

2 0 5 0

wo rld

p op

ul at

io n 9

.4 b

illi on

wor ld

po pu

la ti

o n 5

.7 b

illi on

19 9

5

st re

ss 5

% sc

ar ci

ty 3

% re

la ti

v e

su ffi

ci e n cy

9 2

%

4 W

at e r

cat29974_ch03_052-093.indd 89cat29974_ch03_052-093.indd 89 24/08/12 8:04 PM24/08/12 8:04 PM

5 G

lo b

al C

o m

m u n ic

at io

n s

M aj

o r

fi b

e r-

o p

ti c

su b

m ar

in e c

ab le

s in

s e rv

ic e a

s o

f M

ar ch

2 0

0 4

C ap

ac it

y (

g ig

ab it

e s

p e r

se co

n d

)

5 0 0

5 0

1 0

Te le

p h o

n e l in

e s

an d

c e llu

la r

su b

sc ri

b e rs

p e r

1 ,0

0 0

p e o

p le

M o

re t

h an

1 ,0

0 0

5 0 1 –1

,0 0 0

2 5 1 –5

0 0

1 0 0 –2

5 0

Le ss

t h an

1 0 0

N O

R T

H A

M E

R IC

A

A F

R IC

A

E U

R O

P E

A S

IA

A U

S T

R A

L IA

S O

U T

H A

M E

R IC

A

cat29974_ch03_052-093.indd 90cat29974_ch03_052-093.indd 90 24/08/12 8:04 PM24/08/12 8:04 PM

A T

L A

N T

IC O

C E

A N

IN D

IA N

O C

E A

N

P A

C IF

IC O

C E

A N

P A

C IF

IC O

C E

A N

S e le

ct e d

m aj

o r

te rr

o ri

st a

tt ac

ks ,

1 9 9 5 –M

ar ch

2 0 0 4

In te

rn at

io n al

t e rr

o ri

st in

ci d

e n ts

, 2 0 0 3

G re

at e r

th an

3 0

1 6 –3

0 6 –1

5 2 –5

1

�

� �

� �� �

�

� �

�

�

�

�

��

� �

� �

� �

� �

� �

� �

�

� �

�

�

�

�

C U

B A

V E

N E

Z U

E LA

C O

LO M

B IA

E C

U A

D O

R P E

R U C H

IL E

A R

G E

N T

IN A

K E

N YA

S O

M A

LI A

E R

IT R

E A

M O

R O

C C

O

A LG

E R

IA

F R

A N

C E

B E

LG IU

M

IT A

LY

C Y

P R

U S

IS R

A E

L

G R

E E

C E

T U

R K

E Y

LE B

A N

O N

IR A

N K

U W

A IT

A F G

H A

N IS

TA N

PA K

IS TA

N

IN D

IA

S R

I L A

N K

A M

A LA

Y S IA

P H

IL IP

P IN

E S

I N

D O

N E

S I

A

G E

R M

A N

Y

N O

R W

A Y

R U

S S IA

S E

R B

. &

M O

N T.

B O

S .&

H E

R Z .

U N

IT E

D K

IN G

D O

M

S A

U D

I A

R A

B IA

IR A

Q

JO R

D A

N

C o

n te

m p

o ra

ry t

e rr

o ri

sm h

as t

w o

m aj

o r

m o

ti va

ti o

n s;

c h al

le n g

in g

th e g

lo b

al r

o le

o f

th e U

n it

e d

S ta

te s

an d

n at

io n al

s e lf-

d e te

rm in

at io

n .

T h e v

io le

n t

ch al

le n g

e t

o t

h e g

lo b

al p

re se

n ce

o f

th e U

n it

e d

S ta

te s

b y

al Q

ae d

a is

a r

e la

ti ve

ly r

e ce

n t

d e ve

lo p

m e n t

th at

t ra

n sc

e n d

s st

at e

p o

lit ic

s. A

w o

rl d

w id

e n

e tw

o rk

o f

te rr

o ri

st c

e lls

, m

o re

o r

le ss

a ffi

lia te

d w

it h a

l Q ae

d a,

h as

t ar

g e te

d b

u ild

in g

s an

d a

ct iv

it ie

s th

at r

e p

re se

n t

W e st

e rn

e co

n o

m ic

, p

o lit

ic al

, an

d c

u lt

u ra

l a ct

iv it

y. T

h e s

u ic

id e a

tt ac

ks o

f S e p

te m

b e r

1 1 , 2 0 0 1 , ta

rg e te

d s

ym b

o ls

o f

U .S

. p

o lit

ic al

a n d

e co

n o

m ic

p o

w e r.

T h e b

o m

b in

g o

f a

h o

te l i

n B

al i t

ar g

e te

d A

u st

ra lia

n y

o u th

s o

n h o

lid ay

in a

M u sl

im c

o u n tr

y. A

m o

re t

ra d

it io

n al

f o

rm o

f te

rr o

ri sm

is e th

n o

-n at

io n al

t e rr

it o

ri al

p o

lit ic

s w

it h in

s ta

te s.

F o

r e xa

m p

le , te

rr o

ri st

ac ti

vi ty

in In

d ia

, P

ak is

ta n , an

d t

h e M

id d

le E

as t

is d

o m

in at

e d

b y

th e g

o al

o f

n at

io n al

s e p

ar at

io n o

r se

lf- d

e te

rm in

at io

n .

N O

R T H

A M

E R

IC A

F o

r d

e ca

d e s

N o

rt h A

m e ri

ca w

as p

ra ct

ic al

ly f

re e f

ro m

t e rr

o ri

st at

ta ck

s. H

u g

e c

as u al

ti e s

an d

n at

io n al

s h o

ck f

ro m

t h e e

ve n ts

o f

9 /1

1 in

st ig

at e d

t h e w

ar o

n te

rr o

ri sm

.

S O

U T H

A M

E R

IC A

T h is

a re

a h as

s e e n m

o re

a tt

ac ks

th an

a n y

o th

e r

o ve

r th

e p

as t

fe w

ye ar

s, b

u t

w it

h r

e la

ti ve

ly f

e w

ca su

al ti

e s.

K id

n ap

p in

g s

an d

at ta

ck s

o n U

.S . o

il in

te re

st s

p re

d o

m in

at e .

A F

R IC

A T

h e p

re se

n ce

o f

fa ile

d st

at e s

an d

p o

ve rt

y ra

is e s

co n ce

rn s

th at

s o

m e

co u n tr

ie s

w ill

b e co

m e

tr ai

n in

g a

n d

r e cr

u it

m e n t

g ro

u n d

s fo

r te

rr o

ri st

g ro

u p

s ta

rg e ti

n g

Is ra

e l

an d

t h e U

n it

e d

S ta

te s.

M ID

D LE

E A

S T

T h e Is

ra e l-

P al

e st

in e

co n fli

ct ; te

rr o

ri st

ch al

le n g

e s

to e

st ab

lis h e d

re g

im e s

(s u ch

a s

S au

d i

A ra

b ia

’s );

an d

in su

rg e n cy

ag ai

n st

a n in

cr e as

e d

U .S

. p

re se

n ce

a re

v o

la ti

le is

su e s

in t

h e r

e g

io n . 2 0 1 0 A

ra b

S p

ri n g

u p

ri si

n g

s co

n ti

n u e

ac ro

ss r

e g

io n .

A S IA

C o

n fli

ct o

ve r

K as

h m

ir, t

e n si

o n s

in A

fg h an

is ta

n a

n d

P ak

is ta

n , an

d al

Q ae

d a

p re

se n ce

in S

o u th

e as

t A

si a

co m

b in

e t

o m

ak e t

h is

r e g

io n

a p

iv o

t in

t h e w

ar o

n t

e rr

o ri

sm .

E U

R A

S IA

T h is

is a

k e y

ar e n a

in t

h e w

ar o

n te

rr o

ri sm

, w

it h m

an y

co u n tr

ie s

re ce

iv in

g fi

n an

ci al

a n d

m ili

ta ry

a id

fr o

m t

h e U

n it

e d

S ta

te s.

R e ac

ti o

n fr

o m

s o

m e Is

la m

ic g

ro u p

s is

e vi

d e n t.

W E

S T E

R N

E U

R O

P E

S e ve

ra l c

o u n tr

ie s

h av

e p

ar ti

ci p

at e d

in th

e U

.S .-

le d

w ar

o n t

e rr

o ri

sm —

b u t

ar e

co n ce

rn e d

t h at

t h e y,

t o

o , h av

e b

e co

m e

ac tu

al o

r p

o te

n ti

al a

l Q ae

d a

ta rg

e ts

a s

a re

su lt

.

Te rr

o ri

sm

6 G

lo b

al T

e rr

o ri

sm

cat29974_ch03_052-093.indd 91cat29974_ch03_052-093.indd 91 24/08/12 8:04 PM24/08/12 8:04 PM

P A

C IF

IC O

C E

A N

A T

L A

N T

IC O

C E

A N

IN D

IA N

O C

E A

N

P A

C IF

IC O

C E

A N

C h ri

st ia

n (n

o m

aj o

r se

ct ),

M u sl

im , H

in d

u C

h ri

st ia

n (n

o m

aj o

r se

ct ),

Tr ad

it io

n al

, B

u d

d h is

m C

h ri

st ia

n (n

o m

aj o

r se

ct ),

Tr ad

it io

n al

, H

in d

u , M

u sl

im C

h ri

st ia

n (n

o m

aj o

r se

ct ),

C h ri

st ia

n (R

o m

an C

at h o

lic ),

H in

d u , M

u sl

im , O

th e rs

C h ri

st ia

n (R

o m

an C

at h o

lic ),

B u d

d h is

m , O

th e rs

C h ri

st ia

n (R

o m

an C

at h o

lic ),

M u sl

im , Tr

ad it

io n al

C h ri

st ia

n (n

o m

aj o

r se

ct ),

M u sl

im , Tr

ad it

io n al

C h ri

st ia

n (O

rt h o

d o

x) , M

u sl

im , A

th e is

m C

h ri

st ia

n (R

o m

an C

at h o

lic ),

M u sl

im , O

th e rs

A th

e is

m (a

n d

C o

m m

u n is

m )

B u d

d h is

m H

in d

u M

u sl

im Tr

ad it

io n al

/T ri

b al

O th

e rs

C h ri

st ia

n (O

rt h o

d o

x) C

h ri

st ia

n (n

o m

aj o

r se

ct )

C h ri

st ia

n (P

ro te

st an

t) C

h ri

st ia

n (R

o m

an C

at h o

lic )

R E

LI G

IO N

S

7 R

e lig

io n s

N O

R T

H A

M E

R IC

A

A F

R IC

A

E U

R O

P E

A S

IA

A U

S T

R A

L IA

S O

U T

H A

M E

R IC

A

cat29974_ch03_052-093.indd 92cat29974_ch03_052-093.indd 92 24/08/12 8:04 PM24/08/12 8:04 PM

8 G

lo b

al E

co n o

m y a

n d

W o

rl d

T ra

d e

W o

rl d

m e rc

h an

d is

e t

ra d

e (in

b ill

io n s

o f

U .S

. d

o lla

rs )

G re

at e r

th an

2 0 0

1 0 1 –2

0 0

3 1 –1

0 0

5 –3

0 Le

ss t

h an

5

W o

rl d

e co

n o

m ie

s

H ig

h in

co m

e U

p p

e r-

m id

d le

in co

m e

Lo w

e r-

m id

d le

in co

m e

Lo w

in co

m e

N o

in co

m e d

at a

N O

R T

H A

M E

R IC

A

A F

R IC

A

E U

R O

P E

A S

IA

A U

S T

R A

L IA

S O

U T

H A

M E

R IC

A

Tr ad

e fl

o w

T h e c

ir cl

in g

p at

h s

o f

tr ad

e b

e tw

e e n

co n ti

n e n ts

s h o

w ju

st h

o w

in te

r- co

n n e ct

e d

t h e w

o rl

d ’s

e co

n o

m ie

s tr

u ly

a re

. T

h e r

ic h e st

c o

u n tr

ie s,

s u ch

as t

h o

se in

N o

rt h A

m e ri

ca , w

e st

e rn

E u ro

p e , an

d t

h e F

ar E

as t,

t ra

d e

m o

st ly

w it

h e

ac h o

th e r,

e xc

h an

g in

g d

iff e re

n t

va ri

e ti

e s

o f

si m

ila r

g o

o d

s su

ch a

s au

to m

o b

ile s.

H o

w e ve

r, tr

ad e a

ls o

fl o

w s

b e tw

e e n h

ig h e r-

an d

lo w

e r-

in co

m e r

e g

io n s.

In t

h o

se ca

se s,

t h e h

ig h -i

n co

m e c

o u n tr

ie s

ty p

ic al

ly p

ro vi

d e m

o re

c o

m p

le x

g o

o d

s, s

u ch

a s

e le

ct ro

n ic

e q

u ip

m e n t,

w h ile

lo w

-i n co

m e c

o u n tr

ie s

p ro

vi d

e p

ri m

ar y

g o

o d

s su

ch a

s m

in e ra

ls .

S m

al le

r, p

o o

re r

co u n tr

ie s

ar e m

o re

lik e ly

t o

b e d

e p

e n d

e n t

o n e

xp o

rt in

g a

si n g

le c

o m

m o

d it

y, s

u ch

a s

co ff

e e o

r p

e tr

o le

u m

. In

g e n e ra

l, p

o o

r, la

b o

r- ab

u n d

an t

co u n tr

ie s

te n d

t o

e xp

o rt

la b

o r-

in te

n si

ve g

o o

d s,

s u ch

a s

te xt

ile s

an d

s h o

e s,

a n d

t h e c

o u n tr

ie s

ri ch

in a

ra b

le la

n d

w ill

e xp

o rt

f o

o d

s su

ch a

s g

ra in

s.

cat29974_ch03_052-093.indd 93cat29974_ch03_052-093.indd 93 24/08/12 8:04 PM24/08/12 8:04 PM

Cultural Dynamics in Assessing Global Markets

4

CHAPTER LEARNING OBJECTIVES

What you should learn from Chapter 4:

LO1 The importance of culture to an international marketer

LO2 The origins of culture

LO3 The elements of culture

LO4 The impact of cultural borrowing

LO5 The strategy of planned change and its consequences

CHAPTER OUTLINE

Global Perspective: Equities and eBay—Culture Gets in the Way

Culture’s Pervasive Impact

Definitions and Origins of Culture Geography History The Political Economy Technology Social Institutions

Elements of Culture Cultural Values Rituals Symbols Beliefs Thought Processes Cultural Sensitivity and Tolerance

Cultural Change Cultural Borrowing Similarities: An Illusion Resistance to Change Planned and Unplanned Cultural Change

Chapter

cat29974_ch04_094-125.indd 94cat29974_ch04_094-125.indd 94 22/08/12 11:12 PM22/08/12 11:12 PM