The geographical and the historical [604502]

The geographical and the historical
international env ironm ents

We re member that w e have been dis cussing the task of the interna tional marketer
as being to mold the controllable elements of marketing (product, price,
distributio n and pr omotion) to t he un controllable elements of the environm ent,
coming from both t he dom estic environmen t and from the foreign environm ents.
The dom estic environm ents are usually known and do not need t o be studied, w hile
the foreign environm ents are form ed of variab les that have to be studied in order to
adapt the mar keting strategy of the com pany to them .
The international environments have more elemen ts, that all have to be studied:
geographic e nvironm ent, historic envi ronm ent, cultural environment, political
environm ent, legal environment and eco nomic environment. We will be discussi ng
the internatio nal environm ent from the perspective of its co mponents.

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2.1 The geographical environment

We will look at how the geographic environment of a country can influence the
marketing activity of a company in that country.
How can geography influence the marketing decisions of a company?
Geography can be studied by looking at its elements and their possible influence over the company:
• Climate (temperatures, humidity)
• Physical terrain (altitudes, forms)
• Resources (raw materials, energy)
• Population (size, growth rates, structure)
First of all through its climate . Climate can affect on the one hand the type of
products that can be sold or not in a specific market and on the other hand it can affect the use and the function of the product and consequently to require the
product’s adaptation.
For instance, when we talk about products suitable for certain markets depending on the climate, it does not make sense to sell winter boots in the warm Africa and probably swimming suits or ice-cream are less sold in northern countries with colder climates.
Climate of a country/market can also requi re the adaptation of the product for those
specific climates. One of the classical exam ples is the one of automobiles, that will
have air conditioning by design in Southern Europe and in the Arab countries and a
better heating system in northern countries.
Again, the climate differences in Europe determined Bosch-Siemens company to
modify its washing machines: for the north of Europe where the c limate is cold they
designed the washing machines with a spin cycle of 1000-1600 rotations/minute so that the clothes come out almost dry as consumer s do not have the possibility to hang them
to be dried by the sun. For the south Europ ean countries the number of rotation/minute
is usually lower, around 500 rotations/minute, as people would hang their clothes out in the sun to be dried
1.
Climate can also influence the way the products are distributed in a country. High humidity requires better packaging and cold weather requires too better packaging, while hot weather requires refrige rators for food products.
For instance, the Coca-Cola company when expanding in Russia, transferred its
transportation trucks from Romania to Siberia. Given the fact that the trucks had

1 Cateora, Ph. et al., 2002, International Marketing , McGraw Hill, p. 59.

The geographical and the historical international environments
only the metal structure and in rest were formed of plastic covers, they were not
sufficient to preserve the Coca-Cola bottles in the minus 30-400 Celsius degree
winters of Siberia. At the beginning a large quantity of the products ended up damaged (broken bottles) at destination b ecause of the very low temperatures. The
company had to equip the trucks with special heating systems in order to be able to
use these trucks during winters in the cold Siberia.
There are countries where the climate diffe r from one region to another, such as
Canada, USA, Russia, conferring a higher degree of heterogeneity to these markets
that would require adapted products, packages and distribution means.
Temperature also influences the efficien cy of people at work, and the aspect
becomes more important when the degree of involvement in that market increases. Empirical research had showed that at a 26
0C temperature only 80% of the work
capacity is used by individuals, at 330C, the work capacity is reduced at 50% and
over 350C the work capacity is reduced at 20%. In case of intellectual work, if
enough motivated, people will work with similar efficiency up to 330C2.

Another geographical aspect worth studying is the physical terrain or the
topography of the land in foreign countries. Physical terrain is important to be studied in a country because it can affect the distribution of the product in that
country. High mountains, tropical forests, deserts constitute natural barriers that make transportation and communication more difficult in a country. The countries
of Latin America have a topography that is dominated by high mountains and
tropical forests. The tropical forest from th e Amazon basin is the largest rain forest
in the world with a three million square meters surface. This is inhabitable but also impenetrable. Such a landscape represents a strong natural barrier that inhibits
national growth, trade and communication. Pe ople live in large urban areas that are
usually isolated from one another. There are inadequate roads and poor
communication between the major cities of those countries. Because of the
physical isolation, different cities have different lifestyles and different population characteristics and therefore can be treated as different markets.
Existence of rivers, seas and oceans is considered to be a positive aspect for
transportation. But even in this case a careful study of the natural phenomena has
to take place because otherwise mistakes can be made.
For instance, an American food processing company decided to build a plantation of pineapples in Mexico in the delta of the river Mexico. They wanted to transport the ripe fruits on the river down the stream to be canned and afterwards to load

2 Pop. N. et al ., 2001, Marketing Interna țional , Editura Uranus, Bucureș ti, p. 91.

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them directly on ocean ships and send them to various markets of the world. But
when the ripe season arrived the compan y noticed that it had a problem: the crop
maturity coincided with the flood stage of the river and the water stream was so strong that the barges could not go up stream up to the plantation. They had to close down the operation
3.
Also lakes and seas could facilitate transpor tation and access to that country. At the
same time they can also indicate that those countries can be markets for certain
products such as entertainment, sport, tourism products.

Another element of geography that will have an influence on the company’s
activity is represented by the natural resources, such as raw materials, sources of energy. These are important to be studied in a foreign country, when the company
intends to make production investments in that country.
The location of the earth’s resources is not equally distributed between countries. In many cases a nation’s demand for a particular mineral or energy does not coincide with domestic supply and the need of imports appear. Also countries that
have been self-sufficient in respect to the use of one mineral, run out of it and
become net importers of that raw material. Is the case of USA that up to 1942 was completely self sufficient as the petroleu m is concerned and who became a major
importer by 1950, its degree of dependency on foreign resources increasing from 36% in 1973, to more than 56% in 2000
4.
Knowing the availability of natural resources in one country can be an indication of
larger potential for economic development in the future, therefore making that
country more interesting for foreign investors.

Another important elem ent of geography is population . Population is a good
indicator to estimate the market size in a country for most consumer goods. Even when we talk about industrial goods, populat ion is important given the fact that
industrial demand is a derived demand from the demand for other products, in
many instances consumer products. Therefore, the study of the population of a country is absolutely necessary when stud ying a foreign market. The company
should be interested in:
• the size of the population , as it gives us an idea about the actual market
potential for certain goods (mainly c onsumer goods, but also industrial
goods).

3 David A. Ricks, 2000, Blunders in International Business, Blackwell Publishers, Cambridge, p. 20.
4 Cateora Ph. et al., 2002, Op. Cit., p. 67.

The geographical and the historical international environments
• the growth rate of population is also of interest, as it gives us an idea
about the future market potential. It is not enough to have a great
market potential now, it is important to see what will happen also in
the future. How much is it worth to be involved in that country? The higher the future market potential, the higher the involvement. Sometimes the present market potential is not very high, but there are chances that this will increase in the future, making worth the entry.
• the structure of population according to different criteria such as age,
gender, education offers information about potential market segments. The evolution of population on different structures gives an indication about how different market segments will evolve in the future. The increase in the life expectancy in many countries indicates that third
age population will increase and there will be market for products designated to this group in the future. An example of future shifts in the structure of population of China is presented in box. no. 2.1.
• the density of population and the urbanization degree is another
important indicator. The way the population is distributed between rural and urban areas in a country influences on the one hand the market segments existent in the country, as consumers in urban areas have different characteristics, education, incomes, lifestyles and consequently demands than those in rural areas. Also the way the
company will distribute the product and will communicate with people depends on their density. The more dispersed is the population the
more difficult distribution and communication will be. The more concentrated the population (usually in urban areas) the easier the distribution and communication will be . It is estimated that by 2025,
the population of the world will reac h almost 8 billion inhabitants and
more than 60% of them will live in urban areas
5. Not always living in
urban areas, means better life conditions. In Mexico City for instance, that has over 20 million inhabitants there are 2 million families who have no running water and no sewag e facilities in their homes. There
are produced 14 000 tons of garbage everyday and only 8 000 tons are processed, the rest being left on the streets and getting into the atmosphere. Consequently Mexico City has major pollution problems
6.

5 http://www.census.gov
6 Cateora Ph. et al, 1999, International Marketing , McGraw Hill, p. 71.

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At present the largest city in the wo rld became Tokyo, that over-passed
26 million inhabitants in 2000, due mainly to the migration from rural to
urban areas. The migration from rural to urban areas is a phenomenon met in many countries due to increased desi re to access to education, health
facilities and better life of people all over the world.

BOX NO. 2.1 Shifts in the population’s gender structure in China

In China, due to the large increase of the population, the government took measures to
control the population growth, by allowing on ly one child per couple. This regulatory
measure coupled with the traditi onal values (that dictate the superiority of male over the
female), this defined preference of parents fo r boys and the possibility to prenatal scanning,
will disequilibrate the balance of the gender structure in China. Given the fact that in rural
areas people are more traditional and willing to have boys they will give up girls before birth, while in the urban areas where people are more educated people will have what God gave them, even if is a girl. Consequently th ere will be more girls in towns and more boys
in villages. It is appreciated that in 10 years time the number of male will be higher than the
number of female, with 15% positive difference in favor of males in urban areas and 45% positive difference in favor of males in rural areas. Besides the gender desiquilibrium, it will also take place an educational and lifestyle mismatch. There will be more less educated men in rural areas, while in urban areas will live many educated female. Few of them will find a suitable partner.

Cateora Ph. and Graham J.,1999, International Marketing , McGraw Hill, p.75.

Table no. 2.1 presents the structure of the world’s population by its provenience
from different groups of countries according to their level of development and
table no. 2.2 presents the population of a number of selected countries from the
208 total number of countries existent in 2002.

The geographical and the historical international environments
Table no. 2.1 Structure of world’s population on groups of countries, 2002

(thousand)
Group of countries Population
World 6.198.688
Low income countries 2.494.603
Middle income countries 2.737.920
Lower middle income 2.408.492
Upper middle income 329.428
Low and middle income countries 5.232.522
East Asia and Pacific 1.838.485
Europe and Central Asia 472.948
Latin America and Caribbean 524.905
Middle East and North Africa 305.823
South Asia 1.401.455
Sub-Saharian Africa 688.907
High income 966.165
European Union 305.483
Source: http://www.worldbank.org ,

Table no. 2.2 Population of selected countries, 2002
(thousand)
Rank in total Country Population
1. China 1.280.400
2. India 1.048.641
3. United States 288.369
4. Indonesia 211.716
5. Brasil 174.485
6. Pakistan 144.902
7. Russian Federation 144.071
8. Bangladesh 135.684
9. Nigeria 132.785
10. Japan 127.150
11. Mexico 100.819
12. Germany 82.485
15. Turkey 69.626
20. France 59.485
21. United Kingdom 59.229
22. Italy 57.690
25. Ukraine 48.717
47. Romania 22.300
90. Bulgaria 7.965
Source: http://www.worldbank.org ,

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2.2 The historical environment

It is important to know the history of a country because history influences present
behaviour of nations and c onsequently of consumers. Current and especially past
events explain a country’s attitudes, prejudices and fears.
By studying the history of a country we can find out and understand:
9 How it perceives its neighbours: as Romanians look suspiciously at Hungarians and vice-versa due to history.
9 How it sees itself: we remember the well known “history book image” of Romania as a little country attacked by other empires over time. If we look at the map of Europe we are not so little and there are many other countries that are much smaller than Romania. But the image was transmitted over time due to the permanent fight of the Romanian people for autonomy and independence in front of the empires of the past such as Turkey, Russia, Austro-Hungary.
9 What is the role of government in the business sector in that country;
9 What are the sources of management authority: such as age and experience in Japan and abilities and skills in USA.
9 Its attitudes towards multinational companies: a country that was always in war over time, will be reluctant to open to foreigners.

Looking back at history we can understand the reluctance of British in building the
Channel Tunnel because of their continuous history of war with France. By looking back at history we can understand why Greeks do not like Turkish products, why Arabs (or at least some of them) boycott American products.

On the other hand is very important to know the history, as the locals see it, because history is subjective : the same historical event is interpreted in one way in
a country and can be recorded and interpreted completely different in the other country. While USA sees itself as the guardian of the Latin America and considers all its interventions in the countries of South America as justifiable acts of foreign policy, Latin American countries see American acts as unwelcome intrusions in their affairs. See box no. 2.2.

The geographical and the historical international environments
BOX NO. 2.2. USA and South America: whose history?

A lot of USA activities in the past two centuri es in South America is based on the Monroe
Doctrine and the Manifest Destiny. The Manifest Destiny meant that Americans were
chosen people by God to create a model societ y. This was justifying for the annexation of
Texas, Oregon, New Mexico and California to USA during and after mid 1800’s. The
Monroe Doctrine , that is a cornerstone of the USA foreign policy was enuncited by
president Monroe and has three basic ideas: 1) no further European colonization in the
New World, 2) abstention of the USA from the European political affairs and 3)
non-intervention of European governments in the regions of West ern Hemisphere. At
beginning of 1900’s Theodore Roosevelt further developed the Monroe Doctrine, in what
is was known as the Roosevelt Corollary that stated that not only would the USA prohibit
non- American intervention in Latin Americ a, but it would also police the area.

The Mexican-American war lasted from 1846 to 1848. The event might be dismissed as
irrelevant history north of border, but not south of it. During the war the San Patricios
(St. Patrick’s Battalion) were approximately 250 Irish men who disserted from the USA army and fought for Mexico. When the region felt to Americans, 30 of the rebels were
hanged and the others were inscripted on th eir face with a D (fro m desertor). They
became a symbol of the Mexican independence and are honored every year both in Mexico and in Ireland.

In 1903 the state of Panama was formed in just 67 hours with the American help. After
the Colombian Senate refused to sell the Panama Canal zone to USA, a group of
Panamian rebels traveled to Washington and agreed to stage a USA backed-revolution.
The flag, the constitution and the declaration of independence were created in New York.
On 3 November 1903 USA bribed the Colombian garrison to lay down their arms and the
revolution began. On 6th of November US A recognized the sovereignty of the State
Panama and on 18 November 1903 the Pana mian Ambassador signed the Panama Canal
Treaty. In 1977, USA agreed to relinquish control of Panama Canal Zone in 1999.
In 1905 based on his corollary Roosevelt forced the Dominican Republic to accept the
appointment of an American economic adviser, who very quickly became the financial
director of the small state.

Cateora Ph. et al., 1999, International Marketing , Irwin McGraw Hill, p. 59; pp. 77-81.

The past and recent history of Europe is seen differently by different countries. A
group of Central and Eastern European schol ars were in Hungary and were making
a trip to Visegrad, a well known historical town of Hungary. While presenting the Visegrad castle, the Hungarian guide looke d in one direction and said: “In that
direction is a country called Slovakia. This country had never existed, the nation
was invented at the beginning of the century”. Immediately Anetta from Slovakia reacted to the comments. The guide who had no intention to offend anybody (but
she did not ask where from the group was before making her presentation) tried

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to justify herself that a very famous H ungarian historian wrote that. And Anetta
from Slovakia argued that the Slovakian historians have written completely
different.

The recent events in Iraq are another pr oof of the different interpretation of
historical events. While USA forces with their allies saw their intervention as being
helpful for the Iraqi people, after two years of constant boycott of the American
troups and administration, they handed in administration to locals, who perceived Americans and their allies as intruders.
If we want to understand attitudes of a count ry and its behaviour, we have to know,
how it sees history.