Chapter 4 Geopolitical Analyses of Regional Markets

1. Chapter 4Geopolitical Analyses of Regional Markets John S. Hill

2. Geopolitical Analyses of Regional Markets Regional Development in the Worldwide Context • Regional Markets: Geopolitical Analyses • Geographic Characteristics • Historical & Cultural Perspectives • Commercial Characteristics North America Latin America Western Europe Eastern Europe Middle East and Africa Asia Figure 4-1: Geopolitical Analyses of Regional and National Markets: Topic Overview

3. Chapter Outline • Introduction: The Importance of Geopolitical Studies • Regional Development in the Worldwide Context • North America • Latin America • Western Europe • Eastern Europe • Middle East and Africa • Asia

4. The Importance of Geopolitical Studies • Recognizing how historic factors have affected regional development and the impact of geography on national economic and cultural development within the regional context • Understanding regional and national ethnic and linguistic compositions • Understanding how climate and topography affect country and regional communications and infrastructure development

5. 1998 GDP Billions of $ Average GDP per Capita ($) Range per Capita ($) Population Projections (Millions) 2000 2010 2020 Africa $468 1.5% $672 $100 (Ethiopia) to $3,730 (Mauritius) 696 9.7% 1,009 1,230 Middle East $421 1.4% $2,661 $280 (Yemen) to $17,870 (UAE) 214 4.0% Asia $7,802 25.5% $2,210 $210 (Nepal) to $32,350 (Japan) 3,122 58.8% 4,075 4,495 North America $10,645 34.8% $25,138 $19,170 (Canada) to $29,240 (U.S.) 290 5.5% 330 358 Latin America $1,832 6.0% $3,404 $410 (Haiti) to $8,030 (Argentina) 466 8.8% 583 642 Western Europe $8,496 27.8% $17,220 $3,160 (Turkey) to $39,980 (Switzerland) 443 8.3% 523 521 Eastern Europe $609 2.1% $3,543 $370 (Tajikistan) to $9,780 (Slovenia) 239 4.5% 307 317 Australasia $275 0.9% $17,584 $14,600 (NZ) to $20,640 (Australia) 21 0.4% 33 37 Totals $30,548 (100%) 5,309 (100%) 6,862 7,601 World and Regional Analyses: Gross Domestic Products and Populations

6. NORTH AMERICA • Geographic Characteristics

7. NORTH AMERICA Geography • Geographically large (Canada #2, US #4) • Canada’s latitude gives cold climate and population concentrations in south • US’s climate varies from cold north to sub-tropical south; benign topography • Good natural resource base—agriculture, minerals and energy

8. NORTH AMERICA • Historical and Cultural Perspectives • Prior to 15th and 16th centuries, North America was inhabited solely by Indian tribes and Inuit • 1492, Columbus “discovered” the new continent • Immigrants began from Mayflower in 1620; established Anglo Saxon culture and English as the major language • Liberation war from the British in 1776 • Civil War of 1861-1865 united nation • 1823 Monroe Doctrine asserted national sovereignty confirmed US independence from Europe • US accounts for approximately 5 percent of the world’s population, but it is responsible for over a quarter of the world’s gross domestic product (GDP)

9. NORTH AMERICA • Commercial History • Early North American settlements were agriculturally based • In 1869, the first trans-US railroad opened; by 1900 the telegraph facilitated trans-continental communications. • The US industrial revolution occurred between 1870 and 1920 • By 1914, US output exceeded that of Britain, France and Germany combined • By the 1920s, it produced 40 percent of the world’s coal and half its manufactured goods

10. LATIN AMERICA • Geographic Characteristics

11. LATIN AMERICA Geography • Geographically large • Proximity to equator results in hot, tropical climate over much of region (rain forests) • Excellent agriculture, minerals, and energy

12. LATIN AMERICA • Historical and Cultural Perspectives • Many Latin American countries had Indian civilizations predating 15th and 16th centuries (Aztecs, Mayas, Incas) • Modern Latin American history dates from the early 1500s, when the Spanish colonized most of the region and the Portuguese occupied Brazil • Independence was won from 1810 to 1824 • US interest in Latin America increased in the early twentieth century • Southern European influence on Central and South America is evident in language; religion and social class

13. LATIN AMERICA • Commercial History • Early interest in the region was spawned with the discovery of silver at Potosi • In the 17th century, tobacco, hardwood and coffee crops became extensively cultivated in the Caribbean and Brazil • Slavery contributed to agricultural development • The collapse of the global economy in the 1930’s caused civil unrest throughout the region • In the 1980s, privatization and movements towards market blocs followed democratization trends and opened up Latin markets to trade and investment

14. WESTERN EUROPE • Geographic Characteristics

15. WESTERN EUROPE • Historical and Cultural Perspectives • Romans established Europe-wide empire from 100 BC to 400 AD; built regional infrastructures and established trade • Colonizing activities of 16th through 19th centuries established the region as political and economic leaders worldwide • Britain was first country to industrialize (between 1750 and 1830) • The 1930s economic slump left its mark on European society and politics • To pay for Western Europe’s mixed economy, personal tax rates are high compared to those of non-European countries • Continue to maintain national distinctions, but significant similarities exist among Europeans • Feudal history and heredity monarchs have contributed to

16. WESTERN EUROPE Geography • Northern latitude means temperate rainy climate; good for agriculture • Geographically compact (trade, communications, infrastructure) • Extensive coastlines (naval expertise)

17. WESTERN EUROPE • History • Romans built roads, formalized trade routes, made region-wide laws, established a common currency • Monarchies/aristocracies establish hereditary social class system • By 15th century, superior sails, rudders, compasses, and maps enabled ships to sail longer distances • Colonization establishes trading routes and global reach • 17th century – British, German, Belgian, and Dutch banking systems establish financial infrastructures • By 1914, region was the center of world commerce • 1930s depression highlights needs for social welfare systems and mixed economies • 1950s-70s: de-colonization and trade bloc formed

18. WESTERN EUROPE Commercial History • 1952 European Coal and Steel Community formed • 1957 Treaty of Rome establishes European Economic Community—6 original members • 1960 European Free Trade Association formed • 1973 European Community expands to 9, then to 15 by 1995 (became the European Union), then to 25 by 2004 • 1992 Abolition of non-tariff barriers within the EC • 1999-2002: establishment of Euro as common currency • European multinationals account for about half of the world’s $7.1 trillion of FDI • Trend toward privatization and deregulation picked up pace during the 1990s.

19. EASTERN EUROPE • Geographic Characteristics • Eastern Europe includes the Central European countries of Poland, the Czech and Slovak republics, Hungary, the Balkan countries, Russia, and the other states of the former Soviet Union • Russia dominates as world’s largest country (11 time zones); northern latitude means colder climates • Minerals and energy in good supply • Agriculture problematic

20. EASTERN EUROPE • Historical and Cultural Perspectives • Much of Eastern Europe’s post 1500 history is tied to Russia • Early attempts to modernize were made by Peter the Great (1672-1725); feudalism dominant into 20th century • Russian Revolution of 1917-18 engineered by Vladimir Ilyich Ulyanov, known as Lenin, and Leon Trotsky • 1945 Yalta Conference establishes Iron Curtain • Communism and cold war dominate until 1980s when perestroika (restructuring) and glasnost (openness) occur • 1991: USSR dismantled--1990s saw the countries of Central and Eastern Europe implement democratic reforms • 2004 Many eastern bloc nations join EU

21. EASTERN EUROPE • Commercial History • In 1924 Joseph Stalin collectivized agriculture and initiated comprehensive industrialization programs • In 1992, Hungary, Poland, and the Czech and Slovak republics signed a Central European Free Trade Agreement • In 1994, the EU completed free trade agreements with the Baltic States of Latvia, Lithuania, and Estonia • Privatization of former state-owned businesses has been brisk, with an estimated $200 billion of assets returned to private shareholders

22. MIDDLE EAST AND AFRICA Geographic Characteristics • Middle East: harsh desert climate; some agriculture though rainfall is variable; OIL dominates regional economy • Africa: large land mass; situated on equator; hot, humid climate means tropical vegetation and difficulties in establishing infrastructures; other parts of Africa desert-like with crop-raising problems; major source of minerals

23. MIDDLE EAST AND AFRICA • Historical and Cultural Perspectives • The Middle East and North Africa: Key event was establishment of Islam 7th century and its spread throughout Middle East and North Africa. Ottoman Empire major influence until 1918; colonial interest heightens with oil discoveries; many nation states established in 20th century. Internal tensions over Palestine; external tensions with western powers • Africa: Source of slaves 16th-19th centuries; colonized 19th century (1884 Berlin Conference) and major interests in mineral deposits in 20th century; de-colonization after 1945 and many ethnic tensions cause problems establishing democracies; AIDS virus major problem in 21st century

24. MIDDLE EAST AND AFRICA • Commercial History • Middle East major trader with Asia via the Silk Road 6th century onwards • From the 1870s to 1918, agricultural produce was the major Middle Eastern export, mainly to Europe • The 1930’s depression devastated Middle Eastern economies with major declines in raw material and commodity prices • Since the 1950s, oil has been dominant in the Middle Eastern economies; tensions over oil price rises • African economic progress has been slowed by ongoing internal conflicts and deflated world prices for commodity exports; trade blocs starting to form (COMESA, SADC)

25. ASIA • Geographic Characteristics

26. ASIA Geography • Large geographic area dominated by Pacific Ocean; island states of Philippines, Indonesia • Large nation states of India (1 billion people) and China (1.2 billion) • Climatically variable: sub-tropical, monsoons, earthquakes

27. ASIA • Historical and Cultural Perspectives • Dominant religions: Buddhism, Hinduism, Islam, Confucianism and Taoism • China an early civilization, with Confucius as a major influence on Chinese government and society for nearly 2000 years; imperial dynasty overturned 1911 • In India, Hindu religion dominates history and economic development • Japan: Island status insulated nation from western influences until 1868 Meiji Restoration; modernization and imperial aspirations caused problems until 1945 • Colonization by Europeans a major influence on many Asian nations

28. ASIA • Commercial History • China an early innovator (iron, gunpowder, compass) • Asia from the 15th century was a source of silks and spices • China and Japan reluctant to open to west until 19th century • Japan dominates Asia as the first to industrialize. Resurgence after 1945 as the country surged into world markets after the 1960s • Asian economic growth in the latter half of the 20th century was powered first by Japan, then by South Korea, Hong Kong, Singapore and Taiwan • More recently, China, India, Malaysia, Thailand, Indonesia, and the Philippines have joined the Asian economic resurgence

29. Key Points • Geopolitical studies • North America • Latin America • Western Europe • Eastern Europe • Middle East and Africa • Asia

30. Key Points • Geopolitical studies are important to international business people as they provide key insights into regional and national development and valuable background in understanding current policies and problems.

31. Key Points (Americas) • North American development progressed out of European colonization, with religious freedom and non-hereditary social-class systems as hallmarks of the new American society. Pioneering and westward expansion contributed to societal characteristics of self-reliance and individualism. • Latin America was colonized by the Spanish and Portuguese. Their language, religion, and hereditary social-class system are still apparent today.Independence occurred between 1810 and 1824. Instability characterized the next 150 years until major movements toward democratization and market-forces economies during the 1980s and 1990s.

32. Key Points (Western Europe) • Western Europe’s compact geography and temperate climate significantly aided the region’s industrialization and trading efforts, and historic monarchies and feudal background laid the foundations of a hereditary social-class system. • European colonization gave the region worldwide influence up to the mid-20th century. World wars and common historical heritages formed the basis for today’s economic and political integration.

33. Key Points (Eastern Europe) • Eastern Europe’s geographic size and climate significantly shaped its development. • Russian influence through the communist revolution of 1917-18 and the Yalta Agreement were major influences on world politics up to the 1980s, when democratization and market-forces economies have emerged to re-shape regional destinies.

34. Key Points (ME & Africa) • Development was greatly influenced by geographic size, climate, natural resource deposits. • Both regions were heavily affected by European colonizing efforts. • Present day development has been hindered by politics and religion (Middle East) and by ethnic compositions (Africa).

35. Key Points (Asia) • Modern history has been influenced through European colonization activities. • Ethnic, cultural, and religious diversity is apparent over much of Asia and has affected regional development. • Japan has historically been the dominant regional power, though China’s economic ascendancy has altered the regional, political, and economic balance.

36. Key Points • Geography and history are primary shapers of regional and national cultures. • Geographic size, climate, and topography affect commercial interactions within markets and with the outside world. • History records how peoples have responded to their geographic and environmental circumstances and provides key insights into current cultures and behaviors.