“Doctors Without Borders” is doing an excellent job in supplying medical help to some of the poorest people on earth. But that’s only a small part of what they really need. What they really need is a much higher standard of living. And only a new organization which I’m calling “Marketers Without Borders” can do that.
Why are there so many wealthy people living in large cities? And conversely, relatively few wealthy people living in small cities and towns?
Why are larger countries wealthier than smaller countries? Why are China and India the fastest-growing economies in the world?
What creates wealth anyway? It’s not management. It’s not marketing. It’s not production. It’s “focus”, another word for specialization.
Take the ten countries in North America: America, Canada, Mexico and the seven countries in Latin America: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. America (population: 318 million) has considerably more people than the 200 million people living in the other nine countries. And so is America’s per-capita gross domestic product much larger than those of the other nine countries. America’s per-capita GDP is $55,800, more than twice as much as the average $19,800 per-capita GDP of the other nine countries. Larger countries are wealthier.
Why is America much wealthier than the nine smaller countries? Because companies in America are more focused than companies in the other countries. And the more focused a company is, the more efficient it becomes, creating wealth for the company’s owners and its employees. Visit a small country like Honduras (population 8.6 million. per-capita gross domestic product $4,900). You’ll find the typical Honduran company into a wide range of businesses: Perhaps a hotel, a restaurant or two, gas stations, a trucking business and a construction firm. All relatively inefficient and not very profitable.
As time goes on, smaller countries fall farther behind larger countries. Suppose you started a software company in Honduras? How could you compete with Microsoft? Or suppose you started a computer company in Honduras. How could you compete with Lenovo? Or a smartphone company. But how could you compete with Apple?
It’s no secret what creates wealth. In his book The Wealth of Nations, published in 1776, Adam Smith had the answer: The division of labor leads to specialization, expertise, dexterity, and machinery, thereby producing greater wealth. But, as Smith pointed out, there is a limit to specialization: as it is the power of exchanging that gives occasion to the division of labor, so the extent of this division must always be limited by the extent of the market. In other words, the larger the market, the more specialization and the greater the wealth. The smaller the market, the less specialization and the smaller the wealth.
Compare a big city with a small town. You won’t find many rich people in a small town unless they moved there from a big city. You will find many rich people in a big city because wealth is created by specialization. And specialization can only happen when the market is large enough.
Why are some small countries rich?
The per-capita gross domestic product of Qatar, a country with a population of just 2.2 million, is $132,000. The per-capita GDP of Luxembourg, a country of just 540,000 people, is $99,000. There are eight countries wealthier than America and all of them are small-population countries. In addition to Qatar and Luxembourg, they include Singapore, Brunei, Kuwait, Norway, the United Arab Emirates and Switzerland. Total population of these six countries: 34.5 million. Less than the population of the state of California.
What makes a small country wealthy? Exports. Petroleum in the case of Qatar. Financial services in the case of Luxembourg. Here are the values of each country’s exports as a percentage of the country’s gross domestic product.
Assuming a country has a free-market economy, there are only two ways for a country to become wealthy. Either you are a large country like America or you are a small country with a large export economy. There’s no way a small country can become economically successful by citizens selling things to each other. A small country can only become economically successful by selling things to people in other countries. And not commodities either, unless the commodities are in huge demand like oil.
Fig. 1: The countries wealthier than the U.S. are all small-population countries with exports
Why are some large countries poor?
China is the largest-population country in the world with 1.4 billion people. India is second with 1.3 billion people. Together the two countries account for 36% of the worlds 7.4 billion population. Yet both countries are relatively poor. China’s per-capita GDP is$ 13,200 and India’s per-capita GDP is $5,700. Why is this so?
Adam Smith had the answer to this question, too: “The statesman who should attempt to direct private people in what manner they ought to employ their capitals would… assume an authority which could safely be trusted to no council and senate whatever:’ In other words, when the government tries to run the country’s businesses, as happens in socialistic or communistic countries, the economy suffers.
In the past, both China and India suffered from this exact problem, decades of government control of business. But relatively recently, both countries have adopted free-market principles. The results have been astounding. China is perhaps the world’s fastest-growing economy with average annual growth over the past 27 years of 9.9%. India has had an even longer period of growth with aver age annual growth over the past 65 years of 6. I%.
If these growth rates continue in the future, both China and India will close the gap between their economies and the more-developed nations like America, Germany and Japan.
What can be done about really poor countries?
There are some 200 countries in the world, 193 of which are members of the United Nations. And 28 of those countries have a per-capita GDP of $2,500 or less. To the right, you can see 17 of those countries and their per-capita GDP.
In poor countries like these, many services we take for granted are just not available to the average person. For example, medical care. That’s why there is an organization called “Doctors Without Borders: In more than 60 countries around the world, the organization saves lives by providing medical care.
It’s a never-ending task. How can a small country get wealthy enough to provide adequate medical care for all of its citizens? And, of course, things like food, housing, transportation, security and the other products and services enjoyed by people living in the developed countries.
Fig. 2: Here are 17 of the world’s 28 countries which have a per-capita GDP under $2,500
Marketers Without Borders
Perhaps this is a job for a new organization called “Marketers Without Borders”. The name itself suggests the answer to the problem. No small country can get wealthy if it stays within its own borders. A small country can only get wealthy if it ignores its own borders and markets brands to the rest of the world.
But business people inside small, poor countries really don’t have the knowledge or the experience to build brands on the global market. However, marketing people in large wealthy countries obviously do.
Take one example. Dietrich Mateschitz was in Thailand when he discovered a drink called “Krating Daeng which helped to cure his jet lag. So, he looked up the owner of the drink (Chalco Yoovidhya) and suggested forming a global company. Mateschitz and Yoovidhya would each hold 49% of the company and the remaining 2% would be held by Yoovidhya’s son, Chalerm. Thanks to Dietrich Mateschitz’s marketing savvy, Red Bull (the English translation of Krating Daeng) would become a worldwide brand with sales last year of $6.7 billion.
What the world needs is hundreds of people like Dietrich Mateschitz who would spend some of their time in the poorest countries of the world looking for future Red Bulls.
Where will we find the marketing experts?
Suppose some far-sighted individuals got together to create an organization called “Marketing Without Borders.” Where would this organization find the experts to send to the small countries of this world?
Most marketing experts have zero experience in building a new global brand. And many of the existing global brands were built decades ago. Lipton, the world’s largest tea brand, is 126 years old. Coca-Cola, the world’s largest cola brand, is 130 years old. Gordon’s, the world’s largest gin brand, is 247 years old.
Where would Marketing Without Borders find the people it needs? One place to look is the 100 most valuable global brands, an annual list published by Interbrand, a global branding consultancy. Only 15 countries account for the 100 most valuable global brands. And only five countries account for more than three brands. So, it’s obvious that Marketing Without Borders will have to do most of its recruiting in these five countries.
Fig. 3: The five countries that own the most number of global brands
The problem is going to get worse
In many of the developed cow1tries of the world, including America, income inequality is generating a lot of social unrest. But how about income inequality among countries? Isn’t that just as big a problem? Isn’t income inequality among countries likely to cause even bigger problems than income inequality among people? Like terrorism and war? I think so. And unless a poor country strikes oil or some other inherently valuable natural resource, there’s no solution to the problem except building global brands.
And isn’t that what many marketing experts in the more-developed countries of the world have been trained to do?
Why not apply this expertise to the millions of people who have been unlucky enough to have been born in the dozens of small, poor countries of the world?
It’s nice to have free medical help from time to time, but I’m sure that most of the people unlucky enough to have been born in dozens of small, poor countries would rather have a substantial amount of money instead.
Al Ries is the Chairman of Ries & Ries, focusing consultants. He is the father of the Positioning concept and a member of the Marketing Hall of Fame. He has written 10 books on the subject of marketing, including the key text Focus. Other books include: Positioning, Marketing Warfare, The 22 Immutable Laws of Branding, The Fall of Advertising & the Rise of PR and War in the Boardroom.