The marketplace of life? An exploratory study on the commercialization of water resources through the lens of macromarketing. Georgios Patsiaouras1, Michael Saren2, James, A. Fitchett3 University of Leicester, School of Management



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The marketplace of life? An exploratory study on the commercialization of water resources through the lens of macromarketing.

Georgios Patsiaouras1, Michael Saren2, James, A. Fitchett3

University of Leicester, School of Management

Considering that marketing research has paid limited attention to water markets and water consumption, we examine the interrelationships between the ongoing crisis in water resources management and macromarketing theory and practice. Contrary to the dominant ideology for unlimited growth and increased global water markets, we discuss some of the consequences of commercial water trading indicating that the area of water marketing can be a useful and fertile context in which to further emphasise the importance of the macromarketing agenda. Employing the lens of macromarketing, we approach and examine the economic, technological and political dimensions emerging from the commodification and marketization of water resources. We conclude that the consideration of a water marketing system can have a positive effect on economic and social development by elaborating on the implementation of public policies for the sustainable consumption of water, commercializing environmental awareness and communicating consumers’ responsibilities towards the use of water.

Keywords: water, marketing, public policy, commercialization, scarcity

Introduction

As the global population continues to grow and many parts of the world are expected to become more economically developed and affluent, one of the serious challenges for marketing will be how to manage markets for goods and commodities once considered abundant and, effectively, ‘infinite’, but are increasingly viewed as scarce and diminishing. Demand for many categories of basic commodities and necessities will almost certainly increase dramatically whereas natural resource constraints will limit available supply. Obvious examples of categories that illustrate this dilemma include markets for energy, oil, and lately water (Fishman 2011).

Over the last thirty years the implications of water scarcity on individuals and the ecosystem which sustains us have been approached, examined and discussed by environmental and resource economists (Cowan 1997; Olmstead 2010), management theorists (Berry 1977; Molden 2007), public policy makers and legislators (Sax 2006; Kibel 2007), political scientists (Barnaby 2009; Zeitoun 2011) and a plethora of chemical and environmental engineers (Brooks et al 2010; Lall 2011) amongst other academic experts, businessmen and non-governmental organizations. Although it has been argued that the term ‘water crisis’ has been overstated and dramatized (Rogers, Llamas, and Martinez-Cortina 2006), numerous scientific reports and increased international recognition (UNDP 2006) highlight that rise in population, river pollution, climate change, inefficient/wasteful irrigation, lack of legislation and water mismanagement from a governmental, community and individual perspective constitute the main factors which have been strengthening the growing water shortage in several parts of the world. With over one billion people lacking adequate access to clean drinking water, almost 40 developing and developed countries declaring a water drought status and 22 percent of world’s GDP to be produced in water short areas (Postel 2003), efficient water supply is more than likely to emerge as the most urgent resource issue for the 21st century according to the World Resources Institute.

Although the term sustainability is an extremely complex concept (Dobson 1996; Dolan 2002), in the following sections we argue that both ecological and human crises derive from the unsustainable and inappropriate management and consumption of water resources. Consequently, we can suggest that the sustainable use of water “would require the development and maintenance of a required flow of benefits to a particular group or place, undiminished over time” (Gleick 1998, p. 573) without reducing benefits to other groups or ecosystems. Inevitably, this simplistic definition does not encapsulate the complexity arising from different forms or sectors of resources use – such as agricultural, industrial, ecosystem, individual etc. – together with the presence of enormous divergence regarding political, cultural, economic, legislative and cultural differences in water use and demand. Our macroconcerns for this paper focus primarily on the anthropogenic factors that contribute to unsustainable use of water resources through its commercialization.

In the following pages, we remind and elaborate on the fact that the commercialization of the most vital substance on the planet is also driven by increased private sector involvement which is often characterized by the lack of a sustainable ethos. Following Hunt’s (1981, p. 8) definition, we argue that macromarketing is a multidimensional construct which refers to the study of the impact of marketing systems on society and the impact of society on marketing systems. Therefore, our paper aims to examine the commodification and marketization of water resources through the structure and activities of interconnected private water markets in order to highlight the consequences of commercial water trading for sustainable practices and consumption. Taking into account scientific marketing’s predominant focus with the firm on the one hand and individual customers on the other (Arndt 1981; Meade and Nason 1991; Schultz 2007; Wilkie 2005) our key research objective is to suggest that macromarketing theory can constitute the vehicle in through which to explore the wider implications of the commercialization of water resources, with one aim being to highlight marketing’s responsibility to encourage sustainable public policies and social practices.

Secondly, we focus and examine private water markets which synthesize and constitute a complex system (Mittelstaedt 2006, Phipps and Brace-Govan 2011) of interrelated entities whose main role is to behave responsibly and efficiently for the provision of the most important commodity: clean water for consumption. Consequently, we suggest that the policy makers of water marketing systems are responsible in undertaking the organization for the proficient flow of consumable freshwater to citizens together with the supervision of marketing channels which offer adequate sanitation for domestic consumption. The fact that unlike any other economic good, water remains without substitute attributes a special and controversial status to issues around competition, economic development and efficient channel structure (Olsen and Grazin 1990) of private water markets. This paper aims to draw some attention to the growing necessity to develop ethical and sustainable marketing systems so as to cultivate an overarching tenet of fair water distribution, primarily for vulnerable and less affluent consumers.

From a macromarketing perspective, many of the key issues and challenges facing water consumption are essentially marketing problems and consumption issues. As well contributing in the fertile area of policy development, this context also explicitly highlights the value and importance of the macromarketing approach more generally to the overall development of marketing theory, as well as emphasising the importance of examining issues of sustainability and marketing in common terms. In terms of the water markets, consumer education around sustainable water use and consumption, raising awareness around critical sustainability issues such as use and water treatment (for example, see Bradshaw 2010), and the consequences of the development of institutional structures in the water market (i.e. international development issues, global water privatisation, water rights etc.) are but the most obvious examples of where macromarketing, sustainability and marketing theory development issues collide.

Water, Public Good versus Private Commodity

The dilemma whether water resources should be considered as a common good or commodity has a long and controversial history closely related with urbanization, modernization, industrialization processes and agricultural growth (Bakker 2003). Supporters of private sector participation in the provision of water and sanitation argue that multinational water corporations will improve efficiency and service quality overcoming the limitations of expensive and dysfunctional public services (Segerfeldt 2005; Sitaraman 2008). On the other hand, opponents of private water markets direct their criticism towards the commodification and exploitation of water resources via the increase of water rates, rising operating profits (Barlow 2001) and the upset of ecological balance and environmental pollution (Burke 2000) amongst others. Perhaps, the only common view shared by exponents and critics of water privatization is the false assumption of continuing water security. Overall, the number of emerging private water markets is on the increase (Fishman 2011). Actually, such phenomena occurs in several countries in Asia, Africa and Latin America which do not necessarily follow and adopt the economic philosophies and orthodoxies of free trade, deregulation and enhanced privatization of natural resources (Bakker, 2010; Budds and McGranahan, 2003). Apart from the striking examples of full privatization in Chile (Bauer 1998), England and Wales (Cave 2009), almost 300 million individuals in China, 60 million in the United States, 40 millions in France, 60 millions in Brazil get access to water from private owned, investor-owned or privately managed but publicly owned - under concessions - water companies (Pinsent Masons 2012). In cases of full privatization companies retain and are responsible for the whole water supply network including collection of tariffs, maintenance and continuous improvement through investments (Clarke and McDonald 2003).

In the following sections of the paper we offer examples from heterogeneous forms of water supply which can assist us to perceive the difficulty in conceptualizing and implementing long-term, cross-national and sustainable water policies. Such diversity and heterogeneity around water policies and provision stem not only from geographical or institutional variables but also from a historical perspective. During the late nineteenth century in most European cities potable water was mass produced as a public good provided via the universal access of networks that ensured the protection of public health. In cities like London, New York and Paris private companies provided water to affluent neighbourhoods and as result in deprived areas consumers used to rely on public taps, rivers even theft of water so as to protect themselves from epidemics such as cholera and typhoid (McDonald and Ruiters 2005). Overall, in the industrialized Western world the underlying economic assumption and philosophy for governments has been that water should be considered as ‘basic need’ (Bakker 2007) essential for the health of competent and industrious citizens. Leaving aside institutional arrangements for water resource management, and adopting a macromarketing perspective, we notice that issues related to the balance between demand and supply, sustainable market development, ecologically responsible marketing practices and exchange of water resources have been superficially examined by economists and social theorists (Hanemann in Rogers, Llamas and Martinez-Cortina 2006).

As a Goldman Sachs report suggests, water will be the “petroleum for the next century”, adding that, “by 2025 one third of the global population will not have access to adequate drinking water” (Goldman Sachs Global Investment Research 2008). Although it has been argued (SciVal 2011) that over the last five years multidisciplinary research on the growing water crisis has attracted the interest of economic and management theorists, the private marketplace of water never came under the scrutiny of marketing and consumer behaviour. Apart from a study on the implementation of public policies for the sustainable consumption of water in Melbourne (Phipps and Brace-Govan 2011), there is negligible marketing research in the area. Taking into account that macromarketing research in this area is relatively embryonic, we present an exploratory and introductory analysis of the economic, technological and political dimensions (Kilbourne, McDonagh, and Prothero 1997; Kilbourne 2005) and implications stemming from the function of private water markets. In spite of presenting and discussing the three dimensions in separate sections and in line with Kilbourne, McDonagh, and Prothero (1997), our macromarketing approach towards the commercialization of water resources considers these dimensions to be inseparable and deeply interconnected. As Phipps and Brace-Govan (2011) have proposed the structure, flow and commercial exchanges of water marketing systems are under the influence of complex cultural, philosophical and legislative forces.

This discussion draws principally on an analysis of the rich interdisciplinary secondary data in this area, including a large number of governmental, inter-governmental and non-governmental reports, Google trends, environmental databases, academic studies and media reports related to the function of water markets, water stress and consumption. Thereupon, this paper seeks to examine and discuss the process and practice of commercializing water resources through the lens of macromarketing theory so as to enhance marketers’ understanding and awareness regarding the development of a sustainable marketing framework and consumption ethos towards planet’s most vital component for survival.

The Economic Dimension of Water Marketing

Macromarketing research around the economic conception of water as a product - or in other words how marketers perceive and think about water - becomes conspicuous only by its absence. The mainstream managerial marketing approach has reduced the relational transactions of water to a focus on the exchanges between bottled water companies, water brands and consumers (Goldsmith et al 2010). From the advertising triumph of Perrier during the Edwardian period, launched as the first water brand (Dibb 2000), to the scandal of Coca Cola’s Dasani, the bottled water industry has become one of the biggest success stories in the modern food and beverage sector (King 2007). Bottled water brands seek to compete and attract consumers by differentiating the same necessity in terms of supposed taste, style, price, packaging, convenience, environmental concerns and well-being. Ionized, alkalized, energy-enhanced and special oxygenated water represent some of the health and performance competitive advantages of water brands (Gleick 2010). The industry quadrupled in terms of sales and profits up to 60 billion dollars over the last twenty years (Forsyth 2010) and as Fishman (2011) has recently argued the bottled water industry seems to symbolize the overindulgence and inequality of modern consumer societies, whilst almost one billion people having no access to clean water. As one would expect the highest sales of bottled water are observed in Western European countries where both the availability and quality of cheap tap water can be found in high levels (Danamonitor 2009). This counter-rational absurdity serves to starkly expose some of the irrational and unjust realities of global markets. While these ‘anomalies’ of the market are by no means restricted to the market for water there is something especially poignant and significant about global inequalities associated with water markets which further emphasize the need for macromarketing attention. In response to growing criticisms concerning unethical business practices - such as waste and environmental pollution -, the marketing and advertising strategies of the biggest global brands of water have begun to enthusiastically embrace and adopt a CSR discourse. This discourse is derived from the idea that purchasing bottled water contributes to the provision of clean drinking water to less affluent consumers (Brei and Bohm 2011). However, it is equally important to retain a degree of perspective in the discussion around the politics of water. While high profile, culturally significant and to a certain extent ‘transparent’, the total amount of water resources utilized by this consumer industry constitutes only a negligible part from the planet’s reservoir.



Water Transfer and Water Banking

The inherent and physical water scarcity in Middle-East renders water resources, together with oil, as the key factor for economic growth and prosperity. Water shortage increases demand for the limited resources constituting water as a source of revenue and a powerful means of diplomacy and political economic power (Hillel 1994; Waterbury 2002). In 2005, Israel signed a groundbreaking agreement to import 50 million cubic feet of water - annually and for 20 years - from Turkey, creating an international channel of freshwater distribution (Pamukcu 2003). In sharp contrast to a tangible good - for example a bottle of mineral water - or an intangible service, such as a swimming pool in a luxurious hotel, the transaction and completion of the exchange between the two parties involved the transfer of tons of freshwater from the South-Eastern Mediterranean to Israeli ports. Although water transfer is not an easy or economically viable process, water security in Middle East is dependent upon the co-operation and exchange of trans-boundary water resources (Shelby 2005). In 2008 and during severe drought the city of Barcelona imported freshwater from France, cross-national transfers of water occur in the Caribbean and ecologically harmful mega-engineering plans are being considered to allow the transfer of water from Siberia to Central Asia (Hoekstra 2010). We observe that growing water scarcity brings forward the formation of innovative water marketing systems whose boundaries, flows, location, economic outcomes and above all environmental impacts and sustainability can be examined in-depth via the lens marcomarketing theory.

Apart from water exchanges between countries, increased privatization and the application of commercial principles to water supply has led to the emergence of ‘water banking’ (MacDonnell 1995). A popular phenomenon in the ‘dry’ Western States of America, a water bank has been defined as “an institutional mechanism that facilitates the legal transfer and market exchange of various types of surface, groundwater, and storage water” (Clifford, Landry, and Larsen-Hayden 2004, p. 3). Existing water banks act as intermediaries or brokers to facilitate the contact between water suppliers and clients through contracts, regulation, assessment of costs and price setting amongst others. In general and due to the complex structure of the marketplace, water banking can be classified in three broad categories including a) institutional water banking for the exchange of water rights and various entitlements, b) surface storage banking functioning as a reservoir or warehouse for physically stored water and c) groundwater banking which provides the means for exchanging water rights from aquifers, especially used during dry years (Clifford, Landry, and Larsen-Hayden 2004). Online companies like ‘WaterBank’ declare to have created “the world's first and most comprehensive website dedicated to creating a broad marketplace for buying, selling, and trading” of water resources, established in 1994. The website displays online listings with available water ‘products’ on the marketplace including: water rights, bulk water, irrigation district water, geothermal water, spring water, bottled-water businesses and disaster relief and emergency water supplies amongst others. The company informs potential investors that acting as a ‘water-rights’ broker and consulting specialist, they can rely upon their extensive database around marketable and exchangeable water assets and their expertise in real property law, ground-water hydrology and water-related transactions. Noticeably, the company displays separate listings for each product including a reference number, location - such as Nevada or Arizona -, water source, for example wells or reservoirs, and of course the respective price.

One of the most striking features of the catalogues is the formation of a truly transnational market for available water resources which can be found in several forms. For example, apart from the provision of bulk water to more than 300 bottling companies, WaterBank® advertises its ability to locate and coordinate the transfer of emergency and disaster relief water supplies so as to face natural catastrophes like flooding in Mozambique, earthquakes in Turkey, hurricane injuries in Central America or even to cover urgent humanitarian needs in refugee camps caused by military action in Middle-East or Africa. It is evident that the services of the WaterBank company indicate the formation of a marketing system (Layton 1985; Layton 2007) comprised of an intriguing and diverse network of several members. Hydrologists, marketing-managers, legal experts, landowners, buyers, sellers, industries, tanker companies, local communities, non-profit organizations, military organizations are directly or indirectly involved so as to facilitate the economic exchange of water and satisfy existing or prospective customer demand. We can identify some similarities with Applbaum’s (2010) study elaborating on how pharmaceutical industries aim to influence and define exchange environments from a macro-perspective – such as global distribution channels, legislation, treatment guidelines and public policies – so as to increase the profitability of their products and services. Additionally, the formation of cross-national market systems for water resources could be compared with aspects of global food marketing systems and their market penetration in developing countries (Witkowski 2008). More research can be conducted on the impact of global water marketing systems upon local and traditional water use and consumption together with their positive and negative consequences on nutrition, health and family life.



On a planet where available freshwater constitutes an aggregate for less than 0.5% of all water (Barlow 2001), a systematic shift towards the logic of uncontrolled trade liberalization of supply chains and free marketplace networks both challenges and jeopardizes the possibilities for sustainable water use and the fair distribution of water resources (Ferrell and Ferrell 2008). Considering that to ‘halve the proportion of global population without access to safe drinking water and basic sanitation by 2015’ represents one of the main Millennium Development Goals, it becomes extremely important to take into account the implications of both government mismanagement of water resources and unfettered water markets on consumption and individuals’ well-being. As Martens (2005) argued one of main aims of the MDG Report was to exhort governments and international corporations to acknowledge the fact that the present world trade system and global market channels favour the interests of few privileged and affluent countries. Consequently, future United Nations targets should not focus on the superficial alleviation of the symptoms of “extreme” poverty or water scarcity but their aim should be to improve the food and water distribution channels of developing countries from an environmentally sustainable and socially just perspective. Consequently, the study of water marketing channels in these contexts presents us with macromarketing issues which can be further explored in the future.

Despite the popular perception that water can be traded as a consumer good only via the form of several water bottled brands, we notice the diversity, range and complexity of several types of water ‘products’ promoted and sold in different marketplaces and contexts. Transportable bulk water resources render water a fungible global commodity like oil or gas; water rights turn rivers, lakes and sources of groundwater into exchangeable and marketable private property; gigantic Jacuzzis and swimming pools, water parks and inconsiderate crop irrigation represent the conspicuous display, use and consumption of water resources. Finally the continuous debate on which institutions - private of public - should provide water services reminds us that water had always been approached as the most valuable consumer asset in the history of mankind.

The Financialization of Water Resources

The structure, efficiency and performance of marketing systems and flows are heavily influenced not only by regulatory and legal frameworks but also by the communication and promotion of fundamental beliefs and set of traditions such as the principles of economic liberalism, possessive individualism and an overall laissez-faire doctrine of free-market competition (Kilbourne, McDonagh, and Prothero 1997; Mitteldstaedt, Kilbourne, and Mittelstaedt 2006). Water privatization in local and national level, water tariff reforms, private sector finance and the readjustment of the financial architecture of water supplies have been some of the main themes in the agenda of the World Bank and International Monetary Fund (IMF) regarding the approval of structural adjustments, water and sanitation loans primarily towards developing countries facing economic difficulties and seeking macroeconomic stability. As Phipps and Brace-Govan (2011) argue wider aggregate marketing systems and the development of a water-efficient culture are heavily defined by the introduction of philosophical antecedents such as the organizing principles and ideological perceptions of the marketplace and we observe that the abovementioned institutions heavily favour market liberalisation and water privatization policies. After several meetings during 2001-2003, the World Panel on Financing Water Infrastructure - comprised of prominent and influential individuals primarily in the fields of governance and international finance - composed and well publicized the ‘Financing Water for All’ report (Hofwegen 2006). Also known as the ‘Camdessus report’, named after its chairman Michel Camdessus who had been Managing Director of IMF from 1987 to 2000, the memorandum constitutes an institutional and international call for increased private sector participation in water provision, infrastructure and delivery (Financing Water for All Report 2003).

As Eckhardt, Dholakia, and Varman (2013) recently argued the triumph of neoliberal ideologies since the 1980s gradually transmuted marketing ideology and discourse into soft and pleasing imperatives of marketing-oriented and consumer-centric practices which conceal the harsh financial reality of laissez-faire policies and doctrines. Kilbourne (2004) has already highlighted that the influence of transnational institutions such as the IMF and World Bank contributes to the globalization of finance capital on the expense of weakening and marginalizing the consequences of the alleged economic development on social and political variables which macromarketers have been struggling to examine. Following Nason (1994, 2008) the rush in structuring and enhancing cross-national marketing systems of products and services has favoured the assessment and measurement of trade flows - as indicators of a successful marketing system - leaving aside the impact of such system on society, environment and individuals’ well-being. World Panel’s on Financing Water statement that “water has been underemphasized and neglected in the past, compared to other sectors”, and the call for doubling the annual funds, globally, for water infrastructure assumes the existence of a transnational, economic and cultural homogeneity amongst water markets, neglecting the varying conditions and needs from nation to nation (Stiglitz 2000).

Bretton Woods Institutions correctly highlight the partial failure of public utilities, primarily in countries of the Southern hemisphere, to provide universal access to freshwater and sanitation (Hall and Lobina 2006; Hall and Lobina 2007; Spronk 2010). However, their suggestion of economic reformation based on the involvement of powerful multinational corporations does not provide a viable plan for 2.4 billion people who lack sanitation worldwide. Additionally, a laissez-faire ‘water as commodity’ model denotes and exhorts an economic environment which is completely antithetical and hostile towards diachronic and long-standing traditions, spiritual beliefs and cultural values of diverse communities (Shiva 2002, see note) which have been viewing and valuing water as a sacred and essential element of sustaining life on the planet (Blackstock 2001). In the past Belk (2006) emphasized the responsibility of multinational corporations and governments to address and compact the catastrophic processes stemming from cultural insensitivity, environmental destruction and homogenization. Although macromarketing and consumer behaviour studies have already paid attention to the consequences from the activities of multinational pharmaceutical companies (Flanagan and Whiteman 2007), global luxury brands (Wong and Ahuvia 1998) and global fast food chains (Witkowski 2007) for example, studies on the impact of corporate water marketing channels towards local communities remain under-examined. The impact of private water markets on the sustainable development and cultural cohesion of local communities could also be examined in the future by macromarketing theory.

Advocates and promoters of privatization suggest that the ‘true value’ of water will be reflected only after proper pricing (Bakker 2003; Economist, 2006; Rees 1998; Sjölander 2005; Turner 2004), aiming to instigate and encourage the preservation of a valuable and scarce resource and simultaneously to stimulate and produce increased financing for the formation of efficient private water networks. Formal water marketplace antecedents (Phipps and Brace-Govan 2011) such as government regulations, cross-national trading regulations and international commercial laws shape the flow of tradable water resources and gradually influence behavioural change. As it has been noted the economic codes of a dominant social paradigm (Kilbourne, McDonagh, and Prothero 1997; Kilbourne 1998) reinforce the continuous growth of capital and the capacity to consumer and economic growth via the commercialization of natural resources for the creation of new markets. For low income families in these markets, in the case of non-payment, access to a life-giving scarce resource without substitute is banned and such outcome can have a disastrous impact for deprived water users which can be found primarily in the Southern hemisphere (Hall and Lobina 2008; Swyngedouw 2004).

The commodification of nature in general and water in particular calls for both marketing academics and policy makers to elaborate on how the increased scarcity of water resources stimulates and instigates the unlimited growth of private water marketing systems against environmental protection, natural resource depletion and consumers’ interests. The economic dimension in managing water resources should be viewed as a crucial element of understanding sustainability as an emerging business megatrend - similar to the IT revolution, electrification, globalization and the quality movement in the past. Consequently water management is directly related (Fuller 1999; Peattie 1995; Prothero and Fitchett 2000; Roberts 1996) to environmental policy issues (Press and Arnould 2009) and ‘sustainable consumption’ (Cohen 2001; Dolan 2002; Heath and Chatzidakis 2012; Kilbourne 2004; Phipps and Brace-Govan 2011).

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