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Location theory. International Business Environment. Location theory. Alfred Weber (1909): 1. A part of the costs are stable 2. To gain as much as possible 3. Cost depending of the geography 4. Transportation costs 5. Agglomeration. Location factors. 1. raw materials 2. energy

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location theory

Location theory

International Business Environment

Tuija-Liisa

location theory1
Location theory

Alfred Weber (1909):

1. A part of the costs are stable

2. To gain as much as possible

3. Cost depending of the geography

4. Transportation costs

5. Agglomeration

Tuija-Liisa

location factors
Location factors

1. raw materials

2. energy

3. working force

4.size of the market

5. transportation

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location economy
Location economy

1. How important is the place?

2. Why do some regions do better than the others?

3. One sector and one place - why?

4. Why is one place/region specialised?

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competitive advantage of nations
Competitive advantage of nations

Michael Porter:

Firm strategy,

structure and

rivalry

Demand

conditions

Factor conditions

Related and

supporting

industries

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competitive advantages of nations
Competitive advantages of nations

Factor conditions:

  • capital, land, jobs and raw material

Demand conditions:

  • not the size of the market but the quality of

the demand

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competitive advantages of nations1
Competitive advantages of nations

Related and supporting industries

  • distribution

 co-operation - cluster

Firm strategy, structure and rivalry

  • many companies, same branch, same region

 competition  innovation

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uneven growth
Uneven growth

What is important for economic growth?

  • geography: harbours, raw materials
  • a specific economical, political, technological or social situation
  • historical factors
  • in the beginning outside factors, later inside factors

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what is growth and welfare
What is growth and welfare?
  • Traditionally: BNP growth of 5-7% or more
  • BNP / capita is growing faster than population
  • non-economical factors( literate rates, healthcare, unemployment)
  • minimising poverty and employment

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the unindustrialised countries
The unindustrialised countries

Differences

  • size (geography, population, incomes)
  • history
  • natural resources
  • relation between public and private sector
  • structure of industry
  • external political, economical and cultural factors

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the unindustrialised countries1
The unindustrialised countries

Similarities

  • low standard of living
  • low production
  • population growth
  • unemployment rates are high
  • dependency of exporting primary products
  • dependency on international relations

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location factors today
Location factors today
  • the importance of innovations
  • innovations are more than high-tech
  • innovations in co-operation with the industry
  • closeness
  • know how is more important than raw materials

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geographical blocks
Geographical blocks

1. The “first world”: North America, West Europe, Japan, Oceanic

2. The “second world”: China, Russia and the former East Europe

3. The “third world”: Latin America, Africa, Arab world, rest of the Asia

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different types of regional economies
Different types of regional economies

1. High technology

2. No diversified economical structure

educated inhabitants

3. Old structure in economics

uneducated inhabitants, low wages

ex. textile industry

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regionalism
Regionalism
  • control on this level
  • co-operation
  • networks
  • barriers against others (trading blocks: EU, NAFTA, PAFTA…)

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agglomeration
Agglomeration

Companies and people concentrated to one

place

ex. Silicon Valley, Detroit, The City of London

Esbo, Uleåborg och Salo in Finland

  • background in traditional location factors
  • when one is successful, others follow
  • industry: concentration to one place

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advantages of agglomeration economy
Advantages of agglomeration economy

1. Cost efficiency in production

2. Cost efficiency in transportation

3. Specialised working force

4. Stimulating environment

-dynamic, flexibility

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the agglomeration cycle
1. Traditional location factories

2. Imitation

3. Local networks

4. Local culture,

infrastructure,institutions

5. City = “brand”

6. External attraction

7. Consolidation

8. Stagnation and crises

9. A new start?

The agglomeration “cycle”

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the role of it
The role of IT
  • base to internationalisation and globalisation
  • a new arrangements of the economic activities
  • creativity and innovations - concentration

time and space have a different meaning

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the role of it1
The role of IT

Transports and communication:

  • faster, specialised (ex. stocks)

Production and processes

  • new machines and new products
  • a shorter product life cycle

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the role of investments
The role of investments

Who & where?

  • The biggest investors: USA, United Kingdom, Germany and Japan

Sectors:

  • finance, marketing, telecommunication, business services and consumption

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the role of the mnc
The role of the MNC
  • to take advantage of geographical differences

 more effective places for production

  • political reasons
  • the role of space becomes different

but we still need special knowledge

(ex. international marketing)

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product life cycle1
Product life cycle

I New market; introduction

II Fast growth, big investments, more production

III Peak, the demand does not grow

IV Demand is going down

  • under the periods III and IV the production will be changed/moved to an other area

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environment

RAIN FOREST DESTRUCTION

DESERTIFICATION

ACID DEPOSITION

Very high degree of desertification hazard

Present distribution of forest area

4.0 most acid

4.5

High degree of desertification hazard

5.0 least acid

Area originally forested

(Estimated acidity of precipitation in the northern hemisphere)

Environment

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economic strength

GDP PER HEAD(In US Dollars)

17,500 or more

15,000–17,499

12,000–14,999

10,000–11,999

7,500–9,999

5,000–7,499

2,500–4,999

1,000–2,499

Less than 1,000

Data not available

American Samoa

Andorra

Anguilla

Bahamas

Barbados

Bermuda

Cape Verde Is

Cayman Is

Christmas

Cocos Is

Comoros Is

Cook Is

Dominica

Faeroe Is

Fiji

French Polynesia

Gibraltar

Grenada

Guadeloupe

Guam

Guernsey

Hong Kong

Isle of Man

Jersey

Kiribati

Liechtenstein

Macao

Maldives

Malta

Mauritius

Mayotte

Montserrat

Nauru

Netherlands Antilles

Niue

Norfolk Is

Reunion

St. Helena

St. Kitts & Nevis

St. Lucia

St. Pierre & Miquelon

St. Vincent

San Marino

Sao Tome & Principle

Seychelles

Singapore

Tonga

Trinidad & Tobago

Turks & Caicos Is

Tuvalu

UK Virgin Is

US Virgin Is

Vanuatu

Wallis & Fortuna

Western Samoa

Economic Strength

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industrial production

AVERAGE INDUSTRIAL GROWTH RATE

(In percent)

8.0 or more

6.0–7.9

4.0–5.9

2.0–3.9

0–1.9

Less than 0

Data not available

Industrial Production

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energy consumption

ENERGY CONSUMPTION

PER CAPITA, 1982

(Kilograms coal equivalent)

Asia

20%

Oceania

1%

Former

USSR

19%

10,000 or more

6,000–9,999

3,000–5,999

2,000–2,999

1,000–1,999

500–999

Less than 500

Data not available

North

America

30.5%

Africa

2.5%

South

America

3.0%

Europe

24%

Energy Consumption

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