Tuija-Liisa1 Location theory International Business Environment

Tuija-Liisa2 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-Liisa3 Location factors 1. raw materials 2. energy 3. working force 4.size of the market 5. transportation

Tuija-Liisa4 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?

Tuija-Liisa5 Competitive advantage of nations Michael Porter: Factor conditions Related and supporting industries Demand conditions Firm strategy, structure and rivalry

Tuija-Liisa6 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

Tuija-Liisa7 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

Tuija-Liisa8 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

Tuija-Liisa9 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

Tuija-Liisa10 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

Tuija-Liisa11 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

Tuija-Liisa12 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

Tuija-Liisa13 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

Tuija-Liisa14 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

Tuija-Liisa15 Regionalism control on this level co-operation networks barriers against others (trading blocks: EU, NAFTA, PAFTA…)

Tuija-Liisa16 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

Tuija-Liisa17 Advantages of agglomeration economy 1. Cost efficiency in production 2. Cost efficiency in transportation 3. Specialised working force 4. Stimulating environment -dynamic, flexibility

Tuija-Liisa18 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?

Tuija-Liisa19 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

Tuija-Liisa20 The role of IT Transports and communication: faster, specialised (ex. stocks) Production and processes new machines and new products a shorter product life cycle

Tuija-Liisa21 The role of investments Who & where? The biggest investors: USA, United Kingdom, Germany and Japan Sectors: finance, marketing, telecommunication, business services and consumption

Tuija-Liisa22 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)

Tuija-Liisa23 Product life cycle

Tuija-Liisa24 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

Tuija-Liisa25 Product life cycle

Tuija-Liisa26 Environment

Tuija-Liisa27 Economic Strength

Tuija-Liisa28 Industrial Production

Tuija-Liisa29 Energy Consumption