Location theory International Business Environment
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
3. working force
4.size of the market
5. transportation
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?
Competitive advantage of nations
Factor conditions Related and
supporting
industries Demand
conditions Firm strategy,
structure and
rivalry Michael Porter:
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
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
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
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
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
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
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
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
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
Regionalism
control on this level
co-operation
networks
barriers against others (trading blocks: EU, NAFTA, PAFTA…)
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
Advantages of agglomeration economy
1. Cost efficiency in production
2. Cost efficiency in transportation
3. Specialised working force
4. Stimulating environment
-dynamic, flexibility
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 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
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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