Session10_11 Detailed notes

Demographic Dimension
Cohen (1963) has described population as a geopolitical variable. He considered its
various characteristics, particularly the qualitative and ideological, as the maor
demographic !actors that in!luence the geopolitical milieu. "ore recently, according to
#aer$ald (1996), the population characteristics o! a country are important because the
s%ills, educational quali!ications, productivity and the cost o! labour play a role in
determining ho$ a country !its $ithin the global business environment. &he ethnic and
religious !eatures o! a population may a!!ect the bilateral or international relationships o!
a country. &he &amil movement in 'ri (an%a or the )ammu and *ashmir disputes in +ndia
may be e,plained !rom this perspective. -lso, the si.e o! a population matters. &hese
demographic !actors have been contributing substantially to the motivation !or opting !or
a particular mode o! international business operation. /iscussions on
these issues !ollo$.
Size of the Population
&he si.e o! a population may be considered an important motivator !or international
business gro$th. 0ith a population o! around 11 million persons, -ustralian businesses
have limited scope to gro$ domestically and this motivates many -ustralian !irms to
invest overseas (2d$ards 3 #uc%ley, 1996). +t may a!!ect in$ard investment as $ell. &he
small population base o! 4e$ 5ealand (about 3.6 million) has been sho$n to be the
primary reason !or the limited long7term business gro$th and decreasing )apanese
investment in 4e$ 5ealand (&as% 8orce on )apanese /irect +nvestment in 4e$ 5ealand,
1991). 9n the other hand, the huge population base in +ndia is a motivator !or !oreign
investors to invest there on a long7term basis (:eissbauer 3 'iemsen, 1996; )acob, 199<;
=ic.iany, 1993).
Supply of Labour
&he supply o! labour is another demographic variable closely related to the population
si.e. +t is perceivable that a larger population $ill produce a larger supply o! labour,
$hich in turn, $ill create a competitive labour mar%et and lo$ labour costs. +t has long
been observed (eg.1> /unning, 19?9), that countries $ith lo$ labour costs are attractive
locations !or !oreign investors. Ho$ever, labour productivity is critical. +n 11?1, @icardo
(in "eier, 1991) identi!ied labour productivity and $age rates as t$o determinants o! a
countryAs comparative advantage. &echnologically developed countries have a pool o!
labour more productive than those o! the developing countries, $hereas, the labour !orce
in developed countries tends to be more e,pensive than that o! the developing countries
(8atehi, 1996). &he human development inde, (H/+) developed by the Bnited 4ations
provides an insight into the quality o! li!e across the nations o! the $orld. #ased on
indicators such as literacy rates, the number o! inhabitants per doctor, in!ant mortality
rates, li!e e,pectancy, calorie (!ood) consumption per capita, car o$nership per 1CCC
people, and education spending as a percentage o! :/D, H/+ also re!lects the quality o!
labour in a particular country (Hill, <CCC). 8or e,ample, it may be argued that the
availability o! cheaper labour in +ndia $ould ma%e this country an attractive investment
destination !or -ustralian companies. -lso, +ndia has a large pool o! technologically
s%illed people ()acob, 199<). Ho$ever, lo$ productivity o! the +ndian labour !orces has
been a concern !or !oreign investors (2ast -sia -nalytical Bnit, 199>). +n 199>, +ndia had
1
an H/+ o! only 31 $hich $as much lo$er in comparison $ith )apan (91), "e,ico (11),
"alaysia (?9), China (6?) and +ndonesia (61) re!lecting the poor quality o! its
labour !orce (Hill, <CCC).
Role of Environmental, Ethnic and Religious Groups
&hese are additional demographic !actors that are li%ely to a!!ect the international
business environment. &here are provisions in the 0orld &rade 9rganisation (0&9)
regulations that countries as $ell as organisations can institute restrictive measures
provided these relate to EF the conservation o! e,haustible natural resources and i! such
measures are made e!!ective in conunction $ith restrictions on domestic production or
consumptionG (Hill, <CCCH 1?1). &here are many environmental groups around the $orld
attempting to sa!eguard their natural environments. Dollution control, through to the
maintenance o! natural habitats !or endangered species are $ithin the agendas o! these
organisations. &hese organisations campaign on various country7speci!ic, regional and
international !ronts. &he 0orld 0ildli!e 8und (008), :reenpeace and many other
country7speci!ic and regional organisations are involved $ith such movements and these
activities can impact international business decisions. 2thnic and religious alignments are
the t$o other maor demographic !actors. &he con!licts bet$een 'erbs, Croats and
"uslims in #osnia7Harcegovina epitomises the e!!ects o! ethnic and religious con!licts
on a national economy as $ell as the ris%s associated $ith doing international
business in these economies. 8rom some 11C nations in the international system, only a
small number are ethnically homogeneous. - survey conducted by the "inorities at @is%
Droect (in Carment, 199>) indicated that, at the time, ethnic groups $ere currently
involved in over 1C protracted con!licts throughout the $orld. 2thnic con!licts in a
particular area may embitter relationships bet$een the countries supporting the particular
ethnic cause or opposing the particular cause. - classic e,ample is the rivalry bet$een
:reece and &ur%ey over the ethnic con!licts in Cyprus $ith consequent adverse and long7
lasting e!!ects on business relationships bet$een :reece and &ur%ey. Ho$ever, the ethnic
population may also have positive e!!ects on a countryAs relationships $ith others. +t may
help build business relationships among nations. &he ethnic Chinese population in the B'
and 'outh72ast -sia are the maor sources o! !oreign investment into China. -
considerable share o! !oreign investments in +ndia comes !rom non7resident +ndians
(#arnathan, 1996). &he !ormal and in!ormal contacts o! the overseas +ndians and Chinese
immigrants $ith their countries7o!7origin constitute the !oundation o! this business
relationship. Cultural bondage is a maor bedroc% o! this relationship pattern.
<