GEOGRAPHIC ENVIRONMENT

Geography is an important component of the foreign environment and refers to a country's climate, topography, natural resources and people.  Everyone engaged in international business must have some knowledge of geographic features of the foreign country as these influence the nature and characteristics of a society. It also affect demand pattern of the people living in the country.  Geography is a major contributory factor to the development of business systems, trade centers and routes.

Different climatic conditions (viz., rain, snowfall, wind, temperature, humidity, etc.,) give rise to demand for different types of products. It is largely due to climatic differences that people differ in their housing, clothing, and food, medical and recreational needs.  Many a time needs are same, and the same products are demanded. But because of the climatic and topographic differences, products need adaptation or modifications to suit local conditions. Rolls Royce cars from England, for instance, required extensive body  work and  renovations in  Canada  because the  salted sand, spread  over streets to keep them  passable throughout four or five months of virtually continuous snow in  Canada, caused  rusting and corrosion in  the fenders and door panels and  oil system also developed  leaks.

Geographic conditions also affect a firm’s plant location decision.  A  firm prefers to set up its manufacturing plant  in  a  country which  has favorable climatic  conditions, possesses suitable topography  (i.e.,  surface features  such as hills, plains, river  and  sea) and  where raw materials, energy and  labour are cheaply  and  abundantly  available. Foreign country’s nearness to other markets and its strategic location on major trade routes are other equally important considerations.

Firms'  distribution and logistics strategies are directly  influenced by  geographic  conditions in the foreign markets,  Re-order points  and safely level stocks are kept generally higher for those countries  or places which are not easily accessible  and  can be  cut off suddenly and heavily due to bad  weather. Location of a country on the world map is an equally important consideration. It affects its trade prospects with other countries.  Landlocked  countries such as Bolivia, Zambia and Zimbabwe ,are not only costly to reach  but are also difficult  to penetrate as trading with these countries depend  upon  their relations  with neighboring  countries through  which goods have to cross.

Consumer demand for many a low priced and essential product is directly related to the number of people living in a country. It is primarily due to large populations that  the countries  like China and  India  have  become  the targets of the  multinational  corporations which are vying with one another to gain  a foothold  in these markets. To arrive at a correct estimate  of the market size, however, one needs to take into account other factors also such as population  growth, population  density and population distribution  by age, income, location and  occupation, taken together, these variables provide better estimates of the present  and future market  potentials  and also help  in  providing information  relevant for communication,  distribution,  product  quality  and pricing  decisions.