Geopolitics: Definition and

its impact on International

Business
Hadi Alhorr, PH.D.
Boeing Institute of International Business
John Cook School of Business
Saint Louis University

The biggest single change during my career

has been the increase in time that managers
spend dealing with government.
Edmund T. Pratt, Jr. CEO, Pfizer, Inc.

if you listen to what they say and if you think

about what they dont say you can see that
most of them [CEOs] are very careful to set limits
on their political and social responsibilities What
constitutes a robust but responsible and
achievable role for CEOs in the new global
economy?
Jeffrey Garten, The Mind of the CEO

"...the spatial scope of social and political

organization is not set for all time. The territorial
state is not a sacred unit beyond historical time."
John Agnew (1994)

Discussion Questions

What is the definition of Geopolitics?

How does geopolitics affect
international Business ?
How is globalization affecting
Geopolitical variables?

Geopolitics: Defined

Geography vs. Geopolitics

Nature of geography and its impact upon other
environmental-specific variables, e.g., local politics and
culture.

No universally accepted definition of geopolitics

Product of its times
Evolved over time along three variables: political
science, geography and macro-economics.

Etymological definition, location-specific factors

that affect political disposition.

Geopolitics: Defined

Kjellen (1899) used the term to describe the

geopolitical basis of national power
Karl Haushopher, a German political scientist
further expanded this idea as a relationship
between political phenomena and geography. He
considered that geographic variables had a direct
bearing on national power.

Geopolitics: Defined

During the inter-war period

Geopolitics was used to develop
geostrategy as a military science.
The importance of geographic location
and size, and their impacts on the
political power of a nation were at the
core of the German geostrategy.
Later, physical distance was considered
a additional variable of geopolitics

Geopolitics: Defined

Following the oil crisis of 1973,

Due to the increased vulnerability of oil
supplies and other valuable raw
materials at their source or during
transit from producer to consumer
states
the control of resources and the
resource-import relationship added a
vital dimension to the study of
geopolitics.

Geopolitics: Defined

During the Cold War

Regionalism : two super powers USA & USSR
Regional blocks for political and economic
association and cooperation, with more
emphasis on political interests.

After the collapse of the USSR,

Regionalism continues to be an important
geopolitical variable, with more emphasis on
economic cooperation ( EU, ASEAN , NAFTA
etc)

Geopolitical Variables
I. Time Dimension

Period until the World War II

Cold War Period
Post-Cold War Period

II. Place Dimension

Natural Resources
Strategic Location
Geographic Proximity
Regionalism

III. Demographic Dimension

Size of the Population

Supply of Labor
Role of Environmental, Ethnic and Religious groups

Geopolitics: Defined in an
International Business Context

it emphasizes physical, economic and historical

geography seen as opportunities or limitations
affecting the political domain, that, in turn,
influences a firms international business
decisions
geopolitical variables are important considerations
for companies when deciding on the modus
operandi for their foreign investment

Geopolitics and International

Business:

Geopolitics and its effects International

on Business

Time Dimension

The international geopolitical

environment has been changing
constantly affecting international
business dynamics at a particular point
of time as well as beyond that time
frame.
Affects all aspects of international
strategy (entry mode, timing, volume of
FDI )

Examples of Time Dimensions

Period Until World War II

Within the colonial setting, any international business was
primarily performed between the colonial powers and the
territories controlled by them. The control of resources and the
resource-import relationship were the two most important
determinants of international business.

Cold War Period

The ideological struggle between the Soviet communism and
the Western democracy had enormous impact on the growth
and patterns of international business for more than 45 year
USSR negotiated restrictive trade agreements with Eastern
European Countries
Unprecedented US world dominance through international
trade and investment with most of the world.

Geopolitics and its effects on

International Business

Place Dimension
For an international business, geographic
proximity may
g
be categorized as a component of location-specific
advantage
every political community has a geographical base.
Each political community is set on a territory that is a
unique combination of location, size, shape, climate and
natural resources. Thus, most transactions among nations
entail significant, even crucial, geographical
considerations.
(Dougherty & Pfaltzgraff , 1990)
Natural resources, proximity, strategic location, regionalism

Geopolitics and its effects on

International Business

Demographic Dimension
the population characteristics of a country are
important geopolitical factors because the
skills, educational qualifications, productivity
and the cost of labor play a role in determining
how a country fits within the global business
environment
The ethnic and religious features of a
population may affect the bilateral or
international relationships of a country

Geopolitics and Globalization

What is
Globalization?
Globalization
Continuum

Global
Extent of Globalization

Quasi-Global
Region-Specific

Country-Specific

Globalization And Geopolitical Variables