INTERNATIONAL BUSINESS ENVIRONMENT ASSIGNMENT

PREPARED FOR:

Dr. ABU YOUSUF MD. ABDULLAH PROFESSOR, IBA

PREPARED BY: GROUP 10

ADITTYA NOMAN KHAN RISHAD HABIB TASNIM ABDULLAH AFIFEH FAKORI BBA 17

ZR 07 RQ 30 ZR 36 RQ 80

INSTITUTE OF BUSINESS ADMINISTRATION UNIVERSITY OF DHAKA

October 16, 2011

Advantages of having a large population

There are several factors that signify the advantages of a large population. A large population often plays a vital role in the economy by contributing positively through offering abundance of cheap labour and human resources and making investments feasible.

1. Availability of cheap labour

Large population brings more human resources. A large population ensures the availability of labour. This often turns to cheap labour due to the competition for jobs. In turn, this works as a competitive advantage for the economy in the international market because cheap labour means reduced costs for the manufacturers and reduced costs enables the manufacturers to gain price advantage over their competitors. Examples of this phenomenon can be the apparel and garments industry in Bangladesh. As labour is extremely cheap in our country, the cost of production in the apparel and garments industry is considerably lower here. As a result, despite the existence of various infrastructural problems like power shortage, political unrest, labour demonstration due to low wages etc, our garments industry is proliferating in the international arena. This has been possible only due to the competitive advantage gained by the low cost of labour.

2. Higher availability of skilled workers

Similarly, a large population ensures the higher availability of skilled workers, again at cheaper cost. As we all know, skilled workers are extremely vital components of any manufacturing process. Without skilled labour, the whole process may become extremely inefficient. Then the availability of cheap unskilled labour would come to no use. In this regard, a large population may prove advantageous to an economy by offering more skilled workers at cheaper price.

3. Reduced cost of production and infrastructure development

As large populations offer cheap labour readily available, in countries with big population size the cost of production is usually lower compared to in countries with smaller population. This gives the local manufacturers competitive advantage over the international competitors as foreign buyers get attracted to the reduced price of goods and services. Availability of cheap labour also makes infrastructural development easier in countries with large population even if the country is technologically weak because infrastructural development is heavily dependent on unskilled and semi-skilled labour.

4. Incentive for technological advancement

Large populations require higher gross agricultural outputs to sustain the whole population. Larger populations are thus related to technological advancements due to the fact that higher productivity is required for their sustenance and rise in productivity without increasing inputs in the form of natural resources can only be achieved through technological innovations. So countries with larger population size are more likely to invent breakthrough technological advancements. In Bangladesh we can see the

reflection of this fact quite frequently. Every now and then scientists are innovating in the agricultural sector in Bangladesh which ensure the higher productivity in this sector. For example, just a few months back, one of the scientists in the BRRI invented a kind of rice which can be harvested twice or thrice with the same plant.

5. Greater demand & bigger market

A large population means greater local demand for goods and services. As a result, the local manufacturers and businesses dont have to rely too heavily on international markets. The high internal or local demand often proves enough for the local businesses to be profitable. The local manufacturers can run their operations targeting the fulfillment of the local demand only and still be profitable. Also, greater internal demand means more economic activity internally or locally. This keeps the economic activities running smoothly, and relatively unruffled by external forces. A large population, with its inherent high demand, makes it easier for the local businesses to feasibly operate focusing on the local market only.

6. More foreign investment

Large populations attract more foreign investment. Companies invest in foreign countries where they see the opportunity of doing profitable business for long periods of time. Countries with large populations are potential untapped markets for global businesses. These countries can also offer unskilled labour for extremely low price. So foreign companies get interested to invest in countries with high populations considering the high business prospects and low costs of production. Therefore, a large population is the best element to stimulate foreign investment. This may have manifold impacts. More foreign investment could bring new technology for a country, which will develop a countrys industry to increase its economy. Moreover, more foreign investment also can increase the standard of living, because this will make more services available to the residents. One good example for this can be the telecommunication industry of Bangladesh. Bangladesh was a completely untapped market with regard to telecommunication penetration 10-15 years back. Foreign companies sensed the business potential and made huge investments in this sector. Now, after about 15 years we can see the results of that. Out of the six telecommunication companies currently operating, five are foreign companies which made significant investments in our telecom sector.

7. Benefits of development conducive age structure

In recent times, a view has gained ground that it is not the size of the population that matters, but its age structure. A population "bulge" in the working age groups, however large the total population, is an inevitable advantage. The more people are there in the working age, the more production will be possible for the economy, and hence the more productivity in the economy. Thus, India, which is beginning to be characterised by such a bulge is seen as advantaged, despite its large population. This has provided one more argument to those who see it emerging as a regional (or even global) power in the not too distant future, even displacing China as potential world leader.

This demographic advantage or dividend to be derived from the age structure of the population is traced to the fact that India is (and will remain for some time) one of the youngest countries in the world. A third of India's population was below 15 years of age in 2000. In 2020, the average Indian will be only 29 years old, compared with 37 in China and the United States, 45 in Western Europe, and 48 in Japan. The demographic process this implies would create a large and growing labour force, which is expected to deliver unexpected spin-offs in terms of growth and prosperity.

8. Export of manpower
Large populations enable countries to export manpower to foreign countries where there is lack of sufficient unskilled and semi-skilled labour. After meeting the internal demand of labour, there is usually excess labour available in highly populated countries. These countries can export a good portion of this surplus labour to other countries and earn considerable amount of foreign currency. Manpower export has been a major source of our foreign currency over the last 20 years or so. Every year Bangladesh exports thousands of workers to countries like Saudi Arabia, Kuwait and other middle-east nations. The remittances the send are a major source of our foreign currency earnings.

9. More government earnings

If the population is high, the government can generate more revenue in the form of taxes from this high population, assuming a moderate economic state and per capita income. The higher the governments earning is, the more the government can invest in the development projects. This gives the government the opportunity to invest heavily in infrastructure development which in turn raises the standard of living of the people and also create job opportunities.

10. Foreign Aid

Developed countries are more inclined to grant aids to relatively underdeveloped countries with large populations. So it becomes easier for densely populated countries to attract foreign aid for infrastructural developmental activities. This works as a huge advantage when the economy is hit hard by natural calamities and recovery necessitates foreign aid. As the donor countries are somewhat more sympathetic towards countries with large populations, it gets easier for these countries to acquire aids in order to recover from natural disasters. Every year Bangladesh gets thousands of dollars as foreign aid from donor countries in times of floods, cyclones and other natural calamities.

11. Regional Benefits

"New Urbanism" advocates for a higher population density to benefit neighborhoods and cities. It proposes that urban sprawl, where a population is distributed into homes in suburbs and then commutes each day in to schools, stores and places of employment, wastes resources and damages communities. New Urban communities are carefully planned to maximize the use of space, distributing the population in an efficient and dense pattern.

12. Discovery of new resources

Large population size can lead to discoveries of new natural resources. This may sound counter intuitive but if we think logically, it actually is quite a possibility. If the population size increases, there is greater demand for goods and services, this calls upon increasing the gross domestic product, which in turn requires more capital in the form of land and natural resources. At one stage, the available resources prove inadequate to support the production of necessary goods and services to meet the increased demands. So a search for newer sources of natural resources and alternative resources which can substitute the existing ones becomes necessary. In this process new resources can be discovered, or technological innovations can turn alternative natural resources into valuable factors of production. As a consequence, a country can end up better off compared to the situation before the increase in population. One relevant example of this can be seen right in our country. In the past, natural gas was only used for cooking and power generation purposes. Automobiles used to run on oil which we had to import at high prices from oil rich countries. But as the population increased and the number of automobiles running in the urban areas increased, demand for oil skyrocketed. Then natural gas made possible to be used as fuel in automobiles. At that time, natural gas was abundant compared to the demand in our country. So people converted their automobiles into natural gas driven ones which reduced the fuel cost considerably, and the government had to spend less foreign currency buying oil from other countries. So, the country was better off.

Conclusion
To conclude, in our opinion, a large population is not exactly a curse for a country. Large populations can prove to be advantageous if the population is put into good use. The government must play a very vital role in this regard. The government must formulate its policies tailored to the proper utilization of its population gained strengths and also the government must come up with policies which will enable the proper manipulation of the potential competitive advantages brought in by a large population. Also, a country with a large population must work hard to build up a strong economy to support the population. In this aspect, the country should pin point its strengths and competencies and try to focus on building up the economy based on these. Without a strong economic background, a populated country may collapse any time in the face of an economic downturn. On the other hand, if the country succeeds in identifying its strengths and capitalizing on those, it can annihilate other competitors in that particular field of business by utilizing its population strengths. However, a densely populated country must come up with ways to educate its people if it wants to take the advantages of a large population. Without education there cannot be innovations. And then it becomes extremely difficult to sustain the population with the limited resources. Also, any densely populated country should try to focus on building an industry based economy, rather than a service based one. Setting up an industry based economy is the best way to take the advantages of cheap labour and low costs of production in the international market.