Evolution of Business and Commercial Geography CBCBA3T03

Syllabus topics (RTMNU)

• Industrial Revolution (1820-1850)
• Rise of European business (1850-1900)
• Impact of First World War on International Business
• The Great Depression and its effect on International Business
• Impact of Second World War on International Business

Industrial Revolution (1820-1850)

Definition: The Industrial Revolution was the change from hand-made production at home to machine-made production in factories, using power from steam and coal. It started in Britain in the second half of the 18th century (around 1760) and spread to Europe and America in the 19th century.

The period 1820-1850 (as named in the syllabus) is the phase when the revolution became mature in Britain and spread to Belgium, France, Germany and the USA. Railways, steamships and large factories became common in these years.

Main features:

1. Machines replaced hand labour – spinning and weaving machines (spinning jenny, power loom) made cloth fast and cheap.
2. New source of power – James Watt's improved steam engine used coal to run factories, ships and trains.
3. Factory system – workers came to one place, worked fixed hours for wages, under supervision.
4. Transport revolution – the first public steam railway (Stockton–Darlington, 1825) and the Liverpool–Manchester railway (1830) cut the cost of moving goods.
5. Iron and coal age – iron replaced wood in machines, bridges and ships.
6. Urbanisation – people moved from villages to industrial towns like Manchester and Birmingham.

Impact on business and economy:

• Mass production lowered cost per unit; goods became cheap for common people.
• Growth of capitalism – owners of capital (factory owners) became powerful; joint stock companies and banks grew to raise large funds.
• International trade grew – Britain imported raw cotton and exported finished cloth; it became the "workshop of the world".
• Colonies as markets – colonies like India supplied raw materials (cotton, indigo, jute) and bought British factory goods. Indian handloom industry declined (de-industrialisation).
• Social problems – long working hours, child labour, poor housing. This led to the first factory laws (e.g. Factory Act 1833 in Britain) and trade unions.

Rise of European Business (1850-1900)

Between 1850 and 1900 European business grew from small family firms into large companies that traded and invested all over the world. This is often linked with the Second Industrial Revolution (steel, electricity, chemicals, oil).

Reasons for the rise:

1. New technology – Bessemer process (1856) made cheap steel; electricity, telegraph and telephone came into use.
2. Railways and steamships – connected inland areas to ports; the Suez Canal (1869) shortened the sea route between Europe and Asia (India).
3. Limited liability – laws in Britain (1855-1862) allowed companies with limited liability, so many investors could put money with less risk.
4. Banking and stock exchanges – London became the world's financial centre; banks financed railways and mines abroad.
5. Colonial empire – Britain, France, Germany, Belgium and others controlled colonies in Asia and Africa (the "Scramble for Africa" after 1880), which gave raw materials and protected markets.
6. Free trade – Britain followed free trade after repealing the Corn Laws (1846); this helped trade grow.

Features of European business in this period:

• Growth of big business – cartels in Germany, large trading houses in Britain.
• Foreign investment – British capital built railways in India, USA, Argentina.

Effect on India: After 1858 India came under direct British Crown rule. Railways (first line Bombay–Thane, 1853), telegraph and ports were built mainly to carry raw materials out and British goods in. Indian cotton mills (Bombay, 1850s) and business families like the Tatas also began to grow.

Impact of First World War on International Business

The First World War (1914-1918) was fought between the Allies (Britain, France, Russia, later USA) and the Central Powers (Germany, Austria-Hungary, Ottoman Empire).

1. Breakdown of trade – sea routes were blocked; submarine war sank merchant ships; normal trade between enemy countries stopped.
2. War economy – factories shifted to making arms, ships and uniforms; governments controlled prices, raw materials and labour.
3. End of gold standard – countries left the gold standard to print money for war; this caused heavy inflation.
4. Debt – European countries borrowed heavily, mainly from the USA. The USA changed from a debtor to a creditor nation.
5. Shift of economic power – from Britain/Europe to the USA and Japan, who supplied goods to the warring nations.
6. Reparations – the Treaty of Versailles (1919) made Germany pay huge reparations, leading to hyperinflation in Germany (1923).
7. Rise of protectionism – after the war, countries raised tariffs to protect home industry.
8. India – imports from Britain fell, so Indian industries (cotton, jute, steel – Tata Steel supplied rails and steel) got a chance to grow; the government later began a policy of "discriminating protection" (1920s).

The Great Depression and its Effect on International Business

Meaning: The Great Depression was a severe worldwide economic slump from 1929 to the late 1930s. It started with the crash of the New York Stock Exchange (Wall Street) in October 1929.

Causes (in brief): over-speculation in shares, over-production in industry and farming, bank failures, unequal income, and the war-debt/reparation problems.

Effects on international business:

1. Fall in world trade – world trade fell very sharply (by about two-thirds in value between 1929 and 1934, by common estimates).
2. Protectionism – the USA passed the Smoot-Hawley Tariff Act (1930) with high import duties; other countries retaliated. This made the slump worse.
3. Price crash – prices of farm goods and raw materials fell badly, hurting exporting countries like India.
4. Unemployment – millions lost jobs in the USA, Germany and Britain.
5. Collapse of banks and the gold standard – Britain left the gold standard in 1931; currencies were devalued.
6. Government intervention – the USA's "New Deal" (President Roosevelt) and Keynes' ideas made governments spend more to create demand.

India: prices of jute, cotton and wheat fell; farmers could not pay land revenue; this added to the Civil Disobedience movement (1930).

Impact of Second World War on International Business

The Second World War (1939-1945) was the biggest war in history. Its impact on business shaped the modern world economy.

1. Destruction – industries, cities and transport in Europe and Japan were destroyed.
2. USA as the leading economy – US factories supplied the Allies; the USA came out as the richest and strongest economy and the dollar became the key world currency.
3. Bretton Woods system (1944) – set up the IMF and the World Bank (IBRD); fixed exchange rates linked to the US dollar, which was linked to gold.
4. GATT (1947) – an agreement to reduce tariffs and grow trade; it was replaced by the WTO in 1995.
5. Marshall Plan (1948) – US aid to rebuild Western Europe; it opened the way for American companies and management methods in Europe.
6. End of colonialism – India (1947) and many Asian/African countries became independent and started planning their own development.
7. Growth of multinational companies – mainly American MNCs spread over the world after the war.
8. New technology – radar, jet engines, nuclear energy, early computers came from war research and later helped business.

Likely exam questions

1. (Long, 8/16 marks) What was the Industrial Revolution? Explain its main features and its impact on business and international trade.
2. (Long, 8/16 marks) Explain the impact of the First World War and the Great Depression on international business.
3. (Short, 4 marks) Write a short note on the rise of European business during 1850-1900.
4. (Short, 4 marks) State any four effects of the Second World War on international business.
5. (Short, 4 marks) What was the Great Depression? Give its main causes.

Syllabus topics (RTMNU)

• Cold War and its impact on International Business
• OPEC Crisis and its impact on International Business
• Gulf War and its impact on International Business
• Dawn of IT era and its impact on business & economy

Cold War and its Impact on International Business

Meaning: The Cold War (about 1947-1991) was a long period of political, military and economic rivalry between two blocs – the USA and its allies (capitalist, market economy) and the USSR and its allies (communist, state-controlled economy). There was no direct full war between the two, hence "cold" war. It ended with the fall of the Berlin Wall (1989) and the break-up of the USSR (1991).

Impact on international business:

1. Divided world market – trade mostly happened within each bloc. Western countries traded under GATT; the Soviet bloc traded through COMECON (1949).
2. Restrictions on trade – the West banned export of strategic and high-tech goods to communist countries.
3. Growth of MNCs from the West – American companies spread in Western Europe, Japan and Latin America with US government support.
4. Aid as a business tool – both blocs gave aid and loans to developing countries to win their support (e.g. Soviet help for Bhilai Steel Plant in India; US food aid under PL-480).
5. Arms race and defence industry – huge spending on weapons, space and nuclear research; later this technology (satellites, internet's origins in ARPANET) reached business.
6. Regional groups – the European Economic Community (1957) grew in the West.
7. Non-Aligned Movement – India followed non-alignment and a mixed economy, taking help from both sides.
8. After the Cold War (1991 onwards) – former communist countries opened to markets; globalisation speeded up; India also began liberalisation (LPG reforms, 1991).

OPEC Crisis and its Impact on International Business

OPEC (Organization of the Petroleum Exporting Countries) was formed in 1960 at Baghdad by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela to control oil supply and prices.

The oil crises:

• First oil shock (1973) – during the Arab-Israeli (Yom Kippur) war, Arab oil producers stopped oil supply (embargo) to the USA and some Western countries. Oil prices rose about four times within months.
• Second oil shock (1979) – the Iranian Revolution cut oil output; prices again rose sharply.

Impact:

1. Inflation and recession together ("stagflation") in Western countries – high prices plus low growth and unemployment.
2. Higher cost of production and transport – industries using oil (airlines, shipping, chemicals, plastics) suffered.
3. Balance of payments problems for oil-importing countries like India; import bill rose sharply.
4. Petrodollars – oil-exporting countries earned huge dollars and deposited them in Western banks, which lent them to developing countries; this later led to the debt crisis of the 1980s.
5. Search for alternatives – energy saving, small fuel-efficient cars (Japanese car makers gained), nuclear and other energy, and new oil fields (North Sea, Alaska).
6. Gulf job market – Gulf countries started big construction projects; lakhs of Indian workers went there and sent money home (remittances).
7. In India, the search for domestic oil increased (Bombay High offshore field started production in the mid-1970s).

Gulf War and its Impact on International Business

In August 1990 Iraq (under Saddam Hussein) invaded Kuwait. A coalition led by the USA, approved by the UN, attacked Iraq in January–February 1991 ("Operation Desert Storm") and freed Kuwait.

Impact:

1. Oil price spike – oil prices roughly doubled for a few months as Iraqi and Kuwaiti oil was cut off.
2. Disruption of Gulf trade and shipping; insurance costs rose.
3. Return of workers – more than 1 lakh Indians were evacuated from Kuwait and Iraq (the 1990 airlift); remittances to India fell.
4. India's 1991 crisis – the higher oil bill and lower remittances worsened India's foreign exchange crisis; by mid-1991 reserves were enough for only about three weeks of imports. This pushed India into the New Economic Policy of 1991 (Liberalisation, Privatisation, Globalisation).
5. Short recession in the USA and some economies in 1990-91.
6. Growth of defence and media business – live TV coverage (CNN) showed the power of global media.

Dawn of IT Era and its Impact on Business & Economy

The IT (Information Technology) era means the use of computers, software, the internet and mobile phones to store, process and send information. It grew fast from the 1980s (personal computers) and the 1990s (internet, World Wide Web) and today includes cloud, AI and mobile apps.

Impact on business:

1. E-commerce – buying and selling online (Amazon, Flipkart).
2. Faster communication – email, video calls; decisions are quicker.
3. Automation and efficiency – ERP software, computerised accounting, inventory control reduce cost and errors.
4. Globalisation of services – outsourcing/BPO; India became a world IT hub (Infosys, TCS, Wipro; Bengaluru, Pune, Hyderabad).
5. Digital banking and payments – ATMs, net banking, UPI.
6. New business models – start-ups, platform companies (Uber, Zomato), digital marketing.
7. Knowledge economy – information and skills became the main source of value.

Problems: cyber crime, data privacy issues, job loss due to automation, and the digital divide between rich and poor.

Likely exam questions

1. (Long, 8/16 marks) What was the Cold War? Explain its impact on international business.
2. (Long, 8/16 marks) Explain the OPEC oil crisis and the Gulf War and their impact on international business, with reference to India.
3. (Short, 4 marks) Write a short note on OPEC.
4. (Short, 4 marks) What is meant by the IT era? State its impact on business.
5. (Short, 4 marks) How did the Gulf War (1990-91) affect the Indian economy?

Syllabus topics (RTMNU)

• Geography - meaning & its relation with Commerce
• Commercial Geography - Nature and scope
• Approaches of Commercial Geography
• Geographical Environment & Commerce - Relationship between geographical environment and Commerce
• Economic activities
• Determinism and possibilism
• Physical environment - Location, size and shape of the country's relief, climate, water bodies, soils, vegetation, animals, minerals
• Cultural environment, settlements, transport, communication and technology

Geography – Meaning and its Relation with Commerce

Geography is the study of the earth's surface – its land, water, climate, plants, animals and people – and of how these differ from place to place. The word comes from Greek geo (earth) and graphein (to describe).

Relation with commerce: Commerce means trade and all activities that help trade (transport, banking, insurance, warehousing, advertising). Geography decides:

• What is produced where – tea in Assam, cotton in Vidarbha, oranges in Nagpur, oil in the Gulf.
• Why trade happens – regions have different resources, so they exchange surplus goods.
• How goods move – rivers, plains, ports and mountains decide trade routes and transport cost.
• Where markets grow – dense population and good climate create big markets and cities.

Commercial Geography – Nature and Scope

Definition: Commercial geography is the branch of economic geography that studies how geographical conditions influence the production, exchange (trade), transport and consumption of goods and services in different regions of the world.

Nature:

1. It is a social science – it studies human economic activity in relation to the environment.
2. It is inter-disciplinary – it uses geography, economics, commerce and statistics.
3. It is dynamic – technology and transport keep changing trade patterns.
4. It is practical – helps businessmen choose locations, markets and routes.
5. It studies both physical and human (cultural) factors.

Scope (subject matter): study of natural resources (soil, water, forests, minerals, power); agriculture and its regions; industries and their location; transport and communication; trade – internal and international, trade routes and ports; population and markets; regional (country-wise) commercial study.

Approaches of Commercial Geography

• Commodity approach – study one product at a time (e.g. wheat, cotton, iron ore): where it is produced, conditions needed, trade.
• Regional approach – divide the world into regions (e.g. monsoon lands, Gulf region) and study all economic activities of each.
• Systematic (topical) approach – study one activity worldwide, such as agriculture, mining, industry or transport.
• Principles approach – study the general principles behind location and trade (e.g. why industries locate near raw material).
• Historical approach – how trade and production in an area developed over time.

Geographical Environment & Commerce – Relationship

Geographical environment means all natural (physical) and man-made (cultural) conditions surrounding man. The environment provides resources, decides the type of occupation, the cost of production and transport, and the size of markets. In turn, commerce changes the environment – roads, dams, mines and cities.

Economic activities are grouped as:

Determinism and Possibilism

• Environmental determinism – the view that nature controls man; climate and land decide human activities and progress. Associated with Friedrich Ratzel and Ellen Churchill Semple. Example: people in deserts are nomadic herders because of lack of water.
• Possibilism – the view that nature offers many possibilities and man chooses among them using his skill and technology. Associated with Vidal de la Blache (French school). Example: Israel grows crops in the desert using drip irrigation.
• Neo-determinism ("stop-and-go determinism") – a middle view by Griffith Taylor: man can change nature but only within limits set by it.

Physical Environment

1. Location – position on the globe (latitude, near sea or inland). Coastal countries like Japan and the UK developed sea trade; India's central position in the Indian Ocean helps its trade.
2. Size and shape of the country – a large country (India, USA) has varied resources and a big home market; a compact shape makes administration and transport easy.
3. Relief – mountains, plateaus and plains. Plains (Indo-Gangetic) support farming, dense population and easy transport; mountains give minerals, forests and hydro-power but hinder transport.
4. Climate – temperature and rainfall decide crops (rice in heavy rain, wheat in moderate), working efficiency and demand (woollens, ACs).
5. Water bodies – rivers, lakes, seas give irrigation, fishing, hydel power and cheap water transport.
6. Soils – alluvial soil for wheat and rice; black (regur) soil of Maharashtra for cotton; laterite for tea and cashew.
7. Vegetation – forests give timber, paper pulp, lac, bamboo; grasslands support animal rearing.
8. Animals – give milk, meat, wool, leather, transport; base of dairy and leather industries.
9. Minerals – iron ore, coal, petroleum, bauxite are the base of industries; e.g. the Chota Nagpur plateau is India's mineral heartland.

Cultural Environment

The man-made part of the environment.

• Settlements – villages (rural, primary activities) and towns/cities (urban, industry and services). Cities are big markets and trade centres.
• Transport – roads, railways, waterways, airways connect producers and markets and lower cost.
• Communication – post, telephone, internet, mobile; makes trade fast and global.
• Technology – machines, irrigation, IT increase production and help man overcome natural limits.

Likely exam questions

1. (Long, 8/16 marks) Define commercial geography. Explain its nature and scope.
2. (Long, 8/16 marks) Explain the relationship between geographical environment and commerce. Discuss the influence of the physical environment on commerce.
3. (Short, 4 marks) Distinguish between determinism and possibilism.
4. (Short, 4 marks) State the different approaches to the study of commercial geography.
5. (Short, 4 marks) What is cultural environment? Explain its elements briefly.

Syllabus topics (RTMNU)

• Role of industries in Economic development
• Factors of industrial location – Raw material, power, market, transport and communication, land, capital, technology
• Weber's theory of industrial location
• Iron & steel industry - India & USA
• Cotton textile industry - India & USA
• Engineering industry in India
• Major industrial regions of the world and India

Role of Industries in Economic Development

1. Increase in national income – manufacturing adds value to raw materials (iron ore → steel → machines).
2. Employment – factories and related services give jobs and reduce over-dependence on agriculture.
3. Modernisation of agriculture – industry supplies tractors, fertilisers, pumps; and buys farm products (cotton, sugarcane).
4. Exports and foreign exchange – engineering goods, textiles, chemicals earn foreign exchange.
5. Balanced regional growth – new industries develop backward areas (Bhilai, Bokaro).
6. Infrastructure and urbanisation – roads, power, towns grow around industries.
7. Self-reliance and defence – heavy and defence industries reduce imports (Make in India).

Factors of Industrial Location

• Raw material – industries using heavy, weight-losing raw materials locate near their source (iron & steel near iron ore/coal; sugar mills near cane fields because cane dries quickly).
• Power – coal, electricity, oil, gas; early industries grew near coalfields.
• Market – industries making bulky or perishable finished goods locate near markets (bakery, furniture, cold drinks).
• Transport and communication – cheap and quick movement of inputs and output; ports attract industries (Mumbai, Chennai).
• Land – flat, cheap land with water supply.
• Capital – availability of finance, banks; big cities attract capital.
• Technology – skilled labour, research and modern methods (IT in Bengaluru).
• Others – labour, water, government policy (SEZs, tax benefits), climate (humid climate suited cotton spinning).

Weber's Theory of Industrial Location

Alfred Weber, a German economist, gave this theory in 1909. It is a least-cost theory: an industry will locate at the place where its total cost (mainly transport cost) is the lowest.

Assumptions: a uniform (isolated) area with the same climate and culture; raw materials at fixed places; market at fixed points; labour available at fixed places; transport cost depends on weight and distance; perfect competition.

Three location factors: (1) transport cost (most important), (2) labour cost, (3) agglomeration (benefits of many firms in one place) and deglomeration.

Types of raw material: Ubiquitous – found everywhere (water, air); Localised – found at certain places only (iron ore, coal). Localised materials may be pure (whole weight enters product, e.g. raw cotton) or gross/weight-losing (lose weight in processing, e.g. iron ore, sugarcane).

Material Index (MI) = weight of localised raw materials ÷ weight of finished product.

• MI > 1 → industry locates near raw material (e.g. iron & steel).
• MI < 1 → industry locates near market (e.g. soft drinks, which add ubiquitous water).
• MI = 1 → anywhere between raw material and market.

Example: if 4 tonnes of sugarcane give 0.4 tonne of sugar, MI = 4 ÷ 0.4 = 10, so the mill locates near the cane fields.

Locational triangle (diagram in words): draw a triangle with two raw-material sources (M1, M2) and the market (C) at its corners; the least-cost point P lies inside the triangle, pulled towards the corner with the heaviest weight to move. Lines joining places of equal extra transport cost around P are called isodapanes; if labour savings at a cheap-labour place are more than the extra transport cost, the industry shifts there.

Criticism: unrealistic assumptions; ignores demand, government policy and changing technology; transport cost is not simply proportional to distance; ignores the role of the entrepreneur.

Iron & Steel Industry – India & USA

Called a basic or key industry because almost all other industries use steel. Main inputs: iron ore, coking coal, limestone, manganese – all heavy, so plants are near raw materials or ports.

India:

• First large modern plant: TISCO, Jamshedpur (Jharkhand), set up in 1907 by Jamsetji Tata's company.
• Public sector plants (SAIL): Bhilai (Chhattisgarh, with USSR help), Rourkela (Odisha, with West Germany), Durgapur (West Bengal, with UK), Bokaro (Jharkhand), plus IISCO Burnpur and Salem; Visakhapatnam (RINL) is a coastal plant.
• Private plants: JSW (Vijayanagar, Karnataka), Jindal (Odisha/Chhattisgarh), AM/NS (Hazira, Gujarat).
• Most plants are in the Chota Nagpur plateau region, which has iron ore, coal and limestone close together.
• India is the world's second-largest crude steel producer (after China).

USA:

• Pittsburgh region (Pennsylvania) – near Appalachian coking coal; historic "steel city".
• Great Lakes region – Gary, Chicago, Cleveland, Detroit, Buffalo; iron ore from the Mesabi Range (Minnesota) comes cheaply by Great Lakes ships and meets coal.
• Birmingham (Alabama) – iron ore, coal and limestone found nearby.
• Today many US plants are mini-mills using scrap in electric arc furnaces.

Cotton Textile Industry – India & USA

India: one of the oldest and largest industries, giving huge employment. First modern mill: Bombay (Mumbai), 1854 (by Cowasji Nanabhai Davar). Main centres: Mumbai, Ahmedabad ("Manchester of India"), Surat, Solapur, Coimbatore, Kanpur, Indore, Nagpur (Empress Mills, 1877, set up by Jamsetji Tata). Reasons in Maharashtra–Gujarat: black cotton soil, humid climate, port for imports of machinery and export, capital and cheap labour. Problems: old machines, power shortage, competition from synthetic fibre and from Bangladesh/China.

USA: the industry began in New England (Lowell, Massachusetts) with water power, capital and port facilities. It later shifted to the South (North and South Carolina, Georgia – the Piedmont region) near the Cotton Belt, with cheaper labour, power and land. The USA is also a major exporter of raw cotton.

Engineering Industry in India

Makes machines, equipment and transport goods; the largest part of India's manufacturing exports.

• Heavy electrical & machinery – BHEL (Bhopal, Haridwar, Tiruchirappalli), HEC Ranchi.
• Machine tools – HMT Bengaluru.
• Automobiles – Pune–Chakan, Chennai, Gurugram–Manesar, Jamshedpur, Sanand (Gujarat).
• Railway equipment – Chittaranjan (locomotives), ICF Chennai (coaches), Varanasi.
• Shipbuilding – Visakhapatnam, Kochi, Mazagon Dock (Mumbai); aircraft – HAL Bengaluru.

Major Industrial Regions of the World and India

India's major industrial regions: Mumbai–Pune; Hugli (Kolkata); Bengaluru–Tamil Nadu (Chennai, Coimbatore); Gujarat (Ahmedabad–Vadodara); Chota Nagpur (Jharkhand–Odisha–West Bengal); Gurugram–Delhi–Meerut; Visakhapatnam–Guntur; Kollam–Thiruvananthapuram.

Likely exam questions

1. (Long, 8/16 marks) Explain Weber's theory of industrial location. State its criticism.
2. (Long, 8/16 marks) Describe the location and development of the iron and steel industry in India and the USA.
3. (Short, 4 marks) Explain the role of industries in economic development.
4. (Short, 4 marks) State the main factors affecting the location of an industry.
5. (Short, 4 marks) Write a short note on the cotton textile industry in India.