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What type of integration did mining firms primarily engage in during the middle of the nineteenth century?
What type of integration did mining firms primarily engage in during the middle of the nineteenth century?
What country became the center of the international mining industry by the late nineteenth century?
What country became the center of the international mining industry by the late nineteenth century?
Which nonferrous metal was primarily exploited by free-standing firms in Spain?
Which nonferrous metal was primarily exploited by free-standing firms in Spain?
What natural resources attracted foreign entrepreneurs to South Africa in the late nineteenth century?
What natural resources attracted foreign entrepreneurs to South Africa in the late nineteenth century?
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What was a significant trend in foreign direct investment related to mining from the 1870s?
What was a significant trend in foreign direct investment related to mining from the 1870s?
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What year was the pipeline completed that enabled the export of Iraqi oil?
What year was the pipeline completed that enabled the export of Iraqi oil?
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In which year did the first major oil discoveries occur in Saudi Arabia and Kuwait?
In which year did the first major oil discoveries occur in Saudi Arabia and Kuwait?
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Which British companies dominated beef exports in Latin America?
Which British companies dominated beef exports in Latin America?
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What was the initial source of rubber prior to plantation agriculture?
What was the initial source of rubber prior to plantation agriculture?
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What activity was primarily undertaken by British entrepreneurs in Latin America starting from the 1880s?
What activity was primarily undertaken by British entrepreneurs in Latin America starting from the 1880s?
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Where were powerful global markets for commodities, such as wheat, typically located?
Where were powerful global markets for commodities, such as wheat, typically located?
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Which region became significant for British planters establishing rubber plantations after transferring seeds from Brazil?
Which region became significant for British planters establishing rubber plantations after transferring seeds from Brazil?
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What role did foreign-owned plantations play in the demand for commodities?
What role did foreign-owned plantations play in the demand for commodities?
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What percentage of British capital invested in mining was in the South African gold industry by 1914?
What percentage of British capital invested in mining was in the South African gold industry by 1914?
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Which metals were specifically mentioned as having significant control over their international prices?
Which metals were specifically mentioned as having significant control over their international prices?
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What was the purpose of the consortium of German metal trading companies during the late nineteenth century?
What was the purpose of the consortium of German metal trading companies during the late nineteenth century?
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What investment trend occurred among US-based companies after World War I?
What investment trend occurred among US-based companies after World War I?
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What does 'vertical integration' refer to in the context of business operations?
What does 'vertical integration' refer to in the context of business operations?
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Which of the following regions did US-based companies invest in during the late nineteenth century?
Which of the following regions did US-based companies invest in during the late nineteenth century?
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What kind of metals are referred to as nonferrous metals?
What kind of metals are referred to as nonferrous metals?
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What was the significant trend in British investment in mining by 1873?
What was the significant trend in British investment in mining by 1873?
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What marked the beginning of multinational investment in natural resources?
What marked the beginning of multinational investment in natural resources?
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Which factor primarily contributes to the differences between various minerals?
Which factor primarily contributes to the differences between various minerals?
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What are nonrenewable resources primarily associated with?
What are nonrenewable resources primarily associated with?
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What is a shared characteristic of mining industries?
What is a shared characteristic of mining industries?
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Which statement best describes the nature of natural resources?
Which statement best describes the nature of natural resources?
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What was one of the principal drivers of integration during the first global economy?
What was one of the principal drivers of integration during the first global economy?
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What do renewable resources include?
What do renewable resources include?
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In which sector did entrepreneurs first recognize and exploit cross-border opportunities?
In which sector did entrepreneurs first recognize and exploit cross-border opportunities?
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What was the result of the United States Supreme Court decision regarding Standard Oil in 1911?
What was the result of the United States Supreme Court decision regarding Standard Oil in 1911?
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Which company was known as Standard Oil of New Jersey after the dissolution?
Which company was known as Standard Oil of New Jersey after the dissolution?
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What significant development occurred in Western Europe regarding oil production in the 1970s?
What significant development occurred in Western Europe regarding oil production in the 1970s?
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What characterized the European oil companies prior to antitrust legislation?
What characterized the European oil companies prior to antitrust legislation?
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Which company began establishing overseas sales offices in 1905?
Which company began establishing overseas sales offices in 1905?
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What were some of the foreign facilities acquired by Standard Oil of New Jersey?
What were some of the foreign facilities acquired by Standard Oil of New Jersey?
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What led to the emergence of European-owned oil companies?
What led to the emergence of European-owned oil companies?
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Which country did Standard Oil have marketing operations in among the following?
Which country did Standard Oil have marketing operations in among the following?
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What mining method was introduced by British companies in the 1900s that allowed for profitable operations in swampy areas?
What mining method was introduced by British companies in the 1900s that allowed for profitable operations in swampy areas?
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Which group of entrepreneurs developed the Malayan tin industry during the nineteenth century?
Which group of entrepreneurs developed the Malayan tin industry during the nineteenth century?
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By the end of the 1920s, which group had tin production in Malaya that exceeded that of local Chinese enterprises?
By the end of the 1920s, which group had tin production in Malaya that exceeded that of local Chinese enterprises?
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What was a primary reason banks and investment houses became involved in mining operations in the late nineteenth century?
What was a primary reason banks and investment houses became involved in mining operations in the late nineteenth century?
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Which company did the Rothschilds control for a time in the late 1890s, known as the largest copper-producing company in the world?
Which company did the Rothschilds control for a time in the late 1890s, known as the largest copper-producing company in the world?
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How did the London Stock Exchange contribute to mining ventures during the late nineteenth century?
How did the London Stock Exchange contribute to mining ventures during the late nineteenth century?
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What innovative advantage did bucket-dredging hold over traditional mining methods?
What innovative advantage did bucket-dredging hold over traditional mining methods?
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Which banking family was instrumental in providing start-up capital for Alcoa?
Which banking family was instrumental in providing start-up capital for Alcoa?
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Study Notes
CHAPTER 3: Multinational Investment in Natural Resources
- Multinational investment in natural resource exploitation began early in the 19th century and increased rapidly.
- This was the first major sector where entrepreneurs recognised, and exploited opportunities, by operating across borders.
- These strategies were key drivers of global economic integration.
- These early strategies created many of the world's leading multinationals that continue to be influential today.
Two Main Subsections of Resources
- Natural resources are categorised into renewable and nonrenewable resources.
- Renewable = agriculture, forestry, and other sustainable practices (e.g. fisheries)
- Nonrenewable = mining, petroleum and others that are consumed or depleted as a result of usage.
Origins of Mining
- Mining was an early form of international business, attracting free-standing firms.
- From the mid-19th century, intra-European mining foreign direct investment (FDI) grew, using both horizontal (cross-country expansion) and vertical (acquiring related companies) integration strategies.
- Britain became the centre of international mining, driving massive growth in the world's FDI.
- The 1870s saw an increase in exploitation of nonferrous metals (metals not containing iron) mostly in Spain and the United States.
- South Africa was a major target for foreign mining enterprises because of the gold and diamond deposits discovered there, particularly by 1914.
German Metal Trading Companies
- Three German metal trading companies became significant players in the global metal market during the 20th century.
- The companies had achieved substantial, vertical integration globally, which led to influence on prices for a range metals.
US Involvement in Mining
- During the 19th century, US-based companies expanded into mining and smelting in places such as Canada, Mexico, and Central America.
- After WWI, this expansion expanded, with increasing investment in Latin America.
- The most prominent US mining corporations were Anaconda Company (1895-1980s), Kennecott Utah Copper, Asarco, and Alcoa. These and other corporations controlled much of the world's mineral production.
Petroleum Industry
- The United States' first oil well was in Pennsylvania in 1859.
- Oil was initially used primarily for lighting and heating.
- Later, gasoline superseded coal as a fuel for the newly developed internal combustion engine.
- Early and significant oil businesses (such as Standard Oil) dominated the industry's ownership, control and output by the 1910s.
US Antitrust Legislation
- In 1911, Standard Oil was broken up, due to its monopoly status under the US antitrust laws.
- Standard Oil was split into 34 separate companies
- Many companies created by this split also had global reach and significantly impacted the petroleum market.
European-Owned Oil Industry
- Until the discovery of North Sea oil fields in the 1970s, Western Europe had no significant indigenous oil sources and their companies focused on trading and exploration.
- In the absence of antitrust regulations in many regions the European oil companies focused on developing joint sharing agreements.
- Several groups (such as the Rothschilds and Deutsche Bank) played an important role in establishing some of the major European oil companies.
Renewable Resources and Foodstuffs
- Manufacturing industries need sources of raw materials (and intermediate goods).
- Many British companies invested in major properties in the United States.
- In some cases, foreign firms (in land, plantations and other business) dominated in certain markets (e.g., beef exports in the US, banana trade).
- The key to success was to control and coordinate aspects of the sourcing, production and distribution processes.
Rubber
- The demand for natural rubber led to a significant investment in rubber plantations in Southeast Asia, particularly in Malaya.
- US companies, such as Firestone, invested in rubber plantations in the colonies and later in plantation operations in Brazil.
Bananas
- The United Fruit Company (later known as Chiquita) controlled much of the global banana market.
- This company controlled production, transportation and distribution (from plantation, to ripening, and export and delivery).
Cotton, Tobacco & Coffee
- These commodity markets were dominated by smaller producers at first but in the later period, these became prominent areas of operation for foreign companies and were increasingly globalised.
- Unilever was a key example of a company that transitioned from smaller companies in a particular region to a global player.
Tea
- China
Determinants of Vertical Integration
- Entrepreneurship Technology and Risks
- Internalisation Factors
- Concessions and Political Factors
- Access to Finance
Risk Management (or Risk Issues) in Overseas Operations
- Mining (and other extractive industries) is a high-risk sector.
- Exploration processes are frequently unpredictable, with considerable costs and time uncertainties.
- Price fluctuations in raw products, coupled with logistical problems and political instability, pose crucial risks.
- Insufficient legal frameworks increase risk in overseas markets.
Concessions and Politics
- Governments in developing countries often granted concessions to foreign companies to encourage investment and development.
- Companies were given extensive rights over land and often with few obligations.
- European and other foreign companies obtained significant advantages using concessions.
- Eventually, host governments renegotiated or cancelled some concession arrangements.
Types of Natural Resources
- A list of various types of resources is provided and depicted visually. These include: Sun, Forest, Rocks, Minerals, Soil, Air, Oil, Water (Note, this page is simply a visual depiction of the various kinds of natural resources).
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Test your knowledge on the historical trends and developments in the mining industry during the nineteenth century. This quiz covers important events, countries, and metals associated with mining, including foreign direct investment patterns. Ideal for history enthusiasts and those interested in industrial evolution.
