Natural Resources and Environmental Sustainability

McGraw-Hill/IrwinInternational Business, 11/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

chapter seven

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Learning Objectives

Describe the role of location, topography, climate, and natural resources as factor conditions in Porter’s diamond model

Explain how surface features contribute to economic, cultural, political, and social differences among nations and among regions of a single country

Comprehend the importance of inland waterways and outlets to the sea

Recognize that climate exerts a broad influence on business Understand the options available for nonrenewable and

renewable energy sources Explain how factor conditions can impact innovation Describe environmental sustainability and its characteristics Draw on the stakeholder theory as a framework for environmental

sustainability

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Why Switzerland Makes Watches

• Mostly mountainous• Close to populated lowlands of

Western Europe• Transportation across mountains

expensive• Has no mineral resources

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Natural Resources

Location• Topography• Climate• Sources of Energy • Non-fuel Minerals• Environmental sustainability

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Location

Political RelationshipsAustria took advantage of its location to

Increase trade with the East.

Become the principal financial intermediary between Western and Eastern Europe.

Strengthen its role as the regional headquarters for international businesses operating in Eastern Europe.

Passive processing

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Trade Relationships

Geographical proximityOften the major reason for trade

between nations.Delivery faster, freight costs lowerMajor factor in formation of trade

groups such as EU, EFTA, and NAFTA

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Topography

The surface features of a region

Differences in topography may require products to be altered

Cake mixes

Internal combustion engines Includes

Mountains and Plains Deserts and Tropical Forests Bodies of Water

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Mountains and Plains

Mountains Divide Markets in Spain Switzerland China Colombia

Population Concentration

Mountains also create concentrations of population

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Deserts and Tropical Plains

Deserts and Tropical ForestsSeparate markets

Increase the cost of transportation

Create concentrations of population

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Deserts

Australia

Continent the size of the U.S. but with only 19 million inhabitants.

Population concentrated

Along the coastal areas in and around the state capitals.

In the southeastern fifth of the nation

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Tropical Forests

Tropical Rain ForestsBrazilian Amazon basin

Occupies one-half of Brazil

Four percent of population

Canadian ShieldA massive area of bedrock covering

one-half of Canada’s land mass

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Bodies of Water

• Attracts people and facilitates transportation

• Inland waterways– Provide inexpensive access to markets– Rhine Waterway

• Main transportation artery of Europe• Carries a greater volume of goods than

do the combined railways that run parallel to it

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Bodies of Water

Other Significant Waterways

The Amazon River in South America

The Tigris-Euphrates (Iraq), the Ganges (India), and the Indus (India) Rivers is Asia.

The Great Lakes--St. Lawrence and the Mississippi River in the United States.

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Outlets to the Sea

• Permit low-cost transportation of goods and people from a country’s coast to its interior

• Africa has 14 of world’s landlocked developing countries– Must construct costly, long truck routes and extensive

feeder networks

– Port countries exert considerable political influence

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Climate

Climate (temperature, precipitation, and wind) the most important element of physical

forcesSets the limits on what people can do both

physically and economically

• Climate has some influence on economic development

• Climate can impede distribution

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Natural Resources

Anything supplied by nature on which people depend.

Principal types of natural resources important to businesspeople include

Energy

Non-fuel minerals

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Energy

• Renewable– Hydroelectric

– Solar

– Wind

– Geothermal

– Waves

– Tides

– Biomass (ethanol)

– Ocean thermal energy

• Non – Renewable

– Petroleum

– Nuclear Power

– Coal

– Natural Gas

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Energy

PetroleumConventional sources - Oil

Estimates of reserves change becauseNew discoveries continue to be made in proven

fields.

Governments open up their countries to exploration and production.

New techniques enable producers to obtain greater output from wells already in operation.

Automated, less expensive equipment lowers drilling costs.

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Energy

• The World – Evolution from 1971 to 2003 of world Total Primary Energy Supply* by Fuel (Mtoe)

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Energy

Petroleum Unconventional sources

Oil sandsLocated primarily in Athabasca,

Alberta, Canada.Oil-bearing shale

Largest source is in Utah, Colorado, and Wyoming.

CoalUsed primarily in South Africa

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Energy

Natural gas

Has been fastest growing source of energy

Nuclear Power Generates little pollution in the

normal process

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Energy

Sources of Renewable Energy

Of the eight types, hydroelectric has had an extensive application (7% of total energy consumption in the world).

– Improved technology has resulted in new support for wind and solar energy

– Solar energy fastest-growing energy technology in the world

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Non-fuel Minerals

Nearly all of the world’s chrome, manganese, platinum, and vanadium are produced by South Africa and the former Soviet Union

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Sustainable Business

• An economic state in which the demands placed upon the environment by people and commerce can be met without reducing capacity of environment for future generations

• Three characteristics of sustainable business practices– Limits– Interdependence– Equity in distribution

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Stakeholder Based View

Insert Fig 7-16

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The Company in a Societal Context