chapter seven

Natural Resources and Environmental Sustainability

McGraw-Hill/Irwin International Business, 11/e

Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

Describe the role of location, topography, climate, and natural resources as factor conditions in Porters 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 Relationships

Austria 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 proximity Often the major reason for trade

between nations. Delivery faster, freight costs lower Major 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

Population

Spain Switzerland China Colombia

Concentration

Mountains also
create concentrations of population
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Deserts and Tropical Plains

Deserts and
Tropical Forests

Separate markets

Increase the

cost of transportation Create concentration s 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 Forests

Canadian Shield

Brazilian Amazon basin

Occupies one-half of Brazil Four percent of population A massive area of bedrock covering
one-half of Canadas 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 countrys coast to its interior Africa has 14 of worlds 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

forces Sets 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
Non Renewable
Petroleum
Nuclear Power Coal Natural Gas

Renewable
Hydroelectric Solar Wind Geothermal Waves Tides Biomass (ethanol) Ocean thermal energy
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Energy

Petroleum Conventional sources - Oil Estimates of reserves change

because

New 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 sands Located primarily in Athabasca,

Alberta, Canada. Oil-bearing shale Largest source is in Utah, Colorado, and Wyoming. Coal Used primarily in South Africa
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Energy

Natural gas Has been fastest growing source of

Nuclear Power

energy

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 worlds 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

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