International bussiness the challenge of global competition 11e chapter 07

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
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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

7-3


Why Switzerland Makes Watches

• Mostly mountainous
• Close to populated lowlands of
Western Europe
• Transportation across mountains
expensive
• Has no mineral resources

7-4


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

7-5

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
7-6


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

7-7


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

7-8


Mountains and Plains

 Mountains Divide
Markets in

 Spain
 Switzerland
 China
 Colombia

 Population

Concentration

 Mountains also

create
concentrations of
population
7-9


Deserts and Tropical Plains

 Deserts and

Tropical Forests

 Separate markets

Increase the

cost of
transportation
Create
concentration
s of
population
7-10


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

7-11


Tropical Forests

 Tropical Rain Forests
 Brazilian Amazon basin

Occupies one-half of Brazil
Four percent of population

 Canadian Shield

A massive area of bedrock covering
one-half of Canada’s land mass

7-12

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
7-13


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.

7-14


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

7-15


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

7-16


Natural Resources

 Anything supplied by nature on which people
depend.

Principal types of natural resources

important to businesspeople include
Energy
Non-fuel minerals

7-17


Energy
• Non – Renewable
– Petroleum
– Nuclear Power
– Coal
– Natural Gas

• Renewable
– Hydroelectric
– Solar
– Wind
– Geothermal
– Waves
– Tides
– Biomass (ethanol)
– Ocean thermal
energy
7-18

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.

7-19


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

(Mtoe)

7-20


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
7-21


Energy

Natural gas

Has been fastest growing source of
energy

 Nuclear Power

Generates little pollution in the
normal process

7-22


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

7-23


Non-fuel Minerals

 Nearly all of the world’s chrome, manganese,
platinum, and vanadium are produced by

South Africa and the former Soviet Union

7-24


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
7-25