2. Natural Resources and Environmental Sustainability McGraw-Hill/Irwin International Business, 11/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. chapter seven

3. 7-3 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

4. 7-4 Why Switzerland Makes Watches Good Case Study of How Environment Infuences Trade Mostly mountainous Close to populated lowlands of Western Europe Transportation across mountains expensive Has no mineral resources Thus, it has to produce high-valued products like watches, cheese and chocolate

5. 7-5 Natural Resources Using the Swiss example, we see that a number of natural resource factors are important in determining trade Location Topography Climate Sources of Energy Non-fuel Minerals

6. 7-6 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: sending partially made products to Eastern Europe for finishing and then r-importation to Austria

7. 7-7 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

8. 7-8 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

9. 7-9 Mountains and Plains  Mountains Divide Markets in  Spain  Switzerland  China  Colombia  Population Concentration  Mountains also create concentrations of population

10. 7-10 Deserts and Tropical Plains  Deserts and Tropical Forests  Separate markets  Increase the cost of transportation  Create concentration s of population

11. 7-11 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

12. 7-12 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

13. 7-13 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

14. 7-14 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.

15. 7-15 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

16. 7-16 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

17. 7-17 Natural Resources  Anything supplied by nature on which people depend.  Principal types of natural resources important to businesspeople include  Energy  Non-fuel minerals

18. 7-18 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

19. 7-19 Stakeholder Based View Insert Fig 7-16

20. 7-20 The Company in a Societal Context