7 Natural Resources and Environmental Sustainability International Business by Ball, McCulloch, Frantz, Geringer, and Minor McGraw-Hill/Irwin Copyright.

7

Natural Resources andNatural Resources andEnvironmental SustainabilityEnvironmental Sustainability

International Businessby Ball, McCulloch, Frantz,

Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.

This chapter covers:

•Business relevance of geography

•Importance of a country’s location

•The contribution of a country’s surface features

•Importance of waterways

•Discovery and use of mineral resources and energy sources

•Impact of industrial disasters

Chapter ObjectivesChapter Objectives

Appreciate the relevance of four elements of geography Understand the importance of a country’s location in

political and trade relationships Understand the importance of a country’s location in

political and trade relationships Comprehend the importance of inland waterways Recognize that climate exerts a broad influence on business Understand why managers must monitor changes in the

discovery and the use of energy sources and changes in a nation’s infrastructure

Appreciate the impact of industrial disasters Describe major issues of the relationship between

environmental sustainability and international business Develop a working definition of a environmentally

sustainable business7-2

Why Switzerland Makes WatchesWhy Switzerland Makes Watches

Mostly mountainous Close to populated

lowlands of Western Europe

Transportation across mountains expensive

Has no mineral resources

7-3

Natural ResourcesNatural Resources

Location Topography Climate Sources of Energy Non-fuel Minerals Environmental

sustainability

7-4

LocationLocation

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

7-5

Trade RelationshipsTrade Relationships

Geographical proximityOften the major reason for trade between

nations.Delivery faster, freight costs lowerThe two largest trading partners of the United

States—Canada and Mexico—lie on its bordersMajor factor in formation of trade groups such

as EU, NAFTASouthern hemisphere opposite growing

season

7-6

TopographyTopography

The surface features of a region

Differences in topography may require products to be altered Cake mixes Internal

combustion engines

7-7

Includes

Mountains and

Plains

Deserts and

Tropical Forests

Bodies of Water

Mountains and PlainsMountains and Plains

Mountains Divide Markets in Spain Switzerland China Colombia

Population Concentration

Mountains also create concentrations of population

7-8

Insert Fig 7-2 Swiss Map

Deserts and Tropical ForestsDeserts and Tropical Forests

Deserts and Tropical Forests Separate markets

Increase the cost of transportation

Create concentrations of population

7-9

Deserts and Tropical ForestsDeserts and Tropical Forests

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

7-10

Tropical Rain Forests Brazilian Amazon

Occupies one-half of Brazil

Four percent of population

Canadian Shield A massive area of

bedrock covering one-half of Canada’s land mass

Bodies of WaterBodies 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

Insert Rhine photo

7-11

Bodies of WaterBodies of Water

Other Significant Waterways

The Amazon River in South America

The Parana and Paraguay Rivers in the Mercosur region.

The Yangtze (China), the Ganges (India), and the Indus (India) Rivers is Asia.

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

7-12

Outlets to the SeaOutlets to the Sea

Permit low-cost transportation of goods and people

Africa has 14 of world’s landlocked developing countries Must construct costly,

long truck routes Port countries exert

considerable political influence

7-13

ClimateClimate

Climate (temperature and precipitation)Perhaps 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 impacts product mix Climate can impede distribution

7-14

Natural ResourcesNatural Resources

Anything supplied by nature on which people depend. Principal types of

natural resources important to businesspeople include Energy Non-fuel

minerals7-15

EnergyEnergy

Non-renewable

Fossil fuels

Petroleum

Coal

Gas

7-16

Renewable Hydroelectric Wind Solar Geothermal Waves Tides Biomass and

ocean thermal energy

EnergyEnergy

PetroleumConventional sources - Oil

Estimates of oil consumption 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.

7-17

EnergyEnergy

World energy consumption expected to increase by 54 percent from 2001 to 2025

Dramatic increases as countries industrialize, such as China

Oil expected to remain dominant source, though non-renewable

Will have to commit to alternative energy source when supplies run out

7-18

Insert figure 7-8 energy consumption

EnergyEnergy

PetroleumUnconventional sources

Oil sands Located primarily in Athabasca, Alberta,

Canada.Oil-bearing shale

Largest source is in Utah, Colorado, and Wyoming.

CoalUsed primarily in South Africa

Natural gasHas been fastest growing source of energy

7-19

EnergyEnergy

Sources of Renewable Energy

Of the eight types, hydroelectric has had an extensive application.

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

Wind energy fastest-growing energy technology in the world

7-20

Non-fuel MineralsNon-fuel Minerals

Nearly all of the world’s chrome, managanese, platinum, and vanadium are produced by South Africa and the former Soviet Union The United States depends on South Africa

To supply 79 percent of its platinum, 78 percent of its chromium, 41 percent of it manganese, and 20 percent of its vanadium

7-21

Changes Make Monitoring NecessaryChanges Make Monitoring Necessary

Mineral Resources

One of the most fascinating discoveries is the fuel cell.

First used by NASA in space capsules

Chemically converts fuel directly to electricity without having to burn it

7-22

Natural Resources Modifications of

infrastructure of great significance to business

New highways and railways reduce delivery times

Chunnel connects England and France

Oresund Bridge links Denmark and Sweden

Destruction of Natural ResourcesDestruction of Natural Resources

Historically nations have paid little attention to contamination and destruction of natural resources

Tragedies have forced officials to recognize Ixtoc 1 Well Blow Out Chernobyl Nuclear Disaster Alaskan Oil Spill Eco-Terrorism in Gulf War Aurul Mine Collapse

Events have led to “green approach”

7-23

Sustainable BusinessSustainable Business

An economic state where demands placed on environment can be met without reducing capacity of environment for future generations

Three characteristics of sustainable business practices Limits Interdependence Equity in distribution

7-24

Economic Challenges Trade and market

liberalization Eco-efficiency Financial impact Subsidies New production

materials Production and

consumption patterns

Stakeholder Based ViewStakeholder Based View

Insert Fig 7-16

China Oil Production and ConsumptionChina Oil Production and Consumption

7-27

U.S. Oil ImportsU.S. Oil Imports

7-28

World Energy ConsumptionWorld Energy Consumption

7-29

European Wind CapacityEuropean Wind Capacity

7-30