7 Natural Resources and Environmental Sustainability International Business by 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 Objectives  Appreciate the relevance of four elements of geography  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 business 7-2

Why Switzerland Makes Watches Mostly mountainous Close to populated lowlands of Western Europe Transportation across mountains expensive Has no mineral resources 7-3

Natural Resources Location Topography Climate Sources of Energy Non-fuel Minerals Environmental sustainability 7-4

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 7-5

Trade Relationships  Geographical proximity  Often the major reason for trade between nations.  Delivery faster, freight costs lower  The two largest trading partners of the United States—Canada and Mexico—lie on its borders  Major factor in formation of trade groups such as EU, NAFTA  Southern hemisphere opposite growing season 7-6

Topography  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 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 Forests  Deserts and Tropical Forests  Separate markets  Increase the cost of transportation  Create concentrations of population 7-9

Deserts 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 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 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 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

Climate  Climate (temperature and precipitation)  Perhaps 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 impacts product mix Climate can impede distribution 7-14

Natural Resources  Anything supplied by nature on which people depend.  Principal types of natural resources important to businesspeople include  Energy  Non-fuel minerals 7-15

Energy Non-renewable Fossil fuels Petroleum Coal Gas 7-16 Renewable Hydroelectric Wind Solar Geothermal Waves Tides Biomass and ocean thermal energy

Energy  Petroleum  Conventional 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

Energy 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

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  Natural gas  Has been fastest growing source of energy 7-19

Energy  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 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 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 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 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 View Insert Fig 7-16

China Oil Production and Consumption 7-27

U.S. Oil Imports 7-28

World Energy Consumption 7-29

European Wind Capacity 7-30