Chapter 05 Natural Resources and Environmental Sustainability McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives LO1 Describe how geographical features of a country or region create contextual differences that contribute to economic, cultural, political, and social conditions important to international business. LO2 Apply Porters diamond model to a discussion of geographical features. LO3 Summarize the importance to business of inland waterways and outlets to the sea. LO4 Outline the nonrenewable and renewable energy options available and their broad business implications. 5-2

Learning Objectives LO5 Describe the issues related to nonfuel minerals that concern international business. LO6 Describe the concept of environmental sustainability and its potential influence on business. LO7 Explain the major characteristics of sustainable business. LO8 Discuss the utility of the stakeholder model for sustainable business 5-3

Geography Elements of geography managers consider Location Topography Climate Physical elements of location are uncontrollable 5-4

Competitive Advantage: Porter’s Diamond 5-5

Location: Builds Political and Trade Relationships 5-6

Topography: Creates differences in economies, cultures, politics, social structures 5-7

Separate Languages 5-8

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3 mountain ranges create 4 separate markets, each with its own culture and dialect 5-11

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Bodies of Water attract people and facilitate transportation Inland waterways give access to interior regions Rhine Waterway – World’s Most Important Inland Waterway 5-13

Climate Climatic conditions explain differences in human and economic development Meteorological conditions Temperature Precipitation Wind 5-14

Natural Resources Anything supplied by nature on which people depend  Nonrenewable Energy  Petroleum  Nuclear Power  Coal  Natural Gas  Renewable Energy  Hydroelectric  Solar  Wind  Geothermal  Waves  Tides  Biomass 5-15

Energy Use by Fuel Type 5-16

Petroleum Reserve estimates change New discoveries in proven fields with improved prospecting equipment Governments open their countries to exploration and production Improved techniques in steam and hot water injection enable greater output from operating wells and new areas Automated equipment lowers offshore drilling costs and makes. smaller-sized discoveries workable 5-17

Petroleum Crude Oil cheap source of energy and raw material for plastics & fertilizers Heavy Oil does not flow easily and cannot be drawn from wells Shale sedimentary fossil rock, yields 25+ liters per 500º C 5-18

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Coal 49% increase projected to 2030 Problems Pollution Global warming 5-21

Renewable Energy Sources 1) Wind 2) Biomass 3) Solar photovoltaic 4) Concen solar therm 5) Geothermal 6) Ocean energy 7) Hydropower 5-22

Context for Sustainability 5-23

Characteristics of Environmentally Sustainable Business Limits Environmental resources are exhaustible Interdependence Actions in one ecological, social, and economic system affects the others Equity in Distribution For interdependence to work, there cannot be vast differences in gains 5-24

Stakeholder Theory Decision-making takes into account all interest holders Addresses Underlying Values and Principles Type of relations business has with stakeholders Balancing of tension among stakeholders Profits a result ( not a driver) of value creation 5-25

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Companies with a Societal Context Consistent with Stakeholder Theory Johnson & Johnson eBay Google Lincoln Electric Freeport-McMoran Interface, Inc. Patagonia Johnson & Johnson eBay Google Lincoln Electric Freeport-McMoran Interface, Inc. Patagonia 5-27