This chapter covers:
7
•Business relevance
of geography
•Importance of a
country’s location
Natural Resources and
Environmental Sustainability
•The contribution of a
country’s surface
features
•Importance of
waterways
•Discovery and use of
mineral resources and
energy sources
•Impact of industrial
disasters
International Business
by Ball, McCulloch, Frantz,
Geringer, and Minor
McGraw-Hill/Irwin
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 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
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

7-5
international businesses operating in Eastern Europe.
Passive processing
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
Insert Fig 7-2 Swiss
Map
 Mountains Divide Markets
in
 Spain
 Switzerland
 China
 Colombia
 Population Concentration
 Mountains also create
concentrations of
population
7-8
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

7-10
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
 Tropical Rain Forests
 Brazilian Amazon
 Occupies one-half of
Brazil
 Four percent of
population
 Canadian Shield
 A massive area of
bedrock covering onehalf of Canada’s land
mass
Bodies of Water

Insert Rhine
photo

Attracts people and
facilitates transportation
Inland waterways


7-11
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
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


7-13
Must construct costly, long
truck routes
Port countries exert
considerable political
influence
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,


7-20
hydroelectric has had an
extensive application.
Improved technology has
resulted in new support
for wind and solar energy
Wind energy fastestgrowing energy
technology in the world
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