1 chapter 8 - physical and environmental forces international business by ball, mcculloch, frantz,...

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Chapter 8 - Physical and Environmental Forces

International Businessby Ball, McCulloch, Frantz,

Geringer, and Minor

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McGraw-Hill/Irwin ©2002 The McGraw-Hill Companies 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 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. Understand why managers must be alert to changes in a

nation’s infrastructure Appreciate the impact of industrial disasters

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Introduction

Important Geographical Elements

– Location

– Topography

– Climate

– Natural Resources

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Location

Political Relationships

– Austria is taking 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.

– Austria’s location enabled the country to develop close trading links with the European Union members.

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Trade Relationships

Geographical proximity

– Often the major reason for trade between nations.

– The largest and the third-largest trading partners of the United States—Canada and Mexico—lie on its borders.

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Trade Relationships

Geographical proximity

– Has always been a major factor in the formation of trading groups.

• EU, EFTA, and the North American Free Trade Agreement.

• Japan’s sales to the Association of Southeast Asian Nations are over twice of either the U.S. or Europe.

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Topography

The surface features of a region. Differences in topography may

require products to be altered.

– Cake mixes and internal combustion engines are examples

• These products may need to be adapted to different environmental elements.

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Mountains and Plains

Mountains Divide Markets in– Spain

– Switzerland

– China

– Colombia

Population Concentration• Mountains also create concentrations of

population

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Deserts and Tropical Forests

Deserts and Tropical Forests

– Separate markets• Increase the cost of transportation,

and create concentrations of population.

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Deserts and Tropical Forests

Deserts

– Australia• Continent the size of the U.S. but with only

19 million inhabitants.

• Population tends to be concentrated

– Along the coastal areas in and around the state capitals.

– In the southeastern fifth of the nation, where more than one-half of the population lives.

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Deserts and Tropical Forests

Tropical Rain Forests

– Brazilian Amazon• Called one of the world’s greatest deserts

because of its low population density.

Canadian Shield• A massive area of bedrock covering one-half

of Canada’s land mass.

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Deserts and Tropical Forests

Caution must be used when drawing conclusions about population density.

– Regions may have significantly higher population density due to mountains, tropical rain forests, or bodies of water.

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Bodies of Water

Inland waterways

– Rhine waterway• The world’s most important inland

waterway system.

• The main transportation artery of Europe.

• Carries a greater volume of goods than do the combined railways that run parallel to it.

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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.

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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.

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Climate

Nonclimatic factors• More important than climate in the development of

trade and manufacturing.

– Mineral deposits

– Accessibility to an area

– Economic and political organizations

– Cultural tradition

– Availability of capital

– Growth of technology

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Climate and Development

Climatic Differences– It has been suggested that the greatest

economic and intellectual development has occurred in the temperate climates of

• Northern Europe and the United States.

• Reasons suggested is less temperate climates limit human energy and mental powers.

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Natural Resources

Anything supplied by nature on which people depend.

– Principal types of natural resources important to businesspeople include

• Energy

• Nonfuel minerals

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Natural Resources

Energy

– Petroleum

– Coal and Nuclear Power

– Natural Gas

– Sources of Renewable Energy

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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.

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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– Technology being developed by Chevron, Shell,

Exxon, and BP Amoco

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Energy

Coal and Nuclear Power

– Because of public concern about safety of nuclear power plans and waste disposal, this energy source is losing market share.

Natural Gas

– Fastest-growing energy source.

– Use expected to more than double between 1997 and 2020.

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Energy

Sources of Renewable Energy

– Types include

• Hydroelectric, solar, wind, geothermal, waves, tides, biomass, and ocean thermal energy conversion

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Energy

Sources of Renewable Energy

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

• An estimated 7 percent of the total energy consumed in the world comes from hydroelectric installations.

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Nonfuel 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.

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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.

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Changes Make Monitoring Necessary

Mineral Resources

– The U.S. Council for Automotive Research

• Formed by Ford, General Motors, and Chrysler to develop automobiles that use advanced fuel cell technology.

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Destruction of Natural Resources The Bhopal Disaster

Chernobyl: The World’s Worst Nuclear Disaster

Alaskan Oil Spill

Eco-Terrorism in the Gulf War

“Biggest Ecological Disaster since Chernobyl”