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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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”