Describe the role of location, topography, climate, and natural resources as factor conditions in Porter's diamond model.

Location, topography, climate, and natural resources are inherited factors that underlie inputs that companies draw on. Local disadvantages in factor conditions can be recognized as advantages and become a force for innovation. Adverse conditions such as local terrain and climate or scarce raw materials, at the basic-factor level, or labor shortages, at the advanced-factor level, force firms to develop new methods, and this innovation often leads to a national comparative advantage. Hence, understanding these factors is important.

Explain how surface features contribute to economic, cultural, political, and social differences among nations and among regions of a single country.

Mountains divide nations into smaller regional markets that often have distinct cultures, industries, and climates. Sometimes even the languages are different. Deserts and tropical forests act as barriers to people, goods, and ideas.

Comprehend the importance of inland waterways and outlets to the sea.

Bodies of water attract people and facilitate transportation. Water transportation has increased even after the building of railroads and highways. Various European firms are shipping goods in barges on the Rhine waterway instead of using highways.

Recognize that climate exerts a broad influence on business.

The differences in climate conditions among a firm's markets and manufacturing sites can significantly affect its operations. In the case of the marketing mix, a product sold for use in northern Canada may need protection against cold weather, while the same product used in the tropics may require extra cooling to resist the heat. Heavy seasonal rains or long, very cold or dry spells can require that the firm carry large inventories because of the difficulty of replenishing stock in inclement weather. Other distribution challenges related to climate include protection from the cold, heat, and humidity.

Understand the options available for nonrenewable and renewable energy sources.

Nonrenewable energy sources include petroleum, both from conventional sources and nonconventional sources such as shale, oil sands, coal, and natural gas. Other nonrenewable sources are coal, nuclear power, and natural gas. Renewable energy sources include hydroelectric, wind, solar, geothermal, waves, tides, biomass, and ocean thermal energy conversion. Each of these energy sources has a cost that impacts its use. As nonrenewable sources approach depletion, renewable sources will become more widely applied as their relative cost decreases.

Explain how factor conditions can impact innovation.

Porter makes the point that local disadvantages in factor conditions can, if recognized, become a force for innovation. Adverse conditions such as local terrain and climate or scarce raw materials, at the basic-factor level, or labor shortages, at the advanced-factor level, may force firms to develop new approaches. This innovation often may lead to a national comparative advantage. Understanding these attributes is important.

Describe environmental sustainability and its characteristics.

Environmental sustainability rests on the commitment of business to operate without reducing the capacity of the environment to provide for future generations. There are three characteristics of evolving sustainable business practices that are widely agreed upon: limits, which apply to the ecological system; interdependence, which applies to the social system as well as to the other two; and equity in distribution, which applies to the economic system

Draw on the stakeholder theory as a framework for environmental sustainability.

Stakeholder theory forces a business to address its underlying values and principles. Stakeholder theory encourages managers to articulate clearly how they want to do business. What kind of relationships do they want and need to create with their stakeholders to deliver on their purpose? In this way, operating with stakeholder theory leads to a public discussion about responsibility of the business among all stakeholders.