MGMT 4660 Exam 2 Part 2

Define environmental sustainability. What are four examples of things environmental sustainability is about maintaining? What four things does sustainability require us to change the way we manage?

Environmental sustainability: state in which the demands placed upon the environment by people and commerce can be met without reducing the capacity of the environment to provide for future generations

Environmental sustainability can be about maintaining the environment, economy, people within the economy, or an organization

Sustainability requires use to change the way we manage government institutions, markets, business organizations, and our own individual behavior

Who developed the widely accepted definition of sustainable development? Define sustainable development. It calls on businesses to develop new approaches to what five things?

UN World Commission on Environment and Development (Brundtland Commission)

Sustainable development: meets the needs of the present without compromising the ability of future generations to meet their needs

It calls on businesses to develop new approaches to

• The way we design, produce, distribute, and consume goods and services

• The way we establish market prices for those goods and services

• The way we provide and consume energy

• The way we respect and regulate the environment

• The way we ensure health and wellbeing of all living creatures

Explain why sustainability is a systems concept. Is sustainability global, local, both, or neither? Explain why.

Sustainability is a systems concept because it combines a group of interconnected elements that forms a complex whole

Sustainability is global and local at the same time because any specific location interacts with systems that are global

What do environmentally sustainable firms have the challenge of thinking about? What three systems does sustainability in the business context usually consider? What did firms look at in the beginning of sustainability efforts? What do firms look at now?

Environmentally sustainable firms have the challenge of thinking about competitive present and the needs of future generations

Approaches to sustainability in the business context usually consider ecological, social, and economic systems the business functions in

At beginning of sustainability efforts, firms looked at their own operations and the way they used resources

Now look at their entire supply chain and take the lead in discarding outdated approaches that are bad for the environment

What certification can for-profit companies seek for sustainability and what does it confirm?

For-profit companies can seek B corporation certification of their social and environmental sustainability performance

Confirms they balance purpose with profit and consider the impact of their decisions on workers, suppliers, customers, community, and environment

Define life cycle assessment. What is a common name? What are manufacturers now concerned about? What do they examine? What is product stewardship?

Life cycle assessment: an approach used to evaluate the environmental impact aspects of a product or service throughout its life cycle; called cradle to grave analysis

Now manufacturers are concerned about impact their product has on the environment

Examine the whole chain of activities that contributes to the production of product and to which their product contributes

Product stewardship means companies are increasingly accepting responsibility for extended impact of activities as a result of thinking informed by LCA

What is Ronald Whitefield’s example of the life cycle assessment? What does it analyze components to find? Who is included in the extended analysis? What are the five environmental statistics that are assessed?

Ronald Whitefield’s example is the pencil

Analyze components to find cost effective alternatives that are more ecologically efficient

Manufacturers include suppliers in extended analysis of value chain

Environmental statistics that are assessed

• Carbon dioxide emissions

• Ozone depletion

• Water use and release

• Toxic release

• Resource depletion

What do life cycle assessments help a company reduce (3), by looking at what three things and what three affected groups? What do LCA actions suggest?

Life cycle assessment can help a company focus on reducing its environmental footprint, cost structure, and potential dangers of carcinogens its inputs, processes, and waste might pose to employees, consumers, and the environment

LCA actions suggest high returns on investment and short payback periods

How does the cradle to cradle design model suggest products and services be designed? What does it mimic and how? What are the two kinds of components C2C identifies? Provide three descriptors for the first kind and two descriptors for the second kind. What did the EU incorporate C2C into?

Cradle to cradle design model suggests that products and services should be designed to completely close the production loop so all resources needed to produce them are recycled and reused rather than discarded or left to pollute

Mimics nature in which ecosystems recycle one agent’s waste to provide another’s nutrition

Two kinds of components 

• Technical nutrients - inorganic, synthetic, and reusable

• Biological nutrients - organic and decomposable

EU incorporated C2C into Circular Economy Action Plan, which is part of European Green Deal for providing the foundation for sustainable growth

What complex need do tools for measuring and reporting sustainability have to meet? What is this need called?

Have to meet the complex need of providing use with meaningful measures across different sectors

Called a comparability test

Define United Nations Global Impact. What do participants need to do annually? What does that action suggest?

United Nations Global Impact: a voluntary reporting scheme for businesses that covers critical areas affecting the conduct of international business - human rights, labor, the environment, and anti-corruption efforts

Participants file an annual report using the compact’s framework

It suggests a serious and committed engagement with sustainability

Define Global Reporting Initiative. What do their guidelines provide businesses with? What four things are included? How were the frameworks developed and why is that important?

Global Reporting Initiative: networked nonprofit organization of stakeholders, mostly businesses, that have collaborated to develop a widely used sustainability reporting framework by the same name

GRI guidelines provide businesses with information on measuring and reporting environmental impacts of their operations

Includes how to report, what to report, what performance indicators to use, and how to apply them

Frameworks were collaboratively developed among corporate members

Important because it meets the needs of a broad range of users

Define Carbon Disclosure Project. Who do they partner with (5)? What does the framework have major standards for? What are CDP emissions reports used to do? What do they encourage companies to do? Who is CDP membership becoming necessary for and why?

Carbon Disclosure Project (CDP): a nonprofit organization that provides reporting frameworks for sustainable water use and the reduction of greenhouse gas emissions and advocates for their reduction

Partnered with major corporations and institutional investors, cities, states, and regions

Frameworks are for reporting progress, and have major standards for carbon emissions reporting

The CDP emissions reports are used to set targets for environmental impact

Encourage companies to monitor their supply chains

CDP membership is becoming necessary for any firm doing business with many global companies because corporations are requiring their suppliers to report emissions

Define carbon footprint. What two forms of consumption does it measure? 

Carbon footprint: measures the volume of greenhouse gas emissions associated with it, usually throughout its life cycle

Measures direct consumption (result of product use) and indirect consumption (as result of manufacture of product)

Define water footprint. Why is it more complicated to calculate? How does water availability affect standardization? What is the trend for measuring water usage and how is it segmented? What do companies that pay attention to water use benefit from?

Water footprints: a measure of the amount of water used in a product’s manufacture and use 

More complicated to calculate because water is used locally but discharged into a global system

Water’s availability varies by location so costs of using it aren’t standardized

Measurements of water usage are growing more common and water is often segmented by source and type

Companies that pay attention to their water use can benefit from lower manufacturing costs 

Why is reporting sustainability efforts getting more attention? What did the Sustainability Accounting Standards Board develop? What framework does the Climate Disclosure Standards Board provide?

Reporting of sustainability efforts is getting more attention because it’s hard to distinguish between companies actively engaging in pro-sustainability activities and those that pretend to do so (greenwashing)

Sustainability Accounting Standards Board developed a set of 77 industry standards related to accounting, providing a framework for companies to explain sustainability and its financial impact

Climate Disclosure Standards Board provides a framework for reporting environmental and climate change information with rigor comparable to financial reporting 

What are three common characteristics of businesses that accept responsibility for environmental sustainability?

Recognize and accept that resources are limited

Develop ways to manage the interdependence of systems in which they operate

Recognize the need for equity in their supply chains

What do limits on resources address? What does the use of water, soil, and air need to be informed by? What should recognition of limits be used to do? How does taking initiative on developing sustainable operations help companies?

Limits on resources address that environmental resources are exhaustible

The use of water, soil, and air should be informed by the awareness that they can be made toxic

Recognition of limits should be incorporated into the way the business operates

Companies that take initiative to lead development of sustainable operations can generate valuable competitive advantage

What does interdependence as part of the sustainability context describe? What is an example? What is the impact local manufacturing facilities have on rural areas? What kind of monitoring does interdependence require?

Interdependence describes complex relationships that sustainable practices create among ecological, social, and economic systems, in which actions of one system may affect the other two, often in ways that are not easily predicted

EX: Outsourcing causes carbon emissions from transportation

Local manufacturing facilities in rural areas cause social disruption

Interdependence requires careful monitoring all along the value chain

What does equity in distribution as part of the sustainability context suggest? Who should benefit? What kind of business model does equity require? What is the impact of vast inequities in a globalizing world where we want transparency?

Equity in distribution suggests that for system interdependence to work, there can’t be vast differences in distribution of gains

All stakeholders have to benefit to some degree from the value added by business activities

Equity requires a business model that allocates gains from businesses to a wide array of stakeholders

Vast inequities may lead to social disruption and violence 

What has the Fair Trade Movement had a positive effect on? What does the Fair Trade label certify? What are the three conditions that must be met?

Fair Trade Movement has had a positive effect on integrating equity into the value chain

The Fair Trade label certifies that products are produced and marketed in ways that meet very modest claims to equity

Three conditions

• Products must be grown and harvested to standards

• Working conditions and pay must meet criteria for safety and fairness

• Sustainability along the supply chain must be monitored

How do some businesses pursue backwards integration? What need does it meet in developing nations?

Some businesses pursue backwards integration by establishing agricultural operations to control their supply chains

In developing nations, they meet the need for increased efforts towards equity

What does the traditional US business model focus on? What is the goal? What is encouraged? How is nature’s worth measured?

Traditional US business model focuses on an input-process-output approach

The goal is profitability

Encourages perpetual economic growth and unbridled consumption

Nature’s worth is measured primarily in terms of potential for generating economic value

Does the meaning people give to the value creation process vary across cultures? What are the three challenges in moving from the traditional business model to the sustainable business model?

The meaning people give to the value creation process varies across cultures

Challenges in changing to sustainable business model

• Our thinking has been molded by the traditional approach

• People resist change

• People don’t see the traditional model as broken because they focus on economic benefits

Define stakeholder theory. Who developed it? What does it call for managers to identify and consider? What does it force businesses to address? Who does it give a voice to? What does it say about tensions between stakeholders? What are the two results?

Stakeholder theory: an understanding of how business operates that takes into account all identifiable interest holders

Developed by philosopher R. Edward Freeman

Calls for managers to identify and consider the network of tensions caused by competing internal and external demands within which business exists

Forces business to address its underlying values and principles

Gives all stakeholders a voice 

Suggests tensions between stakeholders can be balanced 

Results in profit and the business becoming a network of relationships in the larger social context and responsibilities that develop from them

How does a company need to view itself to achieve balance among competing tensions? What does it lead the company to clearly identify? What three things can the company do after identifying?

Company needs to see itself in relation to its stakeholders and in a societal context to achieve balance among competing tensions

Leads company to clearly identify its larger purpose, principles, and responsibilities within the company and in the larger social context

Then the company can

• Identify limits for its operations so what it does is ecologically responsible and acceptable to stakeholders

• Analyze and manage interdependencies among ecological, social, and economic systems that form context of business

• Address ways to achieve equity of distribution

Define triple bottom line accounting. What does it not allow for and why?

Triple bottom line accounting: an approach to accounting that measures the firm’s social and environmental performance in addition to its economic performance

Doesn’t allow for comparisons across companies because measurements aren’t standardized

Define natural capital. What are five examples? What is natural capital the basis for?

Natural capital: natural resources such as air, land, and water that provides us with the goods and services on which our survival depends

EX: Land, air, water, living organisms, and all formations of the ecosystem

Basis for everything we do as humans

What three characteristics of a country are part of natural capital and explain its political and trade relationships? What should international managers know how to do? What part of trading group does geographic proximity shape? Give three examples. 

Country’s location, its neighbors, and location of its capital and major cities are part of natural capital and explain many of its political and trade relationships

International managers should know how these contribute to company’s competitive advantage

Geographic proximity shapes membership in trade groups 

EX: EU, Mercosur, USMCA

Define topography. What differences does it contribute to? What are four major components of topography?

Topography: physical features of an area

Features of Earth’s surface contribute to differences in economies, cultures, politics, and social structures

Major components are mountains, deserts, tropical rainforests, and bodies of water

What impact do mountains have neighbors? What do plains and plateaus facilitate?

Mountains are barriers that tend to separate neighbors and impede exchange and interaction

Plains and plateaus tend to facilitate exchange and interaction unless the climate makes it unlikely

What impact do deserts and tropical forests have on markets, transportation, and population concentrations? What are the impacts of densely populated nations on marketing and distribution and why? What are three countries with densely populated nations?

Deserts and tropical forests separate markets, increase the cost of transportation, and create population concentrations

In more densely populated nations, marketing and distribution cost less because population centers are closer together, communication systems are more efficient, and more people are available for employment

EX: Canada, Australia, and Brazil

How much of the Earth’s surface consists of arid and semiarid regions? Where are they commonly located (2)? Define desertification. What is the example about Australia?

More than 1/3 of Earth’s surface consists of arid and semi arid regions that are located

• On coasts where winds blow away from land

• In their interiors where mountains or long distances cause winds to lose moisture before reaching regions

Desertification: permanent transformation of habitable or arable land to desert

Australia’s coastline is humid and fertile while the center of the country is mainly desert; Australia’s population is concentrated along coastal areas in and around state capitals

What are tropical rainforests a barrier to? What is the Canadian Shield? What three things are sourced from the Canadian Shield? Does it support populations?

Tropical rainforests are a barrier to economic development and human settlement, especially when they are combined with harsh climate and poor soil

The Canadian Shield is a vast outcropping of bedrock thinly covered with soil that covers half of the country in mostly permafrost

Source of minerals, diamonds, and ores

Doesn’t support populations

Describe the impact of bodies of water on people and transportation. What do densely populated regions coincide with? When is water invisible to most? Is the distribution of water even or uneven?

Bodies of water attract people and facilitate transportation

Densely populated regions coincide with rivers, lakes, and seacoasts

Water is invisible to most when used in agriculture and manufacturing

The distribution of water is uneven

Define inland waterways. When was water transport the only economically practical carrier for bulk goods over long distance? Why is water transportation diminished? Where is it not diminished?

Inland waterway: waterway that provides inexpensive access to interior regions

Before railways, water transport was the only economically practical carrier for bulk goods over a long distance

Water transportation is diminished due to competition from air and road transport

Water transportation is not diminished in Europe

Why are navigable waterways with connections important? What do landlocked nations need to construct? What are governments that control coastlines near landlocked countries in position to do?

Navigable waterways with connections to ocean have been important because they permit low cost transportation of goods and people from coast to interior

Landlocked nations must construct long, costly truck routes and extensive feeder networks for relatively low volumes of traffic

Governments that control coastlines near landlocked countries are in positions to exert considerable political influence

Define climate. Why is it important? Where do similar climates occur? What does the North South Divide suggest?

Climate: a set of meteorological conditions of temperature, precipitation, and wind that prevail in a region

Important because it sets limits on what people can do 

Similar climates occur in similar latitudes and continental positions

The North South divide suggests the greatest economic and intellectual development has occurred in temperate climates of northern Europe and US because less temperate climates limit human energy and mental powers

What factors does James Diamond’s Guns, Germs, and Steel: The Fates of Human Societies explore? What does Diamond argue gaps in technology among human societies were caused by? What did populations develop immunity to?

James Diamond’s Guns, Germs, and Steel: The Fates of Human Societies explores factors that contribute to differing levels of development

Diamond argues gaps in technology among human societies were caused by development of early agricultural societies in places favored by climate and topographic features

Populations developed immunity to diseases that allowed them to develop stable social groups

Identify and explain the three factors responsible for underdevelopment in tropical nations that are present because of the climate.

Continuous heat and lack of winter cold means there are no constraints on reproduction and growth of weeds, insects, viruses, birds, and parasites

Techniques available to control pests and parasites but impacts of climate change reduce advantage control

Climate allows certain developments to occur but doesn’t cause them

What three things form basic context for human activity and business ventures? Which are permanent facts and what isn’t? What limits does climate set? What is climate on a global scale being affected by? What three things do climate change result in?

Location, topography, and climate form basic context for human activity and business ventures

Location and topography are permanent; climate isn’t

Climate sets limits for human activity that prove difficult to modify

Climate on the global scale is being affected by greenhouse gas emissions that accompany industrialization

Results in warmer temperatures, melting ice at polar caps, and rising sea levels

Define natural resources. What natural resources have special importance? Identify and define the major categories of natural resources.

Natural resources: anything supplied by nature on which people depend

Natural resources from which energy and nonfuel minerals can be extracted have special importance

Renewable energy: energy that comes from sources that are naturally replenished, such as sunlight, wind, and water flow
Nonrenewable energy: energy that comes from sources that cannot be replenished, the fossil fuels

Describe petroleum. What two things do we look at to know when we are near the end of the supply? What do forecasters anticipate once we know peak oil production has been reached at a global level?

Petroleum (crude oil) is a cheap source of energy and raw materials for plastics, fertilizers, and other industrial applications

Look at discovery and production rates to see when we are near the end of the supply

Once we know peak oil production has been reached at a global level, forecasters anticipate the world’s economies will enter a transition period where there will be an increasing gap between what the market needs and what can be supplied at a reasonable price

When does the Association for Study of Peak Oil and Gas agree the peak petroleum production is? What is the critical question? What does the US Energy Information Administration project? What is oil and natural gas projected to do?

Association for Study of Peak Oil and Gas says peak period is now

US Energy Information Administration projects that world energy consumption will continue to increase through midcentury with dramatic increases in developing countries as they continue to industrialize

Oil and natural gas are projected to retain their role as major energy sources for world during this time period

What are the four reasons estimates of the world’s oil reserves size is uncertain? What does political unrest limit access to? What are the four unconventional sources? What does horizontal drilling allow?

Reasons size estimates are uncertain

• New discoveries continue to be made with aid of improved prospecting equipment

• Aboveground issues (political unrest, financial crises, natural disasters) impact territories available for exploration and production

• Improved techniques (steam and hot water injection and oil recovery systems) enable producers to put new areas into operation and increase output from existing ones

• Automated, less expensive equipment lower drilling costs; allows company to profitably work smaller sized discoveries they wouldn’t otherwise touch

Political unrest limits access to potential sites and governments control access to natural resources

Unconventional sources are oil sands, oil bearing shale, coal, and natural gas

Horizontal drilling allows wells to combine vertical and horizontal approaches to pockets of oil with accuracy and increases wells’ contact area

Describe shale. What are the two reasons oil shale is underdeveloped? What impact have recent technological advances had on oil shale? What five countries have oil shale reserves?

Shale: a fissile rock (capable of being split) composed of laminated layers of claylike, fine grained sediment

Oil shale underdeveloped because of environmental problems in waste rock disposal and great quantities of water needed for processing

Recent technological advances have made deposits more accessible, but fluctuations in global oil prices have impacted economic feasibility of exploiting shale oil

Oil shale reserves in Estonia, China, Brazil, Germany, and Russia

What is hydraulic fracturing? What is the common name? What impact has hydraulic fracturing and horizontal drilling had on oil reserves?

Hydraulic fracturing is cracking of rock by injected a fluid under pressure

Common name is fracking

Horizontal drilling and fracking have opened new reserves in the US

What did Greenpeace and other environmental groups campaign against oil shale projects for? Why do environmentalists not advocate for developing more nonrenewable energy sources?

Greenpeace and other environmental groups campaigned against oil shale projects on grounds that extracting oil from shale creates four times the greenhouse gas impact that extracting conventionally drilled oil has and it creates polluted wastewater

Environmentalists don’t advocate for developing more nonrenewable energy sources because they lead to environmental problems and we know we have to switch to renewable energy sources

Why has nuclear power been decreased in the past? Why is it seen as clean? What is the main problem? Where are nuclear power plants typically located? What countries is the world’s largest exporter?

Nuclear power has decreased because waster material storage raises safety problems and accidents can be dangerous even over large distances

Nuclear power is seen as clean because it doesn’t contribute to climate change, but there are serious concerns about relying on it

The main problem is safety - spent fuel rods have storage challenges, nuclear power plants are targets for terrorism, and many plants are built near earthquake zones

Nuclear power plants are located near coastal zones because they require cooling by water

France is the world’s largest exporter

Why is the use of coal projected to decline? What is coal demand projected to do in 2025 and through 2040? Which country leads the world in recoverable coal reserves? What is the environmental impact of coal usage? Which three countries are contributing greatly to the release of greenhouse gases by the continued use of coal?

Coal usage is projected to decline because it pollutes heavily

Demand for coal is projected to level out through 2025 then decline through 2040 in every region except India

US leads the world in recoverable coal reserves

Emissions released by burning coal is directly responsible for global warming, but clean coal technologies are being developed that reduce the level of pollution released as part of the energy generation process

China, India, and the US are contributing greatly to the release of greenhouse gases by continued use of coal

Which nonrenewable energy source is the cleanest when burning fossil fuels? What are the two reasons its consumption is increasing?

Natural gas is the cleanest burning amount fossil fuels with greenhouse gas emissions significantly lower than oil or coal

Consumption as a substitute fuel is increasing as oil prices increase and new deposits of natural gas are found

What is the change that will happen with the inevitable energy revolution? When does the US Energy Information Administration show the shift will happen? What are the two reasons for the shift?

In the energy revolution, renewable energy sources will replace nonrenewable energy sources

US Energy Information Administration says change is happening now

Shift toward renewable energy sources occurs for one of two reasons 

• Price of nonrenewable energy sources will become too high relative to the cost of developing sustainable renewable sources

• Nonrenewable sources will become unavailable because of depletion or political risk 

What are the seven alternative energy sources that commercial development is tracking to show an organization’s commitment to full commercialization? Are those available everywhere? What two groups have seen renewable energy sector outpace the nonrenewable sector? What is the world’s largest renewable source of electricity?

Alternative energy sources

• Wind power

• Biomass fuels

• Solar photovoltaic power

• Concentrating solar thermal power

• Geothermal power

• Ocean energy

• Hydropower

None of the seven sources are available everywhere, but they have applications under appropriate conditions

Growth of renewable energy sector has outpaced nonrenewable sector in the EU and US

The world’s largest renewable source of electricity is hydropower

Who were Sustainable Development Goals adopted by? What do they include? What group of people is advocating for the renewable energy revolution?

Sustainable Development Goals were adopted by all UN member states

Includes commitment to sustainable energy and increased emphasis on renewable energy sources

Citizens are advocating for the renewable energy revolution, not governments and businesses

Which renewable energy source is the mainstream electric energy source on land and offshore? What are the two trends? What has the International Energy Agency projected?

Wind power is the mainstream electric energy source on land and offshore

Trends are

• Increased offshore development and small scale community projects

• Projections for growth are strong

International Energy Agency projected that electricity generation from offshore wind turbines will increase 15 fold over the next two decades

Define biomass. What two things are can biomass be derived from? What three forms can biomass materials take and provide examples. What is a growing development and what are the two reasons?

Biomass: category of renewable fuels derived from organic materials whose energy source is photosynthesis, through which plants transform the sun’s energy into chemical energy

Derived from agricultural, forestry, and municipal waste and from crops grown expressly for fuel

Three forms

• Solid - straw, woodchips

• Liquid - vegetable oils, animal slurries

• Gas - biogas

Growing development is co-firing biomass fuels with coal to reduce harmful emissions and use existing coal power generating facilities

Why did ethanol usage rise? What are the three most popular sources? Why do environmentalists see ethanol as a concern? Why did ethanol sales in the US drop? Why did the boom in shale oil reduce US consumers’ motivation to use ethanol?

Ethanol usage rose when the cost of oil and concerns about carbon emissions increased

Most popular sources are corn, wheat, and sugarcane

Environmentalists see ethanol as a concern because corn has taken acreage away from food crops, especially in countries that need the food

Ethanol sales in US dropped with reduction in fuel consumption because of the Covid 19 pandemic

Shale oil boom reduced US consumers’ motivation to use ethanol because shale oil brings the US closer to its goal of independence from foreign fuel

Define solar photovoltaic power. Who is the worldwide leader? What four countries follow? What is its growth title?

Solar photovoltaic power (PV): power based on the voltage created when certain materials are exposed to light

China is leader worldwide

Followed by US, India, Australia, and Spain

Fastest growing renewable power technology

Define Concentrating Solar Thermal Power (CSP). Why is it categorized different than solar PV? What are the two countries emerging as leaders? What has recent capacity expansion focused on?

Concentrating Solar Thermal Power (CSP): a system using mirrors or lenses to collect sunlight for heating water that powers an electrical generator

Different category than solar PV because it relies on a different technology

Spain and US are emerging leaders

Recent capacity expansion focused on developing countries and countries receiving high solar radiation

Define geothermal power. What three technologies does it rely on? What are the five countries with the largest sources? How many nations are creating geothermal energy development projects with World Bank’s Energy Sector Management Assistance Program?

Geothermal power: power from heat stored in the earth

Relies on different technologies like 

• Drawing heat from hot water or steam reservoirs deep in earth accessed by drilling 

• Geothermal reservoirs that create hot springs

• Directly from earth’s core to surface temp of 508-608 degrees Fahrenheit

Largest sources are US, Indonesia, the Philippines, Turkey, and New Zealand

More than 30 nations have geothermal energy development projects with World Bank’s Energy Sector Management Assistance Program

What are the two sources of ocean energy? How mature is it? What is interest increasing in? What countries are the two big leaders? What eight countries have small projects?

Two sources of ocean energy are the sun’s heat on the water and the mechanical energy of the tides and waves

The least mature of the renewable energy sources

Interest increasing in wave, tidal, and ocean thermal energy conversion systems

Big leaders are France and South Korea

Small projects in Portugal, China, Russia, Denmark, North Korea, Spain, US, and Canada

What does hydropower draw energy from to generate power? Where are small hydropower operations located and what do they do? What are four countries where major plans are being finished? What kind of projects are expected to increase?

Hydropower draws on energy from moving water to generate power

Small hydropower operations on local rivers in rural areas of Africa that lack electricity are used to replace diesel generators

Major plans being finished in Brazil, China, Laos, and Bhutan

Small scale hydro applications are expected to increase

What are rare earths? Are they rare? Why are they called rare? How much does China produce and what have they recently changed? What are they implementing plans to do and what do they require?

Rare earths: 17 elements used in defense and technology applications

Rare earths aren’t actually rare

Most of them widely dispersed and don’t occur in concentrations that are sufficient to make their mining commercially viable

China produces over 85% of rare earths output and has imposed increased export restrictions on materials, which is causing prices to go up

Nations are developing plans to reduce reliance on individual countries or companies for critical supplies of minerals or other inputs
Implementing these plans will require international cooperation and entail enormous costs in time, money, and environmental impact

What three things should strategic thinking about rare earths focus on? How should we think strategically about natural resources? What does that strategic thinking require?

Thinking strategically about rare earths focuses on availability, use, and recycling

Think strategically about how we use and develop natural resources that provide energy that power our world and makes business efforts possible

Require stewardship, including responsible planning and use

What does increased global competition force international and domestic companies to do? What are improvements in new or existing operations?

Global competition increases force international and domestic companies to find ways to lower costs while improving products and services to remain competitive

Improvements in existing operations or new operations

Define outsourcing. What are the four common functions that are outsourced? Why does management pursue different combinations of outsourcing?

Outsourcing: hiring others to perform some of the noncore activities and decision making in a company’s value chain, rather than having the company and its employees continue to perform those activities

Commonly data processing, logistics, payroll, and accounting

Management pursues different combinations to enhance their company’s international comeptitiveness

Describe supply chain. Define supply chain management. What kind of approach is supply chain management? Why are supply chains integral to quality and cost management initiatives?

Supply chain - activities required to produce a company’s products and services and the way activities are linked together

Supply chain management: process of coordinating and integrating flow of materials, information, finances, and services within and among companies in the value chain

Supply chain management is a total systems approach to managing the overall flow of components in the value chain

Supply chains are integral to quality and cost management initiatives because a typical company’s supply chain costs can be more than 50% of assets and more than 80% of revenues

What is the ultimate goal of effective supply chain management systems? How is it done? What type of product life cycles emphasize achieving effective supply chain performance?

Ultimate goal of effective supply chain management is to reduce inventory

Operations at each stage should be synchronized to minimize buffer inventory size

Shorter, less predictable product life cycles emphasize achieving effective supply chain performance

What did new technology enhance in terms of supply chain management? Why is global supply chain management getting attention? What three pressures can effective supply chain management help with?

New technology enhanced the availability of data and integration with suppliers and customers

The global supply chain management is getting attention because company have to achieve significant international competitive advantage

Effective supply chain management can enhance the company’s ability to manage regulatory, social, and other environmental pressures, nationally and globally

What does the design of a company’s products and services have a fundamental relationship with? What is an important design consideration? What three factors is the consideration affected by?

Design of a company’s products and services has a fundamental relationship with the types of inputs the company will require

Important design consideration is the extent to which the international company’s products and services will be standardized or adapted 

The standardization or adaptation will be affected by the range of competitive, cultural, and regulatory factors

What was the traditional approach to product design? Describe the steps. What is the alternative approach? What does it help the company do?

Traditional approach is the over the wall approach or sequential approach

Traditional approach steps

1. Designers prepare product’s design

2. Send design to company’s manufacturing engineers who address production related problems

3. Send problems back to design team to be adjusted

Alternative approach is cross functional participation in the design stage

Helps identify and avoid  potential sourcing, manufacturing, and other difficulties 

How do companies use customers in product design? What three does concurrent engineering allow designs to be assessed on early? What does concurrent engineering enhance? What should design decisions be integrated with?

Use key customers to ensure designs are consistent with customers’ needs

Concurrent engineering allows designs to be assessed for cost, quality, and manufacturability early

Enhances efficiency and effectiveness of subsequent manufacturing and supply chain management activities

Design decisions must be integrated with assessment of various supply chain considerations

How broad or narrow is recent design process innovation input and who is it coming from? What positive effects does it have on the involved group? How does it help market needs?

Recent design process innovation is getting broad input from general customers

Helps engage the customer and possibly increase loyalty

Allow companies to quickly and effectively develop and deliver new products that better meet market needs

What are three reasons for sourcing globally?

Obtain lower prices

Certain products the company requires might not be available locally, so they need to be imported

The firm’s foreign competitors could be using components of better quality or design than the components available in the home country

Define offshoring. Describe outsourcing overseas and identify the name. What are four benefits of outsourcing?

Offshoring: a company’s decision to relocate some or all of its activities or processes to a foreign location

Outsourcing overseas is when companies set up their own facilities abroad or outsource production to other companies at home or abroad

Outsourcing overseas is called offshore outsourcing

Benefits of outsourcing

• Reduce costs and capital investments

• Improve flexibility and speed or response

• Enhance quality

• Provide other strategic benefits

What four factors should be considered when making outsourcing decisions? What decisions are outsourcing decisions an extension of?

Factors to consider when making outsourcing decisions

Comparison of costs

Managerial control of confidential product design specifications, delivered quantity, quality, design, and delivery time and method

Manufacturing expertise required to make raw material or components

Added cost of not being able to take advantage of scale or larger volumes vendor might have 

What three factors complicate global purchasing? What progression of outsourcing should companies take? What is the lure of global sourcing?

Factors that complicate global purchasing

• Distance

• Different languages of buyers and sellers

• Different national laws and regulations

Start by outsourcing simple activities then gradually outsource more complex activities as the outsourcer and service provider get experience

Lure of global sourcing is existence of suppliers with improved competitiveness in cost, quality, and timeliness

What have emerging economies transitioned from in terms of processes, machines, and skill? What has the ability to effectively and efficiently use global sources been enhanced by (3)?

Emerging economies have transitioned from high labor content products made with light, unsophisticated process equipment and lower labor skill requirements TO sophisticated processes and more complex, lower labor content machines or skill intensive engineering and design services

Ability to effectively and efficiently use global sources has been enhanced by plummeting cost of communications, widespread use of standardized interfaces, and increasing pace companies are automating and digitizing data

Describe the five global sourcing arrangements. 

Wholly owned subsidiary - may be established in a country with low cost labor to supply components to the home country plant OR the subsidiary may produce a product not made in the home country or if it is of higher quality

Overseas joint venture - established where labor costs are lower or quality higher than in home country to supply components or other inputs to home country

In bond plant contractor - production plant in home country or another sends components to be machined and assembled, or just to be assembled, by an independent contractor in an in bond plant

Overseas independent contractor - common in industry in which firms with no production facilities contract with foreign manufacturers to make clothing to their specifications and with their labels

Independent overseas manufacturer - company contracts with independent manufacturer in another country to provide it with products, often designed by overseas manufacturer

What does global sourcing have a strong relationship with? Define intrafirm trade. What proportion has been rising for decades? What are the two reasons for the increased proportion?

Global sourcing has a strong relationship with ownership of foreign sources

Intrafirm trade: trade that occurs between a parent company and its foreign affiliates

Proportion of externally purchased materials in overall costs of goods sold has been rising for decades

Reasons 

• Greater complexity of products

• Increasing pressure for firms to focus on their core business and outsource activities where they lack competitive ability

What two things have caused a rapid increase in the number of new products available to the market? How much of companies’ sales are generated by products that weren’t available five years ago? What has the increase caused additional pressure to do?

Competitive pressures and reduced concept to market cycle times have caused a rapid increase in the number of new products available to market

1/3 of companies’ sales are generated by products that weren’t available five years ago

The increase has created additional pressure to locate suppliers worldwide that can provide inputs at competitive prices and quality levels while responding quickly to market changes

What have firms been setting up electronic procurement exchanges to do? Are they done by individual companies or groups? Are e-procurement systems common in the public or private sector? How does it impact how purchasing is viewed?

Firms have been setting up electronic procurement exchanges to identify potential suppliers or customers and facilitate efficient and dynamic interactions among prospective buyers and suppliers

Done individually or in conjunction with other firms

E-procurement systems are common in the public sector

Purchasing is increasingly considered a strategic function because of rapid e-procurement developments

Define indirect procurement. Who is it a critical focus of? What are the four groups of items that are commonly purchased through indirect procurement? What level is new technology in indirect procurement encouraging?

Indirect procurement: purchasing of goods and services that are not part of finished goods

Indirect procurement is a critical focus of management attention

Items like maintenance, repair, operating supplies, and office equipment

New technology in indirect procurement is encouraging change at all company levels

What are the most basic transactions that occur over the e-purchasing exchange? Describe the interaction between suppliers and buyers. What do buyers and suppliers interact through? What do buyers select quotes based on?

Catalog purchases are the most basic transactions that occur over e-purchasing exchange

Suppliers provide a catalog of products that buyers can access, review, and place orders for at the listed price

Buyers and suppliers interact through the standard bid/quote system where buyers post their purchasing needs and prospective suppliers submit private quotes

Buyers can select quote on the basis of price, delivery time, and other factors

What three things do industry sponsored exchanges facilitate?

Obtaining letters of credit

Contracting for logistics and distribution

Monitoring daily prices and order flows

What are three benefits of global electronic procurement? What is the main problem with global sourcing?

Benefits

• Allow companies to streamline operations, cut costs, and improve productivity in supply chain management and customer response

• Smaller companies can use the Internet to purchase raw materials and sell products to customers on a worldwide basis

• Industry based B2B exchanges optimize supply chain across entire organization network 

Main problem is the alleged lower price isn’t all that low after all costs are considered

What are eight common costs of importing? What is a disdvantage for the importer?

Costs of importing

• International freight, insurance, and packing

• Import duties

• Customhouse broker’s fees

• Transit or pipeline inventory

• Cost of letter of credit

• International travel and communications costs

• Company import specialists

• Reworking products that don’t meet specifications 

Disadvantage for the importer is an increase in price due to the home currency losing value because of exchange rate fluctuation

What companies use hedging? Why do they do it? What are two common logistical issues with sourcing abroad?

Hedging used by companies that operate internationally, especially if the raw materials include one or more of the commodities traded on established commodity markets

Hedging is done as a means of protecting the company from risk of rapid price fluctuations

Logistical issues with sourcing abroad

• Cost of shipping changes based on capacity and demand

• Cargo can be delayed because of bad weather, labor strikes at ports, or other natural or manmade impediments

What does life cycle costing analyze? What organizations are using it? What do firms include in full costing and why?

Life cycle costing is used to analyze purchasing decisions through life of the purchased item, including trade in or future estimated salvage value

Full costing includes use of activity based costing systems to ensure all costs associated with foreign sourcing are fully recognized when making purchasing decisions

What are essential global sourcing decisions linked to? What does developing cross company teams enhance? Why are supply chains monitored?

Essential global sourcing decisions are linked to an organization’s strategy and explicit objectives for suppliers be defined and incorporated in contracts with incentives for meeting and exceeding

Monitor supply chains to ensure undesirable practices that are not being utilized

Why did early version of e-procurement systems fail? What are successful electronic commerce initiatives connected to? What should be considered?

Early versions of e-procurement systems failed because they were isolated from the company’s overall business system

Successful electronic commerce initiatives include connections to traditional system for fulfilling procurement and other value chain activities

Consider how to manage transition because other traditional functions must be accomplished before actual purchasing via e-procurement

What do suppliers in emerging nations have difficulty with that affects e-procurement performance? What are three concerns about making access to the company’s internal systems from the outside?

Suppliers in emerging nations may have difficulty accessing and supporting sophisticated IT infrastructures, which can affect e-procurement performance

Three concerns about making internal systems accessible to outside

• Companies want to avoid risking the loss of their brand equity and margins

• Could expose internal business systems to a wide range of potential security issues

• Government concerns with potential anti-competitive effects of collaboration among competitors 

Define just in time (JIT) production. What are the seven requirements to have an effective JIT system?

Just in time: a balanced system in which there is little to no delay time and idle in-process and finished goods inventory

Effective JIT requirements

• Components have to be defect free or the production line will be shut down while workers in successive operations wait for usable inputs

• Parts and components have to be delivered to each point in the production process at the time they’re needed

• Eliminate inventories of finished goods while still responding quickly to customers’ orders requires manufacturers to set up flexible production units, which necessitates rapid set up times

• Reduce process time

• Simplify product lines and design to use as many of the same parts as possible

• Need to have cooperation of suppliers

• Get product designers, production managers, purchasing people, and marketers to work together as a team

How does Just In Time production reduce process time? What is little JIT? What is big JIT? What does big JIT require and what is integral?

Reduce process time by 

• Lowering the time needed to transport work in progress from one operation to the next

• Having each succeeding operation act as quality inspection so fewer defective parts are produced

Little JIT is only incorporating the narrow focus on managing goods inventories

Big JIT is a total system covering the management of people, materials, and relationships with suppliers

Requires a thorough and companywide commitment to managing quality

Continuous improvement is integral to big JIT

Define total quality management. What is necessary for TQM? Define quality circle. Where is the quality circle used and who leads them? How are activities divided and led?

Total quality management: companywide management approach in which the entire organization is managed so that it excels on all dimensions of product and services that are important to the customer

Teams are necessary for TQM

Quality circle: a small workgroup that meets periodically to independently discuss ways to enhance the quality of the company’s product or service

Used in all functional areas

Usually led by employee who received training on quality control techniques

Activities are divided into subgroups and led by someone junior to the circle’s leader

Define synchronous manufacturing. What is the common name and who created it? What did the creator develop and what did it do? What does it control and what does it seek to do?

Synchronous manufacturing: an entire manufacturing system with unbalanced operations that emphasizes total system performance 

Also called Theory of Constraints; created by Eli Goldratt

Goldratt developed a computer program that makes scheduling faster because it can be simulated on a computer instead of trial and error like JIT

Controls scheduling and manufacturing and seeks to locate and eliminate or minimize any constraints to greater production output

Define bottleneck. What do managers do once a bottleneck is found? What does controlling the bottleneck aim to do? When can defective parts be remade and why?

Bottleneck: the slowest operation; what output is determined by and limited to

Managers can concentrate on increasing production on the bottleneck process then move to the next bottleneck once that one is resolved

Aims to balance the product flow through the system, which leaves output levels of various operations unbalanced

Any defective part produced before the bottleneck can be remade because there’s excess capacity in all the operations except at the bottleneck

Define mass customization. What does it combine? When is using mass customization appropriate? What does it require companies to do?

Mass customization: a company’s use of flexible, usually computer-aided, manufacturing systems to produce and deliver customized products and services for different customers worldwide

Combine low unit costs and rapid production speeds of mass production with flexibility of customization for demands of individual customers

Appropriate in situations where it’s feasible to delay differentiating the product for a particular customer until the last possible point in the supply network 

Requires companies to reconceptualize the design of the product and design and integration of processes used for producing and delivering product to customers 

Identify and describe the four basic approaches to mass customization. What is the benefit of having a comprehensive approach to operations?

Four basic approaches

• Collaborative - company helps customers choose required product features

• Adaptive - company offers standard product that users modify themselves

• Cosmetic - only product’s presentation is customized (color, package)

• Transparent - customers are provided with individualized product or service offerings without their knowing it, like on website interfaces

Benefit of comprehensive operations approach is that the company will be able to function at max efficiency and rapidly respond to customers’ needs while maintaining a minimum level of inventory

Define six sigma. What does it combine? What two things does it concentrate on? What is it a method for?

Six sigma: business management process for reducing defects and eliminating variation

Combines rigorous analytical tools with well defined infrastructure and leadership from the top to solve problems and optimize processes

Concentrates on eliminating variation and reducing defects from work processes

The method for creating a closed loop system for making continuous improvements