Natural factors such as climate, soil, forests, minerals, rivers and ocean have tremendous influence on the functioning and growth of commerce and industry. The impact of natural environment of business may be described under the following heads:
- Source of Raw Materials: Natural and physical environment provides the raw materials required for the functioning of industries. For example, iron and steel industry cannot function without ore and other necessary minerals. In fact, the mines, flora, fauna, land mass, nature of soil, etc. serve as the basis of production function.
- Mainstay of Agriculture: People and business both require several types of agricultural items for their survival and growth. Agriculture largely depends on nature. Cultivation of crops and raising of livestock are directly dependent on soil. The types of crops that can be grown in an area depend upon climate and soil.
- Location of Industry: Heavy industry has to be located near the source of raw materials. For example. India’s iron and steel industry is concentrated in the regions which are rich in the deposits of iron ore and coal. Extractive industries such as mining, oil drilling, stone quarrying, etc. depend on the availability of minerals deposited by nature. Industrialists don not like to set up factories in areas which are climate affect the location of certain industries like cotton textiles and watch manufacturing.
- Employment Generation: Existence of minerals and other natural resources alone does not guarantee economic prosperity of people. Proper exploration and utilisation is necessary. Exploitation and utilization of natural resources provides jobs to millions.
- Foreign Exchange Earner: A country can export its surplus natural resources like minerals and oils and thereby earn valuable foreign exchange. Arabian countries have become affluent by exploiting their oil resources gifted by nature. In fact the genesis of international trade lies in the natural environment. Trade between nation is the outcome of geographical differences. Due to natural factors some regions are more suitable for production of certain goods, e.g., tea and coffee in India, Petroleum in Middle East, dairy products in Denmark and so on.
- Basis of Transportation and Communication: Business depends upon transportation and communication facilities which in turn are largely dependent on geographical factors. Uneven land surface, deserts, oceans and forests are barriers in transportation and communication, Though modern technology has enabled man to overcome these barriers, the costs increase tremendously. Even today business activities do not flourish in areas which by nature lack efficient transportation and communication systems.
- Key to Human Life: Business can prosper only when people are healthy and happy. Nature serves not only as a store house of raw materials, it also provides the physical and biological conditions within which people can live in a healthy and happy manner. Almost every commodity which we consume and produce has existed originally in the natural environment. Nature is also the source of almost all the energy used in production and distribution. Nature has is a symbiotic link between man and nature. In fact, earth is so crucial to mankind that out Vedas and seers suggest worship to the Mother Earth.
- Demand Pattern: Demand pattern depends upon topographical and weather conditions. For example, jeeps may be in greater demand than cars in hilly areas with a difficult terrain. Similarly, woolens are in demand in cool areas while coolers and air conditioners are more in demand in high temperature regions. Natural environment may also call for modifications in product mix, packaging and storage systems.