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34 Cards in this Set
- Front
- Back
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What are the seven barriers to international trade?
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-tariffs, currency fluctuations, investment regulations,
environmental restrictions,foreign relations/trade sanctions, safety regulations, immigration |
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What are the two types of markets?
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1) Domestic Market: Is a business that makes most if its transactions inside their own borders.
2) International Business (or foreign market): is the economic system of transactions conducted between businesses in other countries a. Can be companies/government organizations or non profit b. Can be mixed, domestic & foreign markets |
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five ways to do IB
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1) Own retail or distribution outlet in another country (Ex. Tim Horton’s in US)
2) Own a manufacturing plant in another country (Ex. Bombardier Worldwide) 3) Export to a another country (Ex. Lee Valley pools export to Asia, Africa & Europe) 4) Import from another country (Ex. Importing Nike, or Adidas from US) 5) Invest in another country (Ex. Etruscan Resources from North America invested in US company for environmentally friendly technology to process gold bearing ores) |
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Define Self-Suffiency & How did this factor into the beginning of trade
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-A country provides everything it needs to survive without trading (i.e. food, clothing, shelter, water)
-• Most Canadian aboriginals tribes were self sufficient • Growing tribes=need for more resources • Searching for more resources leads to meeting of other tribes • Groups begin to travel long distances to find resources to trade with |
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What was early trade like in North Africa, China & India, and Mediterranean Basin?
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• Mediterranean Basin- figs, scented oils, rare woods
• China & India- spices, tea, clothing • North Africa- silver, gold and special woods |
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What were guilds?
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-Association of merchants/craftspeople organized in region for mutual aid or business benefit
-Controlled economy, very powerful -Charged early forms of tariffs |
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why did euro traders find new routes, and where?
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• Wars in Turkey & Middle East made Euro traders find new routes for spices/silk (Spices preserved food & acted as deodorant)
• This led to discovery of Americas |
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Trade w/ Europe
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• 1700s little Canadian manufacturing, done in UK & France
• Canadian raw material was in high demand (Ex. Beaver pelts, fish & lumber) • Defeat of French=more trade with UK • Settlements were near water for ship transportation o Why settlements are on east coast & great lakes |
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Trade w/ the US
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• Did not trade w/ UK
• Manufactured their own goods • Canada supplied them with wheat & timber • US=huge Canadian trade partner o Exports ’08: $375 Billion o Imports ’08: $227 Billion |
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Trade w/ Japan
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• Trade w/ Japan started after WWII
• Economy grew rapidly after being rebuilt in the 40s • Produce high quality (i.e. radios, TVs, camera, automobiles & computers) • Top 5 Canadian Partner o Export to Japan- $11 Billion o Imports: $15 Billion |
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Trade w/ China
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• Major economic force in past 30 years
• Liberation of Communist economic policies have led to free enterprise • Cheap labor |
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Trade w/ Mexico
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• Canada has begun to trade with Mexico, trade is growing with Mexico
• ’93: NAFTA allows goods to be made in Mexico or USA enter Canada duty-free • Imports: Electrical machinery, vehicles • Exports: Vehicles, electrical machinery & grain/fruit |
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Trade w/ Middle East
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• Trade centers around oil
• Conflicts/trends to move away from Oil effect this trade • UAE, Israel & Egypt have been trading with Canada under non-oil related business |
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Trade w/ Africa
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• Over 50 countries but 0.5% trade, unstable & corrupt
• Though Morocco & South Africa becoming big partners |
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Trade w/ India
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• Pop is over 1 billion
• Outsourcing & manufacturing • Young workforce & educated • Growth of Indian Firms like Tata Group |
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Define Primary Resources
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• Called extractive industries, take raw materials from nature & sell them to other businesses who convert them into semi-manufactured or end product
• 4 Major Primary Industries: a) Agriculture- crops, livestock, poultry milk, eggs b) Fishing/trapping- shellfish, pelts, cod, tuna c) Forestry/logging- lumber, pulp & paper d) Energy & minerals- metals, fossil fuel & hydro electric |
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Define Manufacturing
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• Made up of processing & fabrication sectors
• Processing sector takes raw materials & alters them so they can be manufactured further (Ex. Grinding up logs into pulp) • Fabrication sector takes processed materials & turns them into end product finished goods (Ex. Using pulp to make paper) • Some manufacturing companies do both |
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Define Tertiary or Service Industry
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• Service industries: Businesses that do not sell tangible items, they provide activities not objects that help people (Ex. Transportation & government)
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Advantages to International Trade
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• Attracts investment: When a foreign country’s product has high demand they will invest in an office, factory or distribution warehouse in Canada to reduce costs which creates jobs
• New technology & materials: High tech sector provides supplies many w/products or services, creates competitiveness by creating better tech developed in another country • Diverse Product/Services: Foreign trade opened up the world as a market delivering a rand of foods, fashion & new inventions to Canadian market o Products now not normally found here available due to refrigerator/packing technology |
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Disadvantages to International Trade
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• Support of non-democratic: Countries ignore people’s welfare when making decisions
• Cultural identity issues: Culture is a major export of the US which promotes foreign influence o Companies compete for share of the market & mind (Ex. Italian soccer shoes, French sparkling water) • Social welfare issues: Maintaining safety standards, minimum wages, etc., which cost a lot to tax payers/businesses to less regulated country • Environmental issues: Some countries think Canadian environmental protection laws are to expensive • Political issues: o Wars often occur because of natural resources o War/Civil strife have negative impact on trade capabilities o Due to political issues countries will ban trade • Increased foreign ownership in Canada o Foreign companies have foreign loyalties o Lack of R&D o Reduced exports o Revenues leave Canada o Economic destabilization |
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Challenges of Exporting
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• Establishing a presence
• Production capacity • Costs (packaging & shipping) • Understanding the way business is done in that country |
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Define Importing
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• Companies bringing in product to satisfy the consumers in their own country
• Import products to help manufacture or finished goods • Global sourcing is buying capital goods, equipment, raw materials or service globally (Ex. Buy Dell CPU- US Co., built in India) |
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Trade Missions
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• The government of Canada introduced “Team Canada” trade missions to expand our global reach
• A combo of high level government officials (e.g. Prime Minister, Trade Minister) accompany business executives (CEOs, VPs) on trips to foreign nations in attempts to secure new business for Canadian companies • These missions have been extremely affective in expanding Canadian trade partnerships |
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Trade Shows
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• Specific showcases to promote products or services usually 1 industry
• Allows potential purchases to communicate w/suppliers • Develops valuable trade contacts & distributors |
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Licensing
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• When one company gives another company permission to use product, service, brand name or patent for fee
o Virgin & Bell • Exclusive distribution rights is a form of licensing that allows a company to be the distributor of a product in a certain area or county o Pepsi/OCDSB, I-Phone/Rogers @ first |
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Franchising
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• An agreement to use a company’s name, services, products & marketing
• Franchising signs contract & follows company’s rules for a fee o Timmies, McDs, Second Cup |
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Joint Ventures
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• A common type of doing a international business
• When two businesses, usually 1 from foreign country form a new company w/ shared ownership o Walmart/McDonalds, Esso/Tim Hortons |
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Define Public sector
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investment in government owned operations
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Define Private Sector
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Investment, take-over, mergers of Canadian business
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What are the two types of investment?
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1) Foreign Direct Investment: When 1 company wishes to expand to another country
2) Portfolio investments: A person buys a share in a company but has no controlling interest |
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Foreign Subsidiary
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• When a product company allows a branch to operate in a new country
• Parent company sets targets or goals that need to be met while subsidiary runs its own business o Ex) Toyota Motor Canada which makes Lexus in Woodstock & Cambridge, ON |
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Why do companies expand internationally?
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1) Expand markets & Increased sales
• Increasing the market area=increasing sales • Greater the sales=greater the profits • Increased profits allow companies to spend money • Market expansion is done by exporting, direct capital investment or joint ventures 2) Controlling Expenses • Going international allows companies to find economical solutions to production & manufacturing challenges o Lower wages, closer to natural resources, efficient tech., lower tax, R&D support by government • Outsourcing 3) Diversification • Small/medium sized businesses may enter foreign markets to diversify their product line • Buying foreign companies picks up new lines without investing in new product development • Diversification of markets allow companies to expand & continue to do well when some markets fall 4) Competitiveness • Companies go global to compete with competitors • Look to protect or gain advantage over competitors • Global businesses under cut local businesses because they have cheaper business costs (Ex. Local Hardware store vs. Home Depot) |
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Reasons for IB growth
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a) Development in communication technology
b) Time zones: 24 zones, measured in times an hour ahead/behind the time in Greenwich, England c) Developments in transportation (sea, air, rail, land, pipelines) d) Freer Borders e) Business Confidence (less risky) f) Global competitiveness E.g. Disney copycats |
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Advantages of Business in Canada
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1) Lower production & Business Costs
• ’02, Canada was the low cost leader of industrial nations • Costs in Canada lower than USA → Labour costs 20-40% less →Construction costs 15% less → Electricity 24% less → Transportation 13% less 2) Human Resources • Highly educated workforce • 3rd for secondary enrollment • Top MBA programs outside of US: Queens, Western, U of T 3) Positive Business Climate • Ranked 4th in the world overall business climate → Measures ease in which company can run its business, encourages success of business, promotes fair competition, & welcomes foreign investment • 1st in G8 countries in terms of business ethics • Values like equal opportunities, human rights and equal labour standards Seamless North American Market Access • Canada/USA world’s largest trading partner • Over 1 billion dollars in trade per day • Close proximity (17 of Canada’s major cities are only 90 minutes from USA) • Open Borders (before September 11th) Gateway to the World • Doing business in Canada also provides great opportunity to access the rest of the world • NAFTA- allows access to US & Mexico, which leads to Latin America • APEC- allows access to Asia (Japan, India, China) Good Infrastructure • The fundamental facilities & systems serving a country, city, or area as transportation & communication systems, power plants & schools o Roads, sewers, water supply, Internet, schools, hospitals, ports, etc. Quality of life • In 1999, Canada #1 country by United Nations • 2010, Canada #9 • World reputation of welcoming immigration/refugees |
