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International Business > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

Foreign portfolio investment

A
  • investment in businesses located outside Canada through stocks, bonds and financial instruments
  • allows Canadians to spread out their investments which is less risky than investing in just one area
  • provides greater choice and opportunity
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2
Q

Importing

A
  • to bring products/ services into a country for use by another business or for resale
  • majority of Canadian imports are from the states
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3
Q

Global sourcing

A
  • the process of a company buying equipment, capital goods, raw material, or services from around the world
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4
Q

Exporting

A
  • to send goods or services to another country, for use by a business or for resale
  • majority of Canadian exports go to the states
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5
Q

Measuring economic progress: GDP

A

Gross domestic product = measures the output of goods and services a country produces within its borders

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6
Q

Measuring economic progress: GNP

A

Gross national product: measures output of goods and services produced by all the resources of a country

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7
Q

Balance of trade

A

The difference between a countries exports and imports

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8
Q

Trade surplus

A

More exports than imports

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9
Q

Trade deficit

A

More imports than exports

- results in foreign dept

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10
Q

Making economic decisions

A
  1. Define the problem
  2. Identify alternatives
  3. Evaluate alternatives
  4. Make a choice
  5. Take actions
  6. Review the decision
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11
Q

Value added

A

The amount of worth that is added to a product that is being processed

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12
Q

Foreign subsidiaries

A
  • aka wholly owned subsidiary
    = a branch of a company that is run as an independent entity in a country outside of the one which the parent company is located
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13
Q

Licensing agreement

A

Gives a company permission to use a product, service, brand name or patent in exchange for a fee or royalty

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14
Q

Exclusive distribution rights

A

A form a licensing agreement that grants a company the right to the only distributor of a product in a specific geographic area or country
- used for initial entry into a foreign market

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15
Q

Franchise

A

An agreement granted to an individual or group by a company to use that company’s name, services, products and marketing

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16
Q

Joint venture

A

A common type of international business
- a new company with shared ownership is formed by two businesses, one of which is usually located in the country where the new company is established

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17
Q

Trade barriers

A

Tariffs, protectionism, trade quotas, trade embargoes, trade sanctions

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18
Q

Protectionism

A

The theory or practise of shielding domestic industries from foreign competition often through trade barriers such as tariffs

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19
Q

Tariffs

A

The most common type of trade barrier

= taxes or duties put in imported products or services to allow domestic products to be competitive

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20
Q

Trade quotas

A

A government imposed limit on the amount of product that can be imported in a certain period of time

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21
Q

Trade embargoes

A

A government imposed ban on trade of a specific product or with a specific country, often declared to pressure foreign government to change their policies

22
Q

Trade sanctions

A

Economic action taken by a country to coerce another country to conform to an international agreement or norms of conduct

23
Q

Foreign investment restrictions

A
  • Canadian law with the greatest impact is the Investments Canada Act
  • ensures that all foreign investments are revised to determine they will benefit Canada
  • foreign investments in uranium, financial, transportation, and cultural industries = automatically reviewed
24
Q

Standards

A
  • countries have different standards for products in areas such as environmental protection, voltage and health and safety
25
Q

ISO

A

International organization for standardization

= network of standardization groups from over 170 countries established to set quality regulation

26
Q

Exchange rate

A

The amount of one country’s currency in relation to the currency of another country

27
Q

CAD and the USD

A

The Canadian dollar is most often quoted against the US dollar because the two countries are the largest trading partners in the world

28
Q

Winners of a high Canadian dollar

A
  • importers
  • Canadian travellers
  • major league sports teams in Canada
29
Q

Losers of a high Canadian dollar

A
  • exports
  • Canadian Tourism
  • Canadian retailers
30
Q

Floating rate

A

An exchange rate that is not fixed in relation to other currencies

  • the price at which currency with a floating rate is bought and sold fluctuates according to supply and demand
31
Q

Currency revaluation

A

The increase in value of a currency because the demand for that particular currency is greater than the supply

32
Q

Currency devaluation

A

The decrease in value of a currency because the supply of that particular currency is greater than the demand for it

33
Q

Factors affecting the exchange rate

A
  1. Economic conditions
  2. Trading between countries
  3. Politics
  4. Psychological factors
34
Q

Economic conditions that affect exchange rate

A
  • economic conditions in Canada

Ex. Inflation rate, unemployment rate, GDP, interest rates

35
Q

Taking between countries and exchange rate

A
  • the more favourable the terms of trade (comparison of exports to imports) the higher and currency exchange
36
Q

Politics and exchange rate

A

Political tension and instability or the threat of terrorism decreases the demand for a currency

37
Q

Psychological factors and exchange rate

A

Historical significance and stability change the way currencies are viewed

38
Q

Hard currencies

A
  • Stable currencies
  • easily converted to other currencies on the world exchange market
  • eg the euro, USD and CAD
39
Q

Soft currencies

A

A currency belonging to a country with an economy that is small, weak or that fluctuates often and is difficult to convert into other currencies
- eg. Russian ruble or Chinese yuan

40
Q

Currency speculating

A

Buying, holding, or seeking foreign currency in anticipation of its value changing in order to profit from fluctuation in the price of currency

41
Q

Fixed exchange rate

A
  • aka pegged exchange rate
  • a currency’s value is fixed against either the the value of another single currency
    Eg. Venezuela Bolivar
42
Q

Time zones

A
  • communication technology allows the world of international business to operate 24 hours a day
  • email used anytime
  • telephone needs knowledge of time zones
  • some methods = immediate feedback and interaction
43
Q

Tariff winners

A
  1. Domestic governments - collect additional taxes
  2. Local producers - good are more competitively priced
  3. Local employees - keep their jobs
44
Q

Losers of tariffs

A
  1. Foreign producers - good are more expensive
  2. Consumers - pay higher prices
  3. Foreign employees - lose out on opportunities
45
Q

Why does Canada favour eradication of tariffs

A

Because when one country implements a tariff it’s trading partner will retaliate with a tariff of its own

46
Q

Pros cons of protectionism

A

Pro: retains domestic jobs
Con: cause other countries to limit their imports of Canadian goods

47
Q

Riskiest types of international businesses and why

A

Joint ventures and foreign subsidies
- bc the parent company shares ownership or allows the subsidiary to be run by foreign nationals with little interference from the home country

48
Q

How can companies enter international markets

A

Importing, exporting, licensing agreements, franchising, joint venture, foreign subsidiaries

49
Q

Canada’s top imports

A

Machinery and equipment, motor vehicles and parts, oil, chemicals, electricity, and consumer goods

50
Q

Canada’s top exports

A

Motor vehicles and parts, industrial machinery, aircraft, telecommunications equipment, chemicals, plastics, fertilizer, wood pulp, timber, crude petroleum, natural gas, electricity, and aluminum

International Business (9 decks)

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