chapter 3 Flashcards
how many potential customers does canada represent in the global market?
38 million
what is globalization?
companies manufacturing, financing and marketing worldwide
can a country produce all of the products that its people needs and want?
no
how can canada get goods that are not locally available?
through trade
what is exporting?
the selling of goods and services to another country
what is importing ?
buying products from another country
why is exporting very intense for Canada?
because canadian companies face aggressive competition from exporters around the world
what are Canadas top export?
crude petrolium (81.2B)
cars (29B)
petroleum gas (15B)
gold (14.3B)
sawn wood (7.14B)
who buys most of Canadas exports?
United States (355B)
china (22.5B)
Japan (11.9B)
United Kingdom (11.8B)
Mexico (7.14B)
what are Canadas top imports?
cars (27.2B)
car parts (14.5B)
delivery trucks (14.2B)
refined petroleum (12.5B)
crude oil (11.9B)
who does Canada import from the most?
United States (259B)
what are the 5 pros of free trade?
more potential in the global market
productivity improves when a country has a comparative advantage in production
less costly imports keeps prices down
free trade inspires innovation and competition for firms
helps keep interest rates low
what are the 4 cons to free trade?
domestic workers can lose their jobs
workers may be forced to take pay cuts
moving operations overseas will mean loss of service and white collar jobs
domestic companies can lose comparative advantages
what is the theory of comparative advantage?
the benefit enjoyed by a producer who can supply a certain item with a lower opportunity cost than other producers
what do countries do to inhibit the free flow of imported goods to give their domestic producers a competitive advantage?
implement duties and tariffs
what is the absolute advantage?
the benefits enjoyed by a producer who can supply a certain quantity of an item more efficiently than other producers
what sector of business accounts for half of the private sector and majority of the exports?
small business
what is the balance of trade?
the relationship between exports and imports
what is a trade surplus?
value of exports exceeds imports (profiting on international trade)
what is a trade deficit?
value of imports exceeds exports (spending more money on trade)
what is a balance of payments regarding international trade?
the difference between money coming in to a country and money leaving a country
what is current account regarding trade?
the difference between money coming in and going out of the country from all sources
what is dumping mean in international trade?
selling a product for cheaper in foreign markets than at home
what Is trade protectionism?
using government regulations to keep foreign goods out
what does MNC stand for?
multinational corporation
why is trade important to canada?
trade is important to Canada because it enhances the quality of life and contributes to the canadian economy
what accounts for 20% of canadian jobs and 30 % of every dollar earned in the economy?
exports
where do we rank among other countries as importers and exporters?
11th
over 75% of our exports and 65% of our imports are done with what country?
United States
what are the six strategies for reaching global markets?
licensing
exporting
franchising
contrat manufacturing
International joint ventures
foreign direct investment (FDI)
what is licensing?
a firm (licensor) will licence the right to manufacture its product or use its trademark to a foreign company (licensee) for a fee (royalty)
do licences expire?
yes
who must purchase start up supplies, component materials and consultant services from the licensor?
the foreign company (licensee)
does the licensor spend a lot on marketing for the licensee?
no
what is the simplest way to join the global market?
exporting
what is the best way to serve the local market when exporting?
licensing the the production and marketing to a local company
what is franchising?
an arrangement where someone with a good business idea sells the rights to use the business name and sell the product to a given territory
what do franchisors need to do when selling a good or service or good in another country?
market research and adapt to the countries they serve
what are some examples of franchises?
burger king
McDonalds
Tim hortons
what is contract manufacturing?
when a domestic company uses foreign factories to produce their trademarked products
is contract manufacturing considered outsourcing?
yes
what is the benefit of contract manufacturing?
enables new company to experiment in a new market without incurring heavy startup costs
what is a joint venture?
a partnership in which two or more companies (often from different countries) join to start a major project or form a new company
are joint ventures sometimes mandated by the government as a condition as operating in their country?
yes
what are 5 benefits to a joint venture?
shared technology
shared risk
shared marketing and management
entry into new markets
what is a strategic alliance?
a long term partner ship between two or more companies established to help each other build a competitive advantage
do joint ventures involve sharing costs, risks, management or profits?
yes
what is a foreign direct investment (FDI)?
buying permanent property and business in foreign nations
what is a foreign subsidiary?
a company owned in a foreign country by another company
what regulations does a foreign subsidiary have to follow?
Both the country it in physically in and the country that the owner company is registered in
what are 4 some FDI benefits?
transfer knowledge
technology and skills
increased trade related to investment
what are somethings companies in foreign markets have to be aware of when operating in another country?
the cultural differences
how does exchange rate effect global markets?
it can make your dollar worth more or less when exchanged to the foreign currency
what is a floating exchange rate?
the exchange rate fluctuate according supply and demand for them in the global market
when would bartering and counter trading be used instead of currency exchange?
when a countries currency is significantly devalued
what are some technological constraints in the global market?
it might be difficult to use the same device or machinery in other countries
do Canadian companies need to follow canadian rules when working in other countries?
yes
what are the 3 ways government regulate the import of goods and services?
regulations
tariffs
quotas
what is mercantilism?
a nation who sells more goods other nations than buys more goods from other nations
how does trade protectionism help the canadian economy?
allows domestic companies to survive, grow and produce more jobs
what are tariffs?
tax imposed on imported goods
what are the two kinds of tariffs?
revenue tariffs
protective tariffs
what do revenue tariffs do?
generate funds for the government
what do protective tariffs do?
meant to save jobs for domestic workers by raising the price of imported goods
what are non tariff barriers?
policies used to restrict the import of imported goods
what are 3 different kinds of non tariff barriers?
import quotas
voluntary export restraints
domestic regulations
what are import quotas?
limits set on the quantity of a good that can be imported each year
what is a voluntary export restraint?
import quotas voluntarily put in place by the exporting country
what is embargo?
a complete ban on import or export of a certain product or ban on trading with another country altogether
what are 7 reasons to implement trade barriers?
stimulate domestic employment
foster infant industries
improve a countries terms of trade
protect a countries environmental and safety standards
protect domestic workers from imports produced with cheap foreign labour
national security
cultural sovereignty
how do trade barriers stimulate domestic employment?
it keeps producers of goods open and there for needing to employ domestic workers
how do trade barriers help foster infant industries?
it lets new industries grow and not compete with others that would have to much of an advantage
how can trade barriers improve a countries terms of trade?
it can give them better leverage in trade
how can trade barriers protect a countries environmental and safety standards effect trade?
when certain standards are enforced they will limit what goods can be imported if they don’t meet those standards making consumers buy more domestic product
how can trade barriers that protect domestic workers from imports produced with cheap labour?
because it will make more people buy domestic products and ensure workers are needed in domestic factories
how can trade barriers help national security?
if a war breaks out trade barriers may help keep goods in your country so your country is self sustaining
how can trade barriers help cultural sovereignty?
because it makes more goods that promote domestic culture
what is dumping?
when company sells excess of a product for a cheaper price in a less fortunate country
what does the world trade organization do?
is a referee to world trade
what does IMF and world bank do?
lend money to loss developed nations
what does CUSMA stand for?
canada-US-mexico agreement
what is CUSMA 6 objectives?
eliminate trade barriers and facilitate cross-border trade
promote conditions of fair competition in this free trade area
increase investment opportunities in the territories of the three nations
provide effective protection of intellectual property rights in each others nation
establish a framework for further regional trade cooperation
improve working condition in north america
what is the European Union?
a trade union of 27 nations with no tariffs or non tariff barriers
