chapter 3 Flashcards
Competing In Global Markets: Types of trade (GF)
Global trade enables nations to produce what theta re most capable of producing and to buy what it needs from others.
Free trade is the movement of goods and services among nationswithou without political or economic barrier.
Importing vs Exporting
Importing
is buying products from another country. Imports are subject to government laws and conditions
Exporting
is selling products (i.e., goods and services) to another country. Exports alone account for 1 in 5 canadian jobs.
Balance of payments
is the money coming in from exports and money leaving country for imports, plus money coming in from tourism and other factors. It is more favourablke when more money is flowing in and vice versa.
Balance of Trade:
difference between the value of the goods that a country (or another geographic or economic area exports and the value of the goods that it imports.
Balance of trade is a nations ratio of imports to exports.
Trade surplus occurs when countries exports exceed imports
trade deficit occurs when countries imports exceed it imports.
E.x If I sell you $200 worth of goods and buy only $100 worth, I have an extra $100 available to buy other things. However, I’m in an unfavourable position if I buy $200 worth of goods from you and sell you only $100.
Advantage theories: CA
Comparative advantage theory: produce what you are good at and buy the products we cannot produce as efficiently from other countries.
Absolute Advantage: when a country has monopoly on producing a specific good and is able to produce more efficiently than all others. E.x africa with diamons. This does not occur alot today.
Global trade categories
include industrial materials, machinery, energy products, automotive products, forestry products, travel, transport, commercial, and government services. Servies can be exported, e.x airbnb.
Canada global markets action plan:
Emerging markets with broad Canadian interests.
emerging markets with specific opportunities for Canadian businesses.
established markets with broad Canadian interests.
Global business strategies: FLEC
Licensing:
a firm (the licensor) may decide to compete in a global market by licnesing the right to manufacture its product or use a trademark to a foreign company for a fee (royalty). The licensor may assist with distribution, production, or consulting.
- Coca cola had entered into global licenses with over 255 global licensee’s.
- Disney is the largest licensor of consumer product globally.
Exporting:
export trading companies match buyers and sellers from different countries and deals with customs offices, documentation, and other measures assist exporters with warehousing, billing, and insuring e.x freight brokering.
Franchising:
a contractual agreement whereby someone with a good idea for a business sells the rights to use business name and sell their products in a given territory and specified manner.
Contract manufacturing:
falling under the category of outsourcing contract manufacturing is when countries production of private labeled goods to which a domestic company attaches a. name or trademark. Allows companies to penetrate new markets with relatively low risks.
E.x apple, nike.
Joint venture:
Two or more companies join to undertake major projects are often mandated by governments
example disney and shanghai shendis group joint venture to create the first disneyland in china
Foreign direct Investment:
is buying permanent property or business in foreign markets.
Foreign subsidiary:
company owned in a foreign country by another country.
E.x chinese ownership in canadian companies.
multinational corporation
a firm that has manufacturing capacity in different nations
Nestle is a multinational corporation that manufactures and markets products in diff countries and has multinational stock and ownership.
Sociocultural factors: how it can be hard working with other countries (ER) (CC)
*Entering global markets can be challenging with cultural and enthocentrical difference,
Exchange rate:
is the value of ones currency relative to other countries currencies. High value means it can be traded for more of the other countries currency.
Changes in currency values:
cause many problems globally, For instance, labour costs for multinational corporations like Bombardier, Nestlé, General Electric, and Unilever can vary considerably as currency values shift, causing them to juggle production from one country to another.
forces
Economic and financial forces:
Devaluation of a dollar can help economies
Legal and ethical forces:
Ethics in global trade: bribery; illegal in canada but almost very lucrative in other countries.
Physical and environmental forces:
houses in developing countries dont have elect
Countertrading
is trading goods for goods and services for services.
Trade protectionism
is the use of government regulations to limit the import of goods and services. Advocates of trade protectionism believe that it allows domestic producers to survive and grow, producing more jobs. It also adds millions of dollars to price of products And impedes global trade.
Dumping
is selling product in a foreign country at lower prices than those sold in the producing country. Used to reduce surplus in foreign markets. Or to gain advantage in a new market.
Mercantilism
is for a nation to sellmore goods to other nations than it bought or to have favourable tradebalance, causing governments to imports tariffs.
Tarffis PR-NON
Protective tariffs
are designed to raise the price of imported products so that domestic products will have a competitive price. These protect infant industries in early stages of growth as well as workers.
E.x u.s saw canadian beef was doing better so they imposed tariffs on canadian beef.
Revenue tariffs
are designed to raise money for the government.
Non-tarrif barriers:
Import quota: reduces the amount of product foreign countries can import canada has them on textiles, agriculture products, steel, and clothing.
an embargo
is a complete ban on imports and exports of a certain product or stopping of trade with another country. Ex kinder egg
GATT / WTO / IMF
General Agreement on Tariffs and Trade (GATT),
a global forum for reducing trade restrictions on goods, services, ideas, and cultural programs.
World Trade Organization (WTO)
to mediate trade disputes among nations.
IMF - International Monetary Fund
is an international bank supported by its members that makes short-term loans to countries experiencing poor balance of trade. Unlike World Bank which takes from prosperous countries and lends to fewer countries.
Producer cartels
organizations of commodity-producing countries to raise prices and stabilize trade of products. like opec the organization of petroleum exporting countries.
A cartel…
is a formal agreement between a group of producers of a good or service to control supply or to regulate or manipulate prices. Cartels often fix prices, define trading terms, and allocate trade or market share rules to achieve economies of scale.
United States-Mexico-Canada Agreement (USMCA)
who are they what do they do
exists to coordinate trade among the three member countries—Canada, the United States, and Mexico.
It was within this climate of both approval and disapproval for NAFTA that negotiations to renew the trade agreement began in 2017. In September 2018, NAFTA was replaced with a new free trade agreement called the United States-Mexico-Canada Agreement (USMCA)
The EU
is a group of 27 nations with five member france, italy, spain, germany, and the netherlands. Adopted euro as a common currency.
