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ADMS 1000 > Chapter 9: Global > Flashcards

Chapter 9: Global Flashcards

1
Q

Define Globalization (Hint: integration)

A

is a process involving the integration of world economies and world markets

Ex. World economies - USMCA, is a free trade bloc consisting of Canada, the United States, and Mexico

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2
Q

What are the two factors encouraging business activity?

A

Pull Factors and Push Factors

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3
Q

Define Pull Factors (internal pull)

A

are the positive outcomes a business would gain from entering the international market

  1. Potential for Sales Growth:
    ○ Increased sales are the central aim behind a company’s expansion into international business
    ○ A significant portion of sales among the largest firms are generated outside the home country
  2. **Obtaining Needed Resources: **
    ○ Businesses may choose to engage in global activity to obtain resources that are either unavailable or too costly within its domestic borders
    ○ May locate businesses or plants in developing countries to have access to inexpensive labour
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4
Q

Define Push Factors (external factors)
Hint: Upon Businesses and four points

A

these are forces that act upon all businesses to create an environment where competition successfully means competing globally

  1. The Force of Competition:
    ○ A business may consider the markets beyond domestic borders to grow - where new and untapped market opportunities exist - not a lot of competition
    ○ May find that they have to compete with foreign competitors
    § Vice versa, domestic businesses have to compete with foreign entrants
  2. Shift toward Democracy:
    ○ Shift to a Democracy amongst societies that were formerly economically and politically repressed has contributed to the creation of new market opportunities for businesses in parts of the world
    ○ Ex. McDonald’s entering Russia
  3. Reduction in Trade Barriers:
    ○ Push towards freer trade because of growth in global business activities
    ○ Ex. USMCA, established to remove trade barriers
  4. Improvements in Technology:
    ○ Advancements in technology have been more efficiently facilitated cross-border transactions
    ○ Easier to transfer, information, products, services, capital, and human resources around the world
    ○ Virtual organizations increasing
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5
Q

What are the seven channels of Global Business Activity?

A

Exporting and Importing,

Outsourcing/Offshoring,

Licensing and Franchising,

Foreign Direct Investment,

Joint Ventures and Strategic Alliances,

Mergers and Acquisitions,

Establishment of Subsidaries

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6
Q

Chanels of Global Business Activity: Define Outsourcing/Offshoring

A
  • Outsourcing: involves hiring external organizations to conduct work in certain functions of the company
    ○ Ex. Accounting, payroll, and legal work can be assigned to outsourced staff
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7
Q

Chanels of Global Business Activity: Define Licensing and Franchising

A
  • Licensing agreement: is an arrangement whereby the owner of a product or process is paid a fee or royalty from another company in return for granting them permission to produce or distribute the product or processes
    ○ Ex. Canadian company grants foreign company permission to produce its product
  • Companies that don’t wish to set up production/operations oversees can let foreign businesses conduct these activities and simply collect royalties

Franchising: involves drafting a contract between a supplier (franchisor) and a dealer (franchisee) that stipulates how the supplier’s product or service will be sold

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8
Q

Chanels of Global Business Activity: Define Foreign Direct Investment

A

Foreign direct investment (FDI): involves the purchase of physical assets or an amount of share ownership in a company from another company to gain a measure of management control
* Controlling companies can obtain access to a larger market or needed resources

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9
Q

Chanels of Global Business Activity: Define Joint Ventures and Strategic Alliances

A
  • Joint venture: involves an arrangement between two or more companies from different countries to produce a product or service together, or to collaborate in the research, development, or marketing of a product or service
    ○ Also known as a strategic alliance
  • Strategic alliances aim to extend or enhance the core competencies of the businesses involved, obtain expertise of another organization, and generate new market opportunities for all parties involved
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10
Q

Chanels of Global Business Activity: Define Mergers and Auqisitions

A

Merger: A company can merge with the foreign owned one, and create a new jointly owned enterprise that operates in at least two countries

Acquisitions: allow efficient entry into a market with already well-known products and distribution networks

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11
Q

Chanels of Global Business Activity: Define Subsidiaries

A
  • Subsidiaries or branch operations: a company that is owned or controlled by a parent or holding company.
  • a business may choose to maintain total control of its product or service, by either establishing a wholly owned subsidiary, or by purchasing an existing firm in the host country
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12
Q

What is Canada’s top export?

A

Mineral fuel including oil

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13
Q

What is Canada’s top Franchise?

A

Tim Hortons

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14
Q

Define Global Business

A
  • is a business that engages directly in some form of international business activity, including subject activities, as exporting, importing, or international production
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15
Q

Define a Multinational Corporation (MNC), then define Globally Integrated and Multi-domestic

A

MNC: a business that has direct investments in at least two different countries

  • Globally integrated: are companies that integrate their geographically diverse operations through a decision centralized at head office
    □ All areas might ben given a task of developing a single global product
  • A multi-domestic: permit it’s geographically diverse components to operate relatively autonomously
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16
Q

Define a Borderless Corporation

A

refers to the increasing ability of the multinational corporations to ignore international boundaries and set a business just about anywhere

17
Q

What are the benefits and threats to a MNC?

A

Benefits:
* Encourage economic development
* offer management expertise
* introduce new tech
* provide fiancial support to regions across to globe
* create employement
* encourage international trade
* facilitate global cooperation

Threats:
* MNCs don’t have commitment to their home country
* profits made be MNC may not remain in host country
* difficultly to hold MNCs accountable and can create serious ethical concerns for host country

18
Q

International Trade: What is The Logic of Trade and the definition of Free Trade

A

Freer trade would allow countries to trade as they deem appropriate, each country can specialize on producing those goods or services in which it maintains an absolute advantage, and simply trade with other countries to obtain goods or services that are required, but not produced by domestic suppliers

Free Trade: based on the objective of open markets, businesses in one country compete fairly against businesses in other countries for the sale of their products or services (each country focuses on their own strength)

19
Q

International Trade: Define Mercantilism

A

Mercantilism: Is the economic policy of accumulating financial wealth through trade surpluses– when a country’s exports exceed its imports and more money is entering the country (foreign consumers buying these exports) then it is leaving it
- Ex. Japan
- By imposing tariffs, quotas, banning

20
Q

International Trade: Define Trade Protectionism, reasons why imports are a threat and what governmets can do to imports to protect domestic businesses?

A
  • Trade Protectionism: it’s about protecting a country’s domestic economy, and businesses through restrictions on imports

Why might imports be a threat?
1. Low priced foreign goods that enter the country could compete with goods already produced here and take business away from domestic producers
2. Trade deficit: a country that imports more than exports will have a negative balance of trade - results in more money flowing out of the country than flowing in

What can Governments do?
* Impose Traiffs: tax placed on goods, intended to raise the price to encouragage Canadians to buy domestic goods

  • Import Quota: limits the amount of product that can be imported
21
Q

What’s wrong with Mercantilism and protectionism?

A

Zero-sum gain: There one person’s loss is another’s gain
- Idea that nations can only gain when they force other nations to reduce their trade

22
Q

What organizations promote interntional trade?

A

**General Agreement of Tariffs and Trade (GATT) **(agreement amongst 100 countries to reduce the level of tariffs),

World Trade Organization (WTO) (took over managment of global trade system, established agreed-upon rules for World Trade)

International Monetary Fund (IMF) (Affter WW2, provides low-interest loans to countries)

**The World Bank **(provides long-term loans to countries for economic development and offers low-interest loans to underdeveloped countries)

23
Q

Facilitating Global Business: Define Regional Economic Integration

A
  • Regional economic integration: means bringing different countries closer together by reducing or eliminating obstacles to the international movement of capital, labour, and products or services
  • A collection of countries within such integrated region is called a regional trading bloc
24
Q

What are the different levels of intensity of Regional Integration

A

Free Trade Area, Customs Union, Common Market, and Economic Union

25
Q

Regional Economic Integration: Define Free Trade Area

A
  1. Free Trade Area: (lowest degree) involves the removal of tariffs and nontariff trade barriers on international trade and goods and services among the member countries
    • Lowest degree
      Ex. USMCA
26
Q

Regional Economic Integration: Define Customs Union

A

Customs Union: (highest degree) involves the removal of trade barriers on international trade among the member countries which members will generate uniform policy regarding treatment of non-member countries

27
Q

Regional Economic Integration: Define Common Market

A

Common Market: members of a will typically generate a freer flow of labour and capital across borders, includes policy treatment for non-members

28
Q

Regional Economic Integration: Define Economic Union

A

Economic Union: involves a coordination of economic policies among the member countries
* Involves similar of the fiscal, monetary, and tax policies, and the creation of a common currency
* Ex. EU

29
Q

Define Trading Blocs

A
  • Trading blocs: groups of countries in certain regions that facilitate trade activities
    ○ Leads to reduction of perfectionist measures and encourage freer trade between members
    ○ Ex. North America, Europe, and Asia
30
Q

What is the USMCA? And what the Pros?

A
  • USMCA: is a free trade bloc consisting of Canada, the United States, and Mexico
    ○ Goal to improve trade, increase employment, and improve economic growth between the threePros:
    1. Auto Manufacturing Parts
    * The USMCA requires that 75% of the parts of cars made in North America come from one of the three USMCA countries to avoid tariffs
    * Steel and aluminum: requires 70% of a car’s steel, and aluminum to originate in North America
    * Wage Policies: mandates that 40 to 45% of the parts for any tariff free vehicle must come from a high wage factory, must pay employees minimum $16 an hour
    □ Lead to higher-priced cars and reduce consumer demand and slow the market
    * Labour Standards: some improved labour standards were enacted – provides for a process that allows for “rapid response “inspections of production facilities to investigate workers rights and to impose penalties on products produced at those plants
    2. Dairy and Agriculture
    The act increase trade of dairy and agricultural products between nations

ADMS 1000 (9 decks)

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