Module 1: Part 1.C: International - Exploring Global Business Flashcards
United Nations World Population Estimates
At high point up to over 50 billion people by 2100
At the low level about 6 billion (less than today)
Average is 9 billion expect to see the world
Can created a shrinking or rapidly growing market
Importance of Global Business to Canada
- Economies of scale in production and marketing.
- Ease of transfer of experience, technology. -when companies invest in canada or abroad
- Global recognition of products and brand names.
- Possibility of uniform global image for the companies.
- Enhances the quality of Canadian life
- Canada exports approximately 45% of what it produces (20% of all jobs) -consume just over ½ we make
- Approximately 1/5 of all jobs in Canada are related to international trade
Canadian Trade
Canada largest importing partner with the US, majority what we import is from the US
Why Do Countries Trade?
- No one country can produce all the products that its people want and need.
- Nations who cannot produce what they want and need will want to trade with countries who can and have a surplus (ex. fruit in Canada).
- Some countries have an abundance of natural resources but lack the technological knowhow to retrieve them. (in canada have developed tech thankfully)
- Other countries have the technology but lack the natural resources. (like Europe lots of tech but lack resources- or used up natural resources)
- Example:
- Russia: abundant natural resources but low-tech
- Taiwan: high-tech but minimal natural resources
- Free trade is the movement of goods and services among nations without political or economic trade barriers (orgs. And treaties that help fair trade between countries)
Why Nations Trade
Absolute Advantage
- the ability to produce a specific product more efficiently than any other nation
- Or, a country is the only provider of a product
-ex. Saudi arabia lots of oil- is of lesser cost to extract and deliver to market
-ex. US ; apple, microsoft- tech advantages
Comparative Advantage
- the ability to produce a specific product more efficiently than any other product
- The concept that a country should specialize in the products that it can produce most readily and cheaply, and trade these for goods that foreign countries can produce most readily and cheaply
The Global Marketplace
Why “Go Global?”
-Earn additional profits (more revenues or cost savings)
-Potential for cost savings
-Possess exclusive market information
-Leverage a unique product or technological advantage
-Saturated domestic markets and excess capacity (so much competition must move elsewhere to make profit)
International Trade Key Terms
Exports
Imports
Balance of Trade
Trade Surplus
Trade Deficit
Balance of Payments
Exports
Goods and services made in one country and sold to others [exported from one country to another]
Imports
Goods and services that are bought from other countries [bought from other countries]
Balance of Trade:
The difference between the value of a country’s exports and the value of its imports during a certain time
Trade Surplus
A favourable balance of trade that occurs when a country exports more than it imports
Trade Deficit
An unfavourable balance of trade that occurs when a country imports more than it exports [canada is increasing here in recent years- more money flowing out of canada
- than in = negative balance of payments] -positive balance when exporting more
Balance of Payments
The difference between money coming into the country and money leaving the country
Currency Valuations
Currency exchange rate:
Value of one currency in relation to another
-Economic factors impact exchange-rate fluctuations
-Interest rates
-Inflation and economic strength
-Balance of trade and trade flow
The Global Marketplace
Exporting
Licensing
Contract Manufacturing
Joint Ventures
Direct Foreign Investment
Exporting
Sell domestically produced goods to buyers in other countries
Licensing
The legal process allowing a company use a manufacturing process, franchise, trademark, patent, trade secret, or knowledge [allow company to licence product how to make product to local manufacturer and pay a fee]
Contract Manufacturing
A foreign company manufacturers private label goods under a domestic company’s brand [banglasdesh -lots of clothing/textiles -like joe fresh]
Joint Ventures
Two or more businesses combine for a specific project or business venture
Direct Foreign Investment
Active ownership of a foreign company/manufacturing/marketing facility [from foreign sources]
Fostering Global Trade
Antidumping laws
World Trade Organization (WTO)
World Bank
International Monetary Fund (IMF)
What are antidumping laws?
Regulations to prevent countries from selling surplus goods at unfairly low prices that harm local markets.
What is the role of the World Trade Organization (WTO)?
To arbitrate trade disputes between countries and promote free trade.
[arbitrate between countries with disputes]
What does the World Bank do?
Funds infrastructure projects in developing countries using money from wealthier nations.
[funds infrastructure for countries, wealthy countries provide money here to bank and bank lends it to develop other countries
How does the International Monetary Fund (IMF) assist countries?
Provides short-term loans to countries facing financial instability.
[sister to world bank- stable countries contribute- unstable look her for short term loans]
International Economic Communities
Economic Community
Organization of countries formed to promote free movement of resources and products among member nations (also referred to as regional economic integration) -create freer movement of resources/goods
Also known as economic integration:
* European Union (EU)
* United States-Mexico-Canada Agreement (USMCA)
* Asia-Pacific Economic Cooperation (APEC)
Goals of Economic Communities
-Reduce trade barriers
-Increase flow of international trade
-Promote peaceful relationships between countries
-Provide increased prosperity for the citizens of each member country
Barriers to International Trade
Political Considerations
Economic Environment
Natural Barriers
Political Considerations
- Nationalism [focus on/put needs of own country ahead of others] -impact trade laws
- Mistrust [try to create better relations between countries]
Economic Environment
- Infrastructure [if country doesnt have effect ports, roads- how to get goods out= high cost
Natural Barriers
- Language differences
- Cultural differences
- Legal and Regulatory differences
- Different economic systems
Tariff Barriers
Tariff:
A tax imposed on imported goods
Protective Tariffs
Make imports less attractive to buyers than domestic products [e.g. domestic steel producers tariffs put on importive so so its higher cost for imports to make domestic more attractive to buyers]
Tariffs designed to make imports less attractive than domestic products by increasing import costs.
How do protective tariffs benefit domestic industries?
They raise the price of imported goods, making domestic products more appealing to consumers.
Non-tariff Barriers
Import Quota:
Limit on the quantity of a certain good that can be imported
Embargo
A complete ban on imports or exports of a product
Exchange Controls:
Laws that require a company earning foreign exchange from its exports to sell the foreign exchange to a control agency
Customs Regulations
Regulations on products that are different from generally accepted international standards [enviromental regulations too, produce - pest free]
The Reality of Trade
-If trade makes economic sense and global security sense, then why do we need international trade rules?
-Because while trade is beneficial globally …
►It creates winners and losers domestically (locally, regionally, nationally)
►This creates political pressure to “protect” from trade/globalization.
►Thus national rivalries, economic instability and lack of economic development
Fear of Trade and Globalization
- Canadians have lost jobs because of imports/production shifts
- Others fear losing their jobs
- Employers often threaten to export jobs when facing labour disputes with employees
- Service and white-collar workers are increasingly seeing their operations moving offshore
- Competition is beneficial for consumers but can hurt producers
- Global Political/Economic Unrest: We are interconnected
Benefits of Globalization
- Productivity grows faster with a comparative advantage
- Global competition keeps prices down, less likely to face inflation
- Open economy spurs innovation
- Export jobs often pay more than other jobs available
The Future of The Global Marketplace
- Canada – Exporting our technologies
- Canada – Seeking new markets
- Resources, stable banking, business friendly
- The Emergence of BRICS Economic Power
- Currency Fluctuations
- Global Competition (rise of nationalism)
- Global Political/Economic Unrest
How has international travel and telecommunications affected the global economy?
They have created an interconnected global marketplace, turning the world into a “global village.”
Why is global trade important for Canada and Saskatchewan?
Canada exports about half of what it manufactures, with 75% of exports going to the U.S.
What is the balance of trade?
The difference between the value of a country’s exports and imports.
What is CUSMA?
The Canada-Mexico-USA Trade Agreement that facilitates trade between these nations.
What impact does globalization have on jobs and industries?
It can create job opportunities in some areas while leading to job losses and industry declines in others.
What is the Trans-Pacific Partnership (TPP)?
A trade agreement among 12 Pacific Rim countries aimed at reducing trade barriers, though the U.S. has withdrawn from negotiations.
How has the COVID-19 pandemic influenced global trade perspectives?
It may signify a shift to a new era in global trade, altering opportunities and challenges compared to the pre-crisis period
