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International Buisness > Unit 1 > Flashcards

Unit 1 Flashcards

1
Q

What are the two main approaches to Foreign Direct Investment (FDI)?

A

The two main approaches to Foreign Direct Investment (FDI) are setting up a new business from scratch or buying an existing company.

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2
Q

Do foreign subsidiaries operate independently?

A

Yes, foreign subsidiaries operate independently in their day-to-day management while still being accountable to the parent company for financial performance.

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3
Q

How does a parent company interact with its foreign subsidiary?

A

The parent company sets financial targets for the foreign subsidiary and allows it to manage its own daily operations as long as those targets are met.

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4
Q

Define Foreign Direct Investment (FDI).

A

Foreign Direct Investment (FDI) refers to a controlling ownership in a business enterprise in one country by an entity based in another country, which can involve starting a new business or acquiring an existing one.

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5
Q

Describe a foreign subsidiary.

A

A foreign subsidiary is a branch of a company that operates as an independent entity in a country outside of the parent company’s location, managing its own day-to-day operations while meeting financial targets set by the parent company.
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6
Q

Differentiate between a joint venture and a strategic alliance.

A

A joint venture creates a separate entity formed by two companies, while a strategic alliance involves two companies working together without creating a new entity.

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7
Q

Provide an example of a joint venture.

A

An example of a joint venture is the Shanghai Disney Resort, formed by The Walt Disney Company (43%) and Shanghai Shendi Group (57%).

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8
Q

What are the benefits of forming a joint venture?

A

Joint ventures allow companies to gain access to markets, products, and customers not previously accessible, as well as shared expertise, financing, and technology.

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9
Q

Describe the structure of a joint venture.

A

A joint venture involves the formation of a new company with shared ownership by two businesses, one of which is usually located in the country where the new company is established.

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10
Q

How does a franchise operate in international business?

A

A franchise is an agreement where an individual or group is granted the right to use a company’s name, services, products, and marketing, with the franchisor providing support in various areas for a fee.

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11
Q

What are exclusive distribution rights in the context of licensing agreements?

A

Exclusive distribution rights are a form of licensing agreement that grants a company the right to be the only distributor of a product in a specific geographic area or country.

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12
Q

Define a licensing agreement in international business.

A

A licensing agreement grants permission to a company to use a product, service, brand name, or patent in exchange for a fee or royalty.

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13
Q

Explain the significance of truck transportation in Canadian exports.

A

Explain the significance of truck transportation in Canadian exports.

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14
Q

Identify the top export partners of Canada in 2013.

A

The top export partners of Canada in 2013 were the U.S.A., China, the UK, Japan, and Mexico.

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15
Q

Describe the main exports of Canada in 2013.

A

The main exports of Canada in 2013 included energy, motor vehicles, and metals & mineral products.

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16
Q

What percentage of Canada’s imports are transported by truck?

A

More than half of all imports into Canada are trucked in.

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17
Q

Explain the difference between B2B and B2C importing.

A

B2B importing involves businesses importing finished goods for resale or raw materials and equipment for production, while B2C importing refers to consumers importing products directly for personal use.

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18
Q

How does global sourcing impact businesses?

A

Global sourcing helps businesses keep costs down, improve quality, and access new technology by allowing them to source products and services from international markets.

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19
Q

List some of Canada’s top imported products in 2020.

A

In 2020, Canada’s top imported products included consumer goods, vehicles, electronic equipment, and industrial machinery.

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20
Q

What are Canada’s top import partners as of 2020?

A

Canada’s top import partners in 2020 were the U.S.A., China, the United Kingdom, Japan, and Germany.

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21
Q

Describe foreign portfolio investment.

A

Foreign portfolio investment involves investing in businesses located outside of Canada through stocks, bonds, and financial instruments, allowing Canadians to diversify their investments and reduce risk.

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22
Q

Describe the concept of protectionism in trade.

A

Protectionism refers to government policies that restrict international trade to protect local industries from foreign competition. This can include tariffs, quotas, and other trade barriers.

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23
Q

Define the term ‘trade barriers’.

A

Trade barriers are government-imposed restrictions on the free exchange of goods and services between countries, which can include tariffs, quotas, and import licenses.

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24
Q

How do tariffs function as a trade barrier?

A

Tariffs are taxes or duties imposed on imported products or services, which raise the cost of imports, making locally manufactured products more appealing to consumers.

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25
Q

What are some arguments for protectionism?

A

Arguments for protectionism include protecting local jobs, supporting emerging industries, ensuring national security, and maintaining trade balance.

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26
Q

What are some arguments against protectionism?

A

Arguments against protectionism include higher prices for consumers, reduced competition, potential retaliation from other countries, and hindering economic growth.

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27
Q

How should Canada approach its trade relationships with other countries?

A

Canada should evaluate its trade relationships based on economic benefits, ethical considerations, and the potential impact on local industries.

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28
Q

Identify a potential consequence of imposing trade barriers.

A

Imposing trade barriers can lead to increased prices for consumers, reduced availability of foreign products, and potential trade wars with other countries.

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29
Q

Discuss the importance of organizing arguments in a debate about trade policies.

A

Organizing arguments helps clarify positions, facilitates effective communication, and allows for structured rebuttals, enhancing the overall debate experience.

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30
Q

What is the role of rebuttals in a trade debate?

A

Rebuttals allow teams to address and counter opposing arguments, strengthening their own position and demonstrating critical thinking.

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31
Q

How can Canada determine which countries to trade with or avoid?

A

Canada can assess trade relationships based on economic interests, human rights records, environmental standards, and geopolitical considerations.

32
Q

Describe protectionism in the context of trade barriers.

A

Protectionism is the practice of shielding domestic industries from foreign competition.

33
Q

How do standards act as a trade barrier?

A

Countries have different standards for products in areas such as environmental protection, voltage, and health and safety, which can restrict imports.

34
Q

Define trade quota.

A

A trade quota is a government-imposed limit on the amount of product that can be imported in a certain period of time.

35
Q

Explain foreign investment restrictions.

A

Foreign investment restrictions are laws that limit the type and amount of international investment that is allowed, with the Investments Canada Act being a significant example.

35
Q

What is a trade embargo?

A

A trade embargo is a government-imposed ban on trade with a specific country, often declared to pressure foreign governments to change their policies.

36
Q

How does the ISO contribute to trade standards?

A

The ISO (International Organization for Standardization) is a network of standardization groups from over 170 countries established to set quality regulations.

37
Q

What role do specific industry laws play in foreign investment restrictions?

A

Specific industries have their own laws, such as the Transportation Act, Broadcasting Act, Bank Act, and Telecommunications Act, which govern foreign investments in those sectors.

38
Q

Describe the impact of the Investments Canada Act.

A

The Investments Canada Act ensures that all foreign investments are reviewed to determine how they will benefit Canada.

39
Q

Describe trade sanctions.

A

Economic actions taken by a country to coerce another to conform to international agreements or norms of conduct.

40
Q

How are trade sanctions limited in scope?

A

Trade sanctions are more limited in scope compared to other forms of economic action.

41
Q

What is the aim of implementing trade sanctions?

A

The aim is to hinder the economy or certain sections of the economy.

42
Q

Define the types of restrictions that may be imposed by trade sanctions.

A

Trade sanctions may restrict financial transactions, such as international investments and business acquisitions, as well as technical assistance.

43
Q

Give an example of a trade sanction involving Canada and North Korea.

A

Canadian businesses and individuals are prohibited from transferring large sums of money with businesses or individuals in North Korea.

44
Q

Describe currency fluctuations.

A

Currency fluctuations refer to the changes in the exchange rate, which is the amount of one country’s currency in relation to another country’s currency.

44
Q

Define exchange rate.

A

The exchange rate is the amount of one country’s currency that can be exchanged for another country’s currency.

45
Q

How is the Canadian dollar (CAD) commonly quoted?

A

The Canadian dollar (CAD) is most often quoted against the U.S. dollar (USD) because Canada and the U.S. are the largest trading partners in the world.

46
Q

Identify the winners of a low Canadian dollar.

A

Winners of a low Canadian dollar include exporters, as their goods become less expensive and exports usually increase; Canadian tourism, as it becomes cheaper for Americans to travel to Canada; and Canadian retailers, as Canadians are more likely to shop domestically.

47
Q

Explain why exporters benefit from a low Canadian dollar.

A

Exporters benefit from a low Canadian dollar because their goods become less expensive for foreign buyers, leading to an increase in exports.

48
Q

List the losers of a low Canadian dollar.

A

Losers of a low Canadian dollar include importers, as US-made equipment and goods become more expensive; Canadian travelers, as it costs more to travel to the U.S.; and major league sports teams in Canada, which pay players in US dollars.

49
Q

How does a low Canadian dollar affect Canadian travelers?

A

A low Canadian dollar makes it more expensive for Canadian travelers to travel to the U.S.

49
Q

What are the implications of a low Canadian dollar for importers?

A

Importers face higher costs for US-made equipment, raw materials, and goods for resale, making their products more expensive.

50
Q

Discuss the impact of a low Canadian dollar on Canadian retailers.

A

A low Canadian dollar encourages Canadians to shop domestically, as it becomes more expensive to shop in the U.S.

51
Q

How does the exchange rate influence trade between Canada and the U.S.?

A

The exchange rate influences trade by determining the relative cost of goods and services between the two countries, affecting exports and imports.

52
Q

Describe the concept of currency fluctuations.

A

Currency fluctuations refer to the changes in the value of a currency in relation to other currencies, influenced by factors such as supply and demand.

53
Q

Define floating rate in the context of exchange rates.

A

A floating rate is an exchange rate that is not fixed and fluctuates according to supply and demand in the market.

54
Q

How does a fixed rate affect a country’s economy?

A

A fixed rate stabilizes the value of a currency but makes the economy dependent on another currency and limits the government’s ability to influence domestic monetary policy.

55
Q

List some countries that use a fixed exchange rate system.

A

Countries that use a fixed exchange rate system include those that peg their currency to another stable currency, such as the US dollar.

56
Q

Explain currency revaluation.

A

Currency revaluation is the increase in the value of a currency due to higher demand than supply.

57
Q

What is currency devaluation?

A

Currency devaluation is the decrease in the value of a currency because the supply exceeds the demand.

58
Q

Identify factors that affect exchange rates.

A

Factors affecting exchange rates include economic conditions (inflation, unemployment, GDP, interest rates), trade terms, political stability, and psychological factors.

59
Q

How do political factors influence currency demand?

A

Political tension, instability, or threats such as terrorism can decrease the demand for a currency.

59
Q

Describe hard currencies.

A

Hard currencies are stable currencies that are easily convertible to other currencies in the global exchange markets.

59
Q

Describe hard currencies.

A

Hard currencies are stable currencies that are easily convertible to other currencies in the global exchange markets.

60
Q

Explain the relationship between the dollar’s value and prices of goods.

A

When the dollar is low, goods become more expensive in terms of other currencies.

61
Q

Describe the factors that contribute to a currency’s hard status.

A

Factors include political stability, low inflation, consistent monetary and fiscal policies, and a long-term stable or upward-trending valuation against other currencies.

61
Q

What role do psychological factors play in currency valuation?

A

Psychological factors, such as historical significance and perceived stability, can influence how currencies are viewed and valued in the market.

61
Q

Define a soft currency.

A

A soft currency belongs to a country with a small or weak economy, often fluctuating due to political or economic uncertainty, and is difficult to convert into other currencies.

62
Q

How does political stability affect a currency’s status?

A

Political stability contributes to a currency’s hard status by instilling confidence in the economy, leading to lower inflation and consistent monetary policies.

63
Q

What are examples of hard currencies?

A

Examples of hard currencies include the United States dollar, Euro, British pound, Canadian dollar, and Japanese yen.

64
Q

Explain the impact of inflation on currency strength.

A

Low inflation typically strengthens a currency, while high inflation can lead to a soft currency, making it difficult to convert and reducing its value.

65
Q

How do currency fluctuations affect trade?

A

Currency fluctuations can impact trade by altering the relative prices of goods and services between countries, affecting competitiveness and profitability.

66
Q

Describe the characteristics of a country with a soft currency.

A

A country with a soft currency often has a weak economy, high inflation rates, and political or economic uncertainty, making its currency difficult to convert.

67
Q

What role do consistent monetary and fiscal policies play in currency valuation?

A

Consistent monetary and fiscal policies help maintain investor confidence, contributing to a stable or upward-trending currency valuation.

68
Q

How does a long-term stable currency valuation influence economic relationships?

A

A long-term stable currency valuation fosters trust and predictability in economic relationships, encouraging trade and investment.

International Buisness (3 decks)

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