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Class 11 The Changing Nature of the International Business Environment

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  1. Class 11 The Changing Nature of the International Business Environment

  2. Class 11: Agenda • Administration 7:00-7:15 • Review Protectionism 7:15-7:30 • Model Practice 7:30-7:50 • Globalization 7:50:8:15 • Break 8:15-8:30 • Review 8:30-9:30 • Q & A 9:30-10:00

  3. Nature of the Business Environment • Outcome • To be able to discuss the characteristics and impact of globalization • To be able to discuss the principles of international trade and factors that influence favourably and unfavourably • To be able to apply course material to exam

  4. Final Exam Info MAY 26, 2009 @ 7:00 - 10:00 P.M. IN STUDENT FIELD HOUSE

  5. Final Exam Info • It is a three hour open book final examination. No sharing of notes and textbooks -- each student is responsible to bring her/his own notes and textbooks to the final exam. There is no electronic aids, including computers and cell phones; advise students to bring a watch. They will be instructed to put their cell phones away. Also, students must bring identification to sign in/out of the exam.

  6. Petro Canada - Suncor Part 1: The acquisition of Petro Canada by Suncor. The questions will focus on the assigned mid-term assignment articles from Wesson as well as Lecture 6. There will be two (2) questions, each valued at 25 marks. Part 2: One of the case studies in which A General Model of Government Intervention is applied. There will be two questions, each valued at 25 marks that will require applying the Model.

  7. Petro Canada - Suncor

  8. Final Exam Info • . The first part of the final examination consists of two questions on Suncor's acquisition of Petro Canada using the assigned articles from the mid-term assignment from Dr. Tom Wesson's Canada And The New World Economic Order Third Edition. There has been a twist in the deal between Suncor and Petro Canada as now some at Petro Canada do not want to sell to Suncor.

  9. Final Exam Info • Both questions are valued at 25 marks; so, these are not short answers. Rather answer the questions fully and completely. You may recall from the articles that the theme of the articles is about Canada's global competitiveness.

  10. Final Exam Info • You might find it helpful to go to the index at the back of the book and look up "competitiveness". Make notes to bring to the final examination. • You will have only three hours to answer four questions in total on the final examination. you don't have time to waste copying word for word sentences or paragraphs from the textbook. So, by creating a set of notes for each article in your own words summarizing the theme, arguments. Note source in notes • Citations of sources is required in answer but no bibliography required

  11. Final Exam Info • The second part of the final examination will consist of two questions each valued at 25 marks. Again, these are not short answers. Answer fully and completely in as much detail. One of the case studies that we have been discussing where A General Model of Government Intervention has been applied will be chosen. • Possible Cases

  12. Final Exam Info • Required Case Readings: Between Public and Private • Triple E Senate P. 176-188 • Medical Centre P. 325-360 • Book Publishing Industry P. 361-378 • Canada’s Industrial Strategy P. 379-396 • Cultivating Cash P. 397-428 • Privatization 407 P. 437-442 • Solid Waste Management P. 453-470 • Commercialization LCBO P. 443-452 • Soft Wood Lumber P. 482-514

  13. Final Exam Info • Be certain to present a theoretical explanations for the Dimensions of the Intervention and Quality Determinants. • Your answers will be evaluated on the correct use of the case information and the presentation of your analyses applying A General Model of Government Intervention. If your answer has the incorrect Goal and/or Interventions, then this puts your analyses in jeopardy. So, read the questions very carefully and answer what is asked. Remember. the Goal is often embedded in the question. The Intervention is from the case study.   

  14. Final Exam Info • Grades are only released by the Registrar's Office; so, do not contact me as I am prohibited from releasing grades. • I do not keep or have access to your final examinations. They become the property of the University so I cannot discuss your exam after it is marked

  15. Final Exam Info • Once the grades are released, you will have an opportunity to view your final examination by making an appointment at the School of Administrative Studies in room 282 of Atkinson. You will notice that only grades are provided and no comments are provided on the final examination. • If you believe that something was overlooked in the grading of your final examination, then you can petition on academic grounds for a re-appraisal. But there's a risk -- grades can be raised, lowered or confirmed.

  16. Protectionism

  17. A Mixed Economy • Combines private ownership with government control • Attempts to eliminate inefficiencies inherent in both capitalism and socialism. • Canada is one example of a mixed economy.

  18. A Market Economy • Canada is a market economy. • Prices are determined in a separate market for each commodity. • Prices act as the signaling mechanism to answer all basic economic questions.

  19. Competition • In its pure form it refers to the conditions that are present in the marketplace when buyers and sellers interact to establish prices and exchange goods and services. • Refers to the means whereby the self interest of buyers and sellers acts to serve the needs of society as well as those of individual market participants. • Pure Competition does not exist

  20. Desirable Conditions for Workable Competition • A market structure with at least two buyers and two sellers, but preferably more • A mixture of large and small firms • No collusion or coercion among sellers

  21. What is Protectionism? • It is the degree to which a government intervenes in the operation of the day to day market in an economy. • Refers to government policies that shield domestic production and producers from foreign competition. • Even in the most right wing of countries, governments will inevitably choose to intervene to protect what they perceive as in the nation interest.

  22. How does Protectionism Work • Degrees of Intervention • Persuasion (Minimum) • Manipulation of the tax system • Tariffs & Non Tariff Barriers • The awarding of government contracts • Granting subsidies and tax concession policies • Government Owned Entities • Nationalization of industries

  23. Protectionism Interventions Tariffs • Refers to government policies that shield domestic production and producers from foreign competition. • Tariff refers to a tax imposed by the importing country when a good crosses an International boundary

  24. An Example of a Protective Tariff • A Canadian Tariff of 15% is imposed on foreign automobiles. The automobile costs $50,000/ This means the tariff will be $7500. When exported to Canada the Canadian price will be $57,500.

  25. The Influence of Tariffs • Reduces both imports and exports • Collapse of trade when tariff barriers increase • The decline of tariffs are often accompanied by growth of non-tariff barriers

  26. Protectionism Interventions Non-Tariffs • Non-tariff barrier refers to any action other than a tariff that restricts International trade • Quotas • Licensing • Subsidization • Regulations

  27. The Decline of Tariffs was replaced by Non-Tariff Barriers • Import quotas • A quantitative restriction on the import of a particular good. • Marketing Boards • Voluntary Export Restraints • An agreement between two countries' governments in which the government of the exporting country agrees to restrain the volume of its exports. • Softwood Lumber

  28. The Decline of Tariffs was replaced by Non-Tariff Barriers • Non-tariff barriers are a more severe impediment to international trade than tariffs. • When non-tariff barriers and tariffs are added together for Canada, the overall amount of protection increases more than three-fold.

  29. Redistubutive Policies: Subsidization as Protectionism • Effect a transfer of resources within a society. • Government financing and Infusion of capital • Loans or loan guarantees • Incentive grants • Tax credits • Bailing out a bankrupt corporation

  30. Arguments for Protection • Need to Protect infant industries • Need to diversify domestic industry • Need to protect domestic supply • Need to protect against dumping • National identity

  31. Economic Nationalism • Refers to a movement aimed at achieving greater control by Canadians of their economy. • Protectionism • Dislikes foreign ownership of business • Examples • Defence against Dependency Theory

  32. Dependency Theory • Dependency theory is a body of social science theories, both from developed and developing nations, that create a worldview which suggests that poor underdeveloped states of the periphery are exploited by wealthy developed nations of the centre, in order to sustain economic growth and remain wealthy.

  33. Dependency Theory • Promotion of domestic industry and manufactured goods. By subsidizing and protecting industries - countries can produce their own products rather than simply export raw materials. • Import limitations. By limiting the importation of both luxury goods and manufactured goods that can be produced within the country, supposedly, the country can reduce the amount of its capital and resources that are siphoned off. • Forbidding foreign investment. Some governments took steps to keep foreign companies and individuals from owning or operating property that draws on the resources of the country. • Nationalization. Some governments have forcibly taken over foreign-owned companies on behalf of the state, in order to keep profits within the country.

  34. Consequence of a Protective Tariff • Producers dependent on protection cannot normally export since their costs are often above world prices. • They depend almost entirely on the domestic market. • No incentive to improve or innovate • Focus on protecting tariffs rather than business

  35. Case: Book Publishing In Northrop Frye’s words, “In an immature society culture is an import; for a mature one it is a native manufacture which eventually becomes an export.” (The Department of Canadian Heritage: 362)

  36. Case: Book Publishing A Case of Protection: The Book Publishing Development Program – Goal: Develop Canadian Literary and Publishing industries • From the 1950’s Canada realized that it was a cultural wasteland with no literary figures nor a viable publishing industry. • Canadian culture and heritage was threatened without a literary representation • With the development of the Canadian Council for the Arts in 1957 Canada has achieved spectacular results.

  37. Case: Book Publishing Cultural Program • Writers-in-Residence • Writers in the Schools • Wired Writers Program Led to the development of many Canadian Authors: Michael Ondaatje, Mordecai Richler, Margaret Lawrence, Margaret Atwood • Public Lending Right Commission Pays Canadian Authors to allow their books in libraries. $8M to 11,151 Authors and covering 44,360 books

  38. Case: Book Publishing Industry Programs • Loan Program to Save Canadian Publisher: McClelland and Stewart • Support program for the sale and marketing of Canadian Books and structural support of industry • Cancopy:Support for authors to get paid for photocopying of their work

  39. Case: Book Publishing Key Result Findings • Canadian Books are acknowledged as a major cultural success • Industry is active in all major genres but its economic viability varies greatly • Canadian Owned publishing is diverse from small to very large organizations • Publishing is active in both French and English and in every region of Canada • Purchase of Canadian books if fueled by Canadians and international audiences

  40. Case: Book Publishing Using the Case: The Book Publishing Industry Development Program choose one government intervention that supports books publishing in Canada and describe it using the model of intervention and then evaluate it using the one quality determinant the best measures its effectiveness.

  41. Class 11&12 The Changing Nature of the International Business Environment

  42. The Interconnected World • The world had gone international • Money has become an internationally traded commodity. • Physical trade has become international • Service trade is international. • The power of international markets drives all of these. • The barriers that separated international markets have been torn down by policy or technology.

  43. Financial Services • Exchange Rates are determined principally by market forces • As a result of these freedoms, the financial services industry has created vast array of products enabling borrowers and savers to take advantage of financial conditions around the world. • Thus firms have achieved greater mobility.

  44. Re-Thinking of the Global Economy • The global economy has changed everything we do. Costs have gone down and connectivity had increased. • Distance, time and borders have eroded because they leave no country or community untouched. • International air travel • International communication. • Information and media use.

  45. Impact of Technology • People have been tied together by the impact of the global telecommuni-cations revolution. • People now work and communicate over vast distances. • Trade can be executed much more seamlessly than in previous generations. • Information is much more available. • Technology itself has become a significant product

  46. The Mobile Economy • Capital sweeps across countries at electronic speed. • Manufacturing and the generation of services move flexibly among countries and are networked across borders. • Markets are supplied from a continually shifting set of sources. • Ideas, insights, and techniques are commu-nicated with increasing ease.

  47. The Mobile Economy • Access to technology continues to grow. • Borders are eroded as markets are integrated. • As barriers fall, private capital seeks new markets. • Government anxious to reduce deficits and shift spending to social needs, increasingly welcomes this investment.

  48. The New Markets • The integration of financial markets is significant. • Privatization marked the first true global offerings of equity • The distinctions among national markets have become lost. • World trade is growing. • Creative Destruction increases opportunities

  49. World Trade • As world trade grows, trading in currency is growing at a steeper rate • There is a greater risk of these markets causing instability because they are so large and so much money is moving around in them. Sub Prime Market • This can be destabilizing. Many Asian states have suffered from currency swings in late 90’s. Today it is happening on a global basis

  50. How have Companies Positioned themselves in a Changing World? • There is a presence of wider opportunities and tougher competition. • Boundaries are coming down. • Computers, alliances and outsourcing are permeating the walls of companies. • Financial operations are more transparent and subject to more aggressive scrutiny and demands by outside investors.