slide1 l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Part One PowerPoint Presentation
Download Presentation
Part One

Loading in 2 Seconds...

play fullscreen
1 / 27

Part One - PowerPoint PPT Presentation


  • 272 Views
  • Uploaded on

Introducing the Contemporary Business World Part One Chapter Four Understanding International Business Learning Objectives Describe the increase in international business Identify major global markets Define the following and describe their effects on the business environment:

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

Part One


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

Introducing the Contemporary Business World

PartOne

Chapter Four

Understanding International Business

learning objectives
Learning Objectives
  • Describe the increase in international business
  • Identify major global markets
  • Define the following and describe their effects on the business environment:
    • competitive advantage
    • import/export balance
    • exchange rates
    • foreign competition

© 2003 Pearson Education Canada Inc.

more learning objectives
More Learning Objectives
  • Describe the following market decisions:
    • international involvement levels
    • international organization structure
  • Describe social, cultural, economic, legal and political barriers to trade
  • Explain the benefits of free trade agreements
  • Understand Canada’s trade challenges

© 2003 Pearson Education Canada Inc.

the global marketplace
The Global Marketplace
  • Total volume of world trade is $8 trillion annually
  • Globalization is occurring: the world is becoming a single large market - an interconnected system

© 2003 Pearson Education Canada Inc.

imports
Imports
  • Products purchased in Canada which are shipped in from other countries where they are manufactured

© 2003 Pearson Education Canada Inc.

exports
Exports
  • Products made in Canada which are purchased by consumers in other countries

© 2003 Pearson Education Canada Inc.

major global markets
Major Global Markets
  • North America
  • Asia-Pacific
  • Western Europe

© 2003 Pearson Education Canada Inc.

competitive advantage
Competitive Advantage
  • the ability of an entity to do something better than another entity
  • absolute advantage: a country can produce something less expensively than any other nation
  • comparative advantage: a country can produce an item more cheaply than it can other items

© 2003 Pearson Education Canada Inc.

balance of trade
Balance of Trade
  • Balance of trade:
    • The difference between the total value of exports and the total value of imports

Imports<Exports=TradeSurplus

(Favourable)

Exports <Imports=TradeDeficit

(Unfavourable)

© 2003 Pearson Education Canada Inc.

balance of payments
Balance of Payments
  • Difference between cash flowing in to the country and out of the country, including:
      • Cash flow in includes: exports, foreign tourist spending in Canada, foreign investments in Canada, earnings from Canadian investments outside of Canada
      • Cash flow out includes: imports, Canadian tourist spending outside of Canada, foreign aid, military expenditure outside of Canada, Canadian investments outside of Canada, earnings of foreign investments in Canada

© 2003 Pearson Education Canada Inc.

foreign exchange rate
Foreign Exchange Rate
  • ratio of the currency of one nation to the currency of another nation (eg: how many Canadian dollars does it take to buy American dollars?
  • if Canadian dollar is cheaper: exports increase and imports cost more
  • if Canadian dollar is more expensive: exports decrease and imports cost less
  • fluctuations of the dollar can have profound effects on the economy

© 2003 Pearson Education Canada Inc.

deciding to go international
Deciding to Go International
  • Is there international demand for the firm’s product?
  • Can the product be modified to fit a foreign market?
  • Is the foreign business climate suited to exports?
  • Does the firm have (or can it get) the necessary skills and knowledge to do business abroad?

If No:

Stay Domestic

Is Yes:

Go International

© 2003 Pearson Education Canada Inc.

levels of involvement in international business
Levels of Involvement in International Business
  • Export via Intermediaries
  • Independent Agent
  • Licensing/Royalty Arrangements
  • Branch Office & World Product Mandating
  • Strategic Alliance/Joint Venture
  • International Firm
  • Multinational Firm
  • Foreign Direct Investment

Less Involved

More Involved

© 2003 Pearson Education Canada Inc.

why use strategic alliances
A strategic alliance is a “joint venture” or “partnership” between two independently owned firms

May be mandated in some nations

Useful if a firm lacks knowledge of the culture and business environment in the foreign nation

Why Use Strategic Alliances?

© 2003 Pearson Education Canada Inc.

multinationals
Multinationals
  • Multinational firms enjoy worldwide presence allowing them to benefit from favourable exchange rates, technology and expertise
  • Many multinationals provide needed jobs, prosperity, technology and growth to developing nations
  • Multinationals are often criticized for taking resources out of the country, and not doing enough to develop local labour markets

© 2003 Pearson Education Canada Inc.

barriers to trade
Barriers to Trade
  • Social and Cultural Differences
  • Economic Differences
  • Legal and Political Differences
    • Quotas/Tariffs/Subsidies
    • Local Content Laws
    • Business Practices

© 2003 Pearson Education Canada Inc.

social cultural differences
Social & Cultural Differences
  • language
  • population demographics
  • shopping habits
  • religious differences
  • social beliefs

© 2003 Pearson Education Canada Inc.

economic differences
Economic Differences
  • the role of government in the economy:
  • command vs. market economies
    • capitalist
    • socialist
    • communist

© 2003 Pearson Education Canada Inc.

quotas tariffs subsidies
Quotas, Tariffs & Subsidies
  • embargo: forbidding export/import from a nation (eg: US vs. Cuba)
  • quota: limitations on importation of a product class (eg: cars, motorcycles)
  • subsidy: government financial assistance for domestic firms
  • tariff: a tax on imported goods
    • protectionist: to protect sale of domestic goods
    • revenue: to raise funds for government use

© 2003 Pearson Education Canada Inc.

local content
Local Content
  • requires that at least part of the product be made on foreign soil (may result in joint venture)
  • includes the practice of Canadian provinces to buy from their own companies before going outside of the province

© 2003 Pearson Education Canada Inc.

business practices
Business Practices
  • bribes are seen as “gratuities” to government officials in some nations
  • “dumping”, the practice of selling goods abroad for less than one can in the domestic market, is illegal in most nations
  • “cartels” are associations of producers with the sole purpose of controlling supply and demand (eg: OPEC for petroleum-producing nations) which can often drive up prices (are not illegal and control many industries - oil, diamonds)

© 2003 Pearson Education Canada Inc.

trade agreements
Trade Agreements
  • Working to overcome trade barriers:
    • General Agreement on Tariffs and Trade (GATT)
    • The North American Free Trade Agreement (NAFTA)
    • European Union (EU)
    • Canada-US Free Trade Agreement (FTA)

© 2003 Pearson Education Canada Inc.

general agreement on tariffs and trade
General Agreement on Tariffs and Trade
  • Signed after WWII by 92 countries
  • Has effectively reduced tariffs by 5%
  • Not all signatories comply with GATT, including the US and certain European Union nations

© 2003 Pearson Education Canada Inc.

european union
European Union
  • Reduces tariffs on products traded within the union
  • Imposes higher tariffs on products coming in from outside of the union
  • Imposes limiting quotas on products coming in from outside of the union

© 2003 Pearson Education Canada Inc.

canada us free trade agreement
Canada-US Free Trade Agreement
  • Signed in 1989
  • Goal to gradually eliminate tariffs on goods moving between Canada and the US

© 2003 Pearson Education Canada Inc.

north american free trade agreement 1994
North American Free Trade Agreement (1994)
  • Free trade area for Canada, US and Mexico
  • Trade between Canada and the US has risen by 37% since 1994
  • Canada has a $22 Billion (Cdn.) trade surplus with the US
  • Exports account for about 40% of the GDP, up 15% from pre-NAFTA trade
  • Canada is the most intensive trading country in the G7 (1 out of every 3 jobs is dependent on export trade)

© 2003 Pearson Education Canada Inc.

other free trade agreements in the americas
Other Free Trade Agreements in the Americas
  • Negotiations under consideration:
    • Mercosur (in effect since 1995):
      • Argentina, Brazil, Uruguay, Paraguay
      • Eliminating tariffs between nations
    • SAFTA (proposed):
      • Expansion of Mercosur to include all of South America (South American Free Trade Agreement)
    • AFTA (potential):
      • Expansion of SAFTA to include NAFTA

© 2003 Pearson Education Canada Inc.