INTERNATIONAL BUSINESS

TOPICS
- Basic International Business
Terminology
- Benefits of International
Business
- The Five Ps of International
Business
- Costs of International Business
- Barriers to Conducting
International Business
- Importing and Exporting
- Canada and International Trade
Agreements
- The Future of International
Trade
nternational Business Defined nternational Business Defined
All the business transactions (exchanges of All the business transactions (exchanges of
money) necessary for creating, shipping, money) necessary for creating, shipping,
and selling goods and services across and selling goods and services across
national borders. Also referred to national borders. Also referred to
international trade or foreign trade international trade or foreign trade
Wilson, Jack et al. Wilson, Jack et al. The World of Business (5 The World of Business (5
th th
ed) ed) Canada, Canada,
Nelson, 2007 Nelson, 2007
nternational Business Terminology nternational Business Terminology
omestic Transaction omestic Transaction
Selling of goods produced in the Selling of goods produced in the
same country. same country.
For example: For example:
You visit a store in your community You visit a store in your community
(local store) and purchase a bicycle (local store) and purchase a bicycle
that has been manufactured in that has been manufactured in
Canada. Canada.
nternational Business Terminology nternational Business Terminology
International Transaction International Transaction
Selling goods produced in another country. Selling goods produced in another country.
Involves creating, shipping, and selling Involves creating, shipping, and selling
goods and services across national borders. goods and services across national borders.
Also referred to as Also referred to as international trade international trade or or
foreign trade. foreign trade.
For example: For example:
You go to Canadian Tire and purchase a tool You go to Canadian Tire and purchase a tool
that was manufactured in China. that was manufactured in China.
nternational Business Terminology nternational Business Terminology
Economy Economy
The financial health of a place The financial health of a place
- - Municipal Municipal -- Ottawas economy Ottawas economy
- - Provincial Provincial -- Ontarios economy Ontarios economy
- - National National -- Canadas economy Canadas economy
- - Continental Continental -- North American economy North American economy
- - Global Global -- Global Economy Global Economy
The The health of an economy health of an economy is generally is generally
determined/measured by looking at factors determined/measured by looking at factors
such as such as employment rates employment rates, , interest rates interest rates, ,
gross domestic product data gross domestic product data, , trade deficits trade deficits
vs. surplus vs. surplus.(Next Chapter) .(Next Chapter)
nternational Business Terminology nternational Business Terminology
Imports Imports
A good or service brought into Canada from another country. (made A good or service brought into Canada from another country. (made
in China) in China)
Exports Exports
A product or service produced in Canada and sold in another country. A product or service produced in Canada and sold in another country.
(made in Canada) (made in Canada)
Trade eficit Trade eficit
When Canada imports more goods than it exports, we have what is called When Canada imports more goods than it exports, we have what is called
a Trade eficit. a Trade eficit.
Imports > Exports = Trade eficit Imports > Exports = Trade eficit
Trade Surplus Trade Surplus
When Canada exports more goods than it imports, we have a Trade When Canada exports more goods than it imports, we have a Trade
Surplus. Surplus.
Exports > Imports = Trade Surplus Exports > Imports = Trade Surplus
Which do you think is better for the Canadian economy? Which do you think is better for the Canadian economy?
TOPIC #2
Benefits of
International
Business
Benefits To Businesses Participating in
nternational Business
. Access to many more markets
2. Access to cheaper labour
3. Increased quality or quantity of
goods
4. Access to resources that may not be
available at home.
Access To Markets Access To Markets
Canadas Population:
#oughly 33,600,000
33 million six hundred thousand
World Population: World Population:
#oughly 6, 500,000,000 #oughly 6, 500,000,000
6 billion 500 million 6 billion 500 million
Conclusion: Conclusion:
The Global market can reach The Global market can reach
roughly roughly 200 times 200 times more consumers more consumers
than simply just Canadian than simply just Canadian
consumers. consumers.
Access To Markets Access To Markets
Access to the global market does not guarantee bigger Access to the global market does not guarantee bigger
sales. Why? sales. Why?
Companies must adapt their products and/or services Companies must adapt their products and/or services
to: to:
. different needs, wants and preferences based on . different needs, wants and preferences based on
cultural differences and/or preferences cultural differences and/or preferences
2. conform to different laws of various countries 2. conform to different laws of various countries
Global Product Global Product
A standardized item that is offered in the same form in A standardized item that is offered in the same form in
all countries in which it is sold. (i.e. pencils, soccer all countries in which it is sold. (i.e. pencils, soccer
balls, cameras) balls, cameras)
Cheaper Labour Cheaper Labour
Businesses make Businesses make profits profits when their when their sales are greater sales are greater than their than their
costs costs of running the business. of running the business.
Thus Thus profits can increase profits can increase even more by maintaining their sales even more by maintaining their sales
level and level and decreasing their costs decreasing their costs of running the business. of running the business.
The The single largest expense single largest expense of any business/organization is of any business/organization is
generally the generally the labour labour (employees and management wages and (employees and management wages and
salaries) salaries)
If a company can produce its goods and/or services in If a company can produce its goods and/or services in
another country where the another country where the labour laws allow businesses to labour laws allow businesses to
pay employees less pay employees less than they would be paid in Canada, they than they would be paid in Canada, they
can can reduce their costs reduce their costs of doing business substantially. of doing business substantially.
In addition to helping increase profits, businesses can pass on In addition to helping increase profits, businesses can pass on
those savings to consumers by reducing the price of the those savings to consumers by reducing the price of the
items. items.
The cheaper an item is, perhaps the more the business will The cheaper an item is, perhaps the more the business will
also sell. also sell.
Cheaper Labour Cheaper Labour
iscuss the ethical considerations iscuss the ethical considerations
of cheap labour? of cheap labour?
ncreased ncreased Quality Quality of Goods of Goods
THE BMW X5
ncreased Quality of Goods ncreased Quality of Goods
The BMW X5
Its engine is assembled in Munich, Germany;
Shipped to the production plan in South
Caroline, U.S.;
Magna Corporation in ON, Canada,
manufacturers the rear-view mirror;
Leather seats come from South Africa;
Michelin tires are manufactured in France
BMW wanted to create the best possible BMW wanted to create the best possible
product for its consumers so it searched for product for its consumers so it searched for
the manufacturers that produced the best the manufacturers that produced the best
quality in its car components. quality in its car components.
ncreased Quality of Goods ncreased Quality of Goods
Is this always the case? Is this always the case?
iscuss. iscuss.
ncreased ncreased Quantity Quantity
Access to international markets may Access to international markets may
lead to an increase in demand of lead to an increase in demand of
products thus increased quantities of products thus increased quantities of
goods sold. goods sold.
#esults: #esults:
Hours of operation may increase Hours of operation may increase
New production facilities may open and New production facilities may open and
perhaps in other countries perhaps in other countries
Increase in job opportunities Increase in job opportunities
Access to Resources Access to Resources
Natural #esource Natural #esource
Since Bamboo is a scarce resource in Canada a Since Bamboo is a scarce resource in Canada a
furniture company making bamboo furniture will furniture company making bamboo furniture will
import (bring into the country) bamboo from import (bring into the country) bamboo from
another country. another country.
Human #esources Human #esources
A Canadian company which opens up a factory A Canadian company which opens up a factory
in China to take advantage of its cheaper labour in China to take advantage of its cheaper labour
costs costs
Capital #esources Capital #esources
A company that purchases a specialized piece A company that purchases a specialized piece
of machinery needed for their plant that is only of machinery needed for their plant that is only
made in Japan. made in Japan.