Transcript International Business Topic 1 & 2

INTERNATIONAL BUSINESS
TOPICS
• Basic International Business
Terminology
• Benefits of International
Business
• The Five P’s 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
International Business Defined
“All the business transactions (exchanges of
money) necessary for creating, shipping,
and selling goods and services across
national borders. Also referred to
international trade or foreign trade”
Wilson, Jack et al. The World of Business (5th ed) Canada,
Nelson, 2007
International Business Terminology
Domestic Transaction
 Selling of goods produced in the
same country.
For example:
 You visit a store in your community
(local store) and purchase a bicycle
that has been manufactured in
Canada.
International Business Terminology
International Transaction
 Selling goods produced in another country.
 Involves creating, shipping, and selling
goods and services across national borders.
 Also referred to as international trade or
foreign trade.
For example:
 You go to Canadian Tire and purchase a tool
that was manufactured in China.
International Business Terminology
Economy
 The financial health of a place
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Municipal – Ottawa’s economy
Provincial – Ontario’s economy
National – Canada’s economy
Continental – North American economy
Global – Global Economy
The health of an economy is generally
determined/measured by looking at factors
such as employment rates, interest rates,
gross domestic product data, trade deficits
vs. surplus…(Next Chapter)
International Business Terminology
Imports
A good or service brought into Canada from another country. (made
in China)
Exports
A product or service produced in Canada and sold in another country.
(made in Canada)
Trade Deficit
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When Canada imports more goods than it exports, we have what is called
a Trade Deficit.
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Imports > Exports = Trade Deficit
Trade Surplus
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When Canada exports more goods than it imports, we have a Trade
Surplus.
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Exports > Imports = Trade Surplus
Which do you think is better for the Canadian economy?
TOPIC #2
Benefits of
International
Business
Benefits To Businesses Participating in
International Business
1. 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.
1. Access To Markets
Canada’s Population:
 Roughly 33,600,000
 33 million six hundred thousand
World Population:
 Roughly 6, 500,000,000
 6 billion 500 million
Conclusion:
The Global market can reach
roughly 200 times more consumers
than simply just Canadian
consumers.
Access To Markets
Access to the global market does not guarantee bigger
sales. Why?
Companies must adapt their products and/or services
to:
1. different needs, wants and preferences based on
cultural differences and/or preferences
2. conform to different laws of various countries
Global Product
 A standardized item that is offered in the same form in
all countries in which it is sold. (i.e. pencils, soccer
balls, cameras)
2. Cheaper Labour
Businesses make profits when their sales are greater than their
costs of running the business.
Thus profits can increase even more by maintaining their sales
level and decreasing their costs of running the business.
The single largest expense of any business/organization is
generally the labour (employees and management wages and
salaries)
If a company can produce its goods and/or services in
another country where the labour laws allow businesses to
pay employees less than they would be paid in Canada, they
can reduce their costs of doing business substantially.
In addition to helping increase profits, businesses can pass on
those savings to consumers by reducing the price of the
items.
The cheaper an item is, perhaps the more the business will
also sell.
Cheaper Labour
Discuss the ethical considerations
of cheap labour?
3. Increased Quality of Goods
THE BMW X5
Increased 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
product for its consumers so it searched for
the manufacturers that produced the best
quality in its car components.
Increased Quality of Goods
Is this always the case?
Discuss.
4. Increased Quantity
Access to international markets may
lead to an increase in demand of
products thus increased quantities of
goods sold.
Results:
Hours of operation may increase
New production facilities may open and
perhaps in other countries
Increase in job opportunities
5. Access to Resources
Natural Resource
Since Bamboo is a scarce resource in Canada a
furniture company making bamboo furniture will
import (bring into the country) bamboo from
another country.
Human Resources
A Canadian company which opens up a factory
in China to take advantage of its cheaper labour
costs
Capital Resources
A company that purchases a specialized piece
of machinery needed for their plant that is only
made in Japan.