Transcript The Global Environment for Business

The Global Environment for Business
The Global Environment
for Business
OBEA 2004
The Global Environment for Business
This presentation contains four
sections:
 Introduction to International Business
 Businesses & International Business
 Countries & International Business
 International Business in Canada
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The Global Environment for Business
The Global Environment
for Business
Section 1:
Introduction to
International Business
OBEA 2004
The Global Environment for Business
International business is….
…conducting one or more of the
functions of business internationally. It
can include international trade,
imports/exports, licensing in other
countries, outsourcing work across
borders, and foreign investment.
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The Global Environment for Business
Levels of International Business
Supra-societal
• Boundary conditions such as agreements, international
monetary systems, etc.
• Organizations such as WTO, EU, UN, etc.
Nation/state
• Boundary conditions such as national policies and laws
• National politics and economic situations
Industry
• Conditions that industries create such as competition,
technology, specialization, lobbying/political pressure,
efficiency, etc.
Firm
Group
Individual
• Conditions that individual firms create, such as
employment, policies, economic impact, etc.
• Conditions on groups within firms include changes to
working conditions, learning, change, impacts on
employment, etc.
• Individual conditions such as motivation, talents, expertise,
work/life balance, etc.
Source: Brian Toyne & Douglas Nigh, “A More Expansive View of International Business.”
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The Global Environment for Business
Globalization: What Is It?
 The Government of Canada defines globalization as
“the increased mobility of goods, services, labour,
technology and capital throughout the world.
Although globalization is not a new development,
its pace has increased with the advent of new
technologies, especially in the area of
telecommunications.”
 This definition illustrates that globalization is a key
factor in the growth of international business.
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The Global Environment for Business
Globalization: What’s the Dispute?
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The Global Environment for Business
Activity: Understanding the Arguments
 Many people are for globalization, while many others are
against it. The degree to which globalization is accepted
impacts how international business activities will
develop.
 In pairs, create a t-chart and research the arguments for
and against globalization using resources available to you
at school
 After reviewing the arguments, write down your
personal conclusion about globalization which states
your position on the issue. Back up your position with
reasons.
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The Global Environment for Business
The Global Environment
for Business
Section 2:
Businesses &
International Business
OBEA 2004
The Global Environment for Business
International business as an integrated part of
an organization…
“Overseas operations used to be thought of
as appendages or subsidiaries to help
increase sales; now, they’re part of a
network for accessing knowledge and
human capital around the world.”
Christopher Bartlett, “Global Myth Manager” in Fast
Company, Issue 8, p. 134.
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The Global Environment for Business
The 5 Functions of Business in an International Context
Management
Production
Management is the
function that plans
& organizes all
business activities.
International
business managers
seek out
opportunities in other
countries to fulfil
business functions,
and to coordinate
them.
The factors of production
are: land, capital, labour,
technology, and
entrepreneurship.
Marketing
Marketing
FUNCTIONS
Many international
businesses conduct functions
in other countries. For
example, some North
American businesses
manufacture goods in other
countries where labour and
capital are less expensive
and accessible. This is
especially common in
software development.
International businesses apply one or more of the 4 P’s (product, place promotion, and
price) in other countries, selling products or services in different countries.
Continued… 10
The Global Environment for Business
The 5 Functions of Business in an International Context
(continued from previous slide)
Finance
Human Resources
A company may
engage in
international
business through
international finance:
either investing their
funds in other
countries, or by
engaging investors
from other countries
to infuse capital.
Human resources deals
with hiring, firing,
benefits, wage payments,
record-keeping, health
and safety, and all other
activities that deal with
employees.
FUNCTIONS
In North America,
outsourcing the human
resource function to
developing countries
where labour is
considerably less
expensive is becoming
increasingly common.
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The Global Environment for Business
What is a Multinational Company?
An enterprise that conducts
business in several different
countries
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The Global Environment for Business
More About Multinationals
 Account for over 33% of world output, and 66% of
world trade
 Approximately 25% of world trade takes place
among multinationals
Source: J. Gray. False Dawn: The Delusions of Global Capitalism. London:
Granta, 1999
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The Global Environment for Business
Successful Multinational Characteristics
 A “global mindset”
 The ability to work with people from diverse
backgrounds
 A long-range perspective
 The ability to manage change and transition
 The ability to create systems for employee learning
Source: John B. Cullen, Multinational Management: A Strategic Approach.
Cincinnati: South-Western College Publishing, 1999.
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The Global Environment for Business
Factors Affecting Growth of Multinationals
 Trade agreements and policies that make international
flow of goods & services easier
 Fast and affordable means to move products and
services across the world
 Technology opens doors to rapid exchange of
information and financial transactions
 Varied costs of labour and other resources makes
international production attractive in some countries
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The Global Environment for Business
Activity: Getting to Know a Multinational

Research one multinational company and report back on:
 What products/services it produces (including subsidiary
companies)
 Which countries it does business in, and what business it
does in those countries
 Its recent annual earnings
 Any other interesting information you uncover

Differentiate between the characteristics of multinational and
domestic companies.

Organize your findings in a slideshow or chart paper and share
with the class.
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The Global Environment for Business
The Global Environment
for Business
Section 3:
Countries &
International Business
OBEA 2004
The Global Environment for Business
Trade Among Nations: Interdependence
International business causes greater interdependence
among nations in a variety of ways:
 Links financial markets and economies
 Impacts currency
 Can result in challenges to legislation through trade
wars and consumer issues such as:
 Pressure to change labour/human rights laws
 Pressure to change taxation and trade policies
 Pressure to alter political structures
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The Global Environment for Business
Factors Affecting International Trade
Each of the following will be discussed in the
slides that follow
 Technology
 Currency
 International agreements
 Policies
 Non-governmental Organizations (NGOs)
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The Global Environment for Business
Technology
 Information can flow from one part of the world
to another instantaneously
 Borderless finance – international investments,
online transactions, etc.
 Low cost and widespread availability of
technology makes it affordable for small and large
businesses
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The Global Environment for Business
Currency
 The level of currency can either promote or
hinder international trade
 Weak currency makes goods and services
cheaper for other nations to purchase, while
strong currency has the opposite effect
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The Global Environment for Business
International Trade Agreements
 Contemporary trade agreements promote “free
trade” in which nations agree to support
mutual economic growth by allowing certain
types of goods and services to be traded with
reduced or 0 tariffs or other barriers
 Trade agreements, therefore, contribute to
international trade among those nations
included in them
 Examples include: NAFTA, FTAA, EU, APEC
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The Global Environment for Business
Policies
Types of policies that affect international trade :
 Industry protection (e.g., Canada’s Export and Import
Permits Act or EIPA)
 Tariffs (duties and taxes on imports)
 Non-tariff barriers (e.g., embargos, restrictions, etc.)
 Visa, passport, and immigration policies (restrictions
to the flow of people, which can deter international
travel and movement of workers)
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The Global Environment for Business
NGOs
 A variety of non-governmental organizations actively
promote international trade through lobbying, bringing
together influential individuals and groups, and
compelling research and reports
 Examples include:
 World Trade Organization (WTO)
 Organization for Economic Cooperation and
Development (OECD)
 The World Bank
 International Monetary Fund (IMF)
 Some are considered to be controversial and biased
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The Global Environment for Business
“Fair Trade:” An Emerging Issue
 Fair trade refers to international trade that respects all
parties involved
 The concept has gained prominence from “unfair”
practices that have been exposed. For example:
 Some large buyers of goods are able to push prices down,
to the point where small producers internationally,
particularly in agriculture, can barely survive. An example
of such practice has occurred in the coffee industry.
 Some retailers contract factories in developing countries
where wages are low and few labour laws exist (e.g., child
labour and serfdom occur) in order to be able to purchase
and sell consumer goods at a low price.
 Critics of such unfair trade advocate for reform
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The Global Environment for Business
Principles for Fair Trade

Distributional fairness – paying a fair wage

Non-discrimination fairness – different groups of individuals judged
to be equals

“Golden rule” fairness – not causing harm to others and respecting
agreements

Reciprocity – countries negotiating agreements each make equal
concessions or rescind policies equally

Respecting sovereignty – when negotiating agreements, countries
should respect the the laws and policies that are in existence

Maximum benefit fairness – the trade should maximize the benefits
for all nations involved
Adapted from http://internationalecon.com/fairtrade/index.html
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The Global Environment for Business
Activity: Impacts on Us
 In a group of three or four students, brainstorm
the advantages and disadvantages of international
trade and international business on:
 Jobs
 The environment
 The economy
 When finished, be prepared to report back to the
class
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The Global Environment for Business
The Global Environment
for Business
Section 4:
International Business
in Canada
OBEA 2004
The Global Environment for Business
Canada as a Global Player
 The Government of Canada reports that in 2003,
exports accounted for over 40% of our economic
activity
 Traditionally, Canada exported primary resources but
over time, shifted to manufactured goods
 Canada’s export of services is growing rapidly
 We tend to enjoy trade surpluses (i.e., more exports
than imports)
Source for points 2, 3 & 4: M. Schultz et al., International Business: Canada and
Global Trade. Toronto: Nelson, 2003.
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The Global Environment for Business
Canada’s Trading Partners: Exports
Total exports, 2003: $400,010,000,000
Source: Statistics Canada
Canada's Exports

Japan
8%



Lumber
Forest products
Ores & minerals
United Kingdom
3%


Lumber
Forest products
Ores & minerals


United States 
89%

Cars
Auto parts
Lumber
Forest products
Source: Actden, http://www2.actden.com/writ_den/g13/brief.htm
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The Global Environment for Business
Canada’s Trading Partners: Imports
Total imports, 2003: $341,832,700,000
Source: Statistics Canada
Canada's Imports
United Kingdom
3%
Japan
7%

Manufactured
goods



Chemicals
Plastics
Processed metals
United States
90%


Fruits & vegetables
Machinery
Source: Actden, http://www2.actden.com/writ_den/g13/brief.htm
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The Global Environment for Business
Canadian Global Trade Policies
 Corporate taxation levels
 Tariffs on the import of certain goods and/or goods
from countries who do not have trade agreements
with Canada
 Intergovernmental contacts and participation in trade
agreements (e.g., NAFTA)
 Government trade missions take place regularly where
Canadian officials visit other nations to encourage
trade with Canada
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The Global Environment for Business
The Canadian Winners
According to Industry Canada,
 International export of “commercial services” (e.g.,
services to businesses such as consulting, architecture,
engineering, communications, etc.) has surged recently.
This is good news for Canada’s high tech and
professional services industries.
 Automotive parts accounts for the largest proportion of
Canada’s exported products which is good news for
Canada’s auto industry.
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The Global Environment for Business
Advantages of International Trade in Canada
 Creates jobs
 Attracts investment
 Attracts technology
 Makes more consumer goods available
 Overall, these factors can improve the
economy
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The Global Environment for Business
Disadvantages of International Trade in Canada
 Creates wealth disparity
 Can hinder unique Canadian culture when “imported”
cultural goods become prevalent
 Jeopardizes environment though increased
manufacturing; sale of natural resources, etc.
 Political alliances and NGO pressure can reduce
government sovereignty
 Potential loss of jobs from outsourcing
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The Global Environment for Business
Growing International Markets
 In 2004, the Canada will emphasize the engineering
sector and the Territories as priority areas for
exports
 The service sector (e.g., software development,
engineering, consulting, etc.) plays a prominent role
in our “knowledge economy” and is considered a
growth market
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The Global Environment for Business
Activity: Your Crystal Ball
 In groups of four, predict how increases in global business
will affect the strength of businesses, industries, and sectors
in Canada’s economy in the next decade.
 Use your favourite search engine and the references at the
end of this slideshow to gather data.
 Prepare your findings either on chart paper or in a slideshow
to share with the class.
 Once all groups have presented, reflect on the similarities
and differences among predictions. Record your reflection in
point form using a word processor.
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The Global Environment for Business
Web References for Further Investigation
 Department of Foreign Affairs and International
Trade, State of Trade 2004 Report, http://www.dfaitmaeci.gc.ca/eet/trade/stateoftrade2004-en.asp
 “At Issue: Economic Globalization – Concentrating
Wealth or Creating Opportunity.” A report from
Council on Foundations, June 2002,
http://www.cof.org/files/Documents/
Governing_Boards/bb5globalization.pdf

Introduction to Fair Trade,
http://internationalecon.com/fairtrade/fair01.html
Continued… 38
The Global Environment for Business
Web References for Further Investigation
 For links to learn more about trade agreements in
Canada, visit
http://canadianeconomy.gc.ca/english/economy/issu
es.html
 Opening Doors to the World: Canada's International
Market Access Priorities – 2004, http://www.dfaitmaeci.gc.ca/tna-nac/cimap-en.asp
 Report of the Expert Panel on Canada's Role in
International Science and Technology, http://acstccst.gc.ca/acst/intel/report-web2/rw2_toc_e.html
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