Introduction to International Business

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(No Transcript)
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This presentation contains four sections

• Introduction to International Business
• Businesses International Business
• Countries International Business
• International Business in Canada

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Section 1 Introduction to International Business
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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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Levels of International Business
Source Brian Toyne Douglas Nigh, A More
Expansive View of International Business.
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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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Globalization Whats the Dispute?
economic growth
wealth disparity
environmental threat
prosperity peace
jobs
hurts human rights
common culture
anti-democratic
all can succeed
homogenized culture
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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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Section 2 Businesses International Business
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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, theyre 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 5 Functions of Business in an International
Context
Management 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.
Production The factors of production are land,
capital, labour, technology, and
entrepreneurship. 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.
Production
Management
Marketing
Marketing International businesses apply one or
more of the 4 Ps (product, place promotion, and
price) in other countries, selling products or
services in different countries.
Continued
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The 5 Functions of Business in an International
Context
(continued from previous slide)
Finance 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 Human resources deals with
hiring, firing, benefits, wage payments,
record-keeping, health and safety, and all other
activities that deal with employees. In North
America, outsourcing the human resource function
to developing countries where labour is
considerably less expensive is becoming
increasingly common.
Human Resources
Finance
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What is a Multinational Company?
An enterprise that conducts business in several
different countries
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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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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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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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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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Section 3 Countries International Business
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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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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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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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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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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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Policies
Types of policies that affect international trade

• Industry protection (e.g., Canadas 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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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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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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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/fairtrad
e/index.html
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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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Section 4 International Business in Canada
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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
• Canadas 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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Canadas Trading Partners Exports
Total exports, 2003 400,010,000,000 Source
Statistics Canada

• Lumber
• Forest products
• Ores minerals

• Lumber
• Forest products
• Ores minerals

• Cars
• Auto parts
• Lumber
• Forest products

Source Actden, http//www2.actden.com/writ_den/g1
3/brief.htm
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Canadas Trading Partners Imports
Total imports, 2003 341,832,700,000 Source
Statistics Canada

• Chemicals
• Plastics
• Processed metals

• Manufactured goods

• Fruits vegetables
• Machinery

Source Actden, http//www2.actden.com/writ_den/g1
3/brief.htm
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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 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
  Canadas high tech and professional services
  industries.
• Automotive parts accounts for the largest
  proportion of Canadas exported products which is
  good news for Canadas auto industry.

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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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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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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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Activity Your Crystal Ball

• In groups of four, predict how increases in
  global business will affect the strength of
  businesses, industries, and sectors in Canadas
  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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Web References for Further Investigation

• Department of Foreign Affairs and International
  Trade, State of Trade 2004 Report,
  http//www.dfait-maeci.gc.ca/eet/trade/stateoftrad
  e2004-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//internationale
  con.com/fairtrade/fair01.html

Continued
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Web References for Further Investigation

• For links to learn more about trade agreements in
  Canada, visit http//canadianeconomy.gc.ca/english
  /economy/issues.html
• Opening Doors to the World Canada's
  International Market Access Priorities 2004,
  http//www.dfait-maeci.gc.ca/tna-nac/cimap-en.asp
• Report of the Expert Panel on Canada's Role in
  International Science and Technology,
  http//acst-ccst.gc.ca/acst/intel/report-web2/rw2_
  toc_e.html