INTERNATIONAL BUSINESS

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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

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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

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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.

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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.

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International Business Terminology

• Economy
• The financial health of a place
• Municipal Ottawas economy
• Provincial Ontarios economy
• National Canadas 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)

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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
• When Canada imports more goods than it exports,
  we have what is called a Trade Deficit.
• Imports gt Exports Trade Deficit
• Trade Surplus
• When Canada exports more goods than it imports,
  we have a Trade Surplus.
• Exports gt Imports Trade Surplus
• Which do you think is better for the Canadian
  economy?

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TOPIC 2
Benefits of International Business
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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.

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1. Access To Markets

• Canadas 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.

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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)

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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.

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Cheaper Labour

• Discuss the ethical considerations of cheap
  labour?

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3. Increased Quality of Goods

THE BMW X5
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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.

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Increased Quality of Goods

• Is this always the case?
• Discuss.

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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

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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.