Chapter 4: International Business Day 1: What is International Business?

Chapter 4: International Business

Day 1: What is International Business?

Today’s Response Journal

What do you feel are the advantages and disadvantages of buying products made in another

country?

***Save as Sept 30and save in your Response Journal

Folder***

International Business

•____________________; all the business transactions necessary for creating, shipping and selling goods and services across national borders▫Also referred to as ___________________ or

__________________▫By participating in an international

transaction, you are contributing to the ______________________

Foreign TradeInternational Trade

International Business

Global Economy

Domestic or International•A ______________________ is the selling of

items produced in the same country▫E.g. selling a BlackBerry made by RIM in

Waterloo to a Canadian resident•An _________________________ is the

selling of items produced in other countries▫E.g. selling a BlackBerry made by RIM in

Waterloo to an American resident

Domestic Transaction

International Transaction

Advantages of International TradeInternational trade offers many benefits including;

1.Access to markets2.Cheaper labour3.Increased quality of goods4.Access to resources we don’t have in Canada

1. Access to Markets

•Most countries rely on international trade for their economic survival▫E.g. the Canadian market is small, only 33

million people, where as the world market is much larger, at more than 6.5 billion people

•International trade allows businesses to reach more ________ and introduce their product to different ___________ and cultures

PeopleCountries

2. Cheaper Labour

•Cost of labour (employee wages) is often _______ overseas

•Therefore, many Canadian manufacturers have moved their production to places like _________ and _________

Lower

India China

3. Increased Quality of Goods

•Sometimes a particular company or country is known for the high ________ of their products▫E.g. Carpets made in India, BMW cars

made in German, etc.

Quality

4. Better Access to Resources

•International trade can give a business access to many ____________________▫E.g. if you make a product that requires

something that isn’t available in Canada, like bamboo, you may have to obtain it from another country

•Also applies to retail businesses▫E.g. Zehrs has to get pineapples and

bananas from a tropical country as they can’t be grown in the Canadian climate

Different Resources

Disadvantages of International Trade•Doing business internationally can provide a

wide range of benefits for both businesses and consumers, but it is important to realize that these benefits don’t always come without costs

•______________ are the hidden costs of doing business that have a negative impact on people or the environment and include; 1. Offshore outsourcing2. Human rights issues3. Environmental degradation

Social Costs

1. Offshore Outsourcing

•____________________ is the practice of hiring services providers from countries where labour costs are lower to complete some or all of the steps in the production process ▫This process is also known as ______________▫Moving production to countries such as

China, India, Taiwan, Indonesia, etc is common practice

•Offshore outsourcing results in a loss of domestic (Canadian) _______

Offshore Outsourcing

Contracting Out

Jobs

2. Human Rights Issues•Human rights issues and labour abuses are

two ethical problems that result from offshore outsourcing

•Workers in many poor countries face a wide range of abuses in the workplace such as …▫Physical and sexual abuse▫Forced confinement▫No food or health care▫Long working hours▫Non-payment of wages

2. Human Rights Issues•________________ is another problem with

outsourcing▫Child labour is defined as regular

employment of children under the age of 16•Many children throughout the world work

everyday•There are many organizations working to

improve this situation including:▫International Labour Organization ▫Free the Children▫Amnesty International

Child Labour

3. Environmental Degradation• ______________________ is the process of

developing land, cities, businesses and communities that meet the needs of the present time without compromising future generations

• What would happen if businesses failed to pay attention to sustainable development?▫ ___________________________ occurs when nature’s

resources such as trees, habitat, earth, water and air are being consumed faster than nature can replace them

• Businesses must be aware of and consider how their policies and procedures impact the environment

Sustainable Development

Environmental Degradation

Day 1 Assigned Work

Students please complete the following;

•Complete the Free The Children Activity handout provided

•Read the Ethical, Moral & Legal Considerations box found on page 121 and answer the question “Is it fair to have children under 16 working for a living? Why or why not?”


Day 2: The 5 Ps of International Business


Although buying products made in different parts of the world has its advantages, why is it important to

buy Canadian made products?

***Save as Oct. 1 and save in your Response Journal Folder***

International Business• International business not only offers

advantages to business, it also benefits you the consumer

• If a country can produce all the goods and services that its domestic consumers need and want, at prices they are willing to pay, then why would that country need to buy from another country?

•Read the examples on page 116, paragraph 3•When each country is able to focus its efforts

on what it can do ______, everyone ___________

Best

Benefits

International Business Benefits• Consumers have access to a bigger variety of

goods and services• Consumers are offered these goods and services

at a wider range of prices• Businesses can sell their goods and services to

more markets• As companies expand to serve new markets, they

create jobs at home and overseas• When Canadian and international businesses

exchange goods and services, they also exchange knowledge, which could result in a new approach

• Political benefits – “Countries that trade with one another seldom go to war with each other”

The 5 Ps of International BusinessThere are 5 major reasons for doing

business internationally …1.Product 2.Price3.Proximity4.Preference5.Promotion

Day 2 – Assigned Work


•5 Ps of International Business Worksheet posted on ClassNet under Tasks

Chapter 4: International BusinessDay 3: Barriers and Obstacles

Today’s Response JournalAs a Canadian restaurant owner looking to

expand your business into Asia and India, what obstacles might you encounter?

(I.e. What about your current restaurant would need to be changed?)

***Save as Oct. 2 and save in your Response Journal Folder***

Introduction to Barriers•While doing business internationally may result

in higher profits, there are often difficulties or barriers to successful trading

•The Canadian government uses barriers to help protect domestic businesses and consumers▫These barriers can be used to assist a new

business in started as well as protect an existing industry struggling in a competitive global environment

▫Or they can protect consumers from problematic imports, such as automobiles that may not follow Canadian safety standards

Introduction to Barriers

Some of these barriers include …•Tariffs•Non-tariff barriers•Importing and exporting costs•Excise taxes•Currency fluctuations

Tariffs•__________, also called ______________, are a

form of tax charged on certain imports •Tariffs are used by a government to

manage trade▫For example, charging a tax on an imported

item may make it more expensive than its domestic competitor

▫Therefore, people will buy more of the Canadian product because it’s cheaper

Tariffs Custom Duties

NAFTA

•NAFTA, stands for …_____________________________

•This trade agreement took effect January 1, 1994

•This agreement removes tariffs on many goods which flow between Canada, the US and Mexico

North American Free Trade Agreement

Non-Tariff Barriers•___________________ are standards for the

quality of imported goods that are set so high, foreign competition cannot enter the market

•Read the example on page 125, paragraph 2

•Non-tariff barriers can also be imposed at border crossings where goods are inspected before entering the country▫E.g. all beef imported into the EU

(European Union) must be hormone free

Non-Tariffs Barriers

Importing and Exporting Costs• An ___________ is a good or service brought

into a country for sale• An ___________ is a good or service produced

in one country and sold in another• The price of an item (good or service) is

based on many things …▫Cost of manufacturing ▫Storage ▫Marketing ▫Shipping ▫Advertising ▫Overhead ▫Profit margin of the business

Import

Export

Importing and Exporting Costs


•When importing or exporting ___________ is one of the most expensive pieces of total cost

•A product shipped overseas to be sold or imported into Canada for sale, will therefore likely be more expensive than a product manufactured and sold here

Shipping

Importing and Exporting Costs•______________ is the actual cost of an

imported item, which includes; ▫Vendor cost▫Transportation charges▫Duties▫Taxes▫Broker fees

Landed Cost

Excise Taxes•An ____________ is a tax on the manufacture,

sale or consumption of a product within a country▫E.g. taxes charged on gas by federal and

provincial governments•The government mainly uses excise taxes to

raise __________. However, they may apply an excise tax to some products (e.g. tobacco) to discourage people from engaging in a certain activity (e.g. smoking)

Excise Tax

Money

Currency Fluctuation

•____________________ is a change in the value of one currency in relation to another▫E.g. the Canadian dollar has been worth more

than and less than the US dollar in the last 2 years

•Currency fluctuates _________ based on a number of factors including the strength of the economy of a country


Currency Fluctuation

Daily

International Trade Obstacles

There are two main obstacles which exist when trading internationally …

1.Culture2.Language

Obstacles – Culture Differences•__________ is the sum of a

country’s way of life, beliefs and customs

•Culture influences how and what types of products are bought and sold, and this will differ from country to country▫E.g. products that are

popular in Canada may not sell in the Middle East, and visa versa

Culture

Obstacles – Language Barriers•Different language requirements means

that _____________ of products must be changed from one country to the next ▫E.g. labelling in Canada must be in both in

English and French (bilingual)•The changing of labels could be very

expensive for a company to implement•Language barriers also exist when trying

to communicate orally – a translator might be needed

Labelling

Day 3 Assigned Work


•Activity: Currency Fluctuations (Posted on ClassNet under Tasks)

•Review Questions #10 & 11 on page 127


Day 4: International Agreements & Business

Etiquette


Why is the USA Canada’s largest trading partner?

List a minimum of 4 reasons.

***Save as Oct. 3 and save in your Response Journal

Folder***

Trade Agreements• You have already learned that countries often

set up trade barriers to protect domestic businesses

• However, since World War II, many countries have taken part in negotiations to reduce or eliminate these barriers

• There are 2 main advantages to reducing trade barriers …1. Domestic businesses are able to sell their

products and services abroad at lower prices No custom duties

2. Consumers have access to new products and existing domestic products must improve their quality or reduce their prices to compete

Trade Agreements•A ____________________ is an agreement

between countries which allows goods and services to flow more freely across their borders▫If the countries are just beginning a trade

relationship, this agreement usually deals with importing and exporting products

▫The agreement states which tariff each country will drop or reduce and may include a process of resolving disputes

Trade Agreement

WTO – World Trade Organization•The WTO was founded in ________•Formerly called the General Agreement on

Tariffs and Trade (GATT)•The WTO is the main international

organization that deals with the _______of _______ between countries

•Currently, the WTO Governs about ______of world trade

97%

1995

Rules Trade

NAFTA

•Established January 1, 1994•The purpose of the North American Free

Trade Agreement was to removed trade barriers on goods and services flowing between Canada, the US and Mexico

•Canada expected this agreement to give Canadian companies greater access to US markets, and therefore, increase Canadian ___________Exports

G8

•The G8, or _________________, is a group of the world’s most powerful industrialized democracies

•Members include …Canada GermanyUS ItalyBritain JapanFrance Russia

•The leaders of these countries meet annually to discuss economic and political issues

Group of Eight

Business Etiquette

•________________ is a code of behaviour that defines the expectations for social behaviour according to norms within a society

•Business etiquette differs from country to country

•Failure to consider business etiquette could break a deal

Business Etiquette

Business Etiquette Considerations for International BusinessThere are a number of items to consider

when conducting business internationally, including …▫Punctuality▫Greetings▫Non-verbal communication▫Manners▫Decision-making

Punctuality

•In North America, one is expected to be on time for appointments

•In some cultures, time is more flexible•Therefore, you must complete research

ahead of time ▫Are you dealing with a country that

values punctuality (e.g. Germany) or one that is more relaxed (e.g. Spain)?

Greetings•Handshakes are the most common way to

greet a business associate, but this is not always the same from country to country▫France – a single shake is preferred, more

is considered rude▫Japan – bowing is the preferred greeting,

but a handshake is acceptable

Non-Verbal Communication

•Non-verbal communication may differ from culture to culture▫E.g. the OK symbol is seen as an

obscene gesture in Brazil and represents a currency in Japan

•Must also consider a person’s personal space▫E.g. patting someone on the back

may be considered offensive and an invasion of space

Manners

•Business is conducted _________ in Canada, the US and Europe

•Whereas, in Asia and Latin America, you must get to know your business partner before conducting business with them. Business happens at a much _________ speed

Quickly

Slower

Decision-Making

•In North America, decision making is typically done in a ___________ manner▫Senior people in the organization make the

decisions and communicate them to the rest of the organization

•However, in some other cultures, decisions may be made from the _____________

Top-Down

Bottom-Up

Day 4 Assigned Work

Students, please complete the following;

•Review Question #23 on page 139•Read the Global Dependency section on

pages 144 – 145 and then Review Question #26 on page 145

Chapter 4: International Business Day 1: What is International Business?

Documents

Transcript of Chapter 4: International Business Day 1: What is International Business?