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 Trade International 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 Trade International trade offers many benefits including; 1.Access to markets 2.Cheaper labour 3.Increased quality of goods 4.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 People Countries

2. Cheaper Labour Cost of labour (employee wages) is often _______ overseas Therefore, many Canadian manufacturers have moved their production to places like _________ and _________ Lower IndiaChina

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 outsourcing 2.Human rights issues 3.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 … ▫P▫Physical and sexual abuse ▫F▫Forced confinement ▫N▫No food or health care ▫L▫Long working hours ▫N▫Non-payment of wages

________________ is another problem with outsourcing ▫C▫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: ▫I▫International Labour Organization ▫F▫Free the Children ▫A▫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?”

Chapter 4: International Business Day 2: The 5 Ps of International Business

Today’s Response Journal 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 ___________ BestBenefits

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 Business There are 5 major reasons for doing business internationally … 1.Product 2.Price 3.Proximity 4.Preference 5.Promotion

Day 2 – Assigned Work Students please complete the following; 5 Ps of International Business Worksheet posted on ClassNet under Tasks

Chapter 4: International Business Day 3: Barriers and Obstacles

Today’s Response Journal As 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 TariffsCustom 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 … ▫C▫Cost of manufacturing ▫S▫Storage ▫M▫Marketing ▫S▫Shipping ▫A▫Advertising ▫O▫Overhead ▫P▫Profit margin of the business Import Export

Read the example on page 126, paragraph 1 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; ▫V▫Vendor cost ▫T▫Transportation charges ▫D▫Duties ▫T▫Taxes ▫B▫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 Read the example on page 127, paragraph 1 Currency Fluctuation Daily

International Trade Obstacles There are two main obstacles which exist when trading internationally … 1.Culture 2.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 Students please complete the following; Activity: Currency Fluctuations (Posted on ClassNet under Tasks) Review Questions #10 & 11 on page 127

Chapter 4: International Business Day 4: International Agreements & Business Etiquette

Today’s Response Journal 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 N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 RulesTrade

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 … CanadaGermany USItaly BritainJapan FranceRussia 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 Business There are a number of items to consider when conducting business internationally, including … ▫P▫Punctuality ▫G▫Greetings ▫N▫Non-verbal communication ▫M▫Manners ▫D▫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 ▫A▫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 ▫F▫France – a single shake is preferred, more is considered rude ▫J▫Japan – bowing is the preferred greeting, but a handshake is acceptable

Non-Verbal Communication Non-verbal communication may differ from culture to culture ▫E▫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▫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