Fundamentals of International Business - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  CHAPTER 2: Trade in the Modern World Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Unit 1 Overview – BUSINESS FUNDAMENTALS Chapter 2 – International Business Practices Chapter 2 – Access to Markets Chapter 2 – Trade Barriers Chapter 2 – Currency Fluctuations Culminating Activity for Unit 1 – Unit Test Tentative Date Oct 22nd, 2015

Fundamentals of International Business Key Terms importing global sourcing exporting value added licensing agreement exclusive distribution rights franchise joint venture foreign subsidiary protectionism trade quotas trade embargo trade sanctions exchange rate floating rate currency revaluation currency devaluation terms of trade hard currencies soft currencies currency speculating Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Fundamentals of International Business Chapter Objectives By the time you finish this chapter, you should be able to: Identify the types of international businesses Describe the impact technology has had on the international business environment Identify the factors that affect foreign exchange rates Explain how changes in the value of the Canadian dollar can affect business opportunities Identify the types of products that trade freely into and out of Canada and those that are restricted in their movement Identify and locate on a map Canada’s major trading partners Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

International Business Practices Reasons that Canada trades: Company growth Entry into new markets Expanded customer base Increased profits Access to inexpensive supplies Lower labor costs Access to financing © iStockphoto.com Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

International Business Practices Foreign portfolio investment Investment in businesses located outside of Canada through __________________________________ Allows Canadians to spread out their investments, (diversify) which is _________________ than investing in just one area e.g. money markets, capital investments Also provides ________________ and ________________________ Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

International Business Practices _____________________ To bring products or services into a country, for use by another business (B2B) or for resale. The majority of the goods that Canada imports come from the United States. Table 2.1 Page 37 _______________________ The process of a company buying equipment, capital goods, raw materials, or _______________ from around the world. © iStockphoto.com Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

International Business Practices ____________________ To send goods or services to another country, for use by a business or for resale. The majority of goods that Canada exports go to the United States. (see Table 2.2 P. 38) Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

International Business Practices _____________________ The amount of worth that is added to a product at each stage of processing. It is the difference between the cost of the raw materials and the finished goods. Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

International Business Practices Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Unit 1 Overview – BUSINESS FUNDAMENTALS Chapter 2 – International Business Practices Chapter 2 – Access to Markets Chapter 2 – Trade Barriers Chapter 2 – Currency Fluctuations Culminating Activity for Unit 2 – Unit Test Tentative Date Oct 22, 2015

International Business Practices HOW would you gain access to international markets? Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

1. Licensing Agreement Licensing agreement …… An agreement that________________________ _______________a product, service, brand name, or patent _____________________________. Usually used for a manufacturing process. Usually for a specific period of time. e.g. Parent company sends management expertise to foreign country to set up operations.

LICENSING AGREEMENT - example Partners Applaud Microsoft And Asus Patent Licensing Agreement Expansion by Lindsey O'Donnell on October 2, 2015, 6:08 pm EDT Partners cheered an extended patent licensing agreement between Microsoft and phone manufacturer Asus, saying it could pave the way for tighter integration between the two companies on Android smartphones and tablets. Partners say that means they could start seeing Microsoft Office productivity apps and other services pre-installed on Asus' portfolio of mobile devices, such as its ZenFone and Transformer Pad, as well as new product solutions for both companies. "Microsoft software, including Office, on the entire line of Asus Android smartphones and tablets, is a coup for both organizations in the struggle for an advantage in the uber-competitive mobile market," said Douglas Grosfield, president and CEO of Xylotek Solutions, a Cambridge, Ontario-based Microsoft partner, in an email to CRN.

2. Exclusive Distribution Rights A form of licensing agreement that grants _____________the right to be the________ _______________of a product in a specific geographic area or country. Used as an _________ _________ into a foreign market.

Exclusive Distribution Rights - example MTG Acquires Exclusive Distribution Rights to NHL Ice Hockey “This distribution partnership gives NHL fans in the Nordic countries unprecedented access to our games and our players. It’s a win for NHL hockey and a win for our fans.” Modern Times Group the international entertainment broadcasting group, today announced that it has acquired the exclusive distribution rights to the National Hockey League (NHL) in Sweden, Norway, Denmark and Finland from Medge Consulting. The rights include, but are not limited to, exclusive live coverage on free-TV, pay-TV and the internet, until the end of the 2015-16 season. MTG has held rights to NHL games since October 2009.

3. Franchise Franchise An agreement granted to an individual or group by a company to ________________________________ __________________________________. For a ________, the franchisor provides support to the franchisee in the areas of financing, operations, human resources, marketing, advertising, quality control, etc. Must follow all the franchisor’s (parent company’s) rules! Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc. Chapter 2: TRADE IN THE MODERN WORLD

Franchise - example FRANCHISOR FRANCHISEE

Franchise BENEFITS: DRAWBACKS: 1. ____________________ 1. ____________________ 2. EXPERT KNOWLEDGE AND RESEARCH 3. ___________________ DRAWBACKS: 1. _______________ 2. STRICT RULES 3. _________________

Fundamentals of International Business 4. Joint venture Joint venture A common type of international business, in which a ______________________________________ by two businesses, one of which is usually located in the country where the new company is established. Why? To gain access to makets, products, customers MOST foreign investment is a joint venture! Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Joint venture - examples Sharp Display Products Corporation (SDP) Campbell Swire (Shanghai, China) Campbell will have 60% ownership BYD-Daimler Electric Car BYD Co. and Daimler Mercedes-Benz Chinese battery and auto producer

Joint venture Why? Negative impact of external influences MANY Joint Ventures FAIL! Why? Negative impact of external influences (e.g. a financial crisis, political instability) _________________________________ Common and separate needs and wants must be considered _________ company’s goals and roles needs to be agreed upon _________ company’s cultural differences and business methodologies

Fundamentals of International Business 5. Foreign subsidiaries Foreign subsidiaries Often referred to as a wholly owned subsidiary, a ______________________that is run as an ______________________ in a country outside of the one in which the parent company is located. The parent company often sets financial targets, and allows the ___________________________ ___________________as long as those targets are being met. ______________________ decision-making process. Chapter 2: TRADE IN THE MODERN WORLD Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

Toyota subsidiary's new Miyagi plant rolls out first export batch (January 11, 2011) SENDAI (Kyodo) A new plant operated by a Toyota Motor Corp. subsidiary in Miyagi Prefecture began rolling out subcompacts Tuesday for export. The first 30 Yaris Sedan subcompacts — the first batch manufactured by Central Motor Co. at its new plant in Ohira — are being shipped from Sendai to Nagoya before being exported to the United States and Europe, the company said. …….. the automaker aims to reinforce its capacity so it can manufacture and ship 250 vehicles per day by the end of this month after its operation gets back in stride………The Tohoku region, characterized by the Miyagi plant, is the third production hub of the country's top automaker. Toyota's other hubs include the Tokai region in central Honshu and northern Kyushu. A SUBSIDIARY of TOYOTA

CLASWORK Read P. 41 – Toxic E-Waste Pouring into the Third World Answer 4 questions. Research StEP (E-waste initiatives). www.step-initiatives.org Briefly describe the objectives and project initiatives of the 5 taskforces identified on their website (e.g. ReUse) 4. Answer Q’s p. 58 KNOWLEDGE #2 – 6 THINKING #13