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Business
The manufacturing and/or sale of goods and/or services to satisfy the wants and needs of consumers to make a profit
Transaction
An exchange of things of value
Domestic Business
A business that makes most of its transactions within the borders of the country in which it is based
A domestic business in Canada is:
Owned by Canadians
Relies on Canadian products and services
Sells products and services to Canadians
Internationtal Business
The economic system of transactions conducted between businesses located in different countries
Domestic Market
The customers of a business who live in the country where the business opterates
Foreign Market
The customers of a business who live in a different country than the one where the business operates
5 Ways For a Business to be Considered an International Business
Own a retail or distribution outlet in another country
Own a manufacturing plant in another country
Export to businesses in another country
Import from businesses in another country
Invest in businesses in another country
Trading Partner
When a business in Canada develops a relationship with a business in another country, that country becomes a trading partner with Canada. Occurs between businesses, not countries
Globalization
The process whereby national or regional economies and cultures have become integrated through:
New global communication technologies
Foreign direct investment
International trade
Migration
New forms of transportation
Flow of money
Interdependence
The reliance of two or more nations on each other for products or services
Primary Industry
The sector of the economy characterized by the extraction of natural resources from the earth or sea
5 Major Primary Industries
Agriculture
Fishing, hunting, trapping
Forestry and logging
Energy
Mining
Secondary Industries
Industries that create a finished, usable product. Produces capital goods and consumer goods
Capital Goods
Products used by businesses
Consumer Goods
Products purchased by individuals
Branch Plant
A factory owned by a company based in another country
Tertiary Industry
Industries that do not make a product or extract resources from the earth, but provide necessary services to consumers and other businesses (banking, construction, communications, transportation, retail sales)
Foreign Portfolio Investment
Investment in businesses located outside of Canada through stocks, bonds, and financial instruments
Foreign Direct Investment
To control some or all of a business’s operations (ex. An American investment firm, acquired Hudson’s Bay Company when it was falling off and saved the company)
Importing
To bring products or services into a country, for use by another business or for resale
Global Sourcing
The process of a company buying equipment, capital goods, raw materials, or services from around the world
Exporting
To send goods or services to another country, for use by a business or for resale
Value Added
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
Licensing Agreement
An agreement that grants permission to a company to use a product, service, brand name, or patent in exchange for a fee or royalty
Exclusive Distribution Rights
A form of licensing agreement that grants a company the right to be the only distributor of a product in a specific geographic area or country
Franchise
An agreement granted to an individual or group by a company to use that company’s name, services, products, and marketing. For a fee, the franchisor provides supprt to the franchisee in the areas of financing, operations, human resources, marketing, advertising, quality countrol, etc.
Joint Venture
A common type of international business, in which a new company with shared ownership is formed by two businesses, one of which is usually located in the country where the new company is established
Foreign Subsidiary
Often referred to as a wholly owned subsidiary, a branch of a company that is run as an independent entity in a country outside of the one in which the parent company is located. Parent company often sets financial targets, and allows the subsidiary to manage its own day-to-day operations as long as those targets are being met
Tariffs
Most common type of trade barrier and are taxes or duties put on imported products or services. They raise the cost of imports so locally manufactured products are cheaper and more appealing to consumers
Protectionism
The theory or practice of shielding domestic industries from foreign competition, often through trade barriers such as tariffs
Trade Quotas
A government-imposed limit on the amount of product that can be imported in a certain period of time
Trade embargo
A government-imposed ban on trade of a specific product or with a specific country, often declared to pressure foreign governments to change their policies
Trade Sanctions
Economic action taken by a country to coerce another to conform to an international agreement or norms of conduct
Exchange Rate
The amount of one country’s currency in relation to the currency of another country
Winners of a High Canadian Dollar
Importers
Canadian travellers
Major league sports teams in Canada
Losers of a High Canadian Dollar
Exporters
Canadian tourism
Canadian retailers
Floating Rate
An exchange rate that is not fixed in relation to other currencies. Price at which currency is bought fluctuates according to supply and demand
Currency Revaluation
The increase in value of a currency because the demand for that particular currency is greater than the supply
Currency Devaluation
The decrease in value of a currency because the supply of that particular currency is greater than the demand for it
Hard Currencies
Stable currencies, such as the euro, U.S. and Canadian dollars, which are easily converted to other currencies on the world exchange markets
Soft Currencies
A currency belonging to a country with an economy that is small, weak, or that fluctuates often, and is difficult to convert into other currencies, such as the Zimbabwe dollar and the Venezuelan bolivar
Currency Speculating
Buying, holding, or selling foreign currency in anticipation of its value changing in order to profit from fluctuations in the price of currency
