bbb4m - flashcards

Domestic business

business that makes most transactions within the borders of the country which its based- owned by person belonging to country

International business

economic system of transactions conducted between businesses located in different countries

History of Canadian Trade

- Explorers from France & England landed in what's now Canada in the 1600s, - Traded with First Nations for fur and food which was exported back to Europe, - Its success of international business led to colonies and outposts in Canada (ex. Hudson's Bay)

Tariffs

Taxes or duties put on imported products or services. They raise the cost of imports, so that locally manufactured products are less expensive and more appealing to consumers

Protectionism

The theory or practice of shielding domestic industries from foreign competition, often through trade barriers such as tariffs

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

Pros of International Business

- Variety of products
- New markets, more jobs
- Foreign investments
- New processes and technologies

Cons of International Business

- Loss of cultural identity
- Increased foreign ownership of companies in Canada
- Foreign companies are loyal to investors and executives in home country
- Research and development is usually carried out in the home country
- Exports are reduced, as products manufactured in branch plants often stay in Canada
- Revenues leave Canada to pay head office costs
- Economic destabilization

Exchange Rate

The amount of one country's currency in relation to the currency of another country

Floating Rate

- An exchange rate that is not fixed in relation to other currencies.
- The price at which currency with a floating rate is bought and sold fluctuates according to supply and demand.

Factors Affecting Exchange Rate

- Economic conditions in Canada: inflation rate, unemployment rate, GDP, interest rates
- Trading between countries: the more favorable the terms of trade (comparison of exports to imports), the higher the currency exchange
- Politics: political tension and instability or the threat of terrorism decreases the demand for a currency
- Psychological factors: historical significance and stability change the way currencies are viewed

Cultural Determinants

religion, history, politics, topography, and climate

culture

The knowledge, experience, beliefs, values, attitudes, religion, symbols, and possessions acquired by a group of people who have lived in the same region or country for generations

Cultural Awareness

- must determine the extent and importance of cultural differences
- whether and to what extent products and processes can be adapted to a foreign environment
- cultural traits can be studied and learned; others can only be understood by living in a country and experiencing the culture first-hand

Economic system

The way a country organizes its resources and distributes goods and services to its citizens

Market economy

Free competition, in which businesses, consumers, and government act independently of one another, and market forces and self-interest determine what goods are created and sold

Centrally planned economy

The government controls all elements of the economy, including prices, wages, and production

Mixed economy

Sits between a market economy and a centrally planned economy, combining government intervention and private enterprise

Democracy

- A state governed by all eligible members of the population through elected representatives.
- Characterized by free and fair elections, the rule of law, free speech and press, the right to assembly, and freedom of religion
- Politicians may be more concerned with re-election than the good of the country

Autocracy

- A state governed by a single individual or a small group of people with unlimited power.
- Usually has strong military presence
- Strives to control all aspects of citizens' lives
- Citizens have no influence on government

Underdeveloped countries

Nations that are at the lowest level of the world's economies
- Severe poverty
- Lack of social services
- Poor infrastructure
- Low levels of literacy
- Limited access to technology
- Agriculture- or resource-based economies
- Long-term political issues, such as dictatorships and war

Developing countries

Nations in transition from a poor economy to a prosperous one
- Improved literacy rates
- Increased access to health care and other social services, and technological advancement
- A move away from a resource-based economy to a manufacturing base
- Population moving from rural areas to cities

Developed countries

high per capita income or strong gross domestic product
- A reliance on secondary and predominantly tertiary industries, rather than primary industries
- High standards of living
- High literacy rates
- Major advancements in health care and technology

Leading

Adjust before the economy experiences a change and predict where the economy is going
ex. housing starts

Lagging

Do not adjust until after the economy has experienced a change
ex. unemployment rate

Coincident

Move in conjunction with the business cycle
ex. International trade

Absolute Advantage

The ability of one country to use its resources to make a product or service more efficiently than other countries

Opportunity Cost

The value of what is foregone, or the cost of giving something up to get something else.
ex. cost of being in class is the money a student could earn working at a job

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country.
- the foundation for specialization and trade

Lobbying

The process through which companies, special interest groups, or individuals attempt to influence government officials and persuade them to endorse public policy favourable to these groups
ex. NRA

Ways Government Affects Business

- Establishing import and export laws
- Setting tariffs
- Maintaining membership in trade organizations and negotiating trade agreements
- Determining monetary policy, including currency exchange rates
- Determining fiscal policy, including taxation laws
- Building infrastructure, such as roads and sewer systems

Individualism vs. Collectivism

The question regarding whether people have a preference for being left alone to look after themselves or want to remain in a closely knitted network

long-term orientation

Long-term orientation describes the inclination of a society toward searching for virtue. Short-term orientation pertains to those societies that are strongly inclined toward the establishment of the absolute truth

Uncertainty Avoidance

A national culture attribute that describes the extent to which a society feels threatened by uncertain and ambiguous situations and tries to avoid them.

Masculine vs Feminine

Masculinity implies a society's preference for assertiveness, heroism, achievement and material reward for attaining success. On the contrary, femininity represents a preference for modesty, cooperation, quality of life and caring for the weak

Power Distance

The extent to which members who are less powerful in a society accept and also expect that the distribution of power takes place unequally

Indulgence vs Restraint

Indulgent cultures freely allow gratification of desires that allow individuals to enjoy life and have fun. Restrained cultures have strict social norms and discourage acting simply out of want.

Global strategy

- Regards the world as one big market—all people want the same product and will respond to marketing in a similar way
- Product and marketing are uniform around the world

Multidomestic strategy

- Customizes products, services, and marketing for the local culture—local management is most capable of determining what is best for the local subsidiary

Transnational Strategy

- Combines the best elements of the global and multidomestic strategies
- Respects needs of local market, while maintaining efficiencies of a global strategy

Trade Agreement

An enforceable treaty between two or more countries that involves the movement of goods and services, elimination of trade barriers, establishment of terms of trade, and encouragement of foreign investment

Pros and Cons of NAFTA/USMCA

- Has helped create higher paying jobs in education, engineering, and banking sectors in Canada
- Allows freer flow of goods and services across North America, providing better access to raw materials, talent, capital, and technology
- Manufacturing jobs have been lost to Mexico, where labour costs are lower

The European Union

A trade agreement signed in 1993 that now encompasses twenty-seven countries in Europe and a population of almost half a billion people.

Pros and Cons of Common Currency

- price transparency
- decreased risk of exchange fluctuations

- lack of national control
- initial costs of implementation

Trade Organizations

Groups established to help with the free flow of goods and services. They may be global in scope or national organizations created by individual governments to help domestic companies expand into international markets

world trade organization

An international organization established in 1995 (which now has over 150 member countries) that promotes trade liberalization throughout the world

Asia-Pacific Economic Cooperation

A trade organization, created in 1989, that unites twenty-one of the countries surrounding the Pacific Ocean to co-operate on regional trade. Its goals are to foster open and free trade among its members, increase prosperity and economic growth, and develop the Asia-Pacific community.

G8

A trade organization encompassing the major economies of the world, which meet to discuss macroeconomic issues such as economic growth, trade liberalization, and helping developing countries.
USA, France, Italy, Canada, Great Britain, Germany, Japan, Russia (suspended)

G20

- Economic and employment growth
- Elimination of trade barriers
- Reforming financial institutions and regulations
- Restructuring global financial organizations

Canada's Place in G20 and G8

- Canada's GDP and population are low compared to other G8 and G20 countries
- Talk of replacing Canada in the G8, and placing it as a second-tier country in the G20

The UN

- To keep peace throughout the world
- To develop friendly relations among nations
- To work together to help poor people live better lives, to conquer hunger, disease, and illiteracy,
- To encourage respect for each other's rights and freedoms
- responsible for organizations that influence international business, including the International Labour Organization (ILO), the International Monetary Fund (IMF), and the World Bank

Ethical Imperialism

A view of culture based on the idea that there are certain universal truths or values that are standard across all cultures; if something is wrong in one country, it is wrong in all countries.

Cultural Relativism

not judging a culture but trying to understand it on its own terms

Environmental Issues

- Sustainable development—the ability to meet human consumption while maintaining the environment is a critical issue for businesses
- Many companies have been responsible for pollution and resource depletion
- Companies and governments often resist environmental plans that will impede economic growth

Sweatshops

Factories in underdeveloped and developing countries in which employees work in unsafe environments, are treated unfairly, and have no chance to address those conditions

Corporate Corruption

The involvement in illegal activities, such as bribery and fraud, to further one's business interests

Dumping

Selling products in a foreign country below the cost of production or below the price in the home country.

Predatory
An anti-competitive business practice in which foreign companies price their products below market value to increase sales and force domestic competition out of business, then raise their prices.

Poverty

Over one-quarter of the world's population lives in intense poverty—accompanied by hunger, lack of shelter and medical care, limited access to education, high rates of disease, etc

Product

Canadian products sold outside of Canada
must usually be modified to adapt to the
culture, language, or laws of the foreign
market.

These modifications usually occur in the
following areas:
Packaging: weights, colours, and legal,
labelling and language requirements
Ingredients
Style

Place

A centralized strategy is a marketing strategy in which all of a company's manufacturing and marketing is performed in one location.

A decentralized strategy is a marketing strategy in which a company sets up a manufacturing plant in another nation, or hires a sales force there

Branch Plants

most expensive market entry strategy, but could be the most effective.

The three major advantages to owning a branch plant in a foreign country are:
Shipping costs are lower
Import regulations and tariffs are not an issue
Product modifications are easier

Price

- Companies that use a centralized market entry strategy find that they must increase the price of their product when selling in foreign markets
- These increases in price arise because of added expenses in the following areas:
Labour costs: Labour in foreign countries is often much cheaper than in Canada.
Shipping costs: The cost to ship goods long distances must be factored into their price

Consumers

A business must determine its target market. This is the segment of the consumer market to which a particular good is targeted

Competition

Similar products that already exist in a foreign market are a major marketing problem

Promotion

Use existing ads: Saves money, but markets must be similar.
Translate ads: Replicating an ad campaign in another language is difficult.
Create new ads: Expensive, but the Internet has made customizing promotions much easier.

Logistics

The management of the flow of goods and services both into and out of an organization, from the point of origin to the point of consumption. It consists of transportation, inventory management, warehousing and storage, and packaging

Supply Chain

The sum total of all activities involved in moving raw materials, processed goods, and finished products into an organization, and moving the semi-processed or finished goods out of the organization toward the end-consumer

Functions of a Supply Chain

Inventory management
Storage
Cash flow
Supplier coordination
Information processing
Physical distribution

Horizontal Integration

A method of expanding a company by acquiring its competitors

Vertical Integration

A form of business organization in which a company owns the whole supply chain, or significant portions of it, from acquisition of raw materials to retailing.
Ex. exxon (parent company to esso)

Cash-Flow Management

Involves negotiating payment terms, setting up the method of payment, and arranging exchange of funds across the supply chain

Supplier Management

Often referred to as sourcing or procurement, the practice of finding reliable sources for the products and services that a business needs

Letter of Credit

A financial guarantee, issued by a buyer's bank, that they have sufficient collateral on deposit to pay for a shipment.
- often used for international transactions

Outsourcing

The strategic use of outside resources to perform activities that were previously handled internally by the company itself

Near Sourcing

Sourcing particular business functions or services, such as telemarketing, to a company in a foreign country that is relatively close in distance

Motorized carriers

- The cost of shipping a full truckload (FTL) is lower than shipping a less-than-truckload (LTL).
- Many motorized carriers offer freight consolidation, where goods from different sellers (shippers) are stored in a warehouse until there is an FTL of goods bound for a particular destination.

Rail

- Trains are slower than truck transport and have a more limited range
- Ideal for long distances and much cheaper than truck transport
- Can carry materials from ports to inland cities

Insourcing

A company's establishment of a specific division within the business, such as an advertising department or customer call centre, to handle a function that is normally outsourced

Ocean Freight

- Used by importers and exporters that deal with businesses on other continents
- Inexpensive but slow, and must be used with at least one other carrier, as ships cannot go door to door

Air Freight

- Very fast, but very expensive
- Weight restrictions limit size of air shipments

GFC

- Price of houses began to drop in 2007.
- Thousands of homeowners who had qualified for subprime mortgages could not keep up with payments and defaulted on their mortgages.
- Banks foreclosed on these homes, but because there was no market for them, these assets were worthless.
- Banks stopped lending and many went out of business.
- Without credit from banks, consumers stopped spending.
- Manufacturers and retailers began to lose money and lay off workers.
- The market fell and many people lost savings as pension plans and retirement savings plans decreased.

Subprime Mortgage

A type of mortgage granted to borrowers with lower credit ratings who would not normally be able to qualify for conventional mortgages. As these borrowers are seen as having a higher-than average risk of defaulting on their loans, banks often charge higher interest rates on subprime mortgages.

Collateral

An asset used to guarantee a loan.

The Green Revolution

- Global effort required to reduce carbon emissions, and find new energy sources as alternative to oil, gas, and coal
- Energy-rich nations, like Canada, are reluctant to enter into an agreement to reduce carbon emissions that would jeopardize their oil industries

New Car Technology

- Electric, hydrogen-fueled, and hybrid cars
- Hybrid technology is best alternative at this point
- As soon as more efficient and economical hydrogen fuel cells or lightweight batteries enter the market, hybrid vehicles will be replaced
- Opportunities for a Canadian manufacturer to introduce a small, inexpensive, fuel-efficient car

Foreclose

The legal process through which an owner's right to their property is terminated, usually because they have failed to pay back their mortgage. In this case, the bank usually takes the house back and sells it, using the proceeds to pay off the debt

Price of Oil

- The higher the price of oil on the world markets, the higher the price of the Canadian dollar
- Canada imports and exports huge quantities of oil
- Countries with oil self-sufficiency are often much richer than than countries that do have their own oil reserves
- Canadian economy rests on the price of oil

Visa

A certificate issued by a country an individual wishes to visit that indicates that the department of immigration in that country has checked the individual's credentials and given him or her permission to visit their country temporarily for a specified purpose.
Types of visas
- Tourist visa
- Residence visa
- Work visa

passport

An official document issued by a government certifying the holder's identity and citizenship, and entitling the holder to travel under its protection to and from foreign countries