IB Exam Review

Self-sufficiency in a community pros and cons

Pros: Shared property, shared responsibility, controlled cost for goods

Cons: Limited options, dependant on what you are able to provide

Early trade

Occurred in Mediterranean Sea area (i.e. China traded silk & tea for spices from India)

First trade regulations

Middle ages is when guilds developed

Merchant guilds

Controlled the way trade was conducted in a town.

European Exploration

When Europeans explored and settled in the 1500-1600s, they opened up new trade markets and built empires.

European Connection

Canada and Britain became close friends when people started living in big Canadian cities in the 1700s.

Canada and the EU

In 2017 Canada Signed CETA (Comprehensive Economic & Trade Agreement) with the EU. This removes 99% of duties on traded goods between Canada/EU member countries.

American Connection

Canada's largest trading partner, largest consumer market, reliant on Canada’s raw materials

Pacific Rim

Japan is one of Canada’s most important trading partners, China is one of Canada’s top five trading partners.

Trade is a recent development for Canada and South Korea. Canada entered into their first free trade agreement in the Asia-Pacific region.

CKFTA (Canada-Korea Free Trade Agreement)

An agreement between Canada and South Korea that provides Canadian exporters with preferred access to the Korean economy.

Mexico

Trade between Canada and Mexico has grown due to the North-American Free Trade Agreement (NAFTA)

Canada has an increasing trade deficit with Mexico, as we export more than we import.

The Americas

Canada-Chile free trade agreement = good trading partner

Venezuela: economy shattered, on the verge of collapse

Canada/US have ceased business operations due to safety concerns, civil unrest.

Canada's Major Industries

The primary, manufacturing, and service sectors

Primary Industry

1. Raw materials (from land/water)

2. Adds value to products by extracting them from the earth or sea

3. Capital intensive industry: large investment of money in machinery

4. 4 major sectors:

   1. Agriculture, fishing, forestry, energy and mining, water sometimes

Manufacturing Industry

1. Finished products out of raw materials

2. Labour intensive industry: requires large number of workers

Service Industry

1. Provides things people need or want

2. Activities performed by experts in exchange for money (doctor, hairdresser)

3. 4 major sectors

   1. Commercial, travel, transport, government services

Advantages of International Trade

1. Meeting our needs: Canadian businesses make more products we can use aka trade surplus. We trade that extra stuff for stuff we can’t get in Canada

2. Job Creation: Foreign businesses buy Canadian products, which leads to more jobs for Canadians

3. Attracting Investment: Many foreign companies will invest in an office in Canada to simplify trade and reduce costs if their product is successful in Canada

4. New Technology and Materials: Through trade, Canada can get tech that we didn’t make ourselves

Disadvantages of International Trade

1. Support of Non-Democratic Systems: By trading with non-democratic countries that control the use of land and other resources, Canada is indirectly supporting those beliefs

2. Cultural Identity Issues: Canada’s own culture is influenced by the culture of other countries when products are imported.

3. Social Welfare Issues: Canada is supporting social welfare issues when it purchases cheaper products from countries/companies that do not have social welfare standards.

4. Environmental Issues: When Canada purchases lower priced products from companies who operate in not environmentally friendly countries, it is only encouraging those companies to continue ignoring the environment.

5. Political Issues: Fight for control over precious commodities, such as oil and diamonds can result in simple political disagreements or contribute to global wars.

Immigration Policies

Companies who wish to transfer key executive personnel or specialists to Canada must apply for certain work permits and must abide by the restrictions of those permits.

Tariffs

Taxes imposed on imported goods

Tariff Winners

• Domestic governments (they collect tariff money)

• Local producers (goods are more competitively priced)

• Local employees (people working at local companies keep their jobs)

Tariff Losers

• Foreign producers (goods are more expensive)

• Consumers (product prices go up)

• Foreign employees (they lose out on opportunities)

Investment Regulations

In key industries, such as the financial, transportation, cultural or uranium sector, any foreign investment over $5 million is reviewed.

Environmental Restrictions

These are in place to protect Canada’s environment and natural resource-based industries, such as the beef industry.

Canada and the UN

Canada follows the rules set by the United Nations and can also make its own rules, like stopping the import of dangerous weapons.

Safety Regulations

Certain goods are regulated and administered under a specific act, such as the Food and Drugs Act, Meat Inspection Act and Consumer Packaging and Labelling Act. These acts affect both domestic and imported products.

Global Presence

How much other countries trust and like doing business with a country, and how good their products are.

Canada’s global presence is important because it means other countries are aware of how reliable we are. It gives us access to capital and markets around the world.

Competitive Advantage

When countries and companies outperform their competitors in terms of superior products, pricing, quality, service, uniqueness, or profit.

Can be measured through market share, partnerships, demand

Competitiveness

Linked to the R&D spending of both governments and private businesses.

GDP (Gross Domestic Product)

The total value of all goods and services produced in a country during a specific period.

Low GDP, less productive

Low Canadian productivity is because of:

1. Lagging manufacturing sector

2. Lack of investment into R&D

3. Slower move to adapt new tech

GDP per capita

The total GDP divided by a country's population

Economic Utility

The ability of a product to satisfy the needs and wants of a customer.

Ex: Wheat has little utility until it’s turned into flour and used to produce bread

Opportunity Cost

The benefits of the value of the next best opportunity that was not taken.

Absolute Advantage

The ability of a nation to make something better than any other nation.

Comparative Advantage

The ability of a nation to produce a product faster than it does any other product.

Factors Affecting Canada's Competitiveness

Really Quiet Cameras Instigate Workers, Every Sunday Grind.

1. Research and development

2. Quality & quantity of natural resources

   1. Easy to transport to the U.S., but difficult to transport to many other parts of the world.

3. Strength of currency

   1. When our dollar is strong, the cost of imports is less

   2. A weak dollar encourages foreign investment and exporting.

4. Infrastructure in the country

   1. Strong transportation and communication systems in Canada

5. Workforce characteristics

   1. Canada’s workforce is well educated.

   2. Global businesses are most concerned with lost workdays

6. Entrepreneurship

   1. The quantity and quality of entrepreneurship in a country affects its competitiveness.

   2. Canada encourages entrepreneurship.

7. Social characteristics

8. Government involvement

   1. The level of business and personal taxes.

   2. Involvement in free trade agreements.

Productivity

The amount of work that is accomplished in a unit of time using the factors of production.

Factors Influencing a Country's Productivity

1. Efficient use of human and physical resources

2. Accessibility and quantity of a country’s usable natural resources

3. Accessibility and quantity of a nation’s technology

4. General work ethic and healthy lifestyle

Standard of living

The way people live as measured by the kinds and quality of goods and services they can afford.

Knowledge economy

Businesses, workers, and the government relying more on knowledge, information, and ideas.

Intellectual capital

Everything a country or organization knows, like information, ideas, and experience.

Two ways to ensure international competitiveness:

By price and by uniqueness of product or service.

Taxation

The method used to generate the finance required to run the country.

Rationalization

How a company changes to be better and more competitive by:

1. Organizing differently

2. Making different things

3. Improving how it makes these things.

Economies of scale

The tendency of the cost per item to go down when items are bought or produced in large quantities.

Developed nations

They have a high standard of living and produce a sophisticated range of products such as computers and automobiles.

Total quality management (TQM)

A way to run organizations by

1. Always making things better

2. Improving how employees work.

International Organization for Standardization (ISO)

Encourages the creation of agreed-upon standards and related activities worldwide.

Trading blocs

Regions in which countries agree to support mutual economic growth by opening their markets to cross-border trade and business development.

Bilateral trade

Trade between 2 countries

Multilateral trade

Trade between more than 2 countries

North American Free Trade Agreement (NAFTA/USMCA)

Created a free-trade zone consisting of Canada, Mexico, and the US.

Goal was to boost trade, lower prices by making more stuff, and face global competition challenges.

Free Trade Area of the Americas (FTAA)

• Wants countries in the Western hemisphere to trade freely with each other.

• Goal is to reduce barriers and encourage investment without government interference or special treatment.

European Union (EU)

A political and economic alliance in Europe consisting of 15 countries. Trade barriers are eliminated between members and have a common currency (Euro).

Asia-Pacific Economic Cooperation (APEC)

A forum for ministers and senior government officials of countries bordering the Pacific Ocean to discuss regional policy

Culture

Reflection of the values and beliefs of a community or nation.

Customs

Ways in which cultural behaviors are performed.

Three cultural determinants

1. Geography: climate, arable land, transportation, location, natural hazards

2. History: cultural norms, cultural imperialism (values imposed by one group on another)

3. Religion: Some countries have a single religion that shapes the laws and customs, others have multiple beliefs that sometimes conflict

Business Protocol

Rules of correct behavior to follow when meeting with business people in another nation.

Ex: Gift Giving: Japan expects gifts, Europe thinks they are bribes. Punctuality: Germany punctual, Brazil chill. Schedule of Meetings: Be aware of holidays

Business Entertaining

In certain cultures, business talks happen over meals. In others, business entertaining is just a way to meet foreign business guests.

Centralized Marketing Strategy

Production and sale from one location, export to other markets. “Think local, act global”

Decentralized Marketing Strategy

Local facilities, local decisions. “Think global, act local.”

Push strategy

Marketers sell products through channels of distribution, not the end user

Consumer will see product in store and want it.

Sells product to retailers, not consumer.

Pull strategy

Marketers target consumer directly and convinces them they need product. Attract consumer to product.

Brand acquisition

Acquiring the rights to sell a brand in a specific area.

Brand development

Setting up a foreign subsidiary to develop a product to compete in the local market.

Centralized advantages

Brand building (global brands): Creates brand equity, recognizable around the world

Synergy: Extra positive benefits from larger marketing group vs. smaller local groups working alone

Cost benefits: Avoids duplication (R&D, advertising)

Decentralized advantages

Proximity to markets: Better access to smaller markets, transport savings

Flexibility: Spot trends and competition quickly

Cultural sensitivity: More knowledge of local customs/preferences

What two factors measure the wealth of nations?

1. Wages – if consumers earn wages, they have money to spend.

2. Prices – consumers have to earn enough to afford the price of certain products.

Consumer profiles

International marketers must target consumers in the countries where they do business.   

Maslow’s hierarchy of needs:

• Physiological: hunger, thirst, shelter, warmth

• Safety: freedom from danger, financial support

• Social: belonging to teams/clubs, friends, family

• Esteem: personal achievement, being successful

• Self-actualization: motivated by a desire to know, understand, and explore

Thorndyke’s pleasure/pain theory

• Consumers are motivated to buy products that produce positive events (pleasure) and to avoid products that produce negative effects (pain)

• Buying gifts at mall ex: Pleasure from giving good gifts, pain from crowds, no parking. Reduce pain by having self-checkout, extended hours

Rational/emotional theory

• Rational: practical, logical, needs

• Emotional: impulsive, sentimental, wants

• Companies use both rational and emotional appeals

Purchasing profile

Who purchases the product, what, where and when.

4 Ps and 2 Cs

Product, place, price, promo, consumer competition

Product

Features (Product differentiation, market segment)

Demographics: observable, measurable characteristics of a population

Marketing opportunity analysis: Gaps in the international marketplace

Marketing research: the collection, analyzing, and interpreting of data to make marketing decisions

Place

Channel of distribution: Industrial sales reps, retail marketing, vending machines, telemarketing, etc. 

Price

Based on product features, relative to your competitors, consider the landed costs

Economies of scale: more made and sold the less expensive products become

Business Ethics

Concerned with the behavior of businesses in the treatment of employees, society, stockholders, and consumers.

Code of Ethics

Principles which businesses/people base their behavior on.

Ethical Dilemma

When two or more right choices present themselves and conflict with one another.

Ethical imperialism

The belief that certain behaviour is right or wrong; certain absolute truths apply everywhere

Cultural relativism

The belief that behaviour should be governed by what will bring about the greatest good for the greatest number of people; right and wrong depend on local values

Stakeholders

Community, employees, customers.

Corporate Social Responsibility (CSR)

Broadly covers rules that companies follow about

1. Human rights

2. Environment

3. Labor

4. Community relations.

Social marketing

Listening & accepting feedback from stakeholders as a form of promotion

Consumer issues

Deals with:

1. Product safety standards

2. Quality control

3. Fair pricing.

Equality issues

Role of women and minorities in the workforces, effort to implement equal opportunities

Human Rights Issue

Use of child labour

Labour issues

1. Fair wages

2. Job security

3. Obligation to community (issues layoffs)

Dumping

Selling things in another country at a lower price than in the country where they were made.