Business Unit 1 Test

Trade barriers

Government restrictions on international trade

Tariffs

The most common type of trade barrier, its taxes or duties put on imported products or services
Tariffs raise the cost of imports, so that local products are less expensive and more appealing to consumers.
A trading partner may retaliate with tariffs of its own.

Trade embargo

A governments complete ban on trade or other economic activity with a specific country or group. “We won’t do business with them”

Trade Sanction

Economic sanctions are used to punish illegal actions (humanitarian crimes, terrorism etc). Sanctions usually involve economic or political restrictions such as, partial trade restrictions, asset freezes or travel bans.

Trade quota

A government limit on how much of a product can be imported during a set time, this reduces foreign competition and helps protect local producers.

Protectionism

A policy of protecting local businesses from foreign competition, often by using trade barriers like tariffs

The effects of communication technology in international business

It lets businesses operate across the world 24/7. Communication methods differ: email can be sent anytime but may not get an immediate reply; phone calls allow quick interaction but require considering time zones

Greenwich Mean Time

The time standard historically based on the time at Greenwich, England. It helps compare time across different places and time zones.

Winners of a low Canadian dollar

International Buyers: Canadian good are cheaper for international buyers
Tourism (inbound): Foreigners get more value, increasing spending in Canada
U.S. dollar earners": People earning USD see higher converted CAD

Losers of a low Canadian dollar

Consumers and importers: imported goods cost more
Travellers (outbound): Vacations outside Canada are more expensive for Canadians
Fuel costs: Gas prices rise because it’s globally priced in U.S. dollars

Inflation

The rate at which the price of goods and services is rising and the buying power of the dollar is falling

Unemployment rate

A low unemployment rate means a stable, healthy economy, therefore raising the Canadian dollar

GDP (Gross Domestic Product)

the value of all finished goods and services produced by a country in a specific time period. A stable or rising GDP is also a sign of a stable economy, causing the Canadian dollar to rise.

Domestic Business

A business that makes most of its transactions within the country that its based

International Business

Economic transactions between businesses located in different countries

Globalization

The growing connection and interdependence of countries through the free flow of goods and services across international borders

Positive affects of globalization

• Outsourcing for cheaper materials/labour, causing cheaper costs and prices

• Increased competition causes companies to decrease prices

• Decrease in poverty because of countries sharing resources and creating jobs

• Innovation

• Better jobs

• Increased capital flow

Negative affects of globalization

• Lost jobs due to outsourcing

• Increased pollution

• Safety concerns

• Spread of disease

• Increase in income gap

Primary Industry

The sector of the economy that does extraction of natural resources from the earth or sea.

Secondary Industry

Industries that create a finished, usable product (clothing etc)

Tertiary Industry

Industries that do not make a product or extract resources but provide services to consumers and other businesses.

Currency

The money used in a particular country.

Outsourcing

Hiring an outside company to do work for your business

Offshoring

Moving operations to another country typically to reduce costs

Safety & Environmental Standards

Laws that ensure product safety.

Exports

Goods leaving a country

Trade Deficit

When a country imports more goods and services than it exports

Trade Surplus

When a country exports more goods and services than it imports.

Appreciation

When a currency increases in value.

Depreciation

When a currency decreases in value.

Trades between countries and its effect on currency demand

When a countries exports (goods leaving the country) are greater compared to its imports (goods entering the country), demand for its currency can increase

Political stability and its affect on a countries currency

A political tension, instability or terrorism concerns can reduce investor demand for that countries currency

Hard currencies

Stable currencies (Euro, U.S and Canadian dollars) 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 fluctuates often is difficult to convert into other currencies, such as the Russian ruble or the Chinese yuan

Foreign portfolio investment

Canadians invest in businesses outside Canada by buying stocks or bonds. This spreads investments across different places which can lower risk and give more choices

Importing

To bring products or services into a country, for use by another business or for resale

Exporting

To send goods or services to another country, for use by a business or for resale

Value added

The extra worth a product gains as it is processed, measured by the difference between the cost of its raw materials and the finished product

Licensing agreement

Permission for a company to use another company’s product, brand or invention in exchange for a fee or royalty

Exclusive distribution rights

A type of licensing agreement that gives permission to a company to be the only seller of a product in a specific area or country

Franchising

An agreement that lets someone run a business using a company’s name, products and methods. In return for a fee, the company provides support such as training, marketing and help with operations

Advantages:

• Less risk

• Access to knowledge and research

• Financial aid

• Established brand

• Loyal customers
  
  Disadvantages

• Less profit
  Loss of control
  Strict guidelines

Joint venture

When two or more businesses combine resources and expertise for a specific project or business activity. It can help them save money

Foreign subsidiary

A company branch in another country that is fully owned by its parent company but manages its own daily operations. The parent company sets financial goals (Eg: Walmart Canada)

History of Globalization

Globalization grew after World War II as countries built stronger trade relationships. Over time, fewer trade barriers and new technology made it easier for companies to do business worldwide in real time. This connected countries more closely and made them more dependent on one another.

Trade

The buying, selling or exchanging of goods and services

History of Canadian Trade

In the 1600s explorers from France and England landed in Canada where they traded with First Nations peoples for fur and food

Trade with Europe

In the 1700s, Canada traded raw materials for finished goods from France and England. After Britain defeated France in the Seven Years’ War, Canada relied more on trade with England and British influenced expanded across Canada
After Brexit, Canada and the U.K. adopted this agreement which removes the tariffs on 98% of Canadian products exported to the UK

Trade with the United States

After gaining independence from Britain, the US built its own industries. Canada supplied raw materials such as lumber, and the US remains Canada’s largest trading partner

Trade with Asia

Canada began trading with Japan after World War II. Japan is known for electronics and cars.

China attracts business with its large, lower-cost workforce.

South Korea is a growing trade partner.

India attracts investment because of its skilled workers and competitive labour costs.

Trade with Mexico

Trade grew after NAFTA was signed in 1993. The agreement later changed to USMCA and Mexico has become one of Canada’s top 5 trading partners

What is a business

The manufacturing and/or sale of goods or services to satisfy the wants and needs of consumers to make a profit

Transaction

An exchange of things of value

Domestic transactions: between two Canadian companies

International transactions: involve a Canadian company and a non-canadian company

Domestic business

A business that does most of its transactions in its home country. In Canada, it is Canadian-owned, uses Canadian products or services, and sells mainly to Canadians.

Domestic market

The costumers of a business live in the country where the business operates

Foreign market

The costumers of a business who live in a different country than the one where the business operates

International Business

5 ways that a business can be considered international:

• 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