International Business- Pros/Cons

Globalization (Advantages and Disadvantages)

Globalization is the movement of goods, services, technology, investment, ideas, and people throughout the world

• Advantages: access to new markets, cost reduction, economic growth, increased labor mobility 

• Disadvantages: worker exploitation, job loss, environmental impacts, legal compliance issues. 

How International Business helps/hurts Canadians

Domestic VS Foreign Market

• Domestic business is done within the border of their own country.

• Foreign Market is defined as a business that is not limited to a single country

Branch Plant Ownership is a factory or plant in Canada belonging to a company whose headquarters are in another country. Take the Chrysler branch in Ontario, for example. It would be more affordable because it’s in Canadian dollars and it's local. 

Foreign Subsidiaries is a company that operates in one country but is owned (either wholly or partially) by a company located in another country. For example, Google U.K. Limited, based in the United Kingdom, is a wholly owned subsidiary of California-based Alphabet.

Imports and Exports

• Imports - a good or service bought in one country that was produced in another. Imports and exports are the components of international trade. If the value of a country's imports exceeds the value of its exports, the country has a negative balance of trade, also known as a trade deficit.

• Exports - a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country.

Primary/Secondary/Tertiary Industries

• Primary industries are those that harvest or extract raw material from nature, such as agriculture, fishing, hunting, and trapping, forestry and logging, energy and mining (these are the five major primary industries).  

• Secondary industries are made up of primary manufacturing (called processing) and secondary manufacturing, which includes both capital goods (products used by business such as machinery, trucks, and heavy equipment) and consumer goods (clothing, packaged food, and television sets).

  • Canada has a strong primary manufacturing sector, but a weak secondary manufacturing sector. The world knows Canada for its oil, pulp, paper, and diamonds, but not for its soft drinks, cereals, or running shoes. 

• Tertiary industries, also known as service sectors, do not make or extract anything from nature, but they provide necessary services to other businesses and consumers, such as baking, construction, communications, and transportation.

Global Sourcing- The process of buying equipment, capital goods, new materials, or services from around the world. 

Outsourcing - hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company's own employees and staff.

Offshoring - relocating business processes to another country to cut costs and increase efficiency

Nearshoring - outsourcing tasks to neighboring or nearby countries rather than distant offshore locations.

Inshoring - when a business transfers operations back to its home country.

Economic Conditions

• Change with economic and business cycles (expansion, contraction)

• Employment opportunities in nursing, construction, web development, etc.

Political and Legal Factors

• Governments regulate business to protect consumers

  • Regulation of fair advertising

  • Enforcement of contracts

  • Safety inspections on food & medication

• Canada imposes restrictions, China has strict regulations, North Korea restricts information and choices

Business Etiquette, non-verbal communication cues from different cultures

Business etiquette: the requirements and expectations of social and business behavior and practices and conduct 

A handshake isn’t as simple as it seems when you take it on the road

• In middle eastern countries, for example, handshakes involve the right hand only and the left hand is considered unclean

• Visitors to china will want to lighten theri grip, while folks introducing themselves to Germans should know to stop after one firm downward yank

Business Card Exchange Protocol

Exchanging Business Cards in Korea:

• In Korean business culture, exchanging business cards are formal and ceremonial

• When presenting a business card, it is customary to bow slightly and offer if with both hands as a sign of respect

Cross-Cultural Gift Giving

Countries where a gift is expected…

• Europe: Czech Republic, Poland, Russia, Ukraine

• Latin America: Bolivia, Colombia, Costa Rica

• Pacific Rim: China, Hong Kong, Indonesia, Korea, Taiwan, Malaysia, Philippines, Thailand 

Gift Giving Taboos

WesternCountries (U.S., Canada, most of Europe):

Middle East

• Gift-giving is important, but you also have to stay away from alcohol and pork-related products and anything that could be seen as offensive according to Islamic law.

Interdependence- Items that consumers need and want that are created in other countries. For example, Canadians depend on the U.S. for cars.

Chapter 2 - Trade in the Modern World (Victoria)

Winners and Losers of a High Canadian Dollar

Winners

• Importers - allows them to cross-border shop for good deals.

• Canadian Travelers - less expensive for Canadians to travel.

• Major League Sports Teams - less expensive to pay their teams (they pay players in USD to entice them).

Losers

• Exporters - more difficult for Canadian businesses to compete as there’s been an increase in price.

• Canadian Tourism - people won’t visit Canada as the price of their trip has increased.

• Canadian Retailers - many Canadians will shop online to import products from other countries.

Value Added Goods- the value that is added to a product as it is processed. It’s the difference between the cost of the raw materials and the cost of the finished goods

Ecommerce- the buying and selling of goods and services over the internet.

Discretionary Income- the amount of an individual's income that is left for spending, investing, or saving after paying taxes and paying for personal necessities.

Time Zones are a barrier to international trade as business people need to learn which communication medium is suitable for specific situations (i.e. email, call, Zoom, WhatsApp, etc.), and when to use them (e.g. military time or the following time zones)

Time Zones in Canada

• Newfoundland Time Zone (UTC-03:30 hours) – NST: 2:30 p.m.

• Atlantic Time Zone (UTC-04:00 hours) – AST: 3:00 p.m.

• Eastern Time Zone (UTC-05:00 hours) – EST: 4:00 p.m.

• Central Time Zone (UTC-06:00 hours) – CST: 5:00 p.m.

• Mountain Time Zone (UTC-07:00 hours) – MST: 6:00 p.m.

• Pacific Time Zone (UTC-08:00 hours) – PST: 7:00 p.m

Mixed, Command, Free Market, and Traditional Economies

• A traditional economy is based on customs, history, and time-honored beliefs (e.g. Rural Africa, Asia)

• In a command economy, the government makes all economic decisions and controls all the resources. (e.g. North Korea, Soviet Union, Cuba)

• A free market economy relies on supply and demand with little or no government intervention. (e.g. Hong Kong)

• A mixed economy combines elements of both market and command economies. It allows for private enterprise and government intervention. (e.g. U.S., UK, Germany)

Trade with Emerging Markets refers to countries that are in the process of rapid growth and industrialization (i.e. developing countries). They experience faster economic growth with the potential for high returns, but there are greater political and currency risks.

Economies of Scale- cost advantages companies experience when production becomes efficient, as costs can be spread over a larger amount of goods.

Protectionism- the practice of shielding domestic industries from foreign competition, often through trade barriers such as tariffs.

Duties - Taxes, Tariffs, Trade Quotas, Sanctions

• Taxes are mandatory payments collected by the government from individuals/businesses.

• Tariffs are taxes/duties that raise the cost of imported goods so that consumers will purchase locally manufactured products instead of less expensive imports.

• A trade quota is a government-imposed limit on the amount of product that can be imported in a certain period of time.

• A trade embargo is used to ban trade on a specific product or with a specific country. They’re often declared to pressure foreign governments to (e.g.) change policies).

• A trade sanction acts as a penalty imposed by a nation or a group of nations on another country to punish it or change a particular policy.

Predatory Dumping- refers to foreign companies anti-competitive pricing their products below market value to drive out domestic competition.

Chapter 3- What is Culture? (Soleyana) 

Ethical Issues in International Business

• Corruption

• Health and safety

• Environmental sustainability

• Human rights (ethical labor force)

• Employee privacy

Hofstede’s Theory of National Culture

• Known as Professor Geert Hofstede’s, he defines culture as “the collective programing of the mind distinguishing the members of one group or category of people from others.”

• There are 6 dimensions as it follows:

• Power Distance (PDI) - how the difference of power between people is perceived (e..g low PDI = equality, high PDI = superiority in social status, gender, wealth, etc.)

• Uncertainty Avoidance (UAI) - adaptability to change (e.g. high UAI = conformity & no tolerance for outsiders, low UAI = seek out change, high tolerance for outsiders)

• Masculinity vs. Femininity (MAS) - the degree to which a culture values masculine and/or feminine traits and  gender roles 

• Individualism vs. Collectivism (IDV) - the extent to which people are expected to make their own decisions regarding education, jobs, life partners, etc.

• Orientation (LTO) - long-term LTO cultures have distant long-term goals, short-term LTO cultures focus on “now” more than “then”

• NEW Indulgence vs. Restraint (IVR) - high indulgence cultures don’t take life too seriously/prioritize happiness, high restraint cultures are more controlled and professional

Spatial Perception refers to individual comfort level with personal space and it differs from culture to culture. 

• For example, physical contact is common in Mediterranean and Latin American cultures. Whereas in Asian, British, Canadian, and American cultures, touching is equated with intimacy; in business situations only formal touching, such as a handshake or pat on the back, is seen as appropriate. 

• In other cultures, however, touching is seen as unnecessary and even offensive, especially if it is cross-gender. Muslim countries are an example of such, as men and women generally do not touch at all. 

Chapter 4- Economics and Politics (Prarthana) 

Lobbying- a group of individuals or businesses that can use their power to influence their public. 

• For example, the NRA (National Rite Association) is a powerful group in the United States that lobbies the government on gun-control issues. 

Business Cycle is the periodic growth and decline of a nation's economy, which is measured by their GDP. The stages of a business cycle are recession, trough, expansion and peak.

• Recession: the economy slows down temporarily so there is a decline in the consumer purchasing and rise or increase in unemployment. 

• Trough: when production and unemployment reaches their lowest points; at this the recession has ended and is now going into prosperity.

• Expansion: when the economy regresses again and employment, wages, products, and profits expand. 

• Peak: top of the business cycle, the economy stops, expands and is now contracting.

Economic System: The way a country organizes its resources and distributes goods and services to its citizens.

Political System: The type of government by which a country is run

Chapter 5- International Trade Agreements and Organizations (Prarthana) 

Licensing Agreement: a type of contract where the licensor grants the licensee the right to reproduce, use, sell, and/or display their protected material.

Franchise: an agreement allowing the use of a business name, goods, services, and marketing. In exchange for signing the agreement, the franchise promises to abide by all restrictions set by the franchisor.

Joint Venture: any arrangement where two or more people agree to contribute goods, services, or capital to a common commercial enterprise.  

What is the purpose of the IMF, United Nations, WTO and OECD?

• The purpose of the IMF (International Monetary Fund) is to promote financial stability, prevent economic crises, encourage growth, and remove poverty. 

• The United Nations maintains international peace and security, developing friendly relations among nations and promoting social progress, better living standards and human rights.

• WTO (World Trade Organization) promotes trade liberalization around the world.

• OECD (Organisation for Economic Co-operation and Development) works to remove bribery, money laundering, and fraud.

The European Union (EU) promotes peace as their values are to protect the well being of their citizens by providing them with freedom as well as security injustice without internal borders.

Pros and Cons of Common Currency.

Currency Speculating: the practice of making bets on the future value of a currency.

Currency Devaluation: taking measures to strategically lower the purchasing power of a nation's own currency.

Currency Revaluation: whenever a company has a financial transaction that involves a foreign currency, a revaluation is mandatory at period end. This is to ensure accurate records of the realized or unrealized gain or loss, and to comply with the company's financial reporting requirements, to shareholders, and tax authorities

Hard currencies are stable currencies that are easily converted to other currencies on the world exchange markets. 

Soft currency is 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.

• With the world feeling the after effects from the COVID-19 pandemic, economic conditions have still been poor around the world.

• The world’s weakest currencies belong to the world’s third-world countries, where perhaps the economic crisis has hit the hardest. 

North American Free Trade Agreement (CUSMA/USMCA)

NAFTA stands for North American Free Trade Agreement

This agreement is important because it allows a balanced trade between countries in North America, which promotes high paying jobs and overall growth to the economy. For example, businesses such as farming are able to grow because of this agreement.

USMCA stands for United States Mexico Canada Agreement

This agreement is important because it leads to freer markets, fairer trade and economic growth in the countries involved. 

Different trade agreements and organizations that Canada is a part of.

Four trade agreements that Canada has signed are as it followers

Factors Affecting the Exchange Rates

• Interest and inflation rates 

• Current account deficits.

• Government debt

• Terms of trade

• Economic performance

• Currency Revaluation 

• Recession

Exchange Rate: The amount of one country’ currency in relation to the currency of another country. It can affect import and export costs, either making it more expensive or more affordable for foreign buyers. 

Chapter 6 - Social Responsibility and NGOs (Arianna)

Corporate Social Responsibility- Duty of a company's management to work in the best interest of the society it relies on for its resources (human, material and environmental) to advance the welfare of society and to act as a good global citizen 

Multidomestic Strategy

• Customizes products, services, and marketing for the local culture

• Effective when cultural differences are prominent

• Less political and exchange-rate risk

Transnational Strategy

• Combines the best elements of the global and multidomestic strategies

• Respects needs of local market, while maintaining efficiencies of a global strategy

• Manufacturing takes place at least expensive source, human resources and marketing take place at the local level

Global Strategy

• The world as one big market, all people want the same products and will respond to marketing in a similar way 

• Uniformed around the world 

• Advantages of economies of scale (proportionate savings gained by producing larger quantities) 

• Does not respond to individual cultures 

Primary Stakeholders- Examples

Directly affect the company and its profitability 

• creditors / banks 

• Suppliers 

• Management 

• Freight forwarders 

• Labor unions 

• Shareholders 

• Distributors 

• Foreign and domestic governments 

• Customers 

• Competitors 

• Employees 

Secondary Stakeholders- Examples

Have an impact on the company but do not directly influence its success or contribute to profitability

• Community 

• Political parties 

• Special interest groups 

• NGO’S Courts 

• The media

• Educational institutions 

• Religious groups 

• Professional or trade associations 

• Ethical Imperialism VS Cultural Relativism

Ethical imperialism 

• One set of values for all cultures 

• Right and wrong are the same in all cultures 

• A person’s ethics are not situational 

Cultural relativism 

• Values are dependent on the culture 

• Right and wrong depend on local values 

Microcredit Loans- is a grant of a very small loan, as little as $100, to spur entrepreneurship. They do not need a down payment or a credit history. 

Non-governmental Organizations (NGOs)- are non-profit organizations that are made up mostly of volunteers and have a service and development focus. 

Sustainable Development- the ability to meet human consumption while maintain the environment, it is a critical issue that all businesses need to consider to ensure their functions 

Discrimination

• Racial Discrimination: Treating someone unfavorably because of their race or characteristics associated with race, such as skin color, hair texture, or facial features.

• Gender Discrimination: Unequal treatment based on gender, which can include pay disparities, biased hiring practices, or unequal opportunities for advancement.

• Age Discrimination: Discriminating against employees because of their age, particularly targeting older employees for layoffs or denying them promotions and benefits.

• Disability Discrimination: Treating employees unfavorably because of a disability or failing to provide reasonable accommodations for employees with disabilities.

• Religious Discrimination: Unequal treatment based on an individual's religious beliefs, which can include not accommodating religious practices or imposing unnecessary restrictions on religious expression.

• Sexual Orientation and Gender Identity Discrimination: Discriminating against employees based on their sexual orientation or gender identity, including harassment, exclusion, or unfair treatment.

Rationalization

• Justifying Unethical Behavior: Employees or managers might rationalize unethical actions, such as cutting corners or engaging in dishonest practices, by convincing themselves that these actions are necessary for the company's success or their personal gain.

• Downplaying Negative Impact: Rationalization often involves minimizing the perceived harm or negative consequences of certain actions. For example, a company might justify laying off employees by emphasizing the need to reduce costs, while downplaying the hardship this causes for the affected workers.

• Shifting Blame: Individuals may rationalize their behavior by blaming external factors or other people. For instance, a manager might justify poor treatment of employees by blaming high pressure from upper management or tight deadlines.

• Selective Reasoning: Rationalization can involve selectively focusing on certain facts or arguments that support a desired conclusion while ignoring or dismissing those that don't. This can lead to biased decision-making and reinforce harmful practices.

• Creating False Comparisons: People might rationalize their actions by comparing them to worse behaviors or situations, thereby making their own actions seem less severe. For example, justifying minor unethical behavior by pointing out that others are doing far worse things.

• Ethics - global context: a field of inquiry that addresses ethical questions and problems arising out of the global interconnection and interdependence of the world's population; informally, it is an area of research that engages and contextualizes contemporary ethical issues in their global context.

5 Ways workplace is changing

1. Remote and Hybrid Work: Increased flexibility with remote and hybrid work models, supported by new collaboration technologies.

2. Focus on Employee Well-being: Greater emphasis on mental and physical health, with wellness programs and flexible hours to enhance work-life balance.

3. Technological Integration and Automation: Advanced technologies like AI and automation are transforming tasks, allowing employees to focus on more complex work.

4. Diverse and Inclusive Workplaces: Growing emphasis on diversity, equity, and inclusion, with policies to promote a supportive and inclusive culture.

5. Skills Development and Lifelong Learning: Continuous skills development is prioritized, with training programs and upskilling initiatives to keep employees relevant.

6. Human Development Index: A summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and having a decent standard of living.

Chapter 7- Marketing (Arianna) 

International Marketing involves all activities to get goods and services from the producer to consumers in foreign markets, including research, pricing, and advertising.

Demographics

The statistic data about various characteristics of the japanese population 

• Age: what is the average age for mothers in Japanese populations 

• Gender: the gender difference reflected in baby clothing

• Family life cycle: what are the statistic for single-parents families in japan, is the divorce rate higher or lower in Japan than in canada   

Primary Data VS Secondary Data

Primary data- The data that is collected for the first time through personal experiences or evidence, particularly for research.

Secondary data- Using existing data generated by large government institutions, healthcare facilities etc.

The 4Ps of International Business

Product - Canadian products sold outside of Canada are often modified to adapt to a foreign culture, language, or laws.

• Packaging (weights, colors, legal requirements, etc.)

• Ingredients (strong taboos across different countries)

• Style (what the public find fashionable/offensive)

Price - In most cases, the domestic price of a product is lower than the price of the same product abroad. Factoring in:

• Labor costs

• Shipping/legal costs

• Duties and tariffs

• Competitive Markets
  

Place - Marketing strategies for entering new domestic markets are pretty straightforward:

• Centralized: all manufacturing and marketing in one location

• Decentralized: manufacturing plant in another nation

Promotion - There are three ways to promote and advertise products when selling internationally:

• Using existing ads

• Translating ads

• Creating new ads

The 2Cs of International Marketing

Consumers (factor in…)

• Target Market

• Ethnocentrism

• Demographics
  

Competition (factor in…)

• Direct (similar products)

• Indirect (related products)

• Competitive Advantage
  

Competitive Advantage- Refers to the ability of one company to produce a product more cheaply than another company 

Ethnocentrism- Measuring or judging one's own culture against another culture and can lead to judging someone else's culture negatively.

Product Life Cycle

Introduction 

• A new product or service is launched into the marketplace.

• Some consumers may not know this product exists.

Growth

• If the introduction of a new product or service is successful, then sales will grow.

• Advertising continues and the product or service is available in more and more locations. 

Maturity

• Sales level off, growth is flat and supply equals demand.

• Every consumer who wants one can buy one.

• Brand equity is at its highest.

Decline 

• As a product gets older, it enters the decline stage.

• Sales decrease because the product fails to get new consumers.

Chapter 8 - Logistics

Logistics consists of the acquisition, transportation, and storage of materials from the point of origin to the point of consumption (i.e. the right item, the right time, the right quantity, the right price). 

Three types:

1. Military: the science of planning, organizing, and managing the movement and maintenance of military forces

2. Production: manages inventory and quality control in a company to increase efficiency and production rates

3. Business: Ensures a steady flow of needed materials and information through a network of facilities that move raw materials through all parts of a business.

Issues in Supply Chain

• The supply chain is the sum total of all activities involved in moving raw materials, processed goods, and finished products into an organization or out to a customer. The main links that could have issues are:
  

  • Inventory management

  • Storage

  • Cash Flow

  • Supplier coordination

  • Information processing

  • Physical distribution
    

Vertical and Horizontal Integration

• Vertical Integration allows a company to streamline its operations by taking direct ownership of production stages instead of relying on external contractors or suppliers.

• Horizontal Integration occurs when a company acquires or merges with another company in the same industry that is operating at the same level in the value chain. 

Bill of Lading- the official document indicating that a transportation company accepts goods for shipment. It includes specifics of transport.

Just-in-Time Inventory Systems

JIT’s require suppliers to make and ship what the factory requires as quickly as needed. Four possible locations for the storage of goods:

• Place where the goods are made

• Warehouse

• Distribution center

• Place that receives the goods
  

Intermodal Shipping

• Intermodal shipping means using more than one mode of transportation to get a product from the factory and to its ultimate destination.

Packaging Requirements

Packaging systems must be connected in all aspects of the process for a successful supply chain.

• Weight

• Sustainability

• Waste Prevention

• Correct Materials
  

• Packaging protects goods from external damage and showcases their quality, allowing for reliable transportation. 

Chapter 10 - International Business Trends (Soleyana) 

Requirements needed for “The Global Traveller”

Passports: An focal document issued by a government certifying: Holder’s identity and citizenship and allows travel under its protection to and from foreign countries 

Costs in Canada: 

• 5-year adult passport (age 16 or over) $120

• 10-year adult passport (age 16 or over) $160

• Child passport (0 to 15 years of age) $57

Visas: Visas are a certificate issued by a country you wish to visit. It 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.

Some of the types of visas:

• Tourism

• Business

• Transit

• Employment

• Study

• Residency

Health requirements 

• Many counties will not issue any type of Visa to anyone who is ill with cancer, HIV/AIDS, tuberculosis, or any other serious illness. 

Restricted goods 

• Firearms, tobacco, and alcohol

• Travelers are often not permitted to enter a country with large amounts of cash, fresh fruits and vegetables, and live animals

• Returning Canadians must indicate what they have purchased while away

• Duty-free items are non-restricted items made within the borders of a country that has signed a free trade agreement with Canada

Trends in International Business

International Markets: MArkets where Canadian businesses buy and sell products are often changing 

• Major change: The emergence of China as a significant trading partner with Canada (1997-2006)- in 2001, China became Canada’s second largest supplier of foreign goods. 

• Another market change that took place was when Canada signed NAFTA (1993)- created an increase in Canada’s trade with Mexico

• Canada's exports to Mexico increased to a level 7, now third in the value of its imports into Canada behind the USA and China

• Japan and the European union are no longer important to Canadian business compared to a decade ago