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BBB4M International Business Exam Review Study Sheet
Table of Contents
BBB4M International Business Exam Review Study Sheet
● Meaning of Domestic and International Trade
● General Aspects of the History of Canadian Trade
● General Aspects of Emerging Trade Markets (Regions) in the World
● Advantages and Disadvantages of International Trade for Canadians
● Knowledge of Tariffs and Their Effects
● Knowledge of Factors Affecting Currency Valuations and Fluctuations
● The Five Main Cultural Determinants
● Impacts of Culture on International Business and the Necessity for Cultural Awareness
● Types of Economic Systems and Government Systems
● Absolute and Comparative Advantage, Opportunity Cost
● Hofstede’s Cultural Dimensions
● Different Categories of Economic Development
● Role of Lobbying and Government in International Business
● Advantages and Disadvantages of NAFTA/USMCA to Canada and Member Countries
● Globalization Strategies for Companies
● The European Union (EU) and Advantages/Disadvantages of a Shared Currency
● World Trade Organization (WTO), APEC, and Other Trade Organizations
● The G7 and G20 (and Canada's Place Within Them)
● The Role of the UN in International Business
● Five Main Ethical Issues Affecting International Business
● Ethical Imperialism vs. Cultural Relativism
● Role of Data Management in Marketing
● Components of Supply Chain Management
● Logistics: Infrastructure, Shipping Methods, Forms of Integration
● Intermediaries and Supply Chain Management (Sourcing Strategies)
● The Marketing Mix (4 Ps and 2 Cs of International Business)
● Impact of the 2008 Financial Crisis on the Financial System
Quizlet:
UNIT 1
Meaning of Domestic and International Trade
Business: A general term for an economic activity involving transactions.
Transaction: An exchange of things of value.
Domestic Business: A business that conducts most of its transactions within the borders of its home country. In Canada, this means it is owned by Canadians, relies on Canadian products and services, and sells to Canadians.
Domestic Market: The customers of a business who live in the country where the business operates.
International Business: The economic system of transactions conducted between businesses located in different countries. A business is considered international if it:
Owns a retail or distribution outlet in another country.
Owns a manufacturing plant in another country.
Exports to businesses in another country.
Imports from businesses in another country.
Invests in businesses in another country.
Foreign Market: The customers of a business who live in a different country than the one where the business operates.
Trade: General exchange of goods and services.
Foreign or International Trade: Trade across international borders.
Trading Partner: When a business in Canada develops a relationship with a business in another country, that country becomes a trading partner with Canada. International trade takes place between businesses, though government affects the climate.
General Aspects of the History of Canadian Trade
Early Trade (1600s): Explorers from France and England traded fur and food with First Nations people (like the Ojibwa and Cree) in what is now Canada, sending goods back to Europe. This led to the establishment of colonies and companies like the Hudson’s Bay Company and the North West Company.
European Trade (1700s): Grew rapidly after permanent settlements were established. Europe had high demand for raw materials from Canada such as beaver pelts, fish, and lumber. After the Seven Years’ War, Canada became reliant on England for finished goods.
Trade with the United States: After declaring independence in the late 1700s, the U.S. needed to become self-reliant. Canada supplied raw materials for the growing American industry. The U.S. became, and remains, Canada's largest trading partner.
Trade with Asia: Canada began trading with Japan after World War II, with Japan becoming known for high-quality electronics and automobiles. More recently, China has become a major trading partner, supplying inexpensive and popular products.
Trade with Mexico: Developed significantly after the signing of NAFTA in 1993 (now USMCA). Mexico has been one of Canada's top five trading partners since 2000, with many goods entering Canada duty-free.
General Aspects of Emerging Trade Markets (Regions) in the World
The Middle East: Traditionally focused on oil, but this commodity is not sustainable. Trade is limited by political instability, war, and lack of industrialization in much of the region. However, countries like the United Arab Emirates (Dubai), Israel, and Egypt have established trading relationships with Canadian businesses that do not depend solely on oil.
India: Has a population of over one billion and a generally young, well-educated workforce. Major challenges include lack of infrastructure and widespread corruption. Indian companies are aggressively expanding into international markets (e.g., Tata Motors).
Africa: Imports to Canada are generally low, with business opportunities limited by unstable governments, lack of infrastructure, and rural economies. However, Africa is rich in primary resources, and some countries like Morocco, South Africa, and Angola have emerged as major trading partners, largely dealing with raw materials.
Advantages and Disadvantages of International Trade for Canadians
Benefits (How International Business Helps Canadians):
Variety of products available to consumers.
New markets for Canadian businesses, creating more jobs.
Foreign investments boost the Canadian economy.
Access to new processes and technologies.
Drawbacks (How International Business Hurts Canadians):
Loss of culture/identity due to foreign influence.
Increased foreign ownership of companies in Canada. Foreign companies are often loyal to investors/executives in their home country, and R&D is usually carried out there.
Reduced exports, as products manufactured in foreign-owned "branch plants" often stay in Canada.
Revenues leave Canada to pay head office costs.
Potential for economic destabilization.
Knowledge of Tariffs and Their Effects
Duty or Tariff: Taxes or duties placed on imported products or services.
Effect: Tariffs raise the cost of imports, making domestically manufactured products less expensive and more appealing to consumers. They can increase consumer prices and affect business operations.
Protectionism: The theory or practice of shielding domestic industries from foreign competition, often through trade barriers like tariffs. For example, American governments used protectionist measures on Canadian imports when the fur trade was expanding.
Knowledge of Factors Affecting Currency Valuations and Fluctuations
Exchange Rate: The amount of one country’s currency in relation to the currency of another country, determining how much one currency can be exchanged for another. The Canadian dollar (CAD) is most often quoted against the U.S. dollar (USD), as the USD is the most globally traded currency.
Floating Rate: An exchange rate that is not fixed in relation to other currencies. Its price fluctuates according to supply and demand.
Currency Revaluation: An increase in the value of a currency because the demand for that currency is greater than the supply.
Currency Devaluation: A decrease in the value of a currency because the supply of that currency is greater than the demand for it.
Winners of a High Canadian Dollar: Importers, Canadian travelers, and major league sports teams in Canada benefit.
Losers of a High Canadian Dollar: Exporters, Canadian tourism, and Canadian retailers are disadvantaged.
Factors Affecting the Exchange Rate:
Economic Conditions in Canada: Such as inflation rate, unemployment rate, GDP, and interest rates.
Trading Between Countries: The more favorable the terms of trade (a comparison of exports to imports), the higher the currency exchange.
Politics: Political tension, instability, or the threat of terrorism decreases the demand for a currency.
Psychological Factors: Historical significance and stability can change the way currencies are viewed.
Terms of Trade: The ratio of a country’s export prices to its import prices.
Hard Currencies: Stable currencies (e.g., Euro, U.S. and Canadian dollars) that are easily converted to other currencies on world exchange markets.
Soft Currencies: Currencies belonging to countries with small, weak, or fluctuating economies, difficult to convert into other currencies (e.g., Russian ruble, Peruvian sol).
Foreign Portfolio Investment: Investment in businesses located outside of Canada through stocks, bonds, and financial instruments. This allows for diversification and provides greater choice and opportunity.
UNIT 2
The Five Main Cultural Determinants
Culture: The knowledge, experience, beliefs, values, attitudes, religion, symbols, and possessions acquired by a group of people over generations, transmitted through education and example.
Cultural Determinants: The main factors that shape the culture of a specific group:
Religion: Often shapes cultural practices, ethical standards, and social norms (e.g., dietary restrictions, dress codes, holidays; Saudi Arabia's culture revolves around Islam, with activity stopping five times a day for prayer and Friday as the holiest day).
Politics: Political systems affect culture by shaping laws, policies, and power structures (e.g., communist regimes foster collective values, while democratic systems promote individual freedoms).
Topography: The physical environment can influence cultural practices as people adapt to their surroundings.
Climate: Influences cultural practices (e.g., loose, flowing clothing in hot climates like Saudi Arabia, or prioritizing indoor activities in cold climates).
History: Historical events (e.g., wars, colonialism, economic shifts) can have lasting effects on the culture of a country (e.g., the history of slavery in the United States impacting racial relations).
Impacts of Culture on International Business and the Necessity for Cultural Awareness
Impact on Business: Culture’s role in business can be as important as tariffs, legal regulations, and competition. Failure to consider cultural influence can ruin negotiations, derail marketing campaigns, and cause labor unrest.
Products: Cultural beliefs influence product demand; products may need adaptation (e.g., no market for Canadian pork in Israel due to Jewish dietary laws).
Services: Cultural expectations also affect services (e.g., Canadian banks must understand clients’ culture in foreign countries to meet savings goals, as attitudes towards money are culturally determined).
Labor Market: Not all countries share Canada’s values regarding minimum wage, workplace safety, discrimination prevention, or legislated holidays and hours of work. Canadian businesspeople may encounter differences in areas like child labor, discrimination, wages, and standards.
Meeting Culture: Refers to how different cultures approach meetings and negotiations (e.g., emphasis on hierarchy vs. informality).
Necessity for Cultural Awareness: Canadian firms must determine how much products and processes can be adapted to a foreign environment. Some cultural traits can be learned; others require firsthand experience.
Extent of Foreign Operations: Businesses with manufacturing, retail, or other direct interests in another country need greater cultural awareness than those primarily exporting.
Control of Foreign Operations: If local people manage foreign branch plants, less cultural knowledge is needed from the home office. If all foreign dealings are handled domestically, the required cultural awareness is high.
Degree of Cultural Differences: If the foreign market's language, habits, beliefs, and attitudes are significantly different from Canada’s, comprehensive cultural study is crucial.
Number of Foreign Operations: Companies conducting business in several foreign markets need a more sophisticated understanding of distinct cultures.
Subculture: A cultural group within a larger culture, distinguished by factors like class, ethnic background, and religion, unified by shared beliefs and interests.
Counterculture: A culture with values or lifestyles in opposition to the accepted culture (e.g., punk, emo, hippie movement, women’s rights movements).
Rationalization: Any attempt to increase a company’s effectiveness or efficiency, including downsizing, layoffs, and relocating functions to countries with cheaper labor or fewer union problems.
Monochronic: A time-oriented culture valuing punctuality, structure, and completing one task at a time (time is linear).
Polychronic: A time-oriented culture comfortable with multitasking, prioritizing relationships over strict schedules (time is flexible).
Spatial Perception: How individuals/cultures perceive and interpret space around them, including distances and arrangements.
Types of Economic Systems and Government Systems
Economic System: The way a country organizes its resources and distributes goods and services to its citizens. Defined by answers to questions like what to produce, how to allocate resources, how to distribute, and what prices should be.
Market Economy: Determined by free competition, where businesses, consumers, and government act independently. Market forces and self-interest determine what is produced and sold. Encourages private property, profit belongs to business owners, and competition drives innovation and selection.
Centrally Planned Economy: The government controls all economic elements, including prices, wages, and production. Ownership of property is restricted, all profit belongs to the government, and competition is limited.
Mixed Economy: Sits between a market and centrally planned economy, combining government intervention and private enterprise. Property can be owned by individuals, corporations, or government. Profit is encouraged but taxed to support government projects. Strong competition exists, and the government may also be a competitor.
Political System: The type of government by which a country is run.
Democracy: A state governed by all eligible members of the population through elected representatives. Characterized by free and fair elections, rule of law, free speech and press, right to assembly, and freedom of religion. Politicians may be more concerned with re-election.
Autocracy: A state governed by a single individual or a small group with unlimited power. Usually has a strong military presence, strives to control all aspects of citizens’ lives, and citizens have no influence on government.
Aristocracy: A historical system ruled by a wealthy educated class; no fully aristocratic countries exist today.
Theocracy: A political system based on religion (e.g., the Vatican ruled by the Pope).
Monarchy: A political system based on a king or queen (e.g., Thailand).
Constitutional Monarchy: A political system where the monarch’s power is limited by a constitution (e.g., Canada is a democratic constitutional monarchy).
Republic: Similar to a constitutional monarchy, but with no monarch as head of state (e.g., Republic of Ireland). Democratic republics theoretically result when all eligible citizens have an equal say in local and national decisions.
Absolute and Comparative Advantage, Opportunity Cost
Absolute Advantage: The ability of one country to use its resources to make a product or service more efficiently than other countries. For example, Country B has an absolute advantage over Country A if it can produce more vehicles per hour with the same number of employees.
Opportunity Cost: The value of what is foregone, or the cost of giving something up to get something else. For example, the opportunity 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. This is the foundation for specialization and trade. For example, if Country A has a lower opportunity cost for producing cell phones than Country B, Country A should specialize in cell phones and Country B in cars, and then trade surpluses.
Hofstede’s Cultural Dimensions
This model outlines six dimensions of culture that help explain cultural differences:
Power Distance: The degree to which less powerful members of a society accept inequality.
Individualism vs. Collectivism: The extent to which people are expected to look after themselves versus being integrated into strong, cohesive groups.
Masculinity vs. Femininity: The degree to which a culture values traditionally masculine or feminine traits.
Uncertainty Avoidance: How comfortable a culture is with uncertainty and ambiguity.
Long-term vs. Short-term Orientation: The extent to which a culture focuses on future rewards versus the present or past.
Indulgence vs. Restraint: The degree to which a society allows free gratification versus the control of desires.
Different Categories of Economic Development
Underdeveloped Countries (Least-Developed or Third-World): Nations at the lowest level of the world’s economies. Characterized by severe poverty, lack of social services, poor infrastructure, low literacy, limited access to technology, agriculture- or resource-based economies, and long-term political issues like dictatorships and war.
Developing Countries (Emerging or Second-World): Nations in transition from a poor economy to a prosperous one. Characterized by improved literacy rates, increased access to health care and social services, technological advancement, a shift from a resource-based to a manufacturing base, and population movement from rural areas to cities.
Developed Countries (Industrialized or First-World): Nations characterized by a high per capita income or strong Gross Domestic Product (GDP). Characterized by a reliance on secondary and predominantly tertiary industries (rather than primary), high standards of living, high literacy rates, and major advancements in healthcare and technology.
Gross Domestic Product (GDP): The total goods and services produced in one country in one year.
Economic Indicators
Business Cycle: Recurring periods of increased and decreased economic activity, or expansions and contractions. It is characterized by four stages:
Recession: The economy slows down, with a decline in consumer purchasing, an increase in unemployment, and businesses contracting or closing (defined as two consecutive quarters of GDP decline).
Trough: Production and employment reach their lowest levels, and the economy completes the recession and turns towards prosperity.
Expansion: The economy begins to grow again, with employment, wages, production, and profits expanding.
Peak: The top of the business cycle, where the economy stops expanding and begins contracting.
Types of Economic Indicators:
Leading: Adjust before the economy experiences a change and predict where the economy is going (e.g., housing starts).
Lagging: Do not adjust until after the economy has experienced a change (e.g., unemployment rate).
Coincident: Move in conjunction with the business cycle (e.g., international trade).
Role of Lobbying and Government in International Business
Role of Government: Affects international trade and business in various ways, including:
Establishing import and export laws and setting tariffs.
Maintaining membership in trade organizations and negotiating trade agreements.
Determining monetary policy (including currency exchange rates) and fiscal policy (including taxation laws).
Building infrastructure like roads and sewer systems.
Establishing regulations businesses must comply with.
Setting up trade offices, government embassies, high commissions, and consulates, as well as trade missions.
Corporate Influence on Governments: Corporations influence governments by:
Contributing significantly to political campaigns (regulations vary by country).
Participating in trade missions alongside politicians.
Pressuring the government to change or adopt policies that will benefit their business interests.
Lobbying: The process through which companies, special interest groups, or individuals attempt to influence government officials and persuade them to endorse public policy favorable to these groups. Examples include the NRA in the United States on gun-control issues, and the Canadian Association of Petroleum Producers (CAPP) and the Mining Association of Canada in Canada.
UNIT 3
Advantages and Disadvantages of NAFTA/USMCA to Canada and Member Countries
NAFTA (North American Free Trade Agreement): Launched in January 1994 between Canada, the United States, and Mexico. It created the world’s largest free trade area at the time, setting rules for goods, services, and investments, and largely eliminating tariffs and other trade barriers.
Advantages: Helped create higher-paying jobs in sectors like education, engineering, and banking in Canada. Allowed freer flow of goods and services, providing better access to raw materials, talent, capital, and technology. Trade tripled among the three members since its inception.
Disadvantages: Manufacturing jobs were lost to Mexico due to lower labor costs. Many Mexican farmers could not compete without tariffs and lost their livelihoods. Canadian companies were sold to foreign investors.
USMCA (US-Mexico-Canada Agreement): Replaced NAFTA. Signed November 30, 2018, ratified March 13, 2020. It has a 16-year term (renewable).
Key Differences/Implications: Requires 75% of automotive parts to be manufactured in North America (up from NAFTA's 62%), with 40-45% of these produced by workers earning USD $16/hour or more. American dairy farmers gained free access to sell in Canada. Includes a 16-year "sunset clause" with periodic review every six months. Canada and Mexico have raised issues with existing aluminum and steel tariffs under this agreement.
Globalization Strategies for Companies
Globalization: The process whereby national or regional economies and cultures become integrated through new global communication technologies, foreign direct investment (FDI), international trade, migration, new forms of transportation, and the flow of money. It began after World War II and has increased interdependence among nations, blurring political boundaries.
Three Major Globalization Strategies:
Global Strategy: Regards the world as one big market, assuming all consumers want the same product and respond to marketing similarly. The product and marketing are uniform worldwide, taking advantage of economies of scale. This strategy does not typically respond to individual cultures (e.g., Levi Strauss).
Multidomestic Strategy: Customizes products, services, and marketing for the local culture, with local management determining what is best for the local subsidiary. This strategy is effective when cultural differences are prominent and carries less political and exchange-rate risk (e.g., McDonald’s).
Transnational Strategy: Combines the best elements of both global and multidomestic strategies. It respects the needs of the local market while maintaining the efficiencies of a global strategy. Manufacturing takes place at the least expensive source, while human resources and marketing happen at the local level (e.g., Coca-Cola).
The European Union (EU) and Advantages/Disadvantages of a Shared Currency
European Union (EU): A trade agreement signed in 1993, now encompassing twenty-seven countries in Europe and a population of almost half a billion people. It has its own flag, anthem, currency, and common financial, security, and foreign policies.
Euro: The European currency unit adopted by the European Union and used in most EU countries.
Advantages of a Common Currency: Increased markets, elimination of transaction costs, price transparency, and decreased risk of exchange-rate fluctuations.
Disadvantages of a Common Currency: Loss of tradition, lack of national control, and initial costs of implementation.
World Trade Organization (WTO), APEC, and Other Trade Organizations
Trade Organizations: Groups established to help with the free flow of goods and services. They can be global in scope or national organizations created by individual governments to help domestic companies expand into international markets.
World Trade Organization (WTO): An international organization established in 1995 (with over 150 member countries) that promotes trade liberalization worldwide. Its main purposes are to act as a forum for negotiations, provide a set of rules, and offer a forum for dispute settlement.
Asia-Pacific Economic Cooperation (APEC): A trade organization created in 1989 that unites twenty-one countries surrounding the Pacific Ocean to cooperate on regional trade. Its goals are to foster open and free trade, increase prosperity and economic growth, and develop the Asia-Pacific community.
Organization for Economic Co-operation and Development (OECD): Established in 1961 to promote the advancement of democracy and market economies. OECD members work together to eliminate bribery, money laundering, and fraud, and to create a code of conduct for multinational companies.
World Bank: An organization that provides monetary and technical support for developing countries. It offers loans and grants for education, health, infrastructure, farming, environmental issues, and resource management.
International Monetary Fund (IMF): An organization whose purpose is to promote financial stability, prevent and solve economic crises, encourage growth, and alleviate poverty. It does this by encouraging responsible economic policies, lending money to emerging and developing countries, and providing technical training in areas like banking regulations and exchange rate policies.
The G7 and G20 (and Canada's Place Within Them)
The Group of Eight (G8) / Group of Seven (G7): A trade organization encompassing the major economies of the world that meets to discuss macroeconomic issues such as economic growth, trade liberalization, and helping developing countries. Member countries include France, the United States, Canada, Great Britain, Italy, Germany, and Japan (Russia is suspended). The G7 represents 33% of global exports and includes economies within the world’s top 10.
The Group of Twenty (G20): A trade organization established during the economic crisis of the 1990s to provide a discussion forum for the major economies of the world beyond the G8. It focuses on economic and employment growth, elimination of trade barriers, reforming financial institutions and regulations, and restructuring global financial organizations. The G20 comprises 19 countries and the European Union.
Canada's Place: Canada’s GDP and population are low compared to other G7 and G20 countries. There has been discussion about replacing Canada in the G7 and placing it as a second-tier country in the G20, which would be detrimental to Canada’s interests.
The Role of the UN in International Business
UN Main Purposes: To keep peace throughout the world, develop friendly relations among nations, work together to help poor people (conquering hunger, disease, illiteracy, and encouraging respect for rights and freedoms), and be a center for helping nations achieve these goals.
Role in International Business: The UN is responsible for organizations that influence international business, including the International Labour Organization (ILO), the International Monetary Fund (IMF), and the World Bank. The UN devotes resources to improving standard of living, unemployment rates, and economic conditions globally, with its Economic and Financial Committee dealing with issues like international trade, globalization, and poverty elimination.
Five Main Ethical Issues Affecting International Business
Ethical issues often arise in the following areas:
Environmental Issues: Sustainable development (meeting human consumption while maintaining the environment) is a critical issue. Many companies have been responsible for pollution and resource depletion. Companies and governments often resist environmental plans that could impede economic growth.
Sweatshops: Factories in underdeveloped and developing countries where employees work in unsafe environments, are treated unfairly, and have no chance to address those conditions. They exist due to global competitiveness, corporate greed, and consumer expectations of low prices. Companies owning such factories must ensure workers are paid a living wage and can speak up against abuses.
Corporate Corruption: 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 Dumping: An anti-competitive business practice where foreign companies price their products below market value to increase sales and force domestic competition out of business, then raise their prices (e.g., the ongoing dispute between Canada and the U.S. over softwood lumber).
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, and high rates of disease.
Microcredit: The granting of very small loans (mainly to women) to spur entrepreneurship, allowing them to start small businesses and support their families, is one way poverty is being addressed.
Ethical Imperialism vs. Cultural Relativism
Ethical Imperialism: The belief in universal ethics across all cultures, meaning "if wrong here, wrong everywhere".
Cultural Relativism: The belief that ethical standards depend on cultural context, often summarized as "When in Rome, do as the Romans do".
Non-Governmental Organizations (NGOs): Non-profit organizations with a service and development focus, composed mostly of volunteers and funded through charitable contributions. They may center on trade, education, human rights, or environmental issues.
UNIT 4
Role of Data Management in Marketing
Marketing: Activities that include market research, product development, pricing, advertising and promotion, and sales.
Market Research: Involves finding or collecting data to help solve marketing problems. It is a major part of product development, as companies want assurance of success due to high costs.
Product Development: Most companies use market research to help develop new products, taking consumer reaction into account.
Sales: Businesses must determine the best way to sell their product, whether to retailers, opening their own stores, or selling online.
Primary vs. Secondary Data
Secondary Data: Data collected by someone other than the user, such as censuses and surveys. It is generally less costly to obtain than primary data.
Primary Data: Data observed or collected by a business that relates specifically to its needs or problems. It is typically more costly than secondary data because it is business-specific.
Components of Supply Chain Management
Supply Chain: The sum total of all activities involved in moving raw materials, processed goods, and finished products into an organization, and moving semi-processed or finished goods out of the organization toward the end-consumer.
Main Links in the Supply Chain:
Inventory Management: For retailers, this requires a system that records sales, usually a point-of-sale terminal that tracks stock by SKU.
Storage: Companies are reluctant to be responsible for storage due to valuable space, damage, or theft risks. Each link in the supply chain tries to pass goods on as quickly as possible.
Just-in-Time (JIT) Inventory Systems: Used to eliminate storage altogether by making and shipping goods just as they are needed.
Cash-Flow Management: Involves negotiating payment terms, setting up payment methods, and arranging the exchange of funds across the supply chain.
Letter of Credit: A financial guarantee issued by a buyer’s bank, confirming sufficient collateral to pay for a shipment. Often used for international transactions.
Supplier Co-ordination (Sourcing or Procurement): The practice of finding reliable sources for the products and services that a business needs.
Information Processing.
Physical Distribution: Involves moving goods inward (inbound distribution) and outward (outbound distribution).
Logistics: Infrastructure, Shipping Methods, Forms of Integration
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 includes transportation, inventory management, warehousing and storage, and packaging.
Three Types of Logistics: Military, Production, and Business.
Production Logistics: Processes within a company (usually manufacturing) that ensure each machine and workstation has the right material in the right quantity and quality at the right time.
Business Logistics: A process that ensures a steady flow of needed materials and information to all parts of a business through a network of computer terminals, transportation links, and storage facilities.
Forms of Integration:
Vertical Integration: A business organization in which a company owns the whole supply chain, or significant portions of it, from raw material acquisition to retailing.
Horizontal Integration: A method of expanding a company by acquiring its competitors. This is described as the most effective way for a company to deal with competition.
Shipping Methods (Carrier Selection): The selection of a carrier depends on factors like what is being shipped, weight, speed of delivery, cost, and destination.
Motorized Carriers (trucks, vans, motorcycles): Cost of shipping a full truckload (FTL) is lower than a less-than-truckload (LTL). Many offer freight consolidation, where goods from different sellers are stored until there is an FTL bound for a particular destination.
Rail: Slower than truck transport and has a more limited range. Ideal for long distances and much cheaper than trucks. Can carry materials from ports to inland cities.
Ocean Freight: Used by importers and exporters dealing 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 the size of air shipments.
Containerization: The use of standard-sized reusable metal boxes, designed to fit on top of each other, to store and ship freight.
Intermodal Shipping: The process of using more than one mode of transportation to ship containers.
Issues in the Supply Chain: Reliability of sources, oil prices, unstable political climate, piracy, and optimization challenges.
Sources of Help: Canadian businesses can get help from organizations like the Department of Foreign Affairs and International Trade, The Canadian Trade Index, Customs brokers, and the Canada Border Services Agency.
Intermediaries and Supply Chain Management (Sourcing Strategies)
Outsourcing: The strategic use of outside resources to perform activities that were previously handled internally by the company itself.
Nearsourcing: Sourcing particular business functions or services to a company in a foreign country that is relatively close in distance.
Insourcing: A company’s establishment of a specific division within the business (e.g., advertising department or call center) to handle a function that is normally outsourced.
Offshoring: The transfer of certain business functions by a company to a branch of the company located in another country, usually to save on labor costs.
Inshoring: A company’s contracting out of a function to other businesses within its own country, for example, to another state or province where labor is cheaper or facilities are better.
Inbound Distribution: The process of receiving goods sent to a company.
Receiving Process: The established system a receiving manager uses to monitor and track goods arriving at a business.
Outbound Distribution: The process of arranging the shipment of goods from a company to its customers. Normally, the seller is responsible for arranging shipment.
Ex Works (EXW): A term of sale indicating the buyer is responsible for carrier selection, customs documents, and all charges.
Carrier: A company hired to transport goods.
Bill of Lading: The official document indicating a transportation company accepts goods for shipment, including shipment details.
The Marketing Mix (4 Ps and 2 Cs of International Business)
The Four Ps of International Marketing:
Product: Canadian products sold outside Canada usually need modification to adapt to the culture, language, or laws of the foreign market. Modifications typically occur in packaging (weights, colors, legal, labeling, and language requirements), ingredients, and style.
Place: How products reach the target market. Strategies include:
Centralized Strategy: All manufacturing and marketing are performed in one location.
Decentralized Strategy: A company sets up a manufacturing plant in another nation, hires a sales force, or licenses its brand to a local manufacturer.
E-commerce/E-distribution: Using online platforms to make any business an international business.
Sales Agent: An individual hired on commission to market a product to potential buyers and distributors, often in a foreign country.
Trade Show: A collection of manufacturers and distributors displaying and selling products to registered buyers. Canadian retailers visit international trade shows to find unique selections.
Branch Plants: Building and staffing a factory in a foreign country. This is the most expensive but potentially most effective market entry strategy, offering lower shipping costs, avoiding import regulations/tariffs, and easier product modifications.
Licensing Agreement: A contract granting permission to a company to use a product, service, brand name, or patent in exchange for a fee or royalty (percentage of sales). Types include manufacturing, distribution, and franchising agreements.
Acquisitions: Buying a competing company to deal with competition or expand market (a form of horizontal integration).
Price: Companies using a centralized strategy often find they must increase product prices when selling in foreign markets, potentially making them uncompetitive. Price increases arise due to added expenses in labor costs (though labor may be cheaper abroad), shipping costs, duties/tariffs, and legal costs for modifications.
Promotion: Three ways to promote and advertise products in foreign markets:
Use existing ads: Saves money if markets are similar.
Translate ads: Difficult to replicate a campaign in another language.
Create new ads: Expensive, but the Internet has made customizing promotions much easier.
The Two Cs of International Marketing (Demand Factors): After deciding on the 4 Ps, a company must ensure sufficient demand for its product based on these two factors:
Consumers: A business must determine its target market (the segment of consumers a product is aimed at). Target markets are typically defined by demographic information (statistical data like age, gender). Canadian businesses must avoid ethnocentrism (the belief that one's own culture/values are superior) when selling abroad. It's crucial to determine if consumers in the foreign market have enough discretionary income (money remaining after essential living expenses) to afford the product.
Competition: Similar products already in a foreign market pose a major marketing problem.
Direct Competitors: Businesses that provide products or services almost identical to those offered by the company.
Indirect Competitors: Any product that vies for consumers’ discretionary income.
Competitive Advantage: The ability of one company to produce a product more cheaply than another. Typical competitive advantages include: lower production costs (due to economies of scale – producing more units in one factory makes each unit cheaper), lower distribution costs (e.g., having factories in the target market), product differentiation (differences in flavor, quality, packaging, scent), and brand equity (the number of consumers who can identify the brand).
UNIT 5
Impact of the 2008 Financial Crisis on the Financial System
'Buy American' Policy: Following the crisis, the American government implemented a ‘Buy American’ policy that favored domestic suppliers. This meant Canadian companies had to expand into different international markets.
Organized Labour: Organized labor decreased as companies, particularly in the auto sector, had to retool to adapt to the new economic landscape.
(Note: The sources provide specific impacts related to trade policy and labor rather than a broad overview of the financial system impact.)
Visas and Passports
Obtainment: Visas and passports are obtained in embassies, consulates, and High Commissions (High Commissions are embassies in British Commonwealth countries).