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Fundamentals of International Business

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Presentation on theme: "Fundamentals of International Business"— Presentation transcript:

1 Fundamentals of International Business
 CHAPTER 1: What Is Trade? Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

2 Fundamentals of International Business
Key Terms globalization interdependence primary industries secondary industries branch plant tertiary industries service sector foreign direct investment portfolio investment culture industry business transactions domestic business international business domestic market foreign market trade foreign or international trade trading partner duty or tariff Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

3 Fundamentals of International Business
Chapter Objectives By the time you finish this chapter, you should be able to: Describe key concepts related to international business Explain how and why Canada’s major international business relationships have evolved over time Demonstrate an understanding of how globalization has affected international business Describe ways in which international business activity develops interdependence among nations Evaluate the benefits and drawbacks of international trade for Canada Explain how the global market has affected consumer demand Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

4 International Business Defined
The manufacturing and/or sale of goods and/or services to satisfy the wants and needs of consumers to make a profit. Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

5 International Business Defined
Transaction An exchange of things of value. $ Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

6 International Business Defined
Domestic business A business that makes most of its transactions within the borders of the country in which it is based. A domestic business in Canada is: owned by Canadians relies on Canadian products and services sells products and services to Canadians Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

7 International Business Defined
The economic system of transactions conducted between businesses located in different countries. Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

8 International Business Defined
Domestic transactions are made between two Canadian companies. International transactions involve a Canadian company and a non-Canadian company. Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

9 International Business Defined
Domestic market The customers of a business who live in the country where the business operates. Foreign market The customers of a business who live in a different country than the one where the business operates. Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

10 International Business Defined
Five ways for a business to be considered an international business: 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 Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

11 International Business Defined
Trading partner When a business in Canada develops a relationship with a business in another country, that country becomes a trading partner with Canada. It is important to note that international trade takes place between businesses, not countries. Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

12 History of Canadian Trade
Major fur trade routes used to travel between Canada and Europe Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

13 History of Canadian Trade
Trade with the United States United States declared independence from Britain in late 1700s Needed to become self-reliant Invention of steam engine, cotton gin helped rapid growth of American industry Canada supplied raw materials that were needed in the United States United States became Canada’s largest trading partner—this remains true today Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

14 History of Canadian Trade
Trade with Asia Canada began trading with Japan after World War II Japan became known for high-quality electronics and automobiles China has more recently become a trading partner Chinese-made products are inexpensive and well made, and popular with North American retailers Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

15 History of Canadian Trade
Trade with Mexico Developed since signing NAFTA in 1993 Goods made in Mexico and the United States now enter Canada duty-free Mexico has become one of Canada’s top five trading partners since 2000 Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

16 History of Canadian Trade
Trade with Emerging Markets The Middle East Has traditionally centred on oil, but this commodity is not sustainable Political instability, lack of industrialization in much of the region has limited trade United Arab Emirates (Dubai), Israel, and Egypt have established trading relationships with Canadian businesses that do not depend on oil Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

17 History of Canadian Trade
Trade with Emerging Markets India Population of over one billion people Workforce generally young and well educated Has become major centre of outsourcing and manufacturing Lack of infrastructure and widespread corruption are persistent problems Indian companies are aggressively expanding into international markets Used under license from Shutterstock, Inc. Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

18 History of Canadian Trade
© iStockphoto.com Trade with Emerging Markets Africa African imports to Canada are very low Business opportunities limited by unstable governments, lack of infrastructure, rural economies Rich in primary resources Some countries (Morocco, South Africa) are beginning to emerge as major trading partners Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

19 Fundamentals of International Business
Globalization Globalization The process whereby national or regional economies and cultures have become integrated through: New global communication technologies Foreign direct investment International trade Migration New forms of transportation Flow of money Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

20 Fundamentals of International Business
Globalization History of Globalization Began after World War II with establishment of the United Nations and fostering of trade relations between countries Economic ties between countries strengthened—tax treaties were negotiated, tariffs abolished, global corporations developed New technology allows international business to occur in real time, transforming the globe into one market Has increased interdependence of all nations, blurring political boundaries Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

21 Fundamentals of International Business
Interdependence Interdependence The reliance of two or more nations on each other for products or services. Three main areas of interdependence: 1. Primary industries 2. Secondary industries 3. Tertiary industries Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

22 Fundamentals of International Business
Interdependence Primary industries The sector of the economy characterized by the extraction of natural resources from the earth or sea. Five major primary industries: agriculture fishing, hunting, and trapping forestry and logging energy Mining In Canada, water is sometimes included in this list as well Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

23 Fundamentals of International Business
Interdependence © iStockphoto.com Secondary Industries Industries that create a finished, usable product. Secondary manufacturing produces capital goods (products used by businesses) and consumer goods (products purchased by individuals). Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

24 Fundamentals of International Business
Interdependence Branch plant A factory owned by a company based in another country. Canada has a branch-plant economy, based on businesses owned by foreign interests National Policy of 1879, which stated that businesses wanting to reach Canadian consumers needed to build factories in Canada, led to this situation Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

25 Fundamentals of International Business
Interdependence Example of a company with branch plants in Canada Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

26 Fundamentals of International Business
Interdependence Tertiary industries (service sector) Industries that do not make a product or extract resources from the earth, but provide necessary services to consumers and other businesses. Examples include banking, construction, communications, transportation, and retail sales. Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

27 How International Business Helps Canadians
Variety of products New markets, more jobs Foreign investments New processes and technologies Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

28 How International Business Hurts Canadians
Loss of culture/identity Increased foreign ownership of companies in Canada Foreign companies are loyal to investors and executives in home country Research and development is usually carried out in the home country Exports are reduced, as products manufactured in branch plants stay in Canada Revenues leave Canada to pay head office costs Economic destabilization Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.

29 How International Business Hurts Canadians
Products commonly used in Canada are imported from countries around the world. Chapter 1: WHAT IS TRADE? Fundamentals of International Business Copyright © 2010 Thompson Educational Publishing, Inc.


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