1. Competing in Global Markets

2. What Is Globalization? An interconnected and interdependent world economy oGlobalization of markets: Not a local or national market, but the whole world oGlobalization of production: Moving production to locations to take advantage of lower costs or better quality oOffshore outsourcing (offshoring): Movement of production away from a domestic production site to a foreign location © 2010 Pearson Education, Inc. 2

3. Exporting and Importing Exporting – Selling products to another country Importing – Buying products from another country.

4. A currency is weak when it devalues against currencies of major trading partner oExporters typically prefer a weak dollar because their products are more affordable to foreigners A currency is strong when its value improves compared to trading partners’ currencies oImporters prefer a strong dollar because the cost of importing foreign goods is less Currency

5. Why trade with other nations? No country is self – sufficient Other countries need products that prosperous countries produce Natural resources and technological skills are not distributed evenly around the world

6. Absolute Advantage Absolute advantage means that a country has a monopoly on a certain product or can produce the product more efficiently than any other country can. Ex. U.S produces 700 million gallons of wine per year, while Italy produces 4 billion gallons of wine per year. Italy has an absolute advantage because it produces many more gallons of wine (the output) in the same amount of time (the input) as the United States.

7. What kinds of products can be imported or exported?

8. Prohibited and Restricted Goods Countries will allow only specified quantities of items, dollar values of good to be imported – known as quotas. Restrictions are also imposed to protect the health and safety of a country’s inhabitants. Canada is strict with: ▫Pets/animals ▫Plants/ Soil ▫Agricultural Products ▫Firearms/explosives

9. Trade protectionism The use of government regulations to limit the import of goods and services. This allows domestic producers to survive and grow, producing more jobs. Tariff – a tax imposed on imports

10. The tools of protectionism ▫Protective tariffs- raise price of foreign products ▫Revenue tariffs- raise money for government ▫Non – tariffs barriers include safety, health, and labeling standards, embargo, import quota

11. Examples of barriers Denmark requires butter to be sold in cubes not tubs Ban on Canadian beef

12. Common market A regional group of countries that have a common external tariff, no internal tariff, and a coordination of laws to facilitate exchange. Ex. European Union – 28 countries

13. What are the benefits of International Trade? What are the negative aspects of International Trade?

14. Legal International Business Challenges Laws Regulatory standards Access to unbiased judicial system No universal laws, regulatory standards, or global court exist to settle disputes in the global economy © 2010 Pearson Education, Inc. Publishing as Prentice Hall 14

15. Political International Business Challenges Not always a free market Not always stable, democratic governments Possible market failure Possible government failure © 2010 Pearson Education, Inc. Publishing as Prentice Hall 15

16. Questions If there were no international trade in Canada, what do you think the impact on Canadians would be? What might be some of the consequences if Canada removed its restrictions on the importation of plants and soils?

17. Assignment With a partner or group, choose a country you are interested in. Research what it is like to do business in that country and compare this with doing business in Canada. Examine factors such as: ▫Standard of living, weather, politics, education, housing, economy and others that affect the way in which business is conducted.