Chapter 1 Notes
Domestic vs International Business
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Business: is the manufacturing of goods or services in order to make a profit
o Term “trade” is used interchangeably with business
Transactions: exchange of things of value
Domestic Business: business that transacts mainly in the country it was base din
o
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ie owned by Canadians, in Canada, selling to Canadians (Rare)
International Business: economic system of transactions conducted between businesses in
different countries
Domestic Transaction: between 2 Canadian companies
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International Transaction: between Canadian + non Canadian company
Domestic Market: the customers of a business who are in the same country as the
business
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Foreign Market: the customers of a business who are in a different country as the
business
5 Ways for businesses to must be international
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MUST own retailers or distributors in another country
MUST own manufacturing plant in another country
MUST export to other countries
MUST import from others
MUST invest in other country businesses
Trading Partner: Canada businesses make relationship with businesses in another country, so
they would be Canada’s trading partner.
History of Canadian Trade
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European Trade
o 1700s – trades grew fast after permanent Canadian settlement
o Demand for raw materials (beaver pelts, fish, lumber)
 Europe manufactured Canada’s raw materials
o After 7 years war, England and Canada made trade agreements (help war torn
France)
 near-port cities used to facilitate trade import/exports
US trade
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Late 1700s, US independence and self reliant
Steam engine 1775 James Watt: revolutionized manufacturing and transporting
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Cotton Gin by Eli Whitney: made cotton fibers, traded cotton with Canada
USA did most of Canada’s raw material manufacturing
To this day, US remains as Canada’s biggest trading partner
Mexico
 NA Free Trade Agreement (NAFTA) made duty free trade in North
America
Asian Trade
o
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1940s – Traded with Japan for electronics and cars
China manufacturing (Wal-Mart $15B to China)
Trade with Middle East
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Oil
Politics, lack of industrialization, and technology limited trade
Dubai, Egypt, Israel have trades asides from oil
Indian Trade
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High, educated population
Outsourcing and manufacturing
Although open government, lack of infrastructure and issues troubled trades
India aggressively expanded internationally
 Imports: Linen, Rice, diamonds, clothes
 Exports: fertilizers, vegetables, newspaper, copper
African Trade
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Very low exchange with Canada (1% import, 3% export)
Corrupt government, infrastructure problems loom
Lots of primary resource potential
South Africa (no-oil) and Morocco (oil/fruits) trading partners:
Globalization and Interdependence
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Globalization: where economies and cultures have become integrated through new
global communication, investments, trade, and transport
o easy to globalize nowadays
o global sales, finance, marketing, manufacturing, transportation = globalization
o international business IS NOT globalization
 businesses can operate internationally but not globally
o global businesses can be affected by global events
 2008 recession
 Banks lent at low rates
 not getting returned, lost money
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closure of operations forced
History: Globalization began after WW2
o United Nation first sign of globalization
 Helps negotiate treaties and tariffs
Technology: Internet/cellular made trades nearly instant, quick, even at remote places
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Social Issues
o China – India building big economies
o Large companies want to expand in China/India
 Workers, moneyflow from huge population
o Blur of political boundaries
 EU collaborated all Europe nations
 Agreements merge borders
Interdependence: reliance between 2 or more nations for each other’s products and
services
o eg US relying on China to make goods
Primary Industries: Mainly Raw materials
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Agriculture, Hunting, Fishing, Energy/Mining, Forestry (FEFAH)
Western Canada: oil, gas, metals, beef
Eastern Canada: oil, offshore oil, minerals
Secondary Industries: manufacturing or processing capital goods or consumer goods
o Canada as good manufacturing paper, oil refining, diamond, paper
o Canada relies on US and China for making other goods
 Branch Plant: a factory located outside of host country
 Canada branch plant policy saying you must have a factory to conduct
business here
 Disadvantages of branch plants (3)
 Business reduction in roles mainly R&D and execs
 Innovation follows parent company
 Exports lack – made in Canada for Canadians
 Non-Canadian Materials – uses imported materials often
 Foreign secondary + domestic secondary can add value to raw materials
Tertiary Industries: provides services for consumers and businesses
o
Retail is the largest (banking, construction, communication)
 Canadian retail depend on imports
 Most Canadian retails are owned by foreign places
How International business help Canadians
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Variety of products
o most products made in USA, but we have access to those
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experiences from around the world
electronics mostly imported
benefit from cheap labour and materials in China and India
New Markets, More Jobs
o 34 M pop’n in Canada, 100M pop’n in USA, 1B+ pop’n in China
o BL: make products that suit Chinese demographics
o Tim Hortons USA locations mean they hire more people
o Foreign companies in Canada spend more money on R&D
Foreign Investments
o (1) Foreign Direct Investments (FDI): done to control all or some of business’
operations (startups)
o (2) Foreign Portfolio Investments: stocks/bonds/funds issued by companies to
own a part of it
o HBC went bankrupt if it wasnt for foreign investments backing them up
New processes and Technology
o medical, consumer electronics
How International business hurts Canadians
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Loss of culture/identity
o Movies are mostly representing American culture, rare about Canada
 CRTC regulates how much Canadian TV shows are shown in Canada
 35% of radio music must be canadian
 M – Music
 A – Artist
 P – Produced
 L – Lyrics
 Canadians are often aware of Canadian books and TV shows due to
recognition
o Increased foreign ownership of Canadian companies
 Foreign companies are likely to stay loyal to their come country
 often leaves Canada in the dark when corporate problems rise
 R&D is often left in home country, making such jobs not in Canada and
lowered profits
 Reduced Exports: foreign branch in Canada does things for Canada and
doesnt export
 Revenues leave Canada pay head offices: Canadian branch helps pay head
office costs
 This lowers actual income and lesser taxation.
 High jobs like accounting, advertising, and marketing is done in
home country
 Economic destabilization, Global events can influence and impact
Canadian economy due to many plugins from foreign businesses
 Eg 2008 American “Buy American” campaign negatively affected
CDN economy.