Notes for business Made in Canada, Eh? - - - - - - - - - A business is an organization that produces or sells goods or services to satisfy the needs, wants and demands of consumers for the purpose of making a profit. A need is something you must have, something you can't do without. A good example is food. If you don't eat, you won't survive for long. Many people have gone days without eating, but they eventually must eat. You might not need a whole lot of food, but you do need to eat. A want is something you would like to have. It is not absolutely necessary, but it would be a good thing to have. A good example is music. Now, some people might argue that music is a need because they think they can't do without it but you don't need music to survive. You do need to eat. We consider a business that does most of its transactions within the borders of the country in which it is based to be domestic For example, a domestic business in Canada is owned by Canadians, relies primarily on products and services made in Canada, and sells the products it makes and services it provides to people who live in Canada. Let’s celebrate CHAPMAN’S ICE CREAM as an example of a domestic business! There are five ways for a business to be considered an International Business: Own a retail or distribution outlet in another country. o A retail outlet is a storefront in another country while a distribution outlet is a place that redistributes products to retailers, wholesalers, or directly to consumers. Own a manufacturing plant in another country. o A manufacturing plant is one or more buildings with factories for producing goods. Export to another country. o Exporting is when a business sends goods or services to another country for sale (e.g., Canada exports lumber to China, Japan, the United States, Europe and South Korea). Import from a business in another country. o Importing means to bring goods or services into a country for sale (e.g., Canada imports electronic equipment from China and Japan). Invest in a business in another country. o This involves a company or individual from one nation investing in assets or ownership stakes of a business based in another nation (e.g., High net-worth Canadians have more than 27% of their equity holdings in U.S. companies). Early trade records indicate that items such as oils, spices, artifacts, silk, tea, clothing, gold, silver, fruit, wine, ebony, and ivory were all traded regionally in areas such as North Africa, China, India, northern Europe, Central Asia, the Mediterranean and Black Sea Coasts. Globalization was initiated when larger cities with different classes of people started to pop up across the near-east and Asia - - - - - - - The Egyptian Empire had large advances in engineering, technology, and art; the Chinese Empire in mathematics, science and warfare. Greek civilization created the system of democracy upon which many modern governments are based and was also a centre for arts and philosophy. From 500 BCE to 500 CE, the Roman Empire was the dominant force in the western world. At its height, the Roman Empire controlled much of western Europe and established many of the first trade routes - including the origin of the Silk Roads After the fall of the Roman Empire (500 CE), the growth of technology stalled in the western world, leading to the period of the Middle Ages. During this system of feudalism, the upper class controlled all the imported resources and trade Between 1000 and 1300 CE, the Crusades reconnected Europe with the East, resulting in a demand for luxury goods from the Orient (silks, tapestries, precious stones, spices and perfumes) Italian seaports became trade hubs for Eastern finery - passing these goods on to Europe. Eventually, the demand for foreign resources - especially spices and silk from the East grew so high that the wealthy paid for merchants to transport goods along the Silk Road from China to western Europe. Merchant ships became a more efficient way to transport goods but also brought disease. Population began to increase and improved transportation technology allowed for the immigration of people to new parts of the world. The exchange of ideas and the rediscovery of old ideas brought about the Renaissance Period, of which Italy was the epicenter. This sparked art, literature and cultural change throughout Europe. There was now a drive to explore the rest of the world. Rulers wanted to claim new territory to acquire ideas, money, and goods to trade The invention of the printing press and improvements in navigation led to the expansion of the western world Spain and Portugal sought to find trade routes to circumvent the trade market that was dominated by Italy at the time. It was during this time period that Columbus arrived in “The Americas” originally mistaking them for India, from where he was hoping to acquire silks and spices. Samuel de Champlain formed the first permanent settlements in Canada Back in Europe, increased population led to the growth of the middle class which began to create a more modern capitalist economy. Sugar was a particularly important import for the American colonies, which they got from the Caribbean in exchange for food from American farmer Brown sugar processed in New York was refined into white table sugar and bagged for sale or made into candy The residue from this process - molasses - was distilled into rum and traded in Europe and West India The fur trade in Canada started to decline - partially because consumer tastes were switching to the new fad of silk hats - The Canadian Pacific Railway was completed in 1885 and brought B.C. into Confederation Canada signed the North American Free Trade Agreement (NAFTA) and eliminated all trade barriers among the United States, Canada, and Mexico by 2008 Connecting the Dots - - - - - Interdependence: Dependence of entities such as people or countries on each other. Canada's interdependence on other countries for imports and exports has grown to record levels because Canada is a trading nation. At one time, international business looked upon the world as a series of nations and concerned itself only with occasional interactions with other nations understanding of interdependence is crucial to success in international business. Interdependence results because of something called Specialization this means that countries (and companies and people) can benefit by specializing in the production of the things they are best at, and then trade in order to obtain other goods that they want If a country is better at producing something than another country, we say that they have an Absolute Advantage in the production of that good If a country’s resources are better suited to the production of some goods than others and they have a lower opportunity cost then we say they have a comparative advantage A country has a comparative advantage, then they will benefit from producing that good and trading it for a good in which they do not have a comparative advantage Interdependence means the mutual dependence of countries on each other Become an increasingly critical issue with the growth of globalization: o Trade barriers have been gradually reduced around the world, as have restrictions of the flow of investment capital between countries. o There have been dramatic improvements in information and communication technologies, and an increase in the sharing of this technology. o Methods of transportation have improved, making it easier for people to travel and move products. o There has been an increase in the number and size of multinational organizations and international organizations. Primary Industries take raw materials from nature, process them slightly, and sell them to other businesses that use them to make other products or provide services. Canada has an abundance of natural resources. Primary industries have played an important role in our economic history and continue to be important today. Secondary Industries include both processing and fabrication types of manufacturing. Grinding wheat into crude flour is an example of processing. A company then refines and enriches that flour through a fabrication process to create a manufactured good. Although manufacturing’s role in our economy has declined, it still represents a large portion of Canada’s GDP, and there has been a recent surge in growth in the primary manufacturing industries. - Tertiary Industries provide services to their customers. They do not sell tangible items - although rental services allow customers to use tangible items for a period. Services provide intangibles that people need or want and are often activities performed by experts who can do what untrained people cannot. Services play a very important role in Canada’s economy, with services comprising almost three-quarters of our GDP
