International Business
Practices
Canada Trades
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Company growth
Entry into new markets
Expand customer base
Increase profits
Access to inexpensive supplies
Lower labour costs
Access to financing
Entering International Markets
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Foreign Portfolio Investment
Importing
Exporting
Licensing agreements
Franchising
Joint Ventures
Foreign Subsidiaries
Foreign Portfolio Investment
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1.
2.
By purchasing stocks, bonds, and other financial
instruments
To increase wealth and save for retirement
Looking for dividends, other the interest that can be
gained
Money markets – essentially IOU’s from the
government, financial institution or large corporation
(short term, safe, liquid – can be converted to cash)
Capital markets – directly purchasing stocks on
international stock markets (also mutual funds)
Why Invest Outside of Canada?
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To diversify investments; less risky than
placing all bets in one place
Greater rates of return (emerging
markets experiencing strong economic
growth)
Importing
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Bringing products or services into a country
Used for another business (B2B)
Global sourcing – process of buying
equipment, capital goods, raw materials, or
services from around the world
Benefit – keeps costs down, improves quality,
allows access to new technologies
Importing
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For resale:
Canadian Tire imports BBQ’s made in US
The Bay imports clothing from Italy
Future Shop imports TV’s from Japan
Services also imported
Ex: Call centres located throughout the world
answer calls from Canadians who have
questions about computers etc
Your Turn
What are Canada’s Top Ten Import
Markets by Country?
Exporting
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Occurs when companies outside of
Canada purchase goods and services
Like imports, may be B2B, or for resale
Ex; RIM exports its products both to
other businesses and to end consumers
Ex: Tele Tech (multi national company in
Colorado) has a call centre in London,
ON
Your Turn
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What are Canada’s Top Ten Export
Markets, by country?
Value Added
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Big problem w Canada’s imports and exports
Value added is the amount of worth that is
added to a product after it is processed
Difference b/w cost of raw materials and cost
of finished goods
Companies that focus on extraction of primary
goods do not make as much as those that
process them
Licensing Agreements
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Gives a company permission to use a product,
service, brand name or patent in exchange for
a fee or royalty (often only applicable in certain
region)
Ex: Virgin Mobile (British company) has
licensing agreement with Bell Canada and
allows Bell to use brand in Canada
Virgin benefits: increased profits
Bell benefits: access to extensive wireless
service options
Exclusive Distribution Rights
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Another form of licensing agreement
Allow a company to be the only distributor of a
product in a specific area or country
Often uses as intial entry into foreign market
Ex: when iphone initially entered Canada
rogers had only technology that supported the
iphone and they had exclusive Canadian rights
to sell it
Franchising
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An agreement to use a company’s name, services,
products and marketing
Franchise signs a contract, agrees to rules of parent
company, for a fee the franchisor provides service
support in many areas
Ex: McDonalds, Wendy’s, Subway, Little Ceasars
Canadian owned – Boston Pizza, Mr. Sub, Second Cup,
Tim Hortons, etc
Advantages: less risk, access to expert
knowledge/research and financial aid
Disadvantages: less profit, strict quidelines, loss of control
Joint Ventures
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Occurs when two businesses, one of which is
usually located in foreign market, form a new
company with shared ownership
25-40% of all foreign investment is in the form
of joint ventures
Advantages: to be allowed in a country (China
and Cuba) to gain access to market, products
and customers, share financial, managerial,
technology and cultural information etc
Joint Ventures Cont’d
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Disadvantages: 50% fail
Ex: in 2010 Toyota closed a plant for the first
time in history; its join venture with GM in
California was negatively affected by slumping
US auto sales
Joint ventures that succeed often take years to
generate a profit – both needs and wants of
two companies must be taken into
consideration
Successful join venture: Sun Life Financial with
Sun Life Everbright Group in China
Foreign Subsidiaries (Wholly
owned Subsidiary)
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Most comprehensive type of IB
When a parent company allows a branch of its company,
in another country, to be run as separate entity
Parent company sets financial targets and as long as they
are being met it’s allowed to operate independently
Ex: Toyota (better for Japan – distribution costs less and
Canada benefits from investment and employment)
Canadian companies with subsidiaries (Bombardier, TD)