Globalization: Interdependence

1. Globalization: Interdependence Primary, Secondary, and Tertiary Industries

2. Interdependence What did you have for breakfast this morning?

3. Interdependence • To enjoy breakfast, you must rely on trade with foreign businesses • Without trade, you’d probably just be eating toast • Other nations are equally dependant on trade for things they need • For example, the U.S. relies on Canada’s energy (gas, oil, hydroelectric power), many nations rely on our wheat for their flour, our trees for paper, and our fish for dinner

4. Interdependence • All nations in today’s world must depend upon each other for products or services that their industries either cannot make or cannot grow, or that other nations grow better. • The reliance of two or more nations on each other for products or services is called interdependence • There are 3 main areas of interdependence in trade: primary, secondary and tertiary industries

5. Primary Industries • Canada’s export strength is still in the primary industry sector; the sector consists of extraction and initial processing of all raw materials • There are 5 major primary industries: agriculture, fishing, hunting and trapping, forestry and logging, and energy and mining • A 6th primary industry is often added to the list; water

6. Primary Industries • Primary Industries are situated mainly in eastern and western Canada • West produces: oil, gas, metals, chemicals, and agricultural products (beef and wheat) • Atlantic provinces capitalize upon their offshore oil reserves, fisheries, and mines

7. Primary Industries • Primary industries add value to products by extracting them from the earth or sea and processing them • Our greatest number of exports, both to U.S. and other trading partners, come from businesses in the primary sectors • For example, we sell more oil to the U.S. than the Middle East (about two million barrels per day)

8. Issue: Canada’s Dirty Oil • Quick Facts • http://dirtyoilsands.org/visuals • http://dirtyoilsands.org/visuals/dvd/10min

9. Secondary Industries • Secondary Industries are made up of primary manufacturing (processing) and secondary manufacturing. • Secondary manufacturing produces both capital goods (products used by businesses i.e., trucks, machinery) and consumer goods (clothing, packaged food, tv’s) • Canada has a weak manufacturing sector

10. Secondary Industries • Canada relies on foreign investors to invest in businesses in Canada, provide jobs for Canadians, and make the products we use • Over 50% of all the processing and manufacturing businesses in Canada are owned by foreign companies i.e., Kelloggs, Proctor and Gamble, Kraft Foods • An economy such as Canada’s who relies heavily on businesses owned by foreign companies, is called a branch-plant economy

11. Secondary Industries & Branch Plants • A branch plant is a factory operated from a country outside of it’s host country • Kellogg’s for example, is based in Michigan, but it’s head office is in Mississauga and it’s main manufacturing plant is in London, ON • The Canadian Govn’t initiated this in 1879 through the National Policy, which stated that businesses wanting to reach Canadian markets needed to build factories in Canada • This resulted in direct investment but also resulted in the branch-plant economy

12. Advantages/Disadvantages of Branch-Plant Economy • Branch plants employ Canadian workers, pay Canadian taxes, and provide provides on which Canada depends • Disadvantages to relying on foreign ownership are: • 1.Business Functions: operations reduced from functions performed at head office such as research and development, and upper management • 2. Innovation: little in the way of innovation at the branch plant; it follows the lead of parent company • 3. Use of non-Canadian Materials: satellite factories rely on imports from country where parent company is located • 4. Exports: branch plants rarely export; they serve the Canadian market

13. Tertiary Industries • Tertiary industries do not make anything or extract anything from the earth, but provide necessary services to other businesses and consumers • Ex: Banking, construction, communications, transportation, etc • Tertiary industries make up what is known as the service sector

14. Tertiary Industries Cont’d • The largest service industry is retail sales • Retailers traditionally buy merchandise from a manufacturer or a distributor and sell it to the final user • Ex: Diamond companies create gems out of raw diamonds and sell their products to retail jewellers who add the final value to the product by making it available to the consumer

15. Tertiary Industries – Cont’d • Canadian retailers are major importers, either directly or indirectly of foreign products – just look at the shelves in shoes and clothing stores • Foreign retailers dominate the Canadian retail service sector – few major chain stores not owned by corporations with head offices in another country

16. Popular Canadian Retailers that are Foreign Owned • Wal mart • Future Shop • H & M • Zellers • Foot Lockers • Costco • Sears • Ikea • Home Depot • HMV • The Body Shop

17. Recent Foreign Takeovers of Canadian Businesses • Molson – Owned by Coors (U.S) • Bauer – Owned by Nike (U.S) • CCM – Owned by Reebok (Germany) • Corel – owned by Vector Capital (U.S)

18. How International Business Helps Canadians -Organize yourselves into 8 groups; 3 people per group -When you are in your groups have a representative from your grouppick up the group challenge from Mrs. Forbes -When you finish the 1st activity, pick up the 2nd one, there are 4 in total