Introduction to International Business Businesses & International Business

2. Introduction to International Business • Businesses & International Business • Countries & International Business • International Business in Canada This presentation contains four sections:

3. Section 1: Introduction to International Business

4. International business is…. …conducting one or more of the functions of business internationally. It can include international trade, imports/exports, licensing in other countries, outsourcing work across borders, and foreign investment.

5. Boundary conditions such as agreements, international monetary systems, etc. • Organizations such as WTO, EU, UN, etc. Firm Individual Supra-societal Nation/state Industry Group • Boundary conditions such as national policies and laws • National politics and economic situations • Conditions that industries create such as competition, technology, specialization, lobbying/political pressure, efficiency, etc. • Conditions that individual firms create, such as employment, policies, economic impact, etc. • Conditions on groups within firms include changes to working conditions, learning, change, impacts on employment, etc. • Individual conditions such as motivation, talents, expertise, work/life balance, etc. Levels of International Business Source: Brian Toyne & Douglas Nigh, “A More Expansive View of International Business.”

6. The Government of Canada defines globalization as “the increased mobility of goods, services, labour, technology and capital throughout the world. Although globalization is not a new development, its pace has increased with the advent of new technologies, especially in the area of telecommunications.” • This definition illustrates that globalization is a key factor in the growth of international business. Globalization: What Is It?

7. Globalization: What’s the Dispute? economic growth wealth disparity environmental threat prosperity = peace jobs hurts human rights common culture anti-democratic all can succeed homogenized culture

8. Many people are for globalization, while many othersare against it. The degree to which globalization is accepted impacts how international business activities will develop. • In pairs, create a t-chart and research the arguments for and against globalization using resources available to you at school • After reviewing the arguments, write down your personal conclusion about globalization which states your position on the issue. Back up your position with reasons. Activity: Understanding the Arguments

9. Section 2: Businesses & International Business

10. International business as an integrated part of an organization… “Overseas operations used to be thought of as appendages or subsidiaries to help increase sales; now, they’re part of a network for accessing knowledge and human capital around the world.” Christopher Bartlett, “Global Myth Manager” in Fast Company, Issue 8, p. 134.

11. FUNCTIONS The 5 Functions of Business in an International Context Management Management is the function that plans & organizes all business activities. International business managers seek out opportunities in other countries to fulfil business functions, and tocoordinate them. Production The factors of production are: land, capital, labour, technology, and entrepreneurship. Many international businesses conduct functions in other countries. For example, some North American businesses manufacture goods in other countries where labour and capital are less expensive and accessible. This is especially common in software development. Production Management Marketing Marketing International businesses apply one or more of the 4 P’s (product, place promotion, and price) in other countries, selling products or services in different countries. Continued…

12. FUNCTIONS The 5 Functions of Business in an International Context (continued from previous slide) Finance A company may engage in international business through international finance: either investing their funds in other countries, or by engaging investors from other countries to infuse capital. Human Resources Human resources deals with hiring, firing, benefits, wage payments, record-keeping, health and safety, and all other activities that deal with employees. In North America, outsourcing the human resource function to developing countries where labour is considerably less expensive is becoming increasingly common. Human Resources Finance

13. What is a Multinational Company? An enterprise that conducts business in several different countries

14. More About Multinationals • Account for over 33% of world output, and 66% of world trade • Approximately 25% of world trade takes place among multinationals Source: J. Gray. False Dawn: The Delusions of Global Capitalism. London: Granta, 1999

15. Successful Multinational Characteristics • A “global mindset” • The ability to work with people from diverse backgrounds • A long-range perspective • The ability to manage change and transition • The ability to create systems for employee learning Source: John B. Cullen, Multinational Management: A Strategic Approach. Cincinnati: South-Western College Publishing, 1999.

16. Trade agreements and policies that make international flow of goods & services easier • Fast and affordable means to move products and services across the world • Technology opens doors to rapid exchange of information and financial transactions • Varied costs of labour and other resources makes international production attractive in some countries Factors Affecting Growth of Multinationals

17. Research one multinational company and report back on: • What products/services it produces (including subsidiary companies) • Which countries it does business in, and what business it does in those countries • Its recent annual earnings • Any other interesting information you uncover • Differentiate between the characteristics of multinational and domestic companies. • Organize your findings in a slideshow or chart paper and share with the class. Activity: Getting to Know a Multinational

18. Section 3: Countries & International Business

19. Trade Among Nations: Interdependence • Links financial markets and economies • Impacts currency • Can result in challenges to legislation through trade wars and consumer issues such as: • Pressure to change labour/human rights laws • Pressure to change taxation and trade policies • Pressure to alter political structures International business causes greater interdependence among nations in a variety of ways:

20. Technology • Currency • International agreements • Policies • Non-governmental Organizations (NGOs) Factors Affecting International Trade Each of the following will be discussed in the slides that follow

21. Information can flow from one part of the world to another instantaneously • Borderless finance – international investments, online transactions, etc. • Low cost and widespread availability of technology makes it affordable for small and large businesses Technology

22. The level of currency can either promote or hinder international trade • Weak currency makes goods and services cheaper for other nations to purchase, while strong currency has the opposite effect Currency

23. Contemporary trade agreements promote “free trade” in which nations agree to support mutual economic growth by allowing certain types of goods and services to be traded with reduced or 0 tariffs or other barriers • Trade agreements, therefore, contribute to international trade among those nations included in them • Examples include: NAFTA, FTAA, EU, APEC International Trade Agreements

24. Industry protection (e.g., Canada’s Export and Import Permits Act or EIPA) • Tariffs (duties and taxes on imports) • Non-tariff barriers (e.g., embargos, restrictions, etc.) • Visa, passport, and immigration policies (restrictions to the flow of people, which can deter international travel and movement of workers) Policies Types of policies that affect international trade :

25. NGOs • A variety of non-governmental organizations actively promote international trade through lobbying, bringing together influential individuals and groups, and compelling research and reports • Examples include: • World Trade Organization (WTO) • Organization for Economic Cooperation and Development (OECD) • The World Bank • International Monetary Fund (IMF) • Some are considered to be controversial and biased

26. “Fair Trade:” An Emerging Issue • Fair trade refers to international trade that respects all parties involved • The concept has gained prominence from “unfair” practices that have been exposed. For example: • Some large buyers of goods are able to push prices down, to the point where small producers internationally, particularly in agriculture, can barely survive. An example of such practice has occurred in the coffee industry. • Some retailers contract factories in developing countries where wages are low and few labour laws exist (e.g., child labour and serfdom occur) in order to be able to purchase and sell consumer goods at a low price. • Critics of such unfair trade advocate for reform

27. Principles for Fair Trade • Distributional fairness – paying a fair wage • Non-discrimination fairness – different groups of individuals judged to be equals • “Golden rule” fairness – not causing harm to others and respecting agreements • Reciprocity – countries negotiating agreements each make equal concessions or rescind policies equally • Respecting sovereignty – when negotiating agreements, countries should respect the the laws and policies that are in existence • Maximum benefit fairness – the trade should maximize the benefits for all nations involved Adapted from http://internationalecon.com/fairtrade/index.html

28. In a group of three or four students, brainstorm the advantages and disadvantages of international trade and international business on: • Jobs • The environment • The economy • When finished, be prepared to report back to the class Activity: Impacts on Us

29. Section 4: International Business in Canada

30. The Government of Canada reports that in 2003, exports accounted for over 40% of our economic activity • Traditionally, Canada exported primary resources but over time, shifted to manufactured goods • Canada’s export of services is growing rapidly • We tend to enjoy trade surpluses (i.e., more exports than imports) Canada as a Global Player Source for points 2, 3 & 4: M. Schultz et al., International Business: Canada and Global Trade. Toronto: Nelson, 2003.

31. Canada’s Trading Partners: Exports • Cars • Auto parts • Lumber • Forest products Total exports, 2003: $400,010,000,000 Source: Statistics Canada • Lumber • Forest products • Ores & minerals • Lumber • Forest products • Ores & minerals Source: Actden, http://www2.actden.com/writ_den/g13/brief.htm

32. Fruits & vegetables • Machinery Canada’s Trading Partners: Imports Total imports, 2003: $341,832,700,000 Source: Statistics Canada • Chemicals • Plastics • Processed metals • Manufactured goods Source: Actden, http://www2.actden.com/writ_den/g13/brief.htm

33. Corporate taxation levels • Tariffs on the import of certain goods and/or goods from countries who do not have trade agreements with Canada • Intergovernmental contacts and participation in trade agreements (e.g., NAFTA) • Government trade missions take place regularly where Canadian officials visit other nations to encourage trade with Canada Canadian Global Trade Policies

34. The Canadian Winners • International export of “commercial services” (e.g., services to businesses such as consulting, architecture, engineering, communications, etc.) has surged recently. This is good news for Canada’s high tech and professional services industries. • Automotive parts accounts for the largest proportion of Canada’s exported products which is good news for Canada’s auto industry. According to Industry Canada,

35. Creates jobs • Attracts investment • Attracts technology • Makes more consumer goods available • Overall, these factors can improve the economy Advantages of International Trade in Canada

36. Creates wealth disparity • Can hinder unique Canadian culture when “imported” cultural goods become prevalent • Jeopardizes environment though increased manufacturing; sale of natural resources, etc. • Political alliances and NGO pressure can reduce government sovereignty • Potential loss of jobs from outsourcing Disadvantages of International Trade in Canada

37. Growing International Markets • In 2004, the Canada will emphasize the engineering sector and the Territories as priority areas for exports • The service sector (e.g., software development, engineering, consulting, etc.) plays a prominent role in our “knowledge economy” and is considered a growth market

38. In groups of four, predict how increases in global business will affect the strength of businesses, industries, and sectors in Canada’s economy in the next decade. • Use your favourite search engine and the references at the end of this slideshow to gather data. • Prepare your findings either on chart paper or in a slideshow to share with the class. • Once all groups have presented, reflect on the similarities and differences among predictions. Record your reflection in point form using a word processor. Activity: Your Crystal Ball

39. Department of Foreign Affairs and International Trade, State of Trade 2004 Report, http://www.dfait-maeci.gc.ca/eet/trade/stateoftrade2004-en.asp • “At Issue: Economic Globalization – Concentrating Wealth or Creating Opportunity.” A report from Council on Foundations, June 2002, http://www.cof.org/files/Documents/ Governing_Boards/bb5globalization.pdf • Introduction to Fair Trade, http://internationalecon.com/fairtrade/fair01.html Web References for Further Investigation Continued…

40. For links to learn more about trade agreements in Canada, visit http://canadianeconomy.gc.ca/english/economy/issues.html • Opening Doors to the World: Canada's International Market Access Priorities – 2004, http://www.dfait-maeci.gc.ca/tna-nac/cimap-en.asp • Report of the Expert Panel on Canada's Role in International Science and Technology, http://acst-ccst.gc.ca/acst/intel/report-web2/rw2_toc_e.html Web References for Further Investigation