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INTERNATIONAL BUSINESS
TOPICS
• Basic International Business
Terminology
• Benefits of International
Business
• The Five P’s of International
Business
• Costs of International Business
• Barriers to Conducting
International Business
• Importing and Exporting
• Canada and International Trade
Agreements
• The Future of International
Trade
International Business Defined
“All the business transactions (exchanges of
money) necessary for creating, shipping,
and selling goods and services across
national borders. Also referred to
international trade or foreign trade”
Wilson, Jack et al. The World of Business (5th ed) Canada,
Nelson, 2007
International Business Terminology
Domestic Transaction
 Selling of goods produced in the
same country.
For example:
 You visit a store in your community
(local store) and purchase a bicycle
that has been manufactured in
Canada.
International Business Terminology
International Transaction
 Selling goods produced in another country.
 Involves creating, shipping, and selling
goods and services across national borders.
 Also referred to as international trade or
foreign trade.
For example:
 You go to Canadian Tire and purchase a tool
that was manufactured in China.
International Business Terminology
Economy
 The financial health of a place
•
•
•
•
•

Municipal – Ottawa’s economy
Provincial – Ontario’s economy
National – Canada’s economy
Continental – North American economy
Global – Global Economy
The health of an economy is generally
determined/measured by looking at factors
such as employment rates, interest rates,
gross domestic product data, trade deficits
vs. surplus…(Next Chapter)
International Business Terminology
Imports
A good or service brought into Canada from another country. (made
in China)
Exports
A product or service produced in Canada and sold in another country.
(made in Canada)
Trade Deficit

When Canada imports more goods than it exports, we have what is called
a Trade Deficit.

Imports > Exports = Trade Deficit
Trade Surplus

When Canada exports more goods than it imports, we have a Trade
Surplus.

Exports > Imports = Trade Surplus
Which do you think is better for the Canadian economy?
TOPIC #2
Benefits of
International
Business
Benefits To Businesses Participating in
International Business
1. Access to many more markets
2. Access to cheaper labour
3. Increased quality or quantity of
goods
4. Access to resources that may not be
available at home.
1. Access To Markets
Canada’s Population:
 Roughly 33,600,000
 33 million six hundred thousand
World Population:
 Roughly 6, 500,000,000
 6 billion 500 million
Conclusion:
The Global market can reach
roughly 200 times more consumers
than simply just Canadian
consumers.
Access To Markets
Access to the global market does not guarantee bigger
sales. Why?
Companies must adapt their products and/or services
to:
1. different needs, wants and preferences based on
cultural differences and/or preferences
2. conform to different laws of various countries
Global Product
 A standardized item that is offered in the same form in
all countries in which it is sold. (i.e. pencils, soccer
balls, cameras)
2. Cheaper Labour
Businesses make profits when their sales are greater than their
costs of running the business.
Thus profits can increase even more by maintaining their sales
level and decreasing their costs of running the business.
The single largest expense of any business/organization is
generally the labour (employees and management wages and
salaries)
If a company can produce its goods and/or services in
another country where the labour laws allow businesses to
pay employees less than they would be paid in Canada, they
can reduce their costs of doing business substantially.
In addition to helping increase profits, businesses can pass on
those savings to consumers by reducing the price of the
items.
The cheaper an item is, perhaps the more the business will
also sell.
Cheaper Labour
Discuss the ethical considerations
of cheap labour?
3. Increased Quality of Goods
THE BMW X5
Increased Quality of Goods
The BMW X5
 Its engine is assembled in Munich, Germany;
 Shipped to the production plan in South
Caroline, U.S.;
 Magna Corporation in ON, Canada,
manufacturers the rear-view mirror;
 Leather seats come from South Africa;
 Michelin tires are manufactured in France
BMW wanted to create the best possible
product for its consumers so it searched for
the manufacturers that produced the best
quality in its car components.
Increased Quality of Goods
Is this always the case?
Discuss.
4. Increased Quantity
Access to international markets may
lead to an increase in demand of
products thus increased quantities of
goods sold.
Results:
Hours of operation may increase
New production facilities may open and
perhaps in other countries
Increase in job opportunities
5. Access to Resources
Natural Resource
Since Bamboo is a scarce resource in Canada a
furniture company making bamboo furniture will
import (bring into the country) bamboo from
another country.
Human Resources
A Canadian company which opens up a factory
in China to take advantage of its cheaper labour
costs
Capital Resources
A company that purchases a specialized piece
of machinery needed for their plant that is only
made in Japan.
TOPIC #3
The Five P’s of
International
Business
The Five P’s of International Business
1.
2.
3.
4.
5.
Product
Price
Proximity
Preference
Promotion
P1: Product

A country’s resources determine what
goods and services it can produce.
Examples:
Canada buys citrus fruits from
countries with warmer climates
Canada’s large forests and wheat fields
provide lumber and grain for countries
that don’t have an abundance of these
resources
P2: Price
Cost of producing goods and services
varies from one country to another
Costs usually include: wages, taxes and
raw materials
If a company can reduce its costs, then
it can offer products and services at|
lower prices and increase their profits.
P3: Proximity
Proximity to a fellow neighbouring country allows for a
company and/or country to benefit from doing business
across the border
80% of Canadian population lives with 170km of the
American border.
Example:

Windsor, ON has a population of about 350 000

Across the bridge from Windsor is Detroit, Michigan which
has a population of several million.

Many people and businesses provide Detroit’s car
manufacturing plants with parts and labour.
P4: Preference
Some countries specialize in
certain goods or services that
have a reputation for quality all
over the world
Examples:
Belgian chocolates, Swiss watches,
German cars, Canadian wheat.
P5 - Promotion
The internet and satellite broadcasting
have made it easier to inform people
around the world about goods and
services available.
Ease of electronic promotion and other
communications technology provides
incentive for businesses to reach
beyond their domestic market.
TOPIC #4
Benefits and Costs of
International Business
Benefits and Costs of International Trade
Benefits to Society and Consumers:
1.
Availability of products and services unavailable
in your own country
2.
Broader range of prices offered (cheaper to
purchase various goods)
3.
Job creation
4.
Political Benefits – “countries that trade with
one another seldom go to war with each other.”
5.
Opens up communication lines with people,
improves mutual understanding, and increases
the level of respect people from different
countries have for one another.
Costs of International Trade
The hidden or social costs of
international business engaging in
offshore outsourcing:
1.
2.
Human rights and labour abuses
Environmental degradation
Offshore Outsourcing


Also known as “contracting out.”
The practice of hiring individuals from
countries where labour costs are lower to
complete some or all of the steps in the
production process.
Example:
 Many companies use call centres in India,
China and Costa Rica for customer service
and IT customer service.
Offshore Outsourcing
Advantages
Lower costs to company which can focus
on tasks it does better
Be closer to natural resources needed
Proximity to more efficient technologies
Increase profits from lower labour costs,
another country’s innovations, and
different tax structure
Human Rights Issues and Labour
Abuses
Typical abuses in poor countries include:
1.
2.
3.
4.
5.
6.
7.
Physical abuse
Sexual abuse
Forced confinement
Non-payment of wages
Denial of food and health care
Excessive working hours with no rest
Child labour
Human Rights Issues and Labour Abuses
Child Labour defined:
 Regular employment for boys and girls
under the age of 16
 Many countries ignore abuses that target
children and women.
What can be done to stop Child Labour and
Human Rights Abuses?
International Labour Organization (ILO)
United Nations (UN) specialized
agency that seeks the promotion of
social justice and human and labour
rights that are accepted by all
countries.
Other?
Environmental Degradation

Occurs when nature’s own resources
such as trees, habitat, earth, water,
and air are being used up
(consumed) faster than nature can
replenish them.
Sustainable Development
The process of developing land,
cities, businesses, and communities
that meet the needs of the present
without compromising the ability of
future generations to meet their
own needs.
Businesses need to be looking to
provide sustainable business practices.
Examples of Sustainable Business Practices
TOPIC #5
Barriers To
International Trade
Barriers to International Business
Purpose of Barriers
To help protect domestic businesses and
consumers
May be used to:
1. help assist a new business getting started
2. protect an existing industry struggling in a
competitive global environment.
3. protect consumers from imports with problems or
that do not conform to Canadian safety standards.
Barriers to International Business
Barriers include:
1.
2.
3.
4.
5.
Tariffs or Custom duties
Non-Tariff barriers
Increased costs of importing and
Exporting
Excise taxes
Currency Fluctuations
1. Tariffs


Also called custom duties
One of the most important tools for any
government in managing trade with other
countries.

A form of tax on certain types of imports (goods
coming into Canada from other countries)

Companies bringing in the goods from another
country to sell in Canada must pay the tariffs.

Tariffs are based on a percentage of the retail
value, (i.e. 5% of retail selling price.) or;

On another basis (i.e. $6 per kilogram)

Money collected goes to the government.
Tariffs
Whose job is it to:
1. monitor Canadian tariff
policies?
2. monitor tariff policies of other
countries?
3. change Canadian tariff policies
to best serve the Canadian
economy?
Answer:
 Finance Canada
Tariffs
Provide an example of when it may be:
beneficial for Canada to reduce tariffs
on certain goods imported from outside
countries?
beneficial to increase or create tariffs
on certain goods being imported from
outside countries?
2. Non-tariff Barriers
Legal and policy standards for the quality of
imported goods are set so high that foreign
competitors can not enter the market.
Examples:
A Canadian law forces an international
company to apply for a license to do business
in Canada (it may be very time consuming
and expensive)
Government will allow some goods into the
country only after being inspected and having
met certain health and safety standards set out
by the Canadian Food and Inspection Agency.
Imported Goods That Require Permits, Inspection, or
Special Packaging
Imported Goods
1. Endangered animals and
plants and products made
from them
Government Department__________
1. Environment Canada
2. Agricultural and food
products
2. Agriculture and Agri-food Canada
3. Non-food products and clothing
precious metals, and
radio communications equip.
3. Industry Canada
4. Fish and fish products
4. Fisheries and Oceans Canada
5. Food, drugs, medicines,
pharmaceuticals, medical
and radiation-emitting
devices
5. Health Canada
6. Hazardous waste, goods that
may contain chlorofluorocarbons
or lead gas
6. Environment Canada
7. Motor vehicles
7. Transport Canada
3. Costs of Importing and Exporting
Landed Cost

The actual cost for an imported purchased item.

It is composed of the vendor cost, transportation charges,
duties, taxes, broker fees, and any other charges
associated with getting the product ready to sell in a
foreign market. (another country)
Question
If you owned Canadian Tire and had to choose
between selling a tool from a Canadian manufacturer or
a foreign manufacturer, which one would you select if
the quality of both products was equal?
a. the foreign tool whose landed cost was greater
than the domestic purchase cost or;
b. the domestic tool whose cost was cheaper than the
landed cost.
Costs of Importing and Exporting
Price of a good sold is based on the
following costs among others:







Manufacturing (includes wages);
storage;
Marketing;
Shipping;
Advertising
Overhead (Equipment, Heating etc,
Salaries)
% of profit the company wants to make on
the sale
Depending on the laws of another country and
cultural differences, additional costs may be
incurred.
4. Excise Taxes
Excise Tax

A tax on the manufacture, sale, or consumption of a
particular product produced in your country
Governments use excise taxes to:
1. Raise money (i.e tobacco related health care costs)
2. Discourage people from engaging in certain activities
3. Increase the costs of imported goods to encourage
consumers to buy Canadian products.
Examples of excise taxes:

10 cents per litre on gasoline for the federal government

14.5 cents per litre on gasoline for the provincial
government

Excise tax on tobacco products varies from province to
province
5. Currency Fluctuations

Converting the value of $1 Canadian dollar to
US currency and other national currencies.
Examples
Nov. 2000 - $100 US  $157 Canadian
Nov. 2007 - $100 US  $98 Canadian
Website to research a history of exchange rates
http://www.oanda.com/convert/fxhistory
Factors Affecting Exchange Rates
1. The financial health of Canada’s economy versus the US
economy
2. Interest Rates
Example:

If the Canadian economy is performing better than the US, the
value of the Canadian dollar will increase. The demand for the
Canadian dollar rises. Demand > Supply, the value rises.

If interest rates are higher than those of other countries while
inflation remains fairly stable, the value of the Canadian dollar will
increase. Foreigners will be attracted to invest in Canadian funds
where banks are providing higher interest rates. Demand >
Supply, the value rises.
Information on factors affecting exchange rates:

http://www.bankofcanada.ca/en/backgrounders/bg-e1.html
Impacts of Exchange Rates

Canadian economy is largely dependent on the value of imports and
exports which can be greatly impacted by the value of the Canadian
dollar.
The US is Canada’s biggest trading partner.
 When Canadian Exports to US > US Imports = Trade Surplus
 When Canadian Exports to US < US Imports = Trade Deficit
Exports decrease when:
•
•
the Canadian dollar increases in value to the US dollar, it makes
exports more expensive.
the US economy is weak and the CD dollar is increasing, the US
will be purchasing less from Canadian businesses
Note: Canadian consumers also tend to purchase more products
from the US because the value of the dollar is higher, and
goods are often cheaper in the US, thus making imports
higher.
Result:

Less sales revenue for Canadian businesses which in the long run, can
end up hurting the Canadian economy. For example, when businesses
are earning less revenue, profits decrease and if significant decreases
occur, businesses may start laying off employees.
TOPIC #6
Importing and Exporting
Goods and Services
Flow of Goods And Services
Imports
 Goods and services flowing/coming into Canada
Exports
 Goods and services flowing/going out of Canada
Imports may include:
 Raw materials
 Processed materials
 Simi-finished goods,
 Manufactured goods ready for sale.
The less finished the imported goods, the more jobs
they create for Canadians.
Canadian Imports 2008
Forestry
Products
0.64%
Agriculture
and Fishing
6%
Energy
12%
14.50%
Other
16%
Automotive
products
21%
28%
0%
10%
20%
30%
Industrial
Goods and
Materials
Machinery
and
Equipment
Data Source:
“Imports of goods on a balance-of-payments basis, by product” Statistics Canada, September 10, 2009,
[Online]. Available: http://www40.statcan.gc.ca/l01/cst01/gblec05-eng.htm
Canadian Exports 2008
Foresty
Other
6%
Agriculture and Fishing
8%
12%
Automotive Products
19%
Machinery and
Equipment
23%
26%
Industrial Goods and
Materials
Energy
0%
10%
20%
30%
Data Source:
“Export of Goods on a Balance-of-Payment Basis” Statistics Canada. September 10, 2009. [Online]
Available:http://www40.statcan.gc.ca/l01/cst01/gblec04-eng.htm
Balance of Trade
Balance of Trade

Relationship between a country’s total imports and total
exports.
Trade Surplus = E > I

Export$ are greater than Import$.

Canadians are selling more products to other countries than
they are importing.

If surplus is made up of primarily manufactured goods,
then more jobs are created for Canadians.
Trade Deficit = E < I

Canadians are spending more money on importing goods
from other countries than selling/exporting goods to other
countries.

Usually means that fewer Canadian jobs are being provided
Increasing Your Chances of Success When Importing
Goods for Resale
1.
2.
3.
4.
5.
Before placing your international order, conduct your research to determine an
approximate interest and demand for your imported goods, otherwise, you may
have a full warehouse, and big bill to pay with insufficient revenues coming in to
pay off your bill.
Select your foreign supplier(s) with care. You want the one who can supply the
right product(s) for the right price at the right time. Foreign Affairs and
International Trade Canada can help you find the best foreign suppliers.
Make an effort to learn about the culture you will be dealing with. Cultural
knowledge and sensitivity can help you establish positive working relationships
with your suppliers.
Take time to go through a purchase agreement and ensure it covers all
important and necesssary areas such as: Who pays the shipping costs? When
do the goods have to be paid for? What happens if goods are damaged during
shipping.
When the goods arrive, make sure everything you ordered is there and in good
condition. Expect to pay import or custom duties based on either the value of
goods, quantity or weight.
Export Business
Two ways a business may export goods:
1. Through direct exporting
2. Through indirect exporting
Exporting Business
Direct Exporting
 The exporting company deals directly with the
company that will wishes to import the goods into
his/her country.


Conducted usually by established companies who
have the experience and resources to set up
offices and sales staff in foreign countries.
More risky as the exporting company assumes all
risk.
Canadian
Company
China
Company
Exporting Business
Indirect Exporting
 Goods move from the exporter to an
intermediary, who is often from the foreign
country, and then on to the importing business.
Intermediary
 Someone or another company who helps the
exporter find a company who wants to purchase
and import your goods)
Canadian
Company
Intermediary
Business or
Individual
China
Company
Exporting Business
Indirect Exporting
 Usually conducted by new businesses which don’t
have the resources, or global reputation


Business share financial risks with the
intermediary
Some countries prohibit direct exporting, likely to
create jobs for local intermediaries. (i.e. in the
Middle East, Central America and Asia)
Increasing Your Chances of Success When
Exporting Goods and Services
Conduct your research to determine if there
are potential consumers in foreign markets
and to familiarize yourself with foreign
cultures, customs and laws.
Research Resources may include:



Foreign Affairs and International Trade Canada
Contact foreign agencies through the internet, such as the
Asia Pacific Foundation of Canada, Canadian Manufacturers
and Exporters, and the Canadian Association of Importers
and Exporters.
Canadian embassies in foreign countries
Questions Asked By Potential Export Buyers
1.
What is unique or special about your company, product, or
service.
2.
How do you market or sell your product?
3.
Who uses your product or service? To whom do you sell in
Canada and abroad?
4.
Which countries or regional markets are you targeting, and
why? What do you know about these markets?
5.
How do you plan to enter the market? Will you sell the
products directly? License people to sell your products? Set up a
joint venture with another business? Invest in a venture that
already serves the market?
6.
How would you describe the typical buyer, distributor, agent, or
partner you want to work with in this market?
7.
When do you plan to visit the market? How will you adapt your
product-related literature to suit the needs of this market?
Canada’s Major Trading Partners
Canada’s Top 10 Export Markets
Country
2004
2005
2006
2007
2008
U.S
84.4%
83.8%
81.5%
78.9%
77.64%
U.K
1.88%
1.89%
2.3%
2.84%
2.7%
Japan
2.08%
2.10%
2.14%
2.05%
2.29%
China
1.64%
1.65%
1.77%
2.11%
2.17%
Mexico
0.75%
0.77%
0.99%
1.10%
1.21%
Germany
0.65%
.074%
0.90%
0.86%
0.93%
South
Korea
0.55%
0.65%
0.75%
0.67%
0.79%
Netherlands
0.47%
0.50%
0.70%
0.90%
0.77%
Belgium
0.55%
0.52%
0.55%
0.66%
0.70%
France
0.58%
0.58%
0.65%
0.69%
0.67%
Source: Statistics Canada: http://www.ic.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag
Canada’s Major Trading Partners
Canada’s Top 10 Import Markets
Country
2004
2005
2006
2007
2008
U.S.
58.7%
56.5%
54.8%
54.2%
52.4%
China
6.77%
7.75%
8.70%
9.41%
9.83%
Mexico
3.78%
3.83%
4.04%
4.22%
4.13%
Japan
3.80%
3.89%
3.86%
3.80%
3.53%
Germany
2.65%
2.70%
2.82%
2.83%
2.93%
U.K.
2.71%
2.74%
2.74%
2.82%
2.91%
Algeria
0.87%
1.10%
1.25%
1.25%
1.78%
Norway
1.39%
1.59%
1.38%
1.32%
1.43%
South
Korea
1.64%
1.41%
1.45%
1.32%
1.39%
France
1.50%
1.31%
1.31%
1.25%
1.37%
Source: Statistics Canada: http://www.ic.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag
Canada and US Trade Relationship
Why does it make sense to establish a solid trading
relationship with the US?
1. Shipping costs are cheaper (proximity factor)
2. Similar culture and interests so same types of
products and services will appeal to citizens
3. Speak the same language, watch same TV
programs, movies, sports and similar fashion
styles
4. Population of the states is 10x that of Canada’s
TOPIC #7
Canada and
International Trade
Agreements
International Trade Agreements
International Trade Agreement

Legal contract between or amongst nations who voluntarily
agree to conduct business affairs in each other’s country
based on the terms set out in the agreement.
Common terms outlined in the agreements include:

Reducing tariffs and custom duties on various products to
reduce trade barriers;

When and why people will be able to work across
international borders;

What qualifications one will need to work in another
country;

How business trade secrets will be protected (intellectual
property);
 Process for resolving trade disputes amongst the
participating countries in the agreement.
Advantages of Reducing Trade Barriers
Two main advantages:
Canadian businesses or other domestic
businesses are able to sell their products and
services to international markets at lower
prices because additional tariffs on exported
products are reduced or eliminated.
Increased competition motivates companies
to improve their quality or reduce their prices
in order to compete with imported goods.
(Great for the consumer)
History of the WTO






WTO developed out of an international trade agreement
called the General Agreement on Tariffs and Trade
(GATT).
GATT came into effect in 1948
GATT was signed by Canada and 22 other nations who
were allies during World War II.
An international organization was set up to help GATT
nations negotiate trade deals, resolve problems and
collect data about world trade.
In 1995, the WTO replaced the initial GATT organization.
The WTO currently has 139 member countries.
World Trade Organization
WTO Today
Main international organization that deals with the rules of trade
between nations.
The WTO provides a forum for negotiating agreements aimed at
reducing obstacles to international trade and ensuring a level
playing field for all;
Contributes to global economic growth and development.
The WTO also provides a legal and institutional framework for the
implementation and monitoring of these agreements, as well as for
settling disputes arising from their interpretation and application.
The current body of trade agreements comprising the WTO consists
of 16 different multilateral agreements (to which all WTO members
are parties) and two different plurilateral agreements (to which only
some WTO members are parties).
Governs approximately 97% of all world trade
Source: World Trade Organization http://www.wto.org/english/thewto_e/whatis_e/wto_dg_stat_e.htm
International Trade Agreements
General Agreement on Trade in Services
 GATS came into effect in 1995
 Sets guidelines for the trade of services
such as banking across international
borders.
International Trade Agreements
The Canada-US Free Trade Agreement

Commonly known as FTA came into effect in January 1989.

Intended to gradually phase out (get rid of) a number of tariff barriers between the
two countries
Issues dealt with under the agreement
Canada’s wishes:

wanted stable access to U.S. Markets

Wanted to bid on US government contracts

wanted to create a dispute settlement tribunal

To increase exports to the US

Exemptions included dairy and poultry
US Wishes:

Wanted to increase their exports to Canada

Wanted clarification regarding rules of intellectual property

To reduce restrictions on US investment in Canadian industries

Exemptions: sugar, diary, peanuts, and cotton
All products other than exemptions are duty-free if produced within the freetrade zone.
International Trade Agreements
North American Free Trade Agreement
Commonly known as NAFTA
Came into effect in 1994
Trade between Canada, US and Mexico is
tariff free for all products produced in the
free-trade zone except for exemptions
mentioned.
Each day NAFTA countries conduct $1.7
billion in trilateral trade.
NAFTA
Canada
Economic
Growth
(E.G.)
(19942003)
Concerns
Expressed



E.G. is up 30.9% since
1994
Export sales have
increased by 104%
Export sales to US have
increased by 250%
Depletion of Canada’s
natural resources as US
and Mexico have to much
access
 Canada’s cultural industries
(book, magazine, and TV)
are becoming
Americanized.

US


E.G is up 38%
since 1994
Canada and
Mexico are
perceived to be
taking away jobs
from Americans
Mexico


E.G. is up
30%
Wealthier
northern
countries
are
perceived
as
exploiting
Mexico for
its low
wages.
Trade agreements give businesses power over elected governments,
and in time, these agreements will erode democracy.
Canada and Other Free Trade
Agreements
Regional Trade Agreements
 Trade agreements involving groups of
countries
Bilateral Trade Agreements
 Trade agreements involving Canada and
one other country or group
Trading Bloc
 Group of countries that share the same
trading interests
Other International Organizations
G8
G20
G8
Group of Eight (G8)
Eight of the world’s largest and most powerful
industrialized democracies meet annually and work
together to deal with major economic and political issues
facing their individual and collective countries.
Topics dealt with at major G8 summits include:
• Energy
• Employment • Environment
• Human rights • Arms Control
Seek to provide guidance and support to established
international organizations
Countries include Britain, France, Germany, Italy,
Canada, US, Japan, and Russia
G20
What is the G-20?
Established in 1999
The Group of Twenty (G-20) Finance Ministers and Central Bank
Governors of important industrialized and developing economies to
discuss key issues in the global economy.
Mandate
The G-20 is an informal forum that promotes open and constructive
discussion between industrial and emerging-market countries on
key issues related to global economic stability.
To help support growth and development across the globe by
contributing to the strengthening of the international financial
architecture and providing opportunities for dialogue on national
policies, international co-operation, and international financial
institutions
Source: About G20. [Online] Available: http://www.g20.org/about_what_is_g20.aspx
Other Free Trade Agreements
Free Trade Area of the Americas
Central American Free Trade
Agreement (2004)
European Free Trade Association
(1960)
Asia-Pacific Economic Cooperation
(1989)
TOPIC #8
The Future of
International Business
The Future of International Business
1.
2.
3.
4.
5.
Reduction of Protectionism
European Union
NAFTA
Impact of Cultural Differences
Global Dependency
The Future of International Trade
Protectionism
 a term to describe when countries seek to protect their
individual economic interests by imposing tariffs on other
countries or restricting external trade.

Economic experts agree that such practices will hurt the
global economy as it is all interconnected.

APEC is the fastest growing trading group and largest
trading bloc in the world and engages in protectionism
practices by imposing tariffs and other trade barriers on
countries outside of APEC.
European Union (EU)

27 European countries represent a single market in
Europe

All but the UK and Denmark have adopted a the euro as
the single currency to be used in member states

It has its own elected government

EU court rulings over rule individual country court rulings
and/or laws.

Citizens of member states may travel, move, and work
freely in each other’s countries.

Population is currently about 370 milion.
Evolution of NAFTA
Will NAFTA emerge into a union similar to
the EU where citizens of Canada, Mexico,
and the US would be able to move freely
into each other’s countries where one
currency would be used for all three
countries?
Impact of Cultural Differences
Culture
 the sum of a country’s way of life, beliefs,
customs
 Influences how things are purchased, sold,
 Sets boundaries on what can or can not be done
 Impacts preferences, style, values, and norms
 May be represented by a specific language
Cultural Differences

In order to do business with differing cultures, much
market research is needed to help companies
understand various similarities and differences even
when dealing with everyday cultural norms dealing
with people such as:
1.
Punctuality
Greetings
Nonverbal communication signals
Good Manners
Decision making
2.
3.
4.
5.
Punctuality
Punctuality Norms in North America?
 People are expected to be
on time
 Rely on books, calendars and
even pay a fee sometimes
for missed appointments
Punctuality Norms in Other Countries

Time is considered flowing, flexible,
beyond’s people control
Greetings
Shaking hands – differs from one
country to the next
Eye contact made in some
countries, not in others
Bowing before an elder
acquaintance versus not bowing
at all
Nonverbal Communications Signals

Considered rude in Asian cultures to refuse someone’s
request, so an Asian business person may not give a
direct “no” answer to a sales request
A “nod” means “yes” to North Americans but “no” to a
Bulgarian.
Shaking the head “side to side” means “no” to North
Americans but “yes” to Bulgarians.
The sign okay with ones hand is a symbol for money
in Japan and is an offensive gesture in Brazil.
Personal space interpretations also differs from place
to place.
Good Manners
In North America, getting down to
business is the norm when to
business people meet.
In other Asian and Latin American
countries it would be considered rude
not to discuss family, friends, and
favours first to establish a personal
relationship before business.
Decision Making

In some cultures, decisions are made
from the top down approach, in
others, from the bottom up
approach.
Other Differences

North Americans read from right to left.

Israel and Egyptians read left to right.

This difference may impact the order in
which a sequential advertisement is laid
out from one country to another.
Other Sources

Wilson Jack et al. The World of
Business, 5th Ed. Nelson Education
Ltd., Canada, 2007