SOCIAL WORK IN CANADA An Introduction Third Edition

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

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CHAPTER 2:

Trade in the Modern World

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Key Terms

importing

global sourcing

exporting

value added

licensing agreement

exclusive distribution rights

franchise

joint venture

foreign subsidiary

protectionism

trade quotas

trade embargo

trade sanctions

exchange rate

floating rate

currency revaluation

currency devaluation

terms of trade

hard currencies

soft currencies

currency speculating

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Chapter Objectives

By the time you finish this chapter, you should be able to:

Identify the types of international businesses

Describe the impact technology has had on the internationalbusiness environment

Identify the factors that affect foreign exchange rates

Explain how changes in the value of the Canadian dollar canaffect business opportunities

Identify the types of products that trade freely into and out ofCanada and those that are restricted in their movement

Identify and locate on a map Canada’s major trading partners

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

International Business Practices

Reasons that Canada trades:

Company growth

Entry into new markets

Expanded customer base

Increased profits

Access to inexpensive supplies

Lower labour costs

Access to financing

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

International Business Practices

Photos: © iStockphoto.com

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

International Business Practices

Licensing agreement

An agreement that grants permission to a company touse a product, service, brand name, or patent inexchange for a fee or royalty.

Exclusive distribution rights

A form of licensing agreement that grants a companythe right to be the only distributor of a product in aspecific geographic area or country.

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

International Business Practices

Joint venture

A common type of international business, in which anew company with shared ownership is formed bytwo businesses, one of which is usually located in thecountry where the new company is established.

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

International Business Practices

Foreign subsidiaries

Often referred to as a wholly owned subsidiary, abranch of a company that is run as an independententity in a country outside of the one in which theparent company is located.

The parent company often sets financial targets,and allows the subsidiary to manage its own day-to-day operations as long as those targets are beingmet.

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Trade Barriers

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Trade Barriers

Protectionism

The theory or practice of shielding domesticindustries from foreign competition, often throughtrade barriers such as tariffs.

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Trade Barriers

Foreign investment restrictions

Canadian law with the greatest impact is theInvestments Canada Act

Ensures that all foreign investments are reviewedto determine how they will benefit Canada

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Trade Barriers

Standards

Countries have different standards for products inareas such as environmental protection, voltage,and health and safety

The ISO (International Organization forStandardization) is a network of standardizationgroups from over 170 countries established to setquality regulations

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Currency Fluctuations

Exchange rate

The amount of one country’s currency in relation to thecurrency of another country.

The Canadian dollar (CAD) is most often quoted againstthe U.S. dollar (USD) because the two countries are thelargest trading partners in the world.

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Currency Fluctuations

Currency revaluation

The increase in value of a currency because thedemand for that particular currency is greater thanthe supply.

Currency devaluation

The decrease in value of a currency because thesupply of that particular currency is greater than thedemand for it.

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Currency Fluctuations

Factors Affecting the Exchange Rate

Economic conditions in Canada—inflation rate,unemployment rate, GDP, interest rates

Trading between countries—the more favourable theterms of trade (comparison of exports to imports), thehigher the currency exchange

Politics—political tension and instability or the threatof terrorism decreases the demand for a currency

Psychological factors—historical significance andstability change the way currencies are viewed

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Currency Fluctuations

Currency speculating

Buying, holding, or selling foreign currency inanticipation of its value changing in order toprofit from fluctuations in the price ofcurrency.

Used under license from Shutterstock, Inc.

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Time Zones

Communication technology allows the world ofinternational business to operate twenty-fourhours a day

Certain methods of communication can be used atany time (email); other methods (telephone)require knowledge of time zones

Some methods offer immediate feedback andinteraction; others do not

Chapter 2:

TRADE IN THE MODERN WORLD

Fundamentals of International Business

Time Zones

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