chapter 10: international business trends fundamentals of international business copyright © 2010...

Chapter 10: INTERNATIONAL BUSINESS TRENDS

Fundamentals of International BusinessCopyright © 2010 Thompson Educational Publishing, Inc.

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CHAPTER 10:International Business Trends



Key Terms

subprime mortgage foreclose collateral feed-in tariff sustainability passport visa duty-free



Chapter Objectives

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

Explain how Canadian and international companies, industries, and markets are affected by increased global business activity

Identify and analyze international business trends and their influences on companies, industries, and career opportunities in the global economy

Assess, taking into consideration factors such as markets, financing, and labour, how trends in the global marketplace have changed the ways in which an individual might run a business



Chapter Objectives

Analyze, drawing on information from a variety of sources, including the Internet, the impact of recent global events on Canadian international business

Identify, drawing on information from a variety of sources, including the Internet, the requirements for study, travel, and employment in different countries



The Global Marketplace

Example: The Decline of General Motors GM known for producing large cars As price of oil rose, consumers wanted to avoid

driving cars that used a lot of gasoline Japanese automakers Toyota, Nissan, and Honda

produced small, efficient vehicles Set up plants in the United States; employees were

not unionized, therefore labour was cheaper During financial crisis that began in 2008, consumers

cut spending on gas-guzzling vehicles GM filed for bankruptcy




International Markets—China China has emerged as a significant trading partner Chinese market is huge—important for Canadian

importers, exporters, businesses developing joint ventures in China, and those outsourcing production there

Middle class is emerging in China, creating new market for goods

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International Markets—Mexico Since signing NAFTA, Canadian exports to Mexico

have increased to a level seven times higher than pre-NAFTA levels

Mexico is ranked third in the value of its imports to Canada




International Markets—India Population of over one billion people Top nation for outsourcing Bangalore is known as the Silicon Valley of India

because of the number of high-tech companies there More of the population are entering middle class,

creating opportunities for Canadian products and services




International Finance When people have jobs, they earn and spend money

on products—houses, food, cars, etc. These expenditures lead to growth in the businesses

that supply them, creating more jobs This puts more money in workers’ wallets,

encouraging them to buy more The opposite happens during a recession

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International Finance




The Downward Spiral of the U.S. Financial Crisis Price of houses began to drop in 2007. Thousands of homeowners who had qualified for subprime

mortgages could not keep up with payments and defaulted on their mortgages.

Banks foreclosed on these homes, but because there was no market for them, these assets were worthless.

Banks stopped lending and many went out of business. Without credit from banks, consumers stopped spending. Manufacturers and retailers began to lose money and lay off

workers. The market fell and many people lost savings as pension plans

and retirement savings plans decreased.




Subprime mortgageA type of mortgage granted to borrowers with lower credit ratings who would not normally be able to qualify for conventional mortgages. As these borrowers are seen as having a higher-than average risk of defaulting on their loans, banks often charge higher interest rates on subprime mortgages.




ForecloseThe legal process through which an owner’s right to their property is terminated, usually because they have failed to pay back their mortgage. In this case, the bank usually takes the house back and sells it, using the proceeds to pay off the debt.

CollateralAn asset used to guarantee a loan.




The Effect of the Financial Crisis on Canada Did not affect Canada as deeply as other countries Canadian banks did not invest in subprime

mortgages in Canada Home prices here did not decrease as much as those

in the United States Canadian banks that had invested in U.S. banks

were affected Demand for Canadian goods, especially raw

materials like oil and lumber, dropped




International Labour Organized labour has declined as a result of

globalization and the financial crisis Higher unemployment rates mean unions have less

influence—workers will make salary and benefit concessions to keep their jobs

Many companies buildingfactories in other countries where they can use cheaper, non-union labour

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Global Trends

The Green Revolution—New Energy Sources Global effort required to reduce carbon emissions,

and find new energy sources as alternative to oil, gas, and coal

Energy-rich nations, like Canada, are reluctant to enter into an agreement to reduce carbon emissions that would jeopardize their oil industries

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Global Trends

The Green Revolution—New Energy Sources Canada is not a recognized leader in renewable

energy field. Canadian renewable energy producers are being

lured to countries with feed-in tariffs, which are a guarantee that any company that produces renewable electricity has a guaranteed distribution network, and can price the electricity at higher than normal rates.

As environmental concerns outweigh national economic interests, investment in Canadian renewable energy options will become a priority.



Global Trends

The Green Revolution—New Car Technology Electric, hydrogen-fueled, and hybrid cars Hybrid technology is best alternative at this point As soon as more efficient and economical hydrogen

fuel cells or lightweight batteries enter the market, hybrid vehicles will be replaced

Opportunities for a Canadian manufacturer to introduce a small, inexpensive, fuel-efficient car



Global Trends

The Green Revolution—Reducing the Carbon Footprint

Carbon footprint is the total set of GHG (greenhouse gas) emissions caused directly and indirectly by an individual, organization, event or product.

Any attempt to reduce the carbon footprint has a direct effect on international business It necessitates buying locally, buying less, and buying wisely



Global Trends

Protectionism 2008 economic crisis made protectionist movement a very real

danger to Canadian businesses Unemployment was high in the United States, and anything that

threatened American jobs was very unpopular President Barack Obama included the “Buy American” policy in his

stimulus package Only American steel, iron, and other manufactured goods could be

used in buildings constructed using stimulus money and for state and federal infrastructures projects

Canadian businesses were shut out



Global Trends

Border Security Since the terrorist attacks of September 11, travel

across international borders has become slower and more complicated

Foreign goods are more expensive because of increased costs of securityin shipping

International business travellers have had to adapt to the higher costs of air travel, as well as the additional time required to clear security at airports Used under license from Shutterstock, Inc



Global Trends

Pandemic Protection Increased global travel has brought about epidemics

of disease that spread around the world, such as H1N1 flu in 2009.

Awareness of national health organizations and the World Health Organization has prevented some diseases from spreading across the globe.



Global Trends

Contaminated Products Growing number of tainted, contaminated, and unsafe

products Many from China, where the economy has developed very

quickly and the government has not yet developed a uniform set of safety standards

Many retailers asking for product traceability codes on all imported products, which would lead directly to the manufacturer of any contaminated products



Global Trends

The Fluctuating Price of Oil Canadian economy rests on the price of oil The higher the price of oil on the world markets, the higher

the price of the Canadian dollar Canada imports and exports huge quantities of oil Countries with oil self-sufficiency are often much richer

than than countries that do have their own oil reserves, leading to a power imbalance

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Global Trends

The Fluctuating Price of Oil High price of oil was a major contributor to the global

recession of 2008 Price of oil increased almost 300 percent Transportation costs, heating costs were much more

expensive, and many homeowners did not have enough money to cover these costs and pay their mortgages



Global Trends



Global Trends

SustainabilityThe collective effort, both locally and globally, to meet the needs of the present generation without destroying the ability of future generations to meet their needs. Oil supplies are in decline Other resources, such as fish and fresh water,

may also run out Shift in business activity is necessary, especially

by emerging economic power like India and China



The Global Traveller

PassportAn official document issued by a government certifying the holder’s identity and citizenship, and entitling the holder to travel under its protection to and from foreign countries.

Used under license from Shutterstock, Inc




VisaA certificate issued by a country an individual wishes to visit that indicates that the department of immigration in that country has checked the individual’s credentials and given him or her permission to visit their country temporarily for a specified purpose.

Types of visas Tourist visa Residence visa Work visa




Restricted Goods Firearms, tobacco, and alcohol are the most

commonly restricted items Travellers are often not permitted to enter a country

with large amounts of cash, fresh fruits and vegetables, and live animals

Returning Canadians must declare what they have purchased while away

Duty-free items are non-restricted items made within the borders of a country that has signed a free trade agreement with Canada



Working Abroad

Advantages of Working Abroad

Disadvantages of Working Abroad

Learn a new language Miss family and friends

Expand cultural awareness Experience isolation as a result of not understanding culture/language

Earn a Canadian salary that is higher than typical salaries in that country; enjoy a more affluent lifestyle or save money

Deal with living conditions that are not comparable to Canada’s—poor health care, transportation, etc.

Have valuable experience to add to a resumé

Exposure to dangers—terrorist activity, war, unstable government, etc.

chapter 10: international business trends fundamentals of international business copyright © 2010...

Documents

business slide

international companies

global business activity

chapter objectives

bankruptcy slide

canada slide

global economy

global marketplace example