the global environment for business the global environment for business obea 2004

The Global Environment for BusinessThe Global Environment for Business

The Global The Global Environment Environment

for Businessfor Business

OBEA 2004OBEA 2004

2

The Global Environment for Business

Introduction to International Business

Businesses & International Business

Countries & International Business

International Business in Canada

This presentation This presentation contains four sections:contains four sections:




OBEA 2004OBEA 2004

Section 1:Section 1:Introduction to Introduction to

International International BusinessBusiness

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International International business is….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.

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Levels of International Levels of International BusinessBusiness

Source: Brian Toyne & Douglas Nigh, “A More Expansive View of International Business.”

Supra-societal•Boundary conditions such as agreements, international monetary systems, etc.

•Organizations such as WTO, EU, UN, etc.

Nation/state•Boundary conditions such as national policies and laws

•National politics and economic situations

Industry•Conditions that industries create such as competition, technology, specialization, lobbying/political pressure, efficiency, etc.

Firm •Conditions that individual firms create, such as employment, policies, economic impact, etc.

Group •Conditions on groups within firms include changes to working conditions, learning, change, impacts on employment, etc.

Individual •Individual conditions such as motivation, talents, expertise, work/life balance, etc.

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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 Globalization: What Is It?It?

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Globalization: What’s Globalization: What’s the Dispute?the Dispute?

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Many people are for globalization, while many others are 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 Activity: Understanding the ArgumentsArguments




OBEA 2004OBEA 2004

Section 2:Section 2:Businesses & Businesses & International International

BusinessBusiness

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International business as an International business as an integrated part of an integrated part of an organization…organization…

““Overseas operations used Overseas operations used to be thought of as to be thought of as

appendages or subsidiaries appendages or subsidiaries to help increase sales; now, to help increase sales; now,

they’re part of a network they’re part of a network for accessing knowledge for accessing knowledge

and human capital around and human capital around the world.”the world.”

Christopher Bartlett, “Global Myth Manager” in Fast Company, Issue 8, p.

134.

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The 5 Functions of Business in an The 5 Functions of Business in an International ContextInternational Context

Management Pr

oduc

tion

Mark

eti

ng

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.

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 to coordinate them.

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…

FUNCTIONSFUNCTIONS

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Finance

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.

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.

(continued from previous slide)

Human

Resou

rces

FUNCTIONSFUNCTIONS

The 5 Functions of Business in an The 5 Functions of Business in an International ContextInternational Context

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What is a Multinational What is a Multinational Company?Company?

An enterprise that conducts business in

several different countries

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Account for over 33% of world output, and 66% of world trade

Approximately 25% of world trade takes place among multinationals

More About MultinationalsMore About Multinationals

Source: J. Gray. False Dawn: The Delusions of Global Capitalism. London: Granta, 1999

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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

Successful Multinational Successful Multinational CharacteristicsCharacteristics

Source: John B. Cullen, Multinational Management: A Strategic Approach. Cincinnati: South-Western College Publishing, 1999.

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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 Factors Affecting Growth of MultinationalsMultinationals

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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 Activity: Getting to Know a MultinationalMultinational




OBEA 2004OBEA 2004

Section 3:Section 3:Countries & Countries &

International International BusinessBusiness

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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

Trade Among Nations: Trade Among Nations: InterdependenceInterdependenceInternational business causes greater interdependence among nations in a variety of ways:

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Technology

Currency

International agreements

Policies

Non-governmental Organizations (NGOs)

Factors Affecting Factors Affecting International TradeInternational TradeEach of the following will be discussed in the slides that follow

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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

TechnologyTechnology

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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

CurrencyCurrency

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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 International Trade AgreementsAgreements

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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)

PoliciesPolicies

Types of policies that affect international trade :

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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

NGOsNGOs

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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

““Fair Trade:” An Fair Trade:” An Emerging IssueEmerging Issue

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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

Principles for Fair Principles for Fair TradeTrade

Adapted from http://internationalecon.com/fairtrade/index.html

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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 UsActivity: Impacts on Us




OBEA 2004OBEA 2004

Section 4:Section 4:International International

Business Business in Canadain Canada

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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 Canada as a Global PlayerPlayer

Source for points 2, 3 & 4: M. Schultz et al., International Business: Canada and Global Trade. Toronto: Nelson, 2003.

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Canada’s Trading Partners: Canada’s Trading Partners: ExportsExports

Canada's Exports

United States89%

United Kingdom3%Japan

8%

Cars Auto parts Lumber Forest products

Lumber Forest

products Ores &

minerals

Lumber Forest

products Ores &

minerals

Source: Actden, http://www2.actden.com/writ_den/g13/brief.htm

Total exports, 2003: $400,010,000,000Source: Statistics Canada

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Canada’s Trading Partners: Canada’s Trading Partners: ImportsImports

Canada's Imports

Japan7%

United Kingdom3%

United States90%

Fruits & vegetables Machinery

Manufactured goods

Chemicals Plastics Processed metals

Source: Actden, http://www2.actden.com/writ_den/g13/brief.htm

Total imports, 2003: $341,832,700,000Source: Statistics Canada

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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 Canadian Global Trade PoliciesPolicies

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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.

The Canadian WinnersThe Canadian WinnersAccording to Industry Canada,

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Creates jobs

Attracts investment

Attracts technology

Makes more consumer goods available

Overall, these factors can improve the economy

Advantages of International Advantages of International Trade in CanadaTrade in Canada

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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 Disadvantages of International Trade in CanadaTrade in Canada

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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

Growing International MarketsGrowing International Markets

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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 BallActivity: Your Crystal Ball

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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 Web References for Further Investigation Investigation

Continued…

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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 Web References for Further Investigation Investigation

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