Chapter 1 Notes

Domestic vs International Business

Business: is the manufacturing of goods or services in order to make a profit
Term trade is used interchangeably with business
Transactions: exchange of things of value

Domestic Business: business that transacts mainly in the country it was base din
ie owned by Canadians, in Canada, selling to Canadians (Rare)
International Business: economic system of transactions conducted between businesses in
different countries

Domestic Transaction: between 2 Canadian companies
International Transaction: between Canadian + non Canadian company

Domestic Market: the customers of a business who are in the same country as the business
Foreign Market: the customers of a business who are in a different country as the business

5 Ways for businesses to must be international
MUST own retailers or distributors in another country
MUST own manufacturing plant in another country
MUST export to other countries
MUST import from others
MUST invest in other country businesses

Trading Partner: Canada businesses make relationship with businesses in another country, so
they would be Canadas trading partner.

History of Canadian Trade
European Trade
1700s trades grew fast after permanent Canadian settlement
Demand for raw materials (beaver pelts, fish, lumber)
Europe manufactured Canadas raw materials
After 7 years war, England and Canada made trade agreements (help war torn France)
near-port cities used to facilitate trade import/exports

US trade
Late 1700s, US independence and self reliant
Steam engine 1775 James Watt: revolutionized manufacturing and transporting
Cotton Gin by Eli Whitney: made cotton fibers, traded cotton with Canada
USA did most of Canadas raw material manufacturing
To this day, US remains as Canadas biggest trading partner
Mexico
NA Free Trade Agreement (NAFTA) made duty free trade in North America

Asian Trade
1940s Traded with Japan for electronics and cars
China manufacturing (Wal-Mart $15B to China)

Trade with Middle East
Oil
Politics, lack of industrialization, and technology limited trade
Dubai, Egypt, Israel have trades asides from oil

Indian Trade
High, educated population
Outsourcing and manufacturing
Although open government, lack of infrastructure and issues troubled trades
India aggressively expanded internationally
Imports: Linen, Rice, diamonds, clothes
Exports: fertilizers, vegetables, newspaper, copper

African Trade
Very low exchange with Canada (1% import, 3% export)
Corrupt government, infrastructure problems loom
Lots of primary resource potential
South Africa (no-oil) and Morocco (oil/fruits) trading partners:

Globalization and Interdependence
Globalization: where economies and cultures have become integrated through new global
communication, investments, trade, and transport
easy to globalize nowadays
global sales, finance, marketing, manufacturing, transportation = globalization
international business IS NOT globalization
businesses can operate internationally but not globally
global businesses can be affected by global events
2008 recession
Banks lent at low rates
not getting returned, lost money
closure of operations forced
History: Globalization began after WW2
United Nation first sign of globalization
Helps negotiate treaties and tariffs

Technology: Internet/cellular made trades nearly instant, quick, even at remote places
Social Issues
China India building big economies
Large companies want to expand in China/India
Workers, moneyflow from huge population
Blur of political boundaries
EU collaborated all Europe nations
Agreements merge borders
Interdependence: reliance between 2 or more nations for each others products and services
eg US relying on China to make goods

Primary Industries: Mainly Raw materials
Agriculture, Hunting, Fishing, Energy/Mining, Forestry (FEFAH)
Western Canada: oil, gas, metals, beef
Eastern Canada: oil, offshore oil, minerals

Secondary Industries: manufacturing or processing capital goods orconsumer goods
Canada as good manufacturing paper, oil refining, diamond, paper
Canada relies on US and China for making other goods
Branch Plant: a factory located outside of host country
Canada branch plant policy saying you must have a factory to conduct business
here
Disadvantages of branch plants (3)
Business reduction in roles mainly R&D and execs
Innovation follows parent company
Exports lack made in Canada for Canadians
Non-Canadian Materials uses imported materials often
Foreign secondary + domestic secondary can add value to raw materials

Tertiary Industries: provides services for consumers and businesses
Retail is the largest (banking, construction, communication)
Canadian retail depend on imports
Most Canadian retails are owned by foreign places

How International business help Canadians
Variety of products
most products made in USA, but we have access to those
experiences from around the world
electronics mostly imported
benefit from cheap labour and materials in China and India
New Markets, More Jobs
34 M popn in Canada, 100M popn in USA, 1B+ popn in China
BL: make products that suit Chinese demographics
Tim Hortons USA locations mean they hire more people
Foreign companies in Canada spend more money on R&D
Foreign Investments
(1) Foreign Direct Investments (FDI): done to control all or some of business
operations (startups)
(2) Foreign Portfolio Investments: stocks/bonds/funds issued by companies to own a
part of it
HBC went bankrupt if it wasnt for foreign investments backing them up
New processes and Technology
medical, consumer electronics

How International business hurts Canadians
Loss of culture/identity
Movies are mostly representing American culture, rare about Canada
CRTC regulates how much Canadian TV shows are shown in Canada
35% of radio music must be canadian
M Music
A Artist
P Produced
L Lyrics
Canadians are often aware of Canadian books and TV shows due to recognition
Increased foreign ownership of Canadian companies
Foreign companies are likely to stay loyal to their come country
often leaves Canada in the dark when corporate problems rise
R&D is often left in home country, making such jobs not in Canada and lowered
profits
Reduced Exports: foreign branch in Canada does things for Canada and doesnt
export
Revenues leave Canada pay head offices: Canadian branch helps pay head office
costs
This lowers actual income and lesser taxation.
High jobs like accounting, advertising, and marketing is done in home
country
Economic destabilization, Global events can influence and impact Canadian
economy due to many plugins from foreign businesses
Eg 2008 American Buy American campaign negatively affected CDN
economy.
Chapter 2 Notes
International Business Practices
Canada trades internationally because of 7 main reasons:
Company Growth
Entry into new markets
Expanded customer base
Increased profits
Access to inexpensive supplies
Lower labour costs
Access to financing

Foreign Portfolio Investment (FPI): investments made on items from foreign countries
Joint Ventures are the riskiest
High % of ownership reside in foreign country, not home country
CDNs purchase stocks, bonds, and financial instruments to make money
Dividend: Interest made or amount that can be gained from an investment
Short-Term Investments: (Liquid) safe because they can be converted to cash easily
Capital Market: investing platform with long-term investments such as bonds, stocks.
Stocks are popular way of FPI in New York or Tokyo.
Mutual Funds: combined $ from many people are invested and dividends paid
CDNs invest in foreign to diversify their portfolio
Canada is only 2% of worlds stock markets
Risk: International markets are interrelated with global events
2008 US Crisis affected global markets

Imports: bringing products or services into a country
Intended for resale or Business to Business (B2B)
Global Sourcing: importing equipment, capital, raw materials from around the world
Importing helps keep costs low, improve quality, or access new technologies
Services can also be imported
Call centers are regularly imported from India
Canada Imports: machinery, cars, oil, chemicals, electricity, consumer goods
In 2008, Canadas import were ~$490 B

Exports: when companies outside of Canada purchase Canadian goods or services
Services can also be exported, ie Call centers
Canada exports lumber, telecom. equipment, chemicals, plastics, fertilizers, oil, gas,
electricity, aluminum
In 2008, Canadas exports were ~$443 B
Exports are vital to Canadas economic success
#1 CA trading partner is US, who is 77.7% of global exports

Optional Section: Oil
CA imports 1 M barrels/day
CA exports 3.4 M barrels/day
CA imports for Eastern CA because there arent pipelines spanning west-east, only
north-south

Value Added: amount of worth that is added to a product as it is processed
= cost of finished products cost of raw materials
Issue: Canada, making mainly primary goods, have little Value added to exports
Example: Value addition for furniture
CDN Lumber sold at $50, zero value added
US Furniture Maker sells table at $3000, added $2950 in value
CA Furniture store buys table for $3000, sells for $4500, made $1500 in value

Licensing Agreement: gives a company permission to use a product, service, brand name, or
patent in exchange for free or royalty.
Usually applicable in one specific region
For Example: Bell Mobility wanted to use UK Virgin brand in CA
Bell has to pay Virgin a fee for using it in Canada
Bell therefore has increased profits because of this new brand

Exclusive Distribution Rights: a form of licensing where a company is allowed to be the only
distributor of a product in a specific geographic area.
Strategy often used as an entry into a foreign market
Example: Rogers was the exclusive carrier for the iPhone 3G in 08 when it first came
out in CA
Licensing is used mostly for manufacturing also
Senior parent company staff are sent to train foreign manufacturing
After they are trained, the foreign employees manage it as parent staff retreats
Licensing agreements have little risk but offer limited money returns.

Franchising: agreement to use a companys name, services, products, and marketing.
Franchisee signs a contract and agrees to follow all the rules with the franchisor
They pay franchisor fees for finance, marketing, HR, operations, quality support
Examples include Kumon, McDonalds, Wendys, Boston Pizza
Franchisees have less risk and lots of support from franchisor
Often have lesser profit, strict rules, and loss of control

Joint Ventures: when 2 businesses, one from a foreign country, form a company with shared
ownership
25-40% of all foreign investments are joint ventures
Reason: joined so theyll be allowed into countries
Often joining with govt or companies in China or Cuba with communist
Trade Winds Inc is a CDN mining company in China to explore
Companies can gain control of new markets, customers, and products
May also share financing, technology, cultural, risk reduction
However, it may be a risk for investors because 50% of all joint ventures fail
GM and Toyota joint failed, lost investors money
To over come these risks, formal contracts, and attention to detail makes things run
smoothly


Trade Barriers
Tariffs
Most common type of trade barrier
Tariffs are taxes or duties put on imported products or services.
Purpose to raise the cost of imported goods so consumers will purchase local products
Protectionism: shielding against foreign competition
Winners
Domestic government
Local producers
Local employees
Losers
Foreign producers
Consumers price of products go up
Foreign employees overseas employees lose out on opportunities
Canada uses NAFTA to void taxes in North America

Trade Quotas
Government imposed limit on the amount of a product that cam be imported
Protects domestic producers limiting import and reducing foreign competition
eg Canada has a quota of 14.5M kg of peanut butter to export to USA
Tariffs increase once company exceeds quota

Trade Embargoes
banning ALL trade on a specific product or with a specific country
used to pressure foreign countries to change government policies or human rights
Embargoes increase the price of products as supply decreases
2003 Canada embargo for beef with mad cow disease

Trade Sanctions
Action taken by a country to force another to follow to international trade agreements or
norms of conducts
Similar to embargoes, but Sanctions often only involve banning some products
Cuba USA sanction for banning trade will continue until Cuba becomes democratic

Foreign Investment Restrictions
Laws in Canada influences foreign investment
Investments Canada Act must review investments to make sure they benefit
Canada
ie investments > $5M with non WTO country must be reviewed
investments >$312M with WTO country must be reviewed
trades of uranium, financial, transport, or culture industries must be
reviewed
Bank act, telecom act, transport act also limit foreign ownership
Transport act limits 25% ownership to all Canadian domestic airlines
Canada faces foreign restrictions too
Canadians face Australias Foreign Investment Review Board for >$5M
real estate invests

Standards
Countries have different standards for environmental protection, voltage, or
health/safety
Companies making products must account for compatibility in foreign standards
ISO (International Organization for Standardization) can help alleviate this
standards issue

Currencies
Exchange Rate: amount of currency in relation to the currency of another country
Fluctuations cause barriers because of uncertainty in pricing goods accurately
CAD often quoted with USD because they are largest partners in the world
Historically CAD was less than USD, at one time low of 1CAD = $0.637 USD
But now its sometimes higher if not even at most times
Canada is 7th most traded in the world

Winners of High Canadian Dollar
Importers: consumers like high dollar, means pay less CAD for USD products
Companies gain when importing US goods like machinery etc.
Canadian Travelers: costs less to spend CAD in USD after conversion
Major League Sports Teams: teams operating in Canada pay US dollars to players
If CAD is higher, it costs USD less to pay Canadian players

Losses of High Canadian Dollar
Exports: difficult to foreign importers to buy Canadian products
causes companies to leave Canada for less expensive locations
Canadian Tourism: high cost in Canada keeps tourists home
2009 Passport policies discouraged American visits even more
Hollywood Movies which were usually made in Canada are no longer
Canadian Retailers: Canadian shops in USA dont import from Canada, prefer to buy
from elsewhere

Factors affecting the exchange rate
Floating Rate: no fixed rate in CAD compared to other currencies
Currency Valuation: demand > supply causing CAD to rise
Currency Devaluation: supply > demand causing CAD to fall
Economic Conditions in Canada: Inflation rate, GDP, unemployment rate have
impact
Inflation Rate low = good stable prices
GDP increase = stable healthy economy
Low unemployment = good job market
Interest rates in CA attracts investors here
Trading Between Countries
Export > Imports = more demand for currency
Higher Terms of Trade: comparison between exports to imports = Higher
currency
Politics: stability of country affects currency
Tension, terrorism, rioting
Psychological Factors: historical significance on international market
In international uprising, Swiss Franc is refugge, US+Euro are safe.
Hard currencies: easily convert to other currencies (CAD, US, Euro)
Soft currencies: not easily converted (Yuan, Russian ruble)
Canada wasnt affected in 2008 recession because, by comparison, US had
more problems while Canadas natural resource was still growing. Thus,
CAD still stayed high

Currency Speculating: trading or holding foreign currency in anticipation of its
changing value
Profit from currency fluctuations
Canadian companies often trade in USD to avoid currency fluctuations
Also trade with other countries in USD to have common currencies
Overcome currency fluctuations with multiple bank accounts serving different
currencies

Time Zones
Different time zones mean Canada cant call Japan on demand, they must wait for the
right time
Communication technologies make it easier, but still a barrier
Call centers business take advantage of this
Text/email can communicate, but real time feedback is hard to happen
Culture Intro
Culture: encompasses the knowledge, experience, beliefs, values, attitudes, religion, symbols,
and possessions acquired by a group of people who lived in the same region or country for
generations.
Subculture: a cultural group within a larger or predominant culture distinguished from it by
factors such as class, ethnic background, and religion, and unified by shared beliefs and
interests
Counter Culture: A culture that has values or lifestyle that are inopposition to those of a
current accepted culture. Members of a counter culture openly reject the established cultural
values that surround them.
Culture Determinants: The main factor that shape the culture of a specific group include
religion, politics, topology, climate, and history.

Culture of Saudi Arabia
Revolves around religion of Islam
Prays 5 times a day
Friday is a holy day, Weekend is Thurs Sat
Clothing is loose because its hot
Women hide everything except hand feet and face
Criminal cases are tried under Sharia (Sunni Islam) courts

Culture of Japan
Shintoism and Buddhism dominate (caring for nature and logic
Hierarchical, status matters
Kimonos worn by women during special events
Gifts are informal for visits, formal for meetings
Wrapping is often more important
Opened when recipient is invited to do so
Extravagant gifts are not appreciated, sets up inequalities between both parties
Belittle your informal gift at visit (Its only a token but..)

Cultural Awareness and Business
Canadian firms going global must determine the cultural differences
Decide whether or not their business can adapt to foreign culture

Extent of foreign operations
Level of cultural awareness will depend on how much business a company does in foreign
country
Primary domestic operations that export do not need to care
Manufacturing, retail are more crucial

Degree of cultural differences
If foreign culture is similar, no need to spend as much time
If its very different, then you need to spend more time

Number of Foreign Operations
Businesses in foreign markets need to be aware the difference between cultures
Impact of culture on international business
Failure to consider culture could ruin negotiations, marketing, labour, or even death
Products
Culture has a direct impact on the types of products and services that will be
successful in other markets
Culture has little impact on the sale of Canadian raw goods
Canadian exports depend on foreign culture though (ie pork in
jewish/muslim area)
Services
Financial services are most commonly exported into foreign markets
Peoples attitude towards money is different in every culture
Chinese like to save money, investment firms like to tap into the billions of
dollars

Impact of culture on labour
Canadian values extend into the workplace by means such as minimum wages, safety,
discrimination, and holidays

Rationalization: any attempt to increase a companys effectiveness and efficiency
Ex. Downsizing, layoffs, relocating corporate functions and activities

Many companies find Canadian labour is very expensive for manufacturing jobs
For skilled jobs, Canada is very educated and well fitted for those tasks
Canadians who wish to do business abroad must understand the differences between other
countrys values about labour

Child Labour
Child Labour is very prominent in Asia and the Pacific countries
To Canadian businesses, this is easy to control, just dont hire kids
But to some nations, it may be ok or they dont care whos working
Some take advantage of kids, putting them in dangerous conditions
If a Canadian business is caught doing this, Canadians will see this as
unacceptable and will decline to buy their products
Discrimination
Canadian law prohibits any form of discrimination in the workplace
However, in Saudi Arabia, hiring women can be difficult as their values are different
Homosexuality may also be less welcomed in other countries
Wages
Wages reflect standards of living in a country
Canadian manager must ask what is an acceptable or average wage in foreign countries
Standards and Practices
Cultures may have different norms as part of the workplace than Canada
Lunch breaks: Canada = 1 hour, Mexico = 2 hours, Muslim Countries have times
to pray
Labour Unions and benefits may be non-existent in some countries
Different labour cultures affect Canadian branch plants that they must respect
Indigenous Cultures
Foreign branches must be aware of indigenous cultures
Positive indigenous effects: employments, medical, roads, water.
Ie Businesses who need educated people might benefit local schools etc.
Historically, it hadnt worked out with indigenous people
Ex French Canada traders abused Native Indians to do resource extraction
Angola and Sierra Leone have rebel forces trading Diamond with bloody conflicts
Exploitation of diamonds for guns harms ecosystems, human life, and animal life
Thousands of indigenous colonies get displaced when companies expand into
forests

Business Meetings and Negotiations
Canada
Men wear suits, tie, jacket, black shoes, dress pants
Women wear blazers, suit, or dress
10 minutes before meeting
Sits at side of meeting table
Shakes hand, maintains eye contact
Logically paced presentation and scheduling
Time Perception
Monochronic: sees time as linear and sequential, and focus on one thing at at time
Based on contracts, back and forth, formality, fact based, direct
Polychronic: sees many things happening at the same time with participation of many
people
Works based on trust, contacts, and lesser formal
Spatial Perception
Refers to the personal space and amount of physical contact
Europe, South Americans are closer than North American cultures
Physical contact can involve kissing, touching
Canada: hand shaking, patting on back is appropriate
Latin America: Kissing, hugging, patting is appropriate
Muslim: touching is offensive
Seating can also be different
Canada likes sitting across from eachother, China likes side by side
Non-Verbal Communication
Non-Verbal communication is closely related to cultural norms of space.
Ie Japan is strict to have 1 person talking at once, whispering is unacceptable
Some gestures are regarded as offences
Ie OK sign is obscene in Spain
Business Etiquette
Expectations for how a business person presents him/herself in a meeting is different
Business cards, dress, punctuality, gifts, greetings, and topics should be considered

Hofstedes Cultural Dimensions
Power Distance (PDI)
How different in power between people is perceived differently.
High Power Distance
Cultures with superiority because of age, wealth, gender, status, job etc.
Ex. Mexico, India, Indonesia
Lower Power Distance
Cultures that assume on equality regardless
Assumed based on earned status and how you build yourself
People arent prejudged
Ex. Israel, Canada, Austria
Uncertainty Avoidance (UAI)
How cultures adapt to change
High Uncertainty Avoidance
You like rules, routines, religion, belief
Act based on beliefs
Little tolerance for outsiders
Ex. Mexico, Japan, Saudi Arabia
Low Uncertainty Avoidance
Love risk taking and seeking change
Very high tolerance for difference
Accepting, diverse
Ex. Canada, USA, Sweden, Singapore
Masculinity vs Femininity (MAS)
Workplace values of males and females
Masculinity
Something we possess and show
Being assertive, competitive, ambition, accumulative of material goods
(collecting)
Ex. Japan, Mexico
Femininity
Degree of culture values nurturing, family values, and social support systems
Ex South Korea
Individualism vs Collectivism (IDV)
Extent to which a person makes their own decisions regarding your education, job, and
life partner
Individually (High IDV)
Makes decisions yourself
Ex Canada, USA, Australia
Collectivism (Low IDV)
Members have government, churches, and families make decisions for them
Ex. China, Cuba
Orientation (LTO)
Long term orientation vs Short term orientation
Long Term Goals
Having perseverance for long term goals
Ex. South Korea
Short Term Goals
Looking at the present, what are you going to do now.
Ex. USA, Canada

Hofstedes Canada
High IDV: individualistic approach and attitude. Privacy.
Low LTO: short term driven and appreciates cultural traditions
Low PDI: High level of equality.

Chapter 4 Notes
Economics and Politics
Political System: the type of government by which a country is run
Economic System: the way a country organizes its resources and distributes good to citizens
Economic systems try to answer:
What should the country produce and in what quantities?
How should scarce resources such as labour and capital be allocated?
How should goods and services be distributed throughout the country?
What should be the price of goods and services?
Market Economy: capitalism or private enterprise
Businesses, consumers, government run independently of each other
Ensure there is a variety and little government control
Atmosphere in which citizens and corporations can be successful
Private Property: encouraged to own property (real estate, automobiles,
furniture..)
Free to rent, sell, trade, or give properties
Profit: encouraged to be profitable because then companies can improve
Profit belongs to the owner of the business and they choose how to spend it
Competition: Companies compete on quality, services, price, reputation &
warrantees
competition results in more incentives by the companies to have loyal
customers
Advantage:
Freedom of speech, religion, assembly
Efficiency
Innovation
Economic Growth
Low prices
Disadvantages
Rich and Poor gap
No education
Unhealthy products
Centrally Planned Economies: communism or command economy
Government controls all element of the economy and distributes income
Government provides education, healthcare, employment, and housing
Private Property: Restricted. Government owns all housing & businesses like
factories, offices, farms. All workers are employed by the government
Profit: Profit belongs to government. No portion belongs to citizens.
Governments re-invest revenues into businesses or education, military.
Governments control prices to increase revenue when needed
Competition: Limited. Government determines size, price, quality, and amounts.
Consumers have little variety
Ex. North Korea, Cuba.
China and Russia are changing to market economy practices
Advantages
Citizens ensured minimum standards
No unemployment
All services provided
Stability
Disadvantages
Restriction of freedom
No motivation to work
No innovation
Large military
Corruption
Mixed Economies: Free enterprise systems
Ex. Canada has government services like healthcare and education, yet
prosperous businesses and large corporations.
Private Property: owned by individuals, corporations, or government.
Government has offices, parks, and schools. It sets regulations that affect private
property.
Ex Canada has regulations for ownership of financial institutions and
media
Profit: encouraged, but taxed to support government. Federal & provincial level
through sales tax, income tax, corporate tax. Municipal collects property taxes
Competition: Strong competition between businesses, but government might be
a competitor too.
Ex. Government owned VIA Rail, Canada Post affect DHL, Fedex, UPS
etc.
Advantages:
Consumer protection
Individual incentive
Basic social services
Disadvantage
Higher taxation
Individuals have little on input on tax spendings
Less working motivation
Government might intervene growth

Political Systems
Theocratic: based on religion
Monarchy: based on king and queen
Aristocracy: based on rich and wealthy
Democracy: Free and fair elections, rule of law, free speech, assembly, press, and
religion
Entitled to education and govern themselves
Accompanied by market economy
Ex Canada, USA
Politicians get concerned with re-election than the overall benefit
Politicians rely on corporate funding may be influenced by corporations
Similar background from politicians (lack of women, minorities, poor)
Expensive to maintain
New emerging economies lack judicial systems to maintain political stability
(latin america)
Autocracy: Ruled by a small group or individual
Believe 1 government will have rational decisions for entire country
Strong military presence
Controls citizens lives including media, professions, businesses, religions
Citizens have no say in government decisions
Ex. North Korea, Cuba are led by a single leader
Tied with centrally planned economy, though some countries have foreign
investments

Classifying Economic Development
Countries are classified by economic development. Whether theyre poor, rich, or just
getting started
Countries are ranked based on criteria determined by United Nations (UN) and IMF
(International Monetary Fund)
Underdeveloped Countries, least developed, or third world
Poor infrastructure, no healthcare, education
Small economies by comparison
Low literacy, limited technology, weak economies
Political issues, corruption, war
Relies predominantly on agriculture or resources
Frequent natural catastrophes result in underdevelopment (Rwanda, Madagascar)
Developing Countries, emerging countries
Improved literacy rates, increased health care access, technological advancements
Shift towards industrialization and manufacturing
Ex. China, Brazil, India, South Africa
Rural shift to cities as well as urbanization
Canadian businesses like Bombardier can benefit by providing for these countries
However, lower labour costs Canada cant match can compete with Canada
Often weak regulatory and legal systems.
Developed Countries, industrialized nations, first world countries
High Income or strong GDP
High literacy rates, good healthcare, education, and technology
Manufacture diverse complex equipment like cell phones, computers, hybrid cars
Strong alliances between developed countries (G8)
Correlation between democracy and economic growth

The Business Cycle
Recession, contraction
Economy slows down
2 consecutive quarters of negative GDP
decline in consumer purchases, employment, business growth
Indication in Canada are construction contracts and exports
Trough, Bottom of the cycle
Employment and production at their lowest point
Turning point to success
sometimes worsens to become depression (ie 1930s)
Expansion, recovery, prosperity
growth of employment, wages, production, and profits
Strong investments, businesses created (Ie 2001-2007)
Peak
Top of the business cycle when economy stops expanding and begins contracting

Economic Indicators of the business cycle
Leading indicators: predict where the economy is headed.
adjusts before economy actually experiences change
guides investors, businesses, and governments
Ex. Housing starts are leading indicators because people wont purchase new
homes if economy is down
Lagging Indicators: are adjusted after economic changes.
Takes 2-3 quarters for economic change to influence a lagging indicator
Ex. Unemployment rate: takes 6 months for unemployment rate to decrease after
change
Coincident Indicators: move in conjunction with the business cycle
Ex International Trade: slumping economies involve less trading

Governments and the Business Cycle
During the 2008-2009 US recession, Canada was affected by decrease in American
purchases
Governments increased their spending to stimulate the economy
Canada allotted $12B for infrastructure, $7.8B for homes, $200B for consumers.
USA had a $787B stimulus package to government agencies
Democratic governments may invest in social programs to influence voters decisions
before elections

Economics of Trade
Absolute Advantage
a country has absolute advantage if it makes a product or service more productively than
other countries.
They use the resources more efficiently to manufacture more products.
Country has better technology to produce goods with absolute advantage
Opportunity Cost: is the value of what is forgone
Opportunity cost of being in school is the money you could be making in a job
Comparative Advantage
When a country has a comparative advantage, it means that country can produce a good
at a lower opportunity cost as the other
Countries exporting products in which they have a comparative advantage, and import
goods from country with a comparative advantage for that product, both countries will
benefit.

The Role of Government in International Trade
Governments role include: IN/OUT Laws, tariffs, trade agreements, immigration laws,
currency rates, taxation laws, education, tax treaties, military systems, environmental policies,
infrastructures, embargoes
Canadian government help intd businesses set up in canada with incentives
But impede with regulations, licenses, and laws.

Government Regulations
Government regulates laws such as minimum wage
To start a business in Canada, it is easy to start a business with only one online
application
New registered businesses will receive
A registration number
GST/HST number
Corporate income tax account
Import/Export account
Payroll deduction information
In China, though, it takes 13 stages of approval to open a business there

Trade offices
Established in foreign countries, it helps foreign businesses operate
Trade offices help investments, exports, R&D, and lower costs by providing expertise
Government Embassies, High commissions, and Consulates
Consular Services in foreign countries help traveling Canadians in case of emergencies
Communications with family after accident
Lost passports or identifications
Customs, Taxes, VISAs
Embassies: located in capital cities they provide full range of services
High Commissions: Same as embassies, but in Commonwealth countries (GB,
Australia)
Permanent Missions: Located in UN, WTO and EU. No consular services
Consulates General: embassy like offices located in major cities
Consulates: located in major cities but do not provide all range of services
Consulates headed by honorary consuls: Located around the world headed by
honorary consuls. In places like Uganda and Paraguay.
Offices: Found in major and capital cities to aid with specific projects without consular
services.

Trade Missions
Organized by DFAIT, Team Canada visits a specific country focused on a specific
industry
Provides Canadians a business opportunity to meet potential customers, suppliers etc.
Junior Team Canada are teenagers going abroad to gather business information,
contacts, and opportunities.
Brand Canada promotes Canadian Culture to foreign places

International Trade Agreements and Organizations
Key Ideas:
-Globalization
-In an economic context, is the movement of goods, services, technology, investment,
ideas, and people throughout the World.

3 major types of globalization strategies (company use): Global
1. - Regards the world as one big marketall people want the same product and will respond to
marketing in a similar way
2. - Product and marketing are uniform around the world
3. - Takes advantage of economies of scale (proportionate savings gained by producing larger
quantities)
4. - Does not respond to individual cultures
Multi-domestic
5. - Customizes products, services, and marketing for the local culturelocal management is
most capable of
determining what is best for the local subsidiary
6. - Effective when cultural differences are prominent
7. - Less political and exchange-rate risk
Transnational
Combines the best elements of the global and multi-domestic strategies
Respects needs of local market, while maintaining efficiencies of a global strategy
Manufacturing takes place at least expensive source, human resources and marketing take
place at the
local level Trade agreement
An enforceable treaty between two or more countries that involves the movement of goods and
services, elimination of trade barriers, establishment of terms of trade, and encouragement of
foreign investment.

The North American Free Trade Agreement (NAFTA)
- Launched in January 1994 between Canada, the United States, and Mexico
1. - Created worlds largest free trade area
2. - Sets rules surrounding movement of goods, services, and investments across North America
3. - Eliminates tariffs and other trade barriers, and promotes fair competition

Tax Treaties: A tax treaty is created to prevent double taxation and tax evasion for people
who would pay taxes in Canada and another country.
The European Union (EU): A trade agreement signed in 1993 that now encompasses
twenty-seven countries in Europe and a population of almost half a billion people. It has its
own flag, anthem, and currency, and common financial, security, and foreign policies.
The euro: The European currency unit adopted by the European Union and used in most
EU countries.
Trade
organizations
Groups established to help with the free flow of goods and services. They may be global in
scope or national organizations created by individual governments to help domestic
companies expand into international markets. Example:
World Trade Organization (WTO) (Founded in 1995, has more than 150 members country)
The main purposes of the WTO are:
To act as a forum for negotiations
To provide a set of rules that have been negotiated and signed by the governments of
member countries To offer a forum for dispute settlement
Asia-Pacific Economic Co-operation (APEC) (Created in 1989)

The Group of Eight (G8)
The Group of Twenty (G20) Canadas Place in the G8 and G20
1. - GDP, population : Low compare G8 and G20 countries
2. - Talk of replacing Canada in the G8, and placing it as a second-tier country in the G20
3. - Would be detrimental to Canada, as its needs, concerns, and interests would not be given the
same consideration as in the past.
Organization for Economic Co-operation and Development (OECD) (Created in 1961, 30
members country) The World Bank (186 members country) International Monetary Fund
(IMF)
The UN has four main purposes:
1. To keep peace throughout the world
2. To develop friendly relations among nations
3. To work together to help poor people live better lives, to conquer hunger, disease, and
illiteracy, and
to encourage respect for each others rights and freedoms
4. To be a centre for helping nations to achieve these goals
1. UNs Work:
1. - UN is responsible for organizations that influence international business, including the
International Labour Organization (ILO), the International Monetary Fund (IMF), and
the World Bank
2. - UN devotes resources to improving the standard of living, the unemployment rate,
and economic conditions throughout the world
3. - UN Economic and Financial Committee deals with issues such as international trade,
globalization, and poverty elimination