Chapter 6: International: The Global Market Place

Transcription

1 Chapter 6: International: The Global Market Place BAM Peter Forint BA, MBA, GBM

2 Proposed Agenda l Quiz l In the news l Chapter 5 l Chapter 6 l Mid-Term Review 2

3 Remember PESTI l Political (Government) l Economic l Social l Technological l International 3

4 About Chpt 5: Technology l Very short l Just take a quick read 4

5 PESTI l Political (Government) l Economic l Social l Technological l International 5

6 Definition of Globalization l the act or process of globalizing: the state of being globalized; especially: the development of an increasingly integrated global economy marked especially by free trade, free flow of capital, and the tapping of cheaper foreign labor markets 6

7 Video l 7

8 Big Question: Is globalization a positive or a negative thing? 8

9 Learning Outcomes 1. Show why global trade is important to Canada and how it is measured. 2. Explain why nations trade. 3. List some of the international economic communities. 4. Explain how companies can enter the global marketplace. 6. Discuss how governments and institutions foster world trade. 7. Explain some of the threats in the global marketplace. 8. List some of the trends in the global marketplace. 9

10 In the News l Lululemon Athletica founder Chip Wilson resigns from board of directors Great story in text Another example of luck? 10

11 Definition of Luck Luck is what happens when preparation meets opportunity. Lucius Annaeus Seneca (c. 4 BC A.D. 65) according to 11

12 Global Vision l The ability to recognize and react to international business opportunities, be aware of threats from foreign competition, and effectively use international distribution networks to obtain raw materials and move finished products to customers p

13 Affects Every Canadian Business 13

14 Remember: Economic History l French, English, Spanish l Economic Zones (North) Canada: Resources (Middle) Northern USA: Manufacturing, Commerce (South) Southern USA: Agriculture

15 French, English, Spanish (1700s)

16 What countries are most successful? It s all about manufacturing, stupid. - Peter Forint and many before him! 16

17 Basic Term Ø Recognizing international opportunities. Global Vision Ø Awareness of threats from foreign competitors. Ø Effectively using international distribution networks. 17 Copyright 2014 by Nelson Education Ltd.

18 Impact of MNCs l Multi-National Corporations Corporations that move resources, goods, services, and skills across national boundaries without regard to the country in which their headquarters are located. p. 141 l Includes money and tax avoidance Copyright 2014 by Nelson Education Ltd. 18

19 If Apple were a Country l If Apple were a country, it'd be the 55th richest country in the world Adrienne Lafrance l Apple Is 0.5% Of US GDP, 0.15% of Global GDP 19

20 Canada Goes Global Offers expanded markets for our products. } Economies of scale in production and marketing. } Ease of transfer of experience, technology. } Global recognition of products and brand names. } Possibility of uniform global image for the companies. 20 Copyright 2014 by Nelson Education Ltd.

21 Measuring Trade Between Nations Exports Imports Balance of Trade (Imports - Exports) Balance of Payments 21 Copyright 2014 by Nelson Education Ltd.

22 Challenges } Economic crises of 2008 and onward. } Fluctuating value of currencies JUPITERIMAGES CORPORATION 22 Copyright 2014 by Nelson Education Ltd.

23 Hewers of wood and drawers of water l l Hewers of wood and drawers of water made Canada what it is today. Unfortunately, they may now be part of the unmaking of Canada and not worth standing up for. Many times in recent years on this page Lawrence Solomon has advanced the radical idea that these traditional resource industries, long a source of wealth, have become economic laggards. Instead of fuelling growth, they draw cash from productive Canadians in cities and drain it away to support money-losing operations in the hinterlands. c5c3f67e4a77&k=72354#ixzz14bcmvcnx

24 Dutch Disease l The phrase Dutch Disease was coined by The Economist in response to reduced exports and economy growth in the Netherlands following a discovery of North Sea natural gas deposits in the 1960s. Source: 24

25 In the news l Search continues for food processor to fill pending Heinz gap 25

26 Jeff Rubin argues for Carbon Tax l l For a petro-economy such as Canada s, the financial risks associated with the pending battle against climate change are much greater than any cyclical downturn in oil prices. From pipelines and rail regulations to fiscal and monetary policy, Canada needs to undertake a fundamental rethink of its economic future. The current cyclical correction in oil prices might be challenging, but there s a far bigger shoe yet to drop on the country s oil-fuelled dreams. 26

27 Canada China Trade Deals l Canada, China sign currency deal aimed at boosting trade Allows direct business between Canadian dollar and Chinese yuan, cutting exchange costs Prime Minister Stephen Harper and Chinese Premier Li Keqiang 27

28 Canada China Trade Deals l Little visible movement on Canadians imprisoned in China despite Harper trip 28

29 Huawei and Ontario l Huawei courts Wynne with a futuristic vision she could not have imagined But play with the Huawei devices on display two rooms over and you would quickly be reminded you were in an authoritarian state. If you tried to navigate to Google, you would find the site blocked by government censors. Premier Kathleen Wynne, right, speaks next to Premier of PEI, Robert Ghiz during a news conference in Beijing, China 29

30 Why Nations Trade Absolute Advantage A country can produce and sell a product at a lower cost. Or, the country is the only provider of the product. Principle of Comparative Advantage The concept that each country should specialize in the products that it can produce most readily and cheaply and trade those products for those that other countries can produce more readily and cheaply. 30 Copyright 2014 by Nelson Education Ltd.

31 Fear of Trade and Globalization } Canadians have lost jobs. } Others fear losing their jobs. } Employers may threaten to export jobs if there are labour disputes. } Service and white-collar workers are increasingly seeing their operations moving offshore. 31 Copyright 2014 by Nelson Education Ltd.

32 Benefits of Globalization } Productivity increases. } Global competition. } Open economy spurs innovation. } Export jobs often pay more than other available jobs. 32 Copyright 2014 by Nelson Education Ltd.

33 Globalization and Poverty l According to the Economist Nearly 1 billion people have been taken out of extreme poverty in 20 years 33

34 Thomas Friedman l New York Times prize winning journalist and author l Globalization had lifted billions out of poverty l In 1950s, 2. 5 Americums l Now thee are nine! l But planet can t sustain it 34

35 So why the Occupy Movement? 35

36 How globalization has left the 1 per cent even further ahead (in Canada) The market for people at the top has only improved because they ve got more scope for their skills. Meanwhile, people in the middle to the bottom end in Canada are put in a position where they are competing with workers globally, said Michael Veall, economics professor at McMaster University, who has been studying income trends for 25 years. 36

37 Why Occupy Movement? l Wealth Inequality in America: Infographics on the distribution of wealth in America, highlighting both the inequality and the difference between our perception of inequality and the actual numbers. The reality is often not what we think it is. l Nick Hanauer "Rich people don't create jobs": l The richest 1% are likely to control more than half of the globe s total wealth by next year likely-to-own-more-than-half-total-global-wealth-by report-says/ 37

38 Wealth Inequality in America l 6/the-pitchforks-are-coming-for-us-plutocrats html#.VDF1HSV0xWc 38

39 International Economic Communities NAFTA Mercosur European Union ASEAN 39 Copyright 2014 by Nelson Education Ltd.

40 European Union is Unique l Free movement of people l Common currency 40

41 Exhibit: The European Union Gets Bigger 41 Copyright 2014 by Nelson Education Ltd.

42 Basic Terms Exporting Sell domestically produced products to buyers in other countries. Licensing Allowing use of manufacturing, patents, or knowledge. Contract manufacturing Private label manufacturing by a foreign company. Joint venture Domestic company buys part of a foreign company or joins foreign company to form new company. Direct investment Active ownership of a foreign company. 42 Copyright 2014 by Nelson Education Ltd.

43 Entering the Global Marketplace high risk/high return Risk Exporting Licensing Joint Contract Venture Manufacturing Direct Foreign Investment low risk/low return Return 43 Copyright 2014 by Nelson Education Ltd.

44 Sienna: Starry Night Astronomy Software l 90% + exports l PST audit l Resellers l Licensing

45 Countertrade A form of international trade in which part or all of the payment for goods and services is in the form of other products. 45 Copyright 2014 by Nelson Education Ltd.

46 Fostering Global Trade Antidumping Laws World Trade Organization (WTO) World Bank International Monetary Fund (IMF) 46 Copyright 2014 by Nelson Education Ltd.

47 Treats in the Global Marketplace Political Considerations Cultural Differences Economic Environment Natural Barriers Tariff Barriers Non-Tariff Barriers 47 Copyright 2014 by Nelson Education Ltd.

48 Unintended Consequences l Launch of Japanese automobile brands in response to US quotas! 48

49 The Future of the Global Marketplace } Canada Increasing its prominence in the world. } Canada Seeking new markets. } The emergence of BRIC economic power. 49 Copyright 2014 by Nelson Education Ltd.

50 Protectionism Today l American Recovery and Reinvestment Act s (ARRA) Buy America Policy l Ontario Green Energy Act s Ontario Content Rules l Can these be fair? 50

51 What about NAFTA and WTO? l How can ARRA Buy American apply in light of free trade obligations to NAFTA and the WTO? Under NAFTA, the U.S. requires that Canadian goods and suppliers be exempt from Buy American requirements if procurement is being done directly by a listed U.S. federal department or agency and if the value of procurement exceeds NAFTA thresholds (currently US$25,000 for goods, US$79,507 for general services and US$10,335,931 for construction services). A similar requirement exists under WTO obligations however the threshold level for procurement is US$7,864,000 l Many exemptions apply: 51

52 WTO Ruling Against Ontario l Ontario Liberals scrap local content rules for green energy l Ontario will no longer require renewable energy developers to use local suppliers, says energy minister Bob Chiarelli. al_content_rules_for_green_energy.html# 52

53 But l Officials investigate alleged dumping of solar panels by China Trade tribunal ruled there was "reasonable indication" dumping of solar panels from China causing "injury to domestic industry February 4, 2015 by The Canadian Press on

54 Fair Trade l Fair Trade is a different way of doing business. It's about making principles of fairness and decency mean something in the marketplace. l It seeks to change the terms of trade for the products we buy - to ensure the farmers and artisans behind those products get a better deal. Most often this is understood to mean better prices for producers, but it often means longer-term and more meaningful trading relationships as well. 54

55 Group Exercise l You are interested in opening an ice cream/frozen yogurt store in Saudi Arabia. l What are some of the problems you could encounter? Consider differences in cultural, social, economic differences, legal and political regulations, and problems with currencies, etc. 55

56 Back to the big question: Is globalization a positive or a negative thing? 56

57 Follow the money! 57

58 Learning Outcomes 1. Show why global trade is important to Canada and how it is measured. 2. Explain why nations trade. 3. List some of the international economic communities. 4. Explain how companies can enter the global marketplace. 6. Discuss how governments and institutions foster world trade. 7. Explain some of the threats in the global marketplace. 8. List some of the trends in the global marketplace. 58

59 Next Class l Mid-Term Exam Chapters 1,2,3,4,5,6 Multiple Choice Short Answer Case l Paper translation-only dictionaries l No other aids l Bring a pencil and a pen l Regular Seneca policies apply 59