IB
Business: the manu &/ sale of g&s to satisfy the wants & needs of consumers to make a profit.
Transaction: an exchange of things of value
Domestic business: a business making most of its transactions within the country in which it is based
A domestic business in Canada is: owned by Canadians, relies on Canadian p&s, sells p&s to Canadians
International business: the economic system of transactions conducted between businesses located in different countries.
Domestic transaction: CAN to CAN International transaction: CAN to USA
Domestic market: customers of a business who live in the country where the business operates.
Foreign market: customers of a business who love in a different country than where it operates.
Five ways a bus is considered an international business: own a retail or distribution outlet, own a manufacturing plant, export to businesses, import from businesses, invest in businesses in another country
Trading partner: when a business in Canada develops a relationship w/ a business in another country
– Explorers from France and England landed in what is now Canada in 1600s, Traded with First Nations people (Ojibwa and Cree) for fur and food & sent goods back to Europe, The success of this led to the establishment of colonies and outposts in Canada, notably the Hudson’s Bay Company and North West Company
– European Trade: trade grew quickly after permanent settlements were established in CAN in the 1700s, demand for raw materials (beaver pelts, fish, lumber) grew in Europe where manufacturing took place, England defeated France in 7 years war which led to Canada’s reliance on England for finished goods, many major cities were established near ports to facilitate export of raw materials and imports of finished goods.
– Trade w/ US: US declared independence from Britain in late 1700s, needed to become self reliant, invention of steam engine, cotton gin helped growth of American industry, Canada supplied US w/ raw materials, US became Canada’s largest trading partner.
– Trade w/ Asia: Canada began trading w/ Japan after WW2, Japan became known for high-quality electronics & automobiles, China has more recently became a trading partner, Chinese made products are inexpensive & well made & popular w/ North American retailers.
– Trade w/ Mexico: Developed since signing NAFTA in 1993, goods made in Mexico and US now enter Canada duty free, Mexico has become one of Canada’s top 5 trading partners since 2000
Trade w/ Emerging markets
The Middle East: has traditionally centred on oil but this commodity is not sustainable, political instability, lack of industrialization, limited trade, UAE (Dubai), Israel, and Egypt have established trading relationships w/ Canadian businesses that don’t depend on oil
India: Population of over one billion people, workforce generally young and well educated, has become major centre of outsourcing & manufacturing, lack of infrastructure & widespread corruption are problems, Indian companies are aggressively expanding into international markets.
Africa: African imports to Canada are very low, business opportunities limited by unstable governments, lack of infrastructure, rural economies, rich in primary resources, Morocco & South Africa are beginning to emerge as major trading partners.
Globalization: The process whereby national or regional economies and cultures have become integrated through: new global communication technologies, foreign direct investment, international trade, migration, new forms of transportation, flow of money
History of Globalization: Began after WW2 w/ establishment of the UN & fostering of trade relations between countries, economic ties between countries strengthened – tax treaties were negotiated, tariffs abolished, global corporations developed, new technology allows international business to occur in real time transforming globe into one market, has increased interdependence of all nations blurring political boundaries.
Interdependence: The reliance of 2 or more nations on each other for products or services. 3 main areas of interdependence: primary, secondary, tertiary industries
Primary Industries: extraction of natural resources from earth or sea. 5 major industries: agriculture, energy, mining, forestry & logging, fishing, hunting & trapping
Secondary Industries: industries that create a finished usable product. Secondary manufacturing produces capital goods (products used by businesses) and consumer goods (products purchased by individuals)
Tertiary Industries: provide necessary services to consumers and other businesses. Ex. Banking, transportations and retail sales
International business helps Canadians: variety of products, new markets = more jobs, foreign investments, new processes and technologies
International business hurts Canadians: loss of cultural identity, increased foreign ownership of companies in Canada, Foreign companies are loyal to investors and executives in home country, Economic destabilization, revenues leave Canada to pay head office costs, exports are reduced, as products manufactured in branch plants stay in Canada.
Reasons that Canada trades: company growth, entry into new markets, access to financing, expanded customer base, increased profits, low labour costs, access to inexpensive supplies
Foreign portfolio investment: investment in businesses located outside of Canada through stocks, bonds, and financial instruments, allows Canadians to spread out their investments which is less risky than investing in just one area, also provides greater choice and opportunity
Importing: To bring products or services into a country, for use by another business or for resale.
Global sourcing: the process of a company buying equipment, capital goods, raw materials, or services from around the world.
Exporting: To send goods or services to another country, for use by a business or for resale.
Value added: The amount of worth that is added to a product at each stage of processing. It is the difference between the cost of the raw materials & the finished goods.
Licensing agreement: an agreement that grants permission to a company to use a product, service, brand name, patent in exchange for a fee or royalty.
Exclusive distribution rights: a form of licensing agreement that grants a company the right to be the only distributor of a product in a specific geographical area or country.
Franchise: an agreement granted to an individual or group by a company to use that company’s name, services, products, and marketing. For a fee, the franchisor provides support to the franchisee in the areas of financing, operations, human resources, marketing, advertising, quality control etc.
Joint venture: a common type of international business in which a new company w/ shared ownership is formed by 2 businesses, one of which is usually located in the country where the new company is established.
Foreign subsidiaries: often referred to as a wholly owned subsidiary, a branch of a company that is run as an independent entity in a country outside of the one in which the parent 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 being met.
Tariffs: the most common type of trade barrier, are taxes or duties put on imported products or services. Tariffs raise the cost of imports so that locally manufactured products are less expensive and more appealing to consumers.
Protectionism: the theory or practice of shielding domestic industries from foreign competition, often through trade barriers such as tariffs.
Trade quotas: a government-imposed limit on the amount of product that can be imported in a certain period.
Trade embargo: a government-imposed ban on trade of a specific product or with a specific country, often declared to pressure foreign governments to change their policies.
Trade sanctions: Economic action taken by a country to coerce another to conform to an international agreement or norms of conduct.
Foreign investment restrictions: Canadian law w/ the greatest impact is the investments Canada act, ensures that all foreign investments are reviewed to determine how they will benefit Canada.
Standards: countries have different standards for products in areas such as environmental protection, voltage, and health and safety, the ISO (International Organization for Standardization) is a network of Standardization groups from over 170 countries established to set quality regulations.
Exchange rate: The amount of one country’s currency in relation to the currency of another country. The Canadian dollar CAD is most often quoted against the US dollar USD b/c the 2 countries are the largest trading partners in the world.
Winners of a high Canadian Dollar: importers, major league sports teams in Canada, CAN travellers
Losers of a High Canadian Dollar: Exporters, Canadian tourism, Canadian retailers
Floating rate: : an exchange rate that is not fixed in relation to other currencies. The price at which currency w/ a floating rate is bought and sold fluctuations according to supply and demand.
Currency revaluation: the increase in value of a currency because the demand for that currency is greater than the supply.
Currency devaluation: the decrease in value of a currency because the supply of that currency is greater than the demand for it.
Factors affecting the Exchange Rate: Economic conditions in Canada – inflation rate, unemployment rate, GDP, interest rates, Trading between countries – the more favourable the terms of trade (comparison of exports to imports), the higher the currency exchange, Politics- political tension and instability or the threat of terrorism decreases the demand for a currency, Phycological factors- historical significance and stability change the way currencies are viewed.
Hard currencies: stable currencies such as the euro and the US & Canadian dollars, which are easily converted to other currencies on the world exchange markets.
Soft currencies: a currency belonging to a country w/ an economy that is usually weak or that fluctuates often, and is difficult to convert into other currencies such as the Russian ruble or the Chinese Yuan
Currency speculating: buying, holding, or selling foreign currency in anticipation of its value changing to profit from fluctuations in the price of currency
Time zones: communication technology allows the world of international business to operate 24 hours a day, certain methods of communication can be used at any time (email); other methods (telephone) require knowledge of time zones, some methods offer immediate feedback and interaction; others do not.
Culture: the knowledge, experience, beliefs, values, attitudes, religion, symbols, and possessions acquired by a group of people who have lived in the same religion or country for generations. Culture is transmitted from one generation to the next through education and by example.
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.
Counterculture: a culture that has values or lifestyles that are in opposition to those of the current accepted culture. Members of a counterculture openly reject the established cultural values that surround them. Examples include punk, emo, nu metal, and gangsta rap.
Cultural determinants: the main factors that shape the culture of a specific group. These include religion, politics, topography climate and history.
Culture of Saudi Arabia: revolves around religion of Islam, prays 5x a da, Friday is a holy day, Weekend is Thursday to Saturday, Clothing is loose b/c its hot, women hide everything except hand feet and face, Criminal cases are tried under Sharia (Sunni Islam) courts
Culture of Japan: Shintoism & Buddhism are the predominant religious beliefs, hierarchical status member, definite sense of etiquette and rules of behaviour
Culture Awareness and Business: Canadian firms that want to “go global” must determine the extent and importance of cultural differences between Canada and heir target nations, they must decide whether and to what extent products and processes can be adapted to a foreign environment, some cultural traits can be studied and learned; others only by living in a country and experiencing the culture first hand
Extent of foreign operations: levels of cultural awareness depends on how much business a company does in a foreign country and the type of business it does there, primarily domestic operations that export to only one or two foreign markets don’t need to be as conscious of cultural differences as businesses that have manufacturing, retail, and other interests in another country.
Control of Foreign Operations: companies that have branch plants or distribution outlets in other countries that are managed by local people do not need to have as much knowledge about cultural differences, if all of a businesses foreign dealing are handled domestically, the required level of cultural awareness is high
Degree of Cultural Differences: if the culture of the foreign market is similar to Canadian culture, companies do not need to spend much time examining cultural differences. When the language, habits, beliefs, and attitudes of a culture are marked by different from Canada’s it is important to study the culture of the foreign market.
Number of Foreign Operations: companies conducting business in several foreign markets must be aware that each country has a distinct culture, the more operations a business has in foreign markets, the greater the need for cultural knowledge.
Impact of the Culture in Business: Culture’s role in business can be as important as the influence of tariffs, legal regulations, and competition. Failure to consider that influence could ruin negotiation, derail a marketing campaign, and cause labour unrest.
Culture has a direct impact on products: It is important to consider factors such as climate and religious beliefs when considering entering a foreign market. For example, there is no market for Canadian pork in Israel, as Jewish culture forbids eating this product.
Culture also has a direct impact on services: Canada’s financial service industry has successfully entered foreign markets. As attitudes towards money are often culturally determined, Canadian Banks in foreign countries must understand their clients culture to meet their savings goals. For example, many Japanese families save for specially made kimonos for their daughters.
The Canadian government, influenced by labour unions and cultural values, regulates the labour force: provides minimum wage mandates workplace safety, prevents discrimination, legislates holidays and hours of work
Rationalization: any attempt to increase a company’s effectiveness or efficiency, including downsizing, cutbacks, layoffs, and relocating corporate functions and activities to countries that have cheaper labour and few to no union problems
Not all countries share Canada’s values in terms of labour and the workplace. Canadian businesses may encounter differences in the following areas: child labour, discrimination, wages, standards and practices, indigenous cultures
Every country has a meeting culture that is based on the following factors: Time perception – monochronic or polychronic, Spatial perception- individual comfort levels w/ personal space and physical contact, Non-verbal communication- eye contact and body language, Business etiquette – appropriate topics of conversation whether you should present a gift
Members of different cultures perceive time in one of two ways: monochronic or polychromic
Monochronic: time is seen as linear and sequential and focus is on one thing at a time in a logical progression
Polychronic: Time is seen as involving many things happening simultaneously w/ the participation of many people. Time is flexible, and schedules are not f primary importance.
Cultural dimensions (identified by Geert Hofstede): Power distance (PDI) – how the difference in power between people is perceived, Uncertainty Avoidance (UAI) – how do various cultures adapt to change. Masculinity vs. Femininity (MAS) – the degree to which a culture values assertiveness, competitiveness, ambition, and the accumulation of material goods. Individualism vs. Collectivism (IDV) – the extent to which people are expected to make their own decisions regarding their choice of education, job, etc. Orientation (LTO) – the degree to which cultures value short or long-term goals.
Economic system: the way a country organizes its resources and distributes goods and services to its citizens
The answers to the following questions define a country’s economic system: what the country should 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 the goods and services
Market economy: an economic system determined by free competition, in which businesses, consumers, and government act independently of one another, and market forces and self-interest determine what goods are created and sold.
In a market economy:corporations and people are encouraged to own private property, profit belongs to business owners and they can choose how to spend it, companies compete in terms of quality, services, price, reputation, and warranties. Consumers have greater selection and companies have incentive to innovate.
Centrally planned economy: an economic system in which the government controls all elements of the economy, including prices, wages, and production.
In a centrally planned economy: ownership of property is restricted, all profit belongs to the government; all workers are employed by the government, competition is limited; government determines price, quality, style, and amount of goods and services.
Mixed economy: an economic system that sits between a market economy and a centrally planned economy, combining government intervention and private enterprise
In a mixed economy: property is owned by individuals, corporations, or governments, profit is encouraged, but taxed to support government projects and programs, strong competition amongst corporations; government may also be a competitor
Political system: the type of government by which a country is run
Democracy: a state governed by all eligible members of the population through elected representatives. Characterized by free and fair elections, the rule of law, free speech and press, the right to assembly, and freedom of religion. Politicians may be more concerned w/ re-election than the good of the country.
Autocracy: a state governed by a single individual or a small group of people w/ unlimited power. Usually has a strong military presence, strives to control all aspects of citizens lives, citizens have no influence on government
Underdeveloped countries: also referred to as the least- developed or third world countries, nations that are at the underdeveloped countries are characterized by severe poverty, lack of social services, poor infrastructure, low levels of literacy, limited access to technology, agriculture or resource-based economies, long term political issues, such as dictatorships and war
Developing countries: also known as emerging or second- world countries, nations in transition from a poor economy to a prosperous one. They are characterized by improved literacy rates, increased access to health care and other social services, and technological advancement, a move away from a resource-based economy to a manufacturing base and a population moving from rural areas to cities.
Developed countries: also known as industrialized or first-world countries, nations that are characterized by s high per capita income or strong gross domestic product. Developed countries are characterized by: a reliance on secondary and predominantly tertiary, high standards of living, high literacy rates, major advancements in health care and technology
Gross domestic product (GDP): the total goods and services produced in one county in one year.
Business cycle: recurring periods of increased and decreased economic activity, or expansions and contractions. The business cycle is characterized by 4 stages: Recession, Trough, Expansion, and Peak
The 4 stages of the business cycle:
Recession: two consecutive quarters of GDP: The economy slows down. There is a decline in consumer purchasing an increase in unemployment and businesses contract or close.
Trough: Production and unemployment reach their lowest levels. The economy completes the recession and turns towards prosperity
Expansion: The economy begins to grow again. Employment, wages, production and profits expand.
Peak: top of the business cycle. The economy stops expanding and begins contracting.
Economic Indicators of the Business Cycle – 3 types of economic indicators:
Leading: adjust before the economy experiences a change and predict where the economy is going
Lagging: Do not adjust until after the economy has experienced a change. Unemployment rate is an example
Coincident: move in conjunction w/the business cycle. International trade is an example
Absolute advantage: the ability of one country to use its resources to make a product or service more efficiently than other countries.
Opportunity cost: the value of what is foregone, or the cost of giving something up to get something else. For example, the opportunity cost of being in class is the money a student could earn working a job.
Comparative advantage: the ability to produce a good at a lower opportunity cost than another country. Comparative advantage is the foundation for specialization and trade.
Some of the ways government affects international trade and business include: establishing imports and export laws, setting tariffs, maintaining membership in trade organizations and negotiating trade agreements, determining monetary policy, including currency exchange rates, determining fiscal policy, including taxation laws, building infrastructure, such as roads and sewer systems
The government establishes: regulations that businesses must comply with, trade offices, government embassies, high commission and consulates, trade missions
Corporations influence governments in several ways: contribute large amounts to political campaigns, participate in trade missions’ w/ politicians, pressure government to change policies that will benefit businesses.
Lobbying: the process through which companies, special interest groups, or individuals attempt to influence government officials and persuade them to endorse public policy favourable to these groups. For example, the NRA is a powerful group in the US that lobbies the government on gun0control issues
Globalization: in an economic context is the movement of goods, services technology, investment, ideas and people throughout the world
Companies use 3 major types of globalization strategies: global strategy, multidomestic strategy, transitional strategy
Global strategy: regards the world as one big market – all people want the same product and will respond to marketing in a similar way, product and marketing are uniform around the world, takes advantage of economies of scale (proportionate savings gained by producing larger quantities), does not respond to individual cultures
Multidomestic strategy: customizes products services and marketing for the local culture – local management is most capable of determining what is best for the local subsidiary, effective when cultural differenced are prominent, less political and exchange-rate risk
Transnational strategy: combines the best elements of the global and multi-domestic strategies, respects needs of local markets, 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 2 or more countries that involved the movement of goods and services, elimination of trade barriers, establishment of terms of trade ad encouragement of foreign investment. Agreements may be multilateral (involving 3 or more parties) or bilateral (involving 2 countries)
The North American Free Trade Agreement (NAFTA): launched in January 1994 between Canada USA and Mexico, created worlds largest free trade area, sets rules surrounding movement of goods, services, and investment across North America, eliminates tariffs and other trade barriers and promotes fair competition.
Advantages of NAFTA: has helped create higher paying jobs in education, engineering, and banking sectors in Canada, allows freer flow of goods and services across North America, providing better access to raw materials, talent, capital, and technology, trade has tripled between the 3 members since NAFTAs inception.
Disadvantages of NAFTA: manufacturing jobs have been lost to Mexico, where labour costs are lower, without tariffs many Mexican farmers could not compete and lost their livelihoods, Canadian companies sold to foreign investors.
Tax treaties: a tax treaty is created to prevent double taxation and tax evasion for people who would pay taxes I Canada and another country. The treaty determines how much tax each country can collect.
The European Union (EU): a trade agreement signed in 1993 that now encompasses 27 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
Advantages of a common currency: decreased risk of exchange – rate fluctuations, price transparency, elimination of transaction costs, increased markets
Disadvantages of a common currency: Initial costs of implementation, lack of national control, loss of tradition
Trade organization: groups established to help w/ the free flow of goods and services. They may be global in scope or national organization created by individual governments to help domestic companies expand into international markets.
World Trade Organization (WTO): an international organization in 1995 (which now has over 150-member countries) that promotes trade liberalization throughout the world.
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): a trade organization created 1989, that unites 21 of the countries surrounding the Pacific Ocean to co-operate on regional trade. Its goals are to foster open and free trade among its members, increase prosperity and economic growth, and develop the Asia- Pacific community.
The Group of Eight (G8): a trade organization encompassing the major economies of the world, which meet to discuss macroeconomic issues such as economic growth, trade liberalization, and helping developing countries. Member countries are: Germany, Japan, Russia, France, USA, Canada, Great Britain, and Italy.
The Group of twenty (G20): a trade organization established during the economic crisis of the 1990s to provide a discussion forum for the major economies of the world beyond the G8. The G20 focuses on economic and employment growth, elimination of trade barriers, reforming financial institutions and regulations, restricting global financial organizations
Canada’s place in the G8 and G20: Canada’s GDP and population are low compared to other G8 and G20 countries, talk of replacing Canada in the G8, and placing it as a second-tier country in the G20, wouldn’t 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): a trade organization w/ 30-member countries, established in 1961 to promote the advancement of democracy and market economies. OECD members have worked together to eliminate bribery, money laundering, and fraud, and to create a code of conduct for multinational companies.
The World Bank: an organization w/ 186-member countries that provides monetary and technical support for developing countries. Provides loans and grants to assist w/ education, health, infrastructure, farming, environmental issues, resource management, and other economic concerns.
International Monetary Fund (IMF): an organization whose purpose is to promote financial stability, prevent and solve economic crisis, encourage growth, and assuage poverty. It does this by: encouraging countries to adopt responsible economic policies, lending money to emerging and developing countries, providing technical training in areas such as banking, regulations and exchange rate policies.
The UN has 4 main purposes: to keep peace throughout the world, to develop friendly relations among nations, to work together to help poor people live better lives, to conquer hunger, disease, and illiteracy and to encourage respect for each other’s rights and freedoms, to be a centre for helping nations to achieve these goods.
The Role of the UN in international business: UN is responsible for organization that influence international business, including the international labour organization (ILO), the international monetary fund (IMF) and the World Bank, UN devotes resources to improving the standard of living, the unemployment rate, and economic conditions throughout the world, UN Economic and Financial Committee deals w/ issues such as international trade, globalization and poverty elimination.
Corporate Social Responsibility: The duty of a company’s management to work in the best interests of the society it relies on for its resources (human, material, and environmental), to advance the welfare of society, and to act as a good global citizen through its policies. Corporate social responsibility can take many forms including: making charitable donations, treating employees ethically, being environmentally conscious, ensuring safe working environments, sponsoring local sports teams, creating and promoting diverse workplaces.
Benefits of CSR: can be used as a marketing tool, dissuades governments from implementing regulations that could interfere w/ business, helps companies attract and retain excellent employees
Criticisms of CSR: costs money, detracts from profits, uses employees’ time and energy, cam distract customers from problems a company creates, a company may act ethically in one country, not in another
Stakeholder Analysis: used to determine which groups interests are most important when a company is faced w/ an ethical dilemma, primary stakeholders directly affect the company and its profitability, secondary stakeholders have an impact on the company, but do not directly influence its success or contribute to profitability.
Business ethics: a set of rules or guidelines that management or individuals follow when making decisions facing their company. The guidelines used when making decisions include: domestic and international laws, the company’s code of ethics and corporate governance, the personal values of the individual making the decision.
There are 2 methods of thinking about ethical issues in a global context:
Ethical imperialism: a view of culture based on the idea that there are certain universal truths or values that are standard across all cultures; if something is wrong in one country, it is wrong in all countries.
Cultural relativism: A view of culture based on the idea that a culture’s different values should be respected as the ethics of one culture are not better than those of another.
Ethical imperialism: one set of values for all cultures, right and wrong are the same in all cultures, a person’s ethics are not situational.
Cultural relativism: values are dependent on the culture, right and wrong depend on local values, when in Rome, do as the Romans do.
Ethical issues in international business arise in the following areas: environmental issues, corporate corruption, sweatshops, dumping, and poverty
Environmental issues
Sustainable development: isthe ability to meet human consumption while maintaining the environment is a critical issue for businesses: many companies have been responsible for pollution and resource depletion; companies and governments often resist environmental plans that will impede economic growth.
Sweatshops: Factories in underdeveloped and developing countries in which employees work in unsafe environments are treated unfairly and have no chance to address those conditions.
Why do sweatshops exist? Global competitiveness, corporate greed and consumer expectations of low prices
Corporate corruption: the involvement in illegal activities such as briery and fraud, to further one’s business interests.
Dumping: selling products in a foreign country below the cost of production or below the price in the home country
Predatory dumping: an anti-competitive business practice in which foreign companies price their products below market value to increase sales and force domestic competition out of business, then raise their prices.
Poverty: over one quarter of the worlds population lives in intense poverty – accompanied by hunger, lack of shelter, and medical care, limited access to education, high rates of disease, etc.
Microcredit: the granting of very small loans to spur entrepreneurship – is one way that poverty is being addressed. Microcredit loans are mainly granted to women, who use the loans to start small businesses and their earnings to support their families.
Non- governmental organizations (NGOs): Non-profit organization w/ a service and development focus that are composed mostly of volunteers and are predominantly funded through charitable contributions NGOs may centre on trade education, youth, improvising the environment, human rights, or other issues.
Typical competitive advantages are:
Lower production costs: according to the theory of economies of scale, he more products you can make in one factory, using the same labour and sharing overhead costs, the cheaper each individual unit is to make.
Lower distribution costs: companies w/ factories in their target market have lower costs
Product differentiation: Difference in flavour, quality, packaging, scent, etc.
Brand equity: The number of consumers that can identify the brand.
Canadian businesses must stock goods from around the world to compete w/ online retailers. Retailers must guarantee a unique selection of products by visiting international trade shows or accessing online distributors. Increase in foreign ownership of Canadian manufacturers means it is more difficult to buy Canadian – made goods. Canadian businesses must remind shoppers that they sell and produce Canadian goods.
Marketing: The sum total of all the activities involved in getting goods and services from the original producer to the ultimate consumer. These activities include market research, product development, pricing, advertising and promotion, sales, and logistics.
Market research: finds or collects data to help solve marketing problems.
Secondary data: is collected by someone other than the user, for example, censuses and surveys
Primary data: is observed or collected by a business and relates specifically to its needs or problems.
Product development: most companies use market research to help develop new products, taking consumer reaction into account. Market research is a major part of product development, as companies don’t want to risk the high costs involved w/out some assurance that they will be successful.
Pricing: The price of a product must consider the amount of labour, the cost of materials, and overhead (such as electricity). Items that are sold in stores are marked up, as the retailer needs to make money on the items it sells.
Advertising and Promotion: are needed to convince the customer to buy the product. Businesses must identify the best way to reach their target market, taking into consideration the cost of different methods. For example, an Internet ad or brochure is much less expensive than a magazine ad or television commercial.
Sales: Businesses must determine the best way to sell their product. Sales methods or venues may include: selling products to retailers, opening their own retail store, selling online
Logistics: Logistics consist of the flow of goods and services both into and out of an organization. It consists of transportation, inventory management, warehousing and storage, and packaging.
The 4Ps of international marketing are: product, place, price, and promotion
- Place : Canadian products sold outside of Canada must usually be modified to adapt to the culture, language, or laws of the foreign market. These modifications usually occur in the following areas: packaging: weights, colours, and legal labelling and language requirements, Ingredients, and Style.
- Place
Centralized strategy: is a marketing strategy in which all of a company’s manufacturing and marketing is performed in one location.
Decentralized strategy: marketing strategy in which a company sets up a manufacturing plant in another nation, or hires a sales force there, or even licenses its brand to a local manufacturer, rather then performing all manufacturing and marketing in one location.
E-commerce: the use of the Internet by businesses to sell products and services to customers in a much larger areas than could be reached through a traditional retail location; using e-distribution, any business anywhere in the world can be an international business.
Sales agent: an individual hired and paid a commission by a company to market its product to potential buyers and distributors, often in a foreign country.
Trade show: a collection of manufacturers and distributors of similar products who rent space, set up display booths, and sell to registered buyers seeking products for their retail businesses.
Branch plants: building and staffing a branch plant is the most expensive market entry strategy but could be the most effective. The 3 major advantages to owning a branch plant in a foreign country are: shipping costs are lower, import regulations and tariffs are not an issue, product modifications are easier.
Licensing agreement: is a contract giving someone the right to use a patent or trademark. Manufacturers pay the owner of the trademark a fee, usually a royalty, which is a percentage of the sale of the licensed product.
3 types of licensing agreements:
Manufacturing agreements: the rights to manufacture product , Distribution agreements: the rights to sell a product
Franchising agreements: grants the ownership of a manufacturing or distribution company to a local franchisee.
Acquisitions: the most effective way for a company to deal w/ competition in a foreign or domestic market is to buy the company it competes w/, then close it or use its marketing connections to expand its market.
- Price
Companies that use a centralized market entry strategy find that they must increase the price of their product when selling in foreign markets. Sometimes the price of their product increases to the point that it is no longer competitive. These increases in prise arise because of added expenses in the following areas:
Labour costs: Labour in foreign countries is often much cheaper than in Canada. Shipping costs: The cost to ship goods long distances must be factored into their price
Duties and tariffs: Some countries charge a tax on imports to protect local industries Legal costs: Modifications to conform to standards in a foreign market can be expensive.
- Promotion
There are 3 ways to promote and advertise products when selling in a foreign market:
Use existing ads: saves money, but markets must be similar, Translate ads: Replicating an ad campaign another language is difficult , Create new ads: Expensive, but the internet has made customizing promotions much easier
After a company has decided on its product, price, place, and promotion, it must ensure that there is enough demand for its product.
Demand involves 2 factors (often referred to as the 2 CS of international marketing): consumers and competition
- Consumers
A business must determine its target market. This is the segment of the consumer market to which a particular good is targeted. Target markets are typically defined by demographics information, which is statistical data about various aspects (age, gender, etc.) of the population.
Canadian businesses, wanting to sell abroad must avoid ethnocentrism, the belief that your own culture, values, beliefs, and customs represent the right way of doing things, and that other value systems are not important.
Ways to avoid ethnocentric thinking: Visit the country you want to include in your marketing plan, read country profiles, offer your product on the Internet
Discretionary income: is the money remaining from an individual’s salary or wages after all essential living expenses, including rent and groceries have been paid.
- Competition : Similar products that already exist in a foreign market are a major marketing problem. There are 2 types of competition:
Direct: businesses that provide products or services that are almost identical to those offered by the company are direct competitors.
Indirect: consumers in every country have a certain amount of discretionary income, and regular spending habits. Any product that vies for consumers spending money is competition.
Competitive advantage: In marketing, the ability of the company to produce a product more cheaply than another company.