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[COMMERCE 1B03] - Final Exam Guide - Everything you need to know! (50 pages long)


Department
Commerce
Course Code
COMMERCE 1B03
Professor
Rita Cossa
Study Guide
Final

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McMaster
COMMERCE 1B03
FINAL EXAM
STUDY GUIDE

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commerce 1b03
CHAPTER 3
COMPETING IN GLOBAL MARKETS
THE DYNAMIC GLOBAL MARKET
Canadian companies, small or large, continuously look for opportunities to grow their business
Companies continuously review their global operations to ensure they are making profits
Important to understand the language of international trade = global market is large
Canada is an EXPORTING NATION
exporting” is selling products
importing” is buying products
WHY TRADE WITH OTHER NATIONS?
Global trade enables a nation to produce what its most capable of making and buying needs
they cannot make
beneficial exchange relationship
free trade” is the movement of goods/service among nations without political carriers
THEORIES OF COMPARATIVE ABSOLUTE ADVANTAGE
Comparative Advantage Theory
- states that a country should sell to other countries
Absolute Advantage
- advantages that exists when a country has a monopoly of making a specific product or
is able to produce it efficiently
IMPORTING GOODS AND SERVICES
Canada Border Services Agency deals with IMPORTERS that enter our country
EXPORTING GOODS AND SERVICES
you can sell just about any goods/service that is used in Canada to other countries - and often
Canadian producers are not as intense as global markets
Trades with other countries ENHANCES the quality of life for Canadians
CONTRIBUTES to our country’s economic well-being
Exporting provides JOBS
MEASURING GLOBAL TRADE
balance of trade” means a nation’s ratio of exports to imports
trade surplus” is a favourable balance of trade, happens when the value of country’s exports
exceeds that of its imports
trade deficit” is a unfavourable balance of trade, happens when imports exceeds exports
balance of payments” is the difference between money coming in and money leaving the
country
STRATEGIES FOR REACHING GLOBAL MARKETS
Key Strategies;
licensing, exporting, franchising, contract manufacturing, strategic alliances,
foreign direct exchanges
provides opportunities for becoming involved in global markets, along with specific
commitments & risks
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commerce 1b03
licensing” is a global strategy in which a firm allows a foreign company to make its product in
exchange for a fee
franchising” is a contractual agreement whereby someone with a good idea for a business
sells the rights to us the business name
contract manufacturing” involves a foreign company’s production of private-label goos to
which a domestic company then attaches it own brand name / trademark (ex: Nike has
contract factories around the world)
INTERNATIONAL JOINT VENTURES
joint venture” means a partnership in which two or more companies join to undertake a major
product
Benefits of Joint Ventures;
shared technology and risk
shared marketing and management
entry of markets where foreign companies are often not allowed unless made
locally
Drawbacks of Joint Ventures;
use other’s technology to their own advantage
too large, not flexible
“strategic alliance” is a long-term partnership between companies established to help each
company build competitive market advantages
FOREIGN DIRECT INVESTMENT
FDI is buying permanent property and business in foreign nations
foreign subsidiary” is a company OWNED by a foreign country by another company
multinational corporation” is when manufactures and products are in many different countries
and has international stock ownership and management (ex: Nestle)
FORCES AFFECTING TRADING IN GLOBAL MARKETS
SOCIOCULTURAL FORCES
“culture” refers to the sets of values, beliefs, rules and institutions held by a specific group of
people
“ethnocentricity” is an attitude that one’s own culture is superior to all others
“devaluation” is lowering the value of nation’s currency relative to other currencies
LEGAL FORCES
labour relations, patents, copyrights, trade practices, taxes, child labour, product liability, the
other issues are governed differently country by country
PHYSICAL AND ENVIRONMENTAL FORCES
Technological forces can have important impact on company’s ability to conduct business in
global markets
TRADE PROTECTIONISM
is the use of government regulations to limit the import of goods and services
dumping” is selling foreign country at lowered prices than those producing country
tariffs” is taxes on imports, therefore making imports more expensive to buy
import quota” limits the number of products in certain categories that a nation can import
embargo” is the complete ban of import and export
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find more resources at oneclass.com
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