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Accounting & Financial Management
AFM 131
Robert Sproule

Module 2 GlobalizationArticle Borderline InsanityMany companies want free trade between Canada and the USTrade with Canada is a low priority for the USTheyre very protective after 911Umar Farouk Abdulmutalalb hid explosives in underpants and failed to blow up Detroit bound jetWith this incident the US closed borders even more US and Canada are working together to bail out large companies Its easy to sneak past the border The border costs Canada a lot of money especially for the auto sector Video Globalization Effects on the Global PoorIs globalization good or bad for the poor o If you phrase this question you have to take sides o Answer both good and badGood helped those countries prosperBad inequalities in income Looking at the Gini coefficient to see the distribution of wealthChapter 3 Competing in Global MarketsWhy trade with other nations 1 Cant produce enough to be self sufficient 2 Other nations will try to sell so they survive 3 Abundance of goods Free trade trading among nations without politicaleconomic trade barriers Comparative advantage theory a country should sell what its best at and buy what its worst at in terms of effectivenessefficiencyAbsolute advantage ability to produce a gs using fewer resources than another country Tradespecializationresources used productively Measuring Global trade and the Canadian experience Many small businesses are getting involved in global marketsTrade enhances quality of life for Canadians and contributes to countrys economic well beingBalance of trade nations ratio of exports to imports trade surplus vs Trade deficit Balance of payments import export extra flowing1 Canada trades heavily with the USGovt has identified 13 priority markets where Canadian opportunities and interests have the greatest potential for growthBy 2050US China Indialargest economiesTo encourage Canadian presence Canadas Global Commerce Strategyo Tax cuts o Support of RD o Improve infrastructure of CanUS border and Canadas Asia Pacific Getaway Strategies for Reaching Global Markets Exporting export gs simplest way to go internationalo Canadians may be reluctant o Specialists exporttrading companiesLicensing licensing the right to manufacture its product or use its trademark to a foreign co For a feeo Can gain additional revenue from a product that may not have worked in home market ofrom additional fees start up supplies services etc o Adv spend littlenoto produce and market products o Con selling secretsFranchising business sells the rights to use the business name and sell a product or service to othersContract manufacturing foreign countrys production of private label goods to which domestic company attaches brand name or trademark aka outsourcing International Joint Venture and Strategic Alliances o Joint Venture partnership where 2 or moreundertake a major project or form a new ProsShared tech and riskShares marketing and mgmt expertiseEasier entry into foreign marketsShared knowledge of local marketcustomslawsgovtConsLoss of trade secretsBecome too large to be flexible o Strategic Alliance long term partnership between 2 or more s to help each one build their own competitive market advantageForeign Direct Investment FDI buying permanent property and business in foreign nations o Foreign subsidiaryowned in a foreign country by another 2Forces affecting trading in Global MarketsSociocultural forces must understand cultural diversity o ethnocentricity feeling of superior culture o Ppl do things diff must understand that ex Culture religion business practicesEconomic forces o Have to tailor products and strategies for local market conditions o Different exchange ratesfloating exchange rates devaluation by govt o Bartering countertrading no need to deal with money directlyLegal and Regulatory forces o Deal with diff law interpretations may be diff o Corruption in many other countriesTechnological forces o Diff levels of tech advancement in diff countries Trade Protectionism use of govt regulations to limit importsBarrier to global tradePro allows domestic producers to survive and growmore jobsCon impedes global trade make things more expensive for consumersDumping selling prices at lower prices in foreign countries o To dispose of surplus goods o To gain a foothold by offering lower prices o Benefits foreign firms generates more sales because of price reduction oBenefits purchasers can buy at lower price o Con domestic producers suffer must lower prices to competeleads to less revenue and job lossesTariffs tax imposed on imports 1 Protective taxes 2 Revenue taxesNon tariff barriers exist as wellEmbargo banImport quota limitsallowedOrganizations pro globalismThe GATT General Agreements on Tariffs and Trade o Created in 1948 with 28 nations negotiated trade agreements o 1986 Uruguay Round voted to modifybecame WTOWTO World Trade Organization o HQ Geneva Switzerland 153 members o Purpose over see cross border trade issuesglobal business practices o Trade issues expected to be resolved in 1215 months 3
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