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Accounting & Financial Management
AFM 131
Robert Sproule

Globalization personally deficits can cause more unemployment and affect the exchange rate consumer lower prices, wider variety of choices, better quality employee harder to find domestic jobs, may earn less $ business owner can export/import with a different market, can work together, greater competition, cheaper resources in other areas student changes in tuition, different job opportunities, program competition effect on the poor widening the gap between the rich and the poor, have moved from extreme poverty, more jobs, leads to rapid economic development high Gini coefficient large spread between the rich and the poor concern for income equality even in developed countries, inter-provincial trade in Canada isn't very protected, issues between Quebec and Ontario, increases barriers to globalization free trade: movement of G&S among nations without political or economic obstructions Pros Cons -more potential customers -domestic workers may lose jobs, may -less-costly imports keep prices lower, hire other workers in favor of paying reducing inflation lower wages -greater innovation and competition -access to foreign investments keeps interest rates low Comparative advantage theory: states that a country should sell to other countries those products that it produces most effectively and efficiently and buy from other countries those products that it cannot produce as effectively or efficiently absolute advantage: advantage that exists when a country has the ability to produce a particular good or service using fewer resources (a lower cost) than another country ex. Zambia has copper reserves -small businesses in Canada are 48% private, provide 85% of exports -service imports are only about 15% -exports account for 1 in 5 jobs in Canada balance of trade: a nation's ratio of exports to imports trade deficit: occurs when the value of a country's imports exceeds its exports balance of payments: difference between money coming into a country (exports) and money leaving (imports) plus money flow factors such as tourism, foreign aid, military expenditures and foreign investment -very dependent on the States, 68.8% of our imports and 73.5% of exports b/c of close proximity, financial similarity, fresh water, minerals, close exchange rate, similar political views, culture, language, Auto Pact Strategies (from least to most amount of control, commitment, risk & profit potential) exports: matches buyers and sellers licensing: a firm allows a foreign company to produce its product in exchange for a fee (royalty); they spend little to no money to produce & market their product, challenge is that the licensee may make a similar product of their own and steal the market franchising: arrangement where someone with a good idea for a business sells the rights to use the business name and sell a product or service to others; must be able to adapt their products to a new market contract manufacturing: a foreign country's production of private-label goods to which a domestic company then attaches its brand name or trade mark; can experiment in a new market without heavy start-up costs joint venture: partnership in which 2 or more companies (different countries) join to undertake a major product or to form a new company benefits shared technology and risk, shared marketing and management expertise, entry into certain markets, shared knowledge of the local market (such as customers, government, skilled labour, supplies) drawbacks one partner may learn expertise and leave or technology may become obsolete strategic alliance: long-term partnership between 2 companies to help each other build competitive market advantages; often do not share costs, risks, management; provides access to market, capital and technical expertise foreign direct investment: buying permanent property and businesses in foreign nations benefits transfer of knowledge, technology and skill, increased trade related to investment foreign subsidiary: company owned in a foreign country by another country; business functions under the control of the foreign subsidiary's management expropriation: when relations falter, the firm's assets are taken over by the foreign country multinational corporation: organization that manufactures and markets products in many different countries and has multinational stock ownership and management Sociocultural factors culture: set of values, beliefs, rules and institutions such as religion, manners, customs, values, language, attitudes ethnocentricity: attitude that one's own culture is superior to others -exchange rate countertrading: a complex form of bartering in which several countries may be involved, each trading goods for goods or services for services; make up 20% of all global exchanges, avoid currency constraints trade protectionism: use of government regulations to limit the import of G&S; allows domestic producers to survive and grow, impedes global trade dumping: selling products in a foreign country at a lower price than domestically; may damage the domestic industry mercantilism: nation to sell more than they buy tariffs: a tax imposed on imports protective: domestic products will be more competitively priced revenue: raises money for the government import quota: limit on the number of goods in a certain category that a nation can import to help preserve jobs embargo: complete ban on the import/export of a certain product of the stopping of all trade with a particular country non-tariff barriers safety, health and labeling standards General Agreement of Tariffs & Trade: 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions, between 23 nations World Trade Organization: replaced GATT, mediates trade disputes among nations, 153 nations International Monetary Fund: international bank that makes short term loans to countries experiencing problems with their balance of trade, 1944, promotes exchange stability, avoids currency depreciation, eliminates exchange restrictions and creates standby reserves World Bank: autonomous Unites States agency that borrows money from the more prosperous countries and lends it to less-developed countries to develop their infrastructure producer's cartels: organizations of commodity producing countries that are formed to stabilize or increase prices to optimize overall profits in the long run common market (trading bloc): a regional group of countries that have a common external tariff and a coordination of laws to facilitate exchange NAFTA: free trade among Canada, US and Mexico, 1990s' 1. eliminate trade barriers and facilitate movement of goods 2. fair competition 3. increase investment opportunities 4. effective protection in each nation 5. framework for further regional competition trade-cooperation 6. improves working conditions European Union: began in the late 50's, 27 trading partners, 30% of GDP, biggest trading power -internet has made trade more accessible and faster, product piracy and counterfeit are a concern, must focus on innovation, entrepreneurship and education Borderline Insanity Abdulmutallab failed to blow up a Detroit-bound jet with hidden explosives in his underpants, since the States fear terrorism, it makes it very difficult to get products across the border Roles of Government national policy: government directive that placed high tariffs on imports from the US to protect Canadian manufacturing which had higher costs crown corporation: a company that is owned by the federal or provincial government privatization: process of governments selling crown corporations Federal Government Responsibilities 1. trade regulations 2. incorporation of federal companies 3. taxation 4. banking and monetary 5. national defence 6. unemployment 7. immigration 8. criminal law 9. fisheries 10. railways, telecommunication, atomic energy marketing boards: organizations that control the supply or pricing of certain agricultural products in Canada ex. control of wheat, barley, dairy and poultry Canadian Wheat Board, Canadian Dairy Commission, Canadian Eggs Marketing Agency, Chicken Farmers of Canada, Canadian Turkey Marketing Agency, Canadian Broiler Hatching Egg Marketing Agency Provincial Government Responsibilities 1. regulation of provincial trade and commerce 2. natural resources 3. direct taxation 4. incorporation of provincial companies 5. licensing for revenue purposes 6. justice administration 7. health and social services 8. municipal affairs 9. property law 10. labour law 11. education Municipal Government Responsibilities -consumer protection, zone requirements, speed limits, charge for water consumption tax credit deducted from a tax bill fiscal policy: federal government's effort to keep the economy stable by increasing/decreasing taxes or government spending federal budget: a comprehensive report that reveals government financial policies for the coming year monetary policy: management of money supply and interest rates subprime mortgages: loans for people who couldn't qualify for regular mortgages, interest rates increase and house prices decreased causing a crisis in Oct. '08 transfer payments: direct payments from the gov. to other gov. or to individuals equalization: a federal government program for reducing fiscal disparities among provinces National Research Council industry remains competitive and innovative Business Development Bank of Canada helps small and medium businesses Export Development Canada helps exporters Industry Canada growing, knowledgeable and competitive economy Canada Business info for start-up entrepreneurs industrial policy: comprehensive coordinated government plan to guide and revitalize the economy
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