AFM 131 Final Review Notes

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Accounting & Financial Management
AFM 131
Robert Sproule

GlobalizationGlobalization impacts our daily life on economic personal and financial levelsThe level of government involvement to stimulate the economy is unprecedented Globalizations impact on poorGood or bad for poorGood provides employment for the poor in third world countries and provide them with an opportunity to move away to a better lifeBad Income inequality social unrest dangerousUsing ginicoefficient to measure income inequality Chinas income inequality is expanding rapidly Increase incomeincome inequalityincome mobilityImpact of terrorism on tradeTerrorism causes trade barriers as strict borderline security is enforcedGlobal trade becomes slower and more expensiveIncrease paranoia and repeal of the security and prosperity partnershipTime and money wasted with security clearance Import vehicles must go through 3000 custom checks and travel between two countries up to 7 timespolitics is often more about perception than reality peoples perception that America has a tighter borderline security leads people to believe it is more safe despite the fact that it isntSociocultural forces affecting global tradingNever assume that what works in one country will work in anotherThink global act localEconomic forces affecting global tradingFluctuating currency ratesLegal and regulatory forces affecting global tradingFollow lawsregulations for business practicesTechnological forces affecting global tradingCertain countries dont have the technological advancements for certain products or services Basic fundamentals of globalizationFree trade open marketImportation exportation balance of tradeImplications of free tradeMovement of goods and services among nations without political or economic trade barriersSome wellknown Canadian and foreign firms have had success with global marketing but many others have stumbled badlyComparative advantage 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 In market economies economists encourage various nations to use its comparative advantage in producing goods However certain governments uses subsides to encourage producers to produce goods that are not a part of its comparative advantage because less imports means improvements in local economy positive impact on GDP lack of tariffs and no dependency on other nations for living necessitiesAbsolute advantageThe advantage that exists when a country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countriesCanadas trading patternsTrade surplus biggest traders include US China Japan UK MexicoMeasuring global tradeBalance on trade a nations ratio of imports to exportsTrade deficit an unfavourable balance of trade occurs when the value of a countrys imports exceeds that of its exportsBalance of paymentsthe difference between money coming into a country from exports and money leaving the country for imports plus money flows from other factors such as tourism foreign aid military expenditures and foreign investmentsMain attributes of the global marketExportinglicensing allowing a foreign country to produce its products in exchange for a feefranchisingcontract manufacturing outsourcingjoint venturesa partnership in which companies join together to form a new companystrategic alliances companies join to help each other build competitive market advantagesdirect foreign investmentsImpact of globalization on businessGenerate a large customer base and consumer marketMore trade opportunities More options with manufacturing offshoring and outsourcingEffects of globalization as a consumer employee business owner and a studentConsumer more selection in products lower prices access to foreign productsEmployee opportunities for employment in foreign countries higher competition in domestic job marketsBusiness owner ability to expand to global markets global investments global corporation and partnerships increasing competition from global marketsStudent ability to expand hisher horizons knowledge and interestReasons to why Canada and USA trade so muchDistance neighboursNAFTASimilar culturelanguageCanadas abundance of resources and Americas enormous consumptionStrategies for reaching global marketsInternational International Contract joint ventures Foreign direct Contract joint ventures Foreign direct ExportingLicensingFranchisingExportingLicensingFranchisingManufacturingand strategic investmentManufacturingand strategic investmentalliancesalliancesLEASTMOSTAmount of commitment control risk and profit potentialAdvantages to exportingdirect foreign investmentExporting potential growth for company access to international consumers and businesses large profit cheaper less risk
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