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ADMS 1000 Study Guide - Quiz Guide: Financial Institution, Justin Bieber, Tim Hortons

Administrative Studies
Course Code
ADMS 1000
Natalie Guriel
Study Guide

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Study Tip#7 – Global Forces (Chapter 8)
Channels of Global Business Activity:
1. Exporting and Importing - Businesses that engage in international trade are more likely
to be involved in importing and exporting than in any other type of global business
activity. While there are about 30 million potential customers within our Canadian
borders, there are over 6 billion potential customers across the world, increasing by about
95 million people annually. Many Canadian businesses have taken advantage of the
benefits of exporting. Canada exports over 40% of our production, making us a major
trading nation.
Over a 10 year period, between 2001 and 2011, Canada’s exports have been steadily
2. Outsourcing/Offshoring - As you may recall, outsourcing involves hiring external
organizations to conduct work in certain functions of the company. So, for example,
payroll, accounting, and legal work can be assigned to outsourced staff. Nike has
typically entered into contractual arrangements with manufacturers in developing nations
to produce its footwear while it focuses largely on marketing its product. In fact, this has
been a major underlying source of controversy with regard to businesses “going
global”—the fear that relatively higher-paying North American jobs will be lost as
businesses decide to outsource manufacturing functions to cheaply paid labour in
developing countries. There are also ethical factors to consider.
In Chapter 10, we will examine ethics and corporate social responsibility issues that
businesses must address when health, safety and labour laws are lacking with their suppliers
in other countries, and how outsourcing or offshoring can be a risk in damaging their
businesses’ reputation.
3. Licensing and Franchising Arrangements - The licensing agreement is an
arrangement whereby the owner of a product or process is paid a fee or royalty from
another company in return for granting them permission to produce or distribute the
product or process. How could this be a type of global business activity? Franchising
shares some of the advantages of licensing, in that both are relatively lower risk forms of
global business. Franchising is, of course, a common type of business activity in Canada
and elsewhere. This becomes a global business activity when the franchises are scattered
in different locations around the world.
Tim Hortons is an example of a Canadian corporation that has franchised out its business
across Canada and the United States.
4. Direct Investment in Foreign Operations - Foreign direct investment (FDI) involves
the purchase of physical assets or an amount of share ownership in a company from
another country to gain a measure of management control. Foreign direct investment in
Canada is the second highest in the G7 as a share of GDP.
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