AFM131 Chapter Notes - Chapter Chapter 3: Quality Control, Lululemon Athletica, Protectionism

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Chapter 3/Module 01 - Competing in Global Markets (Prep for Quiz 1)
The Dynamic Global Market
SUMMARY: Canada has a pop. of more than 35M people and the world market trade is
How globalization Affects you as a(n):
Consumer - Increased access/connectivity and leads to more options
Employee - Interacts w/ customers, clients, business partners in different parts
of the world
Business Owner - Global competition drives innovation/increased access to
resources allows businesses to focus on what they do best
Global Market vs. Canadian Market
Bigger - More customers/opportunity for profit
More Competition - More innovation/increased options for consumers
Access to Additional Expertise - Cheaper resources/suppliers, allows for focus
on what the business does best, potential loss of jobs
Going Global: Non Example
Target Canada
Consumer Perspective: Limited selection, lack of “deals”, expectations
were unmet
Business Perspective: Underestimated complexity of market and led to
high prices/inventory management issues
Over 90% of companies doing business globally believe it’s important for their
employees to have experience working in different countries
There are over 7B potential customers in 194 independent countries that make up the
global market
Canada’s share of North American auto productuction fell to 14% in 2013 due to layoffs
from GM, Fiat, Ford, etc
Exporting: selling products to another country
Importing: buying products from another company
Why Trade With Other Nations?
A: No country can produce all the goods/services that are wanted/needed
Free Trade: movement of goods/services among nations w/o political/economic barriers
Theories of Comparative/Absolute Advantage
Comparative Advantage Theory: a country should sell to other countries those
products that it produces most effectively/efficiently, buy from other countries
those products that it can’t produce as effectively/efficiently
By specializing in trading, Canada/its trading partners can reap mutually
beneficial exchanges
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Absolute Advantage: exists when a country has a monopoly on producing
specific products/able to produce it more efficiently than all other countries
Getting Involved in Global Trade
SUMMARY: Anyone can become involved in world trade through importing/exporting
and business people don’t have to work for large multinational corporations.
Small businesses account for approx. 90% of Canadian exporters
Canada exports most of its merchandise to the US
Why do US and Canada trade so much?
Importing Goods/Services
Purchases From Other Markets
Indirectly through purchases from Canadian subsidiaries of foreign
companies and directly through purchases from foreign suppliers
Items are subject to compliance w/ certain conditions imposed by
federal/provincial government(s)
Is item prohibited entry in Canada?
Eg. Baby walkers are banned due to safety standards
Is item only allowed w/ an import permit?
Eg. Textiles/clothing, steel, grain products, farm products, firearms
Is item subject to a federally-imposed condition?
Eg. Goods for retail sale must comply w/ labelling laws
Is item subject to a privately-certified standard?
Eg. Electrical appliances/equipment must be certified by a
recognized certification group before they can be sold
Does the item have to comply w/ a provincial rule?
Eg. Alcoholic beverages require prior authorization from the
proper liquor commision
Exporting Goods/Services
As of 2016, Canada exports 2.4%/US$458B of world merch trade +
1.7%/US$78B of world services trade
Canada sells indirectly through foreign subsidiaries and directly to foreign
Large Multinational Corporations
Eg. Lululemon, Bombardier, RIM, Four Seasons, etc.
Manufacture/market products in many countries
Has a manufacturing capability/physical presence in different countries
Small-Business Sector
Majority of exporters
Why is trade so important?
A: Trade w/ other countries enhances quality of life for Canadians/contributes to
Canada’s economic well-being
Measuring Global Trade
Balance of Trade: nation’s ratio of imports:exports
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