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)
** BOLDED WORDS ARE KEY TERMS **
** YELLOW = KEY CONCEPTS **
** GREEN = THINGS THAT MAY APPEAR ON A QUIZ/EXAM **
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
■ 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
● 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
○ 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
■ 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