Chapter 3: Competing in Global Markets 2012-09-28 5:59 AM
• How do world population and market statistics s upport the expansion of Canadian
businesses into global markets?
• What is comparative advantage? How does this differ from absolute advantage?
• How are a country’s balance of trade and balance of payments determined?
• What services are usually provided by an export -trading company?
• What are the advantages to a firm of using licensing as a method of entry in global
markets? What are the disadvantages?
• What are the key differences between a joint venture and a strategic alliance?
• What is a multinational corporation?
• What are the major hurdles to successful global trade?
• What does ethnocentricity mean?
• Which cultural and social differences are most likely to affect global trade efforts? Name 2.
• What are the advantages and disadvantages of trade protectionism?
• What is the difference between protective tariffs and revenue tariffs?
• What is the primary purpose of the WTO?
• State 4 objectives of NAFTA
• What is the primary objective of a common market like the EU?
• What are the economic risks of doing business in countries like China?
• What might be some important factors that will have an impact on global trading?
• What can you do in the next few years to rea dy yourself for a career in global business?
Learning Objective #1: Discuss the growing importance of the global market and the roles of
comparative advantage and absolute advantage in global trade
• Canada has a population of more than 33 million people. The world market for trade is
huge. Some 99% of the people in the world live outside Canada. Major Canadian
companies routinely cite expansion to global markets as a route to future growth.
• Why should nations trade with other nations?
o Nations should trade globally as 1) no country is self-sufficient, 2) other countries
need products that prosperous countries produce, and 3) natural resources and
technological skills are not distributed evenly around the world
• What is the theory of comparative advant age?
o The theory of comparative advantage contends that a country should make and
then sell those products it produces most efficiently but buy those it cannot
produce as efficiently
• What is absolute advantage?
o Absolute advantage means that a country ahs the ability to produce a particular
good or service using fewer resources (and therefore at a lower cost) than another
country. For example, Zambia has an absolute advantage over many countries in
the production of copper due to its copper ore reserves
Learning Objective #2: Explain the importance of importing/exporting and understand key terms
used in global business
• Anyone can get involved in world trade through importing and exporting. Business people
do not have to work for big multinational corporations
• What kinds of products can be imported and exported?
o Just about any kind of product can be imported/exported. Companies can
sometimes find surprising ways to succeed in either activity. Selling in global
markets is not necessarily easy though
• What terms are important in understanding world trade?
o Exporting is selling goods and services to other countries. Importing is buying
goods and services from other counties. The balance of trade is the relationship of
exports to imports. The balance of payments is the balance of trade plus other money flows such as tourism and foreign aid. Dumping is selling prod