International Business Concepts

Domestic vs. Foreign Transactions

• Domestic Transactions: Buyer and seller in the same country; conducted in local currency; governed by one country's laws; lower transaction costs, tariffs, and logistics; minimal cultural/linguistic differences.
• Foreign Transactions: Buyer and seller in different countries; may involve multiple currencies, requiring exchange; subject to multiple countries' laws; higher transaction costs, potential tariffs, and complex logistics; significant cultural/linguistic differences.

Global Products

• A global product is designed, produced, and marketed for use and sale in multiple countries worldwide.

5 Ps of International Business

• Product: Imports allow for products not domestically produced; exports support production of large quantities of products.
• Price: Lower wages, taxes, and raw materials in certain regions can lead to lower pricing, increased sales, and profit.
• Proximity: Historically, trade occurred with geographically close countries, often with trade agreements.
• Preference: Consumer preference for products from countries specializing in specific items enhances sales.
• Promotion: Technology facilitates global product promotion.

Offshore Outsourcing

• A business strategy where a company hires a third-party provider in another country to perform specific tasks or services.
• This generally reduces costs and improves efficiency.

Social Costs

• The sum of private costs carried by an economic factor plus external costs imposed on others by that activity.

International Labour Organization (ILO)

• A UN agency promoting social justice and fair labor standards for global workers.
• Established in 1919, it develops labor standards and policy for decent work, collaborating with governments, employers, and workers worldwide.

Sustainable Development

• Meeting current needs without jeopardizing future generations; aims to balance economic growth, social inclusion, and environmental protection.

Environmental Degradation

• The decline of the environment, resulting from resource depletion, ecosystem destruction, and pollution, leading to biodiversity loss and health issues.

Tariffs, Landed Costs, and Excise Taxes

• Tariffs: Taxes imposed on imported goods to protect local industries.
• Landed Costs: Total costs of a product upon arrival, encompassing shipping and tariffs.
• Excise Taxes: Taxes on specific goods, included in the price to discourage consumption.

Currency Fluctuations

• Changes in the value of one currency relative to another. Impacts international trade, investment, and overall economic health.

Balance of Trade, Deficits, and Surpluses

• Balance of Trade: Difference between a country's export and import values over a period.
• Trade Deficit: Country imports exceed exports; signifies purchasing more from other countries than selling to them.
• Trade Surplus: Country exports exceed imports; suggests strong production and global competitiveness.

Exporting and Importing

• Exporting: Goods or services leaving a country.
• Importing: Goods or services entering a country.

The U.S. as Canada's #1 Trading Partner

• Proximity: Physical closeness fosters easy transportation.
• Long History: Existing trade relations and agreements simplify transactions.
• Connected Businesses: Collaborative business relationships.
• High Volume of Trade: Significant volume of goods exchanged.
• Investment: Mutual investments strengthen economic ties.

International Organizations

• WTO: Facilitates international trade with 164 member countries.
• USMCA: Replaced NAFTA; trade agreement between the U.S., Mexico, and Canada.
• EU: Political/economic union of 27 European countries.
• G7: Intergovernmental organization of leading advanced economies discussing policies.
• APEC: Promotes free trade and economic cooperation in the Asia-Pacific region (21 members).
• OPEC: Coordinates and unifies petroleum policies among member countries.
• NAFTA: Predecessor to USMCA; trade agreement between the U.S., Canada, and Mexico.

Bilateral Trade Agreements vs. Trading Blocs

• Bilateral Trade Agreement (BTA): Agreement between two countries regulating trade.
• Trading Bloc: Group of countries forming an economic entity promoting free trade and integration.

Cultural Differences Impacting International Business

• Communication Styles: Varying verbal and nonverbal communication norms (directness, tone, body language).
• Negotiation Tactics: Different attitudes toward negotiation (relationship-building vs. direct business).
• Decision-Making Processes: Collective vs. individual decision-making preferences.
• Perceptions of Time: Varying concepts of punctuality and time management.
• Leadership Styles: Hierarchical vs. egalitarian leadership structures.
• Business Etiquette: Diverse customs around greetings, gifts, and dining.
• Risk Tolerance: Different attitudes toward risk affecting business strategies.
• Work Ethic and Practices: Varying views on work-life balance, loyalty, and productivity expectations.
• Legal and Ethical Standards: Diverse ethical norms and legal frameworks impacting business dealings.

Calculating the Balance of Trade

• Balance of Trade = Value of Exports − Value of Imports

Benefits and Costs of International Business

• Benefits: Market expansion, diversification, access to resources, economies of scale, competitive advantage, cultural exchange.
• Costs: Cultural barriers, political risks, currency fluctuations, increased competition, compliance/regulation, logistics/supply chain challenges.

CUSMA (USMCA)

• A trade agreement between Canada, the U.S., and Mexico that aims to enhance relations; replaced NAFTA.
• Canada's Benefits: Market access, labor/environmental protections, dispute resolution, streamlined customs, agricultural market access.
• Canada's Concerns: Sectoral vulnerabilities, workforce dynamics, regulatory changes, trade deficits.

Tariff vs. Non-Tariff Barriers

• Tariffs: Taxes on imported goods and services.
• Non-Tariff Barriers: Regulations and policies (other than tariffs) restricting or controlling international trade.