International Business Overview

International Business

• International business involves creating, shipping, and selling goods and services across national borders.
• This is often called international trade or foreign trade.
• Participation contributes to the global economy.
• Domestic transactions involve buying products made in the same country.
• International transactions involve buying items from other countries, even if purchased at a local store.

Benefits of International Business

• Access to markets: Understanding consumer needs and wants is essential before selling internationally.
• Standardized products (global products) are offered the same way in all countries. (e.g., packaged food is NOT a global product)
• Cheaper labor costs in other countries.
• Improved product quality by utilizing resources globally (e.g., car manufacturing).
• Increased potential for sales and increased production, as international markets grow.

The Five Ps of Production

• Product: The good or service offered.
• Price: The cost of the product, which can vary by country.
• Promotion: Technology allows easy global promotion.
• Proximity: Distance from the purchase location/production location.
• Preference: Some countries specialize in quality goods.

The Cost of International Business and Tariffs

Costs of International Trade

• International business has hidden costs (social costs).
• Social costs include offshoring, outsourcing, human rights abuses, labor abuses, and environmental degradation.

Offshore Outsourcing

• Offshoring outsourcing involves hiring providers in countries with lower labor costs.
• This often moves jobs from a company's internal production to an external business specializing in the operation.

Human Rights Issues and Labor Abuses

• Human rights issues and labor abuses are ethical concerns with offshoring.
• Poorer countries sometimes experience widespread workplace abuses.
• Child labor is a significant concern.
  • Child labor is defined as employment under age 16.
  • The International Labour Organization (ILO) promotes social justice and worker rights.
• Consumer action groups aim to improve conditions.

Environmental Degradation

• Sustainable development aims to meet present needs without harming future generations.
• Environmental degradation occurs when nature consumes resources faster than they regenerate.

Protectionism

• Governments (e.g., Canada) use barriers to protect domestic businesses and consumers.
• Barriers protect local industries facing global competition.
• Barriers protect against imports not meeting Canadian regulations.

Tariffs

• Tariffs (customs duties) are taxes on imported goods.
• Finance Canada develops tariff policies.
• Tariffs make imported goods more expensive, boosting Canadian businesses.
• Tariffs make Canadian goods more affordable for consumers.