Chapter 2 Flashcards
(50 cards)
Foreign portfolio investment
- investment in businesses located outside Canada through stocks, bonds and financial instruments
- allows Canadians to spread out their investments which is less risky than investing in just one area
- provides greater choice and opportunity
Importing
- to bring products/ services into a country for use by another business or for resale
- majority of Canadian imports are from the states
Global sourcing
- the process of a company buying equipment, capital goods, raw material, or services from around the world
Exporting
- to send goods or services to another country, for use by a business or for resale
- majority of Canadian exports go to the states
Measuring economic progress: GDP
Gross domestic product = measures the output of goods and services a country produces within its borders
Measuring economic progress: GNP
Gross national product: measures output of goods and services produced by all the resources of a country
Balance of trade
The difference between a countries exports and imports
Trade surplus
More exports than imports
Trade deficit
More imports than exports
- results in foreign dept
Making economic decisions
- Define the problem
- Identify alternatives
- Evaluate alternatives
- Make a choice
- Take actions
- Review the decision
Value added
The amount of worth that is added to a product that is being processed
Foreign subsidiaries
- aka wholly owned subsidiary
= a branch of a company that is run as an independent entity in a country outside of the one which the parent company is located
Licensing agreement
Gives a company permission to use a product, service, brand name or patent in exchange for a fee or royalty
Exclusive distribution rights
A form a licensing agreement that grants a company the right to the only distributor of a product in a specific geographic area or country
- used for initial entry into a foreign market
Franchise
An agreement granted to an individual or group by a company to use that company’s name, services, products and marketing
Joint venture
A common type of international business
- a new company with shared ownership is formed by two businesses, one of which is usually located in the country where the new company is established
Trade barriers
Tariffs, protectionism, trade quotas, trade embargoes, trade sanctions
Protectionism
The theory or practise of shielding domestic industries from foreign competition often through trade barriers such as tariffs
Tariffs
The most common type of trade barrier
= taxes or duties put in imported products or services to allow domestic products to be competitive
Trade quotas
A government imposed limit on the amount of product that can be imported in a certain period of time
Trade embargoes
A government imposed ban on trade of a specific product or with a specific country, often declared to pressure foreign government to change their policies
Trade sanctions
Economic action taken by a country to coerce another country to conform to an international agreement or norms of conduct
Foreign investment restrictions
- Canadian law with the greatest impact is the Investments Canada Act
- ensures that all foreign investments are revised to determine they will benefit Canada
- foreign investments in uranium, financial, transportation, and cultural industries = automatically reviewed
Standards
- countries have different standards for products in areas such as environmental protection, voltage and health and safety
