Chapter 5 Flashcards
(27 cards)
Total volume of world trad per year is
15 trillion
Globalization
Integrations of markets globally, the world in becoming a single interdependent system
Major world markets
1) North America
2) Europe
3) Pacific/ Asia
Imports
Purchased in Canada and manufactured in other countries
Exports
Made in Canada and are purchased by consumers in other countries
Forms of competitive advantage
1) absolute advantage
2) comparative advantage
3) balance of trade
4) balance of payments
Absolute advantage
A country can produce something more efficiently than any other country
Comparative advantage
A country can produce a certain item more efficiently (cheaper) than it can other items
Balance of trade
Difference between total exports and total imports
Trade surplus
The nation exports more than it imports - creates a favourable balance of trade
Trade deficit
The nation imports more that it exports - creates a negative balance of trade
Balance of payments
The flow of all money into or out of a country.
- cash flow in: exports, foreign investments in Canada
- cash flow out: imports, tourist spending overseas
Foreign exchange rate
Ration of one currency to another
When CDN $ depreciates
Exports increase and imports cost more
When CDN $ appreciates
Exports decrease and imports cost less - hurts export industry
Exporter
Makes products in one country and sells to another
Importer
Buys products in foreign markets for resale at home
International firm
Conducts much of its business abroad
Multinational firm
Firm that designs, produces and markets products in many nations
What are the components of the international organizational structure
1) importing or exporting via independent agent
2) licensing agent
3) establishing a branch office
4) choosing a strategic alliance
5) foreign direct investment
Barriers of international trade
- Social and cultural differences
- Economic difference
- Legal and political differences
Social and cultural differences
- language
- population demographics
- shopping habits
- religious differences
- social beliefs
Economic differences
- role of the government in the economy
- planned vs. market economies
- capitalist, socialist and communists
Legal and political differences
- quotas
- tariffs
- subsidy
- protectionism
