Chapter Three

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Chapter Three

• Business in aBorderless World

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International Business

• Refers to the buying, selling, and trading of
  goods and services across national boundaries

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Absolute Advantage

• Absolute advantage exists when a country is the
  only source of an item, the only producer of an
  item, or the most efficient producer of an item.
• Example Zambia has reserves of copper ore
  (bauxite).

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Comparative Advantage

• Comparative advantage occurs when a country
  specializes in products that it can supply more
  efficiently or at a lower cost than it can
  produce other items.
• Example the U.S. agricultural commodities, such
  as corn and wheat, Canadian automotive products

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Where Canadian Exports Go ()
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Source Strategis http//strategis.ic.gc.ca/sc_mrk
ti/tdst/tdo/tag
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Where Canadian Exports Go ()
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Source Strategis http//strategis.ic.gc.ca/sc_mrk
ti/tdst/tdo/tag
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• Definitions
• Balance of Trade difference between the value of
  a countrys exports and imports
• Trade Deficit imports exceed exports i.e, IgtE
• Trade Surplus exports exceed imports i.e., IltE

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Top 5 Countries Canada Traded with in 2006
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Source Strategis http//strategis.ic.gc.ca/sc_mrk
ti/tdst/tdo/tag
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International Trade Barriers

• Economic
• Legal/political
• Social/cultural
• Technological

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GATT and NAFTA

• General Agreement on Tariffs and Trade (GATT)
• Trade agreement that provides a forum for tariff
  negotiations and a place where international
  trade problems can be discussed/solved. The World
  Trade Organization (WTO) is responsible for
  administering GATT.
• North American Free Trade Agreement (NAFTA)
• Eliminates most tariffs and trade restrictions on
  agricultural and manufactured products between
  Canada, Mexico, and U.S. (1994-2009).

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Increasing GlobalInvolvement
Multinational Corporation Direct Investment Joint
Ventures Contract Manufacturing Licensing Trading
Companies Exporting
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15 Largest Global Public Corporations
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Source The Forbes 2000, Forbes,www.forbes.com/
The Forbes 2000 - Forbes_com.mht
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Solve the Dilemma

• a. What are the key issues that need to be
  considered in determining global expansion?
• b. What are some of the unique problems that a
  small business might face in global
  expansion that larger firms would not?
• c. Should Audiotech consider a joint venture?
  Should it hire a sales force of people native
  to the countries it enters? (Page 70 of text)

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