:::.

'
Contents
Preface V1

Special Features vli

Acknowledgements vlii
iv
Reviewers

Chapter 1 What ls Trade? 2

1.1 An introduction to business and trade 4

1.2 History of Canadian trade 8
1.3 Advantages ofinternationaltrade 26
1.4 Disadvantages of internationaltrade 34
1.5 Globalization 3B
Chapter Review 46
Business Skills First lmpressions 50

Chapter 2 Elements of International Trade 52

2.1 Types of international business 54
2.2 Trade barriers 6B
2.3 Currencyfluctuations 76
Chapter Review 82
Business Skills Time Management B6

(hapter 3 (anada's Role in the Wortd 88

3.1 Canada on the world stage 90
3.2 Attracting foreign investment ro2
3.3 Productivity and the changing workplace 108
Chapter Review 116
Business Skills Dress for Success 120

Chapter 4 Culture in International Business L22

4.1 What is culture? 124
4.2 Business cultures around the world L28
4.3 Cultural awareness and international busineSs 138
4.4 The impact of culture on international business 146
4.5 Culture's influence in the workplace 160
Chapter Review 168
Business Skills Etiquette 172

Chapter 5 Economics and Politics 174

5.1 Economic and political systems 776
5.2 Classifications of economic development r84
5.3 The business cycle 1BB
5.4 Economics of trade 104
5.5 The role of government in international business 198
Chapter Review 206
Business Skills Report Writing 2ro

lV I Fundamentals of International Business

 chapter 6 International Trade Agreements and 0rganizations 212
6.1 Giobalization and international trade 2r4
6.2 Tnde ageements 220
6.3 Trade organizations 238
6-{ The role of the united Nations in internationat business 250
:-::::r iev'iew 256
:_: -ess Skills Collaboration
260
Ch4ter 7 Social Responsibility and NGOs 262
7.1 What is corporate social responsibility? 264
7.2 Business ethics 270
7.3 Ethical issues in international business 276
7.4 Non-governmental organizations (trlCOs) 290
Chapter Review
296
Business Skills Networking
300
Chapter 8 Marketing 302
8.1 Internationat marketing and the four ps 304
8.2 The two Cs of marketing 316
8.3 Market research and marketing strategies 326
Chapter Review
332
Business Skills presentations
336
Chapter 9 Suppfy (hain and Logistics 338
9.1 Defining logistics 340
9.2 Understanding suppiy chain rnanagement 344
9.3 Methods of physical distribution in the supply chain 356
9.4 Challenges in the supply chain 362
9.5 Supply chain asslstance 370
Chapter Revievu
376
Business Skills Risk Management
380
chapter 10 Global lssues and tnternational Business Trends
382
10.1 Beyond the global financial crisis
384
10.2 Gtobal trends
390
10.3 Geopolitical tensions
4r0
10.4 The giobal traveller
4r4
Chapter Review
424
Business Skills
428
G lossary
A\A
Credits
440
List of Companies
442
I ndex
444

Fundamentals of International Business rV

 ':==.:.
l.it::.::.:

-n!!!!r!!!!!!!rl!!!!!qur!rtntruririirlriiriif!]llllltuitilllllllllilll

L*m rr$FmG By the time you fintsh this chapter, you should be abie to:

*bjen€FveE " Describe key concepts related to international business

' Explain how and why Canada's major international business
relationshlps have evolved over time
' Describe ways in which internationai business activity develops
intprdpnpndonno among countries

' Evaluate the benefits and drawbacks of international trade for

Canada
' Demonstrate an understanding of how globaiization has affected
internationai business
. Explaln how the global market has affected consumer demand
Key Terms :---i-
-. trade deficit
:::=:3:r domestic market
:---- ------
-'->.-_-b:
-rila/
I.
litrllll
..4
-----:J-
---:-;-rT; l:r-Ess j^-l'dn m:rkptq
--- *-b"

--:- :::e-in C:ect investment (FDI)

j--
-----i-- -.- :::i::: nvestment
::=- :: : -a:t
=,x= -'^'---i-^Jn-
<-----i1*!-

eDo= ?::- -<:r:

baiance cf :ace r:n-prri nn i <rn

frrdp <r'rrnlrrc
 'a J:'::r::::::.:l::r::l= j'

.... * t^r_ ".^! _^:hi. -,

^^nad_an 5 4

An introduction to
vv c 1r1t6t1L lluL LI1111^ U1 !4

T:re as an internationol business E€

Rlr bpra. se ii salls n-rdlgf5 =
-ttd" h\ rnmiaries tlrpd'n
cthef countries, it is.
business and trade
A business is defined as an organization that produces a good or
offers a service in exchange for money with the goal of making
a nrnfif Tn r-ondrrct IJUSrness, a cOmpany r-nmnlotpc rnrinrrc
transactions. A transaction is an exchange ofthings ofvalue.
domestic business 国内商务/本国商务 A
domestic business is one tnat makes most of its transactrons
within the borders of the country in which it is based. A domestic
business in Canada is owned by Canadians, relies primarily on
products and services made in Canada, and sells the products it
*-i'^-
lIldItCJ ^-r Jt:I
dll(l ^^'--;^^-'t
V ILtj) nrovides
lL prv v ruLJ to neonle who live in Canada.
Lv pLvyLL

f wuqj, fitL fD
Todav rrLuLL +^
difficlr+
is uff 1-^ ' +^+^rr-'
LU uc d
r^-restic business. Canada
LULdLLy uull

relies heavlly on imports for much of its machinery and products,

-^ r.^^^,ri^^
DU -^-^^^i^- +r^^+
UOI1OUIOII LUIllPOlllcJ ^**^-- *^
Llld.L dPPt:dI
L^ puf LrJ uvrifLrLfL
LU Ut: nttTelv domestic cortld
Lvu be
makins non- domestrc transactions.
企业被定义为以盈利为⺫标，⽣产商品或提供服务以换取⾦钱的组织。为了开展业务，公司要完成各种交易。交易
是有价值物品的交换。
国内企业是指在其总部所在国境内进⾏⼤部分交易的企业。加拿⼤的国内企业由加拿⼤⼈所有，主要依赖于加拿⼤
制造的产品和服务，并将其制造的产品和提供的服务销售给居住在加拿⼤的⼈。
如今，很难完全成为⼀家国内企业。加拿⼤在很⼤程度上依赖进⼝机械和产品，因此，那些看似纯粹从事国内业务
I i Chapter 1: What ls trade?
的加拿⼤公司可能在进⾏⾮国内交易。
国际商务是位于不同国家的企业之间进⾏交易的经济体系。这个词
也⽤来指在国家之间开展业务的特定公司或法⼈。

International business 国际商务

International business is the economic system of transactions

conducted between businesses located in dlfferent countries. This
term is aLso used to refer to a specific company or corporatron that
conducts business between countries.
Any business that conducts financial transactions outside of its
natlve country is an international busrness. If you live in Canada and
buy from a canadian fruit distributor, it is a domestic transacnon,
even if the fruit came from Mexico. The transaction type depends
on the businesses involved, not the product. Domestic transactions
are made between two Canadran companies. An international
transaction involves a canadran business and a non-Canadran one.
International buslnesses can be companies, government
organizations, or even non-profits that mlx both domestic and
international transactions. There are five main ways for a business to
be considered an internatlonaL business. A business could:

Export to buslnesses tn another country. Canada Goose is an

rnternationai business because the company manufactures
its products rn Toronto and Winnlpeg and sells its Canadran_
made jackets to more than 5O countrles.

2 Import from businesses in another country. Canadian Tire is

an international business because it sells products made by
companies in other countries at its stores in Canada.
3 Invest in businesses in another country. In2OI4,ltalian car
manufacturer Fiat merged wlth Chrysler, which was struggling
at the time. The new company, Fiat Chrysler Automobiles
(FCA), provided Fiat an opportunity to expand
in North
America by selling the Fiat brand in Chrysier deaterships.
4 Own a retal1 or distrlbution outlet in another country.
Amazon, the wortd's iargest online retailer, opened Canada,s
first-ever Amazon hlgh-tech robotic dlstribution centre in
Brampton, Ontario. Today, it is searching for more warehouse
locations in North Amerrca.
5 Own a manufacturing plant in another country. Magna, a
world leader in automoilve products, is an international
business because the company has manufacturing plants
all over the world. Simiiarty, Honda and Toyota are both
Japanese automakers rnrifh menrrf:r-rrrrjnd plants in Ontario.
 Why trade?
Thrnrrohorrt
I rrruu6rrvuL hiqtorrr, indirridrrels
IIIUMUUqLO, grottns stetes and coltntries have
6lvuyr,
traded with their neighbours. Buying, seiling, or exchanging goods
and services is known as trade.
in to get the
LrfL soods thorr
rln
\nlhrr dn npnnlp-- frade? Thev trade -'' order Lv 6LL rrlLy w
r --r -'uLI

lfnof have
vL rru inf exchangp
v ! ff !r!Lf furrt)s for
lvr LrrL ooods thev have Both oarties
fhe r*_ -'-- expect
-__. to
be better off following this exchange. The reliance of people on each
other for goods, services, or ideas is known as interdependence.
Trade is everywhere, and it occurs locally, regionally, and
intprnetionellrr glL r . JTrrst
'*v! tuuN oruurru
.-rl rrnrl
1^^l' ^.^"h/l q]]u
JvL Will See hOW this iS tfUe.
\nlhet did ,r.,',
vv rrqL uru doridp tn rnrear todarr? There is a sood chance vour
y vu uLlluL

clothing was made in India, China, or Banglad'esh. What was the last
meal you ate? If you had coffee this morning, the beans probably
came from a country in South America (perhaps Colombia or Brazil).
.rhn nrrnrn. rnrl nr. d? T ikelv from the United
r ne OranSes ano orange Julce you enjoye*.
States, in Florida or California. Those earbuds your friend just
bousht?' Probablv
-'"'*-'J made somewhere in Asia. What about the plastic
'-

and metal in the smartphone you love so much? It's likeiy that the
copper was mined in Chile or Peru and the oii used for making the
nlastic misht have come from the Mlddte East, Africa, South America,
the United States, or even Canada. At a domestic level, farmers in
A-+nyia ^^- -^11
\JIILd.IIU LdII ^-rlps fo
)CLL dPPLuo Lv qa groce1v chain jn Orrpher \^rhile
!rrurrr tlr \1uEUsL, cnnSUmeIS
vvrrrLL Lv
6rvL!rJ,
::r/here does our stuff come from? i-
ttt nLUC]Lo ^^^ ^,,,.hase
^rr-.nr+n Lorr PurLl wine made in British Columbia.
ro. ' i-. n-<q;hro <n11;6pr 6f
:laierials in the items shown here. Although trade ls often described as "between countries," lt is really
- -,- - dn \/orr
J'*'
nr^rn lhi nos rnm
- "'_,,"'b" _- n: rp'
t- ' neonle who trade Therefore when"'-*'' Jvou
'* hear
-- that Canada does most
of its trade with the United States, what
it means is that Canadians trade mostly
with Americans. A family trip to Disney,
a weekend snorts fournament across the
U.S. border, or that online music purchase
/-^^-li^-^ +-^,li^^..,i+lw]Ln
^-^ aL[
are ^.,^-^l^-
^'l1 exampLes ^F Lanaolans
or rraoln8
Americans.
It's important to note that the termtrade
is often used interchangeabLy with the
term buslne ss. Foreign trade or international
trade means the same thing as international
business. When a business in Canada
develons a relationshjn rnrith e hrrsiness in
rnnfhor .^rrntnr
d.IluLIlcI LULll.lLiyr fhrt rnrrntnr ic
Lrro-L LUurlLrj rJ nnncir]oro.l
LU11)ruqlfu

a trading partner with Canada.

5 Chapter 1: What ls trade?

 Figure 1-1 Canada's Balance of Trade from 2008 to 2018

4,000

2,000

-2,000

-4,000

-6,000
2012 2014 2016 201 8

Balance of trade 贸易差额

进⼜
Imports are products or services brought into a country for trade.
出⼜ Exports are products or servlces sent from one country to another.
The difference between a country's exports and imports is known as
its balance of trade. A countly that exports more goods and services
than it imports has a trade surplus-that is, it selLs more than it
buvs. Similarlv a corrrfrv that imnorls rnore goods and servir-es than
it exports has a trade deficit-that is, it buys more than it setls. The
following summary makes it easy ro remember:

exports > imports = trade surplus 贸易顺差

exports < imports = trade deficit 贸易逆差
5ection review
Canada had a trade surplus wlth the United States tn2Ol7 of
more than $126 blltion $+t+.2 billion in exports and $2BB billion in W,hat is the d:fference
between a domestic buslness
imports). And as you can see from Figure 1-1, Canada's balance of
and an international
trade fluctuates at various points through each year. business? Name an example
ofeach.
:

What does interdependence

rnean?
What are imports and
exports?
What does the term balance
of
trad"e refer to?

Explain the difference

between a trade surplus errl
a trade deficil
.. ,r!:1 . -_ :

A man n'lhp earlrr frr r trpde

routes used to travel between
trr1?^^^ O11U
LUTUPC ^-,1 a^-^l^
Ldllduo.
1.2 History of Canadian
trade
The Canada we know today exists because of trade. After Columbus's
success in exploring the "New World" and exploiting its riches, other
explorers set out from Europe to find what lay across the ocean. In
the 1600s, ships from France and England landed in what is now
Canada, sailing up the St. Lawrence River to Quebec. There they
traded with First Nations peoples for fur and food, and sent their
treasures back to their home country. This international business
was so prosperous that settlers from France and Engtand soon
moved to Canada to estabtish colonies and trading outposts (e.g., the
Hudson's Bay Company and the North West Company).
Many First Nations traded with the Europeans. Representatives
from the Ojibwa and Cree Nations would often bring the furs (mainly
beaver pelts) that they had trapped to European trading posts and
exchange them for rifles, blankets, and other goods they needed. First
Nations aiso acted as intermediaries, trading furs for prized European
manufactured items, and then trading these items for more furs from
nations much farther west. The traders would bring the recently
acquired furs to the trading posts and strike new deals.

t I Chapter 1: What ts trade?

 Trade with Europe
once permanent setttements were estabhshed in I{alifax, Montreal, Figure 1-2
Quebec, ottawa, Kingston, and Toronto during the 17oos, trade grew Iotal Canadian r', _- i : - _

very qulckly. Llttle manufacturing took place in Canada, so finlshed lmpofts with lhe i_ -::
Unron, 2017
goods came from British or French businesses overseas. In turn,
the
demand in Europe for raw materiars from Canada (especialtv beaver Total Exporis
pelts, fish, and lumber)grew rapldly. to the Eurspean Union
During this time, France and Engtand were fighting the Seven (Millions of g)
Years war in both Europe and North America. The defeat of the
41,580
French ted to a greater reliance on trade from England and less
on trade from France, and allowed Britlan to expand into the rest Total lmports
of Canada. Canada's historical connection to Britain and Europe from the turopean
remains strong, as can be seen in its majOrity language (Engtish) and Union
currency laws, which are British in origin. A11 of the goods required (Millions of S)
for setttement came from Europe by ship. The same was true for the
66,248
united States, as their cities, too, devetoped near the Atlantic seacoast
and inland waterways such as the Great Lakes. The United States
was buitding its trade economy at the same time that Canada was,
and because of the proximity of their cities to our cities, it was only
a
matter of time before the two countries became trading partners.
Today, Europe remarns a major tradlng partner with Canada, and
this trade ls expected to grow. In2OI7, Canada signed CETA, tne
Comprehensive Economic and Trade Agreement, with the European
union (EU). This agreement wili remove 99 percent of duties (taxes)
on traded goods between Canada and EU member countries. Made un
of 2B member countries, the EU
remalns the largest free trade
zone in the world and Canada's
second-most important tradlng
partner after the United States.
You will learn more about CETA +

and trade with the EU more tr

extensively in Chapter 6. ,=E
 Trade with the United States
The united states declared its independence from BritaininrTT6,
E re1-3 having fought for that independence in the American Revolutionary
Total Canadian Fxports and
fmports with the United war. As a result, u.S. trade with Britain suddenly decreased, and the
States, 2017 united states had to become self-rellant. This need for independent
sources of manufactured goods coincided almost perfectly with the
Industrial Revoiution.
The earty manufacturing lead that America took over Canada is
still obvious today. In the united states, more industrial jobs were
414,737 created through manufacturing than in Canada, and American
plants and factories expanded rapldty. During this time, Canadian
businesses were mainly resource-based, producing coal, lumber, oil,
and agricultural products.
The first American manufacturing plants in Canada were
newsprint mills. elthough these American companies would nave
preferred to import the Canadian lumber for their paper businesses,
the provincial governments in Canada (scared of losing jobs and
hurting the Canadian economy) insisted that the u.s. companies
build iocal mills. Canada accounted for about 65 percent of global
newsprint exports by 1929. The discovery of minerals such as gold,
nickel, and zinc created a mining industry in Canada. American
mining companies began setting up businesses in canada, bringing
with them knowledge, skilis, and the financial capital required to
extract these mining resources.
The United States, with a poputation of over 320 million,
continues to be our largest trading partner, and American brands
can be found everywhere in Canada. The united states also has the
largest consumer market in the world: consumer spending is three
times that of China, the second-largest consumer market. rn2or4,
the united States was home to 128 of the world's largest companies,
ranked by sales, according to Fortune Global 5OO.
The united states still relies upon canada's raw materiais such as
oil, lumber, and water. Canada's exports to the united States in2or7
amounted to $4r4.7 billion, and our imports from the united states
were just short of g2BB biltion (see Figure 1-3). Further, opportunities
for trade to exist for Canadian businesses across sectors, for
example, in aerospace, automotive, oil and gas, and information and
communication technology.

il | tlepter 1: t{hat ts trade?

 expcr::
C+^+--

_-1 ---'.--A
e-
---
r--
r--
,t--*F
-----*-1
--./-,----a1:--- --.- ---
-____---1
E-
_-44'- ---

-#:44=+_=--- *l-#--
==,V:.-.-=i
-==_-V=_7
t===1 --
- =.=
==*:
====:=--
= =
=:i
--_=---:
Y-
;'e
'::

:9'€*:
 Trade with Asia
il Figure 1-4 rn2017 , more than 75 percent of canada's total trade with Asra was
I lotal Canadian Expofts and done wlth lts top three Asran tradlng partners:Japan, china, and South
ti
lmports with Japan, 2017 Korea. Let's Look at these three countries, as well as India.

Japan
ll (Millions oi 5) Canada started tradlng with Japan after worid war II, in the late
1940s, whenJapan's industries were rebuilt after being destroyed
1 1,830
by Atlied bomblng. Japan's economy grew rapidly. Japan,s modern
Total lmports factories began to produce hlgh-quatity electronic products such as
. from Japan radios, teievisions, cameras, and computers.
(Millions of g) Toward the end of the twentieth century, Japan also became
17,521
known for its automobrles and high-tech equipment. with highty
skitted workers, excellent infrastructure, and low corruption,
Japan remains one of Canada's most important partners. Over
100 canadian companies have a permanent presence in
Japan, and
the country has an exceilent international business environment.
After China, Japan is Canada's largest trading partner in Asia.
Panasonrc enployees in
canadian businesses imported $17.5 billion worth of goods from
.'olcL C.SSFirrOle O:gar:c Ligh.r
Emitiing Diode televislons, Japan in2017, and exported $ll.S btllion in goods to Japan in the
:ntroduced in2aI7. same year (see Figure 1-4).

'1"1..1
 China
In the past 30 years, China has emerged
as a ma;Or economic Figure t-5
force' Liberalization of communist
eJonomic poticies has red to Total Canadian Lr:,: i :-,1
free enterprise being promoted in lmpofts with Ciir-a
several Chinese districts. cheap -_--
and abundant tabour has encouraged
businesses from the west to
devetop partnerships with chinese
firms. Two-thlrds of China,s
expofts are from factories that foreign
investors own, either outright
or rn partnerships with Chinese firms.
Chinese products are well
made and inexpensive; as a result,
they have become very popular 23,611
with North American retailers.
Chinese businesses have also invested
in Canada. For exampte,
China Nationat Offshore Oil Corporatlon (CNOOC)
t tmiteO,
headquarters in Berjing) purchased
calgary-based Nexen in2or2 for
$15'1 billion in cash. while China wa, 70,928
to-okrng to gain an entry in
the Alberta oil sands, fatling oii prices
and production issues on
the Canadian side meant that Canada
welcomed this investment,
especially foilowing a recession in
Arberta's economy. China remalns
one of Canada's top five trading partners,
accounting for gTO.gbiltion
rn imports and $23.6 bil110n in
exports in2or7 (see Flgure t-s).

In2012, CNOOC Limited

purchased Ca1gary_based
Nexen for $15.1 billion,
secunng a significant
lnvestment in Canada,s oil
industry.

History of Canadian trade 113

 Figure 1-6
South Korea

rc
Total Canadian Lrl.ori: and Canada's trade with south Korea is a recent deveropment. Thrs
lmports lrith Souih Koiea. country of 50 million people serves as a key market
LUlt
for internationai
business and investment by Canadian companies
looking to
expand into Asia. South Korea's key industries
include agriculture,
auto manufacturing, media and entertainment,
oil and gas, and
telecommunications. with its strong focus on infrastructure,
south
Korea is one of the most favourable busrness
destinations in a[
53A6 of Asia. A hlghly educated and skilled tabour
force makes this an
emerglng economy for international busrnesses.
onJanuary r,2015, canad.a entered its first free
trade agreement
in the Asia-pacific region. The Canada_Korea
Free Trade
Agreement (cKFTA) agreement provides
canadian exporters with
preferred access to the world's eleventh-targest
economy and the
fourth-largest in Asia, with an annuai GDp
of almost $1.8 trillion.
since this agreement was signed, Canadian
exporters have seen
gains in trade in various sectors, compared
to 2or4,most notablv in
agriculture, fish and seafood, and forestry products.

Foliowing the success ofJapanese automakers

in the
1970s and t9BOs, South Korean automaker
Hyundai began
exporting cars to Canada. After some initiai
success, the
company decided to build a plant in Bromont,
Quebec,
at a cost of $4OO miilion to produce the
Hyundai Sonata.
However, the factory ctosed within two years.
Why did this venture fait? First, because
few South
Koreans spoke French and vice versa,
communication
was difficutt. A second mistake was
importing car parts
to Canada at a time when the Canadian dollaiwas weak,
which made imported parts more expensrve.
Hyundai no
longer operates a plant in Canada. Hyundai
learned from
its mistakes, and today it builds vehicies
in Alabama and
operates car prants in china, Brazil, India,
and Turkev.
Following the Hyundai takeover of KIA in
2007, boti
Hyundai and KIA have continued to import
'into their vehicles
Canada.

14 | Chapter 1: What ts trade?

 India
India has apopulation of 1b1rion, second on$ to
china. it has become Figure 1-7
a major centre for outsourcing services and manufacturing Iotal Canadian L,.i:= --,:
and is one
of the world's fastest-growing economies. lmports with India, 2t1.
India's workforce is young
(the average age is 27) andwerl-educated.
As an emerging market,
India seems poised to take on China. It continues
to attract forergn
investment due to its competitive tabour
costs, lucrative domestic
market (the in-country market), and skilled workforce.
In 2010, Canada started discussing a free trade 4,278
agreement with
India. However, there are a number of chalrenges
for international
businesses in India. Its infrastructure (roads,
electricar, waste
management, water supply, and so forth)are
underdeveloped and
pose chatlenges to foreign companies.
India arso tacks a strong rure of
law' and working with government offices 4,159
can be a srow process. For
rnternational businesses to succeed in India,
they need tt devetop an
understanding of the rocar culture and buird
relationshlps. (Thrs topic
is exptored in more detaii in Chapter +.)
tt is tikely that ianadian
businesses will continue to work with
Canada's federal government
to pursue a free trade agreement with India.

Canadian prime Minister

Justin Trudeau speaks with
ICICI Bank CEO Chanda
Kochhar during the 2016
Canada-lndia Mumbai
Business Forum in Mumbai,
India. Canada and India
continue to actively explore
investment oppoft unities
and develop greater trade
partnerships that benefit both
countri€s.

Figure 1-8
-:::i Canadian Exports and
rports with Mexico, 2017
-,:: man:facru.ed tn Mex.co,
ieady to be loaded on ships
icr erpori from the port of
iui
eracruz.
illllllllllllllll rlll l l li
Trade with Mexico
Canada's trade with Mexico has grown because of the North
American Free Trade Agreement (NAFTA), signed in 1993. The
agreement allows goods made in Mexico and the united States to
enter Canada duty-free A duty (or a tariff) is a tax most countries
place on imports ln order to make the price of domestic goods
competitive. Duties increase the price of foreign imports.
Imports from Mexico have greatly increased since NAFTA was
signed, rising from $t3 billion in 2004 to almost $tg billton in 20oB to
$35.5blllion in2ol7. However, exports from Canada to Mexico remain
somewhat soft. They increased from just over g3 bittion in2OO4to just
under $6 bittlon in 20oB and as of 2oL7 were just under $B b1[ion (see
Figure 1-B).
since 2011, Canada had an increasing trade deficit with Mexico,
importing far more from Mexico than it exports. Mexico has become
one of canada's top five trading partners within the last decade.
 Trade with South America
Brazil Figure 1-9
Brazil is the most important south American economy for Canadian Total Canadian Exports arrd
lmports with Brazil. 20i7
companies and the top export market in the continent for Canadian
businesses. rn2or7, Canada exported more than $t.z bitlion worth
of goods and services to Brazil. Meanwhile, Canadians imported
over $4.7 bitlion of goods and services from Brazit (see Figure 1-9).
The Canadian government is exptoring the possibllity of a free
trade
1,712
agreement with Brazil through the Mercosur regional trading b10c
(Argentina, Brazll, paraguay, and Uruguay).

4,713

A potash mine in Saskatchewan

Potash is used to make
fertilizers, which make up about
30 percent of Canada's exports
to Brazll.

Venezuela
Venezuela's economy has shattered and is on the verge of
Figure 1-10
economic collapse. Although venezuela has the world's largest
oil Total Canadian Exports and
reserves,it is in a severe recesslon-in part due to 10wer oil prices lmpofts with Venezuela,
between 2015 and 2017. Many Canadian and American companies 2017
have ceased business operations in Venezuela. Air Canada, for
exampte, suspended all flights to venezueta in March of 2017
over
safety concerns due to the civil unrest. American Airlines,
a u.s.
corporation, ceased operations in venezuela ofjune the same year.
other internationat businesses have also left the once prosperous
country. General Motors, an American international business,
had its
factories and plants taken over by the venezuela's government
after
69 years of business in Venezuela.
The people of Venezueia face high lnflation (rising prices)
and extreme scarcity of basic necessities. In 2016, prices rose
by
B0o percent, and shoppers were forced to wait in long lines to
buy
basic necessities in stores where they often found empty shelves.
it
is likety that Canadian and international businesses will continue
to
refrain from doing business in Venezueta until the country,s political
and economic situation becomes stable.

Histon of (^rrb |r* r 17

I
 Chile
Fgue 1-11 Canada has a well-established trading and investment
Total Canadian ExDorts and relationship
with chite. The Canada-Chiie Free Trade Agreement came
lmports with Chile, 2017 into force
onJuly 5,1997. chile is also the top direct investment
destination for
Canadrans in South and Central America; 6o percent
of its GDp (gross
domestic product) is dependent on internatronal trade.
since free
trade was introduced, trade between Canada and
chile has tripled-
in2017, nearly $2.9 bitlion of merchandise trade occurred.
Chile's economy is politi
Canadian companies many
aimed at attracting foreign
attract business people the worrd over to establish
a business in
Chile. Chile is the world' rargest expofter of copper,
fo[owed by
China and Peru, far surp ssing Canada in copper
exports.

Colombia
Figure 1-12 with many countries
Total Canadian Exports and
Trade Agreement
lmports with Colombia,
ment has offered
2017 Canadian exporters and investors lower trade barriers
to a non_

Figure 1-13 Top 10 copper-producing countries in

the world ,2017

1 Chile
5,330
2 Pelu
2,390
3 Ch ina
1,860
4 United States
1,270
5 Austra lta
920
6 Democratic Republic of Congo
850
7 Mexico
755
8 Zambia
7s5
9 In don esia
650
10 Canada
620

ll I tlepter 1: t{hat ts trade?

Canada's trade with emerging markets has shaped our economy.
Japan was an emerging market in the early 1950s, and Mexico was
one in the 19BOs. Trade with China and South Korea has been
growing in the 2OOOs. New markets are emerging as trading partners
for Canadian busrnesses to trade with.

Trade with the Middle East

Several problems in the Middte East restrict the trade Canadian Figure 1-14
Total Canadian Exports and
businesses can do in this region. Most of the Mlddle East is situated
lmports with the Middle
in a desert, whlch is not suitable for growing crops. Also, the majority
East, 20'17
of the countries that comprise the area are not yet industrialized.
As a result of the Israeli-Arab conflict in the region, widespread
^h+i ^ "_^-;-^'^| r^^li-oq
d.rrLi-l1lllcIILdt | uct | | Lo_, cnnspnratirrp
_---_ rplioinrrq lprdorqhin fho
recent Syrlan conflict, and the war on terrorism, the Middle East rs
nnlitirrlhr rrncf rhlo However if is irrvoLLJ Lrrl volatjlifv
mosllrr the of the
v vLqLf Lf Lj v1ILtIg Oil

market that prevents many of the countries in the Middle East from
becomins
.- ---------o long-term economic [eaders.
In 1960, Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela were
the five- --foundinp'
*''*"-b members of the Orsenization of the petroLeum
Fvnnrtino cnrrntrioc (OPEC).
\vr !v/. LLr (a
OPEC iS an oii cartel Sroun vr
\q 6rvuy of
indeOendent DIOdlcpr" rrrhn trrr fn rnnfrnl
Lv lvffLfvr fhe srrnnlv
Ll]L DuPPrj nf oil fif OiL
vr vfL, l1^

prices, or use other restrictive suppiy tactics). OpEC has lost primary
control of gLobai oil prices as competition from non-OpEC countries,
such as the Canadian oil sands and the U.S. shale industry, have
reduced oiL prlces. OPEC
countrres that have relied
- ----*- -'J on oil revenue
rorimariLv
fn ntr-h..^
LW P Ur LllqJC
+^^A ^^A
IUU\.1 d.11L1

other necessities have few

established industries to
renlace lost rerrenrrc f16p'1
lnrnrpr nil nrirpq

The German automaker

Voikswagen announced it vrould
ieturn to Iran in 2017 after a
17 year absence VoLkswagen
startei seLling cars in lran in the
?iCs, but v,rithdrew when ,,,rolid
..::. oa-'. r.':.(( ^1 -:)'
'' --- ' l't-)
 Saudi Arabia has opened its doors to foreign investment as it
tries to modernize its economy and move away from its dependence
on oil. InJune 2015 Saudi Arabia allowed foreign investment by
large international financial companies for the first time (whlte
still restricting individual investors). The country is atso seeking
investment from Asian businesses in China andJapan through Saudi
Vision 203O-a plan to move away from oil and develop other sectors^
of its economy such as tourism, heaith care, and education. Recent
tensions with its neighbour Qatar threaten to destabilize this nlan for
improving Saudi Arabia's economy.

However, the UAE (United Arab Emirates), Israel, and Egypt have
established trading relationships with Canadian businesses that do
not depend on oil. Dubai has become the real estate, tourism, and
financiat centre of the Middte East, showing phenomenal growth
throushout
,---_*o--"*" the first decade of the twentv-first centrrrrr
/ rrroL LLfrLuf j.

The UAE has a stable economy with a modern political system

and a high per capita income. canada has a strong trade relationship
with the UAE, and Canadian companies have been successful in
many sectors such as oil and gas resources, power, infrastructure,
and information and communication technology (tcr). The uAE is
Canada's largest expoft market in the Middte East and continues to
attract lnternational business with its free trade zones that offer zero
taxes and 10O percent ownership by foreigners.
Israel and canada have signed a fiee trade agreement, and Israeli
businesses shipped almost $t.: biltlon worth of medicine, diamonds,
engines, shoes, and numerous other products to Canada in 2016.

Figure 1-15 Total Canadian Exports and lmports with Select Countries in the
Middle East,2017

United Arab Emirates 1,603 189

SaudiArabia 1,453 2,619

Turkey 1,265 1,785

lsrael 450 1,287

Egypt 291 991

D I (later l: What ts trade?

 T-^lA^
Trade with Africa 1 ldlll! ^^^^^^
Pd)>C) L.. .c.a -

nlrifnrmq in thp nnrf n:

Many African countries have unstable or corrupt governments. There Lagos, l\rgerra Ine c:ty nas
been ranked one ofthe most
are enormous social, health, and economic problems throughout p1np1-iye;n the worrd b,fr
the continent. Most Afrlcan countrles have major infrastructure r '"t '_o l've 'r
mrlv neon
,''*'_i .luns v;'rl-
nroblems and nrral economies. Manufactrrrino indrrstries in most nn ninpd r^/rtpr nr lnilplq
r^^,.,^,,^- f-:^^ 1:1.^ .^--l-
orcoJ orc JLdTLC/ rruvvEVtrr nrr lLd.j LIt\c \-dIldLld, ^-^4.,-^- d]] -L,,.ndance
^^ d.uu
^ PluuuLc)
of raw materials. The continent's exceptionaily rich resources are one
factor that has contributed to Africa's many problems.
Many countries in Africa face what is known as the "naturaL
resources curse," whereby a country focuses all of its energies on
a single industry and negiects the other major sectors. As a result,
the countrv*----) becomes
- -------o denendenf
uLpLrru!rlL on the
vrl ^-;^^ Ur
Lrr! PIrLC LlrdL ^--+i-'llar
^F+L-+ PdlLrLL
resource, and the economy becomes unstable. Corruption in
sovernment and uneven distribution of wealth -"*j mav -"follow
"" ''
(also
r,^^,.,-
NllUvvII
ro +hn
GJ LIIC "^^,-dox
POIOUv^ vr nlentv").
of yruLrLj r rr! income from natural
/. The

resources such as oil, diamonds, or timber is mismanaged by

leaders instead of supporting growth and development. Nigeria is
qfl examnle
an L^qrrr}/L! of aq cor'-*-"
ur LvLIIIL-Ly
i6 ^F'i^^
-LII l1I
+tr'-+ l rich in oiL resources but
I LLc. LIIdL is

nlagued bv cornrntion.

There are, however, countries that are starting to recognize Africa

r'ni+r-ather
dJ d.II UPPUILUIIILy I*-^.,- fhan * desfination
---*--J*-irrst- a *--LrrrqLrvlr for foreign ard.
rur rvrLf6lI q

Several countries, such as South Africa and Morocco, are key trading
nartners r,rrith Canada. Other African countries are foilowing these
models and offerlng opportunities for international business.

- >__ .
 sort cocoa beans in fiont
,',i'omen
ofa pubLic notlce against chiid
Chocolate
iabour in Duekoue, Ivory Coast,
According to Fairtrade Canada, the annual chocolate consumption
by Canadians is an average of 5.5 kilograms. Chocolate is made
from the dried seed of the cocoa pod (sometimes referred to as the
cacao pod), which grows in tropical environments. The ideal climate
for growing cocoa is hot and rainy, with lush vegetation to provide
shade for the cocoa trees. Africa, Asia, and Latin America are the
primary growing regions.
The Oimecs (tSOO-+OO ecr) were Likely the first humans to
consume chocolate and cultivate cocoa in Mexico. They crushed the
cocoa beans, mixed them with water, and added spices, chilies, and
herbs. over time, the Mayans and Aztecs developed methods for
cultivating cocoa as well. At one time, the cocoa bean was used as a
form of money.
In the seventeenth century, cocoa began arriving in ports
throughout Europe and chocolate beverages first appeared in
England, coinciding with the arrival of tea from China and coffee
from the Middle East. As chocoiate consumption rapidly expanded
with the Industrial Revolution, Africa ied the world in cocoa
production. It became the biggest cocoa producer in the twentleth
century. Today, Africa's Ivory Coast is the primary source of all cocoa
production, accountingfor 40 percent of the globat supply, followed
by Ghana, which produces an additional 2o nerr"enr of r-nr-ne olobally.

inatter 1: lYhat ls trade?

 The retail chocolate market has been growing in North America and
around the world as chocolate catches on with consumers in BraziL,
Russia, and China. Initially, increased demand resulted in higher
prices. However, choco[ate production has increased to such an exrenr
that chocolate prices are now falting. Currently, the only barrier to
rhncnlrtp nrndrrnfinn
Hrvuu!Lrvrr iS the
fJ Lrf! drvjndlinO srrnnlrr vr
uvvrrruL-rrb JuppLJ rnrn: hrrtfor
nf !u!vq uuLLct.

According to Fairtrade Canada, 9O percent of the worid's

cocoa is grown on small family farms by about 6 miLlion farmers.
Pests, fungal infections, and cLimate change are damaging cocoa
trees around the worid. As wel1, the number of farmers is falling
because the benefits are so poor that few young people want to
stav in the nrofession. Farmers
Lrr! yrvrLoDrrJtI. not benefit
do IIOL
rd.I11I€I5 UU frnm flslng
u__._,,- dirpr-flrr ,,_,,,
ot rriLiLqDLu
nrices vr increesed r-rrodrrctinn
_ **,-__ thp rnr:rr mrrltinefionel rn---
*J -I_tUtLllIdLlOnaL COmpanIeS
do. They remain rn poverty as their incomes fall to keep up with
rising production costs and household expenses. By contrast,
multinational chocolate companies make billlons in profits because
labour costs are kept low.
Child labour in West African cocoa farming has been a concern
since around the turn of the century when journalists focused the
world's attention on chiLdren trafficked to lvory coast to farm cocoa.
A.rnrdino tn nrof JLdLr)L.rLJr
hrnrrr r-!uorL
Lv rvvfj o{-r1-i-f ian 1 1
children were
.r.Z -.llion
-Lt|.LLtU.L.L eIi.tLUIell Wele e__o_o_*
engaged
in cocoa production in the country between 2013 and 2014. poverty
nl:rrpd e rnrinr rnlo in child
Lf I rLu Labour,
Lquvurr with
vv f Lll manv
1. farmlng families
struggling on an income of less than a dollar a day. Multinational
r-hocol:tp romneniog sUCh aS NeStLd,
f!!JLLL, MOndeL€2,
f.tVfl and HerSheV,S haVe
created or expanded programs to deal wlth child labour rssues and
improve the incomes of cocoa farmers.

Check Your [.tnderstanding

According to Falrtrade Canada, how much chocolate do

Canadians consume each year, on average?
How do you think your annual chocolate consumption
compares with the Canadian average?
What klnd of cLimate is required for cocoa? Whlch region is
the leader in cocoa producilon?
Whlch two countries produce the most chocoLate? How much
of the worid's supply does each produce?

Describe the conditions of cocoa farmlng. Research some

of the programs fiom large international businesses (such
as Nestle, Mond€le2, and Hershey's)that are dealing with
improving the conditions of cocoa farmers.
Trade with South Atrica
Canada has a strong trade reiationshrp with South Africa, a
resource-rich country with strong institutions and opportunities
in several sectors, including mining, power, infrastructure,
raii, aerospace, agriculture and iight manufacturing. South
Afrlca benefits fiom a developed financial sector and mod.ern
infrastructure, making it an rmportant destination for canadran
companies. The country also acts as a gateway to other countnes rn
Africa that Canadian companres hope to enter.

Figure 1-16 Figure 1-17

Total Canadian Exports and Tota Canadlan Exports and
lmporLs with South A'Tica, mports ulith i,Aoiocco,
2017 2411

Total Exports Total Exports

to 5outh Africa to Morocco
Secticre rev;€w
(Millions cf 5) (Millions of S)
1 What does CETA stand fo
and why is it important?
472
2 Who are Canada's two
trotal lmports Total lmports most impoftant trading
from South Africa from Morocco partners?
(Millions of 5) (Millions of 5) 3 What has happened to
manufacturing jobs in
911 396 Canada and the United
States?

4 What happened in20l2

between CNOOC and
Trade with Morocco Nexen?

Morocco has one of the most advanced and developed business 5 What does CKFTA
environmen ts in Arrica. It 1s politlcally stable with a srrong banking stand for, and why is it
imnnrfenfT
syslem. Canada's top export to Morocco is wheat; its top import from
Morocco is citrus fruit, including mandarin oranges, which often
6 Why do countries impcs:
duties on imported
appear in Canada's supermarkets during November and December. products?
Canada went from a trade surpLus (exporting more than importing)
7 What is the state of
prior to 2OI4 to a trade deficit with Morocco of $tO4 million CAD in Venezuela's econc ::-.-l
2015. However, since 2017 (see Figure 1-17), Canada is back to having How are interna-:::=.
. +.^.1^ hrrqinpqqpq rpqF^- ji- --
q Lrauc -.,-^1,,-
DulPLu).
8 What iS OPEC?
9 How is Saur'---:a:-1 :
-t---.---
cLUlru!!r),--1-_.--:
I.1l.^+;^^.
vvrroL qt=: -;--
__=_ _:a --- ----
-
i-!^--
Ill-c---:----1--i - -:. :

to j.:=----:t t.. t- -
'
 Canadian markets sucn as ihis
farrners' rnarkel in \ranccu rter
leaFute r:,6n) .'
. Advantages of
^' -
vegetabies ihat cannot be grc!,n
in Canada
international trade
Canadian businesses and consumers benefit from trade with other
countries. The world is our marketplace, which means Canadian
factories, distributors, services, and retailers have access to any
product or service availabie anywhere in the world. This provides
Canadians with a wide variety of products to choose from. Canadian
hrrqinpqspc
u uJrrfsDJLJ
pxnorlL rnrnrldruide onening llD new markets for their
L^yvr
nrndrrcts
PMUILT
and
uffu services
rLr and creafing new iobs at home Foreign
investors provide capital for expansion, innovation and exploration
New technology invented in other countries becomes available in
Canada for use in our hospitais, factories, and other enterprtses.

Dolng bustness internationally means that Canadians can

choose from a wider vanety of products, and Canadian businesses
can acceSS new markets and expand, have greater opportuntttes t0
attract capital investment, and share in the new discoveries of other
countrles.

26 | Chapter 1: What ls ttade?

International business allows Canadlans to enjoy products from
foreign countries that cannot be produced in Canada or that
consumers would prefer to buy from another country. InternationaL
business provides the opportunity to choose from an assortment of
stvles models and nrirp rurr6LD nf rnrinrrc
mndpc vt nrndrrrfc
vorlvuD PruuuLLD,

For example, Canada imports bananas from Costa Rica and

Colombia and avocados from Mexico, whlch cannot be produced in
Canada. Many Canadians also prefer foreign-produced cars such as
a BMW or Mercedes Benz overdomestically produced vehicles from
North American automakers such as General Motors or Ford.

Lower prices
Workers in many developing countries, such as China and India, are
paid lower wages and expect to make Less than canadian workers. As
a resu lt. the comnanies thaf emnlorr thpm
LriLfrl can
lqfr snpnd
uyLllu qionifir":ntlrr
ot6jjfjILqflLLj lpcc
LLoD

money on wages by operating factories in those countries rather than

in Canada. Small appliances, glassware, linens, and countless other
ofoducts qrL mttch LrrLuyLr
are rfruLtr cheaner todav
Lvuq) than
Lrrqll thev
LIILJ on.p
_''__ \^rprp Thiq lzpr
,-'-..'eps
h?i-^d l^.., f^-.^^^ri
pllces LOW ror Lanaoran consumers. At one time, the low prices of these
products would have indicated that they were lower quality than those
made in canada or the United States. This is no longer true. Factories
and offices can also take advantage ofLower-priced goods from other
countdes.

New markets
There are more than 36 million peopLe in Canada. By contrast, there
are more than 320 million people in the United States, more than
500 million people in the European unron, and more than 1.3 billion
people in China. if you were to make a product or provide a seruice that
the people ln the united States and/or china liked, your sales would
grow incredlbly. The same is true of other Canadian businesses whose
products have become popuLar in foreign markets (out-of-country
markets). For example, Jamieson Vitamins is one of 3O Canadlan
companies selling its products directly to 40o miLlion Chinese
consumers online via Aiibaba's online stores. Freshii's founder and CEo,
Matthew Corrin, opened the first Freshii location rn Toronto in 2005.
Raislng $96 million in an inltial public offering (tpo) inJanu ary 20t7,
the fast-casual food chain has grown to 244locations in 15 counrnes,
rapldly expanding gtobally in the healthier, fast-casual food market.
II

Tn lgOa the f -st larse-scale Canadian nrodlt6lien of automobiLes

fLOOK
^^r- place ^- rl-^
^r^- - aL Lne T,r-rkpr\/illp \,1/eOon
WaL-___ .
*o--- \rr/nrkc fprlorrr np:- \,1/jnds
,,,*-or,
Ontario. Driven by the demands of World War I, Canada's auto
industry was Lhe second largest jn the world by 1923. The signing
of the 1965 Automotive Products Trade Agreement with the United
Q'cl'ao ror-acanf
JLdLCJ ICPIC)C11LCt-l arl thp
LltL SinOlp
Jr r r6.L mnst
rr tvJL imnnff
LrtlPvr rnf IdLLUI
LdllL frnlnr in
ll I mriz'n11
llloNlllt) 1lp
--- -

Canadian automotive industry what it is today. During the 1970s, the

gtobat auto industry changed significantly for two reasons: the gLobal
oilcrjsis and the rise ofJapan as a major automotive producer. These
facfo-s r-eserfed sisn jficant challenges to the Norlh Amerjcan auto
lndustry. However, in the last 30 years, Canada's auto indusLry has
pmorOpd qJ
Lr-r!-6Lu ec:q E-vuuLLJr rnmnptitirrp:nd
Olnh:llrr Lvrril/LLrLrvL uiiu :hlp f^ F-l'^ nn nnf nn rr 11626 uuL
uvLu LU LO^C UII IIUL UllLy JOlur- |111f

:lso ofher npw \/ emtrrgino economies srrch as South Korea and Mexico.
Canada's auto industry remains the largest sector in the country and
haS,a nosjtirrp- imn2ct
sjOnifieenf puJ-L-.
rlqJ q J16r---lLorrL ----r ,--- f2prrlirn
nn thp o.nnnm\/
cLUIlullly.
-*-louloll

Figure 1-18 Vehicles manufactufed in Canada. as of December 2017

Company Location Products

Fiat Chrysler Brampton. Ontaiio Chrysler 300, Dodge Challenger,

Canada Dodge Charger

Windsor, 0ntario Dodge Grand Caravan, (hryslet

Pacifica, Pacitica Plug-rn Hybrid

Ford of Canada 0akville,0ntario Ford Edge, Flex, Ford GT (limrted

edition), Lincoln MKT, MKX

General Motors 0shawa, 0ntario Chevrolet lmpala, Light Duty

of Canada Chevrolet Silverado, Light Duty
cMC Sierra, Cadillac XTS

lnnprsnll nnlarin Chevrolet Equinox

Honda Canada Alliston,0ntario Honda Civic, Honda CR-V

Toyota Canada Cambridge Nofth, Toyota Corolla

Ontaiio

Cambridge South, Lexus RX350, Lexus RX450h

0ntario Hybrid

Woodstock, 0ntario Toyota RAV4

 The Canadian-Inade iorC GT
Automotive Ptoducts c*pelcar c:- o. Ia a'- -" 6-.:
Geneva lnternalionaL 14otci
The automotlve industry, which provides high-wage, high-skltted Show
jobs, is one of the most important sectors of Canada's economy. It
is also Canada's largest industry and the blggest contributor to its
manufacturing GDP. It is estimated that one in seven Canadians is
either dlrectly or indirectly employed in the automotive industry.
such
Canada is home to many international automotive businesses
as Ford, Fiat Chrysler, General Motors, Honda, and Toyota'

canada's auto sector also tncludes parts, accessories, and software.

Multimatic is a Canadian automotive business that makes parts such
as door hlnges, tire jacks, and other technology that most
customers
simply see as part of their vehicle. In the 195Os, Tony Czapka started
the odginal Multimatic with partner Frank Stronach. The company
would later change lts name to Magna and become the top auto-parts
supplier in North America, and one of the top three suppliers tn
the world. when Peter Czapka (Tony's son) left to start his own
company, he named it Multimatlc. Multimatic was seiected by
Ford
Motor Co. to produce the highly anticipated and limited edition 2017
Ford GT in Markham, ontario. Meanwhile, ontario-based Magna
International lnc. has i59,OOO employees working in 29 countrtes,
32l manufacturing operations, and 102 sales centres around the
world.

Check Your Understanding

lHowimportantistheautolndustrytoCanada'seconomy?
2HowlargeareMagnalnternattonal'sglobaloperations?
3 Whlch automakers have production plants in Canada?
4 Why is canada's auto sector more than just caIS and trucks?

5DescribethehistorybetweenMagnalnternationaland
Multimatic.
6 Which vehicle is being produced at Multimatic's facllity in
Markham, Ontario?
 Cultural development
International business fosters exchange of culture and ideas between
countries and promotes diversity. Cultural customs can be adopted
from other countries or blended with iocal culture, resulting in fresh
new ideas, Looks, tastes, or sounds.
canadian musicians such as Justin Bieber, Drake, ALessia Cara,
NelLy Furtado, and The weeknd collaborate with other international
artists, bringing new sounds to Canada while finding success in
the g1oba1 music industry. This success is largely made possible
through the Internet, another tool of cross-cultural pollination.
ColLectiveLy, Bieber, Drake, and The weeknd have "clocked over 20
bllLion streaming spins combined, more than any other triumvirate, ,

according to Forbes Magazine.

Food is another area where 1oca1 trends are going gtobat. Jo[ibee
is a Filipino fast-food company that is expanding globalty.
caLled the McDonald's of the phiLippines, JoLiibee opened its first
restaurant in winnipeg, Manitoba, in December 2016, and more are
scheduled to open in Toronto for a total offive Canadian locations.
Jollibee has more than r,ooo restaurants around the world in
countries such as the United States, Singapore, Kuwait, and
Canada. Canadians are now abte to experience dishes such as sweet
spaghetti topped with hot dogs and cheddar cheese orJollibee's
popular peach-mango pie.

More jobs
By expanding into gtobal markets, Canadian companies create more
jobs at home. Canadian banks and financial companies, such
as
TD Bank and Bank of Montreat (er,lo) have increased their sales by
expanding internationalty, especihily in the united States. Although
it is a common perception that Canada is becoming more controlled
by international businesses, Canadian businesses have been buyrng
more foreign firms than the reverse. Aside from addltional profit,
the major benefit has been the hiring of more Canadian workers to
service gtobal markets.

: \'/hat ls trade?
 Canadian musicians such
a.Lol,e.e:-A_-d_ote
(micldLe), and Tae :_.-
There are two ways that non-canad.ians can r.nvest 'r/eeknC ,
in Canadian have co' a5- o-.; .. _-- - _-:
businesses: foreign direct investment (FDI) to internationaL anist,s alc i:.
contror some or all
of a business's operations, and portfolio investment, ._.-_, b '').
tindino a _ i- r. 5.-t
r .e
which is the music inciustr,l
purchase of stocks, bonds, and other financial
instruments issued by
canadian firms. Foreign direct investment in Canada
has grown from
just over $+SO bttiion 1n 2009 to
$gZS biilion in 2016.
This investment money will often help start
a new business in
Canada or save a failing one. French,s, for
example, moved alt of
its ketchup manufacturing from the united States
to its canadian
plant in North york, ontario. The company Figure 1-19
was taking advantage
of a made-in-Canada trend for its product. in Canada's Foreign Direct
the meantime Hernz, tnvestment position
which atso made ketchup, ctosed
its Leamington, ontario, piant In cADs biltions

1,200
in2OI4, costing the communitv
almost BOO jobs. When French,s 1,000
in Canada started u the
8oo
same tomatoes and same
tomato-processlng plant 600

formerly owned by l{einz, Heinz

faced aback\ash on social media
for its decision to leave. Many
Canadian ketchup consumers
0
switched over to the French,s 2002 2004 2006 2008 2010 2012 2014
brand.
I Canadian direct investment abroad I Foreign direct investment in
Net direct investment position

Advantages of interrat : -: :-::= l

 The lnvestment Canada Act
The Investment Canada Act was created in the 19BOs to provide
investment, economic growth, and jobs for Canada. The purposes
of the Investment Canada Act are "to provide for the review of
slgnificant investments in Canada by non-Canadians in a manner
that encourages investment, economic growth and employment
nnnorflnitjes i- \-dlldLt4 . drlu
I.t1 .^^..1 .^.1 r-n -'CVide
LU Pr \ fOr the feVieW Of
investments in Canada by non-Canadians that could be injurious to
national security."
This means that non-Canadlan businesses wishing to establish
a new bustness ln Canada need to seek approval from the
Government of Canada. The Investment Canada Act also requires
the Government of Canada to review mergers and purchases of
Llr16 Canadien hrrsinesses hv non-Canadians. Foreign takeovers
cxisfinp
LAIO

of Canadian companies reviewed under the Investment Canada

Act have almost always received approval. There have been
two exceptions in recent Years.

' Australian company BHP Billiton withdrew its $40-bitlion

takeover bid for the Potash Corporation of Saskatchewan in
Novembet 2010.

' MacDonald, Dettwiler and Associates Ltd., the Canadian space

and satellite technology company that developed the robot
arm for the space station, was the target of a $1.3-billion
takeover attempt by Alliant Techsystems of Minnesota. The
federal government blocked the sale of the company.

Figure 1-20 Foieign Buyets of Canadian Firms and Canadian Buyets of Foieign Firms;
Mergers and acquisitions by industry, 2004-2013

Foreign Buyer of Canadian Firm Canadian Buyer of Foreign Firm

lnformation
I
Technology 854 687
1 389

Financials ! zss 607

lndustrials 665 561

Consumer Discretionary f aza 478

EnergY lzot 432
Healthcare lzzs 204

Consumer Staples I rra 140

Utilities Irg l'rzz

Telecommunication Services I :t l:o

,', ^-: ls irade?

Figure 1-21 Foreign Takeovers by Canadian Businesses

2/2017 Calgary-based Enbridge Inc. Houston-based Spectra Energy 528 billion

3/2016 TransCanada Corp of Calgary Houston-based tolumbia Pipeline Group 513 billion
6/2015 tanada Pension Plan Investment Board Antares Capital from General Electric Co. 512 billion
''
2/2016 Fortis, headquartered in 5t. John's, NL U.S transmission utrlily llC Holding Corp. 51 1.3 billion

9/2003 Manulife Financial Corp. John Hancock Financial 511.1 billion

9/2015 Halifax-based utility company Emera rlUl lUd-Ud)CU I tLU tl lCl! y 510.4 billion

New processes and technologies

With the click of a mouse, Canadian businesses can research other
firms around the world that may have more modem, more efficient,
or more economical machinery for their business. Domestic
companies that partner with foreign businesses can learn new
technology and make contacts with potential customers, suppliers,
creditors, and distributors in foreign countries.
In addition, businesses that operate internationally can
exchange technological know-how that enables underdeveloped
and developing countries to establish new industries with the
assistance offoreign aid. Foreign deals, contracts, invoices,
shipping manifests, product inquiries, financiai transfers, and other
business activities can occur in real time using the Internet or
cellular communication devices. The abitity to process transactions
in almost any country in the world has transformed the globe into
one market and has encouraged corporations to expand into remote
parts of the world where business costs are reduced.
Manufacturing businesses use the Internet to source parts,
ingredients, and other supplies from around the world-to inform
importers in other countries about their product selection and
to sell online to anyone on the planet. Service industries book
flights and accommodations for tourists and business travellers,
arrange and track shipments, pay bitls, and connect with potential
customers online. In a business sense at least, the world is united.
The American filmArgo, about
the rescue of six U S diplomats
from Iran du rrng Lhe hostage
1.4 Disadvantaqes of
crisis of 1979 1981, was
crlticized both in Canada and internationSl trade
the U S for exaggerating the
role of the CIA and mininizing The benefits of international business come at a cost to Canadians.
the role of Canadran diplomacy
during the actual event No other country has as large a foreign economrc presence as Canada
does wlth the economic influence of the united states. Amerrcan
dominance of Canada's econom\/ effpr-tq us economicaily and
culturally.

loss of culture an i en i
if you watch American sports, watch Hollywood movies, listen to
musical artists from New york, play American video games, or read
books by u.s. authors, you are a consumer of American culture as
well as (or instead of) your own. It is very difficult to live in Canada
and avoid American cuiture. Almost 9o percent of Canadians live less
than 16O kilometres from the U.S.-Canada border.
For example, prior to 2017, Super Bowl commercials were btocked
in Canada. In order to protect Canada's broadcasters, a Canadian
commercial would be shown instead of the u.S. advertisement.
This angered many Canadian viewers who went to youTube to see
the U.s. super Bowi ads. rn2oL7, the Canadian Radio-television
and Telecommunications Commission (cRrc) changed its 4o-year
rule and altowed U.S. super Bowl television ads to be broadcasr ro
Canadran viewers watchlng Super Bowl 2017.

3,1 i (hapter 1: What ts trade?

 it is difficult to assess the lnfluence of American culture on
a^h^,li^-
Lanaolan iJ^^ri+-- r
roentlty. ln some respects, many Canadians define
themselves as "not American." Certainly there are fewer Canadian
movies and television shows than American ones shown in Canada.
American movles and tetevision programs teLl American stories that
feature American culture. Canadrans do not typicalty see a reflection
of their history or identity on the screen-or may perceive that it has
been dtstorted or minimrzed.
The Canadian government recognizes the cultural importance
ofCanadian broadcasting, and protects the Canadian radio and
television industries. The cRTC estabhshed a system of quotas to
regulate the amount of canadian program content broadcast in
Canada. The resultrng Canadian content rules, which came to be
known as "Cancon," were devised to stimulate Canada,s cutturaL
production by ensuring greater exposure for Canadian artists in the
a^h^.li^-
Ldr taularr rrlaIKetp
-^-l-^+-l^ Lace.

The Canadian music industry has been given quite a boost

because of these rules. In most cases, 35 percent of aLL music aired on
Canadian stations must have canadian content. To qualify as such,
music must conform to at least two out of the four conditions in the
Muslc, Artist, Performance, and Lyrics (iUepi,) system, which was
firqt :dnntpd in 'l
O71

Canadian radio stations look for canadian groups or artists who

have talent and popular appeal and give these artrsts lots of airplay to Arcacie Flre is an exampLe
compLy with the Cancon regulations. By contrast, in the past, musical of a band that has r,videned
rts erposure wlthln Canada
acts with major American labeLs dominated the canadian musrc
thanks to the MAPL system
scene.

Figure 1-22 The MAPL Syslem

Music Composer of the music must be

Canadian

Artist Music and/or the lyrics are

performed principally by a
Canad ia n

Performance Musical selection consists of a

performance that is
(r) recorded wholly rn Canada, oi
(ii) performed wholly in Canada
and broadcast live in Canada

Lyrics Lyrics are vvritten entirely by a

Canadian
 co anies in Canada
' "- thoush
"Even -"" *b" foreisndirect investment in Canada is now 3O times
'"'''b''
hisher than it was in l950 onlv I nercent of the annroximatelv
1.3 million corporations in Canada are foreign-owned. This I percent,
however, accounts for 3O percent of Canada's business revenue.
Everv foreign comnanv however is rearrired to nav hoth federaL and
provincial taxes on their profits to the Canadian governments, and
forpign-ownpd httsinpssps nrnrrjdp inhs fo1 Canadrans. So how does
foreisn
'-'--b-- ownershin hurt Canada?

Job loss
Managers of foreign companies operating branch plants in Canada
r'r^hf f^ ^r^^-^ *L^
VVd'IIL LU PttrO.J(: ^'lecutives
LIIC (: and IIIVf:JLUrJ
CLLlLI.V(:J O.1]Lt af home
invesLors qL Branch lnLants
rrvrrrL. !rurrrii
are Dlants belonsins to one corrntrv and headcuartered in another.
Theil first nrioritv is their native corrntrv. If the Canadian branch
plant shows Less profit than the head office wants, it willbe closed.
General Motors, for example, moved the production of the Chevrolet
Camaro from Oshawa, Ontario, to Lansing, Michigan. GM hoped to
rpdrrrp cnqtc :nd imnrorrp nrndrrrtinn pfficipncrr hrr mnrrino:sqpmhlrr
tn lhp T rnqino nlrnt

A similar deal occurred with the $12.5-blllion merger of Burger

King with Tim Hortons, executed by the Brazilian private-equity
c-^ '/- LdPrLdL.
ttitrl JU
/--^i+^r nJ
n-
^ -resuLt
d. -- of the deaL. - - cuts occurred at the Tim
*-*,/ Jiob
Hortons offices in Canada. Other retailers that have permanently
cLosed in Canada include Target, Mexx, Sony, and Sears, leaving many
Canadians jobLess.

Revenues leave Canada to pay head-office costs

in a^-^r- l.'^l^-
---- hrench rnlent ed.IIO-L-l.O IItrLPJ ^^'-
+1^^
r irL monev
The LurrrLu hv
rrivr rLJ earned u) thp -*--- --- PO-y Llltr
salaries of head-office staff, including the executives. Administratlon
costs ofthe business operations at head-office level are also
:nnortionpd to
qppwlLrwlrqu Lv thp C^-^J;^-
Llltr Ld.l ^..L^iri^-,. l-In nOrtiOn
td.lllclll JuuJlLrldly. r _- _-_-- Of the reVenUe
also subsidizes the advertising, accounting, and marketing expenses
the head office incurs. This reduces the profit that the Canadian
division realizes and, therefore, the taxes that the business needs to
^^'- +L^ -^'/elnment. morp cmnlovment fOf
'^^^'ri^'^ BU\
Pdy LllC Ldllduld.ll ---------- Tt alSO oTOvidcs
r--,ruLo rrrvrL LrrpLwJruL
advertjsjng u6LriLrLJr
quvLrLrorii6 ^--^"h+;hd
agencjes c[LLULIIILII16 c-*- OII\]
--'l
IlLLllD) marketing denartments
rrrqri\LLrrr6
urpurLrri

within the home country.

'r" hat ls trade?

 Research and development challenges
Research and deveiopment (R&D) is essential to
the growth of a manufacturing firm, and to the
efficiency and increased profitabllity of a processtng
or service business New product development, new
technology, new approaches to the marketplace,

The automotive industry, for example, is so

rmportant to the Canadian economy that the federal
g0vernment introduced the Automotive Innovation
fund (AIF). This program provided car
manufacturers
in Canada with g25O milllon over five years for
research and devetopment projects that suppoft
A ',orclk:: atr 1u a.s:a:t'-l
line ai .it: Hcnda i ...r-
r\iLlsicn Cr-al,i
Ontario, would be getting a nearly $5OO-mlLlion upgrade.
Honda
stated 1t would invest $+oo millron on the ptant, with the
federal and

its greenhouse gas emrssions by aa percent

Most forelgn-owned firms in other rndustries, however, staff their
R&D from their home country, and the ideas they produce
Lead to
more jobs and greater profits domesticaliy, not in Canada.

Reduced exports
one of the main purposes of foreign branch plants in Canada is I What are the two main ways
to servrce the Canadian marketptace as a subsldlary of the parent international business hurts
Canadians?
company. Exports to other markets are usually not part of
the 2 Why is American culture
so dominant in Canada?
Provide two reasons.
of the parent firm. As a resutt, Canadian foreign owned
businesses 3 What does the MApL sys -:_
do not enjoy the benefits assocrated with exporting, such greater refer to, and what percelt:a::
as
empl0yment opportunities and blgger markets for canadian goods. of music played on Ca:. = :-.-
radio stations must h'_'-.
Canadian content?
Economic destabilization
4 What does R&t I _:. -

5 Why is it i::: --. _

-

anR&D l=-='-..
canadian economy. The ::: --l:: of Arberta was hurt by the fall in Cnned':- -
oil
prices between 2or4 anc 2l!- --. : foreign oil
=n-r companies laid off
thetr workers, leading to a p::-.- l:_:.. ::c:ssion.

f
'i!
_</

-==r E EE e
globalization 全球化

Modp"n p-oha 'z,rlion bppan shortlv afte. World War II with the
estabLishment of the United Nations and the fostering of trade
relations between countries. Since then, international business
transactions have grown enormously, as have the economic sjze,
ro:-h dllu
ltdLlr, r-^d PUVVcT r.f r-'--
nn\^/pr ur -^-^^--!i^^- *hat
Llrd..JUr LUrPUldLrull) Lr conduct business on an
inLernationalscaie This is due, in large measure, to gLobalization.
Gtsbaiization is a process whereby national or reglonaLeconomies
and cultures become integrated through new global communtcation
technolosies foreisn direct investment, lnternational trade,
'--'-''"'"b'-u,
!v! !rbrr

j.-'-i <.r'i
d'lluI FL^
lIlIlItl6ld.LlUlli
rOr^/ Of rllvrrLJ.
LliL -.wvr wr mOnefr Onp -^--^6 6ivuqLr4qLlull
vrrL lcoJULl ^-^f.^li-^fi^^ has
occurred is that trade barrrers across national borders have been
reduced or removed. In recent times, globaLization is seen as freer
trade across borders.
As the economlc ties between countries strengthened, tax treaties
were negotiated between countries, tarrffs and financial controLs
\^rorp:hnlrqhpd ,rnd olnhel r'ornnrafinns hpoan fo derrelon The naee of
xl^1-,^l i,rtian tr -. i---^-.^.1 .l-^--ti^^ll', 1.'^--".^ ur .^"^'.1
5c\ cldr e.hlanges
8LoDa.lzatl0n nas Intreaseo olamallcally IJeLduse ^f
Fr-^- L--.-^ r-r.^- ---^: jn fLe
LlldL IIOVC LdNCll PTOLL wjfh
vv rLr rrrr e--L nast few deCades
 It is now relatively easy for companies with sufficient resources
to expand into countries where labour, materials, office space, and
manufacturing facilities are inexpensive and plentiful. This allows
companres to open up new markets and reduce production costs. The
ruies and regulations for setting up a business in Canada are more
restrictive than they are in, for example, India or Mexico.

Figure 1-23 Top 10 Fortune 500 Companies,2017

1 Walmart United States Retail 54oo billion

2 State Grid China Power 531s billion

3 Sinopec Group China Petroleum 5268 billion

China National
4 China Petroleum s263 billion
Petroleum

5 Toyota Motor Japan Automobiles 5255 billion

6 Volkswagen Germany Automobiles 5240 billion

7 Royal Dutch Shell Netherlands/U. K. Petroleum 5240 billlon

8 Berkshire Hathaway United States I nsurance 5224 billion

9 Apple United States Technology 5216 billion

Facebook and Amazon
10 Exxon Mobile United States Petloleum 5205 billion are two of the top growing
al^].'-l l-'---'l- --,1 ^-^
6tvuq( urqrruD orru qlc
each unique examples of
dl^1,^li-^fi^- ih
t3(vuotrzoLrurr 1r1 oL Lrurr.
^-+i^h

Figure 1-24 The Top Growing Global Brands,2016

Es_'EEb=PE
or grE > 5 o
-t=EEao=
= E €,:^F.gE* .=gEE;E=si€EEFE
=!1v-rNor'==ae0JEocJ
.9e>g;
9 I F
3Ea;b=
--!'dt e4.2-
E
Eo
vV.fr
OJ
v
OJ

Globalization | 39
 Posi ive effects of globalization
There are many positlve effects as a result of globaLization. These
include:

1 Outsourcing. Other countries present opportunities to

access cheaper raw materials and labour. These lower costs
allow comna.nies to be
uL COmoetitrve and therefore
mOre lvjllysLfLr
rffvrL LflLfLfv_ offer
customers lower prices.
2 Lower prices. Increased competition from foreign firms
causes domestic companies to be more competitive and
decrease prices to attract customers.

3 Decrease inpoverty. There has been significant progress on

reducing novertv over the yqrL
nast few Acr-ordino fn
decades nLLwlulII6
aL vv uLlquED. Lv thp
LrfL

most recent estimates by the World Bank, lO.7 percent of the

world's populatlon lived on less than US$I.90 a day in 2013-
that's down from 35 percent in 1990.
4 Innovation. Businesses that operate internationatly can
exchange technological know-how. Open borders alLow
ideas to flow from one country to another, stimulating
creativity.
5 Optimal use of resources. When countries produce the
products in which they have a comparative advantage (see
Chapter 5) their productivity rises. Increased productivity
leads to an improved standard of Living.

6 Better jobs. Export jobs usualty require higher education and

a high skill Level; therefore, these workers are paid more.

7 Increased capital flow. Being connected to foreign countries

allows companies, especially those in smaLler countries, to
borrow mone\/ from finenri,el inctit1tionS in Other COuntries.

Globalization has integrated saLes, finance, gLobat monetary

markets, manufacturing, transportation, and communication around
the worLd. It is important to note, however, that globalizatlon is not
synonymous with international business. Thousands of businesses
fL^+ --^ -^+ xl^1.-l;-
LrraL are nor gL0Dat tn scope operate internationally.
Globallzation also means that the whole world's economy may
hp
uL affpr-tpd
urrLLLLU hrr prrpnto fhcf
u_y L vLrrLJ LIIAL hcnnan
IIOPPCLl in nno
lll vIIq nl:rp Crifjricm
LltLl' nf
Dtll vf
PLqLg.

globalization has increased for many reasons. Some of the many

nesative effects of slobaLization include:

1 Lost jobs. Many Canadians have lost their jobs to

outsorrrcing
v s ruv sr !rrrtl The iohs that thev find to renlace them often
have lower pay.
2 Fear of job loss. Many Canadians work with the fear that
therr marr soon lose their iohs to corntries with cheaner
labour sources.
3 Loss of Canadian productivity. Some Canadian companies
will lose their comparative advantages to countries with
-t ^^^^-l-].^,
cneaper raDouI.
4 Exploitation of cheap labour. Children, prisoners, and the
uneducated are forced to work in substandard conditions.
5 Increased poltution. Companles move their factories to
countries with iimited pollution regulations so they can cut
costs.
6 Safety concerns. Many of the products soLd by international
businesses have an adverse effect on citizens' health.
Businesses in other countries do not work under the same
strict reguLatrons as Canadian companies.
7 Spread of disease. Diseases such as Ebola and Zika virus
are contracted by travellers and taken back to their home
countries.
8 Increase in income gap. The gap between the rich and
the noor is widenins. The erosion of the "middle class" is a
common concern ln many countries.
9 Influence of multinational corporations (MNCs) on
governments. Powerful MNCs can manipulate global politics.

fhe gtobal demand for goods and services is growing rapidly as

countries such as India and China (each with populations of over a
hill i on neonl
ulttlvrr l/gvPLtr/c) duqerrcl on their
v trLvy LrrLrf economi 1\/r,,1+i
^.+j ^^.1 -^fh^Iations
!!vrrvirri!r. es fYIuLLfIIoLlvllqL LwlPw
cpp nnnnrfrrnitip< ,nd the emerging mafketS See the inVeStment
notential. Rich comnanies create johs in nnor cnttnfrips reise the
standard of living there, and create new consumers (as well as
i"^^-^^-^ +!'^ +-.' t^^es 111 these
ll lLl CdJC L]1tr LdA UdJtjJ in Ll.tC)t: countries Lrrrwu6rr nronertv
LUUl.tLIl.CJ fhrorrgh yrvy!r LJ, and
ul

wage taxes). Workers with incomes then demand a voice in the

political system.

Giobalization 143
 ocia I and political issues o

Almost 10 years after the Great Recession of 2008, many countries

Protestors in London demand
that former Prime Minister
David Cameron close tax
""r---'-" alrer it was reveaLed
oonholes
ho r-rl'pd f .n- hr.'r'.ltet'S
offshore account
l*.
'*
:rp
qJ! qtill
JL]LL
qtrrroolino tn reco\/er rnrilh onlv modest economic orow[h.
Manri neonle lost their inhs in fhe recession and have been unable to
IIIIU norrn:nonf mprninofrrl
find tllcc----'b^
PCIllIOllCIlL, *, rnrnrk Thp .. J]^ fhev
.-- rnrnrk do rriiu
LrlLy uw mjgl''j- n1'r
find ifrf6flL Pqy
little and be nart time withorrt iob benefits. Prices and the cost of
living have continued to rise and many citizens have become angry
r,vith the b,"""'''b..-.-*''*r""..
srowins san between the rich and ooor.
In 2013, headlines of the largest data Leak in history fuelled a
rise in critrcism of giobalization. The Panama Papers made news
around the world. More than 11milllon fi1es from Mossack Fonseca,
a Panamanian law firm that provides its clients with offshore
accounts, were leaked to the media. Politicians, celebrities, and
corporate executives were among some of the names 1lsted.
Offshore accounts are used to avoid paying taxes but can also
be used for criminal actlvities such as money Laundering, arms
cmrroolino :nd drrro*o dpelino
*-*'---o'
Since the gtobaL financial crisis, cash-strapped governments
have heen frvins to colrect billions in notential tax revenue hidden
in offshore accounts. Google was taken by France and Italy to court
over accusations it avoided
d +--,^^ L." ;11^x^ll"
Pd.y.u t6 Ld^.c) uy rtLC60uy
^^,,i^
mnrrino mnnp\/ tn its Eltronean
headouarters in Ireland. In 2017,
Cnnol p \^rnn itq fioht aoainqt
. tA- 1 11'
a I..t2 DrlLron euro \br.b
-
D1LL]0n

CAD] T TENCN TAX DILL AITCI A

corrrt reiected claims the search

onoinp
Llr6friL oienf ehrrspd
6rurrL uuuuL lnnnholps
to errnid narrino its fair share.
rr,,,^^^ah TUlr.rurr
LU-LUPCdrr Tninn dtIL
-,,lhoritleS had
heen frvins to claim some of
the billions of euros of profit at
Cnnol p in )O17 Gooole
F{nruprrpr
struck a deal of €306 million
($++o million CAD)to settle
a l4-vear disoute with tax
"-''-*'*."r
^,,+1,. ^-i+i^- i^
1rl T+nlrr
d.u LIIUIILIC) r LOLJ .
 Populism is rising among many countries,
such as the united States,
United Klngdom, France, the philippines,
and Canada. poputtsm has
different definltions but it is usually defined
as an ideoloiy with a
concern for "the common" citizen at its
core, and often promotes
protectionism in trade poricies. protectionism
is an economic policy
that aims to restrict imports through tariffs,
quotas, and regulations
in an effort to boost domestic industry. (rhis
concept is dis'cussed
further in Chapter 10 )
Donald Trump elected in Novembe r 2076 as president
of the
united states r^rirh"''ras
a ptedge to bring back manufacturing jobs
to
the united States During the French presidentiat
election in 2or7
centrist Emmanuel Macron overwhelmingly ,

defeated Marine Le
Pen, a right-vring:ooulist who had
nevertheless made it to the
second round in 23 , citizens of the
'7 united Klngdom voted to
leave the EU (a:c.,,ement better known
as Brexit, a short way of
saylng Britain ex:__:tg the EU). Ctoser
to home, Doug Ford,s rise
to take the leace:s:io of the progressive
Conservative party of
ontario in 2oig is a sc seen as a trlumph for
populist potrtics
Wttn the rise i::cpul
With i::cpulism, free trade agreements and
partnerships are ::_rq challenged and rewritten. The Trans_pacific
-rg ci
Partnershrp, alsc .,.::,,,.n as the Tpp, is
a proposed free trade 1 What cioes outsourcrng
agreement discu:::: ::iginally between
12 countries, including mean?
Canada, the Unite : S:ates, Chlna,
Australia, and Vietnam. Upon 2 According to the World
entering office, D:::=.: r rump withdrew Bank, what percentage of
the united States from
the TPP, but the :e::::-::-ng countrles the global population lives
are contrnuing discussions.
Canada's future as - ::::nber of the Tpp on less than US$2 a day?
is uncertain without the Is povefty increasing or
United States's inr-c.-,-=::ent in this trade
deal decreasing?
In2017, the Unil:: S:=::s administration 3 What were the panama
informed Mexico and
Canada that it wou-ci :: :::egotiating Papers?
NAFTA (North American Free
Trade Agreement) Th:
-::::ean union now faces a test of survivai 4 What are some of the
Rrpvrf
Fq ur
qJ LArL rrnfnl.]o
urrruLUJ er-Lrr3ll:! :: NA TA and the problems facing large
EU will undoubtedlv
lmn.^f a.h-J^'-
rflrPoLL Ld.Ltdud
) l
^^^. -.-
international businesses
-^-^-
5 econcl:-.- :< both deals represent the ton
as
tradjnp. like Google with regard to
globalization?
5 What is populism? How
doesit affect international
business?
6 What does the term Brexit
refer to?
7 What does Tpp stand -:::
Which countn'-., _.;_::=- -

from the T?p?

45

llllllllililililil ilr ilr ilr nr il | | r |0

C a ter eview
nowledge
1 Define the term buslness Expiain the difference between a domestic
business and an international business. Whlch type do you think is
more common?

2 Dclne imnnrrc and pxnorts and pxnlain how thev are used to
caLculate a country's balance of trade. What is the difference
between a trade surplus and a trade deficit?

Exnl:in llsinO
L^trLulll,
uJrr16 lhrep
LrlrLL f:ctrrrl px:mnlpc
_..*---f hnr/, .^^^,r^ ;-
,V LdIldUd.
+-^ri^d
tJ d- Ltd.LlItfB

corn'-v with fhp runrlj.

List Lhree main advantages of internatjonal business, and provide

exa-nnles of how it nnsitivelir imn;r-fs Cenadian ConSumeIS
and/or businesses.

List three main disadvantages of international business, and

nrovide exernnl es of how it nesat-irielv imDacls Canadian
consumers and/or busrnesses.

Dcfrnp fhp tp'm nlohqlization.

hrpp nnsjtir.^
Tdpntifil fL11-LL yvr-LiVq ^^.1 rl'.r^^
^r+^^r- OllU
qIICLLJ LlllCC ^.O:ti\/p p[Fpr"lq nI
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rl^}.
6LV UALl4OLlUll.
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8 What are some of lhe social and polltical issues of globalization?

9 \,t/h:t ic thp
LrrL imnrrt
111ryqL( nf
vr thp
LrrL ricp
rrDL in
11r nnnrrlicm
pvlrurtJltr nn
utI frcio
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q5ltrtrlIlEIlLJ.

hinking
1O Identify where two artlcles of clothing you own were made.

11 Name three products you have used today that were made in Canada
and three products that were made outside of Canada.

12 Using the data below, calculate Canada's balance of trade in each year
from2OI2 to 2016. Which years had trade surpluses, and which had
trade deficlts?

455 .171 471,947 526,773 524,049 517,007

462,072 al\ 6A1 512,204 536,296 5?t 147

 13 Calculate Canada's balance of trade for
2or6with the followlng
countries (refer to the figures throughout section
1.2): Japan, tidia,
Mexrco, and Chile. Did Canada have a
trade surplus or deficit with
eacn i
T4 Indicate whether each the following
is an example of a domestic or an
international business transaction
Two sisters in London, Ontario, travel to
Montreat to watch a
hockey game.
b A couple from Toronto has a destination
wedding in Cuba.
c A car dealer n Ottawa buys used cars from a car auction
in
British Colu
A visa student from Shanghai, China,
attends hlgh school tn
Rlchmond Hill, Ontario.
Your friend watches Netflix every Frlday
night as part of family
movie night.
A grocery store in Hamilton purchases bananas
from a supplier.
15 Provide an example of an internationat
business that trades with
Canada from each of the foll0wing countries:
the united states, Japan,
south Korea, china, Itary, and France. Identiry
one product that each
Dustness se[s.

Communica ion
L6 with a partner, discuss the foliowrng statement: ,,Countries don,t
trade, people do." Do you and your partner
agree or disagree with
this statement? Explain.

17 rn a small group, draft a letter to the federal

trade minister either
supporting or challenglng Canada's involvement
in the Tpp.
18 Martin Luther King, Jr., said that "before you finish
eating breakfast
in the morning, you've depended on more
than half the world.,,what
do you thlnk he meant by this? How
many different countries have
you relied on today?

19 In groups of two or three, create a news report (written,

audio,
or video) on the importance of one of
the following industries rn
Canada: automotive, oil, or technology. present
your news repon to
another group.

20 with a partner, create an infographic that traces Canada,s

history of
trade with one of the following regions:
United States, Europe, Asia,
South America. present your infographrc your
to class.
 plication
2L Using the information presented in the chapter and through
additional online research, create a timeline of Canada's economic
development from the ear$ 1900s to today.

22 Using a spreadsheet (such as Google Sheets or Microsoft Excel), create

two charts showing Canada's trade with a region of your choice. Use
updated data from a Government of Canada or Export Development
Canada website.

23 In 10 to 20 years, which part of the world would you predict witl be the
most important to Canada in relation to international trade? Which
part will be the least important? Do you think the United States will
stitl be Canada's largest trading partner? Create a mind map showing
Canada's trade future.

24 For each of the following businesses, make a recommendation on a

country you would conslder expanding into and a country you might
avoid. Explain your reasoning for each.
a A Canadian company that makes arctic wear for extremely cold
temperatures
b An Ontario farm that sells apples across Canada
A Canadian company that manufactures tools for the construction
lndustry and already exports to the United States
An American fast-food company that has 300 restaurants in the
United States, Canada, and Mexico
e A Mexican healthcare company that sells pharmaceutical drugs

t -nn nrnfir nrnonizcfi6n

f\^ IIUII-PI.UIIL UISOl]l4oLrvrr in
ur the
LrfL II K that nrOVideS baSiC neCeSSitieS

to the homeless

r! ---..=-.2- - ll hat ls trade?

Inquiry Activity
G loba lization
r'^^^'l^ i^ ^ +-^li-x
Ld.rro.Lld. .r.) o ^nilntT\/ LoLrr
Lrd'urr.l6 LuutrLrj. trrr-h uo-y vvcannqrmp nrndrrrfq fhcr
derr\^rp cro
_lIdL dle
imnorted from other countries.
Tn thiC
rrr 176rrr larr-^.1
rh:ntpr jULl
Lrrrr LrrqpLrr L(:d.I]lc:LI fhnl-
LIIdL fhnrn rr^ I1.td.tIy
Lllt:tC cllt: m.nr'.1".^t^r^.
d(-tVd.IILdBCJ
to globalization: more jobs; greater variety of products; access to
--ob_.mrrkptq F{nrnlprlpT
TeSOilfCeS nnd hjOOpr ,.,-, JLODaI,ZaLIOII UOeS ht
srlnhnl'-nrinn lnao nave
its disadvantages. job Loss; economic instability; and harmful or
unhealthy products.
rrr drnttnc hnr^r nlnhclizrfinn hno
Tn
6lvuyDr !farlAfo
!qLL qa nrpeontatinn
pf sDqrrLqLlvtr nn
vrl llvvv SLUUaltzdLtuII ltdJ
i-^^^r^r
rrr.rpd.cLeu yuu as a ^ Larra0larr
'rnadian consumel.
consumer. Take _L *, _ *,_* youl
-*,*-,_ arorrnd
*-,_ rnictrrres '

home and school for evidence of international trade in your life.

Think of the food, electronics, clothing, cars, appLiances, and services
around you. Using a presentation software tool, present your findings
to the class and conclude with a statement in favour or not in favour
of globaLization. You might find it useful to make a chart like this one
to organize vour information.

ln your own words, define globalization:

As a group, rank the top three most
important advantages of
globalization for Canadian consumers
and businesses.
As a group, rank the top three most
concerning disadvantages of
globalization for Canadian consumers
and businesses.
1

.lsion on globalization:

Inquir',, Activity 1 .19

"You never get a second' chance to make afirst impression!"

Back ln the 19BOs, shampoo brand Head & Shoulders used this tag
line in its advertising, but it still holds true today-especially in
international business! when meeting someone for the first time,
it is important to present yourself wetl. Employers, co-workers,
and customers form a first impression of you quickty-about three
to five seconds after meeting You.
Why are first impressions so important? If you make a posltive
one, It can:
' Create opportunities for You
. Enhance your likeability and manage what others think about
you
. Build trust and responsibility in your professional
relationshiPs
' Display your confidence in a positive way

first impression,
Use the following tips to create a positive
rnrhpther in a class oresentation, meeting someone for the first
time ettendins a iob interview, or dealing with a customer'

Tip 1 Attitude
' Don't try to be someone you're not. Don't fake answers to
questions You don't know.

' Put your phone, tablet, and electronlcs away' Turn off the
phone's ringer and vibration.
' Give your fuli attention to the person you are meeting'

Iip 2 Verbal Communication

' Check the basics: Do you speak too softly or too quickly? Are
you talking too much or not enough? What language and
vocabulary are YOu choosing to use?
' Be aware of your pitch and tone.

' Avoid using filler words such as "um," "uh," and "like'"
. Practise beforehand and think of what you will say'
Tip 3 Nonverbal communication
. Sjt StreiOht 2n6l errnirl
qr ru ov Utu cln".hi-a
)LUIILIt l.tIB.
. Take interest and make eye contact.
. Listen and pay close attention.
o Arrnid rrnqqind
,- ___,,,o your alms.

Tip 4 Appearance and attire

o \alhpn donidino What
vv rrLrr uLLrurrr6 LU WeaI
WI.LdL tO aII interview
LU an
Wedl tO .t_-__- or meptino
.^-,_-,,,b, IIy I0
match your clothes (formal or business casual) to the person or
business you are meeting with. Be sure to check the dress code
before your interview, and if you're not sure, lean toward more
formal business attire.
. Decide what to wear a few days before the meeting and get a
second opinion.
. Avoid showing piercings and tattoos unless you know that it,s
widely accepted within the company.
. Hair and narls should be neat and clean; anv makeup and
jewellery should be simple.
' For more on appropriate business attire, see the Business skills
section at the end of Chapter 3.

Activity
Create a Venn diagram on first impressions at school, at work, and
at both school and work. What do they have in common, and what is
::ique to each srtuation?

Business Skills 151

 :

=a
L€& Tffi EM By the time you finish this chapter, you should be able to:
aE
u*EeeEtves . Identifv the tvnes of international business
IdentifiT and iocate on a map Canada's major trading partners
Identify the types of products that trade freely into and out of
Canada and those that are restricted ln their movement
Describe, drawing on information from a variety of sources
including the Internet, the impact technology has had on the
international business environment
Identify the factors that affect foreign exchange rates
Explain how changes in the value of the Canadian dollar can
affect business opportunities
Key Terms imnnrtino +-nl^
Llo.uc ^*1.^-<^
trrrrud.rEru
global sourcing trade sanctions
rrrn a*i.^ z
cn'PUr Lu16 World Trade Organization (WfO)
vaiue added pvr^hrndp rrtp
licensing agreement f|aa+i*x -^+^
rr\JclLrrrB IclLtr
exclusive distribution rights currency devaluation
franchise inflatlon
joint venture gross domestic product (GDp)
foreign subsidiary terms of trade
protectionism hard currencies
tariff soft currencies
trade quota curuency speculating
 ^-

Jypes of international
I DUStness
International trade ptays a critical role in Canada,s success
as a
country. Canada trades for a variety ofreasons. These
inciude:
o Company growth
. Entry into new markets
. Expanded customer base
Increased profits
, Access to inexpensive supplles
. Lower labour costs

trade many times a day without

";.:';;::::ffilllational
even reatizing i

There are many types of international business. Some

are very
srmple. In Chapter 1, you rearned that many Canadrans
rnvest in
other countries through foreign direct investment.
other kinds of
international busrness are more complex. Companres
may enter

business are joint ventures and foreign subsidiaries.

They involve a

rnterference from the home country.

;-1 Chapter 2: Elements of International Trade

Many Canadians invest in businesses by purchasing stocks, bonds,
and financial instruments. Canadians do this to increase their wealth
or save for retirement. Some of these lnvestments are made outside
of Canada. Foreign portfolio investments are made because investors
look for dividends-the interest that can be gained on these
investments. These investments can take many forms.
One way to invest is through money markets, where investments
are short term and are considered safe and liquid (easily converted
into cash). Major corporations invest in money markets to earn
interest on their current cash.
Another form of foreign portfolio investment is made through
capital markets. IndividuaLs can invest in capital markets by directly
purchasing stocks on international stock markets such as the New
York or Tokyo stock exchanges (Nvsr or TSE). some Canadians invest
in capital markets through mutual funds, in which contributions from
many people are combined and invested in various assets.
One reason that Canadians invest outside of Canada rs because
it allows them to diversify, or spread out, their investments, which
is less risky than investing in just one area. Another reason is that
many foreign investments provide greater rates of return. Ignoring
investments outside of Canada dramatically limlts investment
opportunities. Great returns can be found in emerging markets such
as China, Brazil, and India, which are experiencing strong economic Canadians can invest ln
httqineqca< uy d
uurrlrs)Jcr hrr rorrlrr nr
ul]trLLl) rr.Ln,
putL i-^
td)rlrB
growth. However, investing in these countries can also be risky. stocks on internationaL stock
markets Here, a man stands
Because the worLd's money markets, capital markets, and global
1n front ofthe Toronto Stock
banks are interrelated, a major change in one country is felt around Exchange (TSX)
the world. For example, the financial crisis
that began in the United States in 20OB
rippled across the globe. Banks in many
countries failed or faltered because they were
unable to collect on loans. Stocks plummeted
in Brazit, Japan, and other major markets
following the news that the U.S. stock market
had dropped.

Iypes of international business | 5S

 Importing means bringing products or services into a country. These
goods and/or services may be intended for use by another business
or for resale. Business-to-business (lZl) lmporting is common in
Canada. Many Canadian manufacturers import products to use in
their factories, while other companies purchase finished goods.
This is referred to as global sourcing, which is the process of buying
equipment, capital goods, raw materials, or services from around
the world For pxamnle menv comnanies nrrrchase comnrrters from
T nnnrrn
LgllvVV/ q LUIIIPOIIy VvrLrr its
'nrith rLJ headcrrarters
rrLquyuqlLLro in
III the
LIIC United
UlIILCU States'
JLOLCJT

however, the computers are manufactured in China. Companies use

globat sourcing because it keeps costs down, improves quality, and
aliows access to new technologies.
-^*^^^i^-
\-u'rpo.rrrtrr *^,, ^r^^,*^^;
,.r.o.y d.Lru r-r'purL **^r,,^+^
pruLruLLr that they want to reselL.
.

For example, Canadian Tire imports barbeques made in the United

States, The Bay imports clothing from ltaly, and Best Buy imports
televisions fromJapan. Roots impofts its clothing from Asia and
South America.
Services can also be lmported. Call centres located throughout
the world answer calls from Canadians who have questions about
their computers and appliances. It is not uncommon to interact with
people in other countries when phoning for tech support for your new
anrnnlttpr Fnr pvrrnnlp (rrlroc Fnfprnricoc Tnn
Inc. io nlnl-'nl oursourcer
]s an SroDa[ nrrfonl

of disital marketins and customer service. Tt onerates call centres in

more than 23 countries on five continents. One of these call centres
has heen set rrn in T,ondon Onfarin Srrkes Assjstancc Senrjces nrovides
healthcare, financial, and automotive seruices for Canadians.

'^-^r^ i-^^-+- ^ varietv

Ld,Ild.Lld. I]IIPUI
LJ cl nrodttcts
of pf
v qf rLLj vr vuuLLD/ nrjmarilrr
PI1111c11IL) lIUIlI LIIt: Irnited
frnm thp U

States, China, and Mexico. According to the CIAWorld Factbook,

Canada's top imports include machinery and equipment, motor
vehicles and parts, oil, chemicals, electricity, and consumer goods. In
2016, Canada's imports were worth approximately $547 billion.

56 | Chapter 2: Elements of International Trade

Expor ing
Exporting occurs when companies outside of Canada purchase
Canadian goods and services. Just iike imports, exports may be
B2B or for resale. For example, Magna is a leading gtobal producer
of automotive parts. Its headquarters is in Aurora, Ontario.
Tt l ^^ UPCtdLIUII) t- zJ
^h^'^+;^'.- I]_L cottnfrjpq rnrhir-h
29 LvurrLrr!o,
1L lIOJ VVttfLll O-. __ -Meon: 2.cpcc
dirrpq
to every major auto manufacturer in the world. As the most
diversified automotive supplier on Earth, it designs, develops, and
manufactures automotive parts.
.^^^l^ ^-,-^. services. For example,
^t-^ c;r;rurtS
\,d.rrclLrd aL>u TeleTech is
a multinational company based in Colorado with Canadian
headquarters in Montreal and locations in prince Edward Island,
New Brunswick, and ontario. It provides consulting services and call
centres for companies all around the world.
Canada exports a varlety of goods and services, primarity to the
United States, China, and the United Kingdom. According to the CIA
WorldFactbook, Canada's top exports include motor vehicles and
parts, industrial machinery, aircraft, teiecommunications equipment,
chemicals, plastics, fertilizers, wood puLp, timber, crude petroleum,
natural gas, electricity, and aluminum. In 2016, Canada's exports
reached approximatety $517 billion. Exporting is critical to Canada,s
economic success. More than 31 percent of our gross domestic product
is erported. ourlargesttradingpartner, the united states, accounts for
about 76 percent ofour exported goods and services, and we purchase The
_ ''' '-o_'.. hoo'l^ a'*ho 67rh
_Masna

Tnternational Moror Show in

about 53 percent of our imports from them. E?^-l'f',.f
r f Grfnrul .^--^-,,
L, utr]1r1d11)

Types of international business | 57


Crate & Barrel is a good examPie
of an international business that
sells American- made furnlture
from materlal (lumber, etc.) of
mlxed origin.
SS I thapter 2: Elements of lnternational Trade
Value added
One problem with Canada's exports is the lack of value added
inherent in the products. v e added is the amount of worth that
is added to a product as it is processed. It is the difference between
the cost of the raw materials and the cost of the finished goods'
Companies that focus on extraction of primary goods do not make as
much money as companies that process these goods'
For example, consider the production of a dining room table'
The lumber needed comes from a company in British columbia.
To build the table, $50 worth of lumber is required. An American
company buys the wood and creates a beautifully crafted dining
room table that it sells back to a Canadian retailer for $3,000'
The Canad.ian retailer sells it to a customer for $4,500. Who
makes the greatest profit from this transaction? The American
furniture company because it applies the most value added. This
is common in Canadian businesses. Most of our exports are fiom
primary industrles. other countries plocess our goods into finished
products, therefore gaining most of the profit from the processed
good. Improving value added in our products is critical for canada's
future success in international business'
,ti[l
Licensin a reements
A licensing agreement gives a company permission to use a product,
cpnrirp hrend n!mo nr nrtpnt rLl in L1\Lrrurt6L
ovr.hrngrg fvr fOf ua rLL
fee Of fOValtV. Often
vr iwjqLLJ

the licence is annlicahle onlv in a snecifir. region rFor examnle

v_ L^uifryLL/ \/iroin
v ff bfff

Mobile, a British company, has a licensing agreement with BelL

f-cnrrlr
Li1r.ri1ua, fLaltaua
rnrrlr'. s l.'6pqi-
Lalb--.rnrnmrrninrfinnc nnmnrnrr .l-lrio narr
",-,,s company. 1nls agreement
aLlows Bel1 Mobltlty to use the Virgin Mobile brand rn Canada. Richard
Branson, chairman of the Virgin Group, states that the licensing
agreement will alLow both companies to experience faster growth,
flexibility, and operating efficiencies. Canadians benefit from this
agreement by having access to Virgin's extensive wireless service
options. Virgin Mobile Canada is the number one moblle network
used
*-_* bv vouns neonle and achieved the rrr6fiLJL
-J J "*_.O cllsfomer satjsfaction
hishesf LUJLVrj] JqLf:

ratings byJ.n Power. Virgin Mobile benefits from this licensing

affangement
urf urr6LrrjLfjL With
vvf Lrr BCll
.'^*^r^ +L-^..-L ,*rrp:qpd nrnfifq
ucLL \_oIIdLtd. Ll1IUu6Il -t-t-t_- _*_

Canadians are impacted by licensing agreements when watching

Netflix. It is frustrating when popular shows on the American Netflix
are not available on the Canadian version. One reason is because
a company like CraveTV or a traditionaL TV channel may own the
convrisht
-"f J,,b-., for its shows. Shows on Netflix are qLov Licensed
qtL aLso LILLTfDEU for snecific
lWt u}Jlsrrr!

platforms and time slots. These restrictions are not easily rolled back.
" _ _'_-"'o )orppmpnl'c srp
T.iepncino ; (r '
One thing is clear, however: Americans have access to more than
lh r p hrr'rFn s'i' h" re.lrtc:_'.'=
three times the Netflix content as do Canadians-approximately Limired o['p'i ros
-__-_"'-' nr \p'flix
10,000 titles offered in the Unlted States compared to 3 600 titles jn Canada are one erarple
of Iicensins 1Yj'[r r
--'_--__"___o 1r o"6
--
offered in Canada (as of the start of 2O1B)
restnctrons

Etr
.D
T, ^^- -i ----=
llL=> -
 Exclusive distribution rights are another form of licensing
Adrppmpnf
q6ILLfIILrrL. Thpcp
f rrruL riohts
r16IILO ellornr
UtlVvv a comnAnv to he the onlv distributor of
u

r PIUUULL
o' nrndrrrt rrl doodrrnhi. cllCd nrin
in q2 6Lv61qPI]IL rran Ul lll Oc cnorjfi6'COltntfv.
JPELffTL LUuriLf i ThiS StfateSV
jc nftpn rrqpd tn 612 jn initinl llIILldL
anfrrr
Cl.ILl)
infn
lllLU : fnlpjgp
O lVf Ll6ri malket.
frrqf r\LL. An eXamOle
o*---

of exclusive distribution rights occured when the lPhone entered

Canada. Rogers Communications had the only technology that would
support the iPhone, and lt had exclusive Canadian rights to selL it. ..
subscribers had to use a Rogers pLan if they wanted to use an iPhone.
Eventually, all providers obtalned the necessary technology and
entered the market as weLl.
ir.pnqino lJiq rifvDL
T
LtLgllDfff6 mnqt frpnrrenflrr
IiuYuLlrLtJ rrsed for manttfactttring nrocesses.
offpn
vl LLrr, ifmen:opmpnf
lqrlq6Lf riLl
pxnertise \^/ill accomnanv the licensing
2drppmpnf
qArL!irr!r Tt is common
lvrtrfflvll for
IvI the
Lff! narenf cnmnen\I to spnd senior
rn^.'"oo-ont to thp foreion corntTv to heln with the '-"r'-___-'
Iliqliq6Lrrllr rmolementatton
of the licence. Once the foreign company is comfortabte with the new
technology or manufacturing process, the managers return to their
anrrnrrrr rlldrto6tr 1lg
*--* pmnlnrrces
hnrnp nnrrntrrr rnd in the
-IIlPLUyCCJ lll forei-- LUUrrLly
Llrtr rwrLIE;II -"'ro
manrrfacturing usins the nrotocol learned from head office. Licensing
agreements have little risk, but the monetary gain is also limited.

When children are very young, some parents

answer the question "Where did I come from?"
with cute stofles that vary from culture to culture.
Brrt
!uL in lanan Pamners@ Dianers cattsed great
fff JqPur

confusion with an ad showing a stork delivering

a baby to a home. Japanese moms and dads did
not understand why a bird would bring a baby.
Tn Irnrn
1a1J u}/urr, hrhioq nro dplirrprpd hrr lrrop flnatino
peaches! One popuiar figure in Japanese folklore
is Momotaro, a heroic flgure who came to Earth
inside a giant peach that was spotted floating
oown a nver.

I !ie'nents of lnternational Trade

 A franchise is similar to ricensing in that
it rs an agreement to use a
company's name, services, products, and marketing.
rtre franchisee
signs a contract and agrees to follow arl of the
franchisor,s (the parent
company's) rules. For a fee, the franchisor provides
service support
in financing, operations, human resources, marketing
adverilsing,
quatity control, and many other areas.
Examples of foreign-owned franchises commonry
found in Canada
are McDonald's, Wendy,s, Subway, Little Caesars, pak Mail, and Maaco
Collision Repair and Auto painting. canadran-owned
franchises
include Casey's Bar and Grill, Boston pizza,Mr.Sub,
Second Cup, Great
Canadian Dollar Store, Kumon, and KerneLs popcorn.

The advantages for the franchisee (who

buys and runs the
franchise) are iower risk, access to expert
knowledge and research,
and financial aid. The disadvantages are
less profit, stringent
guideiines, and loss of control.

one of the most successful canadian franchises

is Boston ptzza.
Started in Edmonton in 1964, it has grown
to become Canada,s
number one casuar dining brand with over
3BO tocations making
over $1 billion in revenue a year. The restaurant
caters to famiLies
during dinnertime and attracts sports teams
and enthusiasts who
watch the rarge-screen televisions in the
sports bar in the evenrngs.
Boston Pizza's strategy is to provide
two experlences under one
roof' Boston pizza has not aiways been A Boston Przza restaurant in
an lnternational success. In
Niagara Fal1s, Ontario
19BB, it expanded into Asia. It
adapted its d6cor to suit Asian
tastes and traditions, but the
restaurants looked outdated
and drab. Boston pizza agreed
to short-term real estate leases
in Asia, and the landtords
increased the rent dramaticaliy
at renewat time. All of the
Asian restaurants closed by
i996. Currently, Boston pizza
is experiencrng success in its
internationat expansion into
the United States and Mexico
under the name Boston,s the
Gourmet Pizza.

,r_=: _
 Joint ventures
A common type of international business used to establish a
presence in a foreign country is a joint venture.
occurs when two businesses, one of which is us he
foreion countrv, form a new Company with shared ownership. In fact,
25 percent to 40 percent of all foreign investment is in the form of
joint ventures.
One main reason companies create a joint ventule is to be allowed
into a country. For example, many Canadian businesses are able
to enter the communist countries of China and Cuba because they
are willing to enter a joint venture with the governments of these
countries. For example, Toronto-based company Internet of Things
Inc. has entered into a joint venture with Chinese company New
Hope Group to provide global industrial technology to New Hope's
manufacturing facilities. In Cuba, more than 60 Canadian companies
do business. Most of these joint ventules are in the mining lndustry,
as well as travel and food (for example Delta Hotels and Resorts,
Sunwing, Air Transat , andPtzzaNova). Joint ventures allow
companies to gain access to markets, products, and customers that
were not prevlously accesslble. other advantages of joint ventures
include shared financlng, managerial expertise, technology, cultural
information, economies of scale, and risk reduction'
However, 50 percent of all joint ventures fail. For example, Tiffany
& Co. jewellery was ordered. to pay Swatch, one of the world's largest
watch manufacturers, $448 million for a failed joint venture The
swiss swatch sued Tiffany, a company headquartered in New York,
in a Netherland's court because that is where the joint ventute
was registered. Joint ventures that do succeed often take years
to
LV senerate
6lfiuruLL a orofit Tnint ventures take longer to negotiate and
establish because the needs and wants of two companies must be
taken into consideration.
Some ways to overcome problems in a joint venture include
cLearly defining each company's roles, establishing formal contracts,
anrl navjns close attention to detail. Companies need to research the
cuitural differences and business methodologies of each company
and the country in which the joint venture is located'
An example of a Canadian company that has successfully
c ininr.,enture
^nrrinrrart OJwrrrL
I]d.VIBd.LtrU v is Sun Life Financial. Sun Life Everbright 1s
r ininr rranr,rro i-
d. lull.tL vcl.rLulc rrr \China between Sun Life and the China
Everbright
cioup, a government-owned entity. The new company sells

L -T,i:::- - :;-2t-i5 c'irternational Trade

 ' . ,-=-':p Drldll.ls f o ar pyra.^d'-o n idrt e c.as; In:: *=:_-'^-. --'- =
l:-: reason for its success is the cLear deLineation ofduties ict =:::-
-:r:l:any Sun Lrfe is accountable flor rhe day-to-day operations
jTlo .^pw cornran\/ whiLe Everbrjshr Lakes care of disLlibuLion
:etworks and Local management expertise. Currently there are ovel
e ( n.'tinnr L.r,art-,-irl.t
LVLlUfr6ffL CUStOmefS
LUJLVIfT!rJ in China serviced
llf !rrrlrq J!f vr!!u bv no-e fhan
JJ _11v_L L_

2,500 employees in 116 locations.

-.at-

^.1
UII
Oi1 is oneof Car:ada s rna;or imports and exports. Why would a
country expoft a p:oduct that it could have used domesticaLly? One
of the mdn reasons -s Canada's vast size. Oil reserves in the West are
not used rn the East
Canada has the thric-,::qest o11 reserves in the world, which
account for 10 percent :- ::= -:talglobal suppty. Saudi Arabia and
Venezuela are first anc s::r:r:. ftore than 95 percent of Canada's
oil is found in the ALbe::= :-- :.*::ds. Reserves can aLso be found in
Saskatchewan, and in:.:-.::::: l.e-,';fcundLand and Labrador. Most
of the oil exnorted in Ca:a:: Eo:s ic the Unlted States. Canadian oil
pxnnrls :rrnrrrlt for 4i ::::::: :: :hp lnilpd Stetps imnorts of oil
T

Canada also imports :- . -: 2016, it imported 759,000 barrels

per day. More than half t::a: anount came from the United States
and a thlrd came from ine :c..owing Organization of the Petroleum
Exporting Countries (OPEC) member countries: Saudi Arabia, Algeria,
Nigeria, and the United Arab Emirates. Imports aLso came from Iraq
cnl \Tnrr^rcrr
d.li\l Ojl ru
l\Ul WOy. \JrL jmnnrfpd jnf6 LUJLCIII
rs rrrryvr p2ofarn Lollduo
/. rnrrlc fn crrn6llTthp
LU JuPj- -J ---- Ojl
--.
npon< nfth:t nrrt nfthp .nrntn/

5-l Chaoter 2: Elements ol lnternational Trade

Figure 2-1 Canadian Crude Oil lmport and Expott Volumes, 2006-2015

Exports

lmports
500
t::*
450

€ 4oo 2,500
(o
!
o.
OJ
350 q,
o, 2,000 o.
ts
0,
300 14
(u

; 2s0 1,500 (o
5 -o

!
3 200 C
r!
c,
(E
150 1,000
=
o
3 1oo
s00
50

0 0
OFFI
FFF F
+
F

N NAIN N |\I
o
N

As you can see in Figure 2-1, Canada has consistently been

increasing its exports in crude oil, while reducing the quantlty it
imports, over the 10-year period between 20O6 and 2016. In order to
continue this trend-to boost Canada's oil exports and minimize the
need for imports-there is a proposal for a 4,500-kilometre pipeline
from Alberta to eastern Canada. The plan is to convert an existing
natural gas pipeline to an oii one, and add new sections, and have an
operational pipeline in use by 202I. One of the many problems with
this proposal is that the eastern refineries will have to upgrade thelr
equipment to cope with the heavier o1t. If they are not upgraded,
most of the oil will be exported. This pipetine also puts First Nations
lands at rlsk by posing a variety of environmental challenges.

Check Your Understanding

1 Identify the location of the world's largest o11 reserves.

2 From where does Canada import oil?

3 How will the proposed pipeline from Alberta to eastern
Canada impact the Canadian oil industry?

Research the current state of the pipeline. Include the risks

and rewards of the pipeline.
:----':--:--.1 r-
\s- *

- =!F=?
Forei n 5U Sl lailes
The most comprehenstve type of international business is called a
foreign subsidiary. A foreign subsidiary, often referred to as awholly
owned subsidiary, exists when a parent company alLows a branch of
its company, in another country, to be run as an lndependent entity.
f 11! n:rpnt
Thp yulLrrL cnmnanv often sets financial targets for sales, profits, and
growth. As long as those targets are being met the palent company
generally leaves the subsidiary to run its own day-to-day operations.
This decentralized decision-making process allows the local
management to incorporate the host country's culture and customs.
Toyota has traditionaliy been a successful foreign subsidiary
piltC),
in Canada through Toyota Motor Manufacturing Canada (f
which operates in Cambridge and woodstock, ontario. These plants -'-' '- - -a -'
.. - :.-

produce the Toyota Corolla and Toyota RAV4 models and assemble
the Lexus RX35O and Lexus RX45Oh, the onLy Lexus vehicles
I State two reasons Canadians
invest.
produced outside of Japan. This subsidiary has many advantages
2 State two reasons
for Toyota. It saves on distribution costs because the pLant is Canadians invest outside
closer to Toyota's North American customers, and it provides of Canada. State one
acceSS to a well-educated workforce. These factors help to increase diqndvantage of this.
ursssesrrlebe -_ ----'

profitabillty. Canada aLso gains from this subsidiary TMMC 3 What is imPofting? Give an
employs more than 8,000 PeoPle example of an item You own
that was imPorted.
Canadian companies also have subsidiaties around the
4 Identify five of Canada's
world. Bombardier, the Quebec-based producer of snowmobiles, major imPorts.
Sea-Doos, trains, and airplanes, has seven subsidiaries in China.
5 Identify five of Canada's
TD Bank Financlal Group, which operates TD Canada Trust maJor exporrs.
throughout Canada, has a subsidlary in the United States' TD 6 Explain the concePt of value
Bank is the ioth-largest bank in the united States. It operates in added.
the Northeast, Mid-Atlantic, the carolinas, and Florida, provlding 7 Define Iicensing agreement
servlces such as online banking, commerciat banking, investments, Give an examPle.

and insurance. It has over 13,OOO locations and services 8 Define/ranchise.

:nnroximatelv B 5 million customers. As a result of Canada's 9 What information is
strong banking expertise, TD Bank Financial Group was able to included in a fianchis-:.
expand its company into an area of business that had historically agreement?

experienced ma;or upheaval and financial difficulty 10 Name five Canadi::: -- ' =

franchises.
11 Whatisajo-:.':--- -

anexa::l:.'- --- - -.. -.'

joint';e: -- =

]r2':.:-'-. - :'.'
:_"
 ./'

l.
2.2 T DaIflers
Although trade is beneficial for all countries, it is not always easy.
Governments set up rules and regulations to protect iocal businesses,
generate revenue, and protect citizens from harmful products;
however, many of these regulations discourage international trade.
This shielding against foreign competition is called protectionism'

The most common type of trade barrier is a tariff. Tariffs are taxes
or duties charged on imported produqts or services. A tariff raises
the cost of imported goods so that consumels wili purchase local$
manufactured products instead of lmports. The other advantage
of tariffs for domestlc govemments is an increase in revenue. The
govemment imposing the tariff coilects the money that the tariff
generates.

"-' * "J favours the reduction

senerallv
Canarla b- or eradication of tariffs.
This is because when one country implements a tariff, its trading
partner will retaliate with a tariff of its own. The North American Free
Trade Agreement (NAFTA) is a trade agleement that eliminates tlade
barriers such as tariffs between Canada, the United States, and Mexico'

2: flements of lnternational Trade

-lf
 Winners Losers

lomestic governments-they collect the Foretgn producets-theit goods dtQ uoVu

additronaltaxes m0re expenStve

I nral nrndrrrers-their
'' '-" noods
J" are mote Consumers-the price of the products
competitively priced go up and consumers ate forced to pay
higher prices

Local employees-the people wotking in Fofeign employees-the peoPle

local companies keep theit jobs working in companies ovetseas lose
out on oppof tunities

lmport Figure 2-3

Canada
How Tarrffs Wotk: Canada's
Raw materials 100 100 Smaftphone Production
10
and lmpo(s
LADOUT 50

Shipping 5 10
q,
Tota 155 120
o I

OJ
6 Matkup (1000/o) i )) 120

Selling price (5) 310 240

Raw materials 100 100

Labour 50 10

Tota I 150 110

=|! Tafiff (5o.l/o) 55

G, Shipping 5 10

Tota I tll t/)

lTa t/)
Matkup (1000/o) t))

Selling price ($) 310 350

With the tariff added, the imported product is not,'- mot:

expenslve than the Canadian ptoduct.
 Trade quotas
Trade quotas are another form of protectionism. A trade quota is
a government-imposed limit on the amount of product that can
be imported in a certain period of time. This protects domestic
nrndrrr"prc hrr Iimitino thp emnrrnt nf nrnd"-* ;*-^+^l
llrrPurLEU --'l
OllU
-J -----"--'O r--JLILL
dprrp:qino fnrpion comnpfition
--rr'r
!9'"'"11'

Canadian importers are faced with trade quotas from around

tho rnrnrld -Fnr pnemnl^ tlI]LrC] tlra /-rnnln-Ertrnnpen Tln jnn
-, ,..*---lJLtr, "-rlar LrrC \-O,rrO\tO-LUlUPtrqlr ul]]vtr
Comnrehensive
LVIfIyILIlLllOtVg Economic and Trade Agrecmcnt (CETA)
LlVffVr \e!f f r/ the arrota of

high-quaiity cheese allowed into Canada from the European Union

(f U) wlit more than double the amount of cheese expofts to Canada.
This rcnrpsents annroximate'lv 4 nercent of the Canadian market.
Canadian products subject to U.S. quotas include beef, cotton, wool,
and synthetic fibres.
.-^-r^
LdIlclud. 1.^lr- ^"^+^ U11 IlId.Ily ^-^,r"^ts 1L
llUt(1) qLILJLdJ
jmnnrts
it llrlPwl
PL\-/(lULLJ f fr!DL jnCLUde
Lo. Thesc f-

agricultural products, firearms, steel, textiles, shoes, and clothing. In

the shoewear industry, for example, returns are carefully tracked. If
returned shoes are of poor quality and must be scrapped, the shoe
business in Canada will be entitled to a replacement impoft if the
shoes came from a country where a quota is imposed.

Both tariffs and quotas provide protection for domestic producers.

lf rrnrrhrrrr'mnnrtad
,r )wu uuj r.'ryu..LJ
--.1u
<hor- dl
JrruFi The jmnOSitiOn Of 2 trriff nr nrrntn .nrctrq nrices fo rise' howeVef, the
then return them for damage difference between the two is that the extra revenue generated by
n- no.T nrrpl''ri irc s'o1g qgp
''nnori *a ]!t'*'__'-"-'
-en'are-P-t na'I a tariff goes to the domestic government, whereas with a quota, the
r*'' al no
cost to them for you) increase in revenue is kept by the producers.

C'r-Bter 2: Elements of International Trade

Trade e argoes and sanctions
i,Vhen a government imposes a trade embargo, it bans trade
completely between two countnes. The strict rules rhe Unrted States
has for aoing business with Cuba are an exampLe of an embargo, and
lncLude a ban on finance, trade, and travel. This embargo started
when Cuba adopted communism under Fidel Castro Cuba has
lost millions of dolLars of potential sales in cigars and rum because
of the restrictrons. Under the Obama Adminlstration, the United
States was negotiating the tifting of the ban. However, the Trump
Administration voted against the United Nations' resolution to
condemn the U.S. trade embargo on Cuba The vote was l9l-2 in
favour of halting the embargo The Itnited States and Israel were the
dissenting votes.
Trade sanctions are often referred to as portiol embargoes and
marr inrrolrrp limiting frade of v snecifrr- nroducts vr
ryrLlrrl or with sneciflc
vv I Llt OPLL-
'
comnanies or indjvidrrals Fnr py:rnn p Canada has restricted the
exporLation of certain products to North Korea These products
incLude firearms, Luxury goods, and aviation fuel including rocket
fuel. Canada has also restricted the importation of a variety of
nrndrrrtq
y_vuu!LO friLLquri16 11vtl, rnel
inrlrrdino i-nn rnl nnl,l
LUqL, oLtu 6uLu.

Trade embargoes and sanctions are intended to pressure foreign

oo\/ernmenfs tn change their nolicies or ro imnroveL their
LIILIl hrrman
IIUJIf
V
f . rtrf
,A' r'" . ''
rights records. For example, Canada has imposed economic sanctions Pre,ider't Ba:acr Ol ama : :,
asainst Srrria in resnnnSe to its humanitarian crisis and breach of visrt to Cuba in March 2C15 i.
inlernation:l nper"p in thp rpoinn r^/:sfhpi--rr<rf - r r.
.
:v!

nrp.idpn
rr_"'!i_"""'\:v'
r, np:- 1-: atrn-r--- .*
J
-

A trade embargo or sanction deciared by Canada affects ' 2'*a ' -" p
-b,-" - -. I + .

/- rnrrli rno l-',,

Ld.r.ril.urdrr5 lrrcrea,--fhp nopd
uy innrnrqi66 ._, nrnrlrrnf c InaI
*_,nesltc plooucts
fnr dnmactir t-hnf IDecome ->--:Da:- !a-:-
rrncrrcilrl'rlo
uIlqVOltOULC rc imnnrfq
OJ llItPUI L mtfi
Lr. fTt rrrq] nfttcp
!quJ!

the orice of
"-'- r''-- a nrodrrct to increase
hpc:ttqp Llltr qrrnnlrr
uELquDs thp lloJ larror.^.1
)uppLJi hno LItrL1cd.JtrLt.
When another country imposes
a trade sanction on Canadian
nrndttr'tq thprp ic qrrrnlrrc dnrno<tir
)-,,^^],. -^'^^l;^- LU.lrr}/qrrrLD
LIPP ty. \-d.Ild.(-l]d]] ^^mntn.ipq rrr
rnrrcf
uo L
find aLternate markets to buy their
nrodttcts or decrpesp nrodrrrfion
and cLose factorres.
 Many countries have directly invested in Canada. you can see this
when you walk down the street. You may have purchased a coffee
at Starbucks, eaten lunch at McDonald's, driven a Ford truck to
qhnn This
WOrk or nttrchased sn2n at Tho Rndrr urrvP. rffro foreign Iffinvestment
rvtLISff vgD

provides new products, technology, and employment, and increaSes

productivity for Canadians. Foreign investors have input into the
management and running of a domestic corporation, and also receive
a return on their investment.

Many laws in Canada influence foreign investment. The law with

the greatest impact is the Investment Canada Act. Its purpose is
to ensure that all foreign investments are reviewed to determine
how they will benefit Canada. Among the restrictions included
in the iegislation is a review ofbenefits to Canada ofany direct
investments over $5 mitlion from countries that are not members of
the World Trade Organization (WtO), and of any direct investments
over $l billion from WTO countries. (fhe WfO oversees the rules of
global trade.) Starting in2O2I, the amounts will be revised based
on growth in GDP. Foreign investments in the uranium, financial,
transportation, and cultural industries are automatically reviewed,
regardless of the amount.

Other laws restrict foreign investment in Canada. The Bank

Act, the Transportation Act, the Broadcasting Act, and the
Telecommunrcatlons Act limit the amount of foreign ownership in
rne uooy 5r'0p rn t0ronto,
each of these sectors. For example, the Transportation Act limits
Ontario-one of its 133 srores in
foreign ownership of a Canadian airltne to 25 percent.

f2 i Chapter 2: Elements of International Trade

 Stan ar s
Trade barriers exist when countries have different standards for
the
way products are used or how they perform. Countries have different
standards in areas such as environmental protection, voltage in
electronic devices, and heatth and safety.
Different standards for vottage in electronic devices means that
smail appliances made in one market must be modlfied for other
markets. For example, hair dryers in Canada operate on different
curr
electrical ent wa11 sockets than in Europe.
rvrii.LrulacLurer
l/I^-"f^-+,,-^*
modifications into account not only
when produci n they are decidrng whether or not to
produce them at all. one major concern for business traveLlers
is the
voltage of their computers and smartphones. A11of the information
can be found on these devices. Most accep tr2o-220 vo1ts. Therefore,
voltage converters are not needed, but walt socket convefters are.
If the American government passes a 1aw to make cars in the
United States more fuel efficient, there wilt be a decrease in the
amount of fuel consumed and lower carbon-dioxide emissions. Car
manufacturers producrng mobites in Canada and exportrng
them will have to improve r vehicles' fuel efficiency to se1l them
across the border. Whl1e most electrical products
requlre socket converters for
Different health and safety standards can also impede trade. use in differeni countries,
It is difficult for a Canadian manufacturer to import goods other technology tike USB-
the Universal Serial Bus-rs,
from another country if the manufacturing process is not up to as its name suggests, a globaL
Canadian standards. Canadians witl not be able to take advantage standard tor cnargtng d va iei)
of lower-priced raw materials if the canadian heatth and safety of mobile devices

standards have not been achieved.

One way of overcomi dization ms is to implement
an ISO 9001(quatlty) or ironmen tecilon)progrurn.
The International Orsan
Standardization (tSO), is a network
of standardization groups from over
163 countries. it
is a non-governmentaL
organization (NGO) established to set
quality regulations. ISO certifi cation I
ensures standards and specifications in the I
areas of quality, environmentat protection,
social responsibility, risk management,
anti-bribery, and a varlety ofother topics.
(For more information, see Chapter 7.)

73
 ?T J; T

*rk E
TG

s 1
7s 5

*a
?T T: T

sfrn Tfi
g
b
B
7s5
i?
=
t=

'i
I

il.l
rl
I
il
lr:
IF
't'
ri
Suppose you need to make an important phone caLl to a customer in
Japan. Should you calt immediateiy? The answer w1ll targely depend
on the tlme difference. The time rn onrario is 13 hours behind the
time inJapan. If 1t is 3:00 p m 1n ontario, 1t 1s 4,oo a.m. in Tokyo-
not a good time to call
Time zones are anothe: bat:i:t :: lrernational trade. The
nternaLionalbusi-es- -,,:r * - .:=-_ l-r hours a day one oItne major

easity, aLmost anywhere in rn. ::,: , rany calL centres that service
Canadian businesses are locar:: ':- -:: =*because the companies can I Define protectionism.
save 0n wages. Because of the r n= :- _::ence, the Indian employees
2 What is a tariff?
3 What is a trade quota?
4 What 1s the difference
Bustness people need to learn r,,,h_:: ::nmunication medrum between atariff an-- t - :_
-
is suitable in specific situations wh,.: :naiis and reports can quota?
be accessed at any time and are not ce ::iCent on time zones, 5 Define embargc
these methods do not altow for imme r-a -e feedback phone calts, 6 Fvhl.i-
!^yrq]lr l^^-.-
rl!,. --- - - - - -__ _:
:_:_-_:
presentations, and face-to-face meetrngs are dependent on time l-.a ^ r'^.t-:--- --

zones, but occur in real time and ailow fol interaction, questions,
and
immediate feedback
 2.3 Currency fluctuations
Would you pay 62,000Japanese yen for a new smartphone? How
about 465 euros? (In reality, these are approximately the same
amounts.) Currency fluctuations are a barrier to international trade
because of the uncertainty they create in trying to price goods and
services accurately. The exchange rate is the amount of currency in
reiation to the currency of another country. The Canadian dollar is
often quoted with respect to the U.S. dollar, the euro, or the British
pound. For example, if $1.00 CAD (Canadian dollar) = $0.79 USD
(Unlted States dollar), then $i.OO USD would cost you $1.27 CAD.

The Canadian dollar is most often quoted against the U.S. dollar
because the two countries are the largest trading partners in the
world. The exchange rate is important to the Canadian economy
because Canada relies heavlly on imports and exports. Historically,
our dollar has been worth less than the U.S. dollar. It reached a low
of $0.637 USD in 2OO2.In2007, the Canadian dollar surpassed the
U.S. dollar for four months. However, in 2013, it dipped below $1.00
and remained there as of early 2018. The Canadian dollar is the
sixth-most traded currency in the world.

qaer 2: Elements of International Trade

 ollar
Many of us purchase online from American retailers. In these cases,
we Like it when the Canadian dolLar is high. However, Canadian
trade favours a low dollar because exports leaving Canada are less
ovnoncirro rnd thorafgfe. fOfeiSn LVUffLfTLO nrrrr"h:sp mnre
COttntfies yUllIlqJE 11l. C:q3fllnn
g !ql

soods There are menv winners and losers of a Low Canadian dollar
(see Figure 2-4).

Winners Iosers Figure 2-4

Exporters Foreign businesses wanl
to buy Canadian goods
when the CAD is lower.
Canadian companies
can sell more products
hpcarrcp thpv :rp
cheaper. This benefits
Canada's manufacturing
sectoT.
Low Canadian
lmporters lt's mofe exPensive to Dollar: Winners
imoo-r and sell products and Losefs
in Canada Businesses
that rmport expensive
equipment, raw materials,
anc IecDn0 0gy nave
ntqner pf0cuctt0n c0sts
and lose efficiencies,

Canadian Foreign tourists visit Canadian it costs mofe to travel

tourism tanada because theii
dollar buys more CAD
Tourist destinations
such as Niagaia
Falls, Stratford, and
Algonquin Park are more
economical. lrt 2016,
American tourists spent
more than 59.6 bitlion
while visiting Canada.
travellers to the United States fof
hrrsinpss nr nlpaqrrrp
Snowbirds (Canadians who
live in the southern United
States during the winter
months) may not stay as
long because the CAD buys
less.

Canadian Canadian retailers Major Ptofessional sports teams

retail gain an edge because
sports oPetating in Pa1l
shopping in the
teams their players to
United States-eithef entice them to play here.
in person or online- When the Canadian dollar
rs m0[e expenstve. is low, it's more costly
When shopping at U S. for the Toronto Blue Jays,
websites, Canadians the Calgary Flames, the
may be shocked by Toronto Raptors, or the
the total, lncluding the Ottawa Senators to attfact
exchange rate. talented players.
 Canada has a floating rate, which means our exchange rate changes
with respect to other currencies. supply and demand dictate the
price at which the Canadian do1lar is bought and sold. If demand
is greater than supply, the value of the Canadian dollar increases.
currency devaluation occurs when supply is greater than demand
and the value of the canadian dollar decreases. Many factors affect
the exchange rate: economic conditions in Canada, trading between
countries, politics, and psychologlcai factors.

Economic conditions in Canada

A variety of economic conditions affect the value of the Canadian
do11ar:

Inflation-the rate at which the price of goods and services

is rising and the buying power of the dollar is fa1ling. A tow
inflation rate causes investors to prefer the canadian dollar
because of the stability of prices.

Unemployment-the number of Canadians without jobs. A low

unemployment rate signals a stable, healthy economy, causing
the Canadian dollar to rise.
Gross domestic product (crp)-the value of all finished goods
and services produced by a country in a specific time period.
A stable or rising GDp similarly indicates a healthy economy,
causing the Canadian do1lar to rise.
Interest rate-the rate charged those who borrow money.
A country with higher interest rates in comparison to other
countries attracts foreign investols. Higher interest rates in
Canada increase the foreign demand for our dollar, which
causes the dotlar's value to rise.

In general, the more confident investors are in Canada's future

prospects, the more the Canadian dollar is in demand.

78 lChapter 2: Elements of International Trade

Trading between countries
The greater
r riL 6l LULLI a countnr's cxnorfs in comnarison tn its imnnrts the
sreater the demand for its crrrrencv The more favourable the terms
of trade (the comparison of expolts to imports), the higher the
cu rrencv exchan ge -'
rate.
"'-.'*"o-

Politics
Tho
PULILILOL JLOUTLTLj vr q rvurrLl)
L LItr ^^lit-incl qf rLLLJ itq pxr.hendp rate If
ctrhilifrT nf : r-nrrntnr :ffprtq
investors are worned about political tension or the threat of
farrariom
LCIIUIIJIII
in c ncrfinrll:r
Irl O POI LlLULqf
rnrrnt6r
!vuff Lrj, thp
LffL domend
uLrrlqf ru fnr lLJ clr1pnat/
1v1 itq LurrLlrLJ

decreases. This causes a devaluation ln that country's currency, as

happened in Venezuela in 2013. There was little confidence in the
newLy elected govemment. The inflation rate rose to 22 percent,
a state of emergency was declared, and rations were put in place.
As a resrrlt of this nolitical instahilifv the Venezuelan doliar fell
32 nercent Citizens reacted bv LininS uo to ourchase ailline tickets
rnrl falarrioinnc nri6'pq fnr thnqp nrndttrf. -^t^rrlrl
Lelevislons-prl--- rlrrmrfinrllr
ano r--**--s woulo olamaltcatly
increase because of the cufiency devaluation.

Psychological factors
Manv crrrrencjes
i'rqir]LulrLrrLfLD hav^ ^ L;-f
ffqv c d IIIJLUIILo'I -i^-iA^ance on the international
^-i-^r JISIIIIIL
markets. For example, in times of international upheaval, the Swiss
franc is considered a refuge currency. The euro and the U.S. dollar
are also seen as safe currencies. Stable currencies, such as the euro,
U.S. dollars, and Canadian dollars, are referred to as hard currencies
because they are easily converted to other currencies on the world
exchange markets. Soft currencies, such as the Russian ruble or the
Chinpqp rrlrAn 2Tp nnf :c orcilrr
LqurLj rnnrrortod
Lvrr v Lf L!u

u.s. Figure 2-5

cents 10 Years of the
120 Canadran Dolla-
.110

100

80

70

60
2006 2007 2010 201 1 2012 2013 2014 2015 2016
i
!

I
I

I
I
ir
it
 olla r?
There are a variety of reasons for this devatuation. One reason is
the 1ow price of oil. tnt.rn"tional demand f or thls major Canadian
export is weak, which causes the demand for Canadian dollars to
decline. Another reason is that the United States has threatened
to implement protectionist measures. Such measures would cause
U.S. purchases of Canadian products to go down and, therefore, Lead
to a decrease in the Canadian dollar. A third reason is the fear that
horrsing nrices in Toronto and Vancouver are roo hish and wilr soon
oecLlne.

Speculating
One wav f o orrcrcome the balrier of currencv excharoe 's hv
speculating. Currency speculating involves buying, holding, or selling
foreisn curlencv
Lurf LirLJ fff Anl-i.inlfinn Ut
in ullLILlPOLlUIt ^f if. r,-llte chanp.jng i,Tf is
ILJ VOLUL Lrrqii6fr16. done to
lJ uvl

nrnfit fl11af1rr+inno in
frnrn thp ..*--Jd.Lru11) irc nrran
r-Ll 1L) PI.tLC.

For example, if you were planning a trip to Florida in the winter,

and you heard in the news that the Canadian dollar was probabLy
goingto go down in the nextmonth volt i^ror d nrr.rh:qp Ir s dollars
h^''? ih
rruw ^^+i-i^^fi^* oI
.rIr arrLlcrpaLroll :f the
LlIe oevaluallon. ..
.L--,_ worrld
devaluatton. This save vorr ._)oney
rr
nn fho .1lrron.\r ovr1131prp fOr VOtt'trin YOU WOUId feCeiVe mOfe U.S.
dollars now than in the future for the same amount of Canadian
dollars. Companies do this as we1l. They buy forward (purchase now)
when they think the Canadian doiLar wiLl devalue and hoLd U.S.
dollars when they thlnk the Canadian doliar wiLL increase.

Why would Canadian companies quote their prices in U.S. dollars?

The main reason is to attract customers. When a Canadian company
sells in U.S. dotLars, it assumes the risk of the currency fluctuations.
To overcome currency fluctuations, many companies have
bank accounts in different currencies. It is common for Canadian
companies that conduct business internatronalLy to have Canadian
and U.S. bank accounts. 1 What is an ex::= -

2 Who are i:=

loseis :' :
i \"':t-,-
oottar .

3 Wha:'-=---.:
tr!!--1-:: : -:

4 -,','.: - :-:-:--=
:--=--:_--

r
 Cha ter evie
Knowledge
1 List three reasons why countries import and export products.

2 Explain the concept of value added. Why is it so important for

Canada's success in international business?

Explain the main advantages and disadvantages of the following:

licensing agreements, franchises, joint ventures, and foreign
subsldiarles why might a company choose a licensing agreement
rather than a franchise?

What is a tariff, and why do governments impose them? When a

tariff is imposed, who wins and who Loses?

5 Define trade quotas, embargoes, and sanctions. provrde an examnrp nf

each.

6 Explain the concept of an exchange rate, and how it is determined.

7 Explain how companies can profit from currency exchange. what rs

this called?

Th in king
one of the imports people in canada enjoy the most is fresh fruit.
Explair hcr',' a person in Canada's tife would be altered if fruit were
not in::c:.eC

A Canadian :::al*-aciuier of hearing aids is planning to expand into

Chlna V/hici -:::: :: _nternatronal business woutd you recommend
and why?

10 List three \niil:::s -: : :::::e lcsers of a low Canadian dollar. Explain.

11 Provide two exa::_: :. :; hornr a company might engage in currency

speculation.

--aDter 2: Elements of International Trade

I
+
I

L2 On a map of the world, colour and label each of the top five countries
that import and export with Canada. Use one colour for import
partners, a second colour for export partners, and a third colour for
countries that do both.

13 Your business is located in Ottawa, and you are negotiating a

purchase with a suppiier in Shanghai, China. At 9:OO a.m. your time,
you discover that you need information about a costing quotation.
Shorrld rrntt nhnnp nr pmeil thp qrrnnlipr?: LAytqftt
LriL ouyyrrLr Fvnl:in jrrnrrr rhnino
wul LrlurLtr.

t4 A Canadian company can produce a mattress using $160 worth of

raw materials and $120 worth of labour, and shtpping costs will be
$ZZ. e Chinese company can produce the mattress using $16O of raw
materiaLs and $40 for labour, with $50 for shipping. Assume that the
Canadian tariff for mattresses is 5O%. The Canadian retailer has a
markup of I5O%. Calculate the price of the Canadian mattress and
compare it with the price of the Chinese mattress before and after
the tariff.
f nnqidprino fho ,'liffoJgnt faCtors frrvvLvLu in these
inVOLved frr LriLrL onj-ions (e
vyLrultD o the
\l.E;.r
final price to the consumer, the profits for the retailer, domestic
versus foreign production, tariffs, etc.), which do you think is the
better scenario, and why?

15 Using a time zone map, complete the following questions:

a If it is 9:00 a.m. in Toronto, what time is it in Frankfurt
Germany?
b If it is 2:OO p.m. in Windsor, what time is it in Auckland, New
ZeaLand?
c If it is 3:OO p.m. in Vancouver, what time is it in Tokyo, Japan?
d If it is 2:OO p.m. in St. John's, what time is it in Santiago, Chile?

i:
 to purchase
15 As a Canadian manufacturer, you have the option
is offering
raw materials from three countries. The united States
to sell the goods for million USD; the United Kingdom for
$1.2
650,OOO GBP; and South Korea for 1'7 billion
KRW'

a Which is the best deal?

or why
b Would you want the supplier to be lSO-certlfied? Why
not?
when
c What other consideratlons would you take into account
making Your decision?

t7

curlency.

0.791 0.832
United States Dollar

Mexican Peso 13.84e l

13.431

Euro 0.685 0.693

1g vivek owns a business in ontario, but 90 percent of his business is

exportedtotheUnitedstates.HehasaContlactwithanAmerican
is in
company to sell $5OO,OOO USD worth of product' Delivery
6OdaysVivekknowstheCADis$O'g2today,butisexpectedto
drop to $O.gg in 60 daYs.
a Calculate the price of the shipment in cAD if (il the customel pays
today and (ii) ttre customer pays ln 60 days' When should Vivek
ask for PaYment?
bWhymightVivekquotehispriceinUSD?Whataretherisks?
c If Vlvek had asked for payment in CAD, what could the customer
d.o to save money? What is this called?

.: =' l: Elements of International Trade

Inquiry Activity
Th rl-,i- cnapter,
rn rnts ^tr-^^+^* --^..
you rtearned that there are many forms of
protectionism-tariffs, quotas, embargoes, and sanctions. In
today's political climate, there is much debate over whether or not
governments should protect local businesses. It is time for you to
form your own educated opinion on this topic. Do some research
on this issue using this chapter and outside resources. you might
find it useful to make a chart like the sample below to organize
your information, giving yourself plenty of room to inctude your
responses.

ln your own words, define Drotectionism:

List three reasons protectionism is qood List three reasons Drotectionism is

for a country. harmful for a countrv.
1
1

2 2

3 3

List a real-life examole of when List a real-life example of when

protectionism was good for a country protectionism was harmful for a countrv.

My opinion of protectionism is:

aa
lnquiry Activity
In this chapter, you learned that there are many forms of
nzafnn+inniom fnriffc nttntlq prnh:fdnp. nnrl onnnfinnc
c1lru Jo.rrLLrulrJ. Tn
r11
()
IJI LeCLIUIIISIII- LdI II'-, yuv lsui -','-*, b-'J,
today's political climate, there is much debate over whether or not
governments should protect local businesses. It is time for you to
form your own educated opinion on this topic. Do some research
on this issue using this chapter and outside resources. You might
find it useful to make a chart like the sample below to organize
your information, giving yourself plenty of room to include your
responses.

I ln your own words, define protectionism:

1 Llst three ieasons protectionism is good List three reasons protectionism is

for a country. harmful for a country.
.1
1

2 2

3 3

List a real-life examole of when List a real-life example of when

protectionism was good for a country protectionism was harmful for a countly.

My opinion of protectlonism is:

toqr-l A(tiYrty I tS

I
Tirna
I ftIIL rnenrdprnpnt rD
rrroffqSLfrfLllL criticel to
iq LItLlLqL e PLrUVff
LV q stlccess This is esDeciallv
nerson'sO OUlLLuu'
true in internationat business when Supplies Ordered from overseas
wiLL take longer to arrive, customers are in different time zones, and
buslness travellers cannot afford to miss a flight. Time is a finite
resource. Make sure you manage it effectively to focus on what
is important. Life holds many distractions, so having good time
management skills will result in higher quatity work and decrease
your stress.

Iime management tiPs

. Set priorities-it
is easy to get distracted by unimportant
things. Focus on what needs to be done first.

. Set a schedule-determine a pian to get things done. Set

reasonable deadlines to help you focus, then stick to your plan.

. Avoid distractions-thls may mean turning off your social

media or finding a quiet place to work. Tell family, friends, and
co-workers when vou are unavailable.

. Use technology-it can provide shortcuts and support. There

are calendar apps, time-tracking and expense-tracking apps,
and apps that will help you create to-do lists.

. Avoid multi-tasking-most of us believe thatwe can do more

than one thing at once. The truth is we are more productive
when we focus on only one thing at a time.
. Stop procrastinating-good time management requires
diqr.inlinp Tf
uroLryLrrrL,
;+ ^^- L^
rr IL Ld.Il
,r^^^ +^r^,, dn rL
UC LIUIItr LUlI4y, uv it tnderr
Lvuoj.

. Learn to say "No"-busy people iike to be involved in many

areas. However, being over-taxed can lead to not doing
anything weli. When possible, potitety decline work that will
cause you to be overloaded.
Questions Activity
I Why is time management important? You are the global manager for a Canadian auto
nnr#o m nn,r rtn+,,rnrin Toronto. You have arrived
2 Why is time management crltical in PO.1 LD rrrclrrUrOLLUrCr r

at work at B:30 a.m. and need to plan your day.

international business?
erpatp rrnrrr schpdrrlp for the dav and nrioritize the
3 Create a list of your time management fnllornrino
''-d
feqkq'
"*"""'
stren gths and weaknesses.
'"''''o'-'"
. Email a sunnlier in
"- Hons - ---- needs to
-'-'-o' This
''"'-o Kong.
4 State a time when you demonstrated poor
be done before the open ofbusiness the next
time manasement skills. Describe the ,l^,,i- A-i^
Lt cly ltJ nDro..
situation. How did you feel? What could you
have done differently?
. Spend an hour writing a section of a
culture report to your boss that needs to be
5 Create a schedule for yourseiffor the r^nmnlptpd npxt Week.
next week. Include all school work, extra-
curricular activities, paid work, and family
. Attend a 10.00 a.m. meeting.

rocnnncihilitioc . Create a to-do list for tomorrow.

6 You need to have a conversation with a
supplier in Paris. What time should you
schedule the conversation so that both of
vou are stili at work?
. Complete an expense form for accounting.
. Review and practise the presentation you
are to give tomoffow.
. Review and undatc todarr's to-do list.
. Read and resnond to email.
o Prpn:rp fnr tnderr'q ln'nn e m mctrfi- j
. Read a brief that will hetp you',',':t:: --:te
crrlfirre renort due next week.

Business Skills | 87
Questions Activity
1 Why is time management important? You are the global manager for a Canadian auto
2 Why is time management critical in parts manufacturer in Toronto. you have arrived
international business? at work at B:30 a.m. and need to plan your day.
Create your scheduie for the day and prioritize the
3 Create a list of your time management
fnllnrnrino trcLc'
strengths and weaknesses.
r Frnril n ctrnnliol in HOnS f\vr16.
KOng. Thjs
4 State a time when you demonstrated poor i trro needS tO
be done before the open ofbusiness the next
time management skills. Describe the
day in Asia.
situation. How did you feel? What could you
have done differently? . Spend an hour writing a section of a
culture report to your boss that needs to be
5 Create a scheduie for yourselffor the
comnLeted next week.
next week. Include all school work, extra-
curricular activities, paid work, and family o Attend a 10:OO'a.m. meeting.
rpqnnn qihi lifi oc . Create a to-do list for tomorow.
6 You need to have a conversation with a . Comnlete en exnense form
rvrfri fnr arr-nrrntino
rvf qLLVUrrLrrat).
supplier in Paris. What time should you
Review and practlse the presentation you
schedule the conversation so that both of
are to give tomorrow.
you are stiil at work?
Review and update today's to-do list.
Read and Tesnond tn email.

Prepare for today's lO:OO a.m. meeting.

Read a brlef that witt help you write rhe

culture renort drre next week.

Business Skills I 87
 By the time you finish this chapter, you should be able to:
€-ea rm cft * " Describe Canadian companies that are leaders at the international
g ee € cves level, and analyze the reasons for their success
" Evatuate the factors currently affecting the international
competitiveness of Canadian businesses
' Explain how Canada can attract foreign investment
' Explain how Canada's cultural diversity contributes to its
competitive success in international business
' Describe how the state of Canada's economy affects international
businesses operating in Canada, and how internatlonal business
imnartc fhp frncdirn o.^n^mrr

Analyze ways in which the workplace, occupations, the nature of

work, and working conditions in Canada have changed as a result
nf the
vr drniarfh
Lrr! 6rv 6f q1 E;l.UUd.l,
vv Lrr vr
n1^L'.1 CLUIIUIIIy
Key Terms competitive advantage
^^^i+^l *^-1,^+^
LclPrLd.r. rrrdra.cLD

foreign investment
Human Development Index (HDI)
nrndr r rtirritrr
f plornmmrrtino
 3.1 Canada on the world
stage
Canada has a unique set of characterlstics by world standards. It is
a large country geographicalty with a relatively small population.
After Russia, Canada has the second-largest globai land mass,
and its current population is approximately 35 million people. By
comparison, the population of the United Kingdom is 65 million;
California, 39 million; and the greater Tokyo area, 39 million.
Canada's population is expected to grow to 5O million by 2060. Thls
is contrary to the trend line for other cQuntries such as ltaly, Japan,
South Korea, and China, whose populations are decreasing. Although
Canada's population is growing, the number of peopLe over the age of
65 wltl soon surpass the number of children for the first time in its
history.
Canada is one of the wealthiest countries in the world, and has a
high standard of living and a strong economy. Most Canadians have
relatively well-paying jobs and access to goods and services most
people can only dream about. It has a gross domestic product (Clp)
of $1.9 billion CAD, which is2.47 percent of the world's economy.
Canada's economy is based prlmarily on the service industry. Its GDp
iS deriVed frOm three spctorq pynlrinpd in FigUre 3-1.

ii
E

1l 90 lChapter 3: Canada's Role in the World

I
 -^l^ri.,^'I,,
Other indicators of the current Canadian economy are d^ rcLGLrvcL]
lnrnr rrnpmnlnrrmpnt rafp pxfemelrz low inferest r:tes and ^h ^rr^7^d^

income of just below $50,000. See Figure 3-2 for average Canadian
salaries byjob sector.

Figure 3-1 Canada's GDP by Sector The servlce sector is ihe larg.: -
e rpLoyei rr Ca- ada l re m,. . '. ".
sector makes up a substaniia'i : ,:,- - -
Agricultural sector (20lo)
of Canada's exported ,iems Ag:t: - -:
. Crops (corn, wheat, oilseed) r'-r"'- "r..-d.:.1-..."-
I uuJt tt() or c u:orqu PIL
. Livestock (cattle, pigs, elk) the provinces ofALberta, Saskatc--; .
. Poultry and eggs and Manitoba

' Dairy
. Horticulture (orchards, plant Service sectot (700/o)
nurseries, flowers) . Trades (electrical, carpentry,
computer repair)
. Healthcare (physician care, nursing,
health care support)

Manufacturing sector (280/o)

. Education (teaching, administration)
. Lumber, paper ' Food and retail (food service,

Food clerki ng)

Phalmaceuticals, chemicals
. Federal government (public
administration and special
Electronics, machinery
agencies)

Figure 3-2 Average Weekly Earnings in Canada by Industry, 2017

Average weekly Average weekly

Industry earnings, 2017 Industry ealnings, 2017

Industrial aggregate excluding 5e76.14 Real estate and rental and leasing Ssea.;s
unclassif ied businesses Professional, scientific, and technical 51,346 s8
(1 l?A 71 Servlces
Goods-producing industries
Forestry, logging, and support 5tizo.tt Management of companies and 5t,ott.tz
enterprises
Mining, quarrying, and oil and gas >1,ut5.35
Administrative and support, waste )/d> )
extlaction
management and remediation
Utilities 51,862.48
servrces
Construction 51,21e.84 Educational services <- --:-_
Manufacturing 51,096.6s Health care and social assistance
Service-producing industries se1e.03 Arts, entertainment, and recreation
Tfade 5744.86 Accommodation and food services
Iransportation and warehousing St,oao.or Other services (excePt Public
lnformation and cultural industries 5t,ztt.gt administration)

Finance and insurance 51.307.34 Public administration

 Canada has been dramatica\ affected by international business'
M:nrr
IrqrrJ erp! nositive
nqnpcf q qf
urlJL!!u yvDrLrv L, inclttding
rrrLluurf I inCteaqe d cmnlnrrment aCCeSS

to better technology and new products and services, and a diverslty

of influence on Canadtan culture. International business has also..
had some negative effects in Canada. These have included the
ioss of manufacturing jobs, the sale of unsafe products, and a shift
dy f,^'-
^,.,.,,
d.w
/-.nrrtirn *^,r^ P] uu LrL Lr o1
I I u tII Ldlld.urd.rr- rrrd.utr ^.^r,,.+" lu CUltUre. Think abOUt hOW
^^'{
your life would be different if Canada did not trade: no tPhones; no
American music, movies, or shows; no coffee or chocolate.
What is Canada's role in international business? When we think of
Switzerland, images of chocolate, clocks, banking, and cheese come
to mind. We associate Japan with electronics. Sweden has IKEA. The
United States produces movies, music, and cars. These are the
competitive aJvantages of these countries. A competitive advantage
i- . ^,^.1,,.r InaL
1S a pIOOUCI
rhnf dr .nrrntnr
C_*-._-J nr
_' r'nmn2n\r is hetter
'_---r*--_/ -D nrodttCinpr +l^^-
at pruuulffr5
ucLLsl qL LIIdrr i+^
ILJ
r-nmnpfitorq
Lvf J. Thp
rvlLlPlLf rrrL :drranteoe
uuvqrrLu6L marr he based on technologv. access to
oJ / *--

raw materials, marketing, management, quality, price, productivity,

warranty, or seIVlce.
What does the world see as Canada's competitive advantages?
Unfortunately, Canada is almost invisible on a globaL level. When
nrpqcpd fnr:n Ansr^rpr mnst neonle- -*-,
savtL^-- t^-^lrwith
^^^^-;^+^ \-ollouc
-IIey cl)JtJLlOLC

iumber and fish. The phrase "hewers of wood and drawers of water"
is often used to describe this country. Taking into consideration
the concent of valtte added (see
r"__ Chanter2),Itts
_--_I__- not in Canada's best
interest to gain competitive advantages solely in primary industries.
By doing so, Canada misses out on the most profitable segments
nf thp crrnnlrr.h2tn /Fi-i"h^l nnnrio rnd -^---;^^-\ '^^^l^ Plu ^-^dUCeS
J '^-*-.- \IIIIISjieU BUUL1J ct]-L(-l )trIVILc)/' \-clllduo
many excellent goods and services that need to be identified and
marketed worldwide in an effort to develop "Brand Canada."
jc
imnnrf2nl
Tt rD rrrtpurLqrr.
rL lh^+ /-rnrrlinno rcLUSIrr4s/
LIIcIL Ld.rrdlr-td.llJ ranaanjT.p DuPywrL, and take
SttnnOTt. qrru Lur

nridp in
--- thp
,--- hioh_n..^1;r-,
x^^r-
---o-- fudLILy SUU(l) dlIL,t
.^../ices
^-.r JtrrVlLLo PrwuuLLu ui
nrodrrced bv dOmeStiC
uv
r--*-
businesses. There are countless exampies of Canadian products
and businesses that became successful domestically only after
they achleved international success, lncludrng ice wine, lululemon
athletica, and Cirque du Soleil. Some domestic businesses seem to
tLIdvtr
.-,^ )1]ICU
ohio.] OVVOy
.,^,c., rlwrrl
fr6111 fuurrLrri
identifujnSthemselVeS aS Canadian; BOStOn
Pizza and New York Frtes are two thriving Canadian franchises
named after American citles.

s Role in the World

 The canada Exports features throughout this resource describe .-rl-not-.".:a .
the many successfut products and services that have originated in arhletrc -i,.eai s:ciae iitdt,,.riS
Canada, from auto parts to entertainment to ctothing. The businesses al:rchec t]l \'alccli''e r 1i iggg
-1 20i5 ils glcbai r.e -,-e]l j: .,.as
behind these success stories are profitable in both the domestrc :-Jr+: r_!n|\r
marketpLace and at a gtobal leveL. Examples of other industries
in whlch Canada may have a competitive advantage are listed
in Figure 3-3. Thousands of innovative Canadian businesses are
becoming known in the international marketplace.

Figure 3-3 Could These Be Canada,s Com petrtive Advantages?

Apples Diamonds 0il

Athletic wear Electricity Paper
(e.9., Roots, Lululemon, Gildan) Enteilainment 5criptwriters
Ba n king Hockey 5pace technology
Beef lce wine Travel and travel accessories
Ca rs
Insurance (e.9., Tilley Endurables)
childrent books Live theatre Water
(e,9., Robert Munsch) Maple syrup Water sport devices (e 9., 5e ::: _,
Colleges and universities Movie technology (e.9., t/VUX) Winter gear (e.9., Canada G::;=
Comedians Music

The famiLlar TD logo appears
at a branch of its American
operations in Manhattan, Ny
j Iiapter 3: Canada's Role
During the recession that started in 2OOB, the United States
suffered dramatically because of the subprime mortgage crisis.
Many Americans lost their homes, and many banks and financiaL
companies, such as Goldman Sachs, Citibank, and Bear Stearns, went
bankrupt or needed massive bailouts from the U.S. government. Did.
Canadian banks suffer in the same way? No. Although Canadian
banks were affected by the recessron, none of them needed baiLouts
or were in jeopardy of bankruptcy. Canada's banking system is
desisned fo handie the uns qrru
and downs
uvvvrjo of
vL thp
LfjL hrrqinocc
uurfff!Jo nrnlp lIlTn tc[LLj
LjLLL. fcnr
the world Economic Forum seLected Canada as the country with the
soundest banking system in the rvorld for eight years in a row.
The Canadian banking industry is dominated by the "Big Six
banks: Royal Bank of Canada (neC), TD Canada Trust, CIBC, Nationat
Bank, BMO, and Scotiabank. Canadian banks are larger in size and
have greater reserves than their European and American competitors.
!qrlouc. J L^-r'i.^-
'^^^r-)^ ^"ltem
Uclltr\l1.tB Jy: -_ fightlrr
_---- is --o--_.J rporrl:fpd hrr thp foAaral
government under the reguLations of the Bank Act. The Canadian
dnr/prnmpnr ic rnnro conservative
vuLrv L than
Liiqrr its international
fLD fflLgIlIqLIUIIc[L counternerts
LUL-lllLtrIpqlLo
with respect to control of the banking system and federaL banking
Laws. In Canada, there are strict ruLes regarding domestic and foreign
ownership of banks ALL of the above have allowed canadian banks to
be profitable and welt-capitaLized.
What is the international roie of Canadian banks? Four of the
10-largest banks in North America, measured bv assets are Canadian.
These banks are RBC, TD, Scotiabank, and BMO.
No Canadian bank was on this list two decades
/-^-^r^
^a^ \_d.]rd.ud. r.rd.> ^"^ttablv its hankino
exnorted rLJ
o6u. "^^ P-LU-L-_*_ vu___.___o
expertise around the world. TD Bank and TD
Ameritrade are subsidiaries found throughout
the United States and employ BO,OOO people in
total. RBC has banking and investing services
in the United States, Europe, Asia-pacific, and
Latin America. The Big Six bank with the greatest
international presence is Scotiabank, with more
than l,BOO branches in 16 countries, including
Mexico, Brazll, Australia, Ireland, Chile, China,
India, andJapan. There is tremendous potential
for Canadian banks to continue to expand
worldwide.
the World
 Canada's banks also excel when it
comes to thelr capital
markets divtsions. These divisions help raise money, access
markets, manage risk, and purchase or dispose of assets. They
buy and sell stocks, bonds, and commodities. Their customers are
companies, governments, and high-value clients around the world.
For example, RBC Capital Markets has 70 offices in 15 countries
in Asia, Europe, and Austraiasia, and in every major city in
North America. It is consistently rated as one of the top 10 gtobal
rnvestment banks. Other Canadian banking divisions successfully
inrrolrred in canital markets are Scotia Securities, BMO Capital
Markets, and TD Securtties.

The gtobat economy is fitted with opportunities for canadian

business. Canada is a resource-rich Country that exports many goods
and services to several countries. Unlike expoft goods-physical
items such as lumber, dairy, and auto parts-expolt services
are defined as the activity of performing work for others within
international markets.
In 2016 Canada was the world's 16th-largest exporter of services,
according to the world Bank. Among the fastest-growing exports
for Canadian companies are financial services such as banking Figure 3'4
and insurance, along with architectural, engineering, and other Growth of Canadian
scientific and technical services. Although the United States is still Services ExPorted to
Union the
Canada's largest export market for services, the European
EU

(fu) is the fastest-growing

destination for these In CAD$ billions
Canadian services. 12
51 0.e
In 2016, the EU accounted billion
l0
for $10.9 billion of Canada's
services exPorts. In fact,
the rate of exPort of
Canadian services to the EU
is growing faster than that
of Canadian goods.

et:*PR
tsiEi6i6i6 RRH

which includes publishing, theatre, visual art' music'
The products of the cultural industry not only
lnfoim the world of Canada's distinctive identity.
Canada's cultural imPact
coveis a varietY of seclors
iowels ovel vl,sitors of the
Vancouver Convenllon
Centre Wriler Margaret
Atr'vood (centre) has insPired
a ne\^r generation through
lhe success ofthe recent
adaptation of her book The
! t nLic' Tole fo' tele'rt'io^'
d
Xavler Dolan (right) is an
acciaimed filmmaker rvho
has r'rion several international
End af
*.he vlarl.d
l:^:da s Role in the Wotld
Canadahasatremendouslystrongandvibrantculturalindustry'
and film'
entertain but also
Thls industry. also
provides employment for skilled workers and is a growth industry
products are over
in Canada. In fact, Canada's expofts of cultural
$7 bitLion annualLy' The cultural
industry is also important for
Canadainotherways:itletsusexamineourselves'ourcommunities'
and our quirks, and offers pure escape and entertainment'
are greatly
In the area of book publishing, Canadian authors
Douglas Coupland'
respected. Writers such as Margaret Atwood'
Rohinton Mistry'
Malcolm Gladwell, Lawrence Hill, Naomi Klein'
throughout
Michael Ondaatje, and Sheila Heti are successful
the Nobel Prize in
the worid. Canadlan author Alice Munro won
short stories"
Literature in 2Ol3 for her "mastery of contemporary
profitable and
Canadian films and television have been both
Handmoid's Tole'
critically acclaimed My Big Fot GreekWedding'The
ad ar e all suc c e s sful
M ommy,the D eg ross i fianchis e, and Hy ena Ro
were nominated for
Canadian production s', Brooklynand Room
been filmed on location
Academy Awards. Many movies have also
winner for Best
in Canada, including Spottight(Academy Award
Canada also boasts
Picture), Suicid-e Squo-d-, andThe TwitightScga'
a great number of critically acclaimed
directors' such as David
Cronenberg, James Cameron, Sarah Poltey' and Denis Villeneuve'
 The music industry in Canada is thriving. Successful canadian
ir Arnerican fiim wiih tt','o
Canadtan connections : R;'a:,
artists include Shawn Mendes, Justin Bieber, The Weeknd, Carly Rae Gosling (boin ln Lonocn,
groups
Jepsen, Serena Ryder, Tanya Tagaq, Michael Bub16, Drake, and Ontario) stars in Blcce -Rui'..-
2049, duectea bY Denis
such as Arcade Flre, Nickelback, and The Tragicatty Hip. Shania Villcneuve (borr it.
-r- '
Twain (from Timmins, Ontario) and Celine Dion (from Charlemagne, Rividres, Quebec)
Orrohpr-)
vucucL/, of Lrls lpql-^11;-x..-.zrirn
erpE fhe -"SiCianS Of alLtime.
uLoL)cLLlI-tE; \-dl IClUlOlr lrru'

Lrve theatre is also booming in Canada, with diverse theatre

districts in Toronto, Montreal, Winnipeg, and Vancouver. In Ontario,
the Shaw Festlval in Nlagara-on-the-Lake and the Stratford Festlval
attract thousands oftourists each year. Robert Lepage, a Qu6becois
^r^,,.^,rirhr cnrnr filrn dirpr-tor end staoe difectOf, haS had SUCC€SS
PLdy vvIISrrL, oLLUl, rrLfrr urrLLLvf
i

both here and internationallY.

Visual artists who have achieved worldwide acclaim include
Robert Bateman, Emily Carr, Alex Colville, Michael Snow, Jeff Walt,
Ken Danby, Yousuf Karsh, Jean-PauL Riopelle, Edward Burtynsky, and
Tom Thomson.
 pnro''.,"
{-iraltr
-_-1--
dl ""'_" i -'!"
** Solpr
internaiionai sLiccess, r,,iiih
Entertainment
Derformances scireCuLed .^--.r- i- -,,r',,--rr-, rrLrr
Ld.tldud I> d- LULLUId.LL) Co|ntn/j ) wjth
rich !uurrLr -..r+..-^r ,-r..^.-ies
sf"^-- LULLUIdL
rLrr JLIUIIE; lllLtU)Ll- that
-l.-^..^. . -^ -: vv
r-9af iOUnC eC OS- ..1:: ^i .
,1-^ *^ior
t - 5 )rOf)[r-C" 1.. - .ii---- ^Fr'^-'r''- slccesscs is
are hishlv exDortable vllc ut LoIIouo J tlloj w] o ULLLJJLJ rJ lri qur du Cirnrre
-r ^ -^"r^-,--- i.-- ^;
a.ape'o-'-o, .- ^. -l Soleil, the circus entertainment company with shows in Las Vegas,
ln Gr."ece
--r *^.^--
\pruVn-k
-\ L vv r u-^, rParis
qrrJ/ LwrlLlu.tl, ^*L^-locations.
T ond^'^ d.II(-1 .tIId.IIy ULIICI ItWaS iaunched
hv slreet nerforrners in Montreal in the 1980s and has srown to a
lulllPqll) +tr"-r
LIIqL ^-^r^ys uuuuL 4
trrIIPLUJ' J aborrt 000 pLvyrtr
T,vvv neonle qlMJ 40 LVUllLr
across aV countries
lsD,
otrntrrzttnoY\x|(
gvrv mtrt'nn I ts| ) 2nnil2rt\/ ln revenue.
) rrrrLLavr

Tr 2Ol5 Circrre du Soleil was sold to maioritv srockholder TPG

\/ll ( l)\ Holdtrgs A ll \ nrt\r2rp trn|tr\/ 1lTm lvltnorlf\i srncKnoLoeJS
irrlrrdc Orrphpr''s
Yqrvsr npnsjon fltnd managpr T.a faissp drr dcnAt c1
nl:rpmpnt:nd Sh:noh:i'q Fncrrn Cenif:l Crnrrn Thp q:lp rnr:.
private but is estimated at $1.5 bilLion-so large lt needed approval
1-.., +1^^ r.--^,r j^- r^iefal govelnment Oo\/ernmFnf arnroVed the
U_V LllC LOllAUlOll lCUs-qL L. Thp
r rrL 6v v Lf fffllLllL qJUIv

sale because it would be of economic benefit to Canada. The sale

--;^"'^f^,r 1L^+ L'^^rcrrarters vvvuLu fremain
JLIUULOLf:(-l' LLid'L I lCo.Llyuqr LLrD worrld Llrr( in Montreal and that
70 np-rprf nf fhp spnio' manaoement roill lematn Canadtan.

Canada also has a growing television industry. One of the most

successfuL shows ts Murdoch Mysteries, about a Toronto detective,
set in fhe earlv 1900s if is nrodrrced hv Shaffeshrrnr I'i'ms and
based on the books by Canadian author MaureenJennlngs. The
show has been in nroduction for more than a decade and is shown
in more than 110 countries. Private Eyes, about a retired hockey
player turned private detective, is another serjes based on Canadian
PUPUtqI 'nrs frme
LTLtrIqLUlC-L]]io
LrilrLi (; H JvJ!L
u.!. ro\/ce s lne Loae lnIS snow IS

also broadcast in the United States.

Canada's Role in the World

li
 Ottrer successful Canadlan television pro ductions exporte d
a:ound the world include Floshpoint, Orphan Block, Schitt's Creek,
Ileartland, Holmes on Homes, Properry Brothers, and Income Property.
Many of these shows are recipients of government assistance-for
exampie, the Canada Medla Fund provides $350 mlllion annual$
in funding for the teievision and digltal media industries, Other
government support comes from the Canadian Film or Video
Production Tax Credit and the Ontario Film 6z Televtsion Tax Credit.
Live theatre is another Canadtan cultural success story. The
Stratford Festival has exported ptays to Broadway after wrapplng
up its season rn Canada. The musical Come Jrom Away, about the
kindness and generosity of the people of Gander, Newfoundland
during 9/ti, was a huge success in Toronto and Later was exported to
Broadway where it won a Tony Award.

Check Your Understanding

1 Do vorr think the Canadian p'overnment should have

:nnrnrrpd
uvvLv thp sale of Circrre du Soleil? Whv or whv
"'-J not?
'--

2 Name and describe two Canadian television successes.

3 The Government of Canada and provinciai governments
provide funding to support Canada's cultural industry. Why
would governments do this? State one possible advantage
and one possible disadvantage of this suppoft.
Saskatchevran native Tatiala
4 Describe Canada's live theatre successes on the rnternational Maslany sta-s as Sa-al, r'a:.-- - .
in the Canadran sri 1:"-i.-
stage.
Orphan Black
Canada's technolo sector
nJ or.nlrinpd in the hpoinning
Ac LAPrqrif! uE6IlIrrrl16 of this
vr Lffrr chanter Canada is an extremelv
Lrruytrrr

large country geographically but has a small population. To allow

businesses and individuals to stay connected across this distance,
excellent communication technology is a necesstty. Successful ..
rnnn.linn
LclIIdLlldlI
hirh tonh fL6fvrro
IIISII-LCLrr fegjOnS inClUde f616nfn
f vfvrfLv, \/ennnttrrpr \nlefgllgg,
and Ottawa.
Canada has a strong and vibrant tech sector. This includes firms
in the traditional information, communication, and technotogy (lCT)
sector but has grown to rnclude industries such as aerospace,
sclentific research and development (R&D), and pharmaceutical
and chemicaL production. This "new" tech sector encompasses
71,OOO companies, of which two-thirds employ fewer than four
nponle These comnanies contrlbute $117 bittion to the Canadian
eLUIIUIIIy .nnrrnllr, o! Julrl
cllIlludLLy, qltm thaf renresents 7l
LltqL rsPrsoLliLD /.r neTCent Of Canada'S
.r'\D Th6 .rr.r.d6 ronl p6nl6rree
\JlJr. IIIC dVtrldSC LCLrf LlrlPtvjLL has ua ttnjrrersitV
rrqr ufrrvLrrlLi degfee.
uu6rr eaTnS an
i. \'^1rhd^r 1-'hon fha .rrar.d6 f cnerli
^L^-,^
d.uuvc-d.vcrd6c retqry,
^^l^-.' ^-.1 rJ
clLr(r Jvu116tr1 urrqll t-fle aVela$e LaIIaUlan
worker.
Three of Canada's cities are leaders in Canada's technology
sector. Montreal is home to a variety of high-tech companies that
qnorielizp in rnrp:reh'lp technologrr
.-oJ' \/rvan^ --^r"^^- -'i-+"^l
- *--cl PIU(1ULtr) V11 Luo't -^alitv
lcq(rLj

headsets, and firms Hexoskin and OMsignal create clothing that

sauses the biometrics of its users. Vancouver has over 600 digital
b**.)'"
media companies that contribute $2 biliion annually to its economy.
Toronto is home to 3O percent of Canada's high-tech companies, and
these firms account for $52 billion in annual revenue.

The MaRS Discovery

DlStIiCt iN TOIONTO IS A
1ri."p "n"-y'121 l-'r95
t^dofh
rv6r Lrr!Iar onf ronron orr r<

educators, researchers,
hrrcinocc avnprt< lnd
social screntists The aim
^f+L^ ^-d--i-^+i^n l.1r
ul LItq ulEdrrl4dLruLl
innovation in research,
-p,-hnnloov and hu 'r^..,
:nd is r hp homr- of m: nr.'
start ups

\^Jorld
Related to the development of the tech
sector, several other industries in Canada
have seen srgnificant growth in recent
years, and many are poised to grow further

Renewable energy
Canada generates many types of renewable
energy, from solar power to wind power
Currently, 65% of Canada's electricity
comes from renewable resources This
amount wiil continue to grow as technology
advances and becomes more cost-effective.
The booming lrcust:r,r- ci
Chemicals and Plastics na-.-e.-_-?_ir8. _ __..'. :.
scLar pale,s cr a sr.al -ain ill
A strong supplier to Canada's manufacturlng companies, this Souiherr Cnlal,c
industry is vaiued at $73 billion and accounts for $40 billion annuaily
in exports. It is also expected to grow dramatically over the next
several years. ...' . . - . ..:

Aerospace 1 Describe Canadawith

respect to geograPhY and
canada has found success in the area of flight simulators, aircraft population.
production, avionics, and space application. This industry currently 2 Describe the three sectors
has over 7oo firms and employs 76,ooo people across the
country. that make uP Canada's
It has revenues of $28 bllllon annually, and exports about BO% of its GDP.

production. 3 What is a comPetitive

advantage?

Medicine 4 Why does the World

that Economic Forum conside:
Canada produces a variety of medical devices in an industry Canada's banklng sYSter.
employs 35,OOO people in approximately L 5OO companies across the soundest in the wor,::
the country. It exports $1.9 blltion worth of devrces annuaLLy. 5 Which Canadian banks
Furthermore, Canad'a's pharmaceutlcal industry employs 27 'OOO have been successfui ::-
other countries?
workers in about 5OO companies across the country
6 What does Canaia: :::'' :
Mining industrY incluce?
to 7 What )---. - -:
Canada's diverse mining industry contrlbutes $SZ biltion annualLy Produ::,
doesthe c-^.--:= -- - " "
the economy and generates over 2a%o of Canada's exports. It mines include?
more than 6o types of minerals and metals, including diamonds, 8 loei---., ---. , -..'

nickel, aluminum, cobalt, uranlum, and zinc. Canada ls the world's O- ' Z]--' -=
iargest producer and exporter of potash, which is used to make
'-l--- - = :'
fertilizer.
A-P'inin ownpd dPrarl meIi.
stnP \nrl<'-nm ".r:rdqd LS
business into Canada in 2016
. Attracting foreign
-pTe '- "rrs co-'o''ahlv rext to
tne Canadian sLaple Roots, at rhe
investment
Eaton Centre rn Toronto
The number of lnternational companies we encounter in our
everyday lives is remarkably high. These international companies-
whether it's Starbucks, Apple, Toyota, or Netflix-are foreign
investors in Canada. Foreign investment occurs when a company
expands its business into a foreign country.
Most countries seek foreign investment because it provides
employment, increases economic activlty, brings new technology,
improves productlvity, and forces domestic companies to become
more competitive. On the downside, foreign investment can detract
fiom a country's identity, and the profits earned by a foreign-owned
company do not stay in the host country. From the perspective
of an international business, foreign investment provides a larger
customer base and increased profits; however, it is often risky and
drains capital away from the parent company.
Canada actively seeks foreign investment, using methods such
as trade missions throughout the world. Another way the federal
government attracts foreign investment is through its website,
Invest in Canada, which seeks to educate potential businesses on
reasons to Locate their companies here. It presents research on
specific regions, describes Canada's competitive advantages, and
outlines how to establish a business.

3: Canada's Role in the World

 infnrmcfinn fnr
Prorlinciel on\rprnrnontc elqn nrnrrido ,,rr()tflraLlon Iot fnroir
Ioleign
investors. The Ontario Ministry of International Trade provides
information on trade missions, expofting, and starting a business.
Even city governments have programs to attract foreign investment.
Major cities such as Vancouver, Toronto, and Montreal all offer
investment seruices. some smaller communrties also have assistance
and incentives to attract investors.
Canada's stabLe economy also encourages foreign investment.
investors do not need to worry as much about dramatic swings in
the TSX, interest rates, unemployment rates, and inflation rates. The
ways that the exchange rate affects global practices are outlined in
Chapter 2. When the dollar is low, it is more attractive for foreigners
to invest in Canadian businesses, which is why the country is
popular with foreign investors. The following sections discuss
reasons Canada is often attractive to foreign investors

Canada is extrcmplrr sunnortirre vf hoth

v L of uvLrf dompctir.
uvrf TLULfL and
urru ffnrpion
vf Lt6Il

businesses. According to the Economist Intelligence Unit, among G7

countries, Canada is the number one place to do business. Globally,
it rates fourth behind Singapore, Switzerland, and Hong Kong. It is
also rated by the World Bank as the second easiest country in which
to set up a business, after New Zealand (see Chapter 5). Canada has
strong ties to North America, Europe, and Asia through imports
and exports, which is an advantage for any international business
situated in Canada. Canada has a strong, stable economy, and has
conslstently maintained low interest, inflation, and unemployment
rates. It has abundant natural resources, a strong technoLogy base,
highty regarded social programs such as education and health care,
as well as the most stable banking system in the world. Canada's
business taxes are the lowest in the G7 and 46 percent lower than
those of the unlted States. The Canadlan government also provides
tax incentives to companies working in the technoLogy, science,
ensineerjns and film industries.

A++.---
{ti :-- -- _
 Canada and the United States share a unique tlading reLationship. In
2017, trade between Canada and the United States amounted to over
$7O27 billion CAD. Many Amertcan cities are closer to Canadian cltres
fL.^
LIIctII
+r.^-, rr^ +^ 1mni.)r-U.S.
LIICj/ OIC LU tIlqJVl centres. Seventeen
U.O. LErtLlgD. UgVsffLLLrl of Canada's
Vf Lqliquq 20 larsest
cities are within 9O minutes of the U.S. border. Windsor, Mbntreal, and
Vancouver are a very short drive from the United States. Several large
U.S. cities, including Boston, New York, Washington, and Chicago, are
closer to production facilities in southern Ontario than they are to the
maior IJ S nroduction reoions of Atlanta Georgia *"* RaLeish North
and -'*'-^o--)'
Carolina. In addition, many American cities are just a quick flight from
major Canadian cities, making business connections easy.
The North American Free Trade Agreement (NAFTA) has also
crcefed hrrsiness nnnortrrnities for comnanies Located in the United
States. North America is home to over 447 ,45O million customers and
has a cumulative GDP of $ZO.l triLlion USD. Trade between Mexico
and Canada is extremeLy heatthy. Canada and Mexico are both each
ofhers' third_larOest
vLrrLrJ Llrllu rqi6LJL
+-^.ii-d
Lld.LlllIE;
h^r+h^rd tr^qV
LoJ)i eccess to
qllLDJ Mexico uaLSO
Lv I'lLnr!v
PcIILIItrIJ.

oDens the gatewav "' Latin America.

"'-' b*.' " *J to

CETA (Canada-European Union Comprehensive Economic

and Trade Agreement) witl allow Canadian businesses to trade
unimneded witn att of the countries of the EU. NAFTA and CETA
have a combined market of over $32 trillion, one-half of the world's
GDP.

Canada has a strong connection to Asia because of its proximity,

immia-nrin^
IlIllIIlSidLIUII
ri-1'.
LlllnJ,
.nd memhershin friin lAPEC (Asia-Pacific
Orru rif!friuLfJrrry

Frnnnmir" Cnoneretisn). Businesses iocated in Canada can take

advantage of the growing economies in Asia, such as China and
India. To this end, western Canada has invested heavily in British
/^^'],1'-Li^'^ +r-h^h^v+^+i^^
"1-- +a
tO i'-nrnrrn rrilr^rr-
LO.UmDla IIanSpOrtaIlOn trnUDS
S lmplOVe -^.+. -nrl ldILWay
pol LS dnu
systems. This wiLl allow merchandise to move smoothly into and
out of Canada to the rest of North America. The Port of Vancouver,
annrrln'o redpc (?OO
hrroincr ^^rt u, frruuuo
Ld..Ll.d.Ud. ) UU)Itr)L pUr pLttLvIl f\-f11,
pLvv hillin- A T) in n^^1. .--'121117
Lll SUUUJ oiIIlu*..J
to more than 170 different countries. Items including hybrid cars,
celLphones, and clothes pass through this port.

-: !'arter 3: Canada's Role in the World

 Canada, the second-iargest country in the wor\d, has strong
infiastructure and transportation systems so that Canadians
CanCommunlcate,meet,andcond.uctbusinesswitheachother.
the
Canad.a,s busiest airport-Toronto Pearson Internationai-is
passengers
hub for all east-west travel and handies half of ali
travellinginCanada'PearsonAlrportisthesecond_iargestairport
million
in North America for international travel. Currently, 44
expected to ciimb
passengers a year use the airport This number is
to 70 mlllion bY the mid-2O3Os'
is home to more than 3oo commercial ports
along its
Canada
Arctic' and
vast coastline, which runs along parts of the Pacific'
longest
Atlantic oceans. The St Lawrence Seaway is the world's
globe to travel
inland waterway. It allows goods from around the
easilyfromtheAtlantlcoceantothemiddleofNorthAmerica.
which
Canad,aalso has extremely well-developed rail systems'
railways have
move 328 million tonnes of goods a year' Canadian
Canada boasts Can:c.:r Pcc,lt -ts a;
a combined rail system of 45,OOO kilometres incoiocralei. lr it3- ar'-r t::''
gOO,OOOkiiometresofroads,inciudingtheworld'slongesthlghway' continues io :Ia:lsDa:i got: :
whlch spans across CalaCa arc rh: ;l :':
the Trans-Canada Highway (Route Transcanadienne),
States
all lO Provinces.

:!F- --1
 A great place to live attracts great
employees
According to the 2017 United Nations Human Development
Index ([IOI) Canada was rated as the loth-best countly in the
world in which to live. The HDI measures three eLements: health
(life expectancy at bith), education (Literacy rare and school
enrolment), and standard of living (Cnl per capita). Over the past
decade, Canada's placement has varied in the rankings, but it has
rematned in the top 10. canada embraces the values of freedom,
pnrralitv
L\-l JULrL tolerance. 6omnession and iustice, and these values are
y

.ntr.n.h.O in the Canadlan Charter of Rights and Freedoms and the

Constitutron. This translates into an advantage for businesses. For
examnle
EAqlrrPLl, hrrsinesses
uuorrfuuu!u fhaf nnerate in Canada will have empLoyees that
wiLl enjoy the excellent standard of living found in Canada'

Mercer Human Resources Consulting rates cities for their quality

of life. In2oLT,Vancouver ranked fifth 1n the world, Toronto ranked
16th, and Ottawa ranked l8th. Rankings like this show that Canada
iq 2 drp2t nj:rp to --i d^ ^l^-^ +h.t hn1-l nrnrrides and attfaCtS
r.*--'- lirr^
-- . tr d.tIu PLo'LC LllqL uvLfr ylv
v iuLr

Skaters cn the Rideau CanaL,
Ottawa, duiing WinterLude
-he countr) s capi-al tva
ranked one ofthe toP 20
places to live in the rvorld bY
Mercer Human Resources
nrrrlitrr pmnlorrppq
--'^r'-J ---'
PeopLe are one of Canada's greatest resources. Canada's citizens
are smart, talented, and educated. More than half of all Canadians
nf rnrnrlrino :dp h:rrp some Mf
. - Jvlllg foTm of noSt-Secondarrr
II vf yvr L rLrvr] edrrcatjon ffOm
e rrnirrprsitrr
q ulrrvLrrrL] Drogram. Canada ranks seventh in
collpoe or technical. r'"o'*_-
the world for educational performance, according to the Organisation
fnr Fconomic
M LLvifvrrlr! Co-oneration
rv v}/lts and Develooment (OECD).

i
I

fi
One of Canada's best assets is its immigrants. Canada attracts
highly educated and knowledgeable people who enhance and grow
the workforce. Canada's fertility rate is 1.6, which is not enough to
replace, never mind increase, Canada's population. The reason that
Canada's population has grown over the past decades is its robust
immigration policy. As a result, one in flve Canadians was born
outside of Canada. One reason that Canada attracts well-educated
immigrants is th'at its immigration policies are business friendiy.
Canada's liberal immigration policies make it one of the most
multicultural countries in the world. Canada's commitment to a
tolerant, peaceful society contrasts attitudes toward interracial
relations in many other countries-across the country, more than
20 O \anguages are spoken. lmmigration provrdes an enormous
advantage in terms of Canada's international business expansion,
as new immigrants bring with them in-depth knowledge of their
homelands and cultures. Employees from different cuitures
provide information about new and untapped markets throughout
the world. They are able to respond easily to foreign customers'
needs and provide information that is essential when canadian
businesses are exporting their products.
Hiring employees with different backgrounds and experiences
also introduces varying points of view to a workplace. The dynamic
interaction between people of differing backgrounds yields creative
and innovative results for Canadian businesses. International
corporations enjoy doing business with Canadian companies
that value diversity, and expect that these canadian firms have
a greater understanding of customers' differing cultural norms.
For example, a company that is sourcing supplies from China has
a competitive advantage if its employees are able to speak the
language and respect cultural norms while negotiating.
Ar rncreasing ]lun]b3: li _-::. -=
Dlciessionals l"ioung aua
'?.?' t".-' -'...'! _
:,i. ai:
.-.
:-.-
:=:" : =
-::::-:: Prsductivity amd the
l- -:r..

whlch both alici^.rs elipLii'ees

chamging workplace
g-(da e b.. , c;-:-
emplo,rrers access tc a e-reaa€r Major economic indicators were discussed at the beginning of
breacith cf talenL
this chapter. Most indicate that Canada has strong economic
performance; however, Canada does, of course, have areas for
improvement in business One of these areas is productivity.
Productivity ls defined as the amount of output wlth respect to the
amount of input. lnput includes capital, raw materials, labour, and
innovation. Productivity can be lmproved by better technoiogy,
improved machinery and equipment, a more educated workforce,
entrepreneurship, or innovation. productivity is measured by GDp
per capita. A hlgh GDP per capita means a high standard of iiving and
quality of Life. It allows for increased taxes for social programs, and it
alLows individuats to acquire more products and seni_ces The gtobat
factors influenclng a country's productivity are t:ade iiberaLization,
currency fluctuations, commodity prices, anc nci,rlcai stabitity.
According to the CrAWorld Factbook the U::l::c States has a GDp
per capita of $59,500 USD (2oth in the \,,-c::i,r -,..,hiie Canada,s is
$48,100 uso (:+th in the wortd). See Figure 3-5 for the top rankings.

Canada' s Role in the World

 What accounts for the $11,400 USD difference between Canada's
GDP and that of the United States? American businesses consistently
invest more money than Canadianbusinesses in machinery,
equipment, and communication and information technology.
Canada has a lower capital intensity, which means it has less capital
npr \^rorkpr than the United StateS. This difference between the two
countries has only been growing. In the i9BOs, Canada's GDP per
capita was about 5 percent lower than that of the United States,
in thp earlv 200Os it rnras I5 nercent lower; and in 2017, it was
1Q
rJ nornonf
vrr!!rrr
lnrnror

Figure 3-5 Top Countrres by GDP per Capita

GDP per GDP per

Rank Country Capita Date Rank Country (apita Date

Liechtenstein 51 39,1 oo 2009 18 Hong Kong 561,000 2417

2 Qatar 51 24,900 2017 19 San Marino 5ss,soo 2017

3 Monaco s115,700 201 5 2A United States 5s9,500 2017

4 Macau 5114,400 2017 71 SaudiArabia 5ss,300 2017

5 Luxembourg s1 09,1 00 2017 22 Netherlands 553,600 2017

6 Falkland lslands 5 96,200 2012 23 Guernsey 552,500 2417

7 S inga pore 590,s00 2017 74 lceland 5s2,1 oo 2a17

B Bermuda s8 5,700 201 3 t\ bantarn 5 51 ,80 0 2017

9 lsle of Man s 84,600 2014 t6 5wecen 551,300 2017

'10
Brunei s] 6,7 04 2017 27 Gef many 5s0,200 2o1i

1.1 lreland s72,600 2017 28 Australia 549,900 za1/

12 Nofway s 70,600 2011 t9 Ancotta 549,900 2a't:

13 Kuwait 5 69,700 2011 30 Taiwan 549,800 )'--'-

14 United Arab Emirates 5 68,200 2017 31 Denmark 549,600 )'-
t) Saint Maarten 566,800 2014 32 Jersey 549,s00 _ -,
to Gibraltar 5 61,700 2014 33 Austria (zla 7r

17 Switzerland s61,400 2017 34 Canada $48,100 201;

Productivity and 't1'= :- .

 Productivit
\n/hrr
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..\mn:'1i: 1c-r1orf'rrpv L, ffig
-- r- - *-.---. --J ILIIPUILdIIL: lUIll O _J!- i J!LLr

more nrodrctive a comnanv is the more orofitable it is From a

macroeconomic perspective, increasing productivity to U S levels

wouLd jncrease [axes, allowing for a tax cut, improved heaLth care,
d..tlu nr'in-.1 udyLoIL
nnur dr lldLIUlld.l ,l..,rc1p ouuJrui.
srrhsidv fFrom jndirridtral yrruy!rLrv
an frrurvruuuL
f ufii uri nersnecfive, all
Canadians wouid have more disposable income.
There are a number of ways that Canadian companies could
i rnnrnrrp fh oir nrnd r rfirritrr Thesp in clr r de'
""_t'""-)'- r

. Increasing investment in machinery and equipment, especially

communication and information technoLogy
. Attractins more foreisn investment

' Expanding Canadian investment in foreign countries, especiaLly

Asia
. Rationalization, which includes downsizing and moving
rrodrrction fo lower-cost countries
r Foqtprino
! voLLrfif6 ULLc innovation bv increasing snending on
cnrnoral
Lvryvf

science and technology

. Initiating government programs in science and technology
o Tnrrp:cino
f liLi uqJlrl6 thp knnrnrlpdop pconom\/ hv gradttating
"a) more
"-"' -

Canadians in the fieLds of science, math, computer science, and

pn oin pprin o
--'b"---"'-o
n Encouraging employers to increase and improve their training
programs
o Tnrroreind nncf -qp.nnd:rrr frrnnino
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ment^--\^i^ PlUBIdIll) jmm jgrarls beCOme
heln rrllrLi16ru-1eu
LU LlLLH uL!u
nrrelifipd in thpir fields of exnertise

Role in the World

Rub el
The rubber used to make tires, boots, and elastic bands may be from
a tropical tree (simply called a rubber tree) found in south America or
Southeast Asia. The bark of the tree is slit, and the juice (called latex)
is extracted. The sap is sent to factories where machines flatten
it and add colour. In 1839, charles Goodyear invented the process
of vulcanization, which makes rubber more durable, more elastrc,
and less sensitive to temperature. vulcanized rubber is resistanr ro
chemrcals and will not conduct electricity.
In Canada, approximatety 3OO rubber companies employ more
than 9,ooo employees and have sales of over $2.3 blllion annually.
Canada imports $1.8 blltlon in rubber annually.

Two-thirds of the rubber used in North America today is

manufactured from petroleum, of which Canada has an abundant
supply. So, why do we import natural rubber? petroleum is a
non-renewable resource and lts extraction is damaging to the
environment. white rubber can be recycled and used to make other
rubber products, such as playground surfaces or artificial reefs to
protect ocean fish, lts disposal is a major environmental concern. In
the future, because of its sustainability, naturaL rubber is very tikely
to grow in popularity.

Check Your Understanding

Where does rubber come from?

2 How is rubber made?
3 How impoftant is rubber to the Canadian economy?
4 Why does Canada import natural rubber?
5 Why will natural rubber grow in popularity?
 Many American retailers, such as Starbucks, Staples, and Home
Depot, have successfutty navigated entry into Canada. However,
some companies fail. Target and Big Lots exited after only two years.
Sam's Club also left.

One mistake American retailers can make when coming to

Canada is assuming that doing business in Canada is the same as
doing business in the United States. There are, of course, many
differences. The most significant differences are cost-reLated: labour
costs in Canada are higher; getting products across the border
involves dealing with customs and changing logistics; and labelling
and language reguiations also increase costs. Tn ?Ol5 thiq Trrdpt
store in Oltawa
Another issue is that the customers are different. Canadian qionellod itq imnpndino
consumers can be more driven by value, more culturally diverse, and closure after the
anmnan\/ qtrr r oolpd l'n
are a little older. Amerlcan retailers need to be well-connected with r^'-rih i-
LCtrtottt --^+if-f,]^
PrurlLautc lll
their Canadian clients in order to ensure success. Canada

--
- l-::ter 3: Canada's Role in the World
Th^ alnr;i.^
r rrc Lo.rro.Llro.rr L^- LrldrrScu
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dl^1-^1i-^+i^n T+ ia ^,tite ilnlikplrr
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6rwuqLr4qLlurr, rL rJ 9urLc
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for vour entire iife or onlv in the neishbourhood in which
\/nlr OIpr^I ttn Snmp nf rrnrr rnrill qnond \rpArc r^rnrLino nrrtcidp nf f-rnr,'l:
Jvu 6rrvv uy. uvfrrL uf jwu vvrLL Dyglru ygqlJ vvvtNrrr6 vuLOfuL uf Lqllquq,
rnrl nhrnra
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that ,/ " * will have between lO and
"^'*- vou 14 iobs before vou reach vour 40s.
Technological
f LLlirrvLv6r!uL develonments
uL v !LvPrrr!rrLJ havp 2lq^ r-'^'r
1lqv L qLJu 1lOU O^ '-ai^?
lllOJUI ^FF^^t \ln the
CIICLL

\^r2\r \^rp \^rork incrpasino thp r:tp nf rh:nop in hrrsinessps e nmnenies'

namna+i+irrn
LwlIlPELlLlV -,r,,-^+ages
E quv q11Lu6!u maV be ShO.t_lived
Jirv- Jv comnanies
L Lr v Lu, So rvlrrPqlrrLJ mUSt
rrr

LUIILIIIUALLy
i66^"^fe and anticiDate
^^^+i-"^rr'- IIIIIUVOL! q!! chanoe Comnefition
lrrsii5!. suirrPLLf Llvfl is
fJ more
r

lntense. Markets are open 24 hours a day.

Comnanies are rpstTuctlring to hecome leaner and more
r"nmnetitive This inclrrdes oltfsoltrcino to corntries with chpaoet
l^i.^,'' ^-'r Li.i^a
LOUUUI O]]U llluIE tpmnnranr
IIlIIl15 -.rp LslIlPUlqlJ errnlnyees. ManV newWOIkeIS
slIlPLwJ

are now offered contract positions, which means that they are onLy
hired for a specific time period, often one year. In this situation,
inrlirrirlrrrlc
IllLtlVl\.tLIo'L)
mnrr qiOn fhpir
nn1-112llrr r16rr
lIIO.y o.LLuuLLj Lriurr fprmin:finn
L!-rrri- n:nprs r^/hpn theri SiOn

their employment contracts. Contract work pIOVides an advantage

for emnlovers hecalrse fhev can lel emnlovees go easiLv and do not
need to narr henefits. Even thouSh this merr not he fhp hest situatiOn
fOf emnlOVeeS. it dOeS nrovide an OnDO-tl'ni1_v tn orin ovrorio1169,
",'r-.'"-
demonstrate one's talents in a particular company, and network with
nfhor pmnlnrrprs in thp indrrctnr

Another change in the Canadian workplace is the availabllity

of potential employees. By telecommuting, employees can use
comnrrters and other fechnologv to work f.om almost anl'r,vhp:e
in the world Comnanies can hire workers who are the best 1n their
fields not iust those who ale located in thp sa-np Tesion or willins to
move. TeLecommuting also gives workers the option of spending some
" "^"-"O from home instead of in the office. As well, it allows
**J " workins
davs
individuals to set up their own businesses as experts in specific fields
^^#^^6i^^ U^11+^^irrce
^^ Lu.tlrPd.l.tlcJ
d) U L)U *. nroiects and fasks such as human resources.
Canadians can telecommute easily and reliably because of this
i n f-r c'-r r r'r t
nr" lnrrasrrucrure.
r-nr r n trrr'< qf rnn d f--p1h n n1L0gy
-nn0

Productivitv and the char:

 LrrrpLwyLLr in lhe
F.mnlorrees rrr xt ^l-,-'
--"1
.^f^1 --^
LrrL 6LUUdt.tIId.II\CLPldLC.llCCJ LU hF\/p
'^ppd tn llptrr Of
llovq q vqrrLLJ
^,72
skills. They need the tech nical skilLs to be able to use computers,
smartnhoneq LLLL nh^^^-
Jr-lqr LprrurrLD, cell
.ll UI
^-.r dLL
p' 'UtlC), dIILl ^f rLlh^ .rrresnonIinp softwate.
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F,mnlovees need interne-sonal skil s rrn irr^-ttdino flev'bilifv the
^Lir+,, +^
dUlLlLy
.rnnr ^^-ilv to
LU d.\-LdyL Cd.JILi -- change
,--^--O,, - -) , fhe
Crealivit\/ ahilifv
-rrL uJ Lv wo-k
rLr LJt to vv v-r\ in

and contrlbute to a team, and a wiLlingness to continue learnlng.

Beins able to undersland sneak read and write in at least one other
l:norr:op is enofhpr imnortanf skill
Workspaces in companies around the world ale aLso changing. For
example, Google plovides free food for its empLoyees. Lines in the
company s cafeteria are carefully timed to be long enough to encourage
interactionberween empioyees from different projects, yet shoIL
pnnrroh
Liivu6ii thrt no timp is rnrasled The Google nLirnqo".lhtr is rhaf wolk
.-A Ptd.y nro
dIIII ^1..'
rnmnrtihle nL
C.IC LUIIIPdLIULL. A1 GooO\enlex
uuu6LLyLL^ (the
\Lrrc name
lIqIIlL rvr ifs
for rLr cornorate
LUryvrq

headcuarters in Mountain View, California), there are common areas

r^rhpra omnlnrrooc nrn nl:rr nnnl fnnch:ll \/^ll^.,1-1ll --;l 11\16
taUte 161
-*.., . OtteyDatl, dn0 Lennis,
allowing them to reiax, network, and work at the same time There are
veru few sinsle offices and most r-"r'-
neonle work
" in cubicles with three
or four other people. Cubicle walls have been lowered to allow more
interaction and collaboration, and the cubicles are made of materiais
haf r-:n hp
fLlluLlqll ULLqOILJ
yp1anF'a't-aA rn
peqily lllurlIlSUICU r.i:r,-a LU nprnpfl
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SeeEierx review
teams. All of this heLps reduce turnover and aLLract excellenr employees.
Occrrnations are also chansins.
-"""b'' Manufacfuring is moving to 1 Define productivity. How is it
measured?
countries with cheaper labour. Routine skiil-based;obs including
simnle accounf ing and enoi neerirg a-e moving lo e orrrrries with 2 Why is Canada's productlvity
q-'n+^'-n '^'r;1. To thrive in the workforces Iower than that of the United
strong education
Luu!qLrvrr uyJLClllJ, -"-r^
)LLL-l-i ^-
dJ llILI.L(
States?
of deveioped countrles such as Canada, the United States, and
3 List five ways Canadian
*r *__, workers need skills that allow them to do more than routine
rJaoan, aamnqniaa ^^- ;nnlove
LUlrlPqllltrJ L4r1 lrlrPr thei-
tasks. People working in Lhese economies need to be creative, vuuL-ri-,ir-,
^.^..1,,
Pr Lr v rLy .

artisLic, and focused on the big picture. Jobs thaL require these 4 How many times might you
skills incLude computer software engineer, video game creator, and change jobs before you are
environmental researcher, as welL as positions in health services, 40 years old?

,,o*-.,
ofO: n j r' n Ori rt tltt t rp rnr'l nnanotecnno-ogy.
J, ano n n nl-ar1. .^
^' ^. 5 Explain how companies a:=
rlnr.:'
6f E;LUUa.
changinO hpearrqp vI
comnctitinn
--___r--_'^-__'
6 What skitts will you nee:
to work in the Elobal
mrrlrotnlne p7

7 How are workpiace .

chrnoino
-_^*__D___d
t. mtra-
nf thc olohal pr- ---::-

8 How are cares:: :':.1-:.:-.:.:-

].^-^,,.^
UCLdUJC ^:-'--
U- ---: - ---
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markeip.=:=:
 Chapter Review
nowledge
1 Describe how Canada compares with other countrles with respect'to
size and popuLation.

2 List the three sectors that make up Canada's GDP. Which is the
'-_o--_' I
lFrdtrql-

Define compeLitive advantoge and explain why it's an important

conceDt
-'__--r _
in jntprnal innal business

List three reasons why Canada's banking system avoided many of

fhe npsative effer'fs from the 2008 recession.

Pick two areas wrthin Canada's culturaI industry and explaln their
j.nro-'r nr^p Prnrridp an elamnle of a sttccess stnr\/ rnrifhin earh r1p3.

Defi
rLri.rL te
fer-r fareion.- investmenL.
he -Li_rlJUrc',9
rL_]L . and cor^^-^
,--IIPO]C
rr-^ 1,^-^Gr- Ott\
Lltg UCIICIILJ ^-C
risks associated with it.

!1JL three ey:mnlpq

LiSf LII]qtr CAOILIPtC) UI t'.,.1o
,rf LIdUC d6iCClllt:llL) ^nd pynl:in
-dr^^rm^nl-. d.Iiu LApLqfir hnrnr
rrvvv thprr
!rrl]

stimula fe fo'ej gn investme nt.

Wl^v Crnpdr'sD imlr;-r^+i^h

is !qltaua
!r L-J ro 1IlII11l5IOL1U11 PULILJ
^* OUV
^^l;-,, Oll ^r,/nnfiOe
qIILobL fnr
f vI i.rfernationSl
I-lLLIllqLIU

business?

What is the Human Development Index (Hlt), and why is it so

imnortnnf?
____r-_'*'_''

10 Defrne the concept of productivity. Explaln how it is measured, and

list three \^IA\/q ! cnlrntrl/ r:n imnrnrrp
__--....r- itc nrodrr.tirrifrr
rrueq!1,
\n/hv ic th
,,_/ -. -,IS
mptrir qn imnnrf:nf fnr r r'orrntnr?

11 Defrne telecommuting and exptain how it has impacted international

busrness.

: l:rada's Role in the World

I
Thinking
ul ln which of Canada's three sectors would you like to work? Explain
your choice.

lil Do you think the phrase "hewers of wood and drawers of water
describrng Canada's business impact is still accurate? why
or why
not?

|l Iist three things that are unique to Canada that help attract foreign
rnvestnent. Explain your cholces.

r5 p-rplain the importance

of the cultural industry in Canada. List five
products ofthec that vou
basis.(Hint:you' one right
would happen if vernmen
support to the cuttural industry?

l5 Based on your career aspirations, in which sector do you

see yourself
working? Expiain the impact of foreign investment on your
sector.
El would you consider telecommuting for work? Compare the
benefits
and drawbacks.

Communica ion
t8 In a small group, create a half-page description of "Brand Canada.,,
Exchange descriptions with another group. Is your description
similar to theirs? Why or why not?

19 with apartner, discuss the foilowing quote from prime Minister

Justin Trudeau: "Canada has iearned how to be strong not in spite
of our differences, but because of them, and going forward,
that
capacity wil1be at the heart of both our success, and what
we offer
the world." How can our diversity be used as an advantage?

2O In your opinion, what are Canada,s top three competitive

advantages? Explain your choices to a classmate. Does your
classmate agree? Why or why not?

2l Pick an international company not currently operating

in canada.
Create a one-page persuasive argument for why that company
shouid consider doing buslness in Canada.

Chapter Review | 117

 Application
States. How
22 Research the top competitlve advantages of the united
do they differ from those of Canada? Are there any connectlons
between competitive advantages and trade between the
two
countrles? ExPlain Your answer

23 ExplainhowyoumightusetheConceptofcompetitiveadvantageon
a personal level to help build your resume'

24 In a group, brainstorm features of your town or city that are

attr to foreign lnvestors. Create an infographic hightighting
the major features.

25 you work at an up-and-coming music productlon studio tn Toronto.

Yourbosshasaskedyoutoresearchagovelnment_fundingprogram
that could heip support the growth of the business' Do some
research and choose one federal, provincial, or municipal
funding
program. Draft an email to your boss summarizing the program
and

its eligibilltY requirements.

26 What skills necessary for the global marketplace do you currently

possess? Which skills do you need to acqutre? Explain wlth
examples.

Role in the World

 Inquiry Activity

In this chapter, you examined why Canada is a great place

for
foreign investment. Some of these reasons include quality
of rife; a
supportive business environment; Canada's position as gateway
a to
rhe world; and infrastructure. However, if a company,"ur.
irrt.rested
in canada, it woutd atso need to pick a city. In a municipatity,
it is the
,'cb of the economic devetoper to attract business to the area.
Assume that you are the economic deveroper for a city in
Canada.
You can select any Canadian city. Research and explain
three reasons
.'-our municipality
is an excellent locatron for a foreign business.

Compete a chart like the one below in point form. Be as

thorough as possible, and be sure to give yoursetf plenty of
room in your chart to inctude your responses.

My city:

Reason 1
Expla nation

Reason 3 Explanation

Using the notes ln your chart, create a format for your

information that could be sent to a potential foreign investor.
It could take the form of a brochure, handout, website, video
letter, or any other medium you choose.

Select an actual foreign busrness that you would tike to

attract to your municipality. Tailor your communication to
that specific business.

Inquiry Activity | 119

Appropriate dress is important for communicating a professional
image. In the Business Skills section at the end of Chapter liyou
iearned the critical lessons for making a good first impression. But
the chailenge doesn't end there. Being suitably dressed for work is
something to conslder throughout your career.
Acceptabte attire is different in each country. For example, in
Japan, businesspeople dress formally and in dark, subdued colours.
Custom dictates that shoes should be easy to remove. In Jamaica,
at formal meettngs a suit is required. However, because of a hot
and humid climate, lighter, more casual, yet professionaL clothing
is appropriate in daily transactions.
So, what is appropriate in Canada? The answer often depends
on the company, and your role there. Many businesses have
abusiness casual dress code. This dress code is ambiguously
defined, but usuaily refers to neat yet casual (non-formal) attire,
including neat pants, casual skirts, dark-coloured, non-ripped
jeans, button or polo shirts, and simple sweaters or tops. However,
some companies (like many banks, investment firms, or law
firms, for example) have a more formal dress code. This usually
means a medium-to-dark-coloured business suit, inciuding a
jacket and matching dress pants or dress skirt. In addition, formal
business wear can include a buttoned-up shirt with a tie. sandals
Or trainerS ale not aCcpnfehlp fnr pifhor h'rSineSS CaSUal Or fOrmal
business wear.
Here are some additional tips:
. Hair and nails should be neat and clean, and any jewellery
and make-up should be simple.
. Make sure your clothes are clean and pressed, and do not
appear damaged or torn.
. Avoid showing piercings and tattoos unless you know that
it's widely accepted within the company.
. If you are in doubt about the dress code, ask your manager
and observe those around you. It is better to be more formal
in the beginning until you are certain of what is suitable.
. If you are unceftain about what is professional, ask for help
from an experienced colleague, friend, or family member.
 Appropriate business attire
Questions takes different forms, but the
consistent markers are neatness.
1 What is the dress code in your current job? simpliclty, and muted colours,

2 Find a company that you would like to work for and research
its dress code.

3 Name three clothing stores in your area you could go to for

help in finding professional clothing.

4 Give an example of what not to wear to work in Canada.

Activities
1 Imagine you are starting a new job. Shop online for a new
wardrobe. (You don't need to actually purchase the itemsl)
Include at least 10 pieces, inciuding shoes, coat, and socks.
Provide pictures and prices. Total the cost of the wardrobe.

2 Pick two countries in which you are interested in working.

Research the dress code for business in those countries. Are
there significant differences to what you find in Canada?

Business Skills I 121

 *" ',0
.-! I3*s -

By the time you finish this chapter, you should be able to:

' Analyze the ways in which cultural factors influence international

business methods and operations
' Analyze differences across cultures in perceptions,
interpretatlons, and attitudes that might affect how individuals
work in another country
' Compare meeting styles and negotiation strategies in other
countries with those in Canada
" Describe the challenges an international company may encounter
with regard to values, language, and business practices in the
various countries in which it operates
Key Terms culture cultural norm
subculture monochronic
counterculture n nl rrrh rnn in

cultural intelligence spatial perception

commodity culturat dimension
rationalization
A oerformance ar rhe Victoria
Tndroprorrs Crr-lrrra' Fesr'val in
2016 hiohlidhfs onp comDonent
of Cpnada'c cnr"ntex cr rliural
m elzer r n
124 | Chapter 4: Culture in lnternational Business
4.1 What is culture?
Globalization is a complex and multifaceted process that refers to
the growing interdependence of peoples, cultures, countries, and
economies around the world. In an increasingly connected world,
ideas and culture spread quickly across the planet. People in other
countries, especially young people, have easy access to cultures
that are very different from their own. Linked by social media,
whether YouTube, Twitter, Snapchat, or Instagram, peopLe are deeply
engaged and have a broader understanding of cultures than ever
before-whether through fashion, music, technology, or even video
games. Pok6mon Go, for example, was not just a local trend, but a
phenomenon experienced in many places across the gLobe.
In another example of globalization in pop culture, in the summer
of 2OI7, a collaboratlon between CanadianJustin Bieber and Puerto
n;^^h Av+;a+^ n^rr" q glohal rrr
hit. The
l\1Ld.11 dI LIJLJ lJdLILly Yankee cl]]Ll Luis
I d.II-t{!(:C and LLIIJ I \J-L-Lor hecame
Fonsi uLLqrrrL a 6LvuqL
Spanish-language "Despacito" became one of the longest-running
No I sonos in II S histonr and the most-watched YouTube music
video ever, with more than 3 billion views. Even Sesame Street joined
the craze, creating a kid-friendly parody video titled "El Patito"
(Spanlsh for "the tittle duck").
Indeed, when many of us thlnk of culture in the age of gLobalization,
we immediately think of music, games, or other pop culture
phenomena. But as we'Ll see, the impact of culture, both in Canada and
abroad, runs deeper and affects business as well as our sociai lives.
 In the midst of rapid globalization, it is important to remember that
not all societies are accepting of Western cuLture. Many traditional
cultures are threatened by the influence of Western music, fashion,
and other cultural trends and feel that they represent Western
imperialism. One of the first rules of business is to acknowledge
the perceptions of local cultures before attempting to introduce
Western products, services, or customs.
But what is culture, exactly? Culture encompasses the
knowledge, experience, beliefs, values, attitudes, religion, arts,
symbols, and possessions acquired by a group of people over time.
(nrno ecnontc nf rrrlflle afe tfanSmitted
TLLLU frOm
rtVfrf One
vrfL generation tO the
6LIIEIqLlVf.
next through education and by example; other aspects are acquired
through changes in beliefs and norms, and through exposure to new
ideas and influences
When new neonle enter a region for
rvr examnle
Llrufril/LL/ one
vffL of Lvv v thinos
vr trnro Lrrrrrt)u

can happen. If their language, values, habits, and attitudes are

similar to the peopLe who are already there, they are assimilated
into the existing culture quite easily. If, on the other hand, their
culture is quite dlfferent from the existing one, rmmigrants wi1l often
form their own subculture. A subculture is a cultural group within a
iarger or predominant culture, distinguished from it by factors such
^- Lt.dJJ,
o'D ^+1-^i^ L^^1--rottnd
^l^^^ CL]]IIIL Ud.LI!B__ *--*r rplioinn
-e!-o4v,,, _- lifpqtrrlp
or .,,___J srrhcrrltrrrp< rrp
Opnerellrr rrnifiod
urrrrrLu 117 chrro.l haliafc
uj JIIOItr\l .-']
UCLICIJ d-]lu
:
I interests, and they aren't limited to
immigrant populations; you can see
I subcultures that aren't defined by one's
; -"*''..-,| of orjgin p\/pnn^rhprp prron in
cottntnr
I
rrorrr hioh qchnnl
J - *- ---O--

Anrl
nf ru jrrof
E Lr fmanrr
trqrrj imminrrnf
]t]]rlf I5I ollL
communities do exist as subcuhures in
Canada, bringing parts of their culture-
including language, religion, and food-
to this country. In the 2016 census,
more than 7.7 million people reported
a mother tongue other than Engtish or
I
French The festpqt-ornr^rind lendrrroo
in the country is Tagalog, a Filipino
language, followed by Arabic, Farsi,
Hrndi, and Urdu.

What is culture? 1125

 Canada is considered a multiculturai natlon because it encourages
r,'rithin the
and supports hundreds of different cultural groups
overall canadian cultural fabric. This multiculturalism has been
groups exists
called a cuLtural mosaic, as each of the different cultural
prcture of
independently as a sep rate "tile" that makes up the total
Canada, from Indigeno s peoples to every rmmigrant
population that
has settled here.
In any soclety, groups may also form in opposition to the
established cultures. These gloupS embrace a countercutture
to
oppose malnstream values and attitudes, usually with a
view to
influence change. Examples of counterculture include
. punk, as a form of music as well as a plovocative attitude
toward mainstream culture;
. street art, which odglnated as social commentary, and has risen
fiom iocal to international influence with the work of Banksy,
for example; and
Stieet art as a form of
counterculture: A mural bY the ' the Occupy movement, with its critique of the world's
B*iI tsh. streeL ali,t Banl'")' tri:h drastically uneven distribution of wealth and social welfare.
a message of Peace was Palnied
I on a t',iaLi in the West Bank
tcwn of Beit Sahour, east of
I BethLehem
paties and p3 :-:-r. : _-r: :: _::=_ : _-:: _:_.,:-:.:iObiC, an intenSe
disLlke or fea: c, :=::'= _: -:_-_ ,-_:_=: __ *llies The fear and hatred
toward foreigners c: a:-, :n_tg foretgn has been rising as many
countries dea with changes in imm grarlon and migrant populatrons.
In Canada, as the popuLation ages, new immigration is easrng
'_r-- tr.
labour shortages 1n the country, and Canada's rate of immigration ",' , .'
has increased for decades. Canada's cultural mosaic and the Lesal
protections against discrimtnation are a part of what makes 1 Define the term culture,

this country a desirable destrnation for families looking for new 2 How has technology
influenced culture?
opportunities.
3 What might happen when
aperson from a foreign
culture moves to Canada?
4 Glve an example of a
subculture.
\ aaan Tdrhd t^ t-j

census, what =-= --=

F^ -+^-+ ---:
o- - --: --: -- --
Lanaoa:
6 De1:= ,.a-.:--' :: -'-

127
 A demonsuatjon in Mex'co Ci[y,
2016, in which tens of thousands 4.2 Business cultules around
of farmers marched to improve
rno
LIltr dn\/ornmonl c n^lif :p.
BU!C.I lrrtr-r! r PU-r!rL:
relating to agriculture Like
the world
Canada, Mexico's agriculture
As technology distributes goods and services across borders,
sector contribules a small
portlon to the nationaL GDP globallzation continues to connect various cultures. When doing
(3 5%, compared to Canada's internationat business, it is necessary to understand important
2%),b.tt it is stlll a vltal Part
of its economy, and emPLoYs
cultural differences when working in a new environment'
- -:a^:1.^-! *^ I
d >1BllIr1Ld1IL PslLcrtLaSc !.itS
Canadian companies that expand into the united States find
rural populations
customers who have similar cultural preferences to their own.
Americans eat much the same food, dress the same way, and English
is the dominant language. They hold a similar range of religious and
political beLiefs, and share many of the same shows, music, books,
and products. This shared cultural background is one of the maln
,."ron, the United States is Canada's major trading partner'
Other countries, however, have very different cuitures shaped
1^.,,,-?i o fnnrnro inclrr din o freli
^1, Id.LLUIJT rrlLtuufr16
uy vd-LIULI>
gion nolitics tonogranhv. climate,
Ltr6rvff,

t irtory. The relationship between business and traditional

"rrd
cuLture in countries such as China, Japan, and India, for exampie,
nfren varies greatlv from North American practice. Anyone working
in international business needs to understand and respect these
differences. Cultural intelligence refers to the capability to adapt,
relate, and work effectively acloss various cultures. It's easy to see
why this is vitally important in today's gtobal economy' In this
section, we look at some of the unique aspects of business culture in
diffcrent narts of the world.

128 | Chapter 4: Culture in International Business

:.-4
Slnce the creation of the North American Free Trade Agreement
/-- " -- " \ - -
(NAr 1At, tvtexrco nas Decome a Key rraorng partner with Canadian
hrrsinesses Althorrgh Canada shares manv hrrsiness crrstoms with
its bordering nelghbour, the United States, Mexican culture is
sisnificantlv different Perhans the sinslp hiooesf differencp with
cnndrrrtino hrrqinpqc in Mpxirn ic thp orp:fpr pmnhesiq nn dprrelnnino
trrrcf in nprqonrl rplrtinnchinc

Both immediate and extended family are important and people

resDect authorjtv Societri and httsiness ere verticaLlr structured
;^ 1^i^-^--L-'
11I d- IllCIcllLIIy.
n-^r- rJ imnortant
-tr\d.]]lt is rrrrpvrLqrrLi and Mexicans are a',..-a:e of how
qllu r'rL

indivlduals, whether in family or business, fit into the-r s::uctures

It is imoortant for a Canadian business to herrp:n p'-nr ---:: -'''lc IS
a decision maker, such as an executive, who will be presen. L,-her
negotiaLing with Mexican co mpanies.
^'ir'^
vlltlNq -^.^rdians OIIU
IIIaII_V and Ameltcans
!OllOUlOlL)nlIlCIiLOllJ VVrrV nre[er
who fUlrr!r fo
Lv keen
R!Lp

nprsona- dpf,:i'< rhn'rf thp.nsplrrp< ,ana-t fJOm business relationshins

personal reLationships are at the centre of most business deals in
Mexico. Lunch is taken around 2:OO p.m and lasts Longer than a
regular Canadian Lunch-usuati.v nro hours. Unllke the custom in
,^^-^,r^
LOIIOUO, ^^^^l^ -f --.1 VerV.
JLAIlU v!1j c-ose to
!.wJ! Lv ea,^L
Lu!-- other
vLrrgr, ard C-eaf,ng What
PCUPLC

would be considered an appropriate amount of pelsonal space in

Canada could be seen as unfrlendLy in Mexico.

Personal relatlonshlps matter.'Take tlme to Atthough English is wideLy spoken, a translator

dprrplnn lnno-fprm rpl etinn chinc in hr r qinpc< who speaks Spanish may be needed.
Business declsions are made in a structured Formal educationaL titles such as "Doctor" or
hiernrchv Be srrre tn deal wlth the correct "Fnoinppr" Arp rommnnlrr rrspd
npnnl p
Pcnnle sfand mlch r-lnser to each other than
Managers provide instructions to subordinates iq dnnp in mrnrr nfhpr rrrltrrrpc aro:tino mnrp
and lead by giving directions. norqnnnl qna.o.nn hp qppn .ac rrnfripndltr
Do nol criticize neonle in front of others or A nnnrrnnrnc
10 nPytr4lo1lLtr) m^{-F^y Tlrpcq
IIIOLLtrt, :nnrnnrinf p r; - - -
trLoJ qPyruyrrqLL.-r - --
onpnlrr
- r -'-'f
in
___ mpptindq
___--'___D-' hrrsiness mpetinos and social events.

Time can be more flexible. Meetings can l1 Lunch is taken around 2:00 p.m. an: :-- ',
start and end late and agendas are not often two hours.
nrodrrced nor stricflv followed
Emofion is nftcn d isnlavcd in meetings ,qnd is a
sign of engaoement and commitment
I
I

-f
Though there is no free trade agreement between Canada and
Brazil, BraziL is South America's largest economy and a gaLeway
to the continent. Brazil is a country vrirh great opportunity,
but international businesses have tradirionalLy struggled wlth
ifs
,." hiOh
rrrbrr taxes
Lq/\Lr, nnlilir-al rrnrprf,r
ufiLLr
jnfv .: nd
:r .nr-r'nf inn nA mi
LUtf UpLtUIl. itc-rr
tltrtlLOi)
IJvrrLrLuL

dictatorship that lasted for two decaCe s (tg0+-tgSS) left many

services underdeveloped. Howeve: -:-::e are many opporLunities for
Canadian companies in this resortr::--'ch country, particularly in the
information technoLogy sector.
r^-ir.' -^rrU ^^--^nal
r q1111Ly Or PCr JU. relation:f--:: ::: o'preaf in"nortanre in
Brazil Estahlishino e ner"o-pl d'* -- .'-* Lo the buslness relat'nnsh'n
1!rr rrLuLrvrrrrrrP
thtough social events 1s part of bu. : --= -:Lst with Brazlllans-and
ttsttallv essenlial fn negotiati.^S z '- : *: ):tant businesS dealS
are usualLy done face to face (nor :- ::-::: :i email). Brazilian
businesspeople may feel insulte: -- = : -:-:-=:s representative visits
them hurriedlv "- infreouenrlv
*'J or '--.' -'1
:-:-'':-
: -:- :_ave a relaxedvrew
of Lime and meetings ca- hp r--
c j:':" -- --: -=:celLedwilh little
walnlng.

Ppnnlp rn Rr:zil m:ri si:nd elncor fn 1/^rr r^rhilo 6 Meetings

__-!4___o- are
*_- senerallv relaxed
o-__!i_*'f _ and informaL
qnprkin o
7 MppfjnOq aAn chrf L urru IllllJll lrf^
2n6l Finiolr LdLcr dllu rrnnzln^
^n; dBCllUd.J
Handshakes are a common form of greeting in are sometimes not followed or even used.
business. Men and women may hug or greet each
It is common for Brazilians Lo interrupt each
other with one or two kisses on the cheek when
nthpr
"'.,'. **..'-b mpptinoq :nd dnino <n iq nnf
drrrino
mppting
---""'''b infnrmelkz
considered rude but rather a slgn of interest.
Brazilians speak Portuguese. Many speak
r^dl;-1^ l.-i-i-* ^ *-^nql:tnr Expensive gifts should be avolded, as they couid
r,lrElrsrr, l.,,+
uuL ltll.[]g a Lla.._.*-_-m:rr hp noap<<21
,,_--_*Iy be considered a bribe. A small gift when meeting
Business cards and product information, such as
for the first time is acceplable.
brochures, should be in Poftuguese.
10 Business attire is often formal and consen-:----.
Meneoerc nppd fn hp dirprf:nd oivp rlp:r
even after knowing your counterpart
instrttcfjonsCornornl-p StruCtUIe can be
11 When meeting for the first time, Br::- ,. - -
comnlpx It iq nftpn difficr rlt fn dicfinor rich
between the influencer and the decision maker introduce themseLves formally r'.--'-: '.... -..-.
-

and fulL name.

Relal jonshins rrp kerr in Brazil. Take time to
*- ' -'"r fhpm.eq hrrqinpqq iq:lrnnrrc norcnnri in
dpvplnn
Brazil.

_': 131
 Business cul ure in China
The influence of China in internationai business today cannot be
overstated. Much like the united States and Japan during the eariy
twentieth century, China is leadlng the world in economic expansion.
Developing relationships is crucial, and understanding Chinese
culture is necessary for any business wishing to enter this foreign
market. Chinese society and business function in a highty structured
hierarchy with respect shown to age, seniority, and educatron. Guanxi
is a common business concept that international businesses should
understand. Though oftenused incorrectly, guonxibasical$ refers to
bullding a network of relationships for business and personal use. In
Canada and other Western economies, deats can be reached during
hrqinocc
u uDIf fEDD lrrLL Lf r16o, cnmptimes rrenr aricklv. However. in China it is
mpptinoc
essential to spend time outside of a meeting, in dinner banquets or
toe
LLq cpccinnq
J!JJfVrfO, tn dppnpn thp rplatinnshin
Lv uLlPLrr

uqv rfr6 ruLL uriu lcPuLqLlvfl qlL jlpnnrf.nf

,,eerrinO f:ro" end "rpnrrfetiOn" 21p rfrrPvf .^n.anfc rn
Chinese culture, and Chinese people tend to develop trust through
buitding business reiationships. The ruLe of law, though getting
<frnndpr
JLl' r6Lrr heq
frUJ vf LLfr feiled to nrovide lesal nrotection in Chinese
nftpn
qnriptrr.-"YJb-.'.-.."tr--"'Jl
cnnrrrioht infrinoement. niracv, and brand knock-offs are
still a concern for international businesses in Chlna. Under Armour,
for example, launched a lawsuit in 2016 against Chinese firm
Uncle Martian for using its logo and violating trademark and other
arrcinmorc inenoaf ! dirni
*-^^^_,,;-- dL
-r OlMrlLfOt
^- ^r4^i^trhdel
intpllpctual nronertv rishts Under Armour was awarded $300,000
1lldl11lCtlUrl1 U

Armour store in Hong Kong

ih
ItI /lnm.d6o
Lldllld.BtrJ in c LrrrttsDE
Ill q fhinoco rnrrrt
lvuf L rrrrlinO
urf 116'

For Canadian businesses, China

is a growing market full of potentiai,
and Canada's second-largest export
market. However, in order to succeed,
businesses need to conduct due
diligence in researching and planning
to enter this market. Hiring local
znnrnonnfofinn
ItrpICJCI]Ld.LlUtl in ahin: iq
ro kprr fnr
rrl.llrfq ^Li rvr
any muitinational business, as
there are often close relationships
between upper-level managers and
government officials in this country.
Despite being a difficult market to
enter, ti:e rervards and potential for
success are vast.

132 | Chapter Cu ltu re lnternational Business

 When doingbusiness in China, do not lt can take man\/ mtrtrlinoq hpfnrp yrv6rLrr
nrndrpqe nr
wr
undereslimatp thp imnnrf:ncp nf yLr nprqnnrl
rv,]a- conclusions are made. Meelings are often a
felatinnshins T.nno-tprm onnlq rnd nhiorfirrac
rLLoLrvrrJrrrpJ. LUrIE-LcI--- _-J---,",- c
JIe way to buitd reiationships rather than focus on
key for doing business with the Chinese. snerifir nhiprfirrpc nr
vr ru hrrqinocc
vqJ[rLOr fnnir
LvPrL,
2 Managers tend to be directive, which reflects the 6 li"i r r^x diFl :^ ^ ^r c , _-y **; hr r cin p<q in
urv 15 6lr LJ^ lJ d -^-r L ul
PdI "tzpnld:tr
hierarchical nature of soclety. talhia^
LI]tt1O tiF+-
UIIL) OlC^-^ ,,^,,^il.. nnpnpd in nrjrretp
UJUd.Lty _r _--_*

Avoid being too direct, and keep in mlnd that it Always wrap glfts before giving them.
is traditional for the Chinese to avoid saying no Do roi nncnlrr diq:orpp rarith
vvrLrr npnnlp It 1r
ic
PLUPLL 1L
directly. important not to lose face in front of others and
4 Business cards are exchanged at the beginning of tn rpenp.f rr rfhnrihr
meetings; treat the business card wiLh respect. A1- ihp pnd nf p mpptiro :llnrnr ahinpctr
r11]LJL nf,rf narc
POI LIICIJ
Present the card with both hands to leave first.
 Tanan's cltltltre is also cuite different from Canadian culture. The
predominant reLigious beliefs inJapan are Shintoism and Buddhism,
often in combinatlon. Both are polytheistic (the belief in more than
one p'od) and naturalistic oivins sreaf resnect and sjgnificance to
the natural world, especially the "natural order of things." This belief
in natural order, in particular, has shapedJapanese culture; it is
reflected in the hierarchical relationship among the people of Japan.
T^h^^ .r'r.^ T^^-^^-^r^--,,^ge €^.,,r".^,.1 ,\,^,, ,,^..h
currenry DUys i..-f
Jdpd'l ^..--^-+1.,L.,,,- lusf over
^ IttcJoPd,llcDtr haS SeVeraj
tdllE;tld.6L rrur JL r !rqr WordS
vvvf uD IUI I d.llLl yUU, Cd.L Of
)5 nprce^t of'-c -vL p2' 'tlDolts
which indicates the status of both the speaker and the listener. An
from Canadian sources, valued
el nF,arl\/f,5OO mill nn:nnrr:ll,r older hishe'in
_ -*_- roerson is ---o--Jr rrl afnr'n ir'-^ )uu-.o*- one for examnle.
DLo.LU) Ltld.I] d- "^unger
Apri. rrlrrrre erd lnod nr^drlcts Tfn:nO<o rttltttrp
ruLLurL nllro. r dT^nf Lrqd. imnarfnnna nh JLd.LU).
ol'.frro
JqpqrrLDL yLqrc) cl 6lrdL 'l^.- U.l
^f lI.t.tPUILctllLC UII
ennfinrp tn hp qioriFieant
ht tsinpqq .nn.rtr nitioe f^r
r MostJapanese wear Western-sn-.e dress, but the ceremonial
Canadian businesses kimono is still worn (mostly by wome:) on speciaL occasions. Western
culture, symbolized by fast food and A.:.erican films, is embraced by
Tananese voltno neonle hrrt Tananese ..
l:e ls stiLl dominant in terms
of popuLar food choices (rice, noodles, su-<rl sports (martiaL arts, sumo
wre stLing), and enteft ainment (manga,,.--c: c galne s ).

The Japanese have a refined sense of e:-: i.::: v/ith numerous

sor'ial exnecfafinns of themselves and othe :s. _-_ Canadtan
businessperson who faiLs to respect these tia:-:-:::s and ruLes
of behaviour is at an exceptional disadvantag: -:r a:r-,- I -s-ness
transaction. For example, there are a host of er:::::---:::>
qrrrrnrrndino thp f r:d'if inn nf oift oirrino in Ten:- -- =- =--=--
J *I.*- -

httsinessnerson shortld know.

GifLs should be informal when visiring When entering a house, it is important to belittle
somcnnp'q hnrrqp hr rl lnrm:l rnrhpn mcptrno your informal $ft ('1t is oniy a token, but..."), and
someone for the first time or when srarting a to present rt when asked into the living room.
httcinoqc rplrtinnchin
Do not bebttle your girt to a businessperson, as
ThF\^/rAnninornd
- --' '. .*Tr-. nrtrspnlefrnn nf fhp oifti< thls shows a lack of respecl
ofl en morF imnnrtenf rhan f hp oift irqplf
An informal gift can be brought in a paper
FYI re\/zotnf oifl s :rp nn'
,.J- dliplet.a-tu, nc tha'
c^nra-:a-a.r ito Lfle! o
Se L bag (preferably from tJre store where the gift
ttn inpntr:lilipq hpfrnrppn oirror rnd rae airor was purchased, 'r-tren removed from the bag
A pifl- shorrld nrlrrhe I rwranned hv lhe rer-rricnt and presented with both hands to the person
when ]'he rer'jnienf js invited LO do so receiving the gifC with the bag beneath the gift.

134 | Chapter Culture in International Business

Tndia's ecnnom\/ is onp nf thp f:srpst' b'"oT'-.-'ra-' in rhp rnrnrld Thp
coltnfrv's i n frasl'l rctrrre--o26le 2'nn--: -: e-on -n IIn'cations and
pnprov-is
Li rLr6j rnn<f:nrlrr
rD LvffDLqf pnn:ndrno ,.-Aq:-. _-=,"
iLL) L_!iq]Lu1_16 -. -.L
r thp enrrnfnrj fnppd.
Lr Ll rUUllLl rscuJ

foreipn
rvf Ll6ri i"rveslmert
I -l v lJLlllL-lL and
urlu nro\/jdPc
PIw v luLJ
q ---1 - - -,- JUI LUL || Ly IUI LOllot

and international busr ness.

India is a diverse society with :: ^.-- -:.':a. and multi-ethnic il n1ta

differences between iLs norlh a: : :: --.- ;:
'gion is a part of
everydaylife; approximateLy B - : -:- ---- -. -:djans are Hindu, and
annroximatelv l5 rercent ale . . '- - -._= :_ainLains a 63519 5vste'n
which divides peopLe by oc - *: :.- - r.. -:- - - . ' '.- nain groups: Brahmins,
v-r^--;-,^-
l\JllqLr])OJr rr^i^1-.,,-^ a^r :-
VOlJrryO), q..- _
:--:_ : :____.
*-.-- -._. ...a__.)
ljShlVValUed a.rd
ne-sonal relationsLins ca:_ _t_:- _..' - . _:_::- -A,rransed p3Jli3ope 21o
common and acceptab,: :: :- -i -'-- -:-= :=-:.: and famiLles with three

:, - ----*:: is hierarchicat and

end late and can be interrun.a: -:=: -:r -

Never Louch someone's head, such as patting ,', -:-::- :::L.c ]ot wear tighr or reveal.Lng
the hair of a child The head is considered the r-lcf n'--- i-r'-<.:.;jfh ntrtc
---- j-uriLJOIC srofor-o; rr'.o-
D-o ylClClfCU lOLllCl

seat ofthe souL than skins. Indla is a conservative society Men

Callino cnmponp \^riih \/nrr indpy Finopr rnd should wear a suit and tie in industries such as
l-.^l'i-^
uor 1^u1ti.
nalrr rrn r-nrrld he ronsidered an insutt.

Consider \/olrr nnqfrrrp Sfrndino r^rith \/orrr Lrrrch mepl rnps a re nreferred. Hlndus do not
handq on rrorrr hins c:n hp infprnrofpd :c en eat beef.

angry or aggr€ssive position. The cow is sacred to Hindus Leather produc-,

Feet are considered unclean, When sitting, such as belts and handbags, may be offens-" -

never point your feet at a person. 10 Avoid using the word 'no," as it is cons' j= -: -
rude. To refuse an tnvitation, use mor= -. -:
Do nol- nnpn
'r'-- o-- -" in frnnt nf thp oift dirrpr rrr:ir
oifts
rrnlrl the nFrqon has le[L refusals such as "we'lL see," "l'11 Lry' -:

n^ fluL
h^+ +1.^-r,,,^,.- L^-*S aftel 11 Tndians slgnlfy 'yes" Lo a quesr'r:. :
ru L]]OI1N JVUl llVDL a meal. lt Can
''
a nd moving their head i- a 1: -:--
insrrlt thcm es "thenk Vou" is consldered a form
^F ^^,,-
ur ^-+ nail trrr similar'n'hnhbll:..
Pdy r11c111.
 Saudi Arabian culture revotves around the religion of Islam, and
its practices and beliefs shape the behaviour of the Saudi Arabian
npnnlp Firrp fimpq p\/^-',,.1^.,
L;ery uay, aLL --+i,,;+,. sLOps
^ll dcLlvlLy rc tvlus[ms
-fnho as l\frrolimo pray.
nrn,
Prayer trme is announced by the calis from the towers (catled
minarets) on top of Muslim mosques Fliday is the holiest day for
Muslims, so the Saudi weekend begins cn Thursday and ends on
Saturdav.. rL illegal in
Tt rris rLLt6qr cn,rri nIOUIO -^ ..-acrise anv rLLt6rvll
relioion vL
other
Ill OqUUI ^.^1.i- LJ P_uLLrou qrrj
A Saudi clothinB -orq caLo:ing
than Islam, unless you are in one of th- ces-gnated compounds that
io men The owner is wearing
a thawb hottses foreioners r^rorkino in fhp .nrn--.

Saudi Arabian clothing is p:ec::r-nantiy Loose and

flowing for comfnrt in the desert :.-r:a:: r.rL
MenI r rrsrrellr/
ur uqLr) r^rper
vv sqf

an ankle-lenoth shirt ca1led athc',t: On the'r rheads

lLuur thev
LrlLJ

\^/PFT A larOp qntterp-qh:npd rlnth e:""- s nhttfrn trrninrllrz

u, L) yjrqLLj

made of cotton;a smallwhite cap ca..ec atoqiyah,which

prevents the ghutra from slipping lic: :he head; and an
oool (or (YqL/,
iool\ as dorrhled black cord :ha: hcids the 6riuLlu shutra rri
in
nlace Women in Sarrdi Arabia musL-,',-:a: a^ ohovn or ofher
uuuJi u vr vLrrLr

lOnS Cloak that cover- +1^^ L^^r --r '-^--^^ nnlrr thp fer.p
'---O '.-*'. , -.J L]]C IItrdU dIIU .Cc,.- ---.r ---- -*--,
hands, and feet bare. It is a legal requ;re :rent that women
wear modest r-lothino Snmp S:rrdi \1/.'rr.r \\rp:r dl^\/oc:nd
v Lo qffu 2
q

veil for increased modestv when in Dul-1c

A1l aspects of life, including business, revolve
arou;d Islamic religion. Accommodating these
beliefs and practices (for example, praying and
frctino) iq pcqpnfiel
Businesses are structured in a hlerarchy, and
nepotism (the hiring of family members) is
plrr nn rti corl
rnri d
3 Aop iq rpqnpcted
4 Managers lead by instructing and workers are
not expected to show initiative.
5 Making strong eye contact shows trust.
6 Several meetings can occur in the same room
and can be scheduled at the same tlme.
Women play little or no role in business life.
Meetings can be 1oud, and behavrour can appear
aggressive; however, this is a sign ofinterest,
not anger or discontent.
Time is flexibte. Meetings can start much Later
than scheduled and may last hours.
10 Avoid touching anyone with your left hand.
Atso, while speaking with someone, avoid
pointing your feet toward the person. These
gestures are rude.
11 Dress conservatively. Men are expected to wear
a jacket and tie. Women should wear modest
clothing. Appearances are judged.
L2 The decision maker is hkely to remain silent
during a meeting with questions being asked by
a person of lesser importance.

136 | Chapter 4: Culture in International Business

 The Saudi government enforces a strlct and conservatlve
version of Sunnr Islam, and Muslims who do not follow the official
interpretation may be arrested. crimlnaL cases ale tried in sharia
courts, whlch exercise authority over the entire populatlon, including
foreigners (regardless of their religion)
The Islamic religious regulatrons, ccmblned wlth the hot, dry
climate, can make doing business in Saudl Arabia a challenge for
some Canadians. It is critical for an; ::e lvishing to do business in
Saudi Arabia to study the culturai :---::ences to avoid making major
marketlng mistakes or offendlng -::-. Saudi bustnesspeopie during
talks, meetings, and negotiations

1 Explain the concePt of

cultural intelligence and rvh''-
Tesco, Brrtain's largest supermarke'" it's important when doing
chain, ran a sPecial Promotlon for international business'
bacon-fl avoured Pringles potato chips. 2 How should Canadlans
What's wrong with that? It turns out adapt their behaviour wher
that Tesco had placed the promotion conducting business deals i:-
Mexico?
under a Ramadan banner (the hotY
month of faslino bv Musllms). 3 What language do PeoPle
speak in Brazil?
Consuming bacon, a Pork Product, is
forbidden in Islamic culture. Making
4 What does gucnxi mean
when doing buslness i:-
latters worse, it occurred at a grocery China?
. -::e in Liverpool with a large Muslim \rlhrr iq herrino lncal
-
- -- -:ner base. representation ke-'
-'
:.=--
rlninr hrrcinosq ir -
-:-= suPermarket chain aPologlzed
What are thre= =,- - '
:-: -:=:--:ake admittingthe chiPs
c!,:- : :
-.-::: -:.: -::=::ly placed. Pringles Japanese
different l-, . ,,
: -::-- --:-: :Iomotion waS lts idea
-: - culture?
: --- :-':: -:: : -:.: SUPef mafket Chain
:: ::: l:=-.:l r=.-- and vinegaf, Of SOUf
:::-:- =-:.- -:--:- -:: fhe PfOmOtion.

137
HungryJack's is the name under
which Burger King oPerates
in Australia Why? Not for the
reason of cultural adaptation as
you might think, but because
the name "Burger King" was
already trademarked by a takeout
restaurant in Adelaide.
13S lChapter 4: Culture in International Business
4.3 Cultural awareness and
international business
Any Canadian firm that wants to "go globat" by starting a business
relationship in another country must first determine the extent and
importance of the cultural differences between Canada and the talget
country. Where differences exist, the business must decide whether
and to what extent its products and plocesses can be adapted to a
foreign environment. Certaln cultural traits can be studied and learned
(such as formal greetings and gift-giving protocot), but attitudes and
values can only be understood by tiving in a country and experiencing
its culture fust-hand. Developing culturai awaleness is not an easy
task. but it is critical to a business's success in a foreign country'
]t is not necessary for every canadian business operating globat$
to have the same degree of cultural awareness. The Canadian brand
Roots, founded in 1973 by Michael Budman and Don Green, has
more than 2OO stores in Canada, the United States, Taiwan, and
china. Roots adapted its business operations in Taiwan and China
by using lighter fabrics specifical$ geared to a warmer climate. Roots
also sells lifestyle furniture in Taiwan and operates caf6s in those
stores. Severai factors determine the need for cultural awareness in
international business relationships: how the business controls its
foreign operations; how extensive these operations are; the degree
of difference between the foreign culture and canada's culture; how
many countries are invoived in the business relationship; and the
effect on Indigenous cuttures.
A company that has branch plants or distribution
outlets in other
gleat
that are managed by local people doesn't need to spend a
countries
deal of time learning about cultural differences, as
the iocal employees
research
will have that knowledge. In this situation, a business should
before
the culture to ensure that there is a market for its product
deciding to set up a branch plant in a foreign country'
In a domestic

business that has handed control of foreign operations

to a specific
department,theemployeesofthatdivislonneedtohaveahighdegree
are handled
of cultural awareness. If all of a business's foreign dealings
very high.
domestical$, the required ievel of cultural awaleness is
India's fast-food restaurant market, expected to reach $4
bittion
by the year 2020, is an instructive example' Many international
Starbucks
brands such as Domino's (with more than l,OOO stores) and
seems t0
are quickly expanding there- In particular, McDonald's
havefoundtheseclettoconquenngthelndianmarket.Howdidan
where most
American fast-food burger company succeed in a country
consumersdon'teatbeefandalmosthalfarevegetadans?
already
McDonaid's created joint ventules with iocal paItneIS who
local
knew the Indian market, and the company adjusted to the
culture by locaiizing its menu and tailoring it to Indian
Consumers,
Maharaja
preferences. The Big Mac has been replaced with the Chicken The Chicken Maharaja Mac ts
:
potatoes' billed as a "gritted chicken douc
Mac and the Aloo Tlkki Burger, a patty made of mashed patty enveloPed in rich habane::
peas,andIndianspices'VegetarlanPizzaMcPuffwasalsointroduced sauce' and is also availabLe in a
vegetallan verslon
utulo*priceof20rupeestoappeaitoconsumersinacountrywith
low to average incomes' McDonald's is also
expanding its McCafd brand, which includes
the ever-popular chai tea, to India.
It wasn't an easy process for McDonald's,
though. Problems in dai$ operations were
encountered and had to be solved' Initially,
as there was no lettuce availabie, workers
garrrished the burgers with cabbage.
YrcDonald's aiso worked with farmers in
lncla io grow the correct type of potato
requi:ed for the fries. In 2017, McDonald's
annoueceC it rvould close 169 of its 450
locations l:,lndia in a franchise dispute
over oyJrersh: rrith one of its partners in
the northenPa:t :f the country.

139
Cultural awareness and international business |
 The extent to which a business needs to be aware of a country's
rrrlfrrrp dpnpndc on thp dpnth end trrnp nf hrrsinccq thp romnenrr dops
in the
rr- foreisn LvqirLry.
Lrr! rvrL16ri
/'^^-ri^- L"'i^6qq
countr" n^ LdlldulOll UUJItILDo that strictlv
LIIoL DLf ILLLj exnorts
L^yv a
commodity, such as oil or gold, requires less cultural awareness than
a business that operates a manufacturing plant, corporate office,
retail store, or restaurant in partnership with foreigners.
IKEA, the Swedish retailer, is planning to open more than 25
stores in India over the next decade. The IKEA restaurants within
the stores serve Swedish meatballs that contain pork and beef in
Canada and the United States. In India, the company will localize food
nnrinno
uP LrurrJ- rrnnnrrrirn
v c5c Ldrrorrr non_vegetarian or both-in each Indian state.

IKEA restaurants will feature an extensive menu of Indian cuisine,

including biryani (a mixed rice dish with meat or vegetables), idli (a
savoury rice cake usuaLLy eaten for breakfast), and samosas (baked or
fried natties fiLledwith vegetahles notatoes snires and sometimes
meat).

The more onerations business has in foreisn markets, the greater

a
the need for cultural knowledge. North American auto manufacturer
General Motors (Ctvt), for example, sells cars in South America,
Frrrnnp tho Tlnilod ,-.urguotli, cnrl I-hine
T{inazlnm aIIu ^- -'
LI.tIlIa. G]vl S SUCCeSS ]n Lnlna W][n
its Buick brand is no accident. Ownership of foreign-owned vehicles
i-
l) d^ JLdLftJ JVtIlUUL i-,^}.i-^
-r-f,,- -,.-l.^l lll \_11111d-) -^ .T\/I ^,r^-+.d tO
)U \J.tv-t dud.PLcu LU the
Lrrc ChineSe
\-llrlrcJc mafket bV
rrlor-.-* -J,
introducins
'^'"^ " ***-^^b a Luxurv
*'*--*'J Buick mrnrvan (the Buick GLB) when it notlced
that business executives in China preferred the roomler minivans
over cars for dolng buslness on the road. However, in the United
crn+aa OllU
JLOLCJ
r'^-^'r^ U|r
^-r LOIIOUO, no longer nroduces minivans and focuses
CM rru
instead on the larger SUVs demanded by consumers. By adapting
to the Chinese consumer, GM became the minivan Leader in that
country.
Canada Goose also continues to expand into globa- markets.
In addition to its outerwear jackets, which soLC -:: a:proximately
$1,000, the company announced it would::::-:: ilxury sweatels
that will se11 for $450. As the compan,. d: . =.::- i:s marketing plans
for the international market, it neecs :c ::r:::srand the local cuLture
in specific regions as it relate: :: : :::-::i a::d apparel.

140 | Chapter 4: Culture in International Business

If a business is deating with foreign markets where the culture is
very similar to Canada's, it doesn't need to spend a great deal of time
examining cultural differences. 1r/hen the language, habits, beliefs,
and attitudes of a cuLture are mrkedly different from Canada's,
however, it is very important tc study the culture of the new market.
Learning the tanguage or hirir:{ a aative speaker to manage foreign
oneretions is pxcpntinnellrr ]-p-^=r'
When (then-Canadian-ot',::ec.t Tim Hortons announced plans to
expand into Asia, it chose the ?:-__ppines as its first location since
the locaL population already ha: ar established taste for both coffee
and h:kpd onndc The same -"5-- .i': -...-as uLrffirujnd the
uJ hch chein'sJ c^por
Lffg Lllqlll exnangl6n
"
inrn rhp Miridlo trecr ylftgJg ccie e and
utlu sweet
ovv treats are a regular
indulgence for local cultures. l.:-,.; established in the Middle East with
1OO tocations, Tim Hortons n*s: siilL absorb a dip in saLes during
the Islamic holiday of Ramaca: ..;!rich requires fasting. In 2017, Tim
Hortons opened its first Lat!: -:-::e :ican location in Mexico, forminq
a joint venture with local inves_::s.

Tim Hortons isn't the oniv c:fee chain to seek further global
expansion. American coffee c:a_:: Starbucks has operated stores Launched in2017, the Starbucks
Rese-ve Roasle'y in Shanghai
outside the United States since _996 and now operates more than is, at 30,000 square feet, one of
25,000 stores in 62 countries. :rlncsr half of these locations are fhp la rops' Srr.hrrrlz. q'n-eS I
the world, and a testament to
outside ofthe united States. The focus ofgrowth for Starbucks has
the brar^d'" endr. r'ng.rrrces- -:-
been in China, where the company has operated since 1998. China

-----it5!--+i
E:j+t-
--- Qi
L!
==
-l-. ----=+:,
.l-:'- ,.a.'
--+t-'-:i:
.':--+ !.=- =
When companies set up factories, distribution centres, retail stores,
nr othpr trrnps
LJi y!u nf hrrsinesses in forejgn cortntries thev must be aware
va

of their effect on Indigenous culture.In some cases, the effects are

positive. Positive effects include increased employment, access
to medical servlces, and improved infrastructure: better roads, a
safer water supply, and improved sanitation. As businesses need an
educated workforce, local schools and unlversities benefit through
increased enrolment.
However, hlstorically and currently, some foreign businesses
have had a devastating effect on Indigenous peoples. In Canada,
early settlers and traders were ultimateLy responsible for the
total extermination of the Beothuk, Newfoundland's Indigenous Tndioonnrrsl:-a::-
population. life continue [o b: =- :-,' ::::-
nrnnn<prl hr qinpss e t' '-' -.'-'
More recently, the Government of Britlsh Columbia planned an across Norf h America T:.=
$B.B biltion hydroelectric project called Site C dam between Fort SLanding Rock SoLidarity R. .'.
(seen here) was held in Portlano,
St. John and Hudson's Hop, BC. The controversial project is located
Oregon, in 2016 to protesL
on the Peace Rrver and would damage Indigenous lands. To create dPVP'onment of I he Dakota
Arcpss Pinplire wh'ch threatens
the reservoir, 83 kilometres of river valLey would be flooded and more
sacred sites as well as access to
than 5,000 hectares of land destroyed. In2017 , the UN Committee clean water for over 18 milLion
on the Elimination of Racial Discrimination conducted a full review
of the Droiect and concluded
that work should stop until
Indigenous peoples could be
consulted about the process.
The committee advised Canada
to chanse the wav it deals with
oroiects on Indisenous lands.
--- ---*-o----
F{errino e hpttpr rrndprstnndino
of indigenous nations and their
cultures is essential for not only
govemments but also businesses
operating both internationalLy
and domesticallv Furthermore,
: ::sulting wlth Indigenous
: : lil^unities in exnansion
:::::=ais that will affect them
'< ---: :--:r:r essentiat part of the
_---:::-_

Cultural awareness and international business 1143

=

=
Working Effectively with
I Indigenous peopfes@

By Bob Joseph and

Cynthia F. Joseph

Reproduced with the permission of

indigenous Corporate Training Inc.

Do community Research set aside the time to do extensive

4l research into the community history, governing parties,
worldviews,
culture and traditions.

Recognize Nation Autonomy one Indigenous Nation cannot

speak for another indigenous Nation. strive to avoid
setting up
Bob joseph ls an Indigeno,_ts
processes, discussions, engagement or consultations
person, more specificaLlv a status where this coutd
Indlan, and is a nenber cf :he be an issue.
Gv,rawaenuk Nailon He is .::
founder of Indigenous Coircia:: Timing can be everything for the person
Tralning Inc
tive and sustainable relationships with
ty. Consider those whose cultures revolve
around fish and fishlng. The priority of fishlng can extend to
the entire community-including the chief and Council.
In thrs
environment, it may be next to iinpossible to get a meeting
to
happen during the fishing season,

Establish ,,{et
to know
you" meeti
u".tinn.r.*
people as a

Match Team Composition Try to match your team,s

Co-author CynthiaJoseph 1s the composition with the communrty's decision-making structure.
main devetoper of the on. jne In
trainlng programs at Indigenous other words, if women are the decislon makers, then send
women
Corporate Training Inc, and vtce versa.

144 | Chapter 4: Culture in lnternational Business

Use Caution Shaking Hands offering a hand for a handshake
is a fairly common social practice when meeting people. This works
most of the time, but we do have to remember that when we are
working with Indigenous peoples we aIe working across cultures
with individuals in their own right and that some Indigenous
Dpnnlp dn nnt qhrkp hands and the:efore are not expecting, or are
uncomfortable with, a handshake.

Always Do Protocol It cal :e .ustomary among Indigenous

Nations to acknowiedge the :-:s: :eoples and their territory at the
outset of any meeting. Th-s :a:- :e established at the beginning of
enrr meetins bv foLLowinq:::::: protocol and acknowledglng the
host community, its pe :: -= =: its territory.

Stay Up-to-date on lssues A key to working effectively with

oec:.:s -s :: *:::::stand their issues and perspectives
Tndisenous r----'--
in advance. i-ea:::-:--l = :::-::nity's history and current issues will
enable -\'cr..:.
i.^+^-^-!^
=::-:a:: -:s ::icrities and core concerns about your
lllLc-c>,>.

Pacing of Communications Try to match the pacing of

communications of the :e::.e you are working with. The traditional
mode of Indigenous comrn*nicatiori is oral, so speech nuances like
tone, tempo, volume, and infl.ections can be very important.

Know the Collective Way that Indigenous rights are

Be aware
communally or collectively held and that the whole community may L How does the degree of
need to be involved in the decision-making process. cultural difference imPact
international business?
Honour Your Agreements Honour all your agreements, 2 How has McDonaid's
ocnprirllrr rrnrrr nr:l aorppmpnfs Traditionallv
LoPLLTqLL) !r_i/ , Tndigenous
rr+.4-o-''- *- adnnfed its menu to the
communities are oral societies and orat agreements are even more Indian market? What
firnnnrtenf
f IIyvr Lqf f L then
Lrf ur I rnrritfen aorpements Tn Tndigenous cuLture, vour
problems did it originatLY'
encounter?
word is more important than anything written on a piece of paper.
3 How is IKEA considerinq
Dress f or the Weather Consider dressing down for work in the culture in expanding : -'
business in Indla?
r"ommrrnitv Tn manrr ceses commrrnitv offices have more casual
UILDD noliripq
drpcc yVLrlfLJ fh:n
Lfrqfi cnrnnrefp
LvryvrqLl Can:da Showing rtn in the oinstrine 4 Why is Generai Motc:s
fnrrrcind nn the m:-'- .-
suite or wlth that Gucci purse can send the wrong message. >trBII]CIIL
i^ aLi--:
llMrl1rc

Participate in Cultural Events At some point duringyour work 5 What is the con:::- =-'"
- _.
<rrrrnrrndind !^: :.-:
with an Indigenous community, you may be invited to participate in British C: .-::.:..-
in cultural events. When in doubt about what to do, ask the host or -.
6 List a:c ::'-: .=-.:.
'

a friend of the community to expLain the ceremony's participation a^---^---:*^ -::

process. If all else faiLs, fo11ow the lead of the people in front of you -1. -...--l -.. ,'

'15
 4.4 T e impact of culture on
Niagara-on-the -Lake VidaL grapes
left on the vine in winter for the
production of ice wine. Canada's
ice wine may be popular around
the world, but not in countri€s
international busines s
where alcohol is forbidden
A businessperson who wants to import, export, set up a joint venture,
start a franchise, build a branch plant, invest in a foreign company,
or become involved in intemational business in any other way must
weigh the impact of culture on his or her enterprise. Culture's role
in a business venture can be as important as the influence of tariffs,
legal regulations, or competition. Failure to consider culture could
ruin a negotiation, derail a marketingcampaign, cause labour unrest,
or, in some cases, endanger one's life_.

Products and services

Culture has a direct impact on the types of products and seryices
that will be successful in other markets. Canada has abundant raw
materials such as oil, timber, iron, wheat, and fish. Other countries
buy our raw materials and convert them into thousands of different
products. Canadian newspilnt, for example, is used to manufacture
newspapers in hundreds of different languages. Cultural differences
have a very low impact, then, on the sale of Canada's raw materials.

146 | Chapter 4: Culture in International Business

 Culture does affect Canadian exports of manufactured goods. In
some countries, as a direct result of cultural differences, there rs no
market for certain Canadian products. Canada is famous for its ice
wine and rye whislcy, for example, which do not find a market in any
Muslim country, as Muslims are not ailowed to drink alcohol. Canadian
I pork has no market in Israel, as Jewish culture forbids eating pork.
I One of the most successful industries Canada has exported
I
t into foreign markets is financial services. Canadian banks,
t venture-capitai companies, and life-insurance firms are making
major inroads in foreign markets. Canadian banks have branches
i
and offices all over the world, and are emerging as players on the
global financiai stage. In 2016, Bank of Montreal was named the first
t and only canadian bank approved to quote Canadian dollars agarnst
I the Chinese curency, the yuan, by the people's Bank of China in
the China Foreign Exchange Trade System. Another Canadian
\I bank, Scotlabank, also continues to pursue gtobat growth and has
agreed to buy a Chilean bank from from Banco Bilbao Vizcaya
Argentaria (BBVA).
People's attitudes toward money are often based on culture.
Spending and saving patterns, for example, are primarily cultural.
The Chinese save their money and do not traditionalty put it into
other investments such as mutual funds or retirement savrngs.
Extravagent klmonos feature
China is one of the biggest growth markets in the world for
nrominenllv nn !v___._r5 nI
vr. Cnmino A ro
!_ n6c
investment funds, and Canadian banks are workins with chinese Day lnJapan
banks to tap into the billions of
dotlars that are saved but not
i invested. In some countries, the
I
I major savings goal for many peopte
I is centred upon cultural ceremonies
t or activities. Many Canadians save
for a summer vacation. In Japan,
January 15 is Coming of Age Day,
a national holiday that honours
young people when they reach the
age of 20. Many Japanese families
save for 20 years in order to
purchase an elegant kimono for the
ceremony.

The impact of culture on international busin ess | 147

 Maple Syrup
canada is known worldwide for its maple syrup. Eighty percent
of
the maple syrup harvested and created in North America
comes from
Canada, and just over 9O percent of that comes from
Quebec.
Maple syrup ls also produced in Ontario and the Maritimes.
There are more than 10,OOO maple syrup farms in Canada,
with
over 44 miilion tree taps. Together they produce about
9 million
ga.lcns cin:aple sl,rru.D €acli r,rear.
C=a:a :]::3::s :t::c -_ua:: Si5l :::i.ion worth of maple syrup,
r..-irh --::e l:_-e: S:a:=s 3:::::=-.-
=:; apan being the laigesi
recipients. Rec_:e s :.:: ::-: -_:-- -,,, ::-: alti tn a variety of
cultures use
maple syrup. ,n ind.a -: := := ::::::_:::: -,,rth turmeric powder,
in
Japan, it is sometimes :ut 3:- :aa: *-:aa:: :neat, and in Germany,
it is used as a topping for yogt: :: -:: :::a:::. 3f course, in va'ous
places across the world, it's aiso;c-Je c :-,-:::alcakes
or waffles.
Maple syrup is harvested in the spr:ii -,,,-::: :he nights
are coLd
and the days mildly warm) from mapie ::ees _i t-1e
form of sap. The
sap is then boiled to reduce the water con.e:- unti.
it becomes mapLe
syrup. Boiling for tonger results in taffy, mapie butter,
or maple sugar.
Early First Nations were the first to create inapie syrup,
and passed
on the practice to European settlers. The trade on thls product
dates
back to the 17oos, making it one of canada's oldest industries.

148 | Chapter 4: Culture in International Business

 Figure 4-1 Maple Syrup Production
Figure 4-2 Top 10 Export Destinations
Dy province, 2015
for Maple products, 2015

0thers
France 5alo
Nova Scotia 4olo
0.20olo
Australia
4Vo
Ontario
4.14V0
United
Kingdom
r\ew _=- 4Vo
Brunswick
4 837o Japa n
7,_
Quebec
90 837o G?lman',,
ti::
United States
65Vo

The Global strategic Maple

Syrup Reserves in
once one of Canada,s best_kept Quebec were
seciets_they currentty notO
approximately $too million
worth of this sweet tiquid. (The
exists because of the uncertainty reserve
of the yield each year.)
However' the reserves gained
notoriety when thieves stote
t.nnes varued at $18 mitlion 2,700
in mapte syrup from the reserves
between 2Oli and 2012. They*.r.
.uugt, and sentenced to pnson
I time, and one thief v
senrencewassweetJtr.TrtJ[1T:'jilT:;:"';iilffi?'il.
I
.l Check your Understanding
.a
tr'
1 Where is mapte syrup made?
2 Describe Canada,s exports
of maple syrup.
rl 3 How is maple syrup made?
I
4 V/hat is the Global strategic
Maple Syrup Reserve?

il
,l

',

Ihe impact of culture on International busires>


A demonstratlon in Banbasa,
1ndia, 2009, lor better working
conditions. It is impoftant to
understand the labour markets
in regions where international
business is being conducted.
150 | Chapter 4: Culture in International Business
Canadian values extend into the workplace. The Canadian
govemment, influenced by labour unions and the culturai values
of most Canadians, has regulated the iabour force, providing
a minimum wage, mandating workplace safety, preventing
discrimination on the job, and legislating hotidays and hours of
work. Canadian laws prohibit chitd labour and promote gender
equity. Labour unions and labour negotiations are also controlled by
Canadian laws that attempt to ensure fairness and "good faith" tn
negotiations between labour and management.
Most companies seek to rationalize their businesses, especial$
during an economic downturn, to boost profitability for their
shareholders. Rationatization includes any attempt to increase a
company's effectiveness or efficiency. In most cases, this involves
downsizing, cutbacks, and layoffs, often coupled wlth a move
to relocate corporate functions and activities to countries that
have cheaper labour and little or no union presence (offshonn$'
A company's bottom-line success is the primary value of these
corporations for the shareholders who own them.
What can Canadians exPect
when doing business outside
Canada? Not alt coultries
share our values or our
standards about labour and
the workplace. It is critical
for Canadians doing business
abroad to understand these
differences and the influence
they might have on business
retationships formed in other
countries.
 Figure 4-3
Child tabour is prevaient in many countries. The International
Facts and Figures about
r .|.^,,, Arrnnircfin6
LauouI rnnnrro flrnf nn cnrr v urr uu-y
\JIBdll']Zd.L-LUIr rCPUr L) LlldL vll orly 6jypn daV. OVef 152 milliOn
6r Child Labour,2016
children are victims of child tabour worldwlde. Figure 4-3 provides
more details about how this number breaks down across ages, 152 million children
genders, and regions of the world. worldwide aged 5-17 ate
victims of child labout.
A Canadian-owned manufacturingplant in another country can
easily controi this probtem by refusing to hire anyone under age, but 0f these,
it is more difficult for Canadian lmpoftels to determine whether child . 73 mlllion do hazardous work
labour was involved in the production of the items they are buying . 88 million are boYs
from abroad. . 64 million ate girls
. 480/o dre 5-1 1 years old
It is also important to distinguish between exploitative child labour . 280/o dte 12-14 years old
and a difference in the cultural values of two countries. In some . 24olo {e 15-17 years old
countries, it is acceptable for young people to enter the labour market
Percentage of children in
at 12 years of age. Their schooling is finished (or there ale no schools
child labour by region:
for them to attend) aad their families expect them to work, often on . Af[ica: 19.6oio
the family farm. This is a cultural norm, avalue the society holds in . Asia 8 the Pacitic: 7.40lo
common. . Americas: 5.30/o
. Europe 8 Centtal Asia: 4.10/o
In contrast, businesses in some countries exploit young peopLe, . Arab States: 2.90/o

unfairly taking advantage of children as young as five years old.

These children may be forced to work in mines or other dangerous
occupations for little or no pay because the government of that
country cannot, or wili not, prevent it. Chltd labour is found in
Bangiadesh's garment industry, in the Democratic Republic of
Congo to mine metals used for smartphones, and in the shrimp
industry in Thailand. Research from World Vision shows that at ieast
1,200 Canadian companies import products into Canada that may
have been made by child labour overseas.

The embroidery work done

by thls child 1n Gujarat,
India, is the cultural norm
in that region Employers
argue that young fingers
and good vislon are ldeaL
for embroldery work.
However, even if conditions
are acceptable, human
rights advocates say the
real problem is that ra:-,'
chlld labourers have ::::-
trafficked awav':: :- ::-='-
famiLies
 Discrimination
Canadians are protected against discrimination ii
-:-=
-,,.-,:..;crce
by the Employment Equlty Act, which requrres b:i.-:_:..=,. :.rd
employers Canada to make sure there rs equitrr _: _::,t .. ::kplace
The law re that that the following four des.g:a _:*
res i:t *9s are
represented rn an organization's workforce:
. Women
. Indigenous peoples
. Persons with disabilities
. Visible minorities
Many countries do not have these iaws. A Ca::a:_t: : *s-ness
starting a branch plant in Saudi Arabia, for exan:.= -. -::.::lave
difficulty hlring women, as women are not pern-__:: _: -,,.-c:k
alongslde men (except in hospitals) in this Mus.-::: ::
-.:_:t:.-

Empiol'e15 in CanaCa a:e

responsibLe for lCentifylng
and elimin ating employment
barriers 1n their r^/orkpLace A
mechanical stair lift is one war,,
of nocLly'rg ou dinE L\ar
not deslgned for moclern
v,/ere
accessibillty standards
countries.
 certain cutturar norms that are part of the workprace
in Canada may
be quite different elsewhere. For example,
a standard lunch break
in Canada is usuaily one hour, but in Mexico
it is usually a two-hour
affair that takes place from 2:oo p.m. unti14:oo
p.m. Muslims need
at least two designated times to pray for
between five and fifteen
minutes (at midday and rate afternoon) rn any
workday. Factories in
some countries close for a two_ or three_week
vacailon.
Labour unions are non-existent or severely
rimited in some
countries, including China, oman, and the
united Arab Emirates.
Health and safety standards are, in some praces,
arso non-existent.
Healthcare benefits, employment insurance,
sick days, and materruty
leave, which some Canadians may take
for granted, vary greatiy from
country to country.
Different tabour cuitures affect canadian businesses
that are
considering opening factories, warehouses,
offices, or distributron
centres in other countries. A Canadian ?:e.'e: cne cf rhe five plliars
_s
manager working in another :_ .s.an ,\{uslims prayat flve
country must respect the cultural norms of
that country regardless set times of day, bowlng down
of what is "normar" in Canada, or risk the in the direction of Mecca,
failure of the operluon.
where the holy shrine of Islam
What a Canadian manager may perceive as
an tmprovement in is located Workplace and
efficiency might be viewed by employees in scheduling accomodations
the host country as
an attempt to impose foreign values on local may need to be consrdered for
culture. e canidian atl faith based practices
manager who works
against a host country's
values and cutture
would face severe labour
problems.

The impact of culture on international business

| 153
Demonstrators in Chicago,
Ililnors, campaign to
raise the mrnimum wage
tc $15 USD per hour (it
-was
$B 25 at the tlme).
Soon after, an ordinance
was passed that raises
the minimum wage in
siages to $13 by 2019 ir,
Ontario, the minimum
wage increased in 2018
fron $11 6O to $14 per hour
(w1ih pians to iaise it to
St5 :n 2Oi9)

!i,=
Wages reflect the standard of living in any country. A wage in
another country that is low in comparison to Canadian wages may be
an above-average wage within that country. A person working with
or purchasing goods or services from another country must ask what
an acceptable or average wage is for a worker in that country.

Just because an international business can pay a low or minimum

wage doesn't necessarily mean that it should. Many businesses
have faced negative publicity over their payments and treatment of
forejsn workers narticuLarlv in farmins. Differences in wage rates
have become a major issue in negotiating an updated NAFTA, where
unions representing workers in Canada and the U.S. auto industry
make in one hour what some workers in Mexico make in one week.
The 7 Virtues Beauty Inc., an international business based in Halifax,
considers fair wages in its business model. The company uses its buying
power to help communities in struggLing countries rebuild. Operating
in locations including Haiti, Afghanistan, the Middle East, and Rwanda,
The 7 Virtues sources essential oils for its fragrances. For example, it
impofts patchouli oil (a herb from the mint family) for its fragrance,
paying 2.5 times the income of a local coffee crop to adult orphans and
widows who grow patchouli (these individuals are then better able
to improve their living conditions and buy school supplies for their
chitdren). For another fragrance, the company pays $1O,OOO USD for
I litre of rose oii to farmers who choose to grow the Legai crop instead
of the itlegal poppy crop often used in the global supply of heroin and
Figure 4-4
other oprates.
Net Minimum Wage
White unfair tradlng practices are prevalent across industries (in afound the World,2018
which companies pay lower-than-fair prices for goods and services (usD)
sourced from other countrles),
an lncreasing number of Austra lia
corporations around the world Germany
are making a commitment to Canada
frir i-rrrla
rdrr nrnnfinno
Lr o'Lr.E Pr tnd rrnrr
c1L LlLcD, d.lru yuu United Kingdom
Chile
can see evidence ofthis on
Unrted States
Labels (for example, on labels
Japan
for some coffee, tea, chocolate, South Korea
ano -l^+1^i^^\
^-J cLornrng/, corporate
^^-^^- mission Greece
statements, and annual reports. Mexlco
Poland
6 9
USD per hour

The impact of culture on international business | 155

 IfaCanadianbusinesspelsonweleinvited.topresentabusinessplan
wouid wear appropriate
to a group of Canadian financiers, he or she
or dress for women), show
busiiess attire (jacket and tie for men, suit
started' sit at the side
up at least ten mtnutes before the meeting
shake hands with the people
of the meeting table (not at the head),
sittingcloseby,keephisorherbriefcaseoffthetable'andestabiish
The presentation would be
eye cJntact during the presentation'
direct and logical$ presented, beginning
with the amount of money
thebusinessisrequesting,thenexplainingindetailwhythisamount
isneeded.ACanadianbusinesspelsonplesentsabusinessplanin
in Canadian business
this way because this behaviour is expected
there is a risk of
culture. If he or she deviates fiom these norms'
their support'
showing d.isrespect to the audience and losing
in
Il on the other hand, a Canadian business were negotiating
Mexico, Japan, or Nigeda, it would need
to adapt to a very different
"meeting culture" based on time
meeting style. fvery country has a
cepte d non-verbal b ehaviour'
perc eptiorrs, sp atial perception, and ac

such as eYe contact.

Time percePtion
monochronic or
Cultures perceive time in one of two ways: -
see time as iinear
potychronic. Members of monochronic cultures
in a logical
,rrd ,.qn.ntial, and focus on one thing at a time
common 1n
progression. The monochronic approach is most
Canada' Germany'
cultures with European influences' including
people also tend to be more
Great Britain, and Scandinavia' Japanese
monochronic than PolYchronic'
Figure 4-5 Monochronic ve[sus Polychronrc Cultures In polychronic cuttures,
time involves many things
happening simultaneousiY
with the ParticiPation of manY
people. Time is elastic and
Pfompt beginnings and endings Flexible start and end times
meeting times are flexible'
Breaks haPPen when aPPfoPflate
Scheduled breaks Results are more important
Deal with one agenda item at a ttme Don't follow a rigid agenda
than schedules- This PercePtion
Rely on specific, detailed, and explicit Often deal in broad concePts of time is most coflrmon ln
communlcatl0n Mediterranean and l-atin
Patttcipants talk tn sequence Anyone with ideas may sPeaK cultures, including France, ItalY,
Lateness viewed as showtng lack ot Lateness is not taken Pefsonallt7 Greece, and Mexico, as welt as
res pect some Middle Eastem cultures'

Business
156 | Chapter 4: Culture in lnternational
 Polrrchronir" hrrsinessnennl e rnrnrk tornrard estahlishing tntSt
with contacts, and de-emphasize legaL contracts and formal
presentations. In contrast, Canadian businesspeople are
monochronic, and iike to get to the bottom line as quickly as
nossible Offers and counter-offers define lhe nolvchronic deaL,
rnrith a lprrpl nf rnmnetitiveness and conslstent back-and-forth.
Monochronic deals are fact-based and direct, with little humour
or casual banter. Polychronic businesspeople usualLy onLy meet
with the flrms they want to do business with, while monochrontc
negotiators attempt to negotiate with several firms, often using the
threat of "taking their business elsewhere."
' Makins a deai witl.rh vvrlIllII ^ ^^r"'L-^-r'
O PULjLllLUlllL ''rllure rLyurr!J
LUtLuiL recuires ua 6rr( great
dp:l
uLqL uf nprqnnrl
nf yLf DvffqL infprenfinn
rffLLf qLLIUII cnrl mcn-r
qlIU lllqlI)i vi<itq
VrDrLJ, :< fhi<
qD LflfD trrnp
LjPL nf
W1

crrltrrre valrres nersonal contact. Monochronic deale's trv to

Rttsirp:c moeti^os'r.nl, '"el alC
remarn lmpersonal, and are often uncomfortable wlth invitations a-p ororn':cd di""-"r'v hareo
+^ r--;r" ):^^^-^ --d ---o----
LU ld.rtlrLy Lr1ll11c1> d.rl* nishts out on the town. A monochronic on the busrness cuLture ofthe
hrrcinpqqnprqnn npOnti2tinO nr
vr \^rnrkinO
vv vi r\rr16 1^rifh
vV ILII
c nnlrrrhrnnin oarricular
r.-'_.'*'*' _- *"" j r -teo-on
counLru 'o_"-_ oI e\ cn
u uJrlrLoJpLr ovir lr!6v LrqLiri6 O PU LJ Llll UlllL
t hp .nmnprrr Tl-p.F d''' pre..Ce:
hrrsinessnerson will have great difficultv if he or she does not have ir [o'- l-ndv larpr rapp. egpndas
a deen rrnderstandins of the other's culture. !urL1111U1llLdLlUr1 't " ^-d
JLJ ttrJr e11r rotl

t!

The impact of culture on international business | 157

 Spatial perception
Spatial perception refers to individual comfort levels with personal
qn:rp rnd nhrreirel .Ontact. ]n nOfthefn !ufEUfOne
vP!/ exnecf mOte
Deonle L^PLLL
yLvPLL
norcnnrl enreo fhrn rfr qorrthorn
in rvuLffLf Frrrnno
fr !uIupL. nA Cenadjen
LqffqulqlI hrrSinCSSpgl5gn
uuJlItcJJl

might feel that an ltalian or Greek business associate stands too cLose
and invades his or her personal space when they're speaktng one-,.
on-one. This would not be the case during a meeting with a client
from the U.K. or Sweden. This perceived invasion of personal space is
the result of a cultural difference, and is not an intentional slight or
intimidation tactic. Canadians typically prefer to maintain at least half
a met-e hptween sneakeJs

Physical contact is common in certain cultures, including those of

the Meditenranean and Latin America. In Asian, British, Canadian, and
LUeelr*rbiq pnrrrtod r^rith
American cttltttrpq tnrrr"hino ,,rLrr infim.nrr
rlrLlrrlacy, in
Ilt l-rrroir
rJusilless
situations only formal touching, such as a handshake or pat on the
hrrlz iq (oon tc rnnrqpli2fp . ffr nthpr rrrltrllgg.
Tn vLttLf LuLLuf Lr, tOUChjng
LvuLrtljj6 jS oLLII
fJ Seen aS
rrnntr.peeanr end orro11 OffenSiVe, LoyLLfULLJ
esner.jallVbetWeen
uLLvvLLrr genderSo. flTn
6LiiuLf
Mus11m countries, men and women generally do not touch at all.
Greeting rituals are based upon these cultural norms, so awareness of
In Western business culture, local cttsfoms is imnnrfanf
uftL fnr npontirtnrq
rvf rrL6vLlqLvfc.
a meeting between twc
buslne sspeople usuaily invoL,,,es Cultural norms for space must aLso be taken into account when
tl:e ind vicua's . .. j- o - 116-.go detefmining SeatinO errangpmpntq
qrrurrbLrrrLriLU rvr nponticfinnc
fnr rrL6ULtCLIUttJ. Tn danarrl
tIl BCIICId.L,
one another However, in
Canadians tend to talk with people seated opposite them, or at an angle.
Chrnese business culture,
businesspeopLe might be more TheSe alrangpmenfs mrrr m:lzp Chinoco nogsfj2f6rs
rrL6vLfqLvro f LLL alienated
feel q(iLtlqL( and
comfo'table sjrr'- p s'ce hv side llnPasv Therr marr nrefer tO
Lv LVffvLrDL VVrltLg sjttinp'side
COnVerSe while JfLLrjj6 Ujl side
JIUL hrr OIUE.
 Non-verbal communication
Non-verbal communication is closely related to cultural norms
of space. Japanese meetings are often silent affairs, with only the
person speaking making noise, whereas in Canadian meetings, it is
acceptable to whisper occasional$ to a colleague. Silence in many
Asian cultures indicates good listening, and there may be pauses or
moments of silence before others respond. In Canada, the United
States, and Brazil, extended silence is perceived as negative.
I
Many people respect a negotiator who can look them in the eye,
while members of other cultures are offended and insulted by direct
eye contact. In the United States, Canada, and many Arab countries,
I eye contact is a sign of reliability and trustworthiness. In Asian
I

a settings, eye contact may be seen as disrespectful and inappropriate,

I whereas looking down is usual$ interpreted as a sign of respect.
Nervous eye movements to the left or right may be perceived as a
sign of shiftiness in Latin America. Businesspeople meeting with
clients from another culture need to study how eye contact is
interpreted, or risk giving offence. Gestures are an integral part of
non-verbal communication, and can be easily misinterpreted and
cause offence. For example, the thumbs-up gesture is offensive in
Saudi Arabia, and crossing your legs or showing the bottom of your
feet when sitting is disrespectful.

Business etiquette
Expectations of how a businessperson should present him- or herself
in a meeting are often different in different countries. Questions of
acceptable behaviour in negotiations and meetings arise in several
areas:
. Should you present a business card and, if so, how and when?
. Whatshoutdyouwear?
. What if you are late?
. Should you bring a $ft and, if so, what is appropriate?
. How should you geet your hosts?
. What toplcs shouldyou avoid?
A businessperson needs to answer all of these questions and many
more before going into a meeting in a foreign count5r, or risk
offending the other participants and losing the deal.
 Teamwork, co-operation,
and solidarity aLl factor
rnto Hofstede's cultural
dimensions theory
Figure 4-6
Hofstede's Six Cultural
Dimensions
€ Culture's influence in
the workplace
Imagine this scenario: you have just landed your dream job for a
multinational clothing company and your role is to manage a global
team. You will be working closely with different people in various
countries. Though excited about your new role, you are also wary
of making a cross-cuttural mistake. Where would you begin to
understand how to effectively work with dlfferent people across
various cultures?
' Cultural differences can act as an obstacle to communicatlng
and motivating workers. There are different theories that help
explain how culture can influence the workplace. One is a theory
of six cultural dimensions identified by Dutch anthropologist
Geert Hofstede (b. l92B), which he uses to describe specific aspects
of culture and to help those doing business in other counriies
understand the cultural differences between two countries. Keep rn
mind that these dimensions reflect a society's overall iendencies, not
those of specific individuals. We'tl discuss each in tr:::.

1 Power distance index (pDt) 4 Individualism versus collectivism (tDV)

2 Unceftainty avoidance index (UAt) 5 Masculinity vefsus femininity (MAS)
3 Long-term versus short-term orientation (LTO) 6 Indulgence vefsus restraint (truD)

.=

160 | Chapter 4: Culture in International Business

 Power distance index (PDl) Figure 4-7
Hofstede uses the idea of power di.stance to measure how the Power Distance lndex

difference in power among people is perceived. In cultures where

some people are considered superior because of social status,
gender, race, age, education, birth, weaith, personal achievements, Russia 93 High
Mexico 81
or family background, citizens generally accept ahigh power
China 80
distance. Cultures that tend to assume equality among people and ln donesia 78
focus more on earned status than ascribed status are described lndia 77
as having alow power distance. People in low power distance
Colombia 67
situations relate to one another more as equals, regardless of their
f^-*^1 h^-i+i^^-
Greece 60
rur rllclt PU JI LIU_[IJ.
South Korea 60 AC
According to Hofstede's research, Mexico, China, and India have Japan 54
Ita ly 50
a high power distance, while Austria, Israel, and Canada have a low
power distance. India is a strong example of a high power distance U.S. 40
culture because its caste system divides the Indian population into Ca nada 39
groups. According to this theory, workers in high power distance U.K 35
Norway 31
cultures would need to be guided and directed by their manager. Team
Sweden JI Low
members like to be guided and might not take initiative to complete a
task ifnot directed to do so.

Uncertainty avoidance index (UAl) Figure 4-8

Another of Hofstede's categories has to do with the way various Uncertainty Avoidance Index

cultures adapt to change. General$, countries that attempt to avoid

uncertainty prefer formal rules and rituals, and hold especial$ strong
retigious convictions. These cultures have a highuncertainLy avoidance Russia 95
level. They place a high value on conformity, and many of the people in Japan 92
South Korea 85
I
,
these societies have little tolerance for outsiders, who are perceived as Mexico 82
I untrustworthy. People in cultures with a low uncertainQt avoidance level Colombia 80
I tend to vaiue risk taking and are less rule oriented. They are also more
tolerant of a variety of opinions, and outsiders find it much easier to Nofway 50
Canada 48
establish business relationships in these countries. u.s. 46 ^^ e

Hofstede found that South Korea, Mexico, andJapan are examples lnd ia 40

ofcountries that tend to avoid uncertainty and therefore have a high

U.K 35
UAI level, while Canada, Sweden, and Singapore tend to be more China 30
welcoming of uncertainty and have a low to average UAI level. Sweden 29
uenmarK 13 L0w

Culture's influence in the wortplace | 161

Figure 4-9 long-term vetsus short-term orientation (tT0)
Long-Term vs. Short-Term Cultures that have along-term orientation value thrift and
Orientation perseverance to achieve long-term goa1s, often so distant that only
firtrrre senerations will annreciate them. Cultures with a short-
Country Hofstede Score
term orientation hoLd that the "now" is often more important than
South Korea 100 "then." Values associated with short-term ortentation are respect
Japan 8B
for tradition and a strong work ethic. Cultures with a short-term
China 87
R uss ia 81 onentation are results oriented, looking at daily profit figures and
.,^-.r., .--,,.1 r^n^rl--
ycdl ty d1111udL .-r '-.1,i^r
IcPUr. LJr d.llu mrinr bUSineSS deCiSiOnS baSed On
rrrd^rr16 rrtojUr
Sweden 53 short-term changes in the market. For example, corporations focus
u.K. 51
lndia 51 ^^ e on eost-crrttino ennroaches to meet short-term r'"'-" "*-o--- without
orofit targets
Greece 45 rnncidprino thp ---- .---o --.--,,-,-r*,
lnno-fprm imnect on the company.
When workins tosether businesses with a short-term
Canada 36
!vb!r!!!r,

Norway 35
orientation will often inadvertently offend businesses with a
u.s. 26 lons-term orientation as thev exnect ti sht deadlines in business
Mexico 24
.13
deals, which are not valued by businesses that set long-term
Colombia soals. Lons-term orientation cultures ensase "' in longer " *"-'
'"''o-' business
nponti2tinn< pqnpciellv iFthp rrrltrrre has e nolrrcentric fime
orientation, whiLe short-term orientation cultures Iook for
Figure 4-10 immediate results with a faster negotiation process.
Individualism vs. Collectivism According to Hofstede's research, South Korea, Japan, and China
have a high long-term orientation, while Austria, Lhe United States,
Country Hofstede Score and Canada score low on this dimension, indicating that these
U.S. 91 High Western countries are more focused on immediate results and
Australia 90 decisions.
U.K 89
Ca na da 80
Sweden 71
Individualism versus collectivism (lDV)
Nolway 69 This dimension refers to the extent to which people are expected
)l
to make their own decisions regarding their choices of education,
Sparn
lnd ia 48 job, and even life partner. Highly individualistic cuLtures encourage
Japan 46^ e
each citizen to make personal choices and stand up for him- ol
Russia 39 herseif. CoLlectivist cultures value the greater good, and many of their
ut tseLc 35
members have their future prescribed by the government, church, or
Mexico 30
family. Countries such as Canada, the United States, and the United
Lntna tu Kinsdom have hish levels of indivldualism.
\lnn:nnro )tl
Thailand 20
'18
South Korea
Colombia 13 LOW

162 | Chapter 4r Culture in lnternational Business

 Masculinity versus femininity (MAS) Figure 4-11
Hofstede uses the term masculinie to rei:::: re degree to which Masculinity vs. Femininit'
a culture values assertiveness, compet;*-;:t::ss, ambition, and
the accumulation of money and wealth. _:is::de uses the term Country Hofstede 5c:'.
femininity to refer to the degree to whi:: ::_:-::s value nurturing, japar 95 Hich
family reiationships, and social suppo:t i-_-:=-s. Atthough in most Hungaiy 88

western cultures the roles of males anc i=- a-:-= are no longer this Austria 79

rigidty prescribed, many cultures stiil ::::: _:=:= Cistinct gender roLes Mexico 69
Hofstede's terms, therefore, also refe: :: _:_= :=i::e to which these Ch ina oo
culturally mandated gender roles ope:a:: ::: -:: and women. U.K. 66
Colombia 64A Y?-7-
Hofstede rated Japan, Hungary, a:_t _:-:s::_a as being highly U.S. 62
masculine and found that these cu-,-:::; ,i-.-: ::3:e rigid gender lndia 56
roles. Hofstede rated the Scandinar _a: ::-::=:s of Finland, Canada 52

Denmark, Norway, and Sweden as ::_:_::=--.::-:e. because they

South Korea 39
value co-operation and solidarir-,- -,,;-_:
=:s3 -:ss fortunate.
In these societies, people like tc -.:ai: -::::ih. discussion,
Russia 36
Fin land LO

compromise, and co-operatlc::. Denmark to

Noruay 8

Indulgence versus restraint (tND)

5weden 5 --ll

In 2010, Hofstede added a sixth dimension in order to measure

enjoyment of life and having fun, in other words, happiness.
Hofstede uses the termindulgence rnreference to the extent to which
Figure 4-12
people across different cuttures control their desires or impulses. ln.|,,l^^^.^
IllUUlUtrllLC V>. i:: - =l
Restraint refers to a society that places restrictions on satisfrTrng
needs and exercising controt based on strict norms. weak controi can
therefore be classified as indulgence and strong controL as restraint.
Mexico q
A very high score in this dimension indicates that a country Colombia
has a culture of indulgence. Cultures that score high in indulgence Swede^
U.K.
generally value leisure time and spend money as they wish. Latin
[ana::
American countries, such as colombia, score high on indulgence as u5.
their societies tend to focus on enjoying life and having fun.
'r l,-rt?r
Cultures in South Korea, India, China, and Russia score low in
Average
this dimension, indicatingthat individuals in these cuttures exercrse ;*
restraint ald more control of needs, and place less value on leisure time.
;a,ar (ffi|
rda
Cirrta
R.asia LOW

Culture's inf luence in the workplace | 163

Conctt"Ttprs in Tnrn"r'n nrrgllg
for the iatest device from the
A nnl o Qinro
164 | Chapter 4: Culture in International Business
Electronics
Canada imports electronic machinery and equipment. According to
Statistics Canada, in 2016, electronic machinery and equipment was
Canada's third-largest import category, with Canadians importing
more than $6 bittion CAD worth of mobile phones.
Most electronics are made in Asia. Japan, South Korea, and China
are home to international businesses such as Sony, Panasonic,
Samsung, and Huawei. Smartphones, computers, tablets, TVs, and
wireless sneakers are iust some of the electronic items Canadians
buy-often online.
Online
vfirrlrL shonning
orrvypfri6 l--'
u) '^^^ri^6^
!ollourollJ ^^^+i^les to
LUllLllIuLr orow yuf
Lv 6rvvv. Drrrino
ftr6 NAFTA
renegotiations in 2017, the United States proposed that Canada
raise the tax-free daily timit for importing U.S. goods from retaiiers
such as Amazon and eBay to $B0O USD. However, this proposal is
unpopular with Canadian retailers who fear it could undercut their
business.
 (ctnn)
A study by the canadian lnternet Registratlon Authority
found that Canadian shoppers embrace a "hybrid" retail shopping
experience (a btend of online and offline shopping). to research
items purchased later in a store and to purchase entertainment
items online. According to CIRA, most Canadians shop online from
rhpir
LIILTi r-nmnrrters
LvrrrF s However, almost one in four youth shops from a
mobile device, and 20 percent of adults (ages lB to 55) shop from
thelr tablets. Canadians shop online for electronics, clothing, books,
music, software, travel, and tickets for entertainment such as
concerts or sPorting events.
Next trme you shop, think of how eiectronics and international
hr r cin
u uDf ocq'infl
lILro rr pncp vnrr
If ff Lulrrge shonni n g exnerience!
j v ur r urrvt/F

Check Your Understanding

1 What was the value of mobile phones lmported in canada in

2016?

2 What products do Canadians shop for online?

3 Conduct an informai survey by asking three people if they
have ever shopped online. If so, what dld they purchase? Did
they shop from their phone, tablet, or computer?
Especiaily when it comes to
4 timit of $800 USD for
Is the proposed tax-free daity elect ron-cs. Canadian buYirg
habits reinforce a "hYbtid
lmportingU.S.goodstoCanadaviaonlineshoppingtoohigh?
model, mixingin store and
Explain Your answer. online shopplng, genelating
a real boon for Parcel oeliver-
5 How wili changes in duty-free taxes for online purchases selvices How have l'c -t l:
impact businesses in Canada? who benefits the most and the your IamilY Purch.o,el
least from this change? electronics?

s||IP ]
IO:

A family participates in the
Charro Days Fiesta, a bi-national
celebration of Mexican culture
that takes place in Brownsville,
Texas, and Matamoros,
Tamaulipas, nelghbouring cities
on two sldes of the u.S.-Mexrco
border
!
166 | Chapter 4: Culture in International Business
Mexico's highest score is in indulgence (IND), indicating that the
cutture places a high value on leisure time and spending money freely
on having fun and enjoyment. Mexico also scores high in uncertainty
avoidance (Uet). fhis indicates that Mexican society has a low
tevei of tolerance for uncertainty. The ultimate goal is to avoid the
.
unexpected. In an effort to increase control, laws and reguiations have
been implemented.
Mexico's individualism (flV) ranking (:O) is relatively low,
though it is stightty higher than other Latin countries. Mexico's score
indicates that its society is collectivist rather than individualistic.
This is demonstrated through long-term commitments to family,
extended family, and friends. In a collectivist society, individuals
tend to take responsibitity for one another, rather than focusing on
themselves.
Mexico has the second-highest mascutinity (MAS) ranking in
Latin America (0g). This indicates that gender roles are highty
differentiated. The male is dominant in Mexican society, which has
ied the female population to become more assertive.
Mexico atso ranks higher than
other Latin American countries in
terms of power distance (pDI), with
a ranking of 81, compared to an
average of70. This indicates that
power and wealth are distributed
unequally in Mexico. This inequality
is generally accepted, or seen as
normal, by the culture as a whole.
, Mexico was not rated on the
long-term versus short-term
orientation (ttO) scale.
Canada's highest- ranking Hofstede dimension is individual i sm (lDV),
at BO. This indicates a society with a more individualistic attitude
and loose fies among menhers Prjvacv js the cultural norm; it is
innnnrnnrir*: and
>CC11 d) IIIdPPIUPIId.Lt; dllLt invaSive
IIlvd)lvtr vvllCil nponle
when /LvytL n-v
y.)

in high TDV countries, success tends to be equated wlLh

se'f-corfrdent and
ne-sonal achievement. Canadians are norma'lv-/"'.'."--'-*-'.
comfortable talkinp'ahout general tonjcs \^rifh mnst retnlo bur we
rtrn'r,rorrnlrr
uulr L u)uoltJ -h.r^ rhp
)rrq]tr dptrils vr
LllE utrLqrLD nf vul Lf vLJ wil"
np-qonAll.ves
orr- PglJvlloL r-vOne bUt
vv lLll olljt

our closest friends.

Canada scores lowest on Long-term orientation (LTO). This LTO
indicafes fh-+
'ankino rrrurLqLLo
-qrrNrr16 '-^^r- i-L) o.- -^'t^r-r
LrrdL Lo'lldLtd )ULItrL.V that
LlloL belleves in lllqq
UCLICVcJ 111 meetins its
----o ---
uuL15OLlUllJ ^^i OPPI
^f.rid^fi^^^ O1lU ^^^-eciates cultural traditiOnS.
.-^-,1 ^'-J ^^,.,^-,1.
lqrrquq pwvvLr -islance (PDi) score 1s reiatively 1ow compared to
the worLd average. This indicates a socierv fhaf features
'-*'*''" a ', ish
* h b level
of equality wilhin government. organizations, and even families.
Thrs orientation reinforces the interaction between indlviduals and
groups with differing amounts of power and. as a result, tends to
reflect a more stable cultural environment. Section review
1 Who is Geert Hofstede, and
how does his -"rork relate to
Figure 4-13 Hofstede's ScoTes for Canada and the United States international business?
2 List Hofstede's six cultural
dimensions.
3 What countries score lowest
on the cultural dimension of
power distance?
.a 5a
4 What is feature of cultures
:l a
that have a high score in
46 48 the uncertainty avoidance
dimension?
What is a feature of a high
25 individualistic culture? Of a
low individualistic culture?

I
Uncertainty Long-teim Masculinil ndulgence
What is the highest-ranking
cultural dimension for
Mexicans?
Avoidance 0rientation \n/hnt iq thp hiohpsf -r: r --'-
-__-___b__'-'_-_---__:
:
cultural dimension fc:
O united states
Canadians?
What is the 1o-.',-:.: :=:-.-.. ;
cultural dime:s-- :- - -,
Lanaolaus.
 Chapter Review

1 what is the difference between a subculture and a counterculture?

2 Why is Canada considered a multicultural countrv?

3 other than Canada, name three countries that have a high level of
individualism according to Hofstede's cuttural dimensions.

4 what are appropriate topics of conversation at a business meetrng

in Mexico?

5 How does silence vary across different cultures? Descrlbe how

sitence can be perceived in Canada.

6 Explain four tips on how to do business with Indigenous cuttures.

.1.
InKtn
7 "A nation's culture resides in the
hearts and in the souls of its
people." Explaln why you agree or disagree.

8 Doyou see evidence ofculture, subculture, and countercultures rn

your school? Describe them.

9 Nelson Mandeia once said, "If you talk to a man in a ge

he understands, that goes to his head. Ifyou talk to his
language, that goes to hls heart." How does this statement relare to
international business?

f0 Why is it important that a decision maker be present when

negotiating a business deal in Mexico?

11 identify three problems that a monochronic negotiator would have in

a meeting hosted by a polychronic negotiator?

12 Describ of developing personal reiationships when

doing b How does this compare to doing business in
Canada tes?

13 How is doing buslness in Brazil similar to and different from doing

business in China?

14 Select a song, television show, or movie that represents culture in

some form. What does your selection show about culture?

168 | Chapter 4: Culture in International Business

 15 Choose a holiday that you celebrate. what are some of the cultural
traditions of this holiday?

16 Research holidays celebrated in India, China, and Brazil. Create a

venn diagram showing simitarities and differences as thev relate to
culture.

17 It is said that there

are many indias wlthin India. what do you think
this means and how might it impact intemational business?

18 Using the information in this chapter, list the top three tips that you
feel are most important when doing business in each of the following
countries: Mexico, Brazil, Japan. Justify your answers with a partner.

19 How does the rule of law impac[ intemational businesses in china?

20 "Think Global, Act Local." h'hat does thrs mean as it relates to culture
and international bustness?

21 Research the temporan- fcreign rr.olkei program in Canada. \r'hat

benefi ts and conEove:sies su::cnd ti,is ::c{;arn?

Communication
22 Create a mind map on tips for doing business in the cultures
explored in this chapter. what connections and relationships can
you make between cultures?
23 How is culture represented in your school and local community?
With a partner, provide examples of stores rn your neighbourhood
that target a subculture as their main consumer. ExDlain vour
answer.
24 rn a small group, create a coliage that represents Canadian culture.
Present your collage to the class.
25 Profile an entrepreneur in your community who has experience
working with a business based outside of Canada. what have been
the benefits and chailenges for this person?
26 In a group, prepare a multimedia presentation (video, audio, or
business presentation) that explains Hofstede's cultural dimensions
and how country scores are calculated.
27 Create a photo essay on the "Top Ten" tips (dos and d.on,ts) for
conducting business in countries or regions with different cultures.
28 In sma11 groups, write a script and role-play a business meeting
between two different cuttures.

ChapterlevretIf59
 Application
29 Using tips from this chapter, create an infographic on working
effectively with Indigenous peoples in Canada.
30 Design a brochure describing in detail the business etiquette in one of
the following countries: Chile, South Korea,Japan, Israel, Saudl Arabia,
France, China, or India. Include a brief summary of Hofstede's cultural
drmensrons in your brochure.

31 ProfiLe the culLure of one of the following countries: lsrael, Finland

Morocco, Vietnam, or Colombia. Discuss religion, geography cLimate,
politics, and cuLtural history in your work. Be sure to include important
holidcrrs fnnd n-ptp-pn.ec Ann \rrsinesq nfinlg-19.
32 Using Hofstede's cuLtural dimensjons, investigate each category as it
reLates fo Canada Do vott aoree rnrith lhp Lrrrvr):
f hennr? Prnrridp
f ruviuL pv:mnloc
L^qllrPLLo
from
--""' vorr'Trprsona
) sirua[ion and indicate whethervorr jvu Agree
qbrLL o-
ur
disrorec
-.-*o--- rnrith thp r:tir
,*, lg

170 | Chapter 4: Culture in International Business

Inquiry Activity

In this chapter, you learned that understanding cultural differences

can reduce gtobal blunders and help those doing business in other
countries. People-not countries-are the ones who trade. Dutch
anthropologist Geert Hofstede identified six cultural dimensions for
understanding the cultural differences betwe en different c ountries.
Using the information in your textbook, list and explain where
Canada ranks on each of Hofstede's cultural dimensions in a chart
like the one below. For each dimension, explain whether you agree or
disagree by providing evidence from your own personal experiences,
and examinlng how it could appty to business. Conciude by writing
areflection supporting or challenging the theory. Be sure to give
yourself plenty of room in your chart to inciude your responses.

Uncertainty avoidance index (UAt)

Long-term vs. short-term orientation (LTO)

Individualism vs. collectivism (tDV)

Masculinity vs. femininity (MAS)

Indulgence vs. restraint (lND)

conclusion on Canada's cultural dimensions:

Inquiry Activity | 171

Etiquette = the ruIes and.norms that govem soctal behaviotr

Why is etiquette so important for international business?

International business is about bullding relationships with
other neonle_, verv ,, in different countries. Differences in
, _-,/ often

cuiture can make doing business across borders challenging.

As we've seen in this chapter, business etiquette varies
from country to country and often from region to region.
Understanding differences and simiiarities in culture can
minimize misunderstandings and al1ow for better communication
and stronger business relationships. Consider personal space,
nrrnnfrrnlifrr cnrl fha
OllU LIrE nnnronf nf timp
LwllLsyL vr ennrnnriefp
LffrrL, qPyf OrpotinOq
v}JrrqLr 6rLLLrrrbu,
PLlIILLLIOLTLy
non-verbal communication, gestures, and attire.
Do your research in understanding the culture of the country oI
region when doing business abroad and follow these tips to make
x^^,] i-^v^oainn
^
d. Suuu rrrrPr cJJrurr.

Tips on etiquette
. Know the names of those you are meeting with and how to
nronerlv address them.
. Present your business card with consideration.
o flrrLL^
hprlz rrif 6rrL dj,,i-d io
dift 61V1115 nnnrnnrjn+^ 4rru, .if
I) dPPlUPIldLc ^p6l so select a Ojft
carefully, with conslderation.
. Dress appropriateiy.

' Be aware of body language and non-verbal communication,

such as eye contact.
o Select annronrietp tnnics of cnnrrersation.
Activity
You are to arrange a meeting with a customer in Mexico.

When you affange the meeting, what will you say when caLling
your customer if an assistant answers?
Describe your attire for the meeting. What outfit, shoes,
grooming, and jewellery would you seLect? Be descriptive.
When should you arrive for your meeting? How early is too early?
How would you correctly greet your customer?
You attend your meeting with a new colieague, Sophia, who has
never met your customer. How would you introduce her?
What would be an appropriate gift to give your customer, if any?
Explain.
Your customer provides you with a wrapped glft. What will you
say? When will you open it?

What are some appropriate topics for conversation? What topics

should you avoid?

Business Skills | 173

 Lea rn in g By the time you finish this chapter, you should be ab.= ::
0 b,iectives ' Assess the ways political and economic factors a:-:::
international business methods and operations
" Understand how absolute advantage and com:a:a:-,-: ::-,-=:-:--i:
affect trade among countries
' Analyze the rationale for, and impact of, Canac:a:l ::-,-:::-:-=:-:
initiatives and policies relating to internaticna. ::::=
' Describe how Canadian corporations can inf.::=:-:= l--=:= s

international and domestic policy

Key Terms economic system economies in transition
political system developing economies
circular flow model Index of Economic Freedom
market economy business cycle
centrally planned economy monetary poticy
mixed economy fiscal policy
democracy absolute advantage
aurocracy opportunity cost
totalitarianism comparative advantage
developed economies tobbying
gross domestic product (COp)
 Accordlng to its mission
statement, the WorLd Economlc
Forum is an independent,
lnternational, non-profit
organrzation "committed to
lmproving the state of the world
by engag rg ousiness, poL tical,
academic, and other teaders of
)oc-ery to shape gtobal regiona
and lndustry agendas " Its
in riariles are often cileo i1
ihe news and have impacted
governments, trade agreements,
industry, and the way we
understand the global economy
176 | Chapter 5: Economics and P0ltItcs
5"1 Economic and political
systems
An economic system is the way a country organ_:-s _:: :=scurces
and distributes goods and services to its cltize::s. --- political system
is the type of government by whlch a count:,,. _s ::::. ;conomic and
political systems are closely linked, and bri: c-rerr.1- impact the way
international business is done.
To understand these tinks, vre must first understarid how
economies work. Economies can be simply described by the circular
flow model. In its most basic form, this model considers economres
simplistically as consisting solely of indivlduaLs (or households) and
businesses. Businesses provide income to individuals in exchange for
labour to produce goods and services; that income is then spent by
the individuals on the goods and seruices produced by the busrness:s,
creating a circuLar flow oftransactions from one to the other.
Figure 5-l illustrates this model.
 Figure 5-1 Ihe Circular Flow Model

Wages, rent, dividends

Individuals Businesses
(Households)
Factors for production

The answers to the followlng four questions define a country's economic

system:

I what should the country produce and in what quantities?

2 How should scarce reso'rces such as labour and capital be
allocated?

3 How should goods and services be distibuted throughout the

country?

What should be the prices of the goods and seryices?

This section discusses three kinds of economic system:the

market economy, the centrally planned economy, and the mixed
economy. Each economic system answers the above questions and
addresses the three major characteristics of private property, profit,
and competition in different waVS.

Economic and political systems | 177

 Market economy
A market economy is also known as capitalism or private enterpise.
In a market economy, the above questions are answered by
individuals and buslnesses. Businesses, consumers, and govemment
act independently of one another. Market forces and self-interest
determine what goods are created and sold. These market forces
ensure that there is variety in goods and services to attract
consumers. The government has little direct involvement in
business. Its main duty is to create an atmosphere in which citizens
and corporations can be successful.
A market economy views pflvate property, profit, and competition
as described below:
. Private propertlr. Corporations and people are encouraged
to own property, incLuding real estate, buildings, equipment,
furniture, and automobiles. Owners can purchase, rent, trade,
sell, give, or will their property to whomever they want.
In a ma rkef ecolo-'nv consumets
l-pvc lhp nrnnrtrrrilv'n rhoose . Profit. Profit is the reward for the rlsks taken. It is encouraged
fiom a wrde y3liol
'*_'-_J v o'goods
"' b"' because profitable companies provlde employment, create ne\{
products, expand, and start newventures.
The nrofit helonss to the owners of rhe
business, and they can choose how to
snend thpjr rprnr:rds Thprr .An rpinvost in
the business or buy personal goods, such as
a house or a new car.
. Competition. Competition is criticai.
Companies compete on quality, seruices,
price, reputation, and warranties-
Competition encourages companies to
nrovide cualitv nroducts at a reasonable
pnce so that consumers do not switch to
other brands. As a result of competition,
consumers have access to greater selectron
and new products, and companies have an
incentive to innovate in order to bring in
mnrp nrnfit

There are no pure market economies in

the world because every country has some
government intervention; the United States
comes the closest to having a market economy.

178 | Chapter Economics and Politics

 Centrally planned economy

communism or a command economy, decisions are

made centra[y
by the govemment. The government controls all elements
of the
economy lishes h ent
provides health
members . A cent
economic system characteristics in the followingways:
. Private properer. Ownership of property is restricted.
Citizens may own small househord items and furniture.
The
govemment owns all of the housing and bus
factories, offices, and farms. The governmen
wiil work in the businesses and where they witl live. A1r workers
are employed by the govemment, which sets the
wages.
' Profit. Arl profit bel0ngs to the govemment, and citizens
do A fruit market in Havana, Cuba.
not receive a portion of the profits they hetp to make. The price of alt the goods shown
If the
government needs to increase its revenues, it raises prices here would be determ ined bv the
or government.
cuts costs such as wages or
capital investment. The profit
made by the government is
reinvested into the businesses
or used for social programs
such as education or the
mititary.
. Competition. Competition
is limited. The government
determines the price, quality,
style, and amount of goods
and services. Consumers have
little choice in products sold.
North Korea and Cuba are run
as centratly planned economies.
Countries that traditionally were
thought of as centrally planned,
such as Russia and China, are still
predominantly centrally planned;
however, each has recently adopted
some market-economv nra cticps

Economic and political systems | 17g

 Mixed economy
Most economies in the world sit somewhere between a market
economy and a centrally planned economy-they have a mixed
-t
economy (also known as amodifiedJree enterprise system).For
example, France offers many social programs, including subsidized
universal health care and a comprehensive pension p1an, but it also
has successful private enterprises and international businesses,
such as L'Ordal and Danone. It has characteristics of both market
and centraily pianned economies. Canada is also a mixed economy.
Canada also has strong social programs such as universal health care,
employment insurance, parental leave, and a comprensive pension
plan, and it too has thriving businesses ttrat compete successfully in
the world market.
In a country with a mixed economy, the balance of influence
between the principies of a market economy and those of a centrally
planned economy will depend largely on its poiitics, history, wealth,
and culture. Generally speaking, a mixed economy has the following
characteristics:
. Private property. Property is owned by individuals,
corporations, or government. The government owns
schooLs, parks, and real estate. It sets regutations that affect
private property; in Canada, there are strict regulations
regarding ownership of financiai institrrtions and the media.
Corporations operated by the Canadian government are
called Crown corporations. Examples include Caaada Post
and the CBC.
. Profit. Profit is encouraged, but is taxed to support
government projects and provide social assistance. Taxes are
collected at the federal and provincial ievels ttrrough sales
tax, income tax, and corporate taxes- Municipat projects are
frrndpd throrroh nrnnprt\/ t2Yoc
. Competition. Strong competition among corporations exists;
however, the government may also be a competitor. For
exampie, in the Canadian transportalion industry, the federaL
government operates VIA Rail, and municipal governments
run their own transit systems. In the overnight delivery
industry, Purolator, run by Canada Post (a Crown corporation),
competes against FedEx, UPS, and DHL.

180 lChapter 5: Economics and Politics

 Swe'l^r j. rnn'l p- o.rrnle Of a
Figure 5-2 Economic Systems Compared IULivod
m ornnnmrr r^rirh
cL cLurrJrl-y im n
w.-Lt _L_tpIPS51r €
fax-'uldec sori:l n"norans lt
offers 48O day. 116 monLh. o'
Advantages Disadvantages srbsidized le:ve ncr rhild (n.: 'no
uD
-r to B0o; of a r ye t rLar'.- . ir
'".'.-
Efficient use of Tesources Gap between rich and poor a cu'ture lLal ernrrrrtr' ?-:-:e:
New products ex pa nds pnrrnliiv
_ f **"'/ f:thpr' :- '-:"r;la/t
Economic growth lack oi corsume' education lntra 41d, -.- ' : cuatler
Good quality products Unhea thy products of that r.n: a- ,:as: 4 n-ionths
L0w pftces
T- L: : :-r: ..l.:l: gOVefnment-
rl. a^-
: -ls :--:: :aientaL Leave is for
-I .-:--- :- \\o; nf : rlrpnl S
Centrally Planned All citrzens are assured Little motivatiol to rr,'ork -:'.' . t:thers 'r'rrca'l'r rike
Economy a minimum standard of na [c 2
Detween 5 weeks of that time
living Aloc m r'-. - -:a.- -t
Health, education, and '-ea<.a'---.-.a'
other social pfogfams -'''--...
are provided free to all
citizens
No unemployment
Long-term stability

Mixed Economy Individual incentive Highef taxation

Basic social seTvices Individuals have little input
ConsumeT protection into how taxes are spent
Government intervention
may stifle gfowth
Less motivation to work
ha rd

Economic and political systems | 181

 Political systems
As mentioned earlier, a country's political system
is linked in many
ways to its economic system. There are many types political
of
systems in the worrd. some are based on retigion (theocracy)
and
others on a ruling king or queen (monarchy), while
others are
governed by the weaithy, educated class (aristocracy).
Although
these types of government stl[ exist (for example,
saudi Arabia is
ruled by a king and the vatican is rured by the pope,
the head of the
Catholic Church), they are not common. The most prevatent
forms of
government are democracy and autocracy.

Democracy
The term democracy comes from the Greek word
meaning
"govemment by the people." A
democracy is characterized by free
and fair elections, the rule of 1aw, free speech, the right
to assembty,
a free press, and freedom of retigion. In a democracy,
all people
have the right to govem themselves, and each citizen
is entittea
to an education. Democracies are usually accompanled
by a mixed
economy, where there is economic opportunity for
au citizens. If a
business is successful, the owners reap the benefits
as a reward for
the risk they have taken.
Countries such as Canada, the United States, and the countries
of
the European union (ru)have representative democracles.
Crtizens
ofiegal voting age cast a vote to elect a representative
to sit in
parliament and vote on their behalf.
Democracy is not a perfect system. politicians
may be more
concerned with being re-elected than with what good
is for therr
country. This could lead them to focus on short-Ierm
solutions rust
in time for another election, rather than taking a long_term
perspective. Politicians who rely on fundlng
from targe corporations
may have in mind the businesses'needs rather than
the needs of the
crtizens they represent. Many of our politicians
come from srmilar
backgrounds and are not representative of groups
such as women,
minorities, and the poor. Democracies are difficurt to
establisrr
and expensive to maintain. Many newly emerging
economies-for
example, those in Latin America-lack the judicial
systems and other
infrastructure that help maintain political stability.

182 | Chapter 5: Economics and politics

 t

lr

I
t

{ Autocracy liorln Kcrea:s al< rr i::r- i

'l

An autocracy or authoritarianism means rule by indivldual

a singLe ol-d 1. 1" -.cf .'* :- q .

Dr-onor.:nd NInrrl- zn. ;t

or a small group of peopLe. The term totalitarianism is often reLated 'j "'-l

to an autocracy. The main difference between these two is that

totalitarianlsm means rule by one party, whrle authoritarianism is rule
by one individual. Proponents of auLocracies believe that one consistent
government allows decrsions Lo be ratronal to be made in the rnterests
Of fhp pntifp Cnlntnl rcfhar'Lrn on^.i.1 ivnr-nc d]ru
IaLtlel -nan SpeClaL rnrl fn h..,^ d
LU rrd.vtr . l^,
-ur1$-L€fIIl
$It,upr, I What four questions do all
i1 IOCUS. pcnnomir q\rsttr'T< :nSwef?
ThiS nOlifira- JlJLCttt
rrrrD puLr!L!qr 1...- *^-,-
qt/Sf^'- tld) .]i --J.,lnf:Opq Arrfnr-r:rjpc-,.,,.1r-,
lIor-Ly Ltr)duv*__-_o*_.^^*-,,,*_,-- 2 Outline how each of the
U>UdLty
strong
have a --.',.o nilitarv nresenre to prsr--e that the Leader or leaders three different economic
svqre* c d,e'' with nrivate
""*_t in nOWe- and rrrirf :in ct:h'l''rr
StaV ,-- r Ooverr-nent
AtttOr--attC 6v v Liltl
fArr I uurvLlqLtL I tL
nrnncrtr/ nrnfif end
strives to control allaspects of its citlzens Uves. includingthe media, .nmnPtitinn
--_'^r _ ____-__'
n-o'essions httsinpsses. and relig'o. Cir'zenS have no in fluence on
tl. !ILl
3 Give two advantages and
the government
'--- o' and if fLev d'sapree w''L jTs,lo6;q'nnc r].o'- .-= ^'-:r two disadvantages of
dor''r^rifh hrrfho -.,ifAfV . aifj 7p.s
gILf 4L I tD
-.rh.
VV 1]U
,liSSent f_a. ,., :_a. .netf
- o r merlrpt trannnml,
=
abiLlty to travel outside of the count:r c-J:ia-.e c. ' a-'-____*"J
centrallv olanned
economy
Current examples of autcclac_:s l.,,.ice \orth Korea and Cuba, . e mixpd Frnnnml/
--'__-___J
each of which is 1ed by a . ir-gL= e ade : Olher examples include
4 Define democracy.What
Vietnam and Belarus. China, which is led by a single party, is an are the characteristics of a
example of a totalitarian government. The economic system most It amne rnew?

closely associated with auLocracy (or totalitarianism) is a centrally 5 Define autocracy and
planned economy. China however, has a mixed economy. In the totalitarianism. What is tre
earlv l9B0s it der"ided that free'ng rfiqf
m,rrkefs'r difference between the s:
l\!LJ lf i fhe
LliL nr'rre'e
yl I v qLg strcfoJ
)q!L
two?
would be key to growth-an assumptlon that proved correct-but it
also main tains slate-owned operations
6 Give two advanta:=. =:--
two disadvan-:i:-. :: =:-
autocracl/.

i
1 183
 Hong Kong is the seventh largest
trading entitY in the world and
carries the toP rating on the
Index of Economic Freedom
182 |
18a I Chaptet 5: Economics and Politics
5.2 Classif ications of
economic develoPment
The world's countries are also classified by their ievel of economtc
strong econ
ntial. ManY
izens suffer
d,isease as a result. while there are different ways to classify
economic
development, all countries fit into one of the following general
(UN) and its partners:
classifications determined by the United Nations
' Developed economies
' Economies in transition
' Developing economies
 Developed economies are characterized by a hlgh per capita income
or strong gross domestic product (GDp), the total goods and services
produced by a country in one year. These countries have high
standards of living and literacy rates, and make major advancements
in health care and technology. They design and manufacture
a diverse range of complex products, such as mobile phones,
computers, and hybrid cars. They have moved from a reLiance on
primary industries into secondary and predominantiy tertiary
industries.
Developed countries are world leaders in international business and
have formed strong trade alliances and agreements. They have created
international trade organizations and intergovernmental bodies such
as the G7. They compete for one another's markets. There is a strong
correlation between developed countries and democratic political
systems. Examples of developed countries include canada, the united
States, Japan, Germany, Australia, and the United Kingdom.

Serbia is considered a counLry

wlth a transitlon economy,
experienclng growth 1n
lnternational buslness
Economies in transition (transition economies) are countries that opportunlties. Pictured here are
are moving from a centrally planned economy toward a market workers in a Fiat auto plant in
Kragujevac, the fourth largest
economy. This transition includes decreasing the role of government, city in Serbia
pnvatiztng government assets,
reducins
--**--''b fariffs and lihprnlizino
markets. While the country is
eXnpripnr-jnO
rrl}/ rr rLliLf f 16 fhoco
LrrLos tr^h.i+i^h^ i+
Lr o.rlJI LJ.ut.tJ, L
-L

may experlence problems such as

infl ation, increased unemployment,
and widening income gaps.
Examples of countries in transition
inciude Albania, Serbia, Montenegro,
and Ukraine.

Classif ications of economic development | 'tg5

 eveloping economies
The third category, developing economies, includes a number of
subcategories. Within this broad category are countries known
as least-developed countries, characterized by severe poverty and
substandard tiving conditions. Their economies are predominantly
agricultural or resource-based. They lack sociai services, such as
health care and education, and have poor infrastructure. In addition,
their geographic location means they may be vulnerable to natural
catastrophes (hurricanes, earthquakes, floods, tsunamis). They
usually have low levels of literacy and limited access le ls6LIn6lno\r
Examples of least-developed countries are Angola, Ethiopia,
Cambodia, Bangladesh, and Haiti.
However, developing economies also include countries such as
Brazil, Mexico, China, India, Israel, and United Arab Emirates. These
countries are in the process of moving away from agdculture and
natural resources toward more industrialization, manufacturing
and technoiogy. A large percentage of the population is leaving the
rural areas for cities, and the skill level of the workforce is steadily
improving. Overall, prosperity is growing.
These countries are becoming more important ln the world of
giobat trade and provide opportunities for Canadian businesses. For
example, if a country requires improved infrastructure, Canadian
businesses like Bombardier can assist with railway technology or
public bus transport. In addition, these countries are able to afford
Canadian exports. Trade between Canada and Mexico, for example,
has been increasing because Mexico can afford more imports from
Canada. In 2OOB, Canada exported $5.8 bitlion to Mexico, an increase
of 17.9 percent from the year before.
However, developing countries are also a threat to Canadiaa
businesses. They have lower labour costs that Canadian businesses
cannot match. They provide strong competition for Canadian
products. Canadians must be careful about investing in developing
countries, especially if those countries have weak regulatory and
legal systems that coutd result in delays or legal problems.

186 | Chapter 5: Economics and Politics

 d late OI r-,,-C 'qIaZll-s , i;
-*-\.--(-a-t:_'"_--_-l-j
o/.\_-:aL.i_o _:- . c_...__i
i
Another way to cLassify economies is through the Index of Economic :nd plprtriritrr-ehirtq ihp
af.luenL Cavea r l'gi.oo :
Freedom. This index measures the economrc freedom of indivlduals ]|^'-'1r]-|o--'1-P.o1..C ':r-o
in I rnttntrrr fzetarirtd in icqrrpc qrrrh qr:c nTODettV
i Lj ffightS
f6riLJ, O6vefnment
v Lf
PIvPL 6v .

integrity, judicial effectiveness, labour freedom, and investment

freedom. Economic freedom is the fundamental right of individuals
fn nnntrnl thoir nrnnoftV and labOUr FCOnOmiCallV free COUntrieS
aLlow their citizens to work, produce, consume, and invest without
constraints. Governments allow labour, money, and goods to move
freelv.
'^ '''J ' The measu-e comes from the The Heritase Foundarion a
research and educationai institution based in Washington, DC,
that belleves that economic freedom leads to economic prosperity.
According to this index, as of 2018, the country with the highest I What are the characteristics
economic freedom is Hong Kong; Canada is rated at number 9; and of a developed economy?
ai,,^
urvtr +1,.-^^ ^,,^--l ^^
Lrrrtrc cIdrIlPLcJ.
the United States scored iB. Figure 5-3 shows the top 10 rankings.
2 What are the characteristics
of an economv in t'ansition?
Figure 5-3 Top 10 Countries on the Index of Economic Freedom,2O18 Girre trnrn pvnmnlpq

What are the characteristics

Rank Rating Rank Country Rating of a developing economy?
Give three examples.
1 Hong Kong 90) 6 lreland 804
How do developing
2 (i nn: nnrp 888 economies provide
7 Eston ia 788
opportunities for Canadian
3 New Zealand 842 8 United Kingdom 78.0 businesses?
4 Switzerland 817 9 Ca nada 71.7 What is the Index of
LCOnOmtC treeoom/ How Is
5 Australia 809 10 United Arab Emirates 77.6
it measured?

187
\r/hilp nn hrr<inocc ic frrrl\/
TPrtrcs'nn-nrnn[ " h:-f vr:19
slores large and small r\/nic:llv
5.3 The business cycle
dn rnrcll drrrino a roroccinn
hecartse flay nrny 6lp;a14i6 Over time, the economies of countries, and of the globe, contract
and mainlelanap lrodn.tS and and expand. This expansion and contraction is called the business
services that are consldered cycle. It measures GDP, and is periodic and unpredictable. The
pqqpntiAl Drrrind : rprocci
- -"-'b - -----'on' httsincss is lltqlqLLEl14gu
r.rzr.lp ID r.harar.terizpd hrr fnrrr tLl.c111-t .+.d^..raaaooi^- trnrrOh
mrjh JLcl6cJ.IcLcJ)IU]]r
mln\r ann<tImor< rnmnlofo rhn . uuorrfLDo LyLrE uy IUut ,- _ _o--,
\urrrPrcLc Lt tqlt
Y^hni,-
owrr
^r"'h reljalfs dno
^-; n"alnlenance
-^i-+^-- expansion, and peak, and Figure 5-4 shows how these four stages
because cash is low
appear over time, and shows how they reflect the current GDP. Of
collrse the cvcle is ncrrcr es rporrlrr vvrrqL thp
uo r^/hAt
uf 2q LfiL fiorrro
rr6qf
qhnrnrq-
E DffvvvD-

the time, and highs and lows of each stage can and do fluctuate
denendjno on several factors.

Figure 5-4 The Business Cycle

o
(9
f
f

6u

o
o
J

188 | Chapter 5: Economics and Politics

 Each stase in the hrrsiness cvcle can he summarized as foLlows:
. Recession. Sometimes referred to as a contraction, during this
phase the economy slows down. The definition of a recession
is two consecutive quarters duringwhich the growth of GDP
I declines. Recession is characterized by a decline in consumer
I
I purchasing, which Leads to an increase in unemployment, and
I it results in businesses contracting or closing. Fewer taxes are
I
collected during a recession, which means the government has
l less capital to provide social servtces.
. Trough. Thls is the bottom of the cycle. Production and
employment reach their lowest leveis. At this point, the economy
completes the recession and turns toward prosperity. Sometimes
Fn cconom\r enters a deen trorrgh known as a dcnrp.<.sinn This is
- PdrLrLurdrry
d. ^^-+i-,,1--l-,,-ljFFi^"r+
ulrrlLuLL dlru ^'.^+^i-^, ^^riod
^.^r >uJLd.rllcu Pc of economic decline.
However, the term depression is commonly reserued to describe Of the iour sr:ai:: : -:: :.^:-ll:::
the maior economic slrrmn that lasted for most of the 1930s. r t' rl- " -
--* -: j.----
L: L - , ),_a___.C ^
Expansion. Sometimes referred lo as recovery or prosperiQ, at this . . - -) -:-. :\p:Ilenaei
^^--.,*^-i
rC 3 1a5
qt:oo thp pcnnnm\/ hpoinq to oro\^r aoain Fmnlo\/mtrnt \^/eoes : -.1--ion, if ecel:tL-t,tot1 One

nrnrlrrnfinn .^l Tnrrocfrrlpnfq ofthe indicators ofa recession is

-r^fif..ll dtt C-^.Pd]r\-1.
PlU(-LULLlUlI, dI.t(-l Pi.UrrL) ^-n.nrl -LrrVCJLl.trLrlLJ arp ctrnnd
orL DLrvr16/ np\^I
rlLvv
e dprlinp in.nn(rmp: snendtno
1-,,-i-^--^- ^-^ LItrd.Lcui
UUJI.IICJJC) d.IC rnd fhp
^-^^+^d orru pcnnnmir rlirnrtp
LrrL LLvrlvlLttL !LrrrruLL iq Onnd
rr 6vvu. /r ..,---i^
'uuq . (----,- ,-
LU vo luu) rdlLUl), lllL l --:.-(
dtrJ
. riqo n r'' errrlnvr"-- .rllc --
Peak. This is the top of the business cycle. At this point, the ln turn affects business Siore
o.^nnrn\/ cfnnq prrnnndino rnd hpoinq cnntrrrtino elr -t,"a- a'd " ,

wtde conroanv c ,,.1 -^. '=

one seen here in 2!-5 t:: :: -
uncommon

The business cycle | 189

 Paper mllls, hke Corner lumber and Fotest Products
Brook Pulp and Paper
Ltd. seen here in Canada is a country rich in natural lesoulces and is dependent on
Newfoundland, are
commitred Lo susLainabLe
its primary industries for its economic growth. Traditionally, the
fnrpqf mAnAotrmpnf United States and Westeln Europe have been the main destination
conrinuirv of
ensrrTinp '"_'_'-'-'"J '_ lhe
__-
markets for Canada's forest exports. British columbia and Quebec are
n atrrral Tesolrrces rec utred
by the putp and paper Canada's main exporting provinces of forest products. The industry
m enrrfreir r rin ct qpatnr
can be dlvided into three main sectors: forestry and logging, solid
(see
wood product manufacturing, and pulp and paper products
Figure 5-5).
Canada has traded lumber with the united States since the
18OOs, and one ofthe longest trade disputes between Canada and
the United States revolves around softwood lumber. The softwood
lumber dispute is basical$ a result of the difference in fees for
harvesting the timber on govelnment-owned land in Canada (where
the government sets the fees) and privately-held land in the United
States (where fees are determined by the mhrket).

Figute 5-5 Lumber Sectors: Contribution to the Economy, 20.13

qt Cmtibution
to Ecormrny

Forestry and logging Field operatlons and harvesting of timber 20

Businesses 0pe[ating in both primary industries, such 44

Solid wood pfoduct
manufacturing as softwood lumber (used ln housing c0nstructlon), and

aa+ Pulp and paper pfoduct

secondary industties, such as millwork and engineered
wood Droducts

Wide range of products covering everything from

manufactufing newsotint to household tissues

190 lChapter 5: Economics and Politics

 Figure 5-6 Export Value in Billions for Canadian Lumber lndustry, 2006-2016

40

:.t:

r I
t.:
=30
€20
IT
I

T
p10
x
ro
2006 2007
II I T
2010 2011 2012 201 3 2014 2015 2016
I
Softwood lumber Newsprint E Printing and writing paper
Wood panels IWood pulp ::::, 0the[ forest products

A temnorarv aoreement called the Softwood Lumber

Agreement (St R)was created in 2006 to resolve this disnrrte and
"br!!r---""

provide stability for the softwood Lumber industry between both

countries. However, the agreement expired on October 12, 2015, and
+L^ ri--"+^ ^-ted as one of fhe _,-*,--
L]rtr (rr)PULC 1tr-tr.r1rcrb_* main --,o_
neontiFtion rnoints
_,__-_ drrrino
_*----o
the updating of the North Amencan Free Trade Agreement (runffA)
in2OI7-2OIB.
Canada is the world's lalgest producer of nervsp:iitt. accounting
for almost 12 percent of the world total. However, rvith the rise
of digitaL media, gtobal demand for newsprint has fallen by
65 percent since the year 2OOO. Today, China and other Asran
countries have become significant markets for Canadian forestry
companies that are still dealing with pressures from a decline
in tradrtional markets such as the United States. The data
I
in Figure 5-6 shows the change in export value in billions of
Canadian dollars for this industry from 20O6 to 20i6.
I

Check Your Understanding

1 Which Canadian provrnces export the majority of forest

nrndr r cfq?

2 What are the three sectors of the forestry economy?

3 What is the main reason for the softwood lumber dispute
between Canada and the United States?
4 Hornr iq dioitel mpdi: imnrntino thic indrrcfrrr?
5 -i:-,v are Canadian companies dealing with these changes?
6 l-=s==::r the current state of the softwood iumber dispute.

The business cycle I 191

 in ica ors oe
usiness cycle
Economlc indicators measure how well an economy is doing. There
are three tvnes of economic indicators-leadino lassins.
'*Db--'o, and
*"*
coincident-which are described below:
. Leading indicators predict where the economy is headed. These
indicators adjust before the economy actuaLLy experiences the
chanse These indicators are critical hecarrse thev heln to suide
investors, businesses, and governments to act according to
what is about to happen. Housing starts (the number of new
houses on whlch construction is starting) and construction
contracts are leading indicators. People are unlikely to purchase
a new house if they beLieve the economy will decline. Retail
sales is another leading indicator, as strong retail sales increase
GDP and strengthen the currency, often leading to higher
employment rates.
. Lagging indicators do not adjust untiL after the economy has
exnpripnced the chanp'e. It mav take two or three ouarters of
economic change to influence a iagging indicator. An example
of a lagging indicator is the employment rate. Once an economy
starts to improve, it may take six months for the employment
rate to increase. A change in a country's GDP is another tagging
indicator, as it can only be seen after the fact.
. Coincident indicators move in conjunction with the buslness
cycle. An example is international trade. When economies
are siumping, countries do not import as many goods and
services. When the economy is strong, countries are abie
to purchase more goods from other countries. Another
coincident indicator is "real wages," or wages adjusted for
inflation (a decrease in the buying power of money). tf the
value of real wages is declining, this indicator may herald the
rise of inflation generally.

xDr

192 | Chapter 5: Economics and Politics

Govern ents and the business cycle
Governments throrrohout the world have a
.r---^ri- i*na:+
Ut qlllqLlL
IIIIPOL ^-
L UII
+he
world
vv vf Lu economv
LrrL ! lvf f vrirj . The
I

main two ways are through monetary and fiscal

policy. Monetary policy is a set of decisions a
countrv's
-- *--'.J
government
federal b" ' -"^'^'-'- makes throush
its central bank. In Canada, this is the Bank of
Canada; in the United States, lt is the Federal
- ..'r imn:rfc thp
Rpcpnrp Mnnofenr rnnlicrr -'-- mn -"-neY
JUPPLy
/+L^ ^-^''-*:f
^"^-r-- \111c d.r.r.ruuI.rL L- ---_--_,
monev in circulation rn
the country), interest rates, and the inflation rate.
Thp nf mnnpt:nr
Onel vf
r rrL 6vqr rlrvfrELqr j ywrrtj ic ornnnrnir
nnlir.rr fD LLvrrvlrrl! cfrhilifrr
JLcurLtLy
and to ensure trust in the currency.
Fiscal policy is the way the government at
aLL 1eve1s (municipaL, provincial, and federaL)
llcou L L__ _

collects end snpndq monev Monev is collected bv governments LIIITTIL -^---^-L-- U:

LC11Lldt : , : - , :

through a series of taxes such as income, corporate, property, sales, for folmL'rolt--. .-.-- .. -
mnnptrnr nni:e i-
and tariffs. The money coLlected is then spent on services such
rc alrrnofinn
a5 euucaLlol], h^^lth
IteatLIl ^^.^ uereltLe, -^'^l€..^
cale, A^{^^.^ weLraIe, .-^.-
mass +r-h-narfn{
LlanspotLatlon,
and many other government programs. Fiscal policy can impact
the business cycle through its spending. One of the key elements
of fiscal nolicv is establishins a hudsef The sovernment can lun
a balanced
u uuLuii!Lu uuu6LL wL^-^
brrdset vvIIC-LC 1trVC11UC) ^^"^1 exnenditures a deficit
^^ CqUdt,--r
" **o-' where exnenditures exceed revenlps or a srrrnlrrs hrrdget
budSet
where revenues exceed expenditures. 1 What is the business cycle?

In recessionary times, governments increase their spending to

2 Describe three
characteristics of a recession,
stimulate the economy. This provides employment, stability, and and three characteristlcs of
:,:tomers for businesses, and economic growth and job training an expanslon.
::::he unemployed. The funding for these programs comes from 3 Explain leading, lagging. and
-:::==sed taxes or from budget deficits-money left over because coincident indicators.
:- -: i- - ^.pr cnont Dttring Tpcoverv nefiOdS 4
the government
V !f IIIf f LI Define monetary policy.
:::-:: :: .:=:l Less money because the country does not need it to 5 What is the goal of monetary
'r---.-':: :- - ---Tpat or sf ehilitv-this
Lt I ro r.anf he
Lqf uL done
uvrrL hv
uj hrrsiness.
uuDlrr
nn lt a\r /

De:-:,-=.- a, . .,nments aLso affect the business cycle when an 6 Define_71scal policy.

eLecticr -. -:':-:-=:-: -:ntrolhngparties often spend money on various 7 Give two examples ci-,,'.-'.,
fhp dnrrornmpnl'aa'-: -- .

social D::E:=r:-: :- -:-'-:=:t:e voters' decisions before an election.

money.
8 Give two ex=:-:
th onrrp--
-^_-c o' ------- -

moner,-

9 Ho.',:i-;: :....... .

.-i. -- -- --

193
 A man checks sheets ofcopper
in Kitwe, Zambia Zambia has an
absolute advantage in produclng
5.4 The economics of trade
c0pper.
There are many advantages to trading internationally, including
an increase in jobs, markets, technology, variety of products, and
competition. But is international trade realty good for everyone?
What about economies in transition and developing economies?
Can they really gain from trading with developed economies or are
weaithy countries just taking advantage of them? These questions
can be answered theoretically using the economic concepts of
absolute and comparative advantage.

-'ry

194 | Chapter 5: Economics and politics

 solute advantage
One country has an absotute advantage if it makes a product
or service more productively than other countries. The country
manufactures more products with the same amount of resources. The
country with an absolute advantage has better technology or labour,
or higher quatity resources. For example, it can be said that Zambia
has an absolute advantage in producing copper, and that Canada has
an absolute advantage in producing forest products. Countries export
products or services in which they have an absolute advantage, and
imporl products or services in which other countries have an absolute
advantage.

Let's use a hypothetical example. Assume that there are only

two countries in the world: Canada and the United States. They can
each produce apples and peaches, but ifeach country uses halfofits
resources to produce each product, they produce different amounts.
This scenario is illustrated in Figure 5-7.
Generally, it makes more sense for each country to specialize
in products in which they have an absolute advantage. In this
example, each country would make twice as much of the product
in which it has an absolute advantage and none of the other
product. This scenario can be seen in Figure 5-8.
Notice the difference in totals? Overall, more apples and peaches
are produced in the second scenario. Canada has an absolute
advantage in apples, and the United States
has an absotute advantage in peaches.
frgtre 5-7 Each Country Uses lts Resources to
Produce Two Products

Ca nada 1,000 600

United States 800 1,400

Total 1,800 2,000

Figure 5-8 Each Country Specializes in One Product

Canada 2,000 0
United States 0 2,An
Total 2,000 2g

The economics of trade | 195

 What if one of the countries is more productlve at manufacturing
both products? In Figure 5-9, the United States is shown to have an
n.lrr.hf.dd frr
^h"^l"r^ dLIVo.IILdSC
duJuLuLc in Pf
nrndrrr.inO
vuuLrf hnth uyyLLo
ennlps qriu
and yLsrrrru.
neaChes

To understand whether Canada and the United States should

trade in this example, we need to understand the concept of
opportunity cost, and then apply it to the production of apples and
peaches. An opportunity cost is the cost of
Figure 5-9 Absolute Advantage to the United States giving something up to get something e1se. For
example, lf you put all your money, energy,
Country Apples Peaches and resources into producing one product, you
Cana da 1,000 500 must give up producing its alternative. The

United States 1,200 00 s consu unlty

c break , for
Total 2,200 11 00 +L^-..
e
^ t havt

Applying the concept of opportunity cost to trade, let's look at

how efficient each country is at producing each fruit based on the
scenario in Figure 5-9, beginning with peaches:
. In Canada, l peach costs I,OOO + 500 = 2 apples

. In the United States, l peach costs 1,200 + BOO = 1.5 apples

Ac rrnrr Lorr qpo thp
.an DEE, annr ^€^4taheq-Oj\/ing
n^^^-+,,nitrr LUJL
nJ )uu Llr! VPPUILUI-IILy UI PLqLfrLr 6rv1'16 1n
*y fho
",,-
alternatjveL vr
qLLLrrrqLrv nrodrrc'^d dPPLCJ-]J
of yrvuuLI.t.tB ^^^1^' i'
r^r"^ot
LUVvtrD in the Unired States;

therefore, the United States should produce peaches.

Now let's look at apples.
o Tn
rf f C:n:dn
Lqf f quu) lr :nnlo
qyy rL cnqtq \OO + 1 OOO = O 5 neaches
. In the United States, I apple costs BOO + I,200 -- 0.667 peaches
Ac rrnrr
rto]vu .an qop thp nnnnrtrrnitrr rnql of ennles-oivinO
b^'..'o*r ttn the
-"-
. of oroduc'-x
alternative *--11r5
- -- r- - ^^"r"^' i' r^"'^st
LUvvc
PCdLrlcJ-rJ in Canada; therefore,
f rnnlr.h^rrlrl
\,o1. loud, JlluuLu nrnrlrl6p rnnlpc
q}JyLLO.
PIvuuLL
In this example, Canada has a comparative advantage in apples,
and the United States has a comparative advantage in peaches. A

e,T .n|n1'n/
LVUflLr y cen
Lqrr hp
uL said
oulu f^ l.-,,^ . rnmnr-riirre qUvuff
L(J 11d.VC ct LUIIIPOIOLlVL advantage anOthef
OVer ufr!
Lq6L vvLr

when il can produce a good or service at a iower opportunity cost.

196 | Chapter 5: Economics and Politics

 arnrrlr
Ldlldud lnnc
I]dD 4 r nnmnrrnii'ro
LUlrlU4l4LrVL
-.]'.--+^x^
duvdllLdSq ih LCl Ldlrr in/]'
111 -^r+^i- llluuJl 'ctvinc
I rCJ

that extract natural resources

and process raw materials. ..
Thls nickel plant in Sudbury,
Ontarlo, also features the
Inco Superstack, whlch, at
'180 meires is crrrrentlv the
tallest chimney in the Western
hpmiqnhorp

Cnntinrrino \^rith nrrr hrrnnthpticel Figure 5-10 Canada and the United States
example, Figure 5-10 shows what would Specialize and Trade
happen if Canada and the United States
each specialize in the fruit for which they
have a comparative advantage. From this,
Ca nada
you can see that trade is advantageous.
United States
Why? Because the total number of apples
and peaches has increased (3,600 total fruit Iotal
by specializing, compared to the 3,500 in
Figure 5-9). Canada and the United States
Figure 5-11 Adjustments
together have given up 200 apples to gain
3OO peaches.

Production in both countries can also

Canada 2,000 U
be adjusted so that no apples are lost (see
United States 200 1,467'
Figure 5-11). ]f the countdes traded after
specializing, the same number of apples Total 2,200 1,467

would be produced as before (Figure 5-9), .The

oppoftunity cost for the United States to produce 200
and 167 peaches would still be gained. apples is 133 peaches (recall, 1 apple costs 0.667 peach-
es), which are then subtracted from 1,600 for an adjusted
fnmncrctirra
LU]IIPOl cdrrqnfppip
OLIV C OUV c---*o iS thp total of 1.467.
foundation for speclalization and trade.
If countries produce items in which they
have a comparative advantage, and import
from other countries the products in which those other countries
have a comparative advantage, both countries benefit. The
lessons from absolute and comparative advantage are general and
simplistic; however, they can be applied to the real world. Although
world trade involves millions of products and many countries, the
study of absolute and comparative advantage demonstrates that
trade is beneficial to all countries.
 The Ambassador Bridge thal
connecLs DeLroir, Mich gan an:
Windsor, Ontario, is the buslesr
rLernarional bo'der crossrng in
i
North America Interestingly,
the brldge is prlvateLy owned
and operated, and the U S. and
Canadlan governments have
proposed to bulld a competLng
bridge nearby
t .
I.a
H
198 | Chapter 5: Economics and politics
5.5 The role of government
in international business
Every country's govemment plays a critical role in its international
business and trading success. some of the ways government affects
international trade and business include
. EstabLishing import and export laws
. Setttng tariffs
' Maintain jng memhersh rrj,
jn rrrin trrdp.n'acnizrrinnc
LrquL vtBolrtzdLrUIlJ nnrl
dlI(l
negotietin g tradp aorppmpntc
ffLIILO
' Estahlishino immior:tinn lrrnrc
. Determining monetary policy, including currency exchange rates
o l)pfprminino ficrrl nnlinrr rrrr
innl,rli-r
Luurr16 taXatiOn laWS
)
. Signing tax treaties with foreign governments
Military systems
o Establishingenvironmentalpolicies
.Buiiding infrastructure, such as roads and sewer systems
o Ordprino pmhrr
- - *,----o ,-,.-*.goes
 The Canadian govemment can help international buslnesses that want
to set up in Canada by providing incentives and tax breaks, but it can also
impede international business through stiff regulations, licences, and laws.
Many laws affect businesses. These laws are meant to provide protection for
workers and consumers. Standards are set to ensure safe working conditions
and to guarantee that imports are not hazardous.

Governments set rules and regulations that affect businesses. If you have
a job, you may have experienced many of these laws. Your employer

must follow established safety standards, for example, or pay at least a

minimum wage. These government regulations change over time and
are different in each country. Businesses must be aware of all laws, and
implement and comply with them.
To start a business in Canada, a business owner needs to follow
government regulations. This includes completing the paperwork
necessary to register the business. For example, the businessperson must
select a name for the business and then search national name databases to
ensure the name is original.
Canada has greatly ..a,-,..0 the procedures needed to staft a business
here; in fact, it is ranked as the second-easiest country in the world in Governments in Canada
nrnrridp orent dpel nf
r_-'_-'* n o_'-'---''_
which to start a business (see Figure 5-12 for a snapshot of the global suppofi to those wishlng
rankings for 2O1B). Att that is needed for a Canadian to start a business is tn eiart e hrrcinoc< Thp\/
require limited paperwork
a single online application. It is also easy for non-Canadians to establish
end mqlzo fho nrnnpqq
businesses in Canada. Investin Canada is a government website that of setting up a business
ciearly explains the steps a foreign investor must take to establish a rolrfirrolrr orcrr

business in Canada.
in other countries, the story is quite
different. When American Apparel set up its
business in Chlna, it had to go through 13 levels
of government. It also had to comply with
requests to submit information, such as the
CEO's electricity bitt for his home in Los Angeles
to prove that his address at home and on his
passport were the same.

The role of government in international business | 199

 Figure 5-12 Ease of starting a Business around the world, Accordinq to the
World Bank, 2018

Top 10 countries where it's Top 10 countries where it's most

easiest to start a business difficult to start a business

1 New Zealand 1 Venelueta

2 Canada 2 Haiti

3 Hong Kong 3 CentralAfricanRepublic

4 Georg a 4 Somalia
5 jamaica 5 5uriname
6 Singapore 6 Chad

7 Ausira ia 7 Eritrea

8 lreland 8 Cambodra
9 SOUth KOIea 9 Equatorial Gu nea
1 0 Kosovo 10 South Sudan

Governments establish a presence in foreign countries to help their

businesses operate in those countries. For example, the Canadian
dn\rprnr.pnt hrc 141
trade
IrqU! offices
Vf IlLLO worldwide.
VVVILUVVJUg. l IlCJC trade
These offices helo
LLdLItr UIIILT

Canadian businesses export products, invest outside ofCanada, seek

Pf,-fi
r\slJ rndq ronhnnlnni'al
urf LL!lrrfvLv6rL onnortttnities
LuiilLrLr/ and
qrlu lower
LvvvEr r-osts
LUJLJ hrr nrnrridino
uy pluv - *---o

market intelligence and expertise. This information is aLso avaiLable

onLine through the Virtual Trade Commisstoner.

ana a's consular services

The Government of Canada provides a variety of consular services
around the worid for Canadrans travelling, studying, living, or
working abroad. These include emergency services; facilitating
communication with family in Canada if an emergency occurs;
help iocating missing persons; passport services; information
and advice on customs, taxes, social services, property and
estate management, and claims against foreign states (including
I corporations). ConsuLar services are avaiLabLe 24 hours a day at
260 offices across 150 countries. It is important that Canadians
I travelting for business or pteasure carry the consular rnformation
fOf each cottnfrv fhevvisit so fhpri
LfiLj r-:n nrrir-klr/:..trcc
Lqil qLLqDD holn iftI
A gurLl\rj ltcLP

necessary.

200 lChapter 5r Economics and politics

 Canada's consular services take many forms:
. Embassies. These are located in the capital cities of countries
and provide a full range ofservices. There are Canadian
embassies in the United States, Mexico, andJapan, for exampte.
. High commissions. These provide the same services as
embassies, but are located in Commonwealth countries, such as
Great Britain and Australia.
. Permanent missions. These offices are located at major
international organizations such as the United Nations, the
G20, and the EU. They do not usually provide consular services.
. Consulates general. These are located tn major cities that are
not capitals. There are offices in Los AngeLes and Sao paulo, for
example.
. Consulates. These are located in major cities, but do not
always provide a full range of serr.rices. For example, there is a
consulate in Munrch, Germany.

' Consuliates headed by honorar5T consuls. There are IOO

consuiates in the world -unat a:e heaCed by persons who are not
professional diplomats but ale Cesignated as honorary consuts.
Locations include Argentina and pa;aguay.

' Offices. These are found in capital and major cities. They The High Commlssion
are established to support Canada's foreign aid programs of Canada in the United
Kinodnm iq loeefod nn
or specific projects. They usually provide limited consular T--f-ld^-
llalarBdr c-..--^
)quirf e i-rn Lonoon,
r ^-r^

ServiCes. For eXamnlp fhprp i< rn nffing in Bratislava, SlOvakia. England

Canada and Australia have

*o- --* to nrovide services for
agreed
one another's citizens if an
embassy for their own country is
unavailable. Canadlans can receive
consular services in 2O countries
in which it does not have offices,
and Australians can use the
services of Canadian embassies
in 23 countries. Canadians may
aiso call the British embassy in an
emergency.

The role of government in international business 201

 The muLticuLtural makeup
of Canada is one reason for
tea's growing popularity
here Shown here are
imported tea brands on the
sheLves of a Toronto store
e China, Japan, England, and various countrles in Africa, for example.
Dr
202 lChapter 5: Economics and politics
Tea
Tea ls the second most consumed beverage in the world. (Water is
number one). Canada does not have the cllmate to grow tea; therefore,
it imports butk btack tea from Sri Lanka, India, and Kenya, and bulk
green tea from china andJapan. These countries have an absolute
advantage over Canada in producing tea. Tea arrived in Canada with
European settlers. It was first imported by the Hudson's Bay Company
in 17i6. It took one year to transport the tea across the ocean.
Tea pLants are grown on large farms cailed tea gardens. when the
plant is three to five years old and over a metre high, workers called
tea pluckers pick the leaves. The leaves are then sent to a factory,
where they are iaid out on drying racks. Air is blown over the ieaves
to dry them out. After that, they are sent through rolling machines
that extract the leaves'juices. Next the leaves are placed in a room
for oxidation or fermentation. In the tast step, the teaves are dried
in an oven where they turn brownish-black. Green tea requires less
processing than black tea.
The Tea and Herbat Association of Canada states that tea
consumption is growing in Canada. One of the reasons is that
consumers are becoming aware of the health benefits of green and
herbal teas. Another reason is the multicultural makeup of canada
and the tea-drinking traditions of numerous countries, iike India,
F

t
I
1
I
)

t'
Black tea is still the .a;ges: _t::::::::.:= :i::a. :3-,,;:-.-c: green
and white are increasilg il sa_es. .::: a,-=:ai: ::a 1j-_:t_.:: _:: Ca:aia
has different varieties of tea in the icitchen. Luxurl- rea saies in
11

Canada are increasing. At a shop in Vancouver, consumers car

purchase a variety of teas from around the wortd. prices start at $17 per
IOO grams for inexpensive teas and go to $2,723 per gram for Imperial
Grroktrro
uJ vr\urv, q
a \rpT-\/ qnpr'irl pvrlrrcirro
v Lr j opcLruLr LALruor v L Lind vl
^rrru ^f J apanese gfeen tea. Why iS it
T

so expensive? There are only 3 kilograms of ImperiaL Gyokuro available

in the world.
Sales of tea in Canada reached $1.3 bitlion in 2015, a 23 percent
increase from the year before.

Check Your Understanding

1 Where is tea grown?

2 Describe how tea is produced.

3 State and explain two reasons tea consumption is growlng in

Canada.

4 Describe the typicai tea drinker in Canada.

5 Descrrbe the luxury tea market.

6 What are sales of tea rn Canada?

7 How would you market ImperiaL Gyokuro tea?

The role of government in international business 1203


Provincial premiers also lnitiate
trade missions. In 2014, then
Ontario Premler Kathleen
Wynne joined prince Edward
Island Premier Robert Ghiz (left)
and Quebec premier philippe
Coulllard (right) in Betjing, China
Plctured centre next to Wynne
is Chinese Assistant Minister of
Commerce Wang Bingnan.
204 | Chapter 5: Economics and politics
Trade missions
The Canadian govemment promotes intemational
business through
various trade missions to other countries. on these
missions, which
are organized through Globar Affairs Canada, representatives
of..
Canadran businesses accompany the prime minister,
the minister
of international trade, and/or senior officials with
Gtobai Affairs.
The group t ommonly referred to as Team
Canada) vis region and focuses on a specific
industry. A nadian businesspeople with
an oppor.unity to meet p tential customers, suppliers,
or other kev
contacts, and to gather m rket intelligence.
Trade missio ken by the federal government:
Provincial ande es hke the Toronto Region Board
of Trade also ini
In addition to Team Canada, there is arsoJunior Team
Canada
through Globat Vision. These Canadian y
nternational
businesses, gather cultural and business
make
critical contacts. The team promotes Canadian cuiture
and businesses
rn an effort to develop
Canada's international
identity, or "Brand
Canada."Junior Team
Canada has visited over
30 countries, including
Argentina, Vietnam, Costa
Rica, and France.
 There are several ways for corporations to influence governments.
Corporations often contribute large amounts to potitical campaigns,
supporting potiticians who will create legislation that is favourable
to their businesses- Many companies support politicians who will
endorse lower corporate tax rates. Companies may also influence
governments byparticipating in Team Canada trade missions.
Canadian representatives have the opportunity to meet potentiat
buyers, network, and attend marketing briefings. participants also
have a chance to talk with the politicians accompanying the group.
One major way that companies influence governments is
through lobbying. Lobbying is the process by which companies,
special-interest groups, or individuals attempt to influence
govemment officials and persuade public policy
favourable to these groups. The ter from the time
when these groups would wait in the lobbies of legislatures in the
hope of speaking to politicians. Lobbyists are experts in their areas
and in the policy process. This makes them useful to politicians who
do not always have the time, knowledge, or money to become expefts
on particular subjects.
Lobbyists work on specific projects rather than broad issues. This
work may include taking part in govemment projects, attempting
to influence policy changes, or obtaininggrant money. The tobbying
process is time-consuming and expensive. The LobbyingAct
of
canada regulates the activities of loblyists and governmmt officials
to ensure that no single group can obtainfrrndingorinflumce
govemment policy through access to lawmakers-
In Canada, lobbyists for the tobacco industry and health care
have attempted to influence the govemment for many years in
favour of their opposingsides. otherlobbygroups include the
Canadian Bankers Association, canadian Association of petroleum
Producers, and Google Canada Corporation. Lobbyists have
significant influence throughout the world. In the united states,
iobby goups have had a tremendous effect on government policies.
one of the strongest tobby groups in the united States is the NRA
(National Rifle Association), which influences the government
on
gun-control issues. other tobby groups work for the oil, tobacco, and
pharmac eutical industries.
 Chapter Review
Knowledge
1 Explain how political systems and economic systems are differenl

2 In your own words, describe the circular flow modeL of how

eccnomles work

3 Compare and contrast democracy and autocracy.

4 \iVhat is the difference between an embassy, a high commisslon,

and a generat consulate?

5 How do businesses benefit when governments make starting a

business easrer?

5 EXnlajn USing
ur1116 L qttrpLcJr ,.,1^,,.^-^,r-
eXamnl^. wlly Ldlldud i^ .r,lil.od o.^nnTI\r
lJ d^ I---..,*

7 Explain how a recession in the United States can affect Canadian

businesses.

I Tn rrrhrt
fri vvirqL nrndttnfc
yluuulLJ dnoc fc-orl . JptrLIduzc:
uvgD LoIIauo cnaninlizn?

9 Using examples, prove that Canada meets the crlteria of a

dorrolnnerl nnrrnfrrr

Thinking
10 Why are most democracies mixed economies?

11 Why are most autocracies command economles?

12 Why are there no true market economies in the wortd?

13 Why do you think that Canadian and Australian consuiates helo

one another's citlzens?

14 Do you think the Canadian government should sp€nc:ax doLlars

on trade misslons? Why or why not?

15 Name three companies operatlng in Canada tha, ',.. ould prosper

during recessionary times.

J1I 16 Where is Canada currently on the business ci'cle? provide

three reasons for your answer.
a

206 lChapter 5: Economics and Politics

 Where do you think the Canadlan economy wiLl go in the next
two years according to the business cycle? Justify your answers.
State two ways the economy will react lf your predlction is correct.

It is difficulf for oovernments

, -1ilIilerrLs to
L() balance _ **b,-. __*__
uitLaIIce a budset State three
_^..__ rn,/ays
the Canadian federal government can increase its revenue. State
three ways the Canadlan federal government can reduce its
expenditures. Which of these do you believe should be done? Why?

ommuntcauon
19 Winston Churchill, prime minister of Great Britain during
World War II, once stated that "democracy is the worst form of
government, except for all those other forms that have been tried
from tlme to time." What do you think he meant?
2O Create an economic system continuum by drawing a line and
putting the Label "centrally planned economy" on the left and
"market economy" on the right. Place the following countries on
the continuum: Canrd: Tlnitpd St:tpq Ireland, China, Cuba, and
Sweden.

21 Using the CiA World Factbook or another reliable online source,

compare Bermuda and Cuba on the following categories:
. Type of political system
. Type of economic system
. State of economic development
. cDP per capita
. GDP composition by sector
. Labour force by occupation
. Population below poverty line
. Literacy rate
. Index of Economic Freedom
What conclusions can you draw from your findings?
22 Write a strongly worded paragraph to the prime minister of Canada
persuading him to move the country from a mixed economy to a
more market economy or toward a more command economy.

23 Oil companies in Alberta are trying to get pipelines built to the east
and west coasts of Canada. The Government of Canada is one of the
stakeholders in this decision. Explain how the oi1 companies can use
lobbying to convlnce the government to allow the construction of the
pipeline.

Chapter Review | 207

 A Canadian company producing apple juice is planning to expand by
exnorlino ifs irrice to the U.K.
a What countries make up the U.K?
b State and explain the political system of the U.K.
c The U.K. ls a mixed economy. Describe this economic system,
and how the U.K. fits into this mode1.
d State two ways the Government of Canada can help with
business expansion.
e What is the High Commission of Canada in London, England?
Hntnl nnn if hpln a .^mnrn\r pvnrnd?

Assume that two countries are trading: Canada and Australia. They
can each produce only two products using half of their resources for
each. Using the following chart, answer the folLowing questions:

Country Coats Sweaters

a How many coats and sweaters are produced?

Ca nada 32,000 8,000

b Complete the following sentences by selecting the correct
word in brackets.
Austra lia 16,000 24,000
. Canada has an absoiute advantage in the production of
(coats, sweaters).
. Australia has a comparative advantage in the
production of (coats, sweaters).
c The two countries each decide to specialize in the product
they have an absoiute advantage in, and trade. Create a new
tabie showing how the production numbers change. Include
totals.
d Will the total production output of coats and sweaters increas=
from specializing? Explain.
Canada has invested in new equipment to improve its productic:: --
sweaters. Using the following chart, answer the following questi:::.:

Country Coats Sweaters

e If the two countries do not trade, how many coats and sweat::.
willbe oroduced?
Canada 32,000 64,000
f What has changed, with respect to absolute advantage, be:=-*-=
Austra lia 16,000 24,000
of the investment in new ecuinment?

Calculate the opportunity costs of producing coats for bc--:-

countrles. Then calculate the opportunity costs ofproc*:-:-:
sweaters for both countrles. Which country has a con:-a:-.-=
advantage in which product?

Create a new table that shows what happens if the r,., : :.--::-=s
speciaiize and trade now.

Witl the total production output of coats and si.iea:e :s -::::=:s=

rn T-nre eaanrTrn/ FYnlaln.

208 | Chapter 5: Economics and Politics

 lnquiry Activity

In this chapter, we studied how countries gauge their success

through measurements such as GDp, the Index of Economic
Freedom, and economic classifications. one country measures it
another way. Bhutan measures its success as a country by happiness.
Bhutan is a country of almost BOO,ooo people that sits hlgh in
'the Himalayan Mountains
between China and India. Traditlonaily,
the country was ruled by a king. In 2006, KingJigme Singye
wangchuck stepped down to pave the way for the country to have
its first democratic etection. The idea of gross national happiness
(crvH) came from the king. The country's
new constitution ensures
that government programs such as agriculture, transportation, and
even foretgn trade be judged not by economic criteria, but by the
happiness these programs generate.
Your task is now to research Bhutan, and write a short report.

Step 1 Research
Use the following questions to guide your research:
. Brrefly describe Bhutan's geography, history, and religion.
. Describe the four piliars of GNH.
. State the nine domains of GNH.
' Do you think Canada should measure its success by GNH?
' What can Canada learn from GNH?
' Do you think Bhutan will be able to keep its distinct culture?
. What is your opinion of GNH?

Step 2 Write your report

using your research, write a short repoft on Bhutan, organized by the
following headings:
' Introduction
. Description of Bhutan
. Description of GNH
' What Can Canada Learn from GNH?
. My Opinion of GNH
' Conctusion

lnquiry Activity 1209

In schoot, one of the major forms of writing you learn is the
essay. In business, a major form of writing is the report. While an
essay focuses on arguments and reasoning, a repoft emphasizes
ruLLo and
faCtS figrrres Thr..^
qiru lr6utLo. r^^^,+^ -^-
lrrcJc lcPulL) L^ -- _--_-
Ld.II UC d) short 2q nnp nrop nr
_-
r*o_
as long as 30-50 pages. A leport is a factual, concise document
that describes and solves a problem, recounts a project, requests
funding, or makes recommendations for the future.

Tips for report writing

' Be clear and concise. Businesspeople are busy and do not
have time to read an extensive document. Keen sentences
short and succinct.

' Know your audience. Is thls report for your manager,

your customer, or an outside reader such as a bank or the
government?
. Use tittes and subheadings. The report shouLd be easy r:
read. Titles and subheadings break up the page, making _-
easier to follow and read.
. Use charts and diagrams as often as you can. These a:=
easier to understand and break up the monotony of a
pnnteo page.
Revise and proofread carefully. You will need to r::a_-:= = _=-.';
revisions to your document. The expectation in b:s_:_=. . - .
nn SnplljnO nr *i^+^1.^- n^i,
CtTzrnlT'^+i-^'l rrilsLaKes. belng Cafe.e S_< ,';.. .::_-:
-, b,*,,...laLtcar
badty on you. Have another colleague you trus:::::::==:
your report as well.
Include an Executive Summary. In a long rep::: =:_
Executive Summary is included at the front ci--:= -=: -:--
It is a one- to two-naoe srmmer\/ of the re:::: --:-: : -:: ::=
of which is to convince a busy businesspe:s:: :- :==:
ron^rf Annfhor nrrrnose AD ==
iS tO feffeSh qa b-_*_:_=..::l::-
LV fLIILOII U; :
memory of the repoft after reading, br':::'.-:-::1 :::-:-::
summary.
Make the introduction and conctusion interesting. -:-=.-
should capture the reader's atten-*::t := --:-::i:-:
prov0long.
=:
 ' ctearly structure the report into distinct sections. Include the l^I^,1'..'i+L
vvurK wlLn alIOLller
^-^+L^, peISor
-^-^^,
following sections in the repoft (these may change based on the vol trttqt rarhpn ii'e nmpq
I imp fn rptri<o rrnrrr ron^r1
pulp\JJc ctttLl ^:7o nf
^^) J14tr ur tho ronnrf\.L/.
LttE 1€pu] -
another DtrTsnectrve o1 \/out
. Contents ''____''o een m:lrp e hrroo
\^/rifind
I'iffaroneo nn r'tc imnrri
. Executive Summary
. Introduction
. Main body-include subheadings as needed
. Recommendations
. Conclusion
. References

Activities
1 write an introduction for a repoft to senior management about
research you have completed about expanding the company,s ice
cream division to Mexico.
2 Write a short report on one of the followlng topics:

' Pick a country. state and describe three different business

practices that are different from Canada.
. Write a report to your boss requestlng to travel to another
country for a personal meeting with your customer. pick a
country and product in which you are interested.
o wdte a report to your local politician explaining three reasons
a mixed economy can be good for business.

Business Skills | 211

 By the time you finish this chapter, you should be able to:

' Define corporate social responsibility and discuss its benefits and
drawbacks
' Evaluate the ethical issues that arise for companies competing
internationally and identify the stakeholders involved in such
issues
' Understand ethical imperialism and cultural relativism, and how
they relate to ethical decision making in international business
' Analyze the ways in which non-governmental organizations
promote economic progress in developing countries
' Describe working conditions in underdeveloped and developing
countries
' Explain how globalization creates the need for standardization of
products, services, and processes

262
Key Terms corporate social responsibility
(csn)
c\^/p: tah nn a

corporate corruption
stakeholder l"*-i*a
u urrrPrrrS
business ethics predatory dumping
ethical dilemma qr rhqid i zi n o
ethical imperialism microcredit
cultural relativism non-governmental organizations
pollution (mcos)
resource depletion
fnrnnr:rp
<.oci.rl rpsnnnsrhilr I v
rrPo- -nar\ [o"-s f"nm small
-cr p rr.oram" likp M-Donald s
ir'P' Ppt rol ryoo-am f " rlured
here\ 'o la -p.' c_'o '''''''.''''
'*_b" r m ir me r [s
to fair trade, envlronmentaL
nrnforrinnc
Pr uLcLLlUll),
:nrl UPilurU
41rU ,nhnlrl
1a )Or(
and faii labour conditlons
.T What is corporate social
responsibility?
Have you ever wondered if anyone or anything was harmed during
r5 c^La
thp nrndrrrtinn nf thp items \/otl ltse everv dav? You mav have heard
about fair trade, sweatshops, damage to the rainforest, and corporate
corruption, but what does lt all mean? How can you be an informed
consumer? How can you be sure that the company you eventually
\^r^rlz f^r nr'rrclroq pthir.r'l nnr-fir-oq? FTntnl cen rrnrr rnntrihttte to
m:kino thp rnrnrld : hpttpr nlerp?
Companies around the world consistently worry about thelr
profits, but they are also concerned with social responsibility and
corporate reputation. Corporate social responsibility (CSR) is defined
as the duty of a company's management to work in the best interests
of the society it relies on for its resources (human, material, and
environmental), to advance the welfare of society, and to act as a good
giobat citizen through its policies. CSR can take many forms, incLuding
. Maklng charitable donations
r Trpetino pmnlorrpps pthicellv
o Roind pnrrirnnrnpnf:llrr rnnqcinrrs
. Ensuring safe worklng environments
o SnnncnrinO lnf
upwrrowr1116 .l chn
LwLdt o fanmo
JPUIrl'LJ LtrcllllJ
. Creating and promoting diverse workpiaces

264 lChapter 7: Social Responsibility and NG0s

Companies gain many advantages by demonstrating strong CSR:

' Companies use CSR as a marketing tool. Many educated

consumers are interested in buying from companies that have
solid CSR track records, such as Starbucks, BMW, and Roots.

' Being socially responsible dissuades governments from

implementing regulations that might interfere with businesses.
For example, if companies implement their own environmental
controls, govemments do not have to create pollution laws and
pay to monitor compliance.

' Companies can attract and retain excellent employees r

^Ll-,.,.^.-hnhi--
LVULOVV
r r-,.r(i
LU111PO111gJ LrrrrrL(
a^-.
if they have solid CSR practices. This is especially true pUDtlSneS
^,,Lli-L^- ^- dnn-d.
an ^^-.. -l wA')OrAt-?

Rpsnnnsihilint ppn.* '^ -..iric:t ii

if employees are allowed to have their say about the nrnvidps e fn.-;- :-:-tr- ent C:l
company's practices. For example, some companies pay and limelab e ':- .:: ::.trarivei
-rrdp:ri q-> :r;-p;q 6f
employees to work for the United Way-employees apply
en,lr:: :::::::::. : :C:eCt-C:- a::C
for this work during the UA fundraising campaign. WestJet trl-- ^
_.\:--]: .::
-

has a program that encourages its employees to participate t:l:-u:e tec:::-3:ts -:: lc:a -s
---;.- :^^------ --; :--; -.-:i-:
in humanitarian trips to Puerto Plata, Dominican Republic. tC-rU.- -v.J .--- a.--
lnVeSti':e1tS l1 :-i:4.:.4:.e
WestJet teams have built 28 new homes for families that (^.^i
1411111rr5
^d
+^-:^^:^di^.
LtrL111lUrU51qD. 4_lU
.-;

were living in extreme povefty. donations to various charities

Figure 7-1 Top 50 Socially Responsible Companies in Canada,
Compiled by Maclean's and Sustainalytics, 2015

lndustry Corporations Industry Corporations

Food and . PepstCo Texti les, . Industria de Diseno Textil SA (Zara)

Beverage . Kelloqg Co Footwear, and . Henres 8 Mauritz AB (H8M)
. Starbucks Apparel . Adidas AG
. Danone . Gildan Activewear lnc.
. Molson Cools Brewing Co . Nike Inc

Materials . Krnross Gold Corporation Banks Vancouver City Savings Credit Union
. Ieck Resources (Vancity)
. lamGold Corp. Toronto-Dominion Bank
. Goldcorp Inc. n^-:-.,i^- a.^,,^
ue)Jdruil r) \ltuuP
. New Gold Bank of Montreal
Canadian lmperial Bank of Commerce
(crBc)
The Co-operators Group Ltd.
Royal Bank of Canada

Retailing and . L'0real Co. Transportation BMW

Household . Rona lnc. (now owned by Lowe's) and Logistics Volkswagen
Goods . Loblaw Companies Ltd. Ford Motor Company
. Canadian Tire Corp. Ltd. Air Canada
United Parcel Service

Technology lntel Industrials Koninklijke Philips N.V. (formerly Philips

SAP SE Electronics)
Cisco Systems Inc Bombardier Inc.
IBM 3M Co.
Accentuie PLC General Electric Co.
Siemens AG

Telecom/ . Telus Corp. Energy and Pacific Rubiales Energy Corp.

Electronics . BCE Inc. (Bell Canada) Utilities Cenovus Energy
. Sony Corp. Cameco Energy
. Rogers Communications Suncor Energy Inc.
Ialisman Energy Inc,

266 | Chapter 7: Social Responsibility and NG0s

 There are also some cliticisms of corporate social
responsibility:
. Being socially responsible costs companies money,
which
reduces the amount of profit a company can
earn' This
conflicts wlth the true purpose of any business'
which is
to produce goods or seruices at a profit' Milton Friedman'
a famous economist, once argued that companies
that are
social$ responsible are stealing from their shareholders'
on CSR'
Companies spendvaluable time and employee energy
shareholders'
7 tnstead, they should' concentrate on maximizing
laws and
wealth, and demonstrate responsibility by obeying
payingtaxes.
Good corporate practices can be used to distract
customers
from problems a company may be creating- For example'
Imperiai Tobacco Canada clearly states on its website
that
"Kids should not smoke. Period." The compaly supports
1 programs that prevent youth from smoking' it supports
p'op.t'suchastheCanadianConvenienceStoreAssociation,s
suppoft
nationat age verification initiative' As hetpful as this
selis one of the
is, it does not change the fact that the company
most dangerous products available'
Companies may use CSR to enhance their reputation
with
domesticConsumers,butmaynotactethicattyinothercountries.

What is corporate social responsibility? | 267

 global comPanY
Companies need to be consistent in their CSR strategies. Their
practices in foreign countries need to mirror their domestic
practices or the company will be seen as hyp l' It is wrong'
res
for a company to market itself as socially e in Canada

but be guilty of misbehaviour in othel Countries. Today,S COnsumel

is educated and can easily find out about corporate wrongdoing
uslng technology, such as the Internet, and through special-interest
groups. A respon corporate record is important to a company's
success, because umers who find out about a company's
misdeeds will react by spendin$ their money elsewhere'
During the restoration Process Companies need to educate employees on their policies, practices,
of the SS United Stotes cruise
ship, two quotes were obtained
ions if the ices'

to remove its asbestos Ltning nies Provt

(Asbestos is a mineraL that is
rnattonal
dangerous at any exPosure )
According to the HarYard sensltrvity, supplier- customel relationship s, confidentiality of
Business Review, "A bid from information, and treatment of labourers. Sun Life Financial has a
a U S. comPanY, based on This
code of business conduct aimed at educating its employees.
U S standards for asbestos
code addresses subjects such as lntegrity, fraudulent activities,
removal, priced the job al more
than $i00 million A company tn money laundering,cu fidentiality, and e
rhe r.lrrajnian ciry oL Sevasropol
workplace. Companle to support their by
offered to do the work for less
than $2 miilion In October setting a CSR budget, corporate office ders in
1993, the shlP r,uas
' i'.ihar
towed to
CSR, andestablishing a reward system that supports and encourages
Ser,'astoioL eihica'i issues
are posed li' :f s a3:rs-l-r- CSR.AlthoughcompaniesmayhavemanypoliciesregardingCSR,
they cannot guarantee that individual
employees will act in an ethical way. it
is important that companies hire honest
employees and managers who will act as
moral examples.

268 lChapter 7: Social Responsibility and NG0s

i

No matter how ethical a company is, it is difficutt to please everyone.

Which group's interests are most important when a company is
faced with an ethical dilemma? One way for a manager to analyze

are individuals or groups affected by the organization that have a

stake in its success and profitability. Pdmary stakeholders, including
customers, suppliers, competitors, and employees, directly affect
the company and its profitability. These stakeholders are of critical
importance, and their interests should be considered first. Secondary
stakeholders also have an impact on the company, but do not directly
influence its success or contribute to its profitability. See Figure 7-2
for examples of primary and secondary stakeholders.
When preparing a stakeholder analysis, managers should
analyze which stakeholders have the most power and influence
in the decision-making process. It is important to identify which
stakeholder has the greatest impact on the profitability of the
company. Nike is a company that is often referred to when
discussing social responsibility. Historically, it was accused of using
sweatshop labour. Nike changed its ethical practices to become more
socially responsible in response to concerns expressed by customers.
-t Key stakeholders in this situation included customers, management,
employees, international governments, and suppliers. The media and
sp e cial- intere st groups were important secondary stakeholders-
they dramatically influenced the behaviour of primary stakeholders
by educating customers about Nike's corporate practices. Currently,
Nike has a well-developed code of conduct that is also used by its
independent contractors, and it consistentty pays above minimum
wage. It is one of the companies listed in Figure 7-1 as one of the
most social$ responsible companies operating in Canada.

Figure 7-2 Examples of Stakeholders

Competitors Community
Creditors/banks Cou rts
Customers Educational institutions
Distributors The media
Employees NGOS
Foreign and domestic governments Political parties
Freight forwarders Protessional or trade associations
Labour unions Religious groups
'Management ircrial
-T-- " intpresf nrnrrns
Shareholders
Suppliers

i
i
 ..i-l.-^--
has
a....o lil-^
.'^- lt.Lal-)
---.-
1-..-i-
lJ---l'eSSCS
iac:d serreral business ethics
cou:tc, 3::-es 3r-er the 1,-q315
. Business ethics
Business ethics refers to a set of rules or guidelines that management
in 2!-8 -: ::s:cl>e :c the
CUi:el- O: C-C C: S-: , 1-l:lA:- or indlviduals follow to make decisions for their company. These
^--^,----c---
a,---
; ;- ,,-
-^-: --
guidelines include domestic and international laws, the company's
'.;^i-
UrlUlU -i-^^-
t-lPtr------: :. j
-L-.-.-i^.
PlldlllldtlC)
\^/].--
VVirdl -..
---' -
code ofethics and corporate governance (see Figure 7-3), and the
.,^,, \^r-l-.--
yuu -L.-l-
LIllItN VV dlllldL t CAC. _ nersonal valrres of the individrral makins the decision. But even
:qL,pd rnrhpn m:lrino thic
decision?
wifh srrch srridelines not everv sitrration has a clear ethical answer.
That lack of clarity can lead to an ethical dilemma. You may have
faced ethicaL dilemmas: whether to copy a frlend's homework, call
in sick to work to go out with friends, or illegally download music.
Companies face ethicaL diLemmas related to paying bribes, using
child labour, and corporate corruption.

270 | Chapter 7: Social Responsibility and ltG0s

 Beyond standard guldelines, companies can consider the "test
of disclosure" method to solve an ethical dilemma. They can ask
themselves, "How would we feel if everyone knew about the decision
we made?" If they are not concerned, they have likety made an
ethical decision. If they are concerned, they have probably not made
the right choice.
You can also solve ethical dilemmas at work by asking:
. Am I being honest?

' Is my choice fair to the company's stakeholders?

' Will my choice enhance the reputation of the company?

If the answers to these questions are yes, your decision is probably

ethical. If you answered no, you need to rethink your solution.

Ftgure 7-3 Corporate Governance F[amework

Board of
Directors
I Committees

legal I
Regulatory

Communication

Rbk s Business Practices

Ferfonnance
llmagement
Disclosure 8
Transparency

Business ethics | 271

Tlm Hortons is one of the
largest coffee chains in
Canada, and usuallY ranks
within Lne roP five in coffee
saLes and poPularitY.
Coffee
it is
canadians drink lots of coffee-after tap and bottled watel,
coffee
our favourite drink. In fact, 79 percent of canadians had a
coffee
in the last week, and we are the third-largest consumers of
in the world. Coffee is the most common drink purchased and
of
consumed outside the home' However, seven out of ten cups
coffee coirsumed in Canada are drunk in the home' The most
prod,uctive coffee-growing countries in the world are Brazil'
Colombia, India, Mexico, Indonesia, and Ethi.opia' Robusta
coffee is grown at lower heights, while the more expensive
and
better quality arabica beans are glown at higher alti.tudes. About
3O developing countries expoft coffee to Canada, and
the coffee
industry provides more than jobs in canada, including
17O,OOO
coffee-shop employees and owners, and people who work in
manufacturing and roasting.
The red coffee cherries are hand,-picked or machine harvested
the
from the branches ofthe coffee tree. In the processing plant,
rpd chprries are seoarated from the overripe or green beans and any
part of the branches that has been left intact. The cherries are then
pressed against a mesh filter; when the bean is released from
the
.fr.try, it passes through the screen' The coffee is fermented' dried'
sorted
hulled, and polished. it is graded by size and density' and
hv cualitv. The coffee is then roasted to make the brown aromatic
heans
ULqf f J that we srind. After thev have been roasted, the beans
must
get to the customer quickly to maintain hlgh quality.
There are many ethical issues surrounding how coffee is grown'
In some areas, most of the vegetation is clear-cut so that coffee
plants can be grown. In addition, pestlcides are used to increase
the crop yield. To avoid these issues, responsible farmers and the
companies that buy their coffee sell shade-grown and organic
coffee. In these cases, the iand is not clear-cut and pesticides are
not used to produce the coffee beans.
Another ethical issue facing the coffee industry is the treatment
of growers. Many coffee growers are not paid a iiving wage, and live
in
III qff pndless crrcle of novertv. The treatment of these workers has
rn LIIULL
been referred to as a "sweatshop in the fietd." Companies that pay
their farmers a living wage, and grow their coffee without pesticides
and clear-cutting, can have their coffee certified as fair trade.
Responslble consumers are willing to purchase fair trade coffee,
even if the price is higher.

Check Your Understanding

I Describe the typical Canadian coffee drinker.

2 Where is coffee qrown?

What is the difference between robusta and arabica beans?

4 What ethlcal issues surround the coffee industry?
5 Are you willing to pay more for shade-grown, organic, or fait
trade coffee? Whv or whv not? A coffee han"est in Guaiemala
 lobal ethical reasonln
Figure 7-4 Hnrnr :-::
do comnanies working in manv different countries, a *
Ethical lmperialism vetsus and value systems solve ethical dllemmas? How can a cc::-: -- ::
-
Cultural Relatlvism certain that people around the world will see its actions a: : -:- - :
Fnr
M rnmnenies
lvf Ilyqf vv rLrr a olohel focrrs ethical decision maki:: -: l-:-:
ff !o r,rrith
Ethical lmpetialism
Lvf rry Lrr! rnd lpss cleal.
cnmnlpv
. 0ne set of values fot all
c u ltu res
There are two methods of thlnking about ethical issu:. --- =
. global context. The first is the concept of ethical imperialism l: - :-
Right and wrong are the
same in all cultutes this viewpoint, aiso known as ethical obsolutism, ceftain -:---::-:
-,',--
. A pelson's ethics are noi truths or values are standard across a1l cultures. In othe: - -:

situationa I if something is wrong in one country, it is wrong in all ::'------.:-

For example, in Canada we believe that child labour sh::-- -- - :
aiLowed. We have iaws that require children to stay ln s - -- ---
--:-:
Cultural Relativism LrrtrJ rre
thorr ru. fTfr rnrp:nnlrr
qr L 1R LrrL rriernrnoint of ethical imner.=-.::----
vv L uyP LJ thp
-'
----:
Values are dependent on situation, no Canadian company would employ anyoi='-:--:-
l:
r the culture zop of lR on a frll-time hasis anvwhere in the world. C:---:. :: -----:
Right and wrong depend viewpoint state that ethical imperialism wrongly forc== -: =
-: :: - l
I on local values one culture onto another.
When in Rome, do as the
At the opposite end of this continuum is cultural rela=-.---
Romans do
Arr-ordino to this nersnective the values of differe:-: :'- -- ---::
should be respected, as the ethics of one culture a:: :-- - r::-- r-
better than those of another. Companies that follc ,'. -:-= ---= = - -
--:-= - :-::
culturaL reiativism make decisions in the context :- -
values of the countries in which they are doing b*=----=. , l=---=-' =-1-
comnenies would not imnose their values oD woI:.:ll -.- -l :--
lvrriyqrrf!r

countries. For example, if the laws of a country p:l:----- -: - = - - - :.

to work full time, a Canadlan-owned business t: -:-=- -'- ---='
would hire peopLe of this age. A 16-year-old in a::::-=: : : -. --
may be providing the income his or her family :-:::: :: : -- ---.:
and refusing to hire him or her could cause ha::- :-- - - = --- - - --:
--- --= =--- - ::
are even more difficult in countries where it i-' -===
14-year-old.
In
rff rcelifrr
f ruLa!y npither ethical imnerialism no- --- - --- -: ---
comnletelrr correct: thev are iust two extren::. l: .:-: ---= - . -- - - --
create a set of standards that must be follc.','=: -:- :--::- : : --- -' -
---
then adant them to local customs. The Un-:=: L =:: --- . :-- =-:-=--- ----:
------
to create a minimum set of acceptable pIa:---:: : -:: - -=: .:- :::1
Declaration of Human Rlghts (see Figure 7-5

27a I thapter 7: Social Responsibility and NG0s

 .LdlldurdllJ
--- -;^-
Figure 7-5 Universal Declaration of Human Rights JLAy 1r: )L-lU!l
I ne\ are 18 buL o \er cc..rt:-.-
do not folLcrv the same Lar,'u-s

ln 1948, the GeneralAssembly of the United Nations created the Univetsal Cultural reiativisrn accounis for
Declaration oIHrman RrghLs ro describe and ensure the rrghts of allpeople. such diiferences
Ihe declaration comprised 30 articles that promote peace, justice, and
freedom throughout the world.In 1996, rhese articles became pattof the UN
InternationalBillof Rights, which includes two other ptotocols, one for political
and civil rights and one for economic, cultural, and social rrghts the declaration
inrlrrdo< thp rinht tn.

. Life, liberty, and security

. Freedom of expression

' Freedom ftom slavery

' A fair trial

' Equal treatment before the law

. Ffeedom of movement, and the riqht to leave any countfy, including
ouI own, and return to that country

' A natronality
. Marfy and have a family

' Take part in the govefrment of his or her country, directly or through
freely chosen representatives

' Work, free cholce of employment, lust and favourable conditions of

work, and protection against unemployment

' Equal pay for equal work

o Rest and leisure, including reasonable llmitation of working hours and
1 Define business ethics.

periodic holidays with pay 2 Define ethical imperialtsm.

u1vtr ^^ ^--^--l^
^i,,^ drr trIqrlrPrc.
' Own propefty alone or in association with othets
o FIeedOm g[ 1l-]6rrnht rnn<,ripnro .rnd roligiOn
3 Define cultural relattt tsm.
Cirra ln pvrmnll

275
 iR
E
,,\ ro
\

ffi

_-.-prq l ,_tlr!-_'
--

':r< /a.trl!tn
..!--o_o_:-.
ntno tno
,lf :."=...: Ethical issues in
- - ira 'T -'- sra- -h-e:rpr ino
Dcih r:]le en.lironnent and the
international business
. r. ^o.i.LO Manv ethical issues surround international businesses. Are
ivfu,ur
su:'",1i'e dprrplnnpd enrrnfripc holnino nr t:kino:drr:nf:op nf rrndprd.-':'^ --:
countries? Are Western businesses destroying the environ:- =:- -

because of their insatlable need to produce more goods? t::

companies so powerfuL that the needs of the workers are ,:::.=-,-=:- -
Thpre a-e no eas\/ auick answers to these crresfions hc\'-.-.-. -
comnanies dnino hls'ress in rhe slohal markeL need to :: :.i - -:t ::- -^

deaL with these issues.

In this section, we wlll explore the following tive er:':: : I -::
. EnvironmentaL issues
o Qrnrorf ch nnq

r f nrnnrlttr aorrr rntion

c T)rrmnjngt 2nal Dc''hc'A:-:nr
r u-rr J-r-q qrru LLU) l(-llz1115

e Pnrrprf
- -'---j
rr

276 | Chaptet 7: Social Responsibility and NGOs

Qrrcte'n:hla /o.'o'^-.p1gnt-the abiliru LV
'neet human consumDtion
Io _rrLLL Lvi tJu-]]}.

whiLe maintaining the envrronment-is a cdticaL issue that aLl

businesses need to consider to ensure their futures. Trade can either
foster or frustrate sustainable development. The natural environment
is a major resource for businesses. It must be respected, supported, and
renewed if businesses hope to have long-term sustarnability. Many
comnanies
LviLI}Juf IILJ h:rre
IIqv L fekpn
LqNL-- :drr: nt:op of lhp pnrrrr^nmont'hrr nnllrrJ-'
-J, /-.--.lng,
depteting naLural resources, and disposing of hazardous waste in
unsafe ways. The world is faced with dramatic environmental changes
such as meLting ice caps, faLting water Lables, shrinking croplands, and
the levelljns of oceanic fish catches There ufL
arp fwo -ne j.^ r!qLg6vl
!vvv liiuill afeonries of
environmentaL damage: pollution and resource depletlon.
Poltution is the contamination of the environment caused by
the manufacture or use of commodities. It takes many forms: ozone
depletion; acid rain; air, water, and land potLution; and nuclear waste.
Resource depletion is the consumption of scarce or non-renewable
resources. These incLude fossil fuets, mineraLs, forests, fish, and
water. Companies are the direct cause of many of these probLems and
should be concerned with trying to soive them. In addition, pollution An oi1 reflner.,r r:r
-^t^--^-
lCitditr):c:f: :_,_
and resource depletion have long-term implicatjons for the success €-^; .--
L1t1it.-- a -a
of businesses that damage or exhaust the resources they need.
I

Figure 7-6 There are many examples of major envfonmental damage caused
Types of Environmental by business and its interests.
ISSUES
' In 1984, poisonous gas leaked from the Union Carbide Plant
. Air emissions in Bhopal, India, kitting 3,000 people and injuring another
. Wastewatei 20 000.
. Land pollution ' Oil spills from tankers like the Exxon Valdez in 1989 off the
. Marine and coastal coast of Alaska, the Sea Empress off Britain's coast ln 199 6,
pollution
and the Prestioe -'-*- Soain tn2OO2 have dramatically affected
near -r*---
. Hazardous mateiials the world's oceans. In 2010, a BP oil rig exploded in the Gulf of
. Asbestos and hatmful dust Mexico, spilling oil into the Gulf for 87 days and kitling ll people
. Solid wastes and extensive wildlife. This is considered the biggest accidental
. Pesticides and pest control marine oiL spiti caused by the petroleum industry. Oit spilts
ptoducts
cause permanent damage to wildlife, affect tourism, and are
. Radiatlon ovfromolrr ownonc'irlo tn rlpnn ttn
. Noise
. Global warming . Canada's waterways have been polluted by mercury emitted
. Deforestation by industriai sources such as coal-burning power plants and
. Overpopulation chlorine producers. Mercury has contaminated many kinds ci
. Acid rain fish, making them poisonous to eat and decimating a major
. 0zone depletion source of food and commerce for indigenous peoples.
. Genetic engineering . The Dead Zone of the Gulf of Mexico is an area of severe
hypoxia. The water is so oxygen depleted that it cannot s-s:2':l
marine life. It stretches from the coast of Louisiana to Te-r:s
and is the size of 4 million football fields. It is caused b'. --::=
nitrogen and phosphorous dumped into the Mississip:- i-',-=:.

.4
In Ghana, Lake Songor is quickly shrinking because of
extensive salt mining on one side of the lake, and diversion of
water for irrigation.
In December 2008, the wall of a holding tank at the Kingston
Fossil Plant (a coal-burning power plant) in Tennessee gave
way, releasing wet coal ash in every direction. This caused
severe contamination of area rivers and wildlife, and destroyed
several homes.

The deforestation of the world's rainforest has increased

dramatically as farmers and ranchers clear land they need to
suppoft themselves. Over 50 percent of the world's wildlife and
4O percent of its oxygen come from the rainforest.

The world's largest trash pile floats in the North Pacific, and the
submerged garbage in the world's oceans is approximately the
size of Texas. This submerged garbage has created a dead zone
which severely affects all living organisms in its vicinity.
Guiyu, China, is one of the largest e-waste dumping grounds
in the world. Computers, smartphones, keyboards, and other
forms of electronics make their way from North America to
China to be dumped. More than 150,000 people live in the Alarming quantities of trash
dump in order to eke out a living. These workers extract wash ashore fiom the Pacific
n.orn in tho Dhilinninpc-, slgns
copper wires, grind up plastic, and collect computer chips. The
of a significant environmental
environmental damage from this area has caused an increase in problem both on sea and on
miscarriages, lead poisoning, and air and water pollution. land
 Governments have initiated agreements on environmental issues,
including the Rio DecLaration on Environment and Development
in 1992; the Kyoto Protocol in 1997; theJohannesburg Declaration
on Sustainable DeveLopment in 2002', and the Paris Agreement of
'./{ )lh I ntr PAns Aoreempnt nroenlzcal n\/ rnp I Inlfpd l\lrrlnnq
alms
to decrease greenhouse gas emissions and keep the temperature
rise to less than 2 degrees Celsius above pre-lndustrial levels. The
-------,
aorppmpnf
*o- - ---,*,,,b ,,r anrrr+
is non-hindino:nd prrpnr tallor tts *l^
,- *itrry can +^il^-;+^ ptans
to meet its individual needs. Currently, 160 of 197 countries have
sisned fhe agreement A laroe hlow to the agreement was delivered
when the United States putled out in 2017. However, the Un jted
Sfates is still canahle of some climate chanse California and New
York still nlan to imnrove their vehicle and nower-nlant emissions.
Canada's indlvidual plan included a 3O percent decrease in
emissions from 2O05levels by 2030. It ptedged monetary support
for emissions-reducing projects in deveioping countries and for
innovations in emissions-reducing technology.
Environmental issues are caused by many businesses, but they
also cost many businesses. The floods in Texas and the wildfires
in Alberta have caused the price of oil to increase dramatically and
srrddenlv This will creete rrnexnpcted hardshins for indrrstries such
^i-li.^^^ duLUi
^^ clrrLr-t.tcJ,
d.J ^-r _---rr---o.
^..+^ d]]u shinninO

Sometimes companies try to be socially responsible

and unintentionally wade into political issues. In 2015,
Starbucks created a campaign that toLd its baristas to write
"#RaceTogether" on ali the cups to start conversations
about race. Sociat media responded immediately by judging
the campaign as a superficial, corporate gesture.
s;r2rnllakc kpnf fr\/rnd lr')lll / 2ttpr prpclaiont l'rllrnn
announced limits on immigration, Starbucks announced
it would hire 10,000 refugees. Again, it was hit with a
backlash. "#BoycottStarbucks" trended. One tweet said that
10,000 was nothing when 10O million people worldwide
were out of work. Because of these two initiatives, positive
brand perception felt by two-thirds and saies decreased.
{

Where were the clothes that you are wearing made? How about your
school's sports uniforms? Do you know if the people who made them
were treated fairiy? Do the factories that made them employ chitd
labour? How can you find out? Does this matter to you? Are you
willing to pay more for a product you know is made by workers who
have been treated fairly?

Sweatshops are factories in underdeveloped and developing

.countries where the empLoyees work in unsafe environments,
are
treated unfairly, and have no chance to address these conditions.
Thp frrtnriocJ omnlnrr nfr^- d.J
nhildro- urLclr
LrrryLw1l LrrrlurEr.r, .. yOUn$
', aS 14 or 15, whO work
alongside adults. Sweatshops pay poverty wages that provide only
one-quarter to one-half of a living wage in the community. workers
are often cheated out of overtime pay. The companies that run the
factories set unrealistic production quotas. To meet these quotas,
workers must put in 12-hour days, cannot call in sick or take breaks,
ortu --^ *^+
^-r dttr ^^ir t^-
I]uL Pd.ILl --,_ last horrr therr rnrnrk p:r.h derr \n/nrnon
luI the
who apply for jobs in these factorles must submit to mandatory
pregnancy tests. working conditions are unbearable. The heat can be
suffocating, and accrdents causing injury are common. If empioyees
r-nmnlrin
rvrrrl/Lqlrr nr
vr tr\r
Lrj t^ r rrninn
wl6qltrzc o.
Lv ^r.f.hiro urI-LUII, +L^"
LIiey 'm^,,1-^ L^*^--^l
lttdy ue.LIilIaSSeu,
intimidated, and/or fired.
Why do sweatshops exist? GLobal competitiveness, corporate
greed, and consumers' expectations of low prices have helped create
them. Developing countries desperately require foreign investment.
Thev
----J comnefe
--.''r- against each other hv nroducing goods illvf
uj ylvuulrrr66vvur more! Lll__r.,
r.hpanlrr
than neighbouring countries. To minimize cosrs, companles
subcontract their manufacturing to factories that pay low salanes,
provide poor working conditions, force employees to work overtime,
intimidate workers, and have high productivity.
should companies avoid using factories in developing countries?
\Tn cnrnnrnioc noarl to continue to
Lv !vrrLfjlug Lv invest
llIvEJL in these
frr LrfLo! r.orrntrjps hrrt
LvuIlLllcD, UL, fhprr
_--,J
must do so fairly. workers need to be paid a living wage. This will differ
ir each country, depending on its standard of iiving. companies must
:a-.- :::ough to allow workers to meet their basic needs and enable
rhe:: :: : -an for an improved future. Empioyees and their famihes
nee3:: := :.: -: ic receive an education. Workers must have the right
to sei-:::::::_::a:_cn. This means that theV should be abLe to sneak
up agarl- :^:::: -.: Ii-.,ocate for improved working conditio;s and
increased:a; -,'--_:_ :: -_:-= -_:t::at of losing their jobs.

Ethical issues in internatl0na, D usin:ss

 Many companies have improved their track records in terms of their
use of sweatshops. Nike is a company often cited as using sweatshops.
it has worked hard to change this image. It now has an extensive code
in labour
of conduct and careful$ monitors its suppliers. The increase
costs is not passed on to consumers, because Nike teaches its
suppliers ,.

more efficient production methods that decrease the need for overtime'
if companies are vigilant in their inspection of subcontractols,
Even
abuses still occur. Some vendors keep more than one set of
books and
coach employees to lie to workplace audttors about working conditions
Rana
and hours. One ofthe greatest sweatshop disasters occurred at
plaza in Bangladesh. The 2oi3 bultding collapse caused the deaths
of t,t:+ workers and injured thousands more' The factory housed
faciiities producing clothing for walmart, The children's Piace, and
Joe Fresh. The eight-storey building was
evacuated the day before the
collapse when a series of cracks appeared in the walls. The workers
were ordered back into the factory that day and the next. If they had
not returned, they wouid have lost their jobs'
This disaster resulted in two agleements to protect workers
and avoid disaster in the future. The Accord on Ftre and Buiiding
safety in Bangiadesh and The Alliance for Bangladesh worker Safety
outline improvements such as sprinkler systems, emergency exits'
and improved working conditions. Failure to meet the expectations
of both of these agreements will cause the western companles
usrng these factories to pull out. Companies have made progress
in
improving conditions, and more companies are being urged to sign
the 2o18 Transition Accord, which will further the work of factory
inspections and safety initiatives.
organizations are trying to improve working conditions around
the world. Non-profit organizations such as Human Rights Watch
and Toronto's Maquila Solidarity Network have asked 72ma|or
clothlng retailers to provide transparency in their purchasing
practtces. They are requesting that companies provide a iist of
companies and addresses of their suppliers' In Canada' Mountain
Equipment Co-op and The Hudson's Bay Company came close
to d,isclosing all information;Joe Fresh disclosed names but not
addresses; and Canadian Tire, which seils clothing through
Mark's
Tire
and Sport Chek, did not provide any information. Canadian
stated that it used third-party auditing firms to monitor factortes'

282 lChapter 7:5ocial Responsibility and NG0s

 As a Canadian consumer, what can you do about sweatshops? You
are faced with an ethical dilemma every time you shop. There are Here, peoPLe can be seen
some practices you Can use tO tly to ensure that you are purchasing desperatelY irYing to satre
victims caught in the rubbLe of
products made by workers who are treated fairly. Investi$ate Lhe Fana Plaza bu-.c':-{ io* ,

companies and learn about their social responsibility records. Buy after it collapsed. 1,134 PeoPLe
lost their lives Ln the disasier
fair trade products, and boycott companies that use sweatshops.

ra.
'--J

{'''s
 If cpernc fh:f prronr d:rr thprp'q qnmpthino in thp ntr\^rs ahottt e

corn rnt comnanv or executive. The United States saw the demise
of Enron. Canada was home to the scandal involving Bre-X, the
minlng company that defrauded Canadians by fatsifylng records
of oold
vr 6v Lu denosits in Tndonesia These comnanies engaged in stock
r--,,,r ^-,r ill^d^l
lId.L-tLl dll.\-L h"ojnpqq
ILLCSo'L UUJIIICJJ nrer-firps These
t rlsDs comnanjeS
LvfrrPqlrrLo rv lOngel
fnO tvrl6\
PIOLLrLED.
exist. Shareholders lost millions of dollars and employees lost their
lobs and their pensions. Senior executives in the companies were
arrested and found guitty of corruption. Corporate corruption refers
to involvement in lttegal actrvities to further one's business lnterests.
Other
vLrrLr pxamnles 6f
L^qrifPrLJ vr 66rrnnrr1'o cnrrrrntinn inClUde:

. Volkswagen cheated on emissions tests in its diesel engines.

The cars contained software that knew when the engine was
heino tested and world renort false nositirre resttlts Tn the
United States, the cars were emitting 40 ttmes the acceptable
amount of nitrogen oxide. The company admitted to the
wrongdoing, and responded by apologizing, recalling the cars,
and fixins the soffware The nrohlem existed in over 11 million
cars globally (tos,ooo in Canada).
. Siemens, a German manufactudng company, was caught
navins bribes for contracts. It admitted to naving ------ tn
'-^o bribes
50 nercent of the countries in which it did business. The bribes
totailed between S135 million and $275 million per year.
. Livent. Garth Drabinsky and Myron Gottlieb were involved
in an accounting scheme at Livent, the theatre production
company they owned. Both were found gultty of misstating
Livent's financial situation from 1993 to 1998. The men had
overstated profits, under-represented costs, and inflated
the value of assets. Both were tried and sentenced in 2009;
Drabinsky to seven years in prison; Gottlieb to six. The
jrrdse staf ed that their Sentences \^rerp e messaoe to other
Canadian businesses that fraud and dishonesty will not be
tolerated in Canada.

284 7: Social Resoonsibilitv and NGOs

Hollinger Inc. Canadian-born Con:ad Black controlled :-:::::* I -=::-- :-::::: :-:::eC
Hollinger Inc., a newspaper congiomerate that included . -. -, -: -- -, *:-:, : - ::a -c
r^ - D^n-i
.- o -^A^
' !..-'c.r.rIIle
the NationalPost (Toronto), the Chicago Sun-Times, and the investors trusted him with
Daily Telegraph (U.r.). Black was found guitty of fraud and rhei- -nnpv hecarrsp ho ran a
successful business, MadofI
obstruction ofjustice by the United States Securities and
Investment Securities, and
Exchange Commission (SfC). He had misappropriated millions nf hr'q ronrrt:rinn ^. I I-
hpe arrqp

of dollars from Hollinger. The court sentenced him to six-and- lormer chairman of NASDAQ ln
the 1990s
a-half years in prison, a $tZS,OOO fine, and the forfeiture of
$6.t mllllon, the amount that he stole from the company.
Ponzi schemes. In the United States, Bernard (Bernie) Madoff
spent years defrauding investors out of $50 bitlion in a Ponzi
scheme. A Ponzi scheme pays returns to current investors
ttsing neW jnrrestors'monp\/
uurrr6 rrsvv rrivLDLvf o rathpr fl2n cntncl ptUttLD.
Lrrurr OLLUOL ^'^fit-. lLTr
was named after Charles Ponzr, who used this technique
in the United States in the 1920s Madoff was sentenced to
the maxlmum sentence of 150 years in prison. The -a:ge s:
Ponzi scheme in Canada Cef:aude : ::3:e ::tdt 3 : : : :::: -=
(one-thild of r','hc:l -,,.-e:: 3=a:-= ::: :- - - '.'--::-
-.:
Gary Sore::sc:t a:t l.'---:-.,;= 3:::: -,',-=:= _:'-:_: _;:-_=. :: ::a::
and theft in a Ca.gr ::'-::::-.1'::,..: :-=:
=:_: s:-:s _::
mining and rniestte: - : : - : e:-= s --:ta: :: a --.- -' :.: - ::::e -e i
_ _

money back to -r-:ier'. l::: -_:::=,- r;--::::

-t:
::::::e c ro
investors because rncsi ci -: -s -:: :as:lc:e acacunrs, repaid
lnitial investors, or was spen: -:-.- Sc:enson and Brost to
maintain a lavish Lifestyte inciuo-ng a ranch in Honduras, a
luxury fishing boat, and flights on private jets.
 There are different forms of corruption. Many people consider it
wrong to give a gift to a business, because it may be misconstrued
as a bribe; however, inJapan gift-giving is a common practice and it
would be detrimental to a business relationship not to give a gift. The
following terms are used to describe certain exchanges that may take
place in a business relationship. In some cases, they are considered ^
to be corrupt practices.
. Gift. A symbol of friendship and respect, a gift is usually of low
cost and often reciprocated, and is not considered a bribe in
most cultures.
Tip. A tip is an incentive for excellent service, and is not
considered a bribe.
Grease. These are smaller payments made to encourage people
to negotiate faster and speed up business processes. This is
considered a bribe and is ittegat in Canada.
Commissions. These are large payments made to a facilitator
or go-between in business negotiations. Commissions are
considered bribes when they are not a lawful business contract.
Bribes. A bribe is money presented to induce people to do
things they should not. Bribes are illegal. The United Nations
estimates that gtobatly approximately a trillion dollars is spent
annually on bribes. This increases the cost of international
business in developing countries by 20 percent.

In Canada, legislation makes it itlegal to engage in practices such

as bribes or excessivety high commissions in return for business
favours. The Comrption of Foreign Public Officials Act makes it
illegat in Canada to bribe a foreign official and to launder or possess
laundered property and proceeds. The Act is implementedto
comply with Canada's obligation to the United Nations under its
U N C onvention against C orruption. H owever, C anadian executives

face an ethical dilemma when they work in countries such as China,

Nigeria, India, and Taiwan, where bribes are commort.

286 | Chapter 7: Social Responsibility and NGOs

Dumping, in an internatlonal business context, means selling
products in a foreign country below the cost of production or below
the price in the home country. A company will dump its products
to get rid of excess product without affecting home-country prices.
A company may also lower the price of the product in the foreign
country to increase sales and force its competition out of business in
the host country. In this case, the exporter wili then raise the prices. Lanaoa L^-
-^-^:^ 1..^l
nas nau dII
^- oilButng
^hd^ir

dispute with the United States

This practice is called predatory du ing. nirer lhe srrhsrdv nICanadian
Lumber, which ls sold aL highly
Sirbsidizing occurs when the importing of a good is hetped through
nrices or botn
.nrr^ netitive" r__'-""_ --''
financial assistance from the foreign govemment. Examples of sldes ofthe border The United
qi.rfps se\/s f hc srrhsidv is unfair
subsidies include loans with preferential rnterest rates, grants, or
and undercuts American mills.
tax incentives. In Canada, the Special Import Measures Act allows Canada says that because mosl
nnmnrnioc tn coolz .rOteCtiOn ffOm eXpOrterS that are dUmping Of Canadian timber is owned by
subsidizlng under the Canada Border Services Agency (CBSA) and the thp nrovinces nri.ps are not se[
in rhp semp \^rrr/ thpl/ arp in thg
Canadian International Trade Tribunal (Ctrr). unlteo 5tates

Ethical issues in international business | 287

 over
One of the biggest problems in the worLd is poverty. Currently, close to
BOO mlllion people in the world live in intense poverty. This amounts
to lO.7 percent of the worLd's popuiation living on less than $1.90 USD
r-^-^+i.^r1., UCL
r.^^ (-LId.lrrclLrLd.LLy
ner darr Thjs nUmbel ]]dJ i^llined over the last few
--
a..ua.t. In 1990, l.B5 billion people tived in poverty. These gains have
occrrrred from imnroved economic conditions in China, Indonesia,
and India. Over half of the world's poor reside in Sub-Saharan Africa.
The majority live in rural locations, have limited education, and work
in the agflcultural sector. Half of the world's poor are under 18. For
the 10 percent of the global population living in poverty, everyday
existence is difficult. PeopLe who live in poverty are hungry, lack
Women rn Freetown, Sierra shelter, have no medical care when they are sick, have no access to
T ^^-^ \"/^-r AF-i-^ ^^.r i^ ^^r^
:culltr vvq)t nrLrLd. PolLlllPq,c
'l : m'r-.or- -o6l j''_ r--t'_'
p;6'gr-t tO
'' 'U'td
education, cannot read, watch their chiidren die of diseases carried in
smali busrnesses unsafe water, have no employment prospects, and Live day to day.

2SS lChapter 7: Social Responsibility and NG0s

Microcredit
One of the ways that povefty is being eliminated, one family at a
time, is through microcredit. Microcredit is the granting of very
small loans-often as little as $t00-to spur entrepreneurship. The
entrepreneur does not need a down payment or a credit history.
The money is used to start a small business such as farming,
running a small shop, weaving baskets, selling rice, or providing
cell-phone service.
Microcredit first gained popularity in 1983, when Professor
Muhammad Yunus of Bangladesh created the Grameen Bank. Banks
like this now operate in over a hundred countries. In 2006, Yunus
received the Nobel Peace Prize for his work in microcredit. the
United Nations declared 2005 the Year of Microcredit.
How does microcredit work? In small villages, groups of people
form a lending circle and recelve a group loan, often for $1,000. The
members then decide how the loan will be sptit. Each member is
responsible for the ottrers' debts, and they collectively guarantee that
the loan witt be repaid. They are essential$ coltateral for one another.
Most lending circles are composed of women, who use tfie money to
start a business. Income from that business pays for their children's
education, food for the family, fuel, or medicine. Microcredit
institutions often target women because they know that the money
will be used to create work and income to suppoft their families.
Because the women can contribute financial$ to their families, they
gain respect, dignity, and independence, which they would not gain
if they were simply given a handout.
Providing microcredit loans expands international business. The
people who receive these loans are able to support themselves and
improve their standard of living. As these businesses expand, they
trade with and support other local businesses, and may eventually
sell to international customers and buv from international sources.
I\/T^hrr nrxnnianfir
'rqrr) vr6qr'aourofls help people loan microcredit money
oniine. Kiva is an organization that matches entrepreneurs in
underdeveloped countries with people who want to lend them
money. Kiva's website allows donors to search for entrepreneurs,
loan money (as little as $25), receive updates, and communicate
with the entrepreneur. When the loan is repaid (the repayment rate
is 97 percent), the donor can reinvest it with another entrepreneur,
donate it to Kiva, or withdraw it. As of 2018, Kiva has given out
$Lf bittionto entrepreneurs in BB countries. Other microcredit
organizations include SHARE and the Grameen Foundation.
 There are thousands of organlzations that help the world's
nnnrrl:finn Tn f hiq honk
---",
rrnrr
)
harre' stldieA
--**--u Lld'LIC nrrrniryrfia'S
+'^A^ UlSOrlr4oLlvrrl Such
asthe \r,'orld Bank, the United Nattons, and the G20. There are also
organizations that are not associated with a specific government.
rhese non-governmental organizations (NGOS) are non-profit
organizations that are made up of paid professional staff and unpald
volunteers, and have a seruice and development focus. These
organizations work for the benefit of the members of other groups in
the world's population.
The focus of NGOs is very diverse. They may centre on trade,
pdrrr.:tinn rrorrth
j vqltt, imnrorrino the environment httmar rro"--' rishr. and
e rreriptrr nf nthpr isqrrps NTGOs erp nredort'^^^+l'
*'' r' **--llllldIILLy
r'--,l
IUlrUtru^- -;-1119h
L--1 uJ6--

charitable contributions. CARE, World Vision, Amn:. :. -r -:rnational,

Greenneace the International Chamber of Com:e::: a:-l Doctors
without Borders are all NGOs. NGOs can affec: l:s-:l:ss activities
throughorrt lhe world Thev mav influen:': ' ------ --^r^"-^-*,
''^:') =-r-;u tU)lIIclIL and
,,-F-i- l^L^,,-
urrrd.ll Lduuur hr..ri.eS and StandardS.
ProLLrl

290 | Chapter 7: Social Responsibility and NG0s

t
WE Charity, formeriy Free the Children, was started in 1995 by l2-year-
old Canadian Crais Kielburser One dav whlle lookins for the comics in
the newspaper, he came upon a story about a Pakistani boy who had
been working twelve-hour days, six days a week, as a slave in a carpet
factory. Iqbal Masih escaped and spoke out against the child abuse
common in factories. Sadiy, Iqbal was killed by those who wanted to
silence him Kielhrt roer oroaniz.ed his classmates and started Free the
ch jldren
!rrlLuf sf l. TodaV LIqI6jg and
r wuq)/ ) cra rtrr brother
qtru his urvLrr!r Mar- lr,,h
t.tqrL ut t +1-,^ ^.a^- j-^+j^n and
LItc utt3otttzoLtu
sneak qtL
DPqqN all VVEI 1lp
orrpr LIIE 111611r1 fn
VVUlLU LU lGIJC .r^r.rah6oq:nd
rcica OVVOiCIICJj srru mnnprr
\rIE
vv L t'-hrri'l-rr
LlldllLy lD io O.Ir
rn nrdcniznfinn
UlSdIIlLdLlU I fhnf
LIIdL rrrnq nfndf2fnq uwffrLDLfLd.LLy
l U.tro prw6rqfrrD dnrnpctircllrr
^'^r ;'^+^---+i^-^rr--
d.]](-L lIILCIll.d.LIUlldLLy. uqJ and
vv ! Darr
rLo \n/E
Tts vv L Schools
qttu \ir/F. u initiatives afe Iun
in Canada, the United States, and the U.K. The WE SchooLs program
is a vear-long Drogram that helns schools to develon transformative
social change. The WE Day programs are stadium-size celebrations
empowering students to become agents of social change. The WE
ViLlages program can be found:n Af:ica. A;:a anC' a:i:. .-::.e:.:a.
This initiatlve works with iocal leade:s a::c. -a:::---:s -l a::a-- :i
high child labour, child exploitation, and minirna. cp:c:ru:-ite s
for gir1s. The organization helps improve education, health, water,
food, and oppoftunity. This NGO has won the Children's Nobel
Prize and the Human Rights Award from the World Association of
Non-Governmental Organizations. It stdves to teach all children that
they are powerful and can make a difference in the world.
 A Roots store in Toronto,
ncino'imnops rlprrl\r
irspired by Canadiana in its The Canadian clothing industry employs approximately 22,0OO
marketing
people and exports $t.z biltion of goods a year. Exports have
decreased over the years, but a focus on niche, high-end markets
has been successful. Three companies that exemptify this trend are
Roots, Gildan, and Canada Goose.

Roots is a global tifestyle brand known for its leather goods, athletic
and casual clothing, yoga wear, and home furnishings. It was created
in 197i by American Michael Budman and Don Green, who spent
their summers at Camp Tamakwa in Northern Ontarlo's Algonquin
Park. They started with a small store in downtown Toronto selling
shoes primariiy. The privatety hetd operation has grown to 2OO retail
stores throughout Canada, the United States, and Asia (China,
Taiwan, and Hong Xong).
Roots came to the forefront internationally when it first created
official Olympic clothing. At the 2OO4 Summer Olympics in Athens,
Greece, competitors from Canada, the United States, Great Britain, and
Barbados sported gear designed by Roots at the opening and closing
ceremonies, on the podium, and throughout the Olympic Vitiage.

Gitdan is a company that produces activewear, children's apparel,

sleepwear, and socks. Founded in 1946 in Montreal, it has grown
to sales of $2.6 billion USD worldwide. The company has expanded

292 | Chapter 7: Social Responsibility and NG0s

by buitdlng distribution centres in North and South Carolina, and
factories in Honduras, Dominican RepubLic, and Bangladesh. Growth
has also come from a series of acquisitions including the American
Apparel brand. Gildan believes in running a socially responsibie
company. It has internal and externai social audits of its facilities
and its third-party contractors, and is accredited by the Fair
Labor Association. Gildan is dedicated to being environmentally
responsible through using renewable energy and wastewater
treatment facilitles. The company is proud of being incLuded on the
Dow Jones Sustainabillty World Index.

Canada Goose produces winter coats abie to endure the harsh

Canadian winters and has recently started to produce knitwear. The
company was started in 1957 in Toronto. The parkas are designed
to he ttsed in temneratures as low as -70 degrees LLLJfUJ.
Celsjrrs Canada
lUI

Goose parkas have been used by Arctic explorers, Mt. Everest

climbers, film crews, and Canadians just trying to keep warm.
The company's Made in Canada poLicy ensures that the more
than247 parts that make up a coat ate produced primarily in the
country from which the coat deiives its inspiration. It employs
more than 1,700 people in five factories across Canada, and selts in
37 countries worldwide.

The company cu::entl1'sends its excess zippers, fabric, buttons,

and Velcro to remote :::ununities in the Arctic that use them to
make jackets and pa:k==. This lnitiative also reduces waste in the
factories. The idea was {e :e :ated when Inuit customers were visiting
the factory. Canada Gocse j:ra:es money from each saLe of specific
parkas to supportpolalbea: iabttats. Canada Goose aLso faces
criticism from animal ng:- 3::,ts:s Drotesting the manner ln which
it traps and harvests coyoi€ :-:::: --::m.

Check Your Understanding

1 Describe Canada's appa::- -:::s=-.

2 State the three comDar-es --::
== a=c-e a::--itc ::::::-s
they make.
3 Describe how Canada's clc-u::-::g -:t:-l_.- :=. -r:=ceC
internationally.
4 Describe the social responsibi jqr
=ac<
:E:c:c of each company.
5 Research how each of these compaies is currently successful.
6 Offer one suggestion for how each of the companies
presented could lmprove its image.

Non-governmental organizations (NG0s) | 293


Look for the recognizabLe FLO
iabei on a ,rarrety of products
(orodr.ice, cltocolate, coffee, rea,
e:: L- \ rI.f . t:_; . :hev compL;-
wiih fatr ernpioyment and
ira0ing practices
294 lChapter 7: Social Responsibility and
International (F
Fairtrade Labetling organizations Internationat (FLo) works
dlligently to secure improved trading relationships for producers
around the wortd. It is headquartered in Bonn, Germany, and
supports the efforts of fair trade organrzations in individual
countries. The Canadian member of FLo is Fairtrade Canada. The
puryose of Fairtrade is to provide a fair and honest deat between all
members of the supply chain. Fairtrade guarantees that the prrces
paid for products are adequate to cover the costs ofsustainable
production. This aLlows member to improve their standard of living
and pian for the future. FLo sets tandards that must be met to
achieve fair trade status. These standards levet imbalances in trade
negotiations and unstable markets.
under this system, workers are treated fairty-they are ensured
safe working conditions, the right to join a union, adequate
housing, and decent wages. Consumers know that the fair trade
products they purchase are congruent with their beliefs and ethics,
and companies are guaranteed that fair employment practices
are part of the entire supply chain. Fair trade is critical for the
environment, too; it rewards farmers who use sustainabte practices
and organic certifi cation.
Fair trade products, including coffee, tea, bananas, cocoa, flowers,
sports balLs, and more, are identified by a labet that certifies they
have been ethically produced. In Canada, you will see the Fairtrade
Canada label on a1t products that are deemed fair trade.
NGOs
Ten Thousand Villages is a non-profit organization whose
retail stores sell fair trade products throughout Canada and the
United States. This NGO sources handicrafts from artisans in
underdeveloped countries and setls their products to consumers,
ensuring that goods have been ethically purchased and created
using sustainable resources. Ten Thousand Villages sells products
from over 73 artisan groups in more than27 countries and provides
employment for 20,000 people. The organization builds and
develops relationships with artisans, and respects their cutture,
needs, and skills. The artisans often work in small groups at home,
where they can look after children or farms. Prices are mutually
agreed upon between the artisans and Ten Thousand Villages;
50 nercent js naid fo the artisan when the order is nlaced and the
remaining amount when the order is fitted.

The International Organization for Standardization (tSO) is

the world's largest standards-developing group, implementing
approximately 27,BOO standards worldwide. The name ISO is used
globatty; isos means "equal" in Greek. ISO standards are found in
agriculture, construction, health care, and engineedng, and other
areas. If you have ever seen ISO 9000, 14000, or 27OOO signs on
buildings, these signs indicate that those businesses meet the
standards set by ISO. The ISO 9000 series is a symbol of quality
management; the ISO 14000 series addresses environmental
management; while the ISO 27000 series creates standards for
information security management.
ISO certification is critical for international trade. It ensures
that products and services sourced gtobatiy are safe, reliable,
environmentaily responsible, and interchangeable with products
from other producers. It allows companies to source vendors from
around the world at economical prices and not be concerned about
+L^ ^''^ri+" UI
^r+L^
LIIC -*oducts Tt jncreases exnorts
LIIt: 9UcrLlLy PIULltlLL> and services.
d.I-t(-|. JtrI VILtr). rL rrr!rLqoLo LApvr LD and

provldes the opportunity for technology and quality standards to

be developed in emerging economies. Employees benefit through
improved safety standards, and customers gain through lncreased
consumer protection. ISO certification allows businesses to trade
worldwide with confi dence.
 Chapter Review

1
I M/hv
VVltj is it rmnnrrart'l^et.n"nnaniec
rJ iL rrrlyvr a-e Consistent in their
anrna-rrn on-i
COIpOf aLe SOCldL I rl rpqnnn<ihiJifv qtrFtpoi^^ dLru)) rlrorry Lvurll
^lfieS?
_, ---*--o'c)

2 What are the advantages of microcredit?

3 List and describe lwo factual examples of corporate corrupLion.

4 What is predatory dumping? Give an example

5 Explain how ISO certification expands international business.

6 Define social responslbtltty and apply the concept to youl life. In what
ways are you a socially responsibLe person?

'7
t lr/hrr
uu IIy ic in oa Lurllyolli
i1- lll
IJ iL ULJL ifrnfereqf fn hp qncirllrr resnonsihie?
.nrnn:nv'co hpqt

8 Why wouLd large internationaL banks not be tnterested in microcredlt

Loans?

g \nihrr rrp drrmnins and subsidizins considered unethica[?

10 ShouLd companies refuse to invest in countlies with a history of using

in Uluqr
a\^ro!rchnnq 111
DVVtrOLDTrU/O nrdpr tn diccnrr raoe f his husiness nractice?' Whv
LU uloLvula5 "- whv
'" "J or "'-J

not?

11 How has WE Charity affected businesses in the areas it has worked?

12 What fair trade products ale you aware of? Explain how the Fairtrade
Labelling Organizations Internattonal (flO) affects internationaL
buslnesses.

296 lChapter 7: Social Responsibility and NGOs

13 In small groups, brainstorm a list of socially responsible companies.

14 Create a code of conduct for your school or your workplace.

15 Research one of the companies listed in the Top 50 Socially

Responsible Companies list (Figure 7-1). Write a paragraph
describing its social responsibllity practices.

16 Provide four ways that consumers can be sure that their purchases
are ethical and socially responsible.

17 Martin Luther KlngJr. said, "Before you've finished your breakfast

this morning, you'tL have relied on haLf the world." How does this
apply to international business and soclat responsibility?

18 Give two examptes of companies that do each of the following and

nrovide e one-spnlence dpscrintinn Lv clnnnrf
vrr fn rrnrrr rhnino
ouyjrvf LJvur Lrlvrlg.

a Makes a charitabte contribution

b Treats employees ethically

c Is environmental$ conscious

d Ensures safe working conditions

e Sponsors a local sports team

f Creates and promotes a diverse workpLace

19 Define the "test of disclosure" method of ethical reasoning. If you

were considering working for a company that manufactures and
sells cigarettes, for example, how wouLd you answer the questions of
this test? Would your answers change your decision about workins
tnere 1

20 You are the owner of a Mexican company that makes and distributes
car parts. You are thinking of getting an ISO 9O0t certification. What
does this mean? Is this a good idea? Why or why not?

21 Exptain what coffee companies need to do to for their coffee to be

considered Fairtrade and verified by FLO.

Chapter Review | 297

 22 A Canadian retaiLer has Learned that one of rts factorles in China has
had an environmental leak Tt is currently poLtutlng a water supply
used by thousands of people News of the envjronmenLaldamage was
rpnorted
| !Pv!
LLU in Thp Clohp nnd Moil The comDanv is t"'_/rvins
rr'a) to
""
determine iI ir
shouLd clean up the environmental damage it has caused
r
cl
- i-r rL.^
L.t>L ^^rJtrLUiludly
-,i---. d.llu
LIIC ptIllld.ly ^-^'-!-^,..^-,^hoLders
)Lo^q inthis situatlon.
b Which stakeholders have the most power to influence the
company's declsion?
c What should the Canadian companv do?

23 You are in a foreign country negotiating an importanl contract thar

is worth $5 milllon for your company. A man who is handllng the
negotiations asks you for a bribe of $15,000 to ensule your company
gets thls contract You know that bribes are common but illegat in this
country Your company has a code ofconduct that says bribes are not
to be paid butyou have heard of limes when they have been

a Use elhlcal imperiaLism ro establish whal you would do.

b Use cuLtural reiativism to establish what you would do.

c Create a stakeholder analysis of this situation.

d ShouLd you pay the bribe? Why or why not?

24 You are the owner of a smalL company that has had a good year
financiaL$. You have decided to donate $10,000 to a Local charity
a To which of the NGOs mentioned in this chapter wouLd you donate?
why?
b SeLect an NGO that is not mentroned in this chapter that you would
consider donating money to or voLunteering for. Describe the
nrrrn^<o nf thp Nle O \n/hrzinrnrrld rrntt \rlrnf ln qttnnnrt il?
""..,I"""*rr-.....

29s lChapter 7: 5ocial Responsibility and NG0s

Inquiry Activity

This chapter has tooked at a series of ethical issues and NGOs

involved in international business. Keeping up-to-date is important
for all members of society. This activity w1li hetp you learn about
current information surrounding these issues and organizations.
Choose three issues/organizations listed below that interest you.
Find a rellable and trusted news source for each organization. The
source must be no older than six months:

Suggested Topics
' Environmentaldisasters
. Srnrpefchnnc

' Corporate corruption

' Dttmnin o and/nr qrrhqidizino

' Poverty
' Microcredit
' WE Charity

' Ten Thousand Villages

' Fairtradelnternational
ISO

Requirements
' Each source must be appropriate and current. Include the
source, its date, the pubiication, and the author.

' Write a brief paragraph (five to ten sentences) summarizing

the article in your own words.
' Write a paragraph explaining how the information in the
article witl impact international business.
' Write a brief paragraph explaining what you tearned from the
article.

lnquiry Activity | 299

Networking is an activity where businesspeople meet and
interact to form business connections and relationships. These
interactions may lead to business opportunitles in the future.
Research indicates that effective networking can lead to more job
and business prospects, improved learning, innovation, status,
and faster advancement.
There are many kinds of networking available to
businesspeople. Some are formalized such as the Rotary Club, the
Chamber of Commerce, or a conference. Some are less formalized
such as tatking to the person you share a cubicle with, asking
the person beside you at a meeting how his or her day ls going,
or introducing yourself to someone you don't know' There are
also online networking opportunities through websites such as
Linkedln. This network allows professionals to meet electronically,
belong to groups, post blogs, and establish online profiles.
Use the following tips for working with others whether in a

class presentation, during a meeting, or working in teams.

Iips on networking effectivelY

. Be authentic. People can tell when you are forcing a
conversation or uncomfortable.
. Be professionat. Dress, speak, and write appropriately.

' Ask great questions. The best way to get to know someone
is to ask them genuine, thoughtful questions about
themselves.
. Be there. Focus on the conversation you are currently
having. Do not be iooking around the room or thinking about
\^rhn
vv llv \/nr \^rAnt to sneak to next T,istening is critical.
J vu vv uf lL Lv

. Do not be afraid. Networking can be intimidatin$. Do not be

afraid to introduce yourselfto new people orjoin a group of
people.

' Smite. People will be less intimidated by you and feet more
at ease.

' Don't highjack a conversation. Be careful about

intprnrntino
ff IL!rf uyLff annther nprson's storv. Let them finish and
f6 urrvLrrLt

th^n
LIICll
rrlrl in rz4l11ideaS ]f theV
d.LlU lll y V Ut IUEqD if LrrLJ
I afeL felated.
ur r
 . Foltow up. If your interaction has been positive, ask for contact
information. This may be a business card or Linkedln. Make
contact within 48 hours. Reference something you discussed so
that the person remembers you easiLy.

Activities
1 You take three clients who are visiting from India out for
dinner. State four appropriate topics ofconversation.
zi r^ri+L
wltn a^ h^,+^,
paruner, practlse:

a Yourhandshake
b A greeting
c Asking each other questions, listening, and responding
to the answers
d Requesting contact information
3 Research three networking opportunities in your communlty,
for example, the Rotary Club, Toastmasters, the Chamber of
Commerce.

4 Create a professional soclai media presence such as a

Linkedln profile. Be certain to use a professional photo of
yourself and include the relevant information.
5 In groups of three or four, create a networking activilv fc:
your class. It could be a team-buitding game or any 1,.')',
for students to find out more about each other. Ha...e
-:
class engage in the activity. What were the streng-is :: --:e
activity? What would you do differentiy next -i-.:?
6 Create a business card for yourself.

Create a mind map of your personal bra::c. F:: ts:a::c

liuty NameJ" in a circle in the mlddie of tne rage. Flr your
interests and skills as spokes from the cicie.

Business 5kills 1301

 !t

g
s

By the time you finish this chapter, you should be able to:

' Understand and differntiate between the different globaijzaion

strategies used by international businesses
' Describe international trade agreements and organizauons :irat
have influenced global business activity
' Describe Canada's involvement in international trade
organizations
Key Terms European Union (EU) Organisation for Economic
eur0 Co-operation and
\ll tr,!1L Development (OECD)

trade agreement trade organizations World Bank

North American Free Trade World Trade Organization (WfO) International Monetary Fund
Agreement (NAFTA) Asia-Pacific Economic (rur)
Temporary Foreign Workers Cooperation (epf C) Organization of the Petroleum
Program (rrwp) Group of Seven (G7) Exporting Countries (OPEC)
Keystone XL pipeline Group of Twenty (G20) cartel
LuxLeaks BRICS Peric Adrpprnpnf
 ::i:x'.''
hlnese
6.1 afli z nd
businesses sit side by side in
this busy tourlst district of
Shanghal, China.
iln:atl r:a de
Globalization-the process whereby national or regional
economies and cultures have become integrated through new
gtobal communication technologies, foreign direct investment,
internationai trade, immigration, and the flow of money-faces
a widespread backlash today. Atthough there are many positive
effects of globalization, nationalist movements across Europe, the
united states, and other countries argue that globalization is failing
its poorest and weakest citizens by increasing income inequalities.
Brexit, Britain's decision to leave the European Union (f U), and
U.s. President Donald Trump's anti-free trade election promises are
examples of this backlash. Canadian companies need to develop
global business strategies that address the social and political
challenges associated with international business.

214 | Chapter 6: International Trade Agreements and 0rganizations

As more companies operate in new globaL markets, more decisions
around how these markets function will be necessary. In many cases,
one size (or strateov) doesn't fit all markets. Some international
businesses treat the worid as one large market, while others establish
different strategies depending on the product, culture, and country.
Yet other businesses use a combination of strategies.
From 2O11to 2015, American chain Domino's Pizza opened
I,BOO stores in 10 different countries. Was each market identical?
Is the pizza, its preparation, and delivery the same throughout the
world? Domino's is seerng great success in China and Brazil and
growth inJapan and India. In India, Domino's changed its pizza right
down to the flour it uses and sells more pizzas in India than in any
other country outside the U.S. Domino's researched everything from
toppings to price and created different pizzaproducts for India-its
menu includes many vegetarian options, including Cheese n Corn,
Peppy Paneer, 5 Pepper, and Burger Pizza(no meat, but double crust).
In 2015, Domino's entered Italy with its first franchise restaurant
in Milan, where it sells the traditional pizza Margherita to ltalian
consumers, along wlth lts familiar staple of menu items. Domino's Pizza in Milan,
Laly Ine stogan reads cuore
Companies use three major types of giobalization strategies: Italiano," -ltalian Heart
global, multidomestic, and transnational. Let's discuss each in turn. "Ampriren VIav "
 Gfobal strategy
This strategy regards the
world as one big market.
and its marketing are uniform The product
across the gtobe. Key decisions
are centratized at corporate
headquarters in the business,s
country' The major strengths home
of this strategy are that
companies to take advantage it artows
of economies of scate
savlngs gained by producing {proportionut.
larger quantities), O.u.Lp
faster, and co-ordinate p.jr.,,
activities.
Red Buti, the Australian
energy drink, rs an example
successfut product backed of a
by a jiobar marketing strategy.
171 countries In the
in which it is sotd, iuo guiii,us
a consistent taste and
arance (for example, it is
not packaged in the standard
mi pop can). tvlany consumers
do not even know rt is
a. Another way that
Red Bull brings ,fr. *orfO
its sporting events, which iogu,fr.,
have been herd on uuur,
:::lilXfl
Young people attend Th so has s
a Red
being to indiv
recognizabie branding
ethno is, the i
products and wilt respond
in a similar fashion to the
marketing
used in the home market.
The t strategy
nds synchronized communica
etween
wfen something goes vrrong.
ovrmhi^
example' Red For
".^r,p::i?Ty
Butt has been critcizeiflr
being unhealthy
in response, Red Bull posts rAQ
uUourrt, drink on all its
websites, including the
exact origin oirt, ,ngr.Oients
the amount of caffeine it and
containl compared to coffee.
parts supplier, aiso used
the
for bankruptcy protection
:
result of the largest
as a r
kata airbags, installed on ;-i

makers, were recalled for

a

of airbags in the world.

Approximatety 2O automakers
were affected by the recalt
and ,truggi.J to supply
repiacement parts to ensure
thelr vehicle safety. As you
can see, a giobal stral
a gre t i
i r so m e th ii,,;.: ;;'fJ ;il^1Tj ;,'"'f; :i"
a d e a

216 I Chapter 6: International

Trade Agreements and
0rganizations
 Multidomestic strategy
This strategy tries to customize products, services, and marketing
for the local culture, and is effective when culturaL differences are
prominent. Decisions are decentralized and made with local needs
and customs in mind. The competition in each market is also
considered. Advantages of a multidomestic strategy include less
political and exchange-rate risk, increased product differentiation,
and sreater resnonsiveness to locaL needs This strategv rlqo
r rrrJ rLlqLL6) has a
nolvcentric view which is the idea that local manaoement is
most caDable of determinins
--'--'-*r*- ''--"-b what is hest for the local subsidiarv.
Ettronean comnanieg often use this strateSv because of the
different cultures, hlstory, and languages found in Europe.
Nestle, the manufacturer of the chocolate bar Kit Kat, uses this
strefpdrr
rLrqLL6j in T:nnn Kit
lrr Jqpqri. f!rL R:t iq prrfrpmplrr
f\uL 1r !ALf Lifr!(J nnnrrl:r
ywyu.a! in
lrtJqpqrl utrLqu>tr rhn
Ienrn horrrrcn Lllc
nrodttcf
yr vuuLL nFmp iq qimil:r
rrqrrrL ro or rr...*- tn fhp T:n:npqp nhrrqp lriff n bnf.-*,
ct' ,ileanlng
n
sure win. Nest16 has introduced over 30 Kit Kat flavours in thrs
cnttntr\/ inrlrrdjnO qnpli:ltrr fl:rrorrrc r^rr!nna/l in nnlrr nr-lu rr
"",.rppeu ln goLo pacKaglng
that cost rrn to lO fjmes the nrice of a Kit Kat bar in Canada
NestleJapan opened a chocotate store in Tokyo's Ginza shopping
djstrict and, to keep up with local demand, built an additional Nestld offers over 3O flavours
0- K L Ka. l1 Japdn. SUan aS
manufacturing plant in 2017 . NestLe has successfully used the gTeer rPa 5r "dwte r ), - ol,q
multidomestic strategy to customrze and adapt its product to the ...--.L:..,.--r
v! aJaur
-....1od
PurPrc y 4111r d11u t
--i-.
oy ro / | 16 nn:--
r^-n:-^ vr n-^ r1 I
rJ PgPura___r
Tananese crrltrrre hv considerinS the needs and customs of the
ar-dlpe^irflrt
.._-.-".^r,''b , rJ'L r -Utaf
Taoanese consumer. tastes

F=
 lTnrlarror a anncrrmar
x^^r-
goo0s compary
-^*-^-,,,,l+L wrl"r ovel
^--

400 brands, is an excellent

trIolrrPrc ui --*-.--.
-. d- LU111Pd11y .haL
L

'''^-
clrlPruj/ J o LrGrrDrrarrufro L
<fratpd\/ \Tnl' nnlrr ero
if q nrndrefs d irrprsi fipd

accclclng ro
^^^^-):-n +^ l^^^+i^--
tocarlon, ;+ 1TS

U i -^ri^- -+-,, UCtUIe

-r., -.
ldIrilCtlUiIdl Stl
^-d^- ^1
is both centraLlzed and
denorirelizod r,ril'h r
r\ridc dlnhAl fnntnrinf
"''.-_ -'"".-'
Pictured here is its office
rn R2ndfnll
rr-
'grrbrrv!!l
lh2r !nal

n:

1-

trl .+'

A
 Dehrrtjno in ?O1j \Tike'S Pro Tattoo Tech f Llrf Tishts
I 16rrLo snarked
oPqf
^Eu
protest in Australia and New ZeaLand. The new brand
A^^:'+^A ^ +^++^^
UCPILLC\l d
ltl-e
Ld.LLUU-LI.r\_ nrint that
,--*_ annperpd
*rr tn hp inqnirpd
r ----_
by the pe'a, the tradltional male tattoo of Samoa.
Annronriatjnn nf the orjnt desjgn urrf6f f was
vv qr Seen aS

offensive by many in the Pacific community. An online

petition protested the teggings as a "direct vioLation of
the Indigenous peoples of the Pacific, and is furthermore
in violation of the UN Declaration on the Rights of
lndisenotts Peonles " \Tikc nrrllpd thp Lfft loooinoc
(L66fff6o rnd foDugu
qtru icqrrpd
^^ d.puLUSy
olt -+^+^* ^*t
^^^r ^x" JLd.Lc]IICl-L_ __-__
fairlv-r arricklir
f *-_-,.J j aff*-esrer the
_--- rnpf itinn
_----,--
galned about 750 signatures.

Transnational strategy
This stratesv tries
----- "---'-oJ --'-' to combine the best ele-nents of the slobal and
multidomestic strategies. It attempts to respect the needs of the
local market while maintaining the efficiencies of a global strategy.
Products are manufactured at the least expensive source, while
human resources and marketjng are managed at a locaL level. This
strategy ls dlfficult to accomplish because of the simultaneous need
for strong controls and commitment to local diversity.
This strategy has a geocentric view that values both 1ocal.
differences and what is best for the company. For example, if the
-^^ ^-^'1''-e
LulllPdlly Lclll P-LUUULthe nrodrrrt LlJu pvnpnqirrplrr
LL lpqq L^r!r,ur " _._/ in _,,_ .^rl
,., ^no __Jntfy t0
exploit economies of scaLe, it wiLl use this production method. If the
.^mn2nr/ noodc r na\dr ViCe-nfesident .it
ff L, !L W,ll SeleCt fhe
vv_LL ULLSLL L]IL hest
ULJL nefson L What is globalization?
PL

for the job, regardLess of where the person resides; but in many 2 Name and define the
three tvnes nf plnhalizarion
cases, a Local person who understands the culture and market will
-ctrrtodi
pc
__ _ _-o_'"'
jnn'c,Piz.za iq :n
Ocf thtr
6LL inh Dnm
LrrL )wu. uwrrrrrru - - -__* -_ *-. pn:mnlp
,--*,-,r._ nf OI a .n mn.h\r rhr+
c Company InaI rrUSeS a
*rnna-^+i^-^l -+-^+^J\/
LlaLIJlloLlUIldL )Ll clLCbj. IAlthnrroh it oLL.D
cpllq q
e u_rrrrLur
cirnilrr nrndrrnt nrimrrilrr
3 Based on what you have
rLLrruu6rr rL },,,,IIaIlty rp:d rnrhirh firnps nf
pizza, throughout the world, it adapts its marketing strategy to nrndttntc nt corrrinoc dn rrnr,
vfJqrvrLtr)uujuu
Localmarkets. For example, in some countries, Domino's owns its think lend themselves to
^f +L^
eacn oI
^^-L dl^1,^li-^.
tne t.OOdLIZOtlOn
dough-manufacturing facilities. In other countries, such as Sri Lanka,
straieo'eq) F.vn'ain rrgql
India, and Bangladesh, it works with franchises to suppLy the dough.
ANSWCI.

219
Former Minister of
International Trade ChrYstia
Freeiand praises CETA-a
comprehensive trade
agreement with EuroPe -at
ihe House of Coinmons
ir Crtarta claiming iiat
ihe agreement helPs
Canada shotv the wollci i'. '
competltive and "oPen for
business " International Bank for Reconstruction and Development
220 | ChaPter 6: International Trade Agteements anci 0rganizations
.2 Trade agreements
The idea of globallzation began to gain prominence when
representatives from many countries met at the Bretton woods
Conference inJuly of tg++,The conference establtshed stable
currency exchange systems and fiee trade. It also laid the
(IMF) and the
foundatlons for the Internatlonal Monetary Fund
(now
called the world. Bonk).In subsequent yeals, a variety of other trade
organizations were formed. These trade organizations 1ed to a series
of trade agreements throughout the world'
A trade agreement is an enforceable treaty between two or
more
countries that add.resses the movement of goods and services,
eliminates trade barriers, estabiishes terms of trade, and encourages
foreign investment. There are many worldwide trade agreements.
These include multilateral agreements
(which involve three or more
(which involve two
parties) such as NAFTA, and bilateral agreements
parties) such as the Canada-Korea Free Trade Agreement
(crrre)
and
and the canada-European Union comprehensive Economic
Trade Agreement (Cffe). Figure 6-1 shows a list of Canada's
current
trade agreements.
Figure 6-1 Canada's Trade Agreements (as of 2018)

Country Agreement

United States and Mexico North American Free lrade Agreement (NAFTA)

lceland. Liechtenstein, Norway, and Switzerland Canada-European Fiee Trade Association (EFTA) Ftee Trade Agteement

Chile Canada-Chile Free Trade Agreement

l5[ael Canada-lsrael Free Trade Agreement

Costa Rica Canada-Costa Rica F[ee Trade Agieemenl

Jofdan Canada-Jordan Free Trade Agreement

Colombla Canada-Colombia Free Trade Agreement

Peru Canada-Peru Free Trade Agleement

Panama Canada-Panama Free Tlade Agreement

Hond u ras Canada-Honduras Free Trade Agreement

South Korea Canada-Kofea Free T[ade Agreement

Ukraine Canada-Ukraine Free Trade Agreement

Trade agreements are critical to a country like Canada, with

a relatively small population and gross domestic product (Clp),
because they allow decisions to be based on the rule of law rather
than on economic power. Figure 6-2 shows what a trade agreement
can mean to a country's bottom line. Although the CKFTA is not
nearly as well-known as NAFTA, it has clearly benefited Canada.
Since this trade deal was struck QOID,98 percent of Canadian
forestry products and 70 percent of its agricultural products have
hppn dprlnrod drrtrr-f16e when entering South Korea.

Figure 6-2 Canada-Korea Free Trade Agreement (CKFTA):

First Year Hiqhliqhts in Tiade

Soybeans 2.4 8.6 7580k

Prepared potatoes 5.5 13.0 1 36Vo

Crude canola oil 57.0 84.0 47olo

Dog food 4.3 1.8 8'1 o/o

Prepared lobster 18.0 29.0 61olo

Frozen crab 0.8 1.4 85Vo

Softwood lumber 63.0 80.0 27olo

Hardwood lumber 22 3.4 55Vo

Trade agreements 1221


InJanuary 1994, Canada, the United States'
what was at the time the world's largest free
Prime Minister Brian Mulroney, Mexican
Former Mexican President Carlos
Sallnas de Gortari, left, former
U S PresidentGeorge HW Bush
(centre), and former Canadian
Prime Minister Brlan MuLroneY,
the makers of NAFTA
greement (NAFT
and Mexico launched
trade zone' Signed by
President Carlos Salinas de
Bush' the No American
Gortari, and U.S. Presid'ent George H'W'
FreeTradeA$reement(unrtdsetrulessurroundingthemovement
ofgoodsandservices,labour,andinvestmentsaclossNorthAmerica.
to
it Jimlnated tariffs and other trade barriers' and continues
among
Promote fair comPetition
the three countries. intellectual
propeftY rights, inciuding
patents, coPYrights, trademarks,
and technical deslgns, are also
protected across the continent'
Under NAFTA, goods traded
between Canada and the United
States became tariff-free on
January 1, 1989, while tariffs
between Canada and Mextco were
eliminated in 20OB. NAFTA set
an examPie of mutuallY beneficial
fiee trade to the rest of the world
by being the first comPrehensive
trade agreement of its tYPe'

Pattnets, 2008-2017 (Millions of cADS)

Figure 6-3 Balance of Trade: canada and NAFTA
20082009201020112012201320142015201620.|7
414 731
357 915 4A4'711 402'173 394'3B4
r rnirp.l qiates Total txDorts 375,480 270,090 298,649 328,975 339'183

TOta||mportS227246186,8032a3344221,474233,889247,]96;78,510285'4432]8,276287,989
TradeBa|ance148,23383,28795,305107,551105,2941.10,.1-19126,201116,73116,108126,748
844 4'803 5'OO8 5'486 5'386 5'435 5'652 6 649 '631
7 7
'849
Mexico Total Exports 5
TOta|1mP0r1S17,91616,53622,11174,52425,57476,12828,83231,19933,18735,492
TradeBaIance_12,072_11,732-17,103-.19,086-20,-138-21,2g3_23,180.24,550-25,550_27,643
SubtotaIsTotaIExp0rts381,324274,E943a3,651334,569344,559363,3504T0,363408,822402,a16472586
TotalImports245,16?203,339225,339245996)59,1i327,1,5243a7347316,642311,458323'4E1
TradeBaIance136,16271,55571,55588,46685,15788,826103,02192,18090,55899,105

and 0rganizations
222 lChapter 6: International Trade Agreements
Advantages of NAFTA
Increase in trade. By elimlnating all tariffs between the
three countries, NAFTA has been beneficial to businesses
by allowing a freer flow of goods and services across North
American borders. This provides businesses with better access to
raw materials, talent, capitaL, and technotogy. This flow is critical
ol nh:l p..Jn.Jmr/
for all narties f o remain comnpliti\/p in f hp 6LVVU( LLVffvifrj.

For example, U.S. and Canadian vehicLe and auto parts trade
deficits with Mexico have grown fiom $1.6 billion pre-NAFTA to
$8.7 biLlion in2OI7.

Lower prices. Lower tariffs have aLso reduced import prices.

NAFTA lowered the prices of fresh vegetables, chocoLate, fruit,
and beef. Oil prices were aLso Lower as Canadian and Mexican oi1
could be transported to processing facilities in the United States. Figure 6-4
tne ll4il 0t a Lofn tefeal
The increase in the supply of oil fiom Canada kept global oll
Product as lt Shuttles between
prices lower NAFTA lowered food prices in much the same way.
Canada and the United States
Food imports totailed S39 4 bilLion 1n 2013,
un f-om S78 t hil';on in 2009
corn is harvested in Ontario, then
trucked to a grain company's elevator
Economic growth. Since its inception, in the southwestern part of the
pr0vrnce.
\IAtr'f A hr.l^'^^^Fi+^.1
-L\A-r -L.t1 t.Ld.b uctrcrtLeu JIIany manulaclulers,
-^-" -^^',F^-+,,--
consumers, workers, and families rn each
country. In2017, Canada's total trade with
jts \TAFTA nArtnprq amOUnted tO Over Ihe corn travels tariff-free by train or
truck to a U S mill, where the corn is
$l trillion USD-more than a threefoLd dry milled into flour

increase since 1993. In 2015, NAFTA

nArtntrrc rpnrospnfod ?R nprronf vfnf fho
LfrL

world's GDP, with less than 7 percent of the

The corn llour returns to 0ntafio,
vv vr Lu D ^^^"1^+;^-
'^'^.],1'. PUPuLo.Lrull. tariff-free, where it is mixed, baked,
and puffed into cereal hoops

Job creation. Many higher-paying.;obs have

been created in Canada in the education,
a^gineerino insrrr:ncp end h:nlrino
sectors, and market competition has The cereal hoops make their third
tariff-free trip across the border to a
e:3i.rn, improving choices for consumers. U.S. food-processing factory, where
they get flavoured and packaged for
S-:::e the creation of NAFTA, foreign direct retailers.

- :-.-esrment has increased dramatically

:^- -^ ^-li^^ -^-^^nieS FOr pxamnlp

_-_93_:f,u_ollLUlIlPd.___ _--_.--r.,,
3a:a:-a: dllect investment in Mexrco
J-:-.'.' +.r- :--.-q53o mlllion CAD in 1993
5--"--"---
The cereal crosses the border for a
foufth time-tariff-tree, of course!-to
tc Sir.8 :----::: C.:) :n 2015, an increase of warehouses and grocery stores. Ffee
tfade supports this efficiency, resulting
a,tncs[ JU-ic.1. in fresh food.

Trade acreements 1223


Thp n*cdr rr inn floor a' rhe
lovr-^ri. < r:nli rdrr" i1
Guadalajara, Mexico
224 lChapter 6: International Trade Agreements and 0rganizations
Disadvantages of NAFTA
Lost jobs and lower wages. Although NAFTA has resulted in job
creation and growth in some sectors, there has also been job loss.
Labour costs in Mextco are substantlally lower than in Canada and
the United States. As a result, many manufacturing jobs have been
lost to Mexico. Where jobs have stayed in Canada and the United
States, employers may threaten to move manufacturing facilities if
employees do not accept lower wages. In the auto sector, Mexican
autoworkers earn on average $4 per hour compared to $gO to $35 pel
hour in Canada and the united states. slnce NAFTA came into effect,
four auto assembly plants ln Canada and ten in the United States
have closed. Erght new plants opened in Mexico. NAFTA also resulted
in the loss of jobs for Mexican farmers who were unable to compete
with larser more ''^"'- oroductive
r-- U.S. farmers. In Mexico, small farmers
nr FT a+^+ihx *hat when tariffs on corn,
PruLcJLcu agair^' I\n.F
rro'vc nrotested
herrc q6qrrI>L ^ lflr^ JLdLrrrB Lr.
L'^nnc
u(d]IJ,
orrdnr OIIU
JLIBdI,
cnrl -ilk
lrlrL^ imnorted
rffrPvr
jnto MeXiCO Wefe llfted, itbeCame
LLU frf Lv I'rL/
too difficrrlt to comDete Manv Mexican farmers went to work in
U.S.-owned factories (known as maquiladoras) for low wages or left
Mexico altosether misratins to the United States. Since NAFTA, the
\^r^oe oen (hetween
\v!rvv!vrr the rich and the ooor) in the United States has
wloeneo.
Human rights issues. NAFTA resulted in the exploitation of
Mexican workers, many of whom went to work at the maquiladoras
established by U.S., Canadian, and Mexican companies. At these
factories, workers have iittle health protection, work 12 hours a day,
and earn low wages. The exploitation of Mexican workers, many
of whom are not able to form unions, has been a major criticism
of NAFTA. There have also been concerns in Canada with the
Temporary Foreign Workers Program (ffWp), a program allowing
employers to hire foreign workers to filltemporary labour and skill
shortages. Tens of thousands of Mexican agdcultural workers have
seasonal work on Canadian farms, as many Canadian residents
are not willing to work in fields for the low wages the agricultural
companies pay. Critics are quick to point to the health and safety
conditions of these temporary foreign workers who are often denied
labour protection and workers' rlghts.

Deterioration of the environment. Mexico's pollution has

lncreased because its policies have prioritized economic growth
1l::-:---: -:',: -:::::--: -:-r:
over environmental regulations. For example, Mexican farmers who
remained in business were pressured to use more fertiLizers and .:.a : - - ::-: ::- :: :S:=: lr-
pesticides to compete with the lower prices of U.S. farmers. .-- - 1,:
:::::!: -:. Canada and the Uniteo
In Canada, the development of the tar sands for oil production Staies
in Alberta also brought criticism since the process of
extracting oil from tar sands has a heavier environmental
imncnf
IIIIPOLL LIIOII tr.;iti^n:l
l-hDh LIqulLlUrrqL mpthndq
rrrLLrrvur. H'iOhpr
r116rrLr Orppnhnrrqp 6qJ
6rLLIrrivuJL
Oeq

emissions, storing waste in tailing ponds, and more energy

needed to heat up the bitumen sand are examples of the
negative environmental impact of the sands.
In the United States, the TransCanada-owned Keystone
XL pipetine (a 1,897-km pipeline running from Alberta's
tar sands to Nebraska that could carry B3O,0OO barrels
of oil each day) has been a fiercely contested project.
Many U.S. farmers and environmentalists have opposed
the construction of the pipeline, with one local farmer
atUacting attention for installing Ameflcan-made solar
paneis on his iand to protest the project. In March 2017,
President Donald Trump approved the Keystone XL
pipeline, reversing former President Obama's declsion
to block the hrghly controversiai oil project. The future
of the pipeLine remains uncertain, and the TransCanada
Corporation amounced to shareholders in July 2017 that it
may never happen.

'r)c
 The present and future of NAFTA
NAFTA created the world's largest fiee trade area more than
two decades ago. With member economies generating $20.8 tritlion,
the agreement has been hailed by free trade supporters as iughty
successfut. Opponents, however, claim that globalization does not
benefit everyone. The fears of globaiization have caused a plotectionist
movement around the world, as seen by Brexit and the united States's
notice to Mexico and Canada that it wanted to renegotiate NAFTA.
That notice futfitted a key etection promise from President Trump to
renegotiate or tear up the agreement.
On July 17 , 2OI7 ,just six months short of NAFTA's 25th
anniversary, the U.S. administration under President Trump served
notice to Canada and Mexico of its intent to renegotiate the terms
of NAFTA. NAFTA renegotiations began ln August 2O\7. A number
of key issues were discussed in the renegotiations that impact
Canadians and Canadian businesses. These include:
. Border security
. Intellectual and digitat propefty rights
. Modernizing border services to speed up trade

' Improving labour rights and standards

. Stricter rules for quatifying for NAFTA's duty exemptions

' Enforcingenvironmentalstandards

' More open access by U.S. businesses to Canada's financial,

dairy, and lumber industries

Tbe original list of NAFTA changes proposed by the United States

also included raising the tariff-fiee amount for Canadian consumels'
tariff-free daily online shopping limit from $20 to $eOO- But perhaps
the most contentious issue is removing Chapter 19-a dispute
settlement clause included in the original NAFTA. The Canadian
government stated it would walk away from a NAFTA deal that
removps Chanter l9 as former Prime Minister Brian Mulroney did on
October 1, 1987, shocking Americans days before the original NAFTA
trade deal was to be signed. Mexico, like Canada, has also indicated
to the United States that the renegotiated NAFTA agreement must
include a dispute settlement clause.

226 lChapter 6: International Trade Agreements and Organizations

Other trade agreements
LanaOa IS lnvOLV€O ln tne I IdOS-: :---- - : ::-:-::::--: - ---- -l: -: :: 1.
^ F.^^
O llCg
r--.r^ ^dr^^'-^rl
LIOUC OSlCClllClr, aTaong'2
ur,.vr16 calll.,oS O;er iOUr ;C r.,ine f._S .. _-:,
.z !vu.rL..-

a market of B0O miLlion peopLe. The combined GDP of these countries

accounted f or 40 nercent of the world's e.oronv af rhp time of its
fi-s1 sjgnjng in 2Ol6 The TPP was a kev iscre jn rhc TT S nrpsidential
election of 2016, and inJanuary 2OI7 the Unlted States wlthdrew
from the TPP. Slnce that tlme, the remaining 11 countries have
discussed moving ahead without the United States, and the deal has
1^^^^ .^-^*^.1 +l-.^
UCCII lClldilltrU
.tmnrehelSiVovL q-lu
LllC LUrllprLfrL-lJf a.rd fP-^*-^- -i.-^ -41<ILCl.LltllL
dr^^'-^^i fOf
-U<lC)JlVt ^
I rans-Paclnc Partnersnrp.

As of August2OIT, Canada was negotiating free trade agreements

..-i+r. T^.ri r T^h^- lvIUrvL!v.
VVlLIIlllulqi
xr,lrocco Singano-e
urrr6qyv.L, ard
ur.U the
LllC LOIIUUCOII Commrrnitv
Caribbean LUlli,l
JqPaLt,
(CARICOM). Canada is aLso invoLved rn free trade drscussrons with
/^
tne Pnrlrpprnes, l narland, I urKey. Lnrna, and lvlercosur (Argentlna,
Br,rzil Pa-aslta\/
DLqL!1, f q-q6uq] ard TT-"a-'^.'\
r q-lu
/--^^!- -:eds
Uf USUOy /. LOIIOUO ll( ro establish these
F-^^ +-^A^ ucotJ
I lcc LlouE ''r ^^r ^ .''i+L- with the United
vv tt tl other Large markets 1f its trade

States is reduced in the future.

 Travel and Toulism
Travel and tourism can be seen as a form of import and export. A
Canadian tourist spending a week-long hotiday in Varadero, Cuba,
rs essentially buying a Cuban product. This transaction is seen as an
imnntr f^- en prrnnrt
^nd dll fnr thp Crrhan econnm\r Conrrprcplrr
frrrpvrL '^^^l^ c.rru
tvr Lortoud tr.^'pulL IUI LIItr L*,*-- ___--_,,-_,r ,-v!!J /
a week-long hotlday in Montreal by an American couple who live in
Miami would be considered an export for Canada and an import for
the United States.
Canada is a travel destination for foreigners. U.S. citizens are
our largest visitor, and spent $9.1biLtion CAD when travelling to
Canada in 2016. Travellers from the U.K. and China were the next
largest group of visitors to canada. Similar to a trade deficit (where a
country's imports exceed exports), Canada has a travel deficit: more
Canadians travel internationally than foreigners traveL to canada. In
2016, Canada had a travel deficit of $17.3 billion.

The cost of international travel by Canadians is affected by

changes in exchange rates. When the Canadian dolLar appreciates,
or goes up in value, Canadians are more likely to travel to the United
States. or another international destination. On the other hand, if
the Canadian dollar goes down in value, Canadians are less likely to
travel outside of Canada and more likeiy to spend their money on
domestic tourism and travel, perhaps in another clty or province.

228 lchapter 6: lnternational Trade Agreements and organizations

Figure 6-5 Figure 6-6
Travel by Canadians to Other Countties, 2016 Tiavel to Canada from 0ther Countt es, 2C1 6

Trips Spending Trips Spending

Country (thousands) (5 millions) Country (thousands) ($ millions)

United States 19,288 18,891 United States 13,892 9,1e1.

Mexico 2,053 2,115 Unlted Kingdom 805 1,081

United Kingdom 1,269 1,872 China 591 1,488

Ffa nce 1,589 Fra n ce 515 749

Cu ba 858 785 Germany 359 619

Germany 586 550 Austra lia 334 793

Dominican Republic 517 602 Japan 285 581

China 497 940 South Kotea 24) 438

i: 488 587 i,''iex ico 238 414

Spai n 450 LIL LLL 3 5,:

Check Your Understanding

1 Explain why countries such as Cuba, Itaiy, and the Dominican

Republic are popular destlnations for travet for Canadians,
-,^+ .^- ^.1 . ioesn't
) cL LOIIOUq UVLOTT L attract
uLLf ULL nearlv
rlLuf Lj aS mUch traVel in retUrn

from these countries.

2 What is the difference between domestic tourism and
international tourism?
3 How do exchange rates affect travel and tourism in Canada?
4 Calculate Canada's travel deficit with the following countries:
Itaty, the U.K., China, and Mexico.
5 Plan an international one-week business trip. Create a budget
and exchange your Canadian dollars into the currency of
the country you will be visiting. Include in your budget any
gifts, if appropriate, you will give to your foreign supplier/
customer. Research and budget your accommodations,
restaurants, transportation, entertainment, and any tourist
attractions you might want to visit.

Trade agreements | 229

 Canada has established tax treaties or agleements
with countries
thro is created to prevent tax evaslon
taxes
and People who would PaY
in C the same income' The treatY
on income
determines how much tax each country can collect
received from pensions, s, or interest' Canada has

signed tax treattes with tries, including the United

States,Japan, india, and
and renegotiate treaties with other countries'
business operations more pred'ictable for companies
Antoine Deltour was one of
three whistle-blowers at the
centre ofthe Luxleaks scandai
While he was found guitty for
his actions, his jail sentence was
suspended and he has garnered
a lot of supPort and sol1datirY ln
20i5, he was awarded both the
ELropean Cttizens'Prize bY lhe
European Parllament and the
Sakharov Prize for Freedom of
Thought
and continues to negotiate
They make
Tax treattes are also a factor in international business.
expanding
aliow goods, caPi ve
rders. In deveioP
fortaxation and nce'
its
The G20, for example, has exchanged information among
(money shelters that let
members to limit or combat tax havens
2013' the oECD
owners avoid, paying tax) by international firms' In
against
European Commission also launched a iegal proceeding
Portugal, Bulgaria, and Cyprus for not
following tax laws when it was revealed
that a secret tax agreement approved
by Luxembourg authorities had
provided tax avoidance for more than
350 companies around the world' This
(or, the
scand.al was known as Luxleaks
Luxembourg Leaks).
This exchange of information
between the G2O members is a crucial
aspect when it comes to combating
profit shifting into tax havens. ln2017,
the European Parliament issued an ordel
requiring large international businesses
to report financial and tax lnformation
separateiy in all countries where they
operate. It is a measure targeted at
dealing with tax avoidance and profit
shiftins to countries with lower taxes'

230 lChapter 6: International Trade Agreements and 0rganizations

Tmnrinn
IIIIeS]IIC
.rr.hdind O^ orfr}JfirLff
qIIOll5llI5 shinmentL of goods frOm
vf 6vvur rr WindSOI tO Montreal. Figure 6-7
The distance is a little over 800 kilometres. Now imagine the EU Membership Timeline
shipment going approximateiy the same distance from Budapest,
Initial members of..the
Hungary, to Amsterdam in the Netherlands. In Canada, the shipment Maastricht Treaty, 1993
would move easily along Highway 4OIin Ontario and Highway 20 Belgium
in \lULUL!r
rrl ifs onlv
Orrehec rLo imnediment the
vrrLj rrrrpLurrrrLrrL LrrL busv
+-^rE;' ^-^^-i^rr'- ctlU
uuoj LId.IIIL, C)PCLLd.LLy ^-^und Denmark
Fra nce
the GTA (Greater Toronto Area). The European shipment, however,
Germany
would have to travel through five countries: Hungary, Slovakia, the Greece
Czech Republic, Germany, and the Netherlands. This would involve lreland
four border crossings, the use of five Languages, five sets of import ItalY
Luxembourg
and transportation documents and, historically, five different
The Netherlands
currencies. The formation of the European Union (EU) has removed Poftugal
many of these obstacles. Spain
United Kingdom
EU members are party to a trade agreement encompasslng
28 countries in Europe (as of 2O1B) and a population of almost half a Joined in 1995
Austiia
billion people. The EU has its own flag, anthem, and currency. It also
Fin land
has common financial, secunty, and foreign policies. Sweden
The Maastricht Treaty came into effect on November 1, 1993, Joined in 2004
and included 12 countries; since then, other countries have joined Cyprus

as members (see Figure 6-7 for a timeline of EU membership). The Czech Republic

rritorir fnr hprnmino-o en *- pcnnnmic

*-- trTl mpmhpr rrp
-- ,LvrrvrrrrL
-
qtrhilitrr m^-l'^+
oLqurLrLj, lrldl ncL
Eston ia
- Hungary
economy, democratic government, positive human rights record, Latvia
r^x^r ;^-+i+''+i^-a dllu
LCBclt ILLJLLLLlLIUIIJT ^^d the
LrrL abilitv
uurLrLJ to
Lv administer
qurrrrl the EU laws and Lrthua n ia

policies. Albania, Montenegro, Serbia, Macedonia, and Turkey are Malta

Poland
candidate countries for joining the EU. Bosnia, Herzegovina, and
Slovakia
Kosovo are potential candidate countries that do not yet fulfilL the Slovenia
rpnrrirprnpntc fnr FTT mpmhprchin
Joined in 2007
The purposes of the EU are to promote peace, economic growth, Bulgaria
government co-operation, strong bonds between people, political Romania

integration, and to ensure that the population can prosper in a Joined in 2013
safe society. This single market allows labour, goods, services, and Croatia

investments to flow freely across borders. The agreement eliminates

protectionism and allows all governments to purchase goods from
each of the EU countries. Since the agreement was signed, trade
across European borders has dramatically increased, and the EU has
become a trading superpower. In 2016, its GDP was the second-largest
in the wortd at $16.4 trillion USD, according to the World Bank.

Trade agreements | 231


A mPctinp of thp Council of Lhe
European Union.
232 | Chapter 6: lnternational Trade Agreements and 0rganizations
The European Union headquarters are iocated in Brusseis,
Belgium. fne eU consists of three major organizations. The main
decision-making body is the Council of the European Union, which
is made up of one representative from each member country'
The council's presidency rotates every six months. Different
representatives go to the councii's meetings, depending on the topic
under discussion. For example, environment ministers fiom each
country go when environmental issues are being discussed' For
most decisions, a majority is sufficient, but if the European Union is
making a major decision, such as whether to let a new member into
the EU, the vote must be unanimous.
The second organization is the European Parliament, elected
by the population of the EU to pass European laws, estabiish a
budget, and supervise the other EU institutions. It meets four times
a year. The third organization is the European Commission, which
is responsible for managing the day-to-day operations of the EU'
It does not have a national focus, but represents the EU as a whote.
The European Commission negotiates trade agleements and allows
members to have a united voice in international affairs.
The EU faces difficulties in achieving its goals because there is a wide
gap in the per capita income of its member countries, and the newly
admitted countries are less developed technologicat$ and economically.
The euro
ono uI
\rIlf nf tho mrinr:r.r-nmnliqhmcnts
LIIE IllqjVr qLLVlrryLrorr of the EII is its imnlementation
of a common currency-the euro. The euro was adopted by nine EU
countries in 1993; Great Britaln, Sweden, and Denmark dld not
r.hendp
LIIqfI6! crrrrpnrieq As of earlv 2018 19 of the 28 members use the
!UrfLrrLf!J.

euro as their currency. AtL new EU member states are expected to

,rdontL the
d.uvP LIIC E errro U u L to
Ul Vr hrrt Lv uvdo so L] rLi mUSt me"t ctrindpnt rnnnotAly
rv theV
sfrndards
DLqIIUqIUD reoarding
f l6ururrrb nrice
ytlLL and exchange-rate stahilitv
q]lu inflation,
i, rrrr!'._'"

dn\rprnmpnt defir'its and nublic debt The monetalv

AvvLlfiilrrrr J Dolicv
r-'-'J -' the EU
of
i" on.rornod
rD 6V V LrrrLU hri the F,ttronean Central Bank.

Figure 6-8 The Euto in 2018

I EU memb:r slaias
adopted the elrrc
,'. : -: -i ,:

I EU
opt
EU
ember states !/ith
ut
member states which have
not yet adopted the eufo
an Y
I

I
t J
CYPRUS

Trade agreements 1233

 The euro provides many advantages for the EU. These include.

Decreasing the risk of exchange-rate fluctuations. Consumers

do not have to speculate about changes in the exchange rate.
Etimination of transaction costs. Businesses and consumers
do not need to pay fees to financial institutions for currency
exchange transactions.

Easy bitting. It is simpler for companies to bill customers in

other EU countries.
Economic stability. The European Central Bank provides
macroeconomic stability, which has allowed inflation rates and
interest rates to remain lower.
Price transparency. Consumers are able to compare prices
between countries.
Price stability. Competition and transparency have kept prices
lower and inflation under control.
Increased markets. A single currency makes it easier to expand
rnto other countries because accounting and billing practices
do not need to be adapted.
. Increased trade and travel. A common cuffency encourages
people to travel and shop online, thus increasing the flow of goods.
. Enhanced tabour movement. It is easier for employees to work
in other countries, because they are paid in a common cufiency.
There are also some disadvantages of a common currency. These are:
. Centralization. Decisions are made at the higher EU
. level. Monetary decisions are made by a smaller group of
individuals, concentrating the power in the hands of fewer
people.
. Initial costs. Many costs are incurred when currency is
changed. These include implementing new accounting software
^^.1 d.(-LcfPLIIIB
dfI(l oix^a Lcl>lj
-,r^^+i^ a JIBt.t)/ ^^-l-' -^di-+^.^ vLrrurrr6 maChineS.
IcBrDLtr-LJ, "ending rrrqLrrrrrLrr OhOne
Hr
booths, and other cash machtnes.

' Lack ofnational controt. Countries have less control over

their monetary policy because they are no longer able to adjust
their interest rates and their exchanqe rates to influence their
individual currencies.
' Loss of tradition. Adopting a common curency makes some
consumers feel that their particular culture and history is being
eroded or watered down.

234 lChapter 6: International Trade Agreements and 0rganizations

Sovereign debt crisis
The EU has faced a number of chalienges over the past decade. In iate
2009, some euro countries (Iretand, Greece, and Portugal) suffered a
financlal crisis known as the "sovereign debt crisis." These countries
could not borrow more funds as investors lost confidence in the
ahilitv of these corrntJies to make their bond I/qJ
navments
rllLrr Lo, The
r ffL crisis
L

spread to other EU member countries, where the investors who

Tlpmnncfral'nr< nri^r t^ a
held these bonds were iocated, resulting in a recession. The Euro
referendum ln Greece in 2015,
Stability Mechanism was created and many reforms were introduced, l-gtng vol ers ln vo'c ''no" tO
which appeared to work in all EU countries except Greece. In 2015, lhp
L-r! nrrpstinn
9ULJL-urr
nf
u. \^rholhpr
!v. ruLrr! | a.,^-^
UlqqLq
qhnrld neepnf thp heilnrrf
Greek banks closed and daily limits on bank withdrawals were
conditions proposed jolntly by
enforced. Greece continues to face economic chaLlenges and possible fhe Errroncrn Cnm-iss'nn a1d
withdrawal from the EU, known as Grexit. the lnternalional Monetary lund

^-' ,t -l',1

ATn|\
alvu) |
L

Trade agreements 1235

 Brexit
A referendum (a vote on one poiitical question) was held in 2016 to
decide whether the U.K. should leave or remain in the European Union
The referendum turnout was 71.8 percent, with more than 3O million
people voting, the yes side won by a very slim margin (3.8 porcentage
points). The Treaty of Lisbon, an agreement signed by atl fU states, '
gives both sides two years to negotiate a leave, meaning that Britain's
exit (Brexit) is scheduled to occur on March 29 , 2OI9.
A "hard Brexit" would mean the complete cutting of formal ties
with the EU, while a "soft Brexit" would allow the United Kingdom to
cut its politicai ties with the EU while maintaining its trade customs
and labour unlons. Whether Brexit will be hard or soft will remain
unknown until later stages in the negotiation.
For Canadian business, this means investing in the United
Kingdom becomes a risky strategy. However, given the trade history
between Canada and the U.K., if Brexit means less trade between the
EU and the U.K., stronger trade between Canada and the U.K. could be
an opportunity for Canadian businesses. U.K. officials have already
discussed the possibility ofjoining NAFTA. However, the United
Kingdom is prohibited from bilateral trade talks with other countries
while it is still part of the European Union.

Figure 6-9 lop 10 Trading Partners of the EU, 2017

3,737,688 100.0
not in the EU

United States 632,021 16.9

China 573,0)3 15.3

Switzerland 261,220 7.0

Russia 731,280 6.2

Turkey 154,251 4.1

Japan 129,373 3.5

Norway 1 28,1 35 3.4

South Korea 99,822 2.7

lndia 85,907 2.3

Canada 69,182 1.9

236 lChapter 6: International Trade Agreements and 0rganizations

 Figure 6-10
The European Union is canada's second-largest export trading Total Canadian Exoorts and
partner after the united States. rn2olr,merchandise trade berween lmports with the European
Union
canada and the EU exceeded $ro0 billion cAD. Canada's major
exports to the EU include metals, precious stones, machinery, and
oil. In 2017, Canada was the EU's 1Otr-largest trading partner(see
Figl:re 6-9 for a tist of the EU's top 10 trading partners). The EU is
also an important source of new technology for Canada.
2017
rn2or4, Canada and the EU met to start negotiations on a free
41,580
trade agreement. on February 15,2or7,the European parliament
voted in favour of CETA, the Comprehensive Economic and Trade
Agreement, a free trade agreement between Canada and the
European Union.
It is expected that CETA witt result in the following benefits: 2017
. Remove customs duties 66,248
. Make European flrms more competitive in canada

' Make it easier for EU firms to bid for Canadian public contracts
. Open the Canadian services market to EU companies

' open Canadian markets for European food and drink expofts

' Protect traditional European food and drink products (known

as "geographical indications,,) from being copied
. Cut EU exporters' costs withoUt cutting standards
. Benefit small and medium-sized EU firms

' Make it easier for Europeans with professional designations

(e.g., lawyers, architects) to work in Canada
' create predictable conditions for both EU and Canadian
investors
. Make it easier for European firms to invest in Canada
. Help Europe's creative industnes
 This scuLpture in Lyon,
France, celebrates the role
of rhe G7 on Lhe world srage,
and was inspired by an
aphorism by Archimedes
'Glve me a Lever Long enoLlgh
and a place to stand, and I
coutd Lift the world "
.3 Trade organizations
Trade agreements are enforceable treaties. Trade organizations
are groups established to hetp wlth the free flow of goods and
services. These organlzations may be giobal in their scope, such as
the world Trade organization (wro) or Asia-Pacific Economtc co-
operation (nprc). They may also be national organizations created
Uy inaiviOual governments to help domestic companies expand
into international markets. An example ls the Japan External Trade
Organization fiETRO) Canada, which helps Canadian compantes
import to or export from JaPan

Figure 6-11 Trade Organizations in which Canada Participates

Organization PurPose

World Trade 0rganization (WTO) Settles trade disputes

Asia-pacific Economic Co-operation (APEC) Promotes trade in the Pacific Rim countties

Group of Seven (G7) DisCusses macroeconOmtc issues sUch as trade, economtc growth, and poveity

Group of Twenty (G20) Discusses financial stability and the growth of developing countries

oroanrsation for Economic Development Pfomotes democracy and marKet economles

and Co-operation (0ECD)

The World Bank Provides monetary support for developing countties

International Monetary Fund (lMF) Tracks and analvzes economic trends and provides loans to countries in distress

23S I Chapter 6: International Trade Agreements and 0rganizations

 World Tra e 0rganization (WTO)
The hlorld Trade organiz on (wro) promotes trade iiberalization
(easing trade restrictions) throughout the world. Economic prospenty
and social development are at the heart of the wro. It has 164 member
countries, and its decisions are made by consensus. The three main
pu4)oses of the organization, established in 1995, are to provide:
. A forum for negotiations. The WTO is a place where countries
can discuss their trade disparities and come to mutually
agreeable solutions.

' A set of rules. The WTO's rules, or agreements, have been

negotiated and signed by the govemments of member countries
to set guidelines for trade between countries. They promote the
flow of goods and services across borders and eliminate trade
barriers.

' Dispute settlement. The WTO is a forum for countries to

consult, mediate, and arbitrate discrepancies in how countries
have interpreted their trade agreements.
The WTO provides protection of inteLlectual property, including
patmts, copyrights, trademarks, geographical names used to identify
poducts, and trade secrets. A patent under the WTO provides
protection for 20 years; and during that time, no company in any of
fre 164 member states can creafe a nroduct or ltse A nrocess that has
been patented.

There are many benefits to the WTO. It promotes peace

b5rensuring countries can trade fairty by r.ttling disiutes by
rrrlspnsus. The organization encourages governments to act fairty
rrrl timit protectionist
policies. This lowers the cost and raises the
*andard of living worldwide: food, clothes, and other necessrties
ue less expensive when high duties and tariffs are removed. Free
U-ade has allowed for increased incomes and orodrrct selectjon, and
glder economic prosperlty.
ltereare also many criticisms of the wto-that it destabilizes
mtrts and drains resources and labour from developing counffies. The
uroencourages countries to produce what they can most efficiently.
hF nlarJr 20i8, China notified the WTO that it would stop accepting
thiryort of certain waste, such as plastics and paper, in an effort to
lrce its environment. china has struggled with waste during its
+d industrialization, le aving toxic waterways and citie s c overe d with
gng hternational recyclers have concerns over the details of China's
hd are like$ to challenge this move with the WTO.
 The WTO's decislons are not always clear and definitive, and
nesofietions
IfE6W LfqLlVrr can be cnmnlex and variable. For decades, the United
States has accused Canada of unfairLy subsidizing Canadian
softwood lumber. This issue stems from the fact that fees charged for
harvesting lumber in Canada on public (government-owned) land are
lower than in the United States, where lumber is harvested on private
land. In 2017, the United states implementeda24 percent tariff
on Canadian softwood lumber, launching the fifth softwood trade
disnrrte
UIDPULL in
fll ahorrf
quvuL Jv vcers
JQ igqf D hetr,rreen
uLLvvlLff Canada and its largest trading
h^7+h^r rnnn.lr hcc nrorreilod rnrhpn ennpalino to NAFTA or the WTO
vvffLrr uyy!u
Pcl-LLIICI. Ld,]]d.Lto. IIOJ yltrvqrLLu
nrpnerino tn +L^ l^+^-+ +^-ifr
end i< r--r*.---o -- e--^^1
*PPtrdL LIltr td'LCJL Lorrrr.

Canada and the WTO

.'^-^,r^,- J nrinririac r^rifh rocnort fn thp \,rITO are fhe refofm Of SlObal
Ld-Lldud PI LUllLlCD VVrLll rsDysLL Lv Lrru "' b'""*'
.dri.,rlrr,i.lo.L rrcrla
dH,IILULLLlI LlOUq, thp jmnrorrement
Llls rrllyrv v !f rfLrrL of mafket
vr rif aCCeSS fOf Canadian

exporters, the enhancement of rules on dumprng (selling at an

unfairly low price) and subsidies, and streamlined border clossings
Canada supports the WTO because trade is vital to Canada's
success. In 2016, Canada was the 12th-largest exporter and the
ninth-larsest "-'r"-' in the world. Canada, a country wrth a very
"" lmDorter
had ec'/( eo rne olasr.c
Cl^ n,: .-^tt
)l.t.tdll ^^-,,lrfinn
pupuld.Lrulr cnrl ljftle
ollu tlLLLS nowef.
Pvvvrr)
gainS gfronofh :nd sttnnolt
"*rr"" thfOUgh
-
and Daoer v,raste of other one of many countries
rts dealings with the WTO. In 2017, Canada was
2OlE ,r 1r:ormed the WTO thal that ratified the WTO's Trade Facilitation Agleement (ffn), a bindlng
,, - r-il rc l-oigei accelt inpor:ed
. .. | : agreement that commits all WTO members to simplify and update
. "- .:
:
' hnrdpr nrnrpdttrpq

F<

*7

a
Asia-Pacific Economic cooperation (Rprc), created in 1989, is a trade
Figure 6-12
organization that unites many of the countries surrounding the pacific APEC Membership Timeline
Ocean. Its mrssion is to support economic growth and prosperity in
the Asia-Pacific region. APEC's 2l member countries (see Figure 6-12 Joined in 1989
Australia
for a tist and dates of when they joined) comprise around 2.8 billion
Brunei
people and represented approximately 59 percent of world GDp and [anada
49 percent of world trade in 2015. ApEC is not established by treaties, lndonesia
but is based on consensus, and commitments are voluntary. ApEC Japan
Malaysia
meetings are held annuaily, wlth the host country rotating each year.
New Zeaiand
Canada tast hosted in 1997 in Vancouver. The Philippines
Singapore
APEC's goals are tO fOStef vyLrr
Onen qrtu free trade
and ffq! Amono lLo
LauuL urffvr16 itc lllEtrrv!ru,
mtrmhpr<
South Koiea
increase prosperity and economic growth, and develop the Asia- Iha iland
Pacific community. APEC's work focuses on its three pillars: trade United States
and investment llberalization, business facilitation, and economic
Joined in 1991
and technical co-operation. Beyond trade, ApEC also discusses China
climate change, security and terrorism, giobal economic success Hong Kong
and integration, and emergency preparedness. The organization has Taipei

decreased tariffs and trade barriers among its members, which has Joined in 1993
caused a dramatrc increase in exports. Since ApEC was created, trade Mexico
Papua New Guinea
between participating members has increased signifi cantly.
Joined in 1994
As a result of APEC's work, growth has soared in the region, with Lnlte
real GDP increasing from $16 trillion USD in 19B9 to $20 trillion USD
Joined in 1998
in 2015. As a result, residents of the Asia-pacific area experienced
PeIU
a per capita income increase of 74 percent, bringing miLLions out of Russia
poverty and creating a growing middle cLass in just over two decades. Vietnam

Figure 6-13 Increase in ApEC lrade

APEC totaltrade Average tariffs fell

fror I
in 1989

between 1 989 and 201 5 in2014

Trade organizations | 241

Figure 6-14 The Group of Seven (CZ) is a trade organization encompassing the
Members of the G7 major economies of the wortd. It was established as the G6 1n 1975,
when France, the United States, Great Britain, Italy, Germany, and
Canada
France Japan met to discuss global issues affecting all of the countries such
GetmanY as the globat economy, security, and energy. Canada joined the
Italy following year (creating the G7), and the European Union joined the
JaPan year after (though the organization has remained the G7).
United Kingdom
United States Russia had joined in 1998, creatingthe Group of Elght (GB),
IEuropean Union] a designation that remained until 2014. As a result of Russia's
annexation of Crimea (a region formerly controlled by Ukraine) in
2014, other members suspended meeting as the GB-in effect, reviving
the G7. Some experts believe the G7 is better without Russia as the
remaining members have similar interests and share the same values.
The purpose of the G7 is to discuss macroeconomic issues, such
as economic growth, trade liberalization, and helping developing
countries. The G7 is also concerned with the information highway,
terrorism, climate control, energy, arms control, crime, and drugs-
The G7 leaders meet once a year on a rotational basis. The host
country sets the agenda and takes on the leadership role. Througlrout
the year, a series of ministerial meetings on current and critical
topics are held. For example, it is common for the finance ministers,
environment ministers, and foreign ministers of each country to meet
on issues critical to their portfolios. The G7 also establishes a series
of working committees that discuss topical globat issues, such as
terrorism, energy, and organized crime. These meetings also provide
an opportunity for busy leaders to network with each other and
establish critical personal relationships.
The future of the G7 is questionable as the group struggles with a
number of worsening relationships arising from member differences.
For example, the decision of the United States under the Trump
administration to ieave the Paris Agreement on climate change and
Trump's criticism of NATO led other G7 members to single out the
United States in some of their public statements.

242 | Chapter 6: International Trade Agreements and 0rganizations

 The Group of Twenty (CZO) was established during the economic Figure 6-15
crisis of the i990s to provide a discussion forum for the major Members of the G20
economies of the world. The creation of the G2O fitted the need
Argentina
to develop beyond the G7 and acknowtedged the influence that
Australia
countries such as Brazit, Russla, India, and China have on world b|.azr I

economics and trade. Canada

China
The G2O encomnasqpq norrpnf nf t\g WOrld's 6fgross
QO vrr fnatiOnal
fqLt\
Fra n ce
product, BO percent ofinternational trade, and 66 percent ofthe Germany
olnhp'c nnnrrlefinn The nrrrnose vr the
uL of LrrL G2O
uzv iS tO
fr Strengthen LL
Lv oLlLtr6LrrLtI ecOnOmIC Ind ia
Indonesia
ties throughout the world. It focuses on economic and employment
Ita ly
growth, eliminating trade barriers, reforming financial institutions
Japan
and regulations, and restructuring gLobal financial organizations such Mexico
as the International Monetary Fund and the World Bank. Russia
5audi Arabia
The G20's importance has increased dramatically because of the South Africa
emergence of strong economies beyond the members of the G7. South Korea
When the economic crisis of 2OOB hit, governments met to create a Tu rkey

United Kingdom
comprehensive global framework for dealing with the financial situation.
United States
-r'r'^ r'''. +^r^"
f rrc uzv LUuclyr TIUWCVtrIr faces a
"lwever, lctLC> different
d. UIIlCI than it did
___- challense
__-*-----o_ European Union

in 2OOB. When the srouo met at the 2Ot7 G2O summit in Hamburs.
'.'-o'-*rL]]I]]uIlIUu]b,

Germany, leaders addressed the current issues facing the group

G2O summlis around the worid
around inequality resutting from globallzation. The 2O17 G2O meeting '".sr';e * ,,ccivtr rremorsrrationS
also saw the launch of the G20 Africa Partnership-a program to Tram nilmcTnil( dro|nq flctc P.r^ r..d
vvc
<,pp A rrnlpq' lhel nrrrrr-od'n
support infrastructure, private investment, and empLoyment in
Toronto when the G20 met there
African countries. in 2010

t
l

t
Figure 6-16 Brazil, Russia, India, China, and South Africa are members of the G20,
Members of BRICS and are aiso a group collectively known as the BRICS economies. The
first BRIC meeting was held in 2OO9 between Brazil, Russia, India, and
Brazil
China. In 2010, China, the chair that year, invited South Africa to attend
Russia
lnd ia the summit, changingthe acronym to BRICS. Atthough not a formal
China tradingbloc with any type of trade agreement, BRICS leaders meet
South Africa annually and attend summits together. These economies demonstrated
significant growth opportunities for international businesses over the
past few decades. As a result of globalization and internattonai trade,
these countries experienced tremendous growth and attracted foreign
investment. Some economists speculate that by 2050, these economies
could be wealthier than the current wealthiest economies.

On the other hand, these countries also face economic and

political challenges. According to the Worid Economic Forum, South
Africa and Brazil have the highest homicide rates among this group,
while China has the iowest. Water and sanitation are a challenge for
India, where 15 percent of its citizens are undernourished. Humart
rights issues are a concern in China and Russia. Russia has also
faced international sanctions as a result of its involvement in the
annexation of Crimea.
In 2013, the IMF (International Monetary Fund) predicted that
Figure 6-17 the economic growth rate for Brazil, Russia, and South Africa would
GDP Growth Rates for be almost the same as the worid average rate until 2018, while India
BRICS Economies and China would continue to outpace world GDP averages. In terms
oftrade, atrade
agreement amongthe
(real GDP growth rate: o/o)
BRICS counfiies is an
unlikely possibility
as China and India
continue to outpace
the other members
economicat$-

2000 01. 02 03 04 05 06 07 08 09 10 11 12

244 lChapter 6: International Trade Agreements and 0rganizations

The Organisation for Economic Co-operation and Development Figure 6-18
(Of CO) rs a trade organization for the advancement of democracy Members of the OECD

and market economies. The group was established in 196I, with Austtalia
its headquarters in Paris, France. It has 35 member countries, Austria
including Canada. Belgium
Canada
The mission of the oECD is to: Chile
. Promote economic growth Czech Republic
Denmatk
. Expand employment Estonia
Finla nd
r Trnnrnrro tho ctrnd:rd nf lirrino
Ftance
. Sustain financial stability Gefmany
G[eece
. Heln corrntries' economic develonment Hungary
. Enhance world trade
lcela nd
lreland
lsfael
The OECD works with businesses through its Business and
Italy
Industry Advisory Committee (elAC), an international business
JaPan
network with gLobal membership. In addition, the OECD produces Latvia
a series of publications on topics such as sustainable development, Luxemboutg
Mexico
world health data, economic statistics, and lnternational trade.
Netherlands
The OECD's periodic research on Canada's economy, published New Zealand
as the "Economic Survey of Canada," is of particuLar interest to Norway
Canadian companies. Canadian exporters witl find similar research Poland
Poftugal
on other countries. In 2016, the OECD published "Promoting Green
Slovakia
and Inclusive Growth in Canada," addressing some of productivity Slovenia
anmnnnino nertjr.rrlarlrr
C^6-,ri^h LUIlIPolllcJ)
faced brr Pqr LlLuLqr LJ small
DrrrqLL and
r-hallenOes rqLuu
LrrqLrLrr6Lr v) Ld.11d.\.l1o'll ql South Korea
medium-sized businesses. SPain
Sweden
The OECD has been instrumental in getting its member Switzerland
countnes to work together to eliminate bribery, money laundering, Turkey
and fraud, and to create a code of conduct for multinational United Kingdom
United States
c0mpanles.

Trade organizations | 245

 Figure 6-19 The World Bank is not a bank in the traditional sense. It is an
The Five Institutions of the organization of 189 member countries (including Canada) that
World Bank provides monetary and technical support for developing countries.
Its mission is to end extre.me poverty and to promote shared
nroqnprifir
It has set the following goals in its mission:
. To reduce the number of people living in extreme poverty to
3 oercent hv 2O3O
. To increase income of the poorest people by a0 percent in
every country
The Wortd Bank provides loans and grants to poor countries to
assist with education, health, infrastructure, farming, environmental
issues, resource management, and other economic concerns. It
provides funds to support HIV/AIDS assistance, biodiversity projects,
clean water, electricity, and transportation, and helps poor countries
move ahead. For example, onJune 23,2OI7, the World Bank approved
$250 mittion for the Skill India Mission Operation (SIivtO), a program
that provides skills training for adult workers with low literacy or who
have completed primary education or less.
There are many criticisms of the World Bank. Critics say that its
policies have caused many countries to suffer because of the rules it
imposes in order to receive a loan. In addition, many of the projects
funded by the World Bank have been criticized by human rights groups
for displacingthe poorest communities and for their environmental
impact. For example, govemment officials in Nigeria evictedpeople
living in slums in the largest city, Lagos, without any waming or
compensation. In Kenya, thousands claimed to have been forced out of
homes in their ancestral forests for a program sponsored by the World
Bank. More recently, human rights groups have documented cases
of forced and child labour in Uzbekistan's cotton industrywhere the
Wortd Bank funds irrigation projects for agriculture. The World Bark,
while stressing that it does not condone abuses, has admitted that
some of its projects have caused problems and is reviewingits actions.

246 | chapter 6: International Trade Agreements and organizations

 The International Monetary Fund (IMf) is an organization that
tracks economic trends, analyzes countries' financial performance,
warns govemments of potential financial problems, provides
I
: expertise to governments, and provides a forum for discussion. The
t
IMF represents 186 member countries, including Canada. The people
I
who wQrk at the iMF are principally economists with expertise in
1
macroeconomlc lssues.
The purpose of the IMF is to promote financial stability, prevent
and solve economic crises, encourage growth, and prevent and relieve
poverty. It accomplishes this through three activities:
t . Encouraging countries to adopt responsibie economic policies
I
I
,
. Lending money to emerging and developing countries
j . Providing technical training in areas such as banking
r-
P regulations and exchange-rate policies
,
l For example, in February 2OI7, the IMF stepped in after two years
E
to help Greece with its crushing debt problems with a loan of almost
Christine Lagarde became the
i
bz D]tt10n. managing director of the IMF in
?O11 Hprp she sneaks at a2017
I Not all IMF policies have had positive results. The IMF is often conference on global outlook
I accused of increasing povefty rather than alleviating it. IMF rnd nnlinrr nrinriijps

I loans often come with strict

{
conditions that emphasize
inflation controls and limit
government spending. This can
result in governments having
t to cut back on sociai program
I spending in such areas as health
and education.

ING POLI CY b
get tf,

ING E

Trade organizations | 247

 rganization of Petroleum Exporting
Figute 6-20 ountries (oPE )
',iembers of OPEC (2018)

Algetia
Angola
venezuela at the Baghdad Conference in September 1960. lt is an '
ECUaC0t
Equatorial Gulnea
t^ |

baD0n
lra n
lraq
Kuwait
Li bYa 14 member countries.
Nigetia
by Saudi Arabia, set limits (quotas) for dally oil
OPEC, ted
production in an attempt to raise the price of oil during much of
Qatat
SaudiArabia
United Atab Emirates 2016 and 2017. Its efforts to do so were limited and constrained
Venezuel a by competition primarily from North American suppliers' This
follows an effort in20l4 bY OPEC
to drive higher-cost Producers in
Figure 6-21 Crude 0ll Ptices, 2008-2017
North America out of the market' To
Dollars (US)
try and achieve this, Saudi Arabia
per barrel increased the supply of oil, causing
140 oil prices to fali. Oil Prices have
120 remained comParativelY low since
100 2015, as illustrated in Figure 5-21.
80 It is not known if-or how far-
60 they will rebound. The Canadian
40
govemment takes the Position that
20
future oil prices will be the key driver
of Canada's oil Production.

An oil refinery in Kuwait, bY night

 I

Many organizations around the world assist in the flow of trade;

Figure 6-22lists three of them.

Figure 6-22 Other Trade Organtzations

0rganization Purpose

World Economtc l-otum

(wEF)
strategtes, and help improve global initiattves.

lntetnational thamber
of Commerce (lCC)

and economic policies

An otganization under the Canadian Ministei of

Canadian International
Finance that deals with inquiries about ttade issues
Trade Tribunal (CITT)
and complaints covered by NAFTA and the WTO.

Canadian trade assistance organizations

Canada also has many organizations that assist in trade. They
provide a wide variety of services, including education, research,
and sustainable development. Some of these organizations are
1 What is the WTO? What are
llsted in Figure 6-23. its three PurPoses?
2 What is APEC? Describe
Figure 6-23 Canada's Trade Assistance Organizations APEC's three Plllars.

Purpose
3 What is the PurPose of the
0rganization G7?

GL0BE Foundation ot A Vancouvet non-profit otganization that ptomotes 4 Why does the G8 no longer
sustainable development and the idea that companies exist?
Ca nada
can make money and tespect the environment 5 What is the PurPose of the
sim u ltaneously. G20?

A Canadian group that endorses a free and ptospetous

6 What do the BRICS
The Ftaser Institute economies have in coml:l:--
globe founded on individual choice, competitive
markets, and personal responsibility 7 Describe what the OECI
does.
A Canadian otganization that aims to lmptove Canada's 8 What is the PurPose :- :-:
C D. Howe Instltute
standard of living through tesponstble economic and World Bank? Wha: a:: . - ' =
- --
social policy cflticlsms of rhe : :
A think tank based in Watetloo, Ontario, that generates BANK
ClGl-Centre for '
ideas io help with global issues, including issues 9 Descr:b- ---:
=: --: - -
lnternattonal
involving trade. lt supports teseatch, wotkshops, tlvli.
Gove[nance Innovation publications, and Public events
1n -'':-- - -::
The Unlted Nations office in
Geneva, Switzerland, hosts
a number of its initiatives,
rncLuding the UN Conference
on Trade and DeveloPment
(uNCTAD) the UN offlce for the
Coordinatlon of Humanilarian
Affairs (ocHA), and the UN
Economic Commlssion for
turope (ECE).
250 | ChaPter 6: International Trade Agreements and 0rganizations
business
The United Natlons is not a govemment; rather' it is a distinctive
organizationofcountriesthatstrivesforworldpeaceandsocial
War II by
advancement. It was established in 1945 during Worid
war' It
world leaders as a mechanism to create peace and eliminate
discuss and
has grown to include 193 countries. Its representatives
United Natlons
collaborate on issues that affect the entire world. The
headquarters are located in New York City, and it has
major offices
located in Geneva, Nairobi, Vienna, Rome, and Copenhagen'
The United Nations has five main purposes:
. Maintain international peace and security
. Protect human rights
' Deliver humanitarian aid
' Promote sustainable development
' Uphold international law
::--l
 'l'o(-la\/ the llniterl Nations
works to alLeviate poverty, help
eradicate land mines, improve food
production, advance human rights,
advocate democracy, organize
d jsaster relief and nromote sociaL

justice. One ofits greatest efforts

.i^ i^ +L^
^-^^ u]
rJ frr LrrE cllcd. ^f ^^^^"kppnjno
ptrd.Lc--__r---o. onp
_--_
examplqof this work began on
Trrlrr 1 1ftl? r"rifh fho l.aUnCh Of the

UN Mission in Colombia to remove

weapons and destroy explosives,
hetping Colombia end the world's
longest civrl war, which has lasted
more than five decades. In August
2OI7,the UN Securlty Council, the
UN body responsible for maintaining peace and security, increased US Ambassador to the UN
sanctions against North Korea in response to its missile and nuclear Nikki
_''_'_.' Halev.
''*''J rishf *'_-
r "o"_, ard -_Brlllsh
*L^^^^r ^- lvldLLrlqw
f,rr1uo)J4uuI
^
1tr^!+L^. . ny
-.-croft
testing. These sanctions targeted North Korea's exports (coal, iron, iron ri-.''-^ ^^^'^^'. North
UlJLUJJ JO11lL1UllJ 4841I1)t

ore, lead, and seafood, among others) valued at $3 billion USD. Korea at a United Nations
Sce11;11y Corrnc'l rep'jno in
20t7
Paris Agreement
The United Nations Framework Convention on Climate Change
(UNFCC) was a treaty founded in 1992 where countries joined in an
effort to combat climate change. Two years later, the Kyoto Protocol
was developed, which aimed at tegalty blnding developed countries
to reduce emissions in a further effort to combat climate change.

Figure 6-24 Global CO, Emissions per Capita

C0, emissions, in metric tons per rapita
5.2
5.0
4.8
4.6
4.4
4.2

1970 2000 2010 2014

The role of the United Nations in international business 1251

 An cLd uranium inine
Canacia has been home
tc serrerai uranium mlnes
over iis history Currently,
ihe on'Ly aciive mines are
iocarec in Saskatchewan
252 | Chapter 6: International Trade Agreements and 0rganizations
Uranium
Once considered mostLy a component for nuclear weapons, uranium
in nrrrlp:r
ic
]J rrcod
UOLU rrl TIULLLUf yV VV Lr nlents for electricitrr nrodttction. Uranium is
nn\^rpr
also used in the cleation of radioisotopes (developed flom plutonium
formed in nuclear reactors) needed in industries such as medicine,
d.6IILULLUIC) rnri fnnd
cnrinrr'ltrrro OrrU rVVu nrpqpnration
PrLoLr vqLfvff.
Radjoisotones arP even fOUnd
in the common smoke detector. In some countdes such as Sweden,
the excess heat fiom nuclear reactors rs used for heating buildings.
DepLeted uranium is also used in aircrafts and yachts because of its
hioh dpnqitv
Canada is home to the worid's top two uranium mines-Cig":
Lake and McArthur River, located in Northern Saskatchewan -:=.=
mines are owned in majority by Cameco Corporation, a pu': --:
traded Canadlan company wlth its head office in Saskatc::'
Saskatchewan. Canada's newest uranium site, Arrow, 3-,';:-: - :'.-
\TpvCpn Fnprorr Limitpd is exnected tO heoin ttr:ri-
f\LAULjjLffLl6JiLffljILlu,fDlAyLLLLuLvUL6Irj
in the Athabasca Basin of Northern Saskatchewall ---:--:--:-: -: --:-.
World Nuclear Association, ln 2016 Kazakhsta:: .: - *--=- --:-= --:=.--
share of uranium from mines (39 percent o1 .' :: : . -:; -' : : : .', = :
by Canada (22 percent) and Australia (to ::::=:-- -
Figure 6-25 Uranium Ptoduction around the World (in metric tons)

Country 2OO7 2008 2009 2010 2011 2012 2013 2014 2015 20'16

Kazakhstan 6,637 8,521 14,020 17,8A3 19,451 21,317 22,451 23,1)7 23,800 24,575

Canada 9,476 9,000 10,173 9,783 9,145 8999 9,331 9,134 13,325 14,039

Australia 8,611 8,430 1,982 5,900 5,983 6991 6,350 5,001 5,654 6,;15

Niger ' 3,'153 3,032 3,243 4,198 4,351 4667 4,518 4,057 4,116 3,479

Namibia 2,879 4,366 4,626 4,496 3,258 4495 4,323 3,255 2,993 3,654

Russia 3,413 3,521 3,564 3,567 2,993 2872 3,135 2,990 3,055 3,004

Uzbekistan (est) 2,320 2,338 2,429 2,400 2,500 2400 2,400 2,400 2,385 2,404

China (est) 712 769 750 827 885 1500 '1,500 1,500 1,616 1,616
United States 1,654 1,430 1,453 1,660 1,537 1596 1,792 1,919 1,256 1'175

The Paris Agreement is tikety to increase the global demand for

uranium, as nuclear power is more consistent than solar or wind
power and carbon-free unlike oil or natural gas. Global demand
for nuclear power is growing, spurred by demand from the Unlted
States andJapan and emerging economies such as China and India.
The 2011 nuctear catastrophe ln Fukushima, Japan, had a worldwide
impact on nuclear energy. That accident resulted in the loss of gtobal
confidence in nuclear power and the decision by some countiles to
shut down their nuclear reactors. However, todayJapan is rebooting
some of its reactors, and China is rapidly expanding its nuclear
pr0gram.

Check Your Understanding

I What was uranium previously used for? How is it being used

now?
2 Who are the top three gtobal producers of uranium?
3 Where are the top two uranium mines located? What are they
called?

4 What caused the demand for uranium to fall in 2011?

5 What does future demand for uranium look like? Why?

The role of the United Nations in international business 1253

 Figure 6-26 Largest Ptoducers of Emissions Worldwide, 2016

28.71o10

US 15.990/o

lndia 6 24alo

Russia 4 53ola

Japan 3.67alo

Germany 2.23alo

Korea 1 .7 Salo

f ran 1.72olo

Canada 1.71ak
Saudi r q(oh
Arabia
0
35 o/o global
emrssrons

Figure 6-27 Ihe Patis Agreement and PrecuTsors, 1919 Io 2017

1979 1 988 1 990 1991 1992 1994 1 995

First IPCC First meeting At the Earth UNFCCC entefs Second IPCC
First World Establishment
Climate of the Inter- assessment of the Intet- 5ummit in Rio, into fotce asSessmenI
governmental report; governmental the United report; Kyoto
tonfetence IPCC
and second Negotiating Nations Protocol
Panel on
Climate World Climate Committee Framework formally
Change (IPCC) Conference call Co n ve nti on adopted
for a global on Clrmate
treaty on Change
climate change (UNFccc) is
prop0se0

1997 2005 2007 2009 2017

Third iPCt First meeting Fourth IPCC Countries The United
First UN
assessment of the Kyoto assessmenl submit pledges States
Climate
fep0rI; Protocol report to leduce a nn0u nces
Change
Conference rules for signatories in emrssr0n5 0[ intention to
takes place in implementing Montreal take action withdraw
6efl ln Kyoto Protocol to reduce from the Paris
are set emtSsl0ns Agreement;
all other
sig natori es
reaffirm their
commitment

254 | Chapter 6: lnternational Trade Agreements and 0rganizations

 '.
On DecemberL2,2015, the Paris Agreement, came into effect as .-..-:-. .::.::;:-1 ..:C CU-
:-: ?.:r 'Qi€€ilrcOL _ ,f,2(I/
fhe
LfiL larsest
Luf6!oL internatic^^r
fffL!iffqLiuIIOL LLIIIlALC ---^^*^nt to date. For the first
-ri-^+^ OSICCtIIC *"-
Hprp nrnfpql'prq
- 'c- . '-'.- '_
in !r/:shi
'_
_____ r_ .. ...__r_-Icn
ri*^ +L^ n^-i^ --^^mpnt hrorrohf
Ll.tlLtr, Lll(-, rd.Il) f161CC
^ *o--- Forppmpnt
*o- Amono hnth dprrplonpd
/ L -wpLu n. -,.r^,L^i, LlrcLl
-^J JLdtl
- - ----,--, ^^,L^"
!t,5dtllql ol1u

and deveLonins countries to fast-track and lncrease the rnvestment r,:cp [6r V;hV'f " ag.pe*.qt-- _

imnnrtant fnr fho nl:npt

rpnrrirpd tn h:ttlp rlimntp rhenop
'.-*..o* :nd fn t:kp thp --'----*',
norpqq:nr qtr
--3PS
to ensure a low carbon future for all countries. The agreement sets
a minimum investment level of $100 bllLion. The Parls Agreement
entered into force on Novemb er 4,2016.As of ApriL 2OIB,Ig4states
and the Euronean IInion renresentino more fhan 88 nercenf of
Olnh:l Orppnhnrrqp b*s
da^ emlsstons,
^^;--t^^- L^,,^
nave -;a^^) 11^^
^'-^^-^-+
stgneo Ine agreement. '
In
o.--*.o-,,,,,--*--
2017, U.S. President Donald Trump announced his intention to
withdraw from the Paris Agreement. Despite this setback, all other
signatories including r'^-^r' IIoVc
rE; Lotlouo,
r^"^ ICdIllL
-^^(A-med their commitment to
the agreement.

1 What are the five main

nrrtnneae nt tno I tt\t /

2 What is the Paris

A drppm pn t?

? \n/hirh.nrntn/:q -- ---
_--_ :--^qr
..-5_-_
nrndrrrpr nf e ' =* '.._;:S?

255
 Chapter Review
nowledge
What is a bilateral trade agreement? Explain by providing
examples

Whatlsthedifferencebetweenatradeagleementandatrade
organization?

3NameflveofCanada'stradeagreements,andprovideabrief
explanation of each. Which ones are most important to Canada's
economy?

4ExplainhowtheG2O,theWorLdBank,andthelMFareconnected

5 What does BEPS stand for? What is its purpose?

6 Explain the difference between a hard and soft Brexit'

7 What are the BRICS countries, and why is it important that thel'
were included in the G2O?

8 Explain the PurPose of a cartel

g Expiain the followlng phrase: "Free trade needs to be falr trade

"

10 Explain the advantages and disadvantages ofprofit shifting --:

tax avoldance.

11 How have you personally gained or lost from NAFTA?

L2 Explain how the adoprion of the euro has impacted Ca:-:: ':
business.

How does the wTo promote internatlonal trade? what are its
chatlenges?

L4 Why is the G2O becoming more important than the

GZ

15 why might Canada lose its prominence in world irade organizations,

and what impact woutd this have on the economy?

WhatistheKeystoneXLpipelineproject?Exptainitsimporlanceto
internationai trade.

256 lChapter 6: International Trade Agreements and 0rganizations

17 In a small group, dlscuss the following quotes. Choose one quote and
create a graphic representation of its meaning.
"Capitaiism is a dirty word for many inteilectuals, but there
are a number of studies showing that open economies and
free trade are negatively correlated with genocide and war."
. "Free trade is not based on utility but on justice."
. "l'm not opposed to free trade if it's fair trade. But I am
opposed to bad trade deals."
18 Kofi Annan once said, "lt has been said that arguing against
globalization is like arguing against the laws of gravity." With a
partner, discuss what you think he meant.
19 Research the current status ofboth the Trans-Pacific Partnership
and NAFTA. Discuss and compare your findings with a partner and
prepare a five-minute presentatlon for your c1ass.
Create a two-coLumn chart listing the advantages and disadvantages
ofNAFTA.
Create a two-column chart listing the advantages and disadvantages
ofthe euro currency.
Using a blank map of the world, create a trade agreement map
that ldentifies countries involved in NAFTA. the EU. and Canada's
hiletpr:l rorppmpntc Prnrridp e lpopnd
23 with
vv rLrl nertnpr
a pqf
o LrrEr, LTEqLC ^- ;-f^x-^^Li^
crpetp dII tIttu6Id.PtIIL ^- +L,.
ulI L.LLt role of the worLd Bank.
Be sure to cover all five of its institutions.
Using academic sources, research and create a one-minute news
script on how competition among OPEC and North American oil
producers impacts the global oii industry.

Chapter Review | 257

 Application
25 You are the manager of operations for a Canadlan start-up in software
derrelonment. You have decided to expand your buslness to Europe.

a which country in the EU will you expand into first? Explain your
answer.
b wilt you use a global, multidomestic, or transnational globalization
strategy? ExPlain Your choice.
c List one trade agreement that will help with your expansion, and
explain your choice.
d Draft a letter to your employees informing them of your expansion
p1ans.
"NAFTA
26 Create a mind map of NAFTA. Start with "NAFTA History" and
Renegotiated" as subcategories, moving into more specific categories
within each.

27 With a partner, design a new logo that represents NAFTA. How does
'-r-*"-' all three members and fieer trade?
rrnrrr looo renresent

28 Create a one-page adverttsement that supports or challenges the

develooment of
erta's tar sands for the production of oil. write a
brief explanation of Your ad.

258 lChapter 6: International Trade Agreements and 0rganizations

Inquiry Activity

Canada has a number of trade agreements, but none more important

than NAFTA-the North American Free Trade Agreement. The
United States is Canada's biggest trading partner, and Mexico is a
hub for Canada's automotive industry. In this chapter, you learned
that there are "winners" and "losers" as a result of NAFTA.
One of President Trump's election campaign promises was to
renegotiate NAFTA or "tear it up." InJuly 2OI7,the United States
administration and President Trump made good on his promise
and published NAFTA renegotiation objectives (essentially a list of
changes they wanted) in updating NAFTA with Mexico and Canada
for the first time since it was enacted, in 1994.
Research the current status ofthe NAFTA renegotiation and
answer the following questions. (fip: Search the internet for the
Summary oJ ObjectivesJor the NAFTA Renegotiation document,
published in2017 bv the Office of the United States Trade
Representative.)
I Provide a half-page summary of the curent status of the
NAFTA renegotiation, and briefly outline the main concerns
of its three members.
2 In your own words, explain what is meant by "Improve the
U.S. trade balance and reduce the trade deficit with the
NAFTA countries."
3 What are some barriers to American exports that might exist?
4 What does the term reciprocal mean? Provide an example of
how it relates to NAFTA.
5 What is meant by "rules of origin"? Do you think this term is a
contradiction of free trade? Explain.
6 What revisions to NAFTA do you Ltunk would be necessary
for Canada to benefit from? List -ltree possibie revisions.

Inquiry Activity 1259

Collaboration = working together with someone to produce or
create something

Why is coilaboration so important? A business needs its

employees to work together. Without collaboration, a company
rnrill ctrrroolp
*bb'-'

Collaboration for any business is important for two main

reas0ns.
o Tf irnnrnrroc nrndrrrfirrifrr
o Tf imnroves jnnovation.

Employees who work together allow a business to come up with

new ideas and products that beat or gain an advantage over the
competition. Just like companies conduct international trade with
each other to meet their needs, employees depend on each other
in the workplace.
Use the following tips for working with others whether in a
LLqDo nresentation
CIaSS yrEDErfLqLfvrr, driring e* mppfinO
u*----o _- 1n'^-1-i-x
61 ./utnttl5
jh LcattlJ.
ttt +^^m-
---__,---o,

Tips on collaborating effectively

. Don't dominate the discussion. Listen first.
r Aqk fnr p:rh norqnn'< innrrt

. qot dr^rn rnloc An6l reSpOnSibiLitieS.

. Be open and transparent. Be honest about making mistakes.

. Consistently review and clarify team goals and
responsibilities.
. Use online apps that allow for live, collaborative editing
and fiLe sharing, such as Google Docs or Smartsheet, to
c0[raDoraLe i^,
-^ll^1-,^-^+^ rn your project.
. Handle conflict and differences with respect.
 The "Amero'wds tle 'c'ic.:.i;-
Activity rlacionorl
UCJrB-lcJ ^r
Ve
nl!nnol qu frr
ul 1.-oI-- :- .- --^
i c' r.l
11'T-pt(\t (tL1- 'c ; ,q : - :.-jS- c
In small groups and using the tips on coLlaborating effectively, design rerdp.'ro) \ ...'.:. '. ii had
a common curency for NAFTA. As you know, the euro is a common prrt,,trpd
hpcn nronp-.t',J.-'_''t'- 7

CllTTenC\/ for the lll1pnoen ITninn Tho "Arng19" WaS flOated aS a

common curency for Canada, the United States, and Mexico, but it
was never seriousiy developed.
Desion a new currenc\r fn hp sharpd hv all three NAFTA members.
Include a name for your currency, a symbol, and a design for a coin or
a n2npr hill trvnl:in rll nf rrnrrr rhnrnoc

Once you have designed your currency, answer the following

questions:
I Did anyone lead the group in the task? Explain.
2 If you had no leader, do you think having designated someone a
leader would have helped?
3 How hetpful were your grouD rnembers in this task? Did anyone
appear to be an expert?

4 Did any team membe:s tune out of the activity? If so, did this
happen out of frustation -,'.1th other members or for some other
reason?

5 What could you have done rc keep all members of the group fuLly
enozopl'?
--'o*c)'*'
6 Did you feet everyone's ideas were welL received during the
activity?
7 Was there anv conflict in this task? How was it handled?

Business Skills | 261

 By the time you finish this chapter, you should be abte to:

' identify the activities that make up marketing (market research,

product development, pricing, etc.)
' Describe the modifications made to goods and services to adapt to
the cultures of other countries
' Identify the challenges an international company may encounter
with regard to ethics, values, ianguage, and business practices in
the various countries in which it operates
' Explain the importance of understanding consumer differences
when marketing gtobatly
' Identify strategies used by companies to enter foreign markets

302
 penetration pricing Maslow's Hierarchy of Needs
Key Terms price skimming disposable income
premium pricing discretionary income
marketing
four Ps of marketing discount pricing competitive advantage
two Cs of marketing psychological pricing economies of scale
business-to-consumer (B2C) clickstream data market research
business-to-business (B2B) influencers primary reseatch
vending machine target market secondary research
trade show ethnocentrism acquisition strategy
e-business demographics centralized marketing strategy
markup Thorndike's Law of Effect decentratized marketing strategy
IKEA's signage and ads cfien
appear ln two languages Ln .ie .€ International marketing
Jnited Arab Emlrates
and the fou r Ps
Marketing ts the sum totaL of a1l activities invoived in gettlng
goods and seruices from the oliginal producer to the ultimate
consumel. These include activltles such as market research, product
rlprrolnnmpnt --, nririnrt auvgl nrlrrnrticinn cnrl nrn*^+;^'^
LI5Il-tB dIIU PlUII]ULlUll) Jd'LCJ, ^-'l l^6jqfi6'q
'^l^^ orru Lv6frLILU'
"------3,
Thp
J- IIC
rnnin
IIlolll nr rrnnqp vr
PUTPWJL
marketing is to seil thp otttnttt of nroductiOn,
of lrrqlNLLfrr
and all of the marketing activities just mentioned are focused on
r-hrr
LlId.L
nrimcnr frrnnrinn
lUllLLfwlr. Tf vu r.an nrodttce 5O,OOO SWeateIS, yOU need
ff vorrJ
PIlIllAIy
rnrrlzptino
IIIqI N! Lfff6 tn
lv mekp
iifur\! slrrp \/olr sell 50 OOO sweaters.

Tr
rL Lo imnnrtent
iq rf riyv! L fnr marketins to have a consistent focus and feel.
Terry O'Reilly, author of the marketing book This I Know and host of
the CBC radjo broad castl.Jnder the Influence, states that a marketing
hr^^r.,- r^, . LUIIIPoTTJi
IUI d.
PIUBId,III
nnmn jnv vL nroduct is iike a kebab (see Figure 8-1). A
or yrvuu
kebab consists of different food ingredients, all held together by a
skewer. Just as there are many elements on the kebab to barbeque,
there are many elements of the marketing plan, and all of these
cnrnnnnpnrs nced to be "skewered" with the same marketing strategy
LvfrrvvrrLfrL

ano r0cus.

30a lChapter 8: Marketing

 Figure 8-1 The Marketing Kebab

business card

adveftising

website

social media

pf rcrng

product

marketing strategy
and focus

Marketers often talk about the four ps and two cs of marketing. you
mav have! LrrLvurrLLr
enaorntprpd thpcp rnnnontc in,,, a pIeVtOUS COUISC.
The four Ps of marketing:
. Product
o Place
. Pflce
. Promotion
The two Cs of marketing:
. Consumers
o f nmnptitinn
Over the next two sections, we will review and apply each of tnese
concepts to an internationat business context, beginning with the
IOUI PS.

International marketinq and the


A shampoo sold in the European
Union displays a label that
conforms to EU specifications.
The "e" denotes that the imperial
amount is estimated. Whlte the
EU is on the metric system, in
?nnqIIq aYn^rtorqqrcn
- *- -essrutty
tobbied the EU to include
imperial equivalents, as long as
ihorr annoer qonnnd
306 lChapter 8: Marketing
e four Ps: Product
The product-what is for sale-will often be sold outside of Canada,
which means it must be modified. These modifications are made
to adapt to a foreign culture, language, or laws, and occur primarily
in the following areas: weight; colour; legal, language, and labetling
f LYUrrrirornonf
ronr Lf rrLf f c' inorpd
jpntq' and strrle
Package weights
Canada is on the metric system, which uses grams and kilograms to
express weight. The United States (Canada's main trading partner)
does not use the metric system.It is the only major industrialized
country that remains on the imperial system, which expresses weight
in ounces and pounds. Any product packaged for export to the United
States must have lmperial weights or volumes on the package.
Package colours
Colours have symbotic meanings, but these vary fiom one culture
to another. White is a symbol of purity in Canada, but of death in
China. Yellow symbolizes courage inJapan. A package colour that
has positive associations for Canadian consumers might ellcit the
opposite reaction in another country. Marketers should research the
cultural preferences of consumers in the country they are exporting
to in order to avoid costly packaging mistakes.
Legal requirements
Every country has laws that affect the packaging of goods that are
sold there, most often in relation to the environmental impact of
the packaging. Many countries have elaborate fee structures that
can cost an exporter more than the packaging itself, if the package
material is considered environmental$ unfriendty. For exampLe, if
a Canadian company is selling its product in Denmark, it needs to
be aware of the extensive taxes levied on environmentally harmful
products, such as additionai taxes on disposable tableware, plastic
bags for products less than five titres, and pesticides.
Language requirements
The information on the package must be translated into the language
vr the
of Lqr6L L countnr Snmp cnrrntrips srr.ch as lreland, Switzerland,
Lf rL tarset
India, and Canada, have language regulations that require two or
more languages to appear on packages.
tabelling requirements
Marketers must investigate labelLing regulations in their target
foreign market. There are different regulations in many countries
with regard to ingredient and food-value labelling, product warnings,
and even the picture of the product that is used. In Callfornia, cars
must have a labet that provides consumers with the vehicLe's globa1
warming score. As well, food labels ln the U.S. must have the name,
*^^"F^-+"-^-
lrrolluloLLuttrt, cl]ILl
Iistrihrrtor on the nackage. The lettering
^^r Ll,--,-- - --_ -*,-_---^b on
__ food

labels must be at least 1.6 millimetres high.

Ingredients
Many countries have strong taboos, both religious and cultural,
thef nrnhihjt thp rrqp nf r.prtrin nrndrrntc ncrfierrlcrlrr fnnA if o,
IJar LrcuLal ry tooo rtems.
Islam, Hinduism, Buddhism, and some branches of Chrlstianity
do not permit the consumption of alcohol, for example. Jews and
Muslims do not eat pork. Hindus do not eat beef. If a potato-chip
manufacturer wanted to sell snacks in a Hindu country, such as
India, it wouid have to make sure the chips were not fried in beef fat.
Some prohibitions are primarily culturally based. Many
vegetarians, for example, do not purchase woo1, leather, and other
products that come from animals. Other ingredients that cause
concern within certain cultures include some sugar substitutes, hala-grocerv
A _'*'*' crore c- '.--^s.-:-s
'_ o'.-'_'J
nuts, gluten, and chemicals such as monosodium glutamate (tvtSC), know that the mea: so.i: ,iere is
because large segments of the population consider them to be ne-mtS.'h-o f ' Lr- '-^' t -:. nOL
iri^l^+^ r^l;-'."- -.
vrutoLc o11j/
^h1' Lc-1<1 *: ,-" *.=D
unsafe or unhealthy.

Style
What the people of one country find fashionable,
people of another country mlght find embarrassing or
offensive. Style capitals such as Paris, London, Milan,
and New York expect cutting-edge products, while
stylish people in many other cities create street fashion.
Fashion and style are very dlfficult to export. Marketers
often adapt their products to conform to thp qfrrlps rh:f
are popular in their target market.

International marketing and the four Ps 1307

 e fou t Ps: Place
Place is where the nroduct is soLd. Place is denendent on the
customer. Business-to-consumer (B2C) strategies sell directly from
the producer to the consumer. Business-to-business (U2e) strategies
sell from businesses to other businesses. For Canadian businesses,
B2B is more common than B2C and is critical to Canada's economy.
Snmp nrndrrrfc h,1ys a short distribution chain. The nroduct is
sold dirprflrr from the nrodrrcer to the consumer. Other transactions
need lntermediaries such as an importer, wholesaler, or retailer.
Tradltionat distribution channels are described in Figure 8-2.

Specialty distribution channels

wrru LebilLer -.1rafrilar
Prndttrpr-imn61fp1-r^rhnlo..lor r
c Lilrrcr -COnSUmeI 1S a mOIe
traditional distribution chain. Coffee, tea, and toys are examples
of products ln a traditional distribution chain. However, in today's
changing world
Lrruii6rr16 vvvLLu fhpre ^'^ d^ "--i^+-'
LrrLrL dlC Vd]]trLy UI -^^-'altv LrtqtttrLrJ.
^r JPtrLIq(LJ channels These
r lrLoL include
television channeLs, catalogues, and telemarketing. One of the most
successfui specialty channels worldwide is the vending machine. In
Japan, there are 5.52 million vending machines selling a variety of
products, including eggs, umbrellas, hamburgers, and even puppies.
The machines can tell you the weather and wilL even take your selfie.
Another fvne of snecjalfv channel critical for international business
is the trade show-a collection of manufacturers and distrlbutors who
rent
llllL snece
oPqlL, set uP dis^r^"
DLL rrn uloPl.dy
1-^^+1^^
UUULllJ, ^-r ^^rr
dIILI
*heir pf
JCLL LrfLrf nroducts
uuuLLr to
Lv reoistered
f L6r,

hrrvers who seek nrodrrcts in e snpr.ific indrrstnr Trade shows nrovide

buyers with a largenumber of product sources under one roof, and can
save them hundreds of hours and thousands of dollars in buying trips.
For sellers, the trade show is often their major sales event.

Figure 8-2 Distribution Channels

Producer A company that creates and supplies a good oi service.

lmporter A company that helps with entry into new countiies and provides infoimation about border crossings,
cultural dtfferences, and legal requirements. lt may or may not take ownership of the goods. Also referred
to as a broker, agent, or industrial sales representative.

Wholesaler A company that purchases products in bulk from a variety of sources, warehouses the goods. and then
resells them to retailers or other businesses.

Retailer A company, latge ot small, that sells directly to the consumer, Examples include department stores, blg-
box stores, boutiques, convenience stofes, supefmarkets, and open-air markets.

308 lChapter 8: Marketing

I-I- !{

t-:

1i,BF "E
 One of the most cdticaL speciaLty channels for internatlonal
businesses is online. The internet and the e-business it has fostered
have revoLutionized rnternational marketing. Now, a business in
any city in the world that is close to a transpoftation hub can be an
internationaL business. Smalt businesses (such as people who rent out
their home on Airbnb) and global enterprises (such as Amazon) can
be headclrartered in one cltv whiLe dojns hrrsjness en1^^rhtrrp nn the
planet.
E-commerce can be more effective than opening a retail store.
Amazon is the best example of a company that uses this strategy;
many other companies use e-distribution in combination with
their retail operations. Canadian retailers such as Lee Valley Tools,
Morrntain Ecrrinmenf Co-on Roots and hundreds of other retailers
seil to consumers online throughout North America and Europe. The
Er-.- i- -^ ^--^--l^
L!;] lJ d11 CIAlllPlC ^r d11
UL ^'^ internet is a great leveller, as the smallest stores can compete onLine
inteinarionaL business that
o,i,:---'-:''-" IrsalSO
with the largest chains.
a sp.c a. -<-r.c or l'usiness traL Of course, the level of competition depends on the quality of
:o'a p',ce acrs 3s a veh-icLe
:- - '-6lprordal- . - nn ,'lO the website lhe navment-Drocessing oDtions the varietv of goods
cr:fr.nenn p',r qr rhp,T rrr-rp. offered online, and the shipplng options-incLuding how easy it is to
".-,..--! ,---:h
1rc!/ crlu
v1lrL4Bq dILu lcdl
Oet eaross hnrdprq Leropr ch:ins r':n nffpr froo ar rodrrnod chir
---.1prng,
a mucn wider customer base
-t,a: a::tt k. a:d-mortar wh1le smaller companies cannot. Some companies can offer a variety
" : ofr'.vol]rd
"1 -* " olter
" ' lr crrrrenllv of credit card and PayPal options; smaller companies often do not.
'. s., I 9 mi.i'or >ellers, and
E-business and e-distribution can turn any local retail operation into
-o: - q r olnnr -I
m:"1,r inl -raq Ul
^!-|J!o\
r / ri lan nllrral< a global one-all that is required is a website.
t-
In most cases, the domestic price of a product is lower than the price
of the same product abroad. This is a major marketing consideration.
If a company exports its product to another country, will consumers
there be able to afford it? Price increases are the result ofseveral
different factors:
o Shinnind
"-.'rr"'o rnsts
---'-
. arllls
-L

. Exchange rates

ll . Insurance
I . Travel costs for em'olovees
. Lawyers
I . Translations
F . Culture consuitants
. Packasinsmodifications

Costs may also decrease when a company becomes

international. For example, the price of labour in foreign countries
SmaLler, single-row packa ges
is often considerably lower than in Canada. Canadian labour costs
of Oreo cookies (anc c:ile:e:-
are among the world's highest. A product made in Canada costs varieties) for saie t:t a S:ta1g:la-
significantly more in most cases than the same product made in a supermarkei.
foreign market.
Anyone trying to market a product
in another country must consider
whether the price of the product in
the foreign market is competitive. For
t example, a product made in a foreign
I
country may be less expensive because
of lower labour, transportation, and
manufacturing costs. Another factor
that must be researched is how much
the foreign consumer is willing to
spend on the product. In China,
t where incomes are lower than in
I North America, Oreos sells a smaller
I
package-just a row of cookies-
I
because many consumers are not
willing to spend money on a larger
package.

,L
International marketing and the four Ps | 311
 Pricing strategies
Setting the correct price is one of the most difficult marketing
decisions a company can make. This is compounded in international
business decisions because of the additional costs and the cultural
and economic conditions in the foreign country. One common way to
determine aprice is markup pricing. Markup occurs when a busirless
adds an additional percentage to the cost to determine the price. This
percentage is the profit. For example, a product costing $12.00 with a
markup of 25 percent would sell for ($IZ.OO ,. 1.25) $15. Products with
a consistent demand such as groceries tend to have smaller markups;
products with inconsistent demands, such as high-fashion clothing,
tend to have higher markups. For exampte, jewellery may have a
500 percent markupl Markup pricing is used specifical$ by retailers
because it would be almost impossible to make a pricing decision for
each individual product. Other common types of pricing strategies are
discussed below.

Penetration pricing-entering a market at a lower price than the

competition. In an international market, this would influence buyers
to try your product. In the long run, once customers have tried and
tiked the product, the company may increase the price.
Price skimming-entering a market at a high price during the
introductory phase. Early adopters can help mitigate the high cost
of entering a new country. Skimming provides the image that the
product is innovative and exclusive. Once the early adopters have
tried the product, the company then lowers the price.
Premium pricing-setting the price higher than the competition's
price to evoke an iliusion of luxury and high quality. This is different
than skimming because the high price is sustained.
Discount pricing-this strategy is often used in a B2B situation where
the producer wants to sell high volumes to a wholesaler or retailer. It
rewards repeat customers and builds toyaity. One method of discount
pricing is a cash discount. Offering goods at2lIO net 30 provides a
2 percent discount if the goods are paid for within 10 days; otherwise,
the futt amount is due in 30 days. Another type of discount pricing is a
quantity or volume discount. This encourages customers to purchase
more of an item. For example, if selling a product to Ireland fiom
Canada, the Canadian business may offer a lower price per product if
the Irish company buys a certain number, like "10 for the price of B!"
The Canadian company may save on shippingbecause it can fiil an
entire shipping container instead of paying for a partial one.

fnlOe;Dr&tarleting
Psychologicat pricing-setting a price at $199 rather than $200 will
sell more product. This strategy provides an illusion of less money
because ConSumeIS tend to concentrate on the first number rather
than the whoie number. Customers are making an emotional decision
over a logical one. This is especial$ crlticat for international pricing
because numbers have different meanings in different cultures. Many
North Americans believe that the number 13 is unlucky. Many hotels
do not have a thirteenth floor and some airplanes have no thirteenth
row. In New York, only 5 percent of the condos have a thirteenth
floor. Indigenous peoples consider the number 4 sacred. In China, the
number B is luclcybecause its pronunciation is close to the word for
prosperity and wealth. Conversely, in China, the number 4 is unlucky
because it sounds similar to the word for "death." companies opelatlng
in China would be wise to inciude an B in the price and foolish to
price a product at$44.In ltaly, the number 17 is bad luck. The Roman
number representation of 17 is XVIL These numbers can be rearranged
to VIXI, which in Latin translates to "my life is over'"

Figure 8-3 Numbefs around the World

, In ltalV and elsewhete, the number

3 3 represents one of the stfongest shapes, word for "8" ls velY close to the word
the triangle, and in Catholicism, 3 is a for "ptosperity." lt's no coinctdence that
sacted number referring to the Holy Trinity
in 2008, when China hosted the 0lympic
. In many Indigenous cultures in North Games, the festivities started on August 8:
4 America, the number 4 is significant; 08/08/08.
the Medicine Wheel, for examPle, has
4 quadrants and signifies 4 seasons, 4
stages of life, and the 4 states of well-
being, among othet thtngs.
t
Thete ate 9 worlds and heavenly tealms
. In Nofth America, U.K., and Germany, the in old Norse poems that describe these
number 4 may be considered lucky because mylns.
of its association with the four-leaf clover,
itself a sign of good fortune.
. In China, Japan, and Vietnam, the number
the Netherlands, Germany
U K., France,
4 is often considered an unlucky number.
Norway, Sweden, and SPain' to nanE
In Cantonese, the word fot "4" sounds very
a few) and usuallY does not aPPeil n
much like the word for "death."
elevators or flight numbers-
. In North Ametica, U.K., France, the
7 Netherlands, and elsewhere, the number -a r . Sometimes called'la nlb bolA'tln
7 may be considered luckY because | ) number 15 is consirkred fdy h sg-t nd
it appeats so manY times-in the Old Spanish-speakirg cortts d 1-l ArEn-
Testament as the number of days to cfeate The LuckY 15 isaPqfrEhcorrr-
the world, as the number of days in the
week, etc. Lucky 7 was one of the games odd/ .
on the TV game show "The Price is Right," Even
and the numbet 7 appeats in many games
of dice.

International marketing and the four Ps | 313

 The four Ps: Pro otion
Promotion is critical to a company's success internationally. It lets
consumers know the product or service is availabLe, lts features,
how it can be useful, its advantages and disadvantages, and how it
Comnares
LvirryurLJ Lv the
tO Corrh^ri+i^h 11^ LUII
Lrr! LviTIPCLILIUII. tPdrIy LdII U)C IIld-lly f"^^S
^^'-h^ Ly Ptj- Of

promotions, including:
. Advertising
. Premiums (fiee goods offered with a purchase)
' Coupons
a Pnint-of nrrrchesp
a
Contests
a Pprqonel qpllino
o Social media

There are three ways to promote and advertise products if you are
nlrnnino tn j6fplnr+innnll'
coll IllLLllldLIU]ld.LLy.
Lv JLLL
P(qIIII1116

Use existing ads-Advertisements for products sold in Canada and

the United States are often the same ads. This is possible because
the accents are not very noticeable and the cultures are srmrlar. The
company can save money because it is able to meet more customers
with the same message.
q "p11.cv|
*_"J
- - '''"_
LT-ea i n-atrpn Translate ads-Print ads and commercials wlth voice-overs are easy
qlnro in rhp Hrrie hpno nictrirf +^ ^,r^^f fLU^ OllULl.l.CI
^-^+L^- LvulrLrrv
^oltntrv hecarrsp thp
LU dUo.PL uLLquDL LffL words
v can be translated
rJ|i-r --- LrLtlta
ru rLr uu, f l^ ir: Aro lz tr- <lnor
vlfq ]\Mubo__ n
.tco- tr ( a rf . roJr ^^.i1,, i-+^
eas.LLy .LnLo many
--^,,l^-. ranguages.
^r.uo
life coLourfuL " The coLour red r+ i^
lL lJ OLVVd.yJ
r;rc-'tlt to
'r'-^"^ \-^t-L-LIILLTLL Lv ru] exactlv the
sav LAU!LLJ LirL same thins
------O in another
---
-jxn.i| Vl -n.du -*---,
fliat ^Li^r
lllllla lJi( o()U
.,c^ Oo )15
bv\
lr ,lr 21^:lnv 5111n'rjplro [96 language. Trying to repticate an advertising campaign in a language
KFC other than the one in which it was originally written is possible,
 but can lead to some rather embarrassing mistakes. In China,
I for example, KFC tried to translate its well-known advertising
I
slogan "Finger Lickin' Good," but in Chinese the slogan read as "Eat
Your Fingers Off." Not exactly what the advertisers had in mind!
Advertisers must also take care that the pictures used in the ads are
understood in the new country.
Create new ads-If the message is better tailored'to individual
cultures, advertisements will be created from scratch. They may
I retain a global theme but must adapt the message to the culture. For
t,
example, food products and cosmetics are different across cultures
t
and need to be adapted to suit the consumers of a specific culture.
Many coinpanies create websites that target consumers in specific
countries. The internet has made it much easier and more affordable
to customize advertising. In addition, wherever consumers live,
internet advertising can target them based on their preferences,
indicated by the websites and ads they explore and the products they
purchase. This information is known as clickstream data, and has
revolutionized the way businesses reach specific customers around
the wortd based on their browsing habits.

Social Media
Social media also has a role to ptay in making a company's products
relevant to other cultures. When products are promoted by people
who share characteristics with a particular culture, those products
may be accepted more readity. Some internationatbusinesses also
align themselves with bloggers or YouTirbers who have a large
following. These individuals, often skilted in communications and
promotions, are known as influencers and can help businesses reach
even more consumers.
1n a
rer
rypica. shopping mall, You
-ped lrr sep oY2rn os oI both
consumers and compertrior and
now r hev rm oact the businesses
there
316 | Chapter 8: Marketing
ffi.3 The two Cs of marketing
Once a company has decided on the product, pri:: : -=:= and
promotion, it need.s to make sure that there is en- *-:1 ::nand for
whatever it is marketing. Demand lnvolves ti'rc :--'--:-:: -actors:
consumers and competition, often referred tc :> ::-= -,', : Cs of
marKetlng.
As rrorr will see ttnderstandins "-o the need-. :::::--.-=:-::-s and
"^'- ----
economic
L!Vrivifrf L caoabilitieq
Lqyuu rtrLrru nf rrnrrr consrmers -S:-;=:---=.::l any
'::-:=:-:a:ding the
business, big or small, local or global. Sim- -=: .
Iifferenf frrneS
uIIlsIsllL LyPLo vr 56mnofitinn ond'p:.--l-:::.', --- :-:::lentiate yOUf
Of LvillyLLfLrvf
nrndrrrt nr spnrirp r'onstitute othel'.'-:a'.'.-.' -:-:::-=:-: =::ects which
we w111 explore in this section
 Countries don't buy products or services-people do.
Just iike
domestic marketers, international marketers must determine the
composition of the consumer market (often called the target market)
in a foreign country for the goods and/or seruices they are selling.
Most often, this involves looking at what people in a selected country
use and then establishing whether or not the goods and services you
provide wil1"fit in."
Canadian businesses wishing to se[ abroad must be very careful
of to avoid ethnocentrism. Ethnocenrism is a belief that your
own cutture, values, beliefs, and customs represent the right way
of doing things, and that value systems of other countries are not
important. In other words, just because we prefer certain products
in Canada does not mean that the same products wiil be popular in
other countries. There are several ways for you to avoid ethnocenurc
thinking:

' visit the country you want to include in your marketing plan.
Look around the local shops, eat in locat restaurants, and
observe the people's daity customs and style of dress. Do not
eat in the hotel or vlsit the local tourist attractions, as you will
not experience the country's culture and customs.

' Read tie numerous counElr profiles available on the internet,

especiallythe information from the Global Affairs canada and
International Tfade and Investment Canada websites.
' offer your produc(s) on the internet in the ranguage of the
target countryto determine if there is any demand at al..

' once you have researched the country's culture and customs
thoroughly, you can decide if your product has sales potential
in the selected county- your product has sales potential if
people in that countrlrwant it and have enough money to pay
for it.
There are three ways of differentiating consumers, studying
their buylng hablts, and establishing a target market. These are
demographics, motivation, and economics.

The two Cs of marketang | 317

 Demographics
Demogr cs are studied.by divid.ing a\arge market into age,
gender, educatron, marital status, lifestyle, and household folmation.
These demooranhir-s diffpr inridplrr A.ross cnrrntrips For pxamnip
in Mexico, 27 percent of the population is under 15 years of age; in
Canada, that number is 15 percent. China now has 33.5 milllon more
men than women. In Denmark, the average age for a man to eriter
marriage is 35; for women it is 32. In Indla, it is 26 for men and22
for women. A third of all adults in the Netherlands have a university
A^F-^^ nr\cJcdrLrrrrr6
^-^^-^1^i^x the of a foreisn market is critical
\rc6rcc. ---* demogranhics
**^^^-o
for understanding how a target market can differ international$.

Motivation
Def erminins whv neonle buv is critical to selling a nrodirct This
can be especially tricky in an international market when cuLtures
infl ttencp nrrrcheqino dpriqinns

One theory used to determine why people buy is Thorndike's

Law of Effect, which proposes that people purchase products to
gain safisfaction or to avoid nrrnishment. For examnle.
yLL, we nrtrchase
vv L yr

prcducts such as music, video games, and spofts cars because they
pro,.;ide us wlth satisfaction and fun. We buy products such as
ins*:a::e, backup cameras in automobjles, and bike helmets because
In Denmark, men and hromen
-"ld,O c dV s'lq " i-rr r h;ir t: e . :=.: ls a'roid or deal with situations that may have punishing
h:--ip< qp;1o rV,,:-" Of hiS ef::::-. :ta: is cause us pain). Some products and services provide
--.1; ir -) nisL lpmrp-,)n-C
bc::-.=--.:a:::rn and punishment avoidance. For example, eatjng
etn hpln mrrlrptprq rorrh
'*'- "_'r
th r. j. alq c -r: ::: . -::s ::le satisfaction of an exceltent meaL while avoiding the
c rd je" W'f .t o r^
seIVlCeS :..-'.'-=-- .lt'-i arpn:mtinn rnd tho rij5hg5
 Another theory used to determine why people buy is Mastow's
Hierarc of Needs. This theory states that humans experience
five leveis of needs-physiological, safety, belonging, esteem, and
self-actualization (see Figure 8-4). It also states that people are
motivated to meet these needs, starting with physiological needs and
moving upwards, and that a satisfied need is not a motivator. ln an
international marketing context, different countries and cultures can
be considered to be at particular levels in the pyramid. For example,
emerging economies will be predominant$ at the physiological and
safety levels, cultures that are polychromatic will be at the belonging
levet, and deveioped economies will be able to focus on esteem and
self- actualization needs.

Figure 8'4 Maslow's Hierarchy of Needs

BETONGING
Interpersonal connections
E.g , family members, colleagues, religious gtoups

The tro G rl rrhtig | 3r9

 - 'lr rr lq a'. r r L'o I :- j
',/a
e 'ied jr rhe s..n tcfo:e 5e':E
Vanilla
f .^ao..p.t a- <pt r:-(et
Canada is the fourth-Largest importer of vanilla in the world. We
get vanilla fiom the pods that grow on the vaniLla orchid; in fact,
the word vanilla means "little pod" in Spanlsh. Spanish explorer
Hernando Cortes and his crew learned of the orchid and its
wonderfully scented pods in Mexico in the 15OOs, and sent the flower
hrnlz fn I'rr.nno fnr nrrlfirrntinn lrLL rffomnts tO gfOW
All qLLLrrfPL vv the
Lli! nlant \OUtSide
|/LUTjL
of Central America failed, however, because the orchid couLd onLy
be pollinated by the Mexican Melipona bee. Over 3OO years later, a
young French-owned sLave from Reunion Island, near Madagascar,
discovered a orrick wav to nolLinate the nlant bv hand. From that
nninf rrenillc nrrlfivrfi6n
PVrrlL, V qllltLO LULLIV CtLrvtr ryrLuu.
cnrprd

ALIvanilla comes from the original Mexican species of orchid,

but there are now three major areas of the world where vanilla
is grown: Madaoascar end other frnnir-:l areas along the Tndian
Ocean, the South Pacific, the West Indies; Central Amerlca; and
northern South America. Today, 75 percent of the world's vanilla
comes from Madaoascar and the island of R6union (a r6f vrl of
\u rresion

France in the Indian Ocean).

320 lChapter 8: Marketing

 ,szil".
lt -- |

vanilla is a very labour-intensive ::.ce to grow and process. As

a result, it is very expensive. In adc1,-::, typhoons, hurricanes,

vaniLla is widely used in baked go3:) :::fume, aromatherapy, and, of

COUISC, lCC CICAM.

Because of the enormous po:*.=:-:. :i the flavour

and the fact
that pure vanilla extract rs expens_.-: _: g:cw and ship, creative
businesses developed artificiai,.-a:-... :-:cduct developers can
now add "vanllla" scents to soa: :::- ::t_: and even air fresheners,

that 95 percent of "vani11a" proGuc:s a::-.--,- contain an artiflcial

vanilla substitute called vaniltln, :.. r-::: :s ::, rhe real thlng. vanillin
is made all over the worid, inciuci:tg Ca::a:=

In 2015, the price of vanllLa started:3 _u::e as€ as consumers

demanded more natural ingredients rn rhe-: icci. Big businesses
like Hershey's announced rt woutd use on.f ia:u:ai ., anilla rn 1ts
chocolate bars. Compounding the problem was a c,\,c-icne that
hit
Madagascar in2OI7. VanilLa that sotd for gtOO per kilogram in
2015
was setling for $600 per kitogram in2OL7.

{heek Your Urcderstanding

L Where is vanilta grown?
2 Why is vanilla expensive?
3 state the distribution chain that vanilia takes to be sold in
Canada.

4 what marketing strategy should be used to sell vanilra in

Canada?

5 If you were a Canadian retaiter selilng vanilla, what pricrng

strategy woutd you use?

=
,l :- -3-Keting | 321
 Economics
Can your consumer afford your product or service? How muci
disposable and discretionary income does your target market have?
Disposable income is the amount of income a person has after
their taxes are paid. Discretionary income is the amount left after
the necessities of life have been paid. Products in underdeveloped
economies wiLl be more successful if they are a necessity. Luxury
nrndrrrtq rnrill qrrr-cperl mnrp in dcrrclnned economies where
VVftL OUILLLU
PIUUULLD

consumers have more discretionary income.

n
urrc
^^
r.'^r'
vvq1, +^
uw uw'ryof€
-^ffin prices across countries is the Big Mac
Index. The Economist created the lndex in 1986 as a lighthearted
r^r2\/ tn .omnere nrices and nurchasing "'--o oower
r- worldwide. Because
r R1o M:r ren hp in mrnrr narrnfrioq feCOgnjZed, and
- - forr-i
iS Well
-- -II(-L 111 1IId]]y LUUrlLirED, lD vvELt rLLv6rrf!Lur

is standardlzed, it ls a good tnternational measure. It is also easy

for non-economists to understand. The Big Mac Index is useful for
travellers to determine how expensive it may be to eat in a country.
Marketers can use it to quickly and generally show how much a
consumer can afford.

Many companies have attempted to translate ad slogans

into other languages-with undesirable effects. Here are a
few famous blunders
Clairol had a curling iron called the "Mist stick." It did
not translate welL into German, because "mist" is slang
for manure.
Braniff Airways' slogan for its luxury class seats used
to be "Fly in Leather," which means "Fly Naked" in
Spanish.

Pepsi discovered its slogan "Pepsi brings you back

to 1ife" transtated as "Pepsi brings you back from the
grave" in Mandarin.
. IKEA, the Swedish furniture manufacturer, called one
of its desks "Fartfull."

322 lChapter 8: Marketing

 Shelves stocked r,vith popular
brands ofpop, juice, iced
tea, and water all in dlrect
The competitive market rn'ithin a rarget country is important to a
competition with one another
business wantlng to seli a proci;c. c: service there. Why would a
consumer in that country'".rant to buy your product when there
are severai products that are as good as or better than yours? when
lululemon athletica, the Canadian clothing company, entered into
the united states, there existed strong competition from Nlke,
Reebok, and department stores such as Macy's and Nordstrom.
Competition can be either direct or indirect.

Direct competition
A company's direct competitors are those firms that provide
products or services that are almost-;identicel to fhp nrndrrnr n
;;;;
s e rv i c e th at t h e ...p ;;;; ;;'.';'#* ffi : i.'. i.'i ?'.,.
sells its product in another country, it is facej with competition from
PepsiCo and locaily produced soft drinks.

Indirect competition
In every country, peopie have certain amount of discretionary
a
income. They also have reguiar spending habits and customs. As
these spending habits are difficult to change, any product that
competes for consumers' money is a competitor. For example,
indirect competition for Coca-Cola soft drinks would be juice, milk,
and water.

Items such as potato chips, candy, and fast food are competition
too. A consumer spending hrs or her discretionary income on a
hamburger will have Less discretionary income to spend on soft drinks.

--: :.: G t' .ne-(etrng 323

 Competitive advantage
Marketing businesses use the term competitive advantage somewhat
differently from the way that globai economists use it. In globat
economics, competitive advantage refers to one country's specific
resources, Labour pool, 10cation, and other attributes that give
it
an advantage on the worid economic stage. (see the discussion of
Canada's competitive advantages in Chapter 3.)

In marketing, competitive advantage refers to the ability of one

company to produce a product more cheaply than another company,
or when it has an edge over companies that make similar products.
These advantages are often temporary, as the competition
strves
to make their products cheaper or better, or add special features.
The folLowing are typical competitive advantages for products
and
services in a marketing context: lower costs of production, lower
distribution costs, product differentiation, and brand ecuitv.

Lower costs of production

This resutts in a iower cost to the consumer. The theory of
economies of scale suggests that the more products you can make
in one factory, using the same Labour and other overhead costs,
the cheaper each unit wiLl be to make. Giant companies such
as Coca-Cola have efficient, well-run operatrons that turn out
millions of cans of coLa every day at a lower cost than their smaller
competitors. Coca-Co1a can either realize a higher profit from this
efficiency, or lower its costs to be more competitive. Because of its
lower costs, Coca-co1a has a competitive advantage in countries
where it buiLds its own factories and can produce its own beverages
more cheapLy than local beverage companles can.

Lower distribution costs

companies that have factories within their target country have
lower distribution costs. shipping beverages from a bottting
plant ln Europe a1L the way to China, for example, is prohibitively
expensive. Coca-cola's 35 bottling factones in china provide
a significant cost reduction in thelr product and a major
competitive advantage over beverage companies that have fewer
or no plants there.

i
t
I
I
I
I
324 lChapter 8: Marketing
I
Product differentiation Singer LesLie Grace appears
'r rr^1T n't Inr,rprv rrn-11g1
A difference in flavour, quaLity, packaging, colour, scent, a:.: :: :: ad for Procter & Gamble's
can be the reason that a customer selects one product ove::::::_:: Ga-n detergent; ceLebrity

similar nroduct For examnle!j air =::orsement can reinforce

freshcnprs and
qtr frLojjLltLru urru lerrndnr
Luujjut y dc-=---=*-:
u-__-____-- ::: : -.ct differentlation
are differentiated on the basis of scent.

Brand equity
Brand equity is the vaLue of a product's brand in the market, c:
the number of consumers that can identify the brand, especia,,i Section review
consumers who name the brand as top in its category. Good
hmnd pnrrirrr ic mncr vrLLff
often the
LtfL fresuLt
louLL of cleffective advertisins and
vI
1 State the two Cs of
mrrl:pfino
promotion. On the international scene, many brands have gLoba.
equlty, meanrng consumers around the worLd recognize them
2 What is a target market?

because of the exposure the brands have had in various medla, such 3 Define ethnocentrtsm.
How can a marketer void
as teLevision and movies, as well as through therr presence in ma.]or
ethnocentrism?
cities around the world .In2or7, the top five global brands accordlng
4 Describe Thorndike's La',.,- ::
to Interbrand were Apple, Google, Microsoft, Coca-Cota, and Amazon. Effect.
5 Define dtsposable::::*= ,--
rli<rrofinnnnr inr"*:

b Wnat 15 tne ::l - -:: -..-:

t niFF^-^--:---: --
, ullltrltr_l-_:-: _:- :-___ _:_-
^-l i--.--
ollul__-__:__ __ _:-
-.'.':-::
8 .: =
'-
- ---1 =---- =

-._-
-:- .-_ i _ : -_ _ . -::

32s
Surveys are one source oj
market research data SurveYs
can be done bY the corPorations
lhemselves or bY a Lhitd PartY
" Market research and
marketing sttategies
organization that collects data
on behalf of other comPanies Everyone in marketing needs to understand the four Ps and
the
two Cs-but they also need to appty this understanding to their
have
business and their specific markets. International businesses
cause, as You ha rket
quite different i om
on to do market uitd
a solid marketing strategy for your product or service'

Market research finds and collects information needed to

successfully sell a product or service and make marketing decisions'
It can be used to better understand customers and their preferences
(the four Ps and two Cs), identify growth and profit opportunities,
detect ch in the market, an
competlt tional context, th uld involve
discoveri culture, language, regulations'
economics, and other areas.

326 lChapter 8: Marketing

 Data can be collected using primary research, which means
the company collects the data itself or hires a market research
firm to do so. The information gathered relates specificaliy to its
company's questions. Examples of primary research include surveys,
questionnaires, observations, focus groups, and interviews. The
advantages of primary research are thatyou can get information
specific to your product or service, and you can specifically target
your customers. The drawbacks are that it is costly, time consuming,
and is not available immediately. When entering a new market,
it would be wise to hire a local market research firm that would
understand the cultural differences and nuances of the market.
Data can also be collectedusingsecondary research; in other
words, data that has been collected by other sources and can be
looked up. The advantages of secondary research are that it is
readily available and not as expensive as primary research. The
disadvantage is that the data are general and may not be specific
to the company's questions- There are many sources avaitabte
to help companies do business internationatty- For exemple, the
Canadian government provides exporting and country data on
websites such as:
. Global Affairs Canada
. Innovation, Science and Economic Development Canada
. Expoft Development Canada

' Canadian International Trade Tribunal

Other sources of international information can be found at:

' Executive Planet

. Organisation for Economic Co-operation and Development

' Trade organizations

. Individual country websites
Many research companies perform studies on international
markets that they sell to interested buyers. These studies might
cover population statistics, competition within industries, product
category demand studies, and market profiles. These studies often
cost hundreds even thousands. of doltars.

Market research and rrbl-l tffiegies I 327

Bicycles
Groupe Procycle (ProcycLe Group) was started in 1971 in Saint-Georges
de Beauce Ouehec a^*J cltl ^^^^*L1-' "^r^.^+
^.^ cl)JClIl.ULy fnr hir-rrrlps Tn 1977
PLclL_tL r\Jr UrLy LLcJ- rrr LJ t t ) the
|

company began manufacturing its own Line of bicycle frames, and

d -r^^-+ +i*^
^ JIIUIL r^+^- ^,-ned cl]I
LII]IC td.L€] )IBIItr(l an C.\LLLI.D]VC
exCluSive liCensino aoreement wjth
LfLcrrJrrr6 u6rLLrrrLrrL vvrL the

French company Peugeot to manufacture and distribute Peugeot

bikes in Canada. Later, Procycle Group acquired CCM (Canada Cycte
and Motor Co. Ltd.), the oldest bicycle manufacturing firm in Canada,
and Rocky Mountain Bicycles, a well-respected manufacturer of
h jsh-nerformance mountain bikes.

Procvcle adderl Orvx. Miele Mikado. and Velo Snort hikes to

its line, and manufactured the Supercycle brand for Canadian
Tire and the Vagabond brand for Home Hardware. In 2010, the
company decided to concentrate on the Miele and Rocky Mountain
lines. In 2OI2,It decided to focus only on independent retailers
and discontinued its sales to large chain stores. One of its newest
nrodrrrts js fhp plpctriC bike Called the eVox The comnanrr js
currently Canada's top manufacturer of high-performance bikes. It
has invested substantially in improving bike technology and holds
numerous patents in North America.
 Procycle markets its brand in more than 30 countries wor,i.,'iie
and has sold more than 7 million bicycles. The company uses a
centraUzed marketing strategy, keeping production in Canada
whlle relying on a Canadian sales staff to distribute the company's
products to bike dealers in different countries.

Check Your Understanding

II r^rL,^+
VVIIOL ^-^,r,,-tq UUED procrrr.le
PIUUULLD dncs TTVLJLLS make?
lrrq^

2 State the distribution channel used by Procycle.

3 Research the price of three Procycle bikes. What pricing

strategy is it using?
4 Find two other direct competitors for the company.
Rirrrrlp q:lpq :Trr<: --.
5 u LqLL fnrrr
Qteto rv uf frrnoc
LJ yro vr indirort rnmnptitinn fnr thp cnmnnnrr
nf world have risen as :-:'
infrastructures have
5 Describe the target market for one of Procycle's products. < nnnrrpd hil'p arnd---*. .'

saje lrave PicL.rred he:. , ',

7 State three countries where the bikes would sell well. r'kc rarkiroln- rPA'a -':.-
station in Amsterdam -:.:
Netherlands

'I
hums up (ngnt/ Is olsptayeo
alongside Coca-Cola and Fanta
in a market in Punjab, India.
Coca-Cola bought Thums Up in
i993 to try to drive Pepsi out of
Indla's market.
330 | Chapter 8: Marketing
When companies decide to expand international$, they need
to formulate and execute a strategy speciflc to this endeavour.
Companies may choose to buy a company in a foreign country
or launch their own product into a new countqr- They may use,.
an acquisition stratery, centratized m etinglstrateg, or
decentratized marketing strategy.
Acquisition strategy
This strategy occurs when a company purchases another company
in a foreign country. Often, it is a competitor that would etiminate
the competition in the market. The advantages of an acquisition are
that it buys the employees, management, reputation, and cultural
expertise. Fewer cuitural blunders occur. For example, Coca-Cola
purchased Thums Up, the number one cola sold in India- The
company considered kitting the competitor but decided that buying
the brand would help compete against Pepsi.
Centralized marketing strategy
-l-tr
r i. JLjdLfYV
rttJ -r-.r^x u):) -l- - : -*
L__: -. ..
Sf;rhrrrks farcxsr-'t ::--^-"':-:---' - :
thesamethroughouirt:e .. :- : --:= - -aa r=::a :-t:::-. ., -- *..-*:
:nd iqptc\/lnrprnonizpin rnrr.^rrnrnr Th^ - l.--o__
Section review
. , rc ou. ^rrL:-
-obc) !.
-
-___) )iralegy
include cost savings and an opporLunity ro build a gLobalbrand One I What is market research?
major disadvanLage is that cultural m istakes are o[ren made-just iook 2 What are the advantages and
at the internationaL blunders hlshtlshted in thts book. disadvantages of primary
research?

Decentra lized rna rketing strategy 3 What are the advantages and
disadvantages of secondary
This stratesv tailors the markefino elempnrs qnpr-ifir:llrr fn rhp
- --'" ""*--o research?
country. This may include pronotional plans distrjbution methods, 4 Whywould a compan'.-:-==:
nricing sjze oIn.odrrcts ard :dve-ris'ro The oarent comDanv lv rllyqii) e mrrlrpfino qtreipc- -l
often hires locaL advertising agencies, market research firms, and 5 T)pfinp rrnrricii'-- -- -:--:-j-
''ke - - _ :-
^^+-+i-'^ r Snmp
JotC) ICPlC)CIILctLIVCJ. Jurrttr romr:nipe
LUtt./dtlttJ -_r-.' Me Done d s ,,,-J rh:nop
_ onlrr ___*--o, Give an exa::::.:
Oa-f iallV. Bip Mac
.,,A "'b je cnl.l r^,n-l'-l-.'.,1o \--r iq Tndia qo
rrfurq, aS vorr
Jvu learned|n
LLcil 6 Define cg-..-:..::: - :'. :. -:
a]--^f^- A :r:^
lrropLcr a, tL l) o -Li-l-^^
^ Ll.trLr,\trI] n,r-r.--^'- nr^- L
lvtdttdld.Jd.tvldL. alhpr:d:nt:rrnnc i6 Trnon JLIU_g-, J- -_ :_ : .-- :
-_,-_ *-._f _-_-Jdpdll
'L--a:
a ferrvaki brrrger. shrimn lllggets ard a gree- tea n ilkshake
include *--"j,,*bb- 1 :: -1-:-: --i:
-:- :. -_- _-l-::_-- __ : --

JJ I
 Chapter Review

1 Explain how marketing activities are like a kebab'

2 Why are importers important to the success of international

business?

3 Describe how e-commerce can turn a small business

into an
international business.

Why wouid the price of the same product be more expenslve

1n a
4
foreign market as opposed to a domestic one?

Explain the difference between price skimming and

premium
5
pricing.

6 Explaln the difference between a centralized and a decentralized

marketing strategy. Provide examples to support your answer'

in India?
7 How would a fast-food restaurant adapt its product to seil
Research how one company has done this'

g what Canadian products would sell well in the foliowtng countrtes?

a l4exrco
b Udtec Kingdcm
c Japan

g provide an example of a product that sells direct$ from the producer

to the consumer.

10 Name two Canad.ian brands that have brand equity in another

country.
I
indirect
11 What is the direct competition for lululemon? what ale some
competitors?

332 lChaPter 8: Marketing

 Search online to find a print ad that was made in a non-English-
speaking country What wouLd you need to change about the ad
before it could be used ln Canada?

t3 Search online to find an advertlsement that would be considered

xl^}- .l L, i^
gruud t
rrr t].^+
LnaL i+ communicates
^^-, to everyone in a similar way. Justify
your cnorce.

L4 Visit the website of a globat brand such as Coca-Cola, Disney, Apple,

or IKEA.

a How "globally friendLy" is the site?

b Describe how consumers from non-English-speaking countries
could use the slte and any difficulties they may have.
c Does the site make the company look like a global brand? If it
does, how does it do so? If it does not, how would you change it to
accommodate a Larger globat audrence?

Joe Chemov, VP of ma:ke'ung_c: I::>_g:::Sc:'':: s:_:: G:::

marketing makes the company -cc.< srlai. G:ea: :ia::::_:ti ::t-.::s
the customer feel smart." V/hat do you thlnk he meant by this? Finc
an ad you believe exemplifies this quotation and justifiT your choice.

L6 what pricing strategy would a company use for a cerealjust entering

the German market? Explain your reasonmg.

17 AJapanese clothing store marks up its prices 70 percent. what would

be the selling price for a jacket that cost the store 25,OOO yen? Explain
the pricing strategy being used.

18 An Irish company is offering the terms of 3ilo net 30. For a purchase of
$1,000, answer the foLlowing questions:
a When is the payment due?
b How much wiLl the company pay if it pays in 30 days?
c How much will the company pay 1f it pays in 10 days?
 19 Luxury cars are selling well in China.

a Using Thorndike's Law of Effect, explain the specific pleasure and

pain you would emphasize to advertise luxury cars in China. Using
this information, describe the content of an advertisement.
b How would you use Maslow's Hierarchy of Needs to market luxury
cars in China?
c On what ievel of needs would you focus? Why? Using Maslow's
theory, describe the content of an advertisement.

20 You are the marketing director for a Canadian chocolate manufacturer

that is planning to enter the market ln the United Kingdom.
a Explain three changes you will make to the package.
b List and describe two methods of promotion you will use.
c State two demographic characteristics of your consumer.
d Explain how you would use Maslow's Hierarchy of Needs to market
the chocolate.
e List two direct competitor products for the chocolate.
f List two indirect competltor products for the chocolate.
g State and explain two sustainable competitive advantages you can
pxnloif fnr fhe chocolate.
h Should you use a centralized or a decentrallzed marketing strategy?
-LXDtaln.

334 lChapter 8: Marketing

i

I
t
Inquiry Activity
I

I In thls chapter we studied the four ps and two Cs of inte:::ationai

marketrng. we also ed at how each of these eiemel:s -s adantecl
to meet the needs o international market.
Locate an advertisement (commerciaL, print, socia.:::::_a, or
other
medla) from an internationai source that you find tc ::
:::arive and
rnnovative. Create a presentatron (use the tips foun:
-:_ _:: Business
Skills in this chapter) to show your findings to the :.=..
The presentation should include the foilowlng:
. The ad

" Why you thlnk it is clever and rnnovatrr-.

. The target market to whlch the ad is a:::_._:-=

The presentation should aLso inctude four :: ::. _ _

_ -:_i :teces
of lnform ation:

' Ilow the ad is different from one f:: _ _-_:- __- ::: **:: or
serulCe

' Application of one of the :::::_.-=_,::,=.::-=_:-..

IJow the product o: ser.-.:: _: ::a:,:: ::: =:- _:-:=::-_:_:rai
market
" The marketing strategy used in the ad
. The pricing strategy that the company did or should
use
* How dlsposable and discretionary incomes appty to the
product or servtce
" An analysis of a competitor,s ad

Inquiry Activity | 335

During school, you have been asked to present in many classes.
This may have been a stressful sltuation for you. Many people
find standing and speaking to be overwhelming. With practice,
presentations get easier. In business, being abie to communicate
your ideas clearly and succinctly is criticaL. At work, your
presentations may be to just a few people, to a small roomful,
or to a iarge auditorium and foltowed ontine by millions. In an
international context, you may also present in another language or
to an audience that speaks another language.
The following are guidelines for creating and delivering great
presentations.

Tips for making great presentations

. After collecting your research, create point-form notes for
yourself. There is presentation software that can help. your
slides should also be in point form with few words. If you
can
---- reolace
- -r'*'' words wjth a njcfrrrc sn much the better.
. Create an interesting beginning for your presentation to
hook your audience.
. Practise, practise, practise. You need to be confident in your
material. The best way to do this is to practise. pay special
attention to your introduction and your conclusion. Some
sources say you should memorize your first three lines. If
you are presenting with a group, the group needs to practise
together a few times from start to finish as well.
You also need to practise with the technology you are going
to use during this presentation. You may be presenting
in another location, so you need to know that you are
competent using that technology.
Dress professionally. It witt give you confidence.

When presenting, do not read. Try to provide more of a

dialogue than a monologue. Engage the audience. In a
classroom, it may be having the class parficipate in an
activity. This wilt make it easier for the audience to retain
the information you are presenting.
 Tf ___o in
vorr ere nresenting ___ a o- - -'r' sit while the other people
- group,
arc nrpsentins. You do not want to draw attention away lrom
thp nerson sneaking. As well, while someone in your group ls
nresentins look interested. If you are bored during your own
presentation, the audience will be too'
If you stumble during your speech, iaugh, forget it, be
confident, and go on. Everyone stumbles
Have a section (lncluding a slide) for questions' Put the
conclusion (including a sllde) aftei the questions so it is clear
when your Presentation is ovei.

uestions
1 Why are people anxious when giving a
nrpqontefi nn7
2 Have volr ever been anxious during a
presentation? What happened? What could
vnrr learn from this situation?
3 Thlnk of a time You gave a good
presentation. What made it good?
Activity
Create and delivel an elevator pitch. An
elevator pitch is a presentation to one or two
other people that is the length of an elevator
ride. Create the pitch about your job, your
favourite activity, or something else you know
well. Deliver it to one other person and have
them critique it. Listen to theirs and critique -:
back.

Sr, 5 33r-
 ,,,

Leanning By the time you finish this chapter, you shou-: :: a: -: :::

0bjectlves ' Compare the logistics of delivering a procl:-:: a -:::- a national,

or an international market
-,'.:',-:
' Describe the key factors that influence th= -: -"' r-:h a
company may deliver its products to an i:-:=:::::-::a. narket
' Compare the advantages and disadvantag:= :: ::-:::ent modes
of transportation for distributing a prod;:: :: :--:e:ent world
markets
" Tdpntifir end describe factors that create
crrnnlrr chain
"\^I-r'J'..*..^

' Explain the roles of organizations thar :an ass,st a Canadian-

based international business with its suppii: 6[311

338
Key Terms third-parry logistics (3pls) omnichannel
point-of-sale terminal inbound distribution )
just-in-time 0IT) inventory outbound distribution I
logistics systems Ex Works (gxw)
production logistics letter of credit carrier
business logistics supplier management bill of tading
supply chain outsourcing containerization
supply chain management nearsourcing freight consolidation
(SCM) insourcing crowd-sourced delivery
vertical integration offshoring optimization
horizontal integration inshoring single-window system \
Logistics is part of the dartY
routine of all business. Here, a
small-business owner checks on
her inventory.
340 | Chapter 9: SuPPlY Chain and Logistics
9.1 Defining logistics
An important function for international businsss 6 menelirtlfre
movement of goods from one country to another. Log!fu
r(nsists
of the acquisition, transportation, and storage of matedabftm
the poin! of origin to the point of consumption- Logistics B prt of
the daily routine of manufacturing companies, retail Sores, senrice
busine ss government agencies- Sraes$il
es, home owners, and
logistics gets the right item to the right place attle rigbfttime inthe
right quantity at the right price. Logistics was original\r a military
term referring to the science of pianning, organizing sslmanaging
the movement and maintenance of military forces-
^dior-ino .o-
rLUBr>LILD uc \.lOmeStiC, internatiOnal, Of a COmbinatiOn Of
Lclrl ho
both. Domestic logistics is the distribution of goods ritrin a country,
while international logistics is the distribution of goodsbeyond the
c ountry' s b oundarie s. M anaging lo gistics rnternationalty
poses even
more challenges, as shown in Figure 9-1-
 Figure 9-1 Comparing lnternational and Domestic Logistics

Feature International logistics Domestic logistics

Transportation lrternational logistics may require road, Domestic logistics may iequire rail and
air, raii, and/or sea tfansport road transport.

Management International logistics will iequire a Domestic logrslics requires a logistics

corporate logistics manaqer who works managef to oversee the movement of
with other managers. goods.

Cost Extfa costs include tariffs, fees, and Costs are generally lower.
changes in exchange rates,

5upply Chain Knowledge of local culture is essentia , Cultural barriers are usually lower and
Relationships ir manag nc ihe supol'i ciain
Trust is key re at;0rsf ips is usuar,,, ess
i-1Tll!

Production logistics
Production logistics refers to logistics processes within a
Lvirrpo.rry, "^"^ll--
urud.Lry d. mnnrrfr-+,,-i-d l-,,^;npqs
^ -Lrrclr.ruIdLLuIIltg pu5lrlc)). prodrrrt1nn
rruuuLLrutr lncri ctirc
LUb-__--_
ensures that each machine and workstation in a plant has the
.ixL'+
rrBrrL *^+^-i^l
rrralelta[ i^ rnefi Ohf nttentifrr lnd quar]Ly
tn +L" nrrclif.r ar nf rne
f'lrn rrgnt
rja'L+ point in
r

time. Its main goal is to increase efficiency and production rates,

'-^-'i* j-i-- d^ r^
lrldAlIlIlZ-LIIB ^+^TV's outDut while
IdLLUIJ vv rrrLL maintainino
irrq___ ____----o nrodrrr.t nrraiifrr
-1 *-.--J
.

Production logistics focuses on maneoind

vfr rfrqlrq6rffb inrrpntnnr
rrr v !rrLvf rnd
j qrtu nrrcl+-,
gudLILy
controL, with little emphasis on transportatlon.

For example, car manufacturer Fiat Chrysler ensures it has the

pr0per inventory when manufacturing its vehicies. Too much
inventory costs money and vaLuable space; not enough inventory
means production delays and wasted time. As the vehicles are
being assembled, Fiat Chrysler checks that each station has
enough parts-windows, seats, tires, steering wheeL, suspenston,
and all the other components-required to make a car. Inspecting
the process for quality aiong the production line and preventing
delays or stoDpages keeps the manufacturing process efficient.

Defining logistics | 341

 Business logistics is responsible for ensuring a steady flow of needed
materiais and information through a network of computer terminals,
transportation links, and storage facilities that move raw and finished
materials through all parts of a business. Business logistics is a
relatively modern concept that evolved in the 1950s as a result of
the increasingly complex tasks involved in exporting ald importing
goods and services to and from global markets. With increased foreign
business activities, companies had to deai with foreign transport
companies, foreign suppliers, foreign storage facilities, foreign rules
and regulations regarding tariffs and duties, and foreignbusiness Laws-

Fluke Transportation Group is one example of a ioglstics company

that provides full distribution services. Based in Hamilton" Ontario,

the company offers Stolage and transportation seruices to customers
shippingtheir products anywhere in North America- Ftuke offers
truck se rvic e fo r transp o rtation, climate - c o ntrolle d warehousing for
storage, and even picking and packing services for shipping

when people think logistics, they normal$ think of the process loown
as J orw ar d logistics
- the step s invoive d in delive ring producs from
producer to consumer. With the increase of online shoppingand
return of unwanted products, managing logistics has become a more
complicated plocess. Enter reverse logistics-all the activities that can
occur after the product has been sold and received by tle customer.
Both processes are iltustrated in Figrre 9-2.
Returns-Customers return products for a variety of reasons. These
include damage, defects, improper fit, or custotosl change of nind-
The business needs to inspect the return and decide what to do with
the returned product.
Recalls-A product is recalled for being fautty orbeinghazardous-
The Canada Consumer Product Safety Act protects the pubtic from
unsafe consumer products being sold in Canada inctudingboth
domestic and imported products. A business may reptace ttre entire
returned item or a specific part that resulted in the recall

342 | Chapter 9: Supply Chain and Logistics

Figure 9-2 Forward and reverse logistics

Modules
sub-assembly

Recalls are fairly regular events in the automotive and food

industries. In2017, Fiat Chrysler recatled approximately 46,OOO Ram
pickups sold in Canada because of a faulty water pump. Customers
were asked to make an appointment at their local dealership to have
the faulty part replaced. In food recalls, customers are notified of the
recall through media and can return the product for a full refund.
Items involved in food recalls are destroyed by the company.
Repair-A customer may retum a product to a business for repairs,
which may or may not be covered by warranty work. Usually,
products are under warranty for a limited time and customers can
purchase extra insurance to pay for repairs down the road.
Repackaging-sometimes manufacturers recall a product only to
determine that it would be usable following specific modifications.
Then the products may be refurbished, repackaged, and resold.
Recycling-Businesses may need to dispose of or recycle products
that cannot be repaired or refurbished. In this situation, the business
may keep usable components or dispose of the product in an
environmentalty appropriate way, often hiring a recycling company
to do so. When the Samsung Note 7 phones were deemed unusable
in 2016 (due to battery problems), they were stripped of components
such as camera modules and precious metals (gotd and silver)before
being disposed of.
 9 .2 Understanding suPP|Y
chain management
The supply chain is the sum of all activities lnrr':
raw materials, processed goods, and finished pr:---- -::
nrrnniznfinn
uISdlllrclLIUIIJ qrru mnrrindthp
cnd rrrvv1116 spmi-nrocessed
Lirr rLrrfr yfvrr :: -:--:-:'- -=

of the organization toward the end consumer' ,

Supply chain management (SCM) is the o-,--:. -:-:-; - '

information, materials, and finances as the c:: --:-- - ::
---: -=:-
i#o orrnnlrr nhcin
ILJ JLIPPty Lllqrrr, trrni6:llrr
LiPlLqLLi from
rf Slnnlief tO
vrrf uuyj,Llrr L\ fC----= -::-- --
wholesaler, retailer, and finally, consumer. I--:--. - :- - ---:=---: =:-:
--
co-ordinating withln and among compantes -----=- -= = - - ' -;: j'
--

chaln management attempts to reduce inv::---: '---- -: : :- - -::s

-

available when needed, keeping costs low.

344 lChapter 9: Supply Chain and Logistics

 Supply chain management requires overseeing the six main links
'in tho qrrnnlrr nhnin'
" "YY')
. Inventory
. Storage
. Cash flow
. Supplier
. Information
. Physicaldistribution
Many organizations, both domestic and international, orr':l the
whole suppty chain, or significant portions of it. This method ::
supply charn control is called vertica[ integration, and an exan:.: ci
it is illustrated in Figure 9-3.
Canadian transport company Day & Ross Freight started in 1950
in Hartland, New Brunswick, with one truck transporting potatoes
between Quebec and New Brunswick. Day & Ross expanded as the
r'^^^ri^- n{cCain Foods
LOrrourdrr LUrrrPc1rly 1'rL\,o.III t uuLtJ started , -----o its notato nroducts
J Ld.] LCLI -sellins

to customers all over Canada. In 1965, McCain Foods bought Day &
Ross, vertical$ integrating its supply chain. VerticaL integration allows
comnan jps to share more information and preeter control in the srrnnlv
" *Y v')
chain, making the supply chain more competitive and faster to respond
tn ,--*--o,-jn thp 11.121ratn1cna
-- fhendpc looay, t'-rnerlien
---*-KeLpLace. '1-nrlc-r Lanaura[ nnmncnrr l\f nr'-c
curr]parry lvrcLaln
Foods has six plants in Canada and dozens more on every continent.

Figure 9-3 Vertical Integration of an Organization Producing Canned Tuna

Understanding supply chain management 1345

Figure 9-4 Horizontal lntegration Example
Provigo
When organlzations use
a courier like FedEx as an
integrated provider for their
oi,r-tbLtt'or -haL s an exanPle
of usrng third-Party logistics
loblaws Valu-mart Fortinos Shoppers No Frills lndel:rdent
--:-: :-'-:::s-cn
When companies expand by acquiring competitors
is called horizontal integration, an example of which :s -.'-'::-:=:
in
Figure 9-4. In 2014, Lobiaw Companies Limlted acqu-:=: S:-:::=:s
Drug Mart for $tZ.+ bitlion. Burger King's parent com: ---'- .'=-:1::ant
Brands International, purchased the Canadian coffee -'':-
":'--.'
Hortons in2OI4 and then acquired Popeyes Louisia:a :-- -::'=:- -:
2017, expanding the company's presence in the globa' -=':-::::
industry. Horizontal integratron can reduce costs, n- -': :::-: ::cre
efficient, and open new markets.
Some companies use third-pa logistics
(gpls) -- ::---'':-ate
the supply chain, meaning they outsource supplie: -- - ----:-='- n
'-
and distribution functions to loglstics companie: ::-:: : j-:::-crm
these actrvities better or more cost effectively T:-::-: =::. .:g-stics
lncreases the number of links in the supply chai: : --' :=: -:='
- ::l:rol
management control of everyday logistics opeia:-: :-: :: i
and more suppiy chain partners mean that mara=::: -=:- ::::11more
time on overali suppty chain management in c::=::- --::-:':e and
eliminate any supply chain problems.
For a small retail business, such as a family flower shop or
convenience store, inventory management is fairLy simple. The
retailer needs a system in place that records saLes, usually a point-of-
sale terminal. The terminal records the code or stock number on each
of the store's stock-keeping unlts (SfUs). For exampLe, a caf6 assigns
different numbers or codes to the various food and drink products it
carries. As products are sold, the point-of-sale terminal records the
sale and deducts the item from the inventory totat. If they wish to,
most retailers can access an accurate inventory figure each day.
' Consider what inventory management must look like for a major
large retail company such as Watmart, with more than 11,OOO storesin
27 different countries. Walmart needs to manage its product inventory
from thousands of suppliers in more than 70 countrie s-and control
store inventory levels in each of its locations. As the world's largest
retailer, Waimart has innovated the suppty chain to keep its prices
low for consumers. One way it did this was by initiating a process Point of sale terminals are used
in many relail busrnesses, ard
called vendor managedinventory, whereby manufacturers manage their
are effectjve tools for rrac<1ng
own products in Walmart warehouses. This has resulted in almost inventory ard saies statisucs
10O percent of orders being futfitled to its stores.

The expansion (and failure) of American

retailer Target into Canada provides a lesson in
the importance of inventory management in the
supply chain. In March 2013, Target announced it
would acquire Canadian discount retailer Zellers
and open lOO to 150 Target stores in Canada. The
company's plan was to enter Canada as quickly
as possible; however, plagued by difficulties in its
suppty chaln, Target Canada announced it would
be ciosing its stores less than two years after
expanding into Canada. What went wrong?
Tarset's strnnlv chain software had rrtuLLff/Ls
srL ffqu muitinLe
problems that left store shelves empty and
warehouses full of products. Target's point-of-
sale terminals and self-checkouts were also
prone to glitches and delays in processing
customer transactions. Because Target had
decided to expand rapldly into a new country, it
did not properly manage its supply chain, which
ultimateiy led to its failure in Canada.

Understanding supply, chain management | 347

 orage
Companies are reluctant to be responsible for storage of goods, as
.if t:kpq rrn rrelrrehlc snar-p end
]L Ld.n(:D UP VOLUqULq OPqLL qffu increaSes
rfrLf Lqu!u tho nnccihilihr tl^:'thgy
will have to deal with damage or theft. Stockrooms depri','e :etail
stores of seLling space. Storage areas take away product-::l srace
from factories. Warehouse space requires Costiy real eS:a::. - here are
fnrrr
Mr nnqqihlp lnr':tinnq fnr the storaoe of soods:
PVJJTU LL LVlqLf vlrJ

-i ^
^-^ *---:*=
r orioinrl lnr.etinn nr f:cilitrr where tl^ ^ -^ ^ r^ d1(
-'IC BUULI>
. Warehouse
. Distribution centre
r Destination location that receives the goods
Because of the costs and risks associatedwith slc:=:: =:::l -lnk
in the supply chain tries to pass the goods on as quic---:. =. ; : sslble.
Many businesses attempt to manage the storage iss*= : . :-::l:lating
this step altogether.Just-in-time $If) inventory systems -::
pvrmnlp rpnrrirp
^-a*---
qrrnnliprs fn
-*/PtltrlJ LU meke
Llrq^s and
qrru shin vvrfqL :'-;:-
otrfy whai !-*'-- ---= -:rtonr
Both Amazon and Walmart have rpfeilpr ronrirpq
nr f!LqrLLr nrricklrr enottoh so that the ooc:< :-: :::::-als
Lilvu6rr
)1r-ial t-- II q :a'pn's n Cleale
vI fLYuifLr YufLi\LJ
+L ^ F--+ Fl^-+i-d.^'--^L^1l (lruuse
t1Q lt:--tLrd ll,3 Wa arflve at the workstation, factory floor, or retail stc:= 1: --:-: , -e
in the sk_rr Products v/ould be needed. Just-in-time inventory systems require tl^ a: =- --:-: -:-<s ln a
. .-:j j'. .*o...-ocrL.,bt daif
o"nnlrr rhcin rra i.
J (-tPP L] LIrOIll Ol E 1r1 !lonstant Comm1nicatiOn Wil: a:::- : -:-:l and act
'.=:2 l:. .-Fl-:.
t 11.....
". ::.-..: :---
yql Lrf!f r rif the djsfrjhrrtion nrocess which CaIt :: ::1 =::-:lg.
^ - ; ^^ ^-;- - ---
.f.uLJ:---:--,: ::
-.--
---.- uo nerfners
as jn
\.,'o:-c l:rr:g ::3G;:as lc:l
tre ai:clail cc-rtt ro sioppe:s companies can now also rent storage space wl--j-:':: *llq or :
nomes The machlne v/ould leasing a warehouse. For example, Seattle-based - -=-,'= :--' :--:e than
ho flnr"rn romntpJrr ehnttt
750 warehouses in 45 markets across North Ame:-:= I -.-:-=ss:s rent
3OO metres above Land, and
L^.,^
1rdvtr -..1+i-l^
tl!utLrPLc
l-,--.^
ud)J from Flexe on an as-needed basis when storage i3 :::--,1::-

: : :.::::::.
€-----=-:-

a---
-ji:'

348 lChapter 9: Supply Chain and Logistics

 Cash-flow managemen
If transactions take place between businesses in two different
countries, suppty chain managers will be lnvolved in cash-flow
management. Cash-flow management within the supply chain
involves negotiating payment terms (when payment for the
goods
(how the payment is
is required), settlng up the method of payment
to be made-by letter of credit, money transfer, etc'), and a-'ranging
any exchange of funds across the links of the suppty chair. inciuding
.rrrrona\r
L ur r rrN_/ oYah2nops

The most important consideration for a supply chain nanager

when dealing with cash flow is how to either make or coL-ecl
a payment. Companles cannot base their operations
on fist;
rhprpfnrp
LIILILIVT gJ hrrsinesses often use letters of credit for
inte:r:a:cnal
the
transactions. A letter of credit is a financial guarantee, iss *ed by
buyer's bank, that the buyer has sufficient collateral on ce:c'sit
to
pay for the shipment. Letters of credit help internationa- :as:-flow
management run smoothty and minimize financj.al ris< b:t only
if
the banks in each country involved in the transaction s: jd and
r:
well managed or part of an established lnternationa' ba:-<'

Supplier management, also referred to as sourcing 3: i-ctirement'

cnn si srs of fi ndins reliable soulces for the produc:s L:: services a
business needs. For example, Loblaw manages one :i=e iargest
supply'chains in Canada. The company works ruitt' r:c:e than
5,OOO suppiiers to source and move products frcn a:cu-nd
the world.
These nrodttcts are moved to more than 3,500 src:'s ei'ery day'
-:neir sources in
Many supplier managers create relationships vri-ir
the supply chain, connecting all of the suppliers cf :aw materials or
finished products electronically to the business :le:lcolk through
electronic data interchange (Ilt) and lnternet
j:,<ages. Each suppliet

then monitors inventory levels and provides 'rh.e ight quantity of its
onnds at the risht time. In order to work, this EDI must include evely
6vvuu
supplier a comPany uses.

350 lChapter 9: Supply Chain and Logistics

 Sourcing products
Outsourcing refers to the strategic use of outside resources to
nerform actrvities that were nrerriorrslrrv fuuoLj handlpd frrLLr
rfqrru(Lu intprnnllrr
jjqLrj hrr
uJ

the comnanv ifself OutsottrcinO

vqLuvuf Lrrf6 occlrs \^/hpn
wLLurJ vvfr!rr :n
ufr nrd^ni72ti^n
vr6qtlraqLfvtl

contracts out, on a long-term basis, major business functlons to

other businesses that specialize in that function, who then become
valued business partners. CaLl centres, for exampLe, are independent
nnmnnni^- +l-'^+ ^l-
e ulrririlrrles rnal aominister incoming product support or information
inCUifies from consrrmers end irtqr\L mako nrrfq6inS
vuLbv fvr telem:rkptino
calls for LLLLrrrq-_-__---o)
A sh'-' -al,i-o ^r.d r^r,tn
client foLlow-up, and debt coLlectron services. Many companies
line in Maglaj, Bosnia, ts an
outsource work to Canada, especially for calL centres for firms based exampLe of offshorlng This
in the United States (this is also termed nearsourcing). factory makes cLothlng for
a number of internationaL
when a business decides to set up a specific division wlthin the businesses, incLuding Hugo
Rncc (hoednrrrrfor:d rn
company to handle a function that is normaLly outsourced, such as
Germany) and Pierre Cardin
tts own advertising department or customer caLL centre, this is called (headquartered 1n France)
insourcing.
Offshoring is similar to outsourcing,
l-,,,+,.,i+L n *-i^- rrrferenr.p
uuL vvlLlr o ltldJUl LtlII __ __-__. Offchnrino
_--_--_-,--t)
does not contract out major business
fitnctions httf simnlrr fnncforc thnco
LrqffJLLfJ LIIVOL

functions to a branch of the company

in another country, usually to save
on labour costs. An example would be
an Ampriren -_j rnr
._*_, torr __,npany openrng
production facilities in China, where
labour costs are low
Companies can aLso contract out
functions to other businesses within
their own corintnr This is called
inshoring. Companies in the United
States, for example, contract functions
to other comnanics ruithin the r.nrrntnr
but often to another state where tabour
is cheaper or facilities are better. For
example, Maine is home to call centres
for many U S. firms around the country
because oflts affordable labour, cheap
rea, es:ate, and telecommunications
infrast:;:r::

Understanding supply chain management 1351


Figure 9-5
Multichannel vs. Omnichannel
Information Management
MULTICHANNE|.
As the comnlpxitv and sneed vf of hrrsiness
uurrrrLl across th: l.::a.
_ srrnnlrr
)UPPLJ
chain increases, effective supply chain managene :: :-:.1 rety
increasingly on technology. In a world where cus:::_=:-. '::en
expect free delivery in as Little as 24 hours, increas.:i::_: -se
of technoloov and dioif alizino fhp diffprpnt nrnrc<.:i :- -
b./*.,*
nrnnodrrroc mclza irlporters and L^yvf
f LLf r qiru exnorters L' more e::-:-=:-. l:e
goal is free-flowing information to support effic-::: :=, -::-Cay
trade. Each member rn the supply chain requires -:-.:=:-: ::::ss
to information to support operations, and ali me ::_::t: _-_::: io
be networked to the same informatlon sources. -:: =-r:=:_-_:-g
to Canada, for example, Target was unable to us: _:. - i -
based software system because it wasn't able tc :_=:_:.= ::=rch
characters and the different currency. The con:_:::. ::::: luy an
oyl-ornel crrcfom '^'hiCh rrL6qLr
negatiVelV affeCted
v L LJ qf rLl itS S*::_. ::=:: -,.fhen
- *-o-' rushed to onen stores.
Target
Information management can supply each -_:_.. _:_ _:= :::in
with daiLy production and distribution schedu.:-- : _ ::-: ::::r
links can oneratp more effectivelv
rvLLj and efficien:_-,-. -,'.-:_=--. =
qrru

supplier knows exactly when its product is rec-:_t=- =: :a:: of the

production process, and has transpoft compa:-=, ::_ _:_: : : - ..r'ork
that are made aware at the same moment thal = .:__::_=:-: _s ready,
there is seamless co-ordination amongthe su::,-. ___-_:_ --:-<s that
saves time and money for everyone involved. _:_ _
=:_:=: s ::*se,
some stores didn't receive weekly flyer spec_a.s .==.--:-: ::::es
emntv of adrrerfispd nrndrrr.tq
- -*-'*o'-'b informatjon js hecomino pven ::l: _:_: t::1::
Manasjns
as companies move to an omnichannel stra:=i-.- :- .=_ _: q:c
customers. Omnichannel is a relatively nei..-::t:_ _: : _:_:::ss,
and esneciailv imnortant in retaiL. Consurne:s -= :-:-,-_::i from
OMNICHANNEL
traditionaL bricks-and-mortar stores to e-cc::_::_::_=
=:-: robile
shopping, but also going back and forth ar:::-i -_:_::: ::.a::nels.
Customer focus is the foundatlon of omnic::a:_:_=.. -:-:- ::::nichannel
business integrates the traditional methoc-. :: =:-. =::_s.:g and
combines them with interactive media su:: :: -.., =::_:=s sccial
media email offers social media messag-:i -:-:::-= -:a:i:ional
yrrj urLqL stores
ohvsical Rll w-L
rLvrLo. nut of the CnanneLS shor',
LJIC channeLs ---- :::_= :t-::sage
SnO\'; ::-= -_*o, nrflclng,
offers and nrodttcts mpenino th2t .1c-^-_
LU/ ----*-----o ^-: - ----
-----=-: --:.: - .^--l^.
-:;CIIIICSS,
consistent shopping experience, regard.e ss :_ ::= ::a:nel they use.
In return, businesses access vaiuable ca:a a:: :: ::>:cmers that
they can use in their market research.

! 352 | Chapter 9: Supply Chain and Logistics

Phrrsjr'el distrihrrtjnn COnCernS the mOvement
v LtfiLf of aq finished
f L vr f iiirori!u nrOduCt
yr \

or seryice to customers. In most businesses, physical distributlon

plays a double role: inbound distribution and outbound distribution.
Management of inbound distribution deals with receiving goods
that are sent to the company, while outbound distribution refers to
*,,*,,b,--b
arranOjnO the sh jnmcnf -- o- ---: ra lts
--, of Oondq frnm thn company to +o nrrn+
customers.

Inbound distribution
Most of the responsibility for inbound distribution rests with the
buyer. At this point in the supply chain, the buyer actually takes
possession of the goods. Legally, the buyer owns the goods earlier
(once therr harre nassed the FOB noint).
yeLttr/ l but from the buver's noint of

view the work really begins when the goods physically arrive at the
store, factory, or warehouse.
Most businesses have an established receiving process during
which a receiving manager
. Inspects the containers for obvious physical damage
Thp errirr:l nf onnds :- ;
. Makes sure that all the containers that the seller says were sent warehouse is kno-. -r a.
rprait/inn :r i :*--- '-::
have actually arrived '....".,.j
i
il^^^^-ri^-
)lrcL-tL
r Does e nhrrsir':l cnrrnt nf prrprrrthino in thp qhinmpnt _ -:_
. Fills out the necessary claim
if enrr
rpnnrtc -- *_-, itpr
,-,,trS are mlsslng
or broken
. Assisns stock numbers (SKUs) to
new items
o Pprnrdq
r\Llvf uJ f[p guqrrLlLy nfnn^i.
LrrL 6112nfifrr UI SUULIJ
received in the inventory
database according to the stock
number of each item
. Records the location ofeach item
(for cxemnlP \^rarphorcp qpllino
floor)
. Indicates to the accounting office
that the shinment has arrived
and the seller's invoice can be
paid

Understanding suppl'i chain management 1353

 0utbound distribution
The outbound distributor is most often the s:.-=: :::
-- :::-d also
be a dlstribution centre or warehouse. The se--=: s :=..- :-:::::ally, is
to arrange the shipment of goods to the bu',-e:.l:-= .=--=: --:-:refore,
is resnonsihle for nrenaring the necessarv cus::::; ::::::_=:tation
for border clearance and selecting a carrier. A :-= =r-=::t::o
this occurs if the goo.l. ero fn ho chinnod Ex Works (Eftt) -,,,-nich
means that the buver is resnonsjhle for car-: -- --<-1ms
documents, and all charges.
Before the shipment is sent, the carrier --:-: ::-::--,-:t:ed to
transpoft the goods) must prepare a bill ef ftrling -:- :-.. :: .ading
is the official document that indlcates tha: --:-= ::-::::::--3n
company accepts the goods for shipment. i- :___ :: =''-: ::scribes
thp itprnc lictc tho nrrrnfifrr rnrl r"rairhf
yuanLtLy ano wetgnl, g--.-:; -_-=-,-:_:: :: -le
shipment, and provides the name, bitting a:::::: =-: .-';ling
address ofthe buyer.

FOB points
Responsibllity for the shipment, both lega. --: --:-=- - = :=qins at
the FOB noinf Tnternntinnrllrr tha trnR h^-- r_=. :-- :=_::ed in
the International Chamber of Commerce's -:: -:-:-:=::. :l.es to
mean Free on Board. This is the point at v,-r-::- --:-: ::: j -_: :isks
associated with the physical distribution :- --:= l:': . = . =.= ::cm the
seller to the buyer. Shipments within No:--: -: -:=:-:= ::= --:: ierm
A view of Halifax's Farview
te'm jral a no-'[or irtcrnationaL FOB for truck, rail, air, and ship transpor: -.,.-:-::::: --:= -:: :ses FOB
maritimp qhinnino
""'rr _, 'b for maritime shipping only.

*z-
;::e,
The ICC lists several different FOB points:
. FCA-Free Carrier (named place, e.g., Vancouver)
The seller hands over the goods, cleared for export, into the
custody of the carrier (named by the buyer) at the named
place.
. FOB-Free on Board (namedloading port, e.g., Montreal)
The setler must load the goods on board the ship nominated
by the buyer. The cost and risk change hands at the ship,s rail.
. CIF-Co st, Insurance, and Freight (named destination port,
e.9., New York)
' Seiier must pay alt costs, including insurance and freight, to
bring the goods to the port of destination.
. CFR-Cost and Freight (named. destination port, e.g., New york;
m ar itime tr ans p o rt only)

Seller must pay the costs and freight to bring the goods to the
port of destination; however, fsk is tansferred to the buyer
once the goods have crossed the ship's rail
. ClP-Caniage and.Insurance paidTo (namedplace of
de stination, e. 9., H alifax)
This is the containerized transport/multimodal equivalent
of CIF. Selter pays for carriage and insurance to the named
destination point, but risk passes to the buyer when the goods
are handed over to the carrier.
. DDU-D elivered Duty tJnpai.d (named destination place, e.g.,
<nprific fnrfnnt)
4vwv,J/

This term means that the seller delivers the goods to the
buyer at the destination named in the contract of sale.
Tho onndc not cleared for importL or
VI unloaded from CIanv
'ro . UIITUG1LTtrLI IIUIII
.
form of transpoft at the place of destination. The buyer is
responsible for the costs and risks for untoading, duty, and
any subsequent delivery beyond the place of destination.
. DDP-Delivered Duty paid (named destination place, e.g., store
address)
This term means that the seller pays for all transportation
costs and bears all risk until the goods have been detivered
and pays the duty.
 9.3 Methods of physical
distribution in the
supply chain
The choices made hv anrr httsiness domesli: :: -:-:::l-:-::-=*-. to
distrihrrte its nrodrrcts and services can ha-;=1*a-::-*:::: cn a its
profltability. An international business neers :: -::j-'-t = ::lmber
of factors in selecting a method to physica,-.- '=.:--: -:= -- lcods. By
proper planning, abusiness can save mone .- --: :-: ::. -: speeding
up the suppty chain and improving the cus:::-=: =r:=:-::::e. Some
of the factors to consider include.
o Tvne of nrodrrct (ncrishahlc
\I/rrrurruvLs sttch a< -::: :::-:.',=:s :cn-
perishabie, dangerous/hazardous)
. Availability of goods (and time nee::: :: ::'-::= --::=::r)

. Access to suppliers (foreign or don:s::

. Time needed to deliver goods (to ::s::-=:
. Customs requirements (informat-::t':l_-=:_-
o Sizp of the shinment
. The method of transportation ic: s:-::-:-g
o Shinnino
-"'rr-"D rnqf
-""-

356 lChapter 9: Supply Chain and Logistics

one of the most important developments in freight handling in
the last 5o years has been containerization. containerization is
the utilization of standard-sized reusable metal boxes to store and
ship freight. containers come in two sizes: small and large. They
are designed to fit on top of each other like toy blocks and have
grooves or hooks to accommod,ate specialized unloading and loading
devices. They are easy to use and easy to handle, making them more
efficient and economical to ship; they are also secule. Containers fit
on standard truck beds and railway flatcars, and containel pofts use
standardlzed equipment to lift them onto ships. A shipper loads a
contalner with product and locks it, and the contents are not touched
until the container reaches customs or, if the shipment is domestic,
reaches its final destination. Containers cut down considerably on
theft
LfIL I L anrl
UffU damage. Thcv have made intermodal shipping possible.

Methods of physical distribution in the supply chain 1357

 Intermodalshippingmeansusingmorethanonemodeof
transportation. It takes advantage ofthe container's standard size
and versatility to combine ail of the components of the physical
distribution of a product from the factory to its ultimate destination.
There are five modes of transportatron that intermodal shipping can
use:
. Air frelght
. Ocean freight

' Rail

' Motonzed carners

' PiPeline

Figure 9-6 Overview of Transportation Modes

Air Freight ' Fast ' Expensive

. Excellent for overnight ' Weight restrictions; unsuitable for latge

. Suitable for shipments of small parcels shipments
. At least one othef carrier needs to be
involved in the shiPment

. Slowest method
Ocean Freight ' Inexpensive

' At least one other cattier needs to be

involved in the shipment

Rail
. Versatile ' At least one other carrier needs to be
involved in the shipment
' Low cost
. Carries heavy bulk shipments ' Slower than motor cartiel

Motorized Carriers
. Direct, door-to-door shipping ' Expensive
. Versatile

Pipeline ' Fast ' lf the pipeline is damaged ot

. ldeal for gases and liquids compromised in any way, substances
can leak or spill, causing envitonmental
damage

358 Chapter 9: Supply Chain and Logistics

Air freight
Air freight is fast-transporting shipments in less than 24 hours in
SOme CaSeS-but has several limitations. For one, lt is very expenslve.
The cost of air freight can doubie the price of goods, and weight
restrictions often limit the size of shipments. Most manufacturers
use air frelght only as a last resort or for emergency shipments.

Parcel shipping through companies such as UPS and FedEx is

ays done by air freight. Both companies rely on an airport hub'
called their worldport, that consolidates all of the parceis sent by
shlppers in one terminal. uPS's worldpor[ is in Louisville, Kentucky;
FedEx's worldport is in Memphis, Tennessee. In a very short period
of time, workers unload parcels from the hundreds of airplanes that
lanrl rlrrrjns the niSht from cities around the world. These parceis are
consolidated into the appropriate outbound destination bins, and
then loaded onto other planes that will take them to UPS or FedEx
hubs all over the world-overnigh

0cean freight
Importers and exporters in Canada that deal with businesses
outside of North America use ocean freight as their main method of
tmnsnortetion Most countries have some form of seacoast, although
approximatety 2O percent are landlocked (have no coastline) and have
(for example,
nO access to an ocean. Shipments to these countries
Austria, Switzerland, Nepa1, Bollvia, and Uganda) ship to the nearest
country with a coastline and arrange transportation from that port.
Being landlocked is a major transportation problem.

Many countries, including Canada, have inland ports connected

by riveis, canals, and lakes that allow ocean freight to travel much
farther inland than the country's ocean ports would suggest. The
maior quvuffLubL
lflqjvr freisht as a transportation method
advantage of rrsinp ocean -'--o--'
is that it is inexpensive. It is, however, quite slow, and requires Sulphur piles slt along the Ports
the shipper to invoive at least one other carrier in the physical of Vancouver, a major hub for
to door. sulphur transportation
distribution process, as ships cannot go door
 Although shipping by ra11 is slower than truck transport, and tratns
have a more limited range than trucks, rail transport is still very
feasible for bulk transport over long distances and is much cheaper
than truck transport. Railcars full of oil, coa1, grain, and Lumber
criss-cross Canada and the United States. Flatcars carry containers
frnm nr-ean norts fo inlrnd ritips Onen cars and tankers move faw
materials from Canadian mines directly into factories on speciaL
I
spur lines that feed them. Canadian Tire is the second-largest user of
the Canadian Pacific (Cp) nari in Canada. The company has multiple
distribution centres throughout Canada since it servlces more than
1,700 stores, including Mark's, PartSource, and Sport Chek.

Motorized carriers
Motorized carriers consist of trucks, vans, and motorcycles. (Bicycles
are sometimes aLso included in this category.)

-. qhinninr
Thp rn<t- nf ,,,-..ID8 ar rUttrIucKloao
frrll frrrnlzlncd \f 1L/\ 1S
/trnr i- atwayS
^l- '-''^ l^"^-+1-
LOWeI Lnan
the cost of shinoins a less-than-truckload (l-ff-), so smaller trucks are
l^'r-
rrsed to transnort (11^r1^- LUdu). LULdL
-^.ld.tLtrI
T
'hih*^-- rcLy
^'^'l >rrrPPCr) ^- "^-'
-^1-- urr ^-C Small
vdrrr olrt
trucks to transport products within or between cities, when small
qhinmpnfs artr On hO^-l T\iT^hrr mnfnrizn,.l r.zrrtpr
LqlrrEr rnmn:niCS
LvrffPqf lrlo OffeJ
uf
)IIlPLllCllLJ OIC Ull UUdILt. IvId.Il.y lrluLUrlrcu
freight consolidation, where goods from different sellers (shippers)
are stored in a warehouse area designated with the destination of the
shinmpnt \,ri hpn there is an FTL for that destination, the shipment
oltf Tt often lglzoc r fornr devc tn rnn5glidXte a fUll trUCklOad, bUt
goes VUL.
6VLJ
tho <errinoq tn lhp qhinnpr:rp qrrhqtential

Just as Uber has changed the taxi industry and Airbnb has reshaped
LrlL hntol
thp rrvLLL @rru hncnit^li+-, i^,1,,-+-r
:nd rrvoylrctLILy llluLIJLIy, /-nn-n17 ro diqnrntinO
LUIIVUi iq uforuyLLii6 LrrL lntCking
thp LruL^fri6

industry. Convoy is an on-demand trucking app that connects

trucking companies with businesses that need to move fieight. When
the Seattle-based company launched in 2015, it branded itself as the
,'l rn n nnnrfL is
' ^+^-i -ar fLrdllJPUr
Iher for tnr cking. " lvruLUllzcu
-- *--..--o.
,/r
r versatile in terms of the

types oftrucks available and the door-to-door service it can provide.

Motorized carriers are a part of almost every shipment.

Pipeline
.."^. .^; linrrirJo.rn
\Jd.)C> dIl\-1 LIqLlILIJ Lqrl he u! lransnOrted
LruriryvrLLU in ninelines
rrr PlyLLrrrLo. Frrels
r uLLr sttCh
ruLrr aS

-^+"rnl r..
IIdLLIId.L Bd), ^il hiafllplq
UlLi UI.UI*-.-, and other licrrids
.'1*-JD srrch
)ulrl as
qo SeWage and Watef
JL vvq6! urr'

are also dlstributed by pipeLine. Pipelines have been used in Canada

for f ransnortins oil for more than 150 vears.

Chain and Logistics

 :a:-..4

services
Alfhoush home grocer\i-y"..'' deliverr".^ Ca-^ad: ic p - - :. * -.rtlar as it
js jn the United States, demand for the selvice is -:-::=asing. 1n
2A04, Canadian grocery slore Longo s purchased G:- -;ry Gateway,
- L^
O. -^ ,r^ri,,^.,, JfIViLL
LLUILIC-\-lCllVCIy -^n,ice -v- groCer..s nurChaSed Cn ,-:. The 2O17
fo- 6rv!Ll
merppr of Amazon and Whole Foodc .narked tncrea,=: oemand for
online orderingand .o *..-^ l^^-^
.r-r;----'- -- r -^--s:--
-IUIr.tC tlcLIVCTy-dIIL1 Ldlld.UldlI
-- - *--ICL'ailefS
E-J-t-y
are responding. In 2017. MeLro announced home del . er1 in Quebec
and Walmart Canada is testing it in Canada. Loblaw i: a -rempting
,j!L 16_!^-ry{
-VV.ILII 1 -^.-h^^.,.r^__ ,- e p. -aO
LU LJd,lLIICI lII)LdLdIL, d LUIIIUd.II-V LLIOL rrpretpc
UJLIqLLJ --- U !- .V! U.S.
markets and wants to expand into Canada.
lnternationaL businesses are now using a new method rn the
su p p ly c h ai n : o n - d e m an d, e r*wd - * :: t t ;* 4*1,2=': *8,v. C r o wd - s o u r c e d
= =
deliverv involvec the use of the InterneL a-d o- -eclnologv ..---.'".'o-I." 'o obtain
de-'ve-v services'rom fhe rrrhlic Crowd-sou-ring is dif'e-erf from
outsourcing in that the wolk Can cOme fJo-n .n 1-nq-oriFed worker or
rm.-^- l^,.--l^^,-l ,t Seg€E*m fl€i{:-.
d LUlllPOlly.n\, nllldZUll
^ tOUliLlltru d LUliiPollJ Ca'-ed F-e.o
Lu--Lu L .!A --i -e.rOnse
-L-r,vr tO
competition from on-demand crowd sourcing delivery businesses. 1 What is containe:-:.:-- --
Walmart in the Unjted StaLes is using Uber in its grocery deLivery 2 Summarize th: ---'=
service. Customers shop WalnarL on-ine or through a mobile app to intermodal:l---:: :.: .- - -=-
nfirensn.--'-:----
build a basket of items and then place their older, seLecting the most
rn^venienl deliverv time Walmart is exoerimenring
" "'---'''o with a number
3 What ls :-=-.-.,
COIIS: ,-:::- - -
of crowd-sourced delivery methods to meet the increase in demand
from consumers for online grocerv service.

JO I
Currency fluctuatrons are one of
seve"ar chalrenges in L1"e supply Challenqes in the
chaln that can and do affect the
rnternational distribution of
products
supply ihain
Globallzation has made managing the supply chain complex and
difficult for many compantes. Although technology and automation
qI s imnrovins
are f IIIyr v efficiencv in distributino products around the world,
a number of issues remain concerns for an international business.
'I nese rncLuoe

. Reliability of sources
. Volatility in oil prices
. Curtency fluctuations

' Weather and natural disasters

. Politlcaiinstability
. Piracy
o Dioif:lization and ontimization
uf6lLqLf LuLf v

2:Z Chapter 9: SUPPIY Chain and Logistics

When businesses source products internationally, getting the
product through the supply chain may pose challenges and risk. For
example, a Canadian business could experience difficulty getting
the right amount of products at the right price. In2OI7, avocado
prices increased as a result of a weak harvest due to weather and
the increase in the demand for avocados. Canada impofts most of
its avocados from its NAFTA Dartners Mexico and the United States
(california).

In2OI4, Canadian consumers and supermarkets faced a sudden

price increase in limes-almost 300 percent. The curious cause
was Mexico's drug cartels. An essential ingredient for Mexican
cuisine and one of the country's key exports, limes are grown in the
southwest state of Michoacdn, Mexico, home to the Knights Templar
cartel. The cartel extofts from and even kidnaps local lime growers.
Companies hired armed guards when the cartel began disrupting
shipments headed for the United States and Canada, and these costs
were passed on to customers.

0il rices
great$-sometimes
As you read in Chapter 6, oil prices can fluctuate
within a very short period of time-resulting in unanticipated
changes in supply chain costs. Because of its importance to the
supply chain, oil prices can make all the difference between
offshoring or onshoring production. Although the price of oil affects
both domestic and foreign shipments, the distance travelled by local
carriers is much shorter than the distance covered by international
transportation methods. The longer the journey, the more expensive
the costs as oil prices rise. The globat financial crisis in 20OB saw
oil prices above $tOO a barrel, but five years later oil prices dropped
to under $30. ey 2017, oil was barely over $50 per barrel. Political
and environmental factors can quickty change oil prices and cause
headaches for global suppty chains.

Challenges in the supply chain | 363

 Internattonal businesseS usually deal with Several foreign culrencles
and will expedence fluctuations in the value of those cullencies.
There is no way to avoid this situation, but businesses can minimize
the risk by inciuding the issue of exchange rate fluctuation
(what
in their supplier agreements or setting a baseline rate
percentage change, up or down, witl be accepted by the two parties)'
Alternatively, businesses may decide to change suppliers. However,
thls is not a decision that is undertaken lightty, as it can involve
malor disruption to the supply chatn.

Natural disasters such as floodlng, hurricanes, or earthquakes

Rescue seffices attend to a
collapsed buildlng aftet a masslve
earthquake hit Mexico CitY in
2017 and claimed 361 lives
can impact the supply chain by causing delays in shipments and
slowdowns in production. For example, an earthquake in Fukushima,
Japan, disrupted the global electronics industry
resulting in a
shortage of key components, such as computer chips and automotive
p International businesses that ate servlces also need to assess
u eseen risk in their supply chain to avoid disruptions and
potentlal loss of revenue and profit.
In2OI7, Hurricane lrma devastated
many Caribbean islands, a PoPular
destinatlon for Canadian tourists.
Canada-based tour operators, crui se
lines, and airlines had to resPond
quickly with a safety plan and cancel
or change their itineraries. Around the
same time, Mexico City was hit with an
earthquake of a magnitude of 7.1 that
crumbled buildings in the capital and
surrounding states. Mexico Clty is home
to many auto manufacturing Plants,
such as Volkswagen and Nissan, and the
earthquake disrupted the automakers'
manufacturing. Nissan sent workers
home early and Audi ended or cancelled
shifts so that employees could leave and
check on family members and loved ones'

i: I l-:rter 9: Supply Chain and Logistics

a
Manv corrntries
1'rqrrJ
LvuiiLrrLo are
urL i^ - JLOLC
rll d ^F^^1iri"1
^+^+^ UI L
+urmoil. When Canadian
PUtILILqL

manufacturers order products from these countries, there is always

the possibility that a shipment will be delayed because of excessive
secrrritv new sovernment regulations.
'-d*'*-'"''"t new
''*
"taxes" (which are often
hriho<)
vtLveot)
p\/on nrnhlpmc r-rrrqpd hrr:rmod cnnflirt Tn rpoions
.-- --o'"--"
^r
plagued by civil war, soldiers on both sides often stop trucks and
confiscate loads.
With changes or turmoil in foreign poLitics, international
businesses face unexpected risk. The Russia-Ukraine political
crists impacted Canadian companies trading with Russia. Canadian
-^.1'
PUI^ OI]U PIWLSDDVMJOlvmel
PWULL]J ^'lccssor
^-,-l ^^"1+-.' rffEL had EAyVr LLU to
rrqu exnnrtpd Rrrssia fof
Lv l\uDorq f u mOfe

than 20 years and was set for record sales until Russia banned the
import of meat products and other goods from Western countries,
i^-l,,ri-d r.^-^,r^ nrrqqie jmnlpmpnfcd LrrlD han
IIIL LLILI-U.IB \-dIld.L,td., n L-l'JJrcl rrrrP LCrrrcrrLCU this Uqrr jn
lrl rresnonse
soPvrf oE to

sanctions from the United States and EU. Clnspd oa'es prPPt vi(ifo-s to
CeneraLMoLors after CM charged
Venezuela is facing its worst economlc crisis in the country's 1L-' - ,L^-ir:^-q> 1..-t
LIIdL duLltulIL i tddrllv
Lrou rLtc6c..J

history. American automaker General Motors announced in 2017 that soizec irs r'arl ir rhe'rdusr-ial
hub ofValencia, VenezueLa A
the Venezuelan government had itlegatly seized its manufacturing rough rranslalion oftne s gn
^t^-+ i-
pLanL tn +hr+ nnrrntnt
LnaL COUliL.ty, faraira
IOIC.LIIB bIVI +n
r'-T\f L0 h^lr rnl lo-t
pruuutL]urr orru
fldIL ^r^.l".finn wrr l11Of€
Loy ^ff reaos, u.lvl olsmtsseo
thrn / \t l{ l omntnrroos.

However, not all international

businesses are leaving the South
American country. Fiat Chrysler is
mnini-nininr rLJ ifo hr^/lrt.tinn nl:ntq
r]rd.r]rLd1111116 PTULT(^* ----, r .*--,-
in an effort to rebuild Venezuela's
automotive industry. Chocolate
manufacturer Mondelez, though
F^ -^.1 ..,i+L A : €A -,,1 +,,
raceQ wrLn o.Lr|IcurLy sourclng
raw materials, plans to continue
operating ai1 its plants, as it has for
over 85 years. A company with one of
its supply chain links in an unstable
- ^,,.^+-- - JULIr
LUUIILIy ^ ^ rVr^.^
^,, ^L ct) CIIL-**.*
"zr r
plt m:rr herrp
mrrch orpefpr nrohlpmc rnrith cnrrrrino
materials than a company that uses
srrnnliers in corrntries with stable
on\/prnmpnts

Challenges in the supply chain 1365

A Coioinblan fl oriculturlst
poses "rltn an arrangemenl at
Flowels
in international flower show
When do Canadians buy the most flowers? You guessed it.
\/alpntinp's d.]ILlMnthpr'q I):rr Coftino frpqh flnrnrorc iq ,,-
T),rrr:nd
v oLEIILIIIC J ud.y nn r-)asy
task Tt recttires a highlrr pffirjpnf qrrnnirr r.hein rDrnnpr
rvyLr farnnoratrrro
LLrffPLrqLurL,
"*YY'l
speed, and maintenance of freshness are key aspects of flower
loSistics T ike all nerichrhlo nrndrrrtc fLv
flnrgglg need tO
vv Lro tiuLu LU be in the
WL rll flsht
LIIL frt)rr!

place at the right time in order for customer satisfactton to be high.

But flowers can bloom and fade long before they arrive to be enjoyed
by the final customer! FLoriculture, also known asflowerJarming, ls a
section of horticuiture that deals with cultivating flowers and plants
for the floral industry.
Many of the flowers imported into Canada traveL from warm,
distant countries such as Cotombia, Mexico, Ecuador, Costa Rica,
and Guatemala. Colombia represents the second-largest import
supplier to Canada's floral industry. Canada and Colombia have had
a free trade agreement (FTR) since August 2011, which eLiminated
the previous 10.5 percent tariff on imported roses from Colombia.
These roses are harvested, boxed, and sent on cargo planes to
Miami where they are then loaded into refrigerated trucks and
shipped all over North America to flower shops, grocery stores, and
convenience stores.

--.-.=' 9: Supply Chain and Logistics

Figure 9-7 Top 10 Sources of Canada's Floriculture and Nutsery
(lncluding Chrrstmas Trees)

7012 2013 2014 2015 20't6

United States 178,431 193,140 206,689 227,716 730,221

Colombia 78,723 82,791 91,996 98,089 103,612

Netherlands 46,187 48,557 52,201 53,640 55,923

tcuac0[ 36,5 89 41 ,37 8 ,9 4241 45,502 39,0'15

Costa Rica 8,7 44 6,825 6,056 7,092 6,197

Mexico 4,785 5,521 6,082 7,391 8,494

Taiwan 3 ,987 4,493 4,5 0 1 6,606 6,780

lsrael 3,817 3,719 4,878 4,896 4,580

Guatemala 3,790 4,018 3,568 4,119 5,726

China 2,583 2,832 3,058 3,920 3,921

utneTs 21,971 25,047 24,905 29,966 34,039

Total 389,607 418,316 445,885 488,937 498,514

Countries iocated closer to the equator have a comparative

advantage in floriculture: climate. Warm days and cooLer nights
provide an ideal growing environment that Canadian producers
cannot renrodrrce and labour is also cheaper in many Latin American
countries. so the next time you receive or buy flowers, think of the
lons iorrrnev) thev made and all the borders they crossed so that you
"'--) -"-
- r----
' Lrr if
nnrrld oninrr thpm prron fnr onlrl for a* fe-
tr rvr ,*W (IdY>'

Check Your Understanding

1 When do Canadians buy most flowers?

\n/hV iq the *rr.J ch^jh .^ imnnrrnnf i- ( distribUtiOn Of
--,- -srrnnlv --Id.III )U rrlrPUl LOrrL 11r the
flowers?
3 Where are most flowers imported fiom?
4 What is floriculture?
5 What dld the Canada-Coiombia free trade agreement change
fnr imnnrtc nf rncoc?

6 Why do countries in Latin America have an advantage in

cultivating flowers?
Look at Figure 9-7. Whlch countries have experienced the
orp:tpqt inrrease in flnrucr exnorts to Canada from 2Ol2 to
Af!uL!u!

)orct

Challenges in the supply chain | 367

 Pirac
parts of the
Piracy remains a probiem for the supply chain in many
coast
world. Most pirate activity in recent years has occurred off the
of Somalia. In2OI7, Somali pirates successfully boarded
multiple
Somalia
shipping vessels off the coastiine that separates northern
urd y.-.n, one of the busiest shipping routes in the world'
From
2OO5 through 20i3, piracy off somaiia's coast was
estimated to have
have
cost world trade billions of dollars. Anti-piracy operations
(Rvpos) to counter
Autonomous vessel Protection Detachments
piracy and protect shipping off of the coast of Somalia'
Untll2016,NATOmembershadpatrolledthewatersoff
somalia, deterring pirates. In 2016, plrate attacks doubled
off the
due
west Afiican coast as military patrols decreased in the area
the
to reduced funding. ln2olT,the first oil tanker was seized off
coast of Somalia, and the crew was hetd for lansom. It was
the first
seizure of a large vessel in Somalia since 2012'
.,,U S. antl Piracy mission in The West African coast ls not the only region where ocean
:he Gulf of Aden, located in the shipments face rlsk from pirates. The passage between Malaysla
-irablan Sea between Yemen and
,he Horn of Afrlca and the Philippines is becoming a danger zone. In 2017, Malaysian
coast guards rescued 14 crew
members and recovered almost
$2 million in diesel fuel from a Thai
oil tanker stolen bY Indonesian
pirates. Events such as these
increase the costs of shiPPing.
Hired security and insurance rates
increase, as do transpoftation costs
from taking different, longer routes
to avoid piracy. The threat of piracy
impacts the economY not onlY bY
increasing shipping costs but also
by reducing tourism in regtons
where piracy occurs. The World Bank
identified the countries affected
by piracy as KenYa, Mozambique,
Madagascar, Mauritius, Pakistan,
Somalia, Tanzania, Yemen, and the
countries of the Persian Gulf.

i:.1 ChaDter 9: Supply Chain and Logistics

Figure 9-8 The Single-Window System

Tradet or agent submtts

all infotmation required
for shipment to the
single-wtndow itE WINDOW o
I

service provider.
o
o att'
lnformation
is sorted,
filtered, and
routed to

at' the propet

sequence.

aa
a ta
from the ca
Responses a
a a
various authorities and a
a
financial institutions are a
a
a
returned to the trader
or agent with either
approval or rejection.

Optimization is the process of making the supply chain highty

efficient, connecting manufacturing plants, suppliers, and customers.
Optimization allows for fewer delays and difficulties in moving
products from one place to another.
one method of achieving this is through digitalization, which uses
technology like databases and integrated apps, connecting each step
in the suppiy chain. Technology has also improved the efficiency of
goods travelling across borders.

Many companies are also archiving optimization by reducing

enabling internationai traders to submit regulatory documents to

a single location in order to complete an international transaction.
This process is illustrated in Figure 9-8. Customs declarations and
applications for permits, certificates of origin, and invoices are
examples of documents that can be submitted using this system.
Customs warehouses are the
domain of the Canada Border 9.5 Supply chain assistance
Servrces Agency, which enforces
certain checks and controls on Efficiently managing the suppiy chain is a complex and difficult task,
in.^mind shinmpntq
especially for a business Looking to expand internationally. Canada's
govemment has a number of resources available to businesses
involved in international trade to assist them with managlng their
lncricfinc
LUBI)LILJ. Othor
.]"^ onanicliTp in fhp mAn\/
rfrqrri aSneCtS
uryL Of
^rdanj--+i^-" d'l)U JPtrLIOLr4E 111 LrrL
\JLrrCl-6qrl-LZdLIUIT)
the
Lrrr rsunnlv
uyl/
L_/ chain for the slohal market. In this section, we'11look at
the following:
. Canada Border Services Agency
r T)pnnrtmpnf of r^-^;x^ ^f€^:-. 'l-.^'le urru Develooment
I rouL and
-- f UIC1611 fllIclllJr

' The Canadian Trade Commissioner Service

. Innovation, Science and Economic Development Canada
' Export Development Canada
. Canada Business Network
. Canadian Trade Index
. FIASCIS
. Customs brokers

370 | Chapter 9: Supply Chain and Logistics

The Canada Border Services Agency (CgSn) ensures Canada's
security and prosperity by managing the access of people
and goods to and from this country. With approximately
14,000 employees and 6,500 uniformed officers, the CBSA operates
in 39 international locations. The CBSA manages 117land-border
crossings and operates at 10 international airports. Officers
caffy out marine operations at major ports, the largest being
Halifax, Montreal, and Vancouver, and at numerous marinas and
reporting stations, as well as at27 rail sites. The CBSA processes
and examines international mail at three processing centres. The
agency is atso responsible for business functions such as:
. Administering legislation that governs the admissibitity of
people, goods, plants, and animals into and out of Canada
. Detaining people who may pose a threat to Canada
. Removing people who are inadmissible to Canada, including
those involved in terrorism, organized crime, war crimes, or
*o*----, hrrm
Crimpq adainSt on'ifrr
rrulrrorrrLy
. Interdicting ittegal goods entering or leaving the country
. Protecting food safety, plant and animal health, and Canada's
resource base
. Promoting Canadian business and economic benefits by
administering trade legislation and trade agreements to meet
Canada's international obligations
. Enforcing trade remedies that help protect Canadian
industry from the injurious effects of dumped and subsidized
imnorted soods
. Administering a fair and impartial redress mechanism
. -Promotins
-"---""-^-o Canadian
-*- interests in various international forums
and with international organizations
. Collecting appticable duties and taxes on imported goods

Supply chain assistance | 371

 Formerlv the Deoartment of Forejsn Affairs and International Trade
(orarr) and the Canadian International Development Agency (CIln),
the Department of Foreign Affairs, Trade and Development (lfRtl)
was created in 2013 by amalgamating DFAIT and CIDA. DFATD has
fnrrr mlin nrinritioc'

1 Contribute to international peace, security, and humanitarian

assistance through renewed leadership and constructive
internationaL engagement.
2 Reinforce Canada's relations with the United States and other
key partners to advance Canadian interests.
3 Strengthen Canada's contribution to a more just, inclusive,
and sustainable world.
4 Contribute to inclusive Canadian and global prosperity
through increased and diversified rnternational trade, and
foreisn direct investment.

-
5ervrce
The Canadian Trade Commissioner Service (rCs) hetps Canadian
I cnmnenipq lookino
.---'^'-o to
-- onerate
-T'-*--
glohallv
o.--*--J.
^F+L^
--J P4lL Ur
r-\^h^r+TIent
LLIC uEPqrLr

of Foreign Affairs Trade and Develooment Canada, the TCS was

created ln 1894 and helps Canadian companies in accessing gtobat
mnrlznfa Uy nrnmafi^x f\,o.llo.ud
Il.Id.]r\CL) l-rrr
PrUIIIULlllB cLurrulrr intefeStS afOUnd the
^^..].'o J ^.^h^miC
rrrnrld first nnsti^-
s rlroL - -^^ ;- "-+-^ri^ r. 1895. The TCS has
vvurtu. fTfLJ PwoLTIIE; Wd.> III fauJLld.LIcl
^ 'n
trade offices across Canada and in 161 offices around the world.
it provides Canadran businesses with intelligence, contacts,
6666af1rnifiao nnrl nrcntincl :fl'r1ir"p nn fnfpidn
Pd.ILIICIJIIIP UPPUTLtlIIILICJ, O.llU PIOLLTLqL quvlLs vrr rvrLL6ff
-ort.ot.hi-
markets to heln husinesses make better decisions when it comes
to thelr lnternational goals. The role of the TCS has become more
critical in an ever-evolving globat economy.

: -- l-::ter- 9: 5upply Chain and Logisttcs

 (ISED)
Innovation, Science and Economic Development Canada
works with Canadians in all areas of the economy and in all parts
of the country to improve conditions for investment in canada's
economy, enhance Canada's innovation performance, increase
Canada,s share of gtobal trade, and make Canada a competitive
marketplace. Areas that ISED oversees include Canada's
airwaves ; bankruptcies, incorporations, inteliectual property, and
measurement SyStemS; financing and research tools for business;
promotion of scientific research; and the protection of Canadian
consumers.
The ISED provides access to directories of Canadian companies
to find suppliers, research competitors, check a company's federal
corporation status, and even register abusiness'

Political tensions can impact an international business:

just ask Coca-Cola. In 2016, the company posted a New
Year's sreeting on a Russtan social media site showing
a ry\2n
q IIIqP nf
vr thp
LfiL r.nrrntrv
LvutrLrj that
LfIqL exclttded
L1\!tqu Crimea a region of
the Ukraine that Russia annexed in2OI4. After facing
online pressure, Coca-Coia republished the map to
include the region.
However, thrs revision sparked outrage from
Ukrainian users who called for a boycott of the soft
drink. The post was taken down and the company
apologized, stating that the map was changed by
an agency hired without Coca-Cola's knowledge.
Geopolitical tensions are just one of the many risks an
international bustness faces in today's gtobal economy'

Supply chain assistance I 373

 Export Development Canada (fnC) is a Crown corporation. EDC is
<olf-fin:nr.pd and onerates at arm's lenoth from the o"'*'------ government. EDC
.1rhh^r+o f nnr.]n'o ovnnrt LrclLlc hrr
LS Ldlldud 5 eiPur L tredp ui helnin- n^-^r'i^- -^-^^^;ag V/i[hI
rrcLPttrB Ldrrclulcllr LurrlPdllrl
SUUpUI
internationaL business opportunities. It provides Canadian exporters"
with trade financing pxnnrf
L^yvf L credit insrrranr'e hondjng servjces, as

rarpll :< fnrpion mrrket pxnprtise.

EDC also suppofts Canadian direct lnvestment abroad and

investment into Canada. Much of its business is done in partnership
with other financial institutlons and through collaboration with the
Government of Canada. Founded inl944, EDC has helped facilitate
more than $1.3 triLLion in exports and foreign tnvestment. In 2016, EDC
hplnod mnrp then 7. , O^^ .^^..linn nnmnrnjps
- \JU LdlLctLrfolI LUIrlPqlllED, mnstlrr OrrfqLL
rrrvJLLi small httsinpsscs
uurrffLur!u)

conduct trade in over 20O countries. Emerging markets represented

3O percent of its business, suppofting Canadian jobs, contributing to
annr,]r'c rnrl halninn
IIeLPII-tB fLdlIdtlId.II
cncrlirn hrrcinpcc
L/uDrrrLrr anmnotp grl6hcllrr '
LvrrryLLL 6Lvuott)
^.nhnmrr aIIU
LalIaOa 5 eCOl.tUIJIy,

The Canada Buslness Network provrdes assistance and promotes

hrrqinpqq:nd
u uofrrLoJ qriu cntrpnrpnprrrshin
LlrLr ryr throrroh an organized network of
d^r'i-^ ^^^+r^^..7Ac.
>trL vILtr LCIlLICJ
n-^-.1 Ennh nrnrrinCe of ]u teffitOfV
dLIUJJ \,OrrdUO.^ LGLrr PrWVrrrlE and LLf rrLvr-y haS
rruL a

service centle that works with community partners providing

. Information for making well-informed business decisions in a
gLobal economy
. Informatron for business in one convenient serulce
r Sirnnlifipd
ulrIlyLrrr!u dpelinos r^rith diffprpnf lerrels of gorrernment
. Advice for business planning, market research, and the use of
strategic business information
In addition to the above, the Canada Business Network provides
businesses with resources inciuding information on government
services, programs, and regulations.

Chain and Logistics

Cana ian
The Canadian Trade Index is a suppLy chain tool for Canadian
businesses that has existed since 1900. Today, lt is a buyer's guide to
the products of more than lOO,OOO verifred industrjal companies in
Canada, and is the country's leading onLine industrial sourcing tool
fnr
rv, m:nttftrtttrprc
rirqiiurq!LurLrr, ovnnrtora
L.!yvr-Lruj rlicfrihrrfnro r.^/ SeIVlce
j, aIICL oa-' ian COmpanleS.
-nmnn-
-'-._'-u,vr
LD i,rrchsite
fTfs vvsuJtLs rrcrpJ ind"-r-i^l --'--L- -tlrce
hplrq rttuuDLLId.L pulLtld>c]>^^-- )L goods
onlinp Thrnrroh
_---, *o--
the index buyers can access information (such as detaiLed company
information and contact information) to help them make sourcing
derisionq Rrr:drrprticind!r lru'rbon fhp cifp e hrr
_*stness gatns exposure t0
nr i.Lrons or potenllaL customeIS.
-illi^-- ^F^^+^-+i^l

ra 5e 15
D-ASers js e comr.phenSive online direCtOrv
rr! ujf Lrtv-Jr and search tool
fhrt nrnrrrdoc infnrrrlSlion vr
onI Canadian
Lufiuqiurf industrlal
rrruuoLIIqL wholesalers
vvllvtgDqtElD,

manufacturers distribuLors, and their products and services. Frasers

also lists international companies that supply goods and services to
the Canadian marketplace, and is the sister publication of lO other
industriaL publications that cover leading Canadian industries
Frasers allows users to frnd company informarron and product
<ttnnl iprq fnr
Jr/p.rLro rvf thnrrc:n.'lo
Lltvu)qlttl) nf
u-L -'^1,'-t.
pluuuLL).
Section review
What does CBSA stand for
ro ers and what does it do?

More than 200,000 importers each year deal with the Canada
What does DFATD stand for I
and what does it do?
BOfdef SelrireS AOpnr-rr rii imnnrtjnd
in r_ilyv_ onndo fa
L_ii6 6wwu) -cnrllr 1'IolIy
Lw !oltouo. \,tr-nrr uInf rhaoa
Lltc)c 3 What assistance does
imnorters relv on a-
----r"-
jcensed customs broke- fo heln them Lltllli rleer lhsjl
LLlqt the Canadian Trade
chin'nontc r'tho hnr6lgl. A Canadian customs
luJLvr_rJ broker is
_u an
Jii exnert
L_!p in Commissioner Service
navlgating the compLicated rules and regulations rhat apply ro items provide?

being imported into Canada. Many businesses use customs brokers What does ISED stand for
and what does it do?
to clear goods, that 1s, to get them through the Canadian border by
paying the necessary taxes, tariffs, and dutles. Once a broker has What does EDC stand for and
what does it do?
cleared the goods, the goods are aLlowed into Canada. Individuals
What is the role of the
who own businesses can clear imports themselves, but this can be
Canada Business Network?
--r +i'
-^*^l;^^+^'l ano
d- Lotrrpucareo tlme-consuming proc€ 'qq rnihieh ic rrrhrr m:r
__, ,-_*fy
What is the Canadian TraC:
btts jnesses onf fn hire a broker
Index?
8 W NAT IS I IASEIS
'
9 What ls the roi: o- a:-.--:::s
DIOREI 1

375
 Chapter Review

1 What is successful logistics?

Consumer Product Safety Act'
2 Describe the purpose of the Canada
between domestic and
3 What are some similarities/differences
international logistics?
in the suppiy chain'
4 List the four possible storage locations
in an intermodal shlpment'
5 Outiine the steps that may be involved
do?
6 What does Canada Business Network

couid integrate vertical$ and

Explain how the following businesses
horizontal$:
' Fast-food restaurant
' Car manufacturer

' Celt Phone service Provlder

' Airline hotel

BHowmightacarmanufactuleluselevelselogisticsinitsproduction
facilities?

9 How is offshoring different than outsourcing?

How does managrng inventory in

the supply chain impact a
10
busines s's ProfitabititYz

llHowcanadverseweatherandnaturaldisastersimpactthesuppiy
Provlde examples'
chain for an intemationalbusiness?
important in the suppiy
12 Why are optimization and digitalization
chain?

Discuss the imptications of the

following statement: Instead of
13
warehouses or stockrooms' the
just-in-time lnventory system utilizes
trucks.

:;5 Chapter 9: Supply Chain and Logistics

Communication
t4

15

16

T7

18

Chapter Review | 377

 19 Using onLine resources, research Canada's oil lndustry and the curent

for Canadian consumers? Defend your prediction with evldence from

your research.

20 outllne all the links in the suppiy chain for a cup of coffee. Be as

detailed and as accurate as possible.

21 Select the appropriate carriers for the followlng shipments, and

provide reasons for your selection.
a Oll fiom Alberta to a refinery in Texas

b Chryslel/Dodge automobiLes from Brampton, Ontario to a Chrysler/

Dodge dealership in Miami, FLorida

Computers manufactured in China, delivered to vancouver, Brltish

Columbia
d Lumber from British Columbia exported to Houston, Texas
e Lobster from Canada's East Coast to a restaurant in Tokyo, Japan

22 Using onLine resources, research trends and technology in global

supply chains. How is technology changing the way supply chains
function?

378 lChapter 9: Supply Chain and Logistics

lnquiry Activity

Tn this chaoter. vou learned about different suppty chain issues and
associated risks that international businesses must anticipate. One
way for businesses to manage risk is to have a better understanding
of the external factors that can impact operations. PESTLE is a tool
that businesses Can use to aSSeSS these external risks. PESTLE is an
acronym for Politlcal, Economic, Socio- cultural, Technotogy, Le gat,
and Environmental factors that can impact an organization These
factors are summarized below.

PoUTICA[: Government term and LEGAL: Cufrent legislation; future

change; trade polrcies; fundlng, grants legislation; international legislation;
and initiatives; lobbyrng and pressure regulatory bodies and ploCess€5;
employment law; consumet protection;
Qfoups; waTs, tertoTism, and contlicts;
elections and political trends/issues; health and safety regulations; money
inter-country telationships; local laundering regulations; tax regulations;
commissionin! ptocesses; coltuptton; competitive regulations; industty-
Du rea ucfacy specific regulattons

ECONOMIC: GDP; inflation; exchange ENVIRONMENTAL: Environmental

rates; unemployment; industry gtor'vth laws and tegulations; ecological
import/export tatios; intetnational regulations; reduction of carbon
t[ade; international exchange rates; footprint; sustainability of sourcing;
local economies; taxation; intlation; impact of adverse weather; recycling
interest rates; seas0nality issues and reclaiming of resources

T-
1II "-.11 drn,,hc
uPJ,
)111d.11 61U
nnn1116[
LvrlL a PESTLE ;1a_.:-S ::] a: -n.e1tatiOna.
business for one of the followingpr:-:::r.::s -:l one cf the
following countries (each group sho*-: ::-::s: a ----.:€:lt::cduct
and country).
/-nr anmnnnrr
Prod ucts \-dr LUrrrPorj
Airline
SmarEphone

Cou ntri es ' Braztl

' Ca:aca
' China
-,'.:al a:e the simila:ides alr
Present your findings to the :.ass.
differences among the presentaiions from the various counti-ies and
products?

Inquiry ActivitY 1379

 ,

Risk mcncgement = the process of identifying and controlling

".
threats to an organization

Businesses always need to be aware of the changing global

environment. sometimes risks appear that are unpredictable and
cannot be directly controlled. These include natural disasters,
vandalism, hacking of computer systems, and unforeseen chanses
in laws and regulations by governments.
Other risks include:
. Financial risks-exchange rate fluctuation, borrowing costs,
chanses in oil orices
. Legal threats-copyright, patent infringement, and lawsuits
. Errors by management-scandals such as the Volkswagen
emissions scandal or GM's faulty ignition switches
. Securitlr threats-on company data or private data, such as
the Whole Foods and Home Depot information breaches
. Accidents and other disasters-factory coltapses, product
recalls safetrr in fond h:ndlrno
rfur ru Lft r6

Even while an international business can't prevent and control

everything, it can exercise control over other areas. It can keep up
with changes rn technology and the environment; it can control
its image, its public relations, and its social media presence; and it
can minimize currency rate changes through planning. A business
can also control legal threats by ensuring it adheres to copyright
and trademark laws, does not break or breach contracts, and
follows workplace safety and human rights laws.
 Sandhaps arp r.spd lo nreDale
Activity Fnr flnnds :rd kppn 'l'o r^r4'91 31
Ln,,
Jay \^/Lrt
wild" ',,ill
wr,ryuJ ',^ ' ih.l,,/l
urL.LUe lnyour
Your task is to create an emergency preparedness plan for your . ai^rrr Flah -^
JdrqLy Prdr LU l-^^-.z^rr
AtrtrP rq6 1y6117
yuu drlu ju*_
business that would allow you to manage risk if you encountered business safe?

72 hours without electricity. Thls assignment is based on the "72

Hours: Is Your Family Prepared?" campaign from the Government of
Canada. You may wish to visit the Government of Canada's online
resources in preparing your plan.

Be sure to consider the following in your safety plan: food items,

documents, phone numbers, safety route and locations, tools,
communication devices, health needs and medicine, pets, gas and
electrical panel shut-off locations, sleeping arangements, energy
sources, and seasonal weather. Be specific in your planning.

Business Skills i3tr

 e

Lem rffi F$G By the time you finish this chapter, you should be able to:

ree €6ves " Explain how Canadian and international companies, industries,
and markets are affected by increased global business activity
' Identify and analyze international business trends and their
influences on companies, industries, and career opportunities in
the global economy
' Assess how trends in the globat marketplace have changed the
ways in which an individuat might run a business
' Analyze the impact of recent gtobal events on Canadian
international business
" Identify the requirements for study, travel, and employment in
different countries
 subprine mo-gaie small to medium-s2ed
Key Terms nrntorrinnr<rn enterprises (SMes)

Sustejnabilri geopolitics
-^-L^-
Lct.!LTULI
n;--d r'5 passport
-j_rr
unive:-i basic income (Ugf) VTSA

cry?toculrenc.v- labour mobitity

b:.ockchain duty-free items

gender parity
 t \1
,{ *lr
itlo*Y:"
a\ $oif,"
-
i, =*=
tag1:j

In Chapter I you read about the severe recession faced by the

gLobat economy in 2OOB. International markets began to collapse-
triggered as the result of years of excessive risk-taking in the U.S
.. .- :. '', .-. ;- :.::'::..:1.:.::,:, market During this time, financial tnstitutions

had approved mortgages to buyers who dld not meet the standard
requirenents 'or buying a home. The orjginal intent of subpr me
loans had been to alLow more lower-income Americans to own a
home BuLt ove" time institurjons sLarted approving loars tne; knew
wouLd go into defauLt since they could remove these loans from the
batance sheets before they were impacted. However, thls system was
not sustainabLe and it eventualLy faited.
corporations that fail affect businesses throughout the
GLobal
worid. Canadtan banks remained relatively strong because they
are well-reguLated, and yet they were affected to some degree, as
they had invested in the Unlted States. But at the corporate level,
since the Unlted States is the Largest market for Canadian goods, a
decline in spendlng there meant a much lower demand for Canadran
products. Canadian companies suffered major Losses because of the
decrease in U S. pr,rchasing Power.

384 | Chaoter 10: Global lssues and International Business Trends

 Canada's recover
Since the globat financial crisis, the Canadian economy has grown
slowly. The Bank of Canada predicted gross domestic product (GDp)
growth of 2.8 percent in 2017, 2 percent in 2018, slowing to 1.6
percent in 2019. Like many governments around the world, Canada's
federal and provincial governments have been running budget
deficits to grow the Canadian economy. (R deficlt exists when the
government spends more than it receives in taxes in a given year.)
The Bank of Canada and the International Monetary fund (tMF)
have been raising the alarm over the state of Canada's economy,
particularly over the enormous increase in personal debt that
Canadian consumers have accumulated. Many middle-class
Canadians are alarmed by the growing cost of living in Canada's
cities, especiatly since wages have not kept pace with the price of
housing or the price of consumer goods. ELected in 2015, Prime Minister
Tuslin Tnrdear carn.rroned on
And yet, by certain measures, Canada continues to be recognized a DTomise of ke"rirp Cenada
comDeritivc rnrhilp nrnfpe f ino
as one of the best countries ln the world in which to live. The
the secur''y n'rhe -idd[e
___-'-'.^"'J
Economist InteLligence Unit ranked Canada as home to three of the class: 'We wan[ to have good
top five most liveable clties in its 2017 Global Liveability Ranking. wel'-nav rs iobs fnr iddle
'' -" t-J _,'oJ" -
ciass Canadians and we wanr
Toronto, Calgary, and Vancouver. Criteria for the ranking included
to grow our locaL and nationaL
education, infrastructure, and health care. economies "

t
Beyond the global f inancial c-'s ; :::
 e United States
In the United States, the price of houses started to go down in
2007. Thousands of homeowners who did not actually quatify for
mortgages in the first place could not afford the payments and
defaulted on their loans. Banks stopped lending money and credit
dried up due to the losses fiom the subprime moftgages. Many banks
went out of business. Outside the United States, banks that had lost
money on subprime moftgage investments were hesitant to lend,
even to each other, and the banking industry itself became unstable.
Capital became hard to get and new business start-ups stopped.
The result was even more unemployment and the deepening of the
recessl0n.

Many countries around the world (including Canada) stepped

in to provide extra capital to stimulate job creation and economic
growth. The lack of spending by American consumers meant that
A Stgn tn l\ew Yort( s lrmes
Snrrere anrolnces a 'isc in
impofts of cars, appliances, buitding materials, and other goods
interest rates for the first tlme decreased. Businesses in the countries that exported these products
fnllnrnrino thp ?OOR rrisis
to the United States saw sales go down and had to close or lay off
Interest rates went down to
nearlv 0 Dercpnl al lhe start of
manv workers These workers had no ln6nmo :nd ,'nrrldn't nrr16[69g
fhe glohal recpssior in nrder to products either, which 1ed to further layoffs and even greater
ql'imrrl:rp 1'ho prnnnmv Thorr
decreases in snending. However, toward the end of 2OI7, the U.S.
l.ave beer ris'ro sreadilv Since
,/l ll\ IrInPn T'llq rlr-llfP \^/aS economy appeared to be accelerating its economic recovery with
taken. strong job creation and growth in GDP.

386 | Chapter 10: Global lssues and International Business Trends

 e rise o
Since the U.S. elections of 2016, the protectionist movement has
been a very real danger to Canadian business. Protectionism is the
practice of shielding a country's domestic industries from foreign
comnetition rstrallrr hrr taxino imnorfs T)ompstic and oloh:l
economies have put many Americans out of work. As a result, trade
or busrness deals that do not appear to be in Amerlcan interests have
been unpopular in the United States.

rFor examnle shortlv

vr EAqfrrPLE/ DrrvrLLj qrLLr Llru
n^^-r,r rF,1,'-h *Le
after the election ^F yvllqLu
LLLLLtvff vt 1IuI1lP, Ll1 U.S.
government was nreDaring
o"'-".'.'''' "" introduce a 22O-nercent tariff on
'-''b to
/-^- ^ ri
UOIIOUIOII ^- ^;-^r ^^ ^ *anufacturer
dIIP Lo'IIC IIIOIILlId.L DUI I IUOI Lrri er
LLlI C L Bombard / Lr cl aimin g Bomhardier's
L Lqrrrrrri6 uvrrruu

C-series jet is being sold below market :rices due to a subsidy from
the Canadran government. Bombardie: had secured a contract with
American airtine company Delta to suor.1 up to 125 C-series jets.
The tariff would have tripled the cost cf e ach airplane to almost
$61 million compared to the $19 miL,ron p:ice tag touted by Boeing,
its II S comnetitor Boeins claimed subsidies enabled Bombardier to
dump its product into the U.S. market, harming aerospace workers in
the United States and throughout Boeing's global supply chain."
As a result, the Government of Canada announced that it would
reconsider its nreviorrs intention of nrrrchasing militarv nlanes
from Boeing and was looking at its options of buying fighter jets
from Australia. The Boeing-Bombardier dispute serves as an
examnle
L^qrrrpLL of how
vr rlvvv rwrrIPd,lIICJ ^-r LUL-tIILll.LJ
com^^^'^- d.IlLl -^''^+-'os resnond
rLOPvlru to
Lv harriers
uurrl. to
trade such as tariffs. Canada and the United States rely heavily
on each other for trade. When tariffs are introduced, the prices
skyrocket, and as a result trade slows down or even ceases.
The move bv the Il S oovernment caused concern for the United
Kingdom as well. Bombardier builds wings and fuselages for the
jets in a plant east of Belfast, Northern lreLand. The dispute put
thour"nd, ofjobs at risk (Bombardier employs 4,OOO workers in
Belfast) and created tensions between the U.K. and the United States,
who are also close ailies and trading partners.
Protectionism also fuels the renegotiation of NAFTA (see
Chanter 6) v/, each cnttntnr zfttrmnfs tn nrOteCt itS own bUSineSS
as !q!fr
uu

interests. The threat of trade wars between different countries across

the world constantly hovers over international trade agreements and
thp olohal p.nnnm\/
"^^- d'""*'''"''"^"J'

A drop in house Prices Points to
consumer fears over the state of
the British economy Since the
Brexit vote, home values have
stabilized but fl at-lined
3E8 | Chapter 10: Global lssues and lnternational Business Trends
London, Engiand, has traditionally been the centre for financial
companies such as banks and investment firms. As Britain plans
its exit from the European Union (EU), these international finance
companies are moving their headqualtels to other countries
to remain part of the EU. Countries such as the Netherlands,
Switzerland, and France are now becoming home to some of the
world's largest banks. The chinese bank HSBC has investigated
moving its EU headquarters to Paris, France. Meanwhile, the biggest
winner of foreign direct investment (f lt) is Dublin, Ireland; it
has quickty become a major destination for many international
businesses, such as Canada's TD Securities.
The global outlook remains unstable as disruptions related
to Britain's exlt from the EU are difficult to predict. uncertainty
remains one of the biggest risks for an international business.
These businesses, along with the EU, have been waiting for the
British government to give some direction on how Brexit would
proceed. International business will be reluctant to invest in Britain
until there is more certainty surroundtng the country's role with
the EU post-Brexit. In the year following the Brexit vote in 2016,
Britain went from being one of the fastest-growing economies of
the G7 (group of seven richest countries in the worid) to one of the
slowest, according to the International Monetary Fund'
 al^i-^ L,,il+
Lnina ;+- nTSI
Dulrr lrs A-^+ ^^--^
passenger
:^r r- 1n 1? ^-J r^ ^^--rtted
lcL lrr zull, dtru rJ LUltllrlr
to taklng on the two giants of
Markets where Canadian businesses buy and sell products are often
commerclal aviation -Boeing
changing. The major change that has occurred over the past decade is and Airbus
the emergence of China as a significant trading partner with Canada.
In2017 , China became Canada's second-largest supplier of
foreign goods (behind the United States). Import trade with China
has increased to five times more than it was in 1997; however, there
is also substantiaL growth in Canada's expofts to China. China is a
significant market for Canadian goods (over $23 blllion in 2017) and
witt likety continue to be into the future. The Chinese economy witl
continue to grow and is expected to surpass the U.S. economy as
the largest in the world. Canadian businesses will continue to focus
on trade with China.
...-....r*'""..)'-
The imnact of srowth in the Chinese market on Canadian
businesses is important for exporters, importers, businesses that
are developing joint ventures with Chinese companies, and factories
that are outsourcing production there. China represents a vast new
market for Canadlan products and seruices. China's economy has a
growing middle class with consumers who prefer foreign products
and luxury items that are seen as a symbol of status and success. As
China's success trickles down to the country's workers, a new middle
class is emerging, providing people with discretionary income to buy
goods and services that they could never have purchased several
years ago. No Canadian firm can afford to lgnore China as a source of
products, a market for goods, a supplier, or a market for competitors.
Vlrtual reality and augmented
reality technologies have
obvious appLtcatlons for the
gaming and entertarnment
jrdustries but they also hare a
roLe to play in the future of some
businesses
390 | chapter 10: Global tssues and International Business Trenos
T. Global trends
Ceftain
vLa Lurri devplonmcnts
uL v ! rvprrtcltL- *- _ inflrrpnrino tho
arp !rr! rrrrrr
vv oj LrroL r'-n-..li.^-
rhrr- Ldt.rclLllarr> .cohduCt
business abroad and will have an impact on trade for the next decade,
or longer. The financial crisis had a major impact on trade. what other
current trends will shape the way we do business around the globe
tomorrow? In this section, we wrlL examine the following topics:
. Fluctuating oil prices
. Climate change and carbon pncrng
. International Labour
. Automation and disruption of retail
. Income distribution
. Augmented reality
. The internet of Things and artificial intelligence
t The
- --- chanoino:tttnmntirrp
---*"o'- indrretnr
. The future of money
. Cybersecurity and data protection
' Eliminatjns
_--------*---,o the sender gan jn hrrsiness
uuDfft\
Fluc ua in oil flces
A sisniflcant trend influencins Canadian businesses is the ever-
--"-o-----'*'---"*'---'''a)
fluctuating price of oil (see Chapters 6 and 9). In some respects, the
entire Canadian economy rests upon the price of oiL, as investors in
other countries often equate the strength of the Canadian dolLar with
its oiL prlces. The higher the price of 011 on world markets. the higher
the nrice of the Canadian dollar. Fossil fuels not onlv heat homes
end nowpr arrtomohiles thev are maior insredierl's in fhorrsands
of nrodttcts
vr yi vuuLLu vvL denend
we uLyLi-* uoon
*r --- each
-*--- dav,
--J , mr--*
--- J)L IiULOULy -r^^f;-- O^nd
-^f^r-'r" PIO.JLILJ
synthetic fibres such as nylon. As the price of oil increases, many of
the nrodrrcts rnrp nepd increase in cost.
Snmp indttqfr\/ pynprtq hpliprrp thrt nil nrirp< rrrill rr:ch tn
historic iows over the next five to 10 years as aiternative fuels, new
technolosies and the adontion of elerf ric vehicl es hv consrrmers
redrrce the slohal demand for oil. fulpsnflv 7o nercent of oil is
used for transportation. Countries that once relied on oi1 revenue
for fheir nrrhlic snending ATp now lookirg at diversifving fheir
economy. In 2016 Saudi Arabia's Crown Prince Mohammed bin Plastics, which a;e naCe ilcr:r

SaLman introduced the country's Vision 2030, a plan to diversify

o l aro p prt)
' ''
""r,a-a a'ra- ''
our - o-: e.. -| c rl
Saudi Arabia's economy from dependence on oil and to develop cabi"els r.tndo-.-b.tnl^ r-
rtnrljr -L' -L-- :-
other areas of its economy, including tourism, educatron, health, c_1.

--,-l *^-,,rna+,,vi*x n--+ ,- *l pasil-s

^l^-+i-- a..-L ^-^;..-'-
>ucl_,tI_oJ-._ - -:._ (''-
d,rru rllolruLdLLuI1116. ^r+L^
rd.] L uI LIIt ^r^'^
,utd.ll I> LL incleaSe nOn_OiL tfade and more in the furuie dre to a :.-e
onen fhp r-nrrntnr tn fOreign direCt investment oil nriepq

\ILIJL'.
 The changing globat oil market impacts Canada general$ and Alberta
in particular. Aiberta is home to Canada's oil sands, where companies
such as Suncor Energy and Husky Oil heat the sand to extract its
bitumen to produce oil. The collapse of oil prices in 2OOB adversely
affected Aiberta, causing job losses, office vacancies, and more crime,
and the province eventual$ fell into a recession. As you can see in
Figure 10-1, unemployment has fluctuated in the province, with a spike
in recent years, and showing signs of lmprovement through 2OI7 .In
2015, the NDP government went on to win a provincial election, beating
out then-PremierJim Prentice and the Progressive Conservative party.
It was the first time since 1971that the Progressive Consewatives were
not goveming the province, signalling a sea change in both politics and
economic strategy for the province.
According to the Canadian Association of Petroleum Producers,
Canada will need more pipelines built by 2030 to deliver its oil to
markets across North America and around the world. By then, its
oil output is projected to be 5.l million barrels per day. Once seen as
a secure source ofenergy for the United States, Canadian oii sales
now rely on international markets since the United States produces
more oil for its own domestic consumption. The new pipelines,
while assuring speedy delivery of fuel, also pose challenges to the
environment and the rights of Indigenous peoples to their land.

Figure 10-1 Unemployment Rates for Alberta, June 2007 to June 20'17

10
9

s7
Eo
;s
=4
Er
52
1

0
2008 2009 2010 2011 2012 2013 2014 201 5 2016 2017

392 | ftapter 10: Global lssues and International Business Trends

Sustainabitity is the coilective effort, both local$ and globaily, to
meet the needs of the present generatton without destroying
the
abrlity of future generations to meet their needs. It aiso referred
to as stewor d,ship.. the concept that Earth's lesoulce need to be
nurtured and protected now so that others can have them in the
future. Many globat businesses today are struggling with this
Concept. It rs a recognized fact that the current generation needs
to
act to curb the destruction of global IeSouICeS. We need to consider
a radical shift in business activity that our govemments can
control.

Scientists are certain that hydrocarbon emissions wiil shorten

the tlfe of this pianet. Governments around the world are taking
stens to reduce these emrssions, although some are doing more than
others. These steps have an impact on how Canada does business
internationat$, and will have an even greater impact in the future.
New energy sources, new cal technologies, and efforts to reduce the
carbon footprint will all influence Canadian businesses within the
next decade and beyond.
Despite the United States opting out of the Paris Agreement
on climate change (see Chapter 6), many industries and countries,
emersjns and established, are deveLoping gleener, environmentally
friondlrr
tIrLlIuLJ' tpr.hnolosips
LlLrrr rvLvbfL that redttce nollution and carbon emissions.
one model supported by most economists for reducing emissions
is carbon pricing, which is the price to be paid for the right to emit
I tonne of CO, into the atmosphere. Canada's federal government
is regulating and taxing poiiution created by Canadian companies
+r-,-^,,al- +hic
LIIIOUEI-t LIIrb 5Lld.LeBy.
r'^-^,1^'-r f^S^,^1
.1-r.fad,, \,d.t1d.Lrd' rcucrqL dCvelnment Undef Pfime
6\
MinlsterJustin Trudeau has made carbon pricing by ali provinces
mandatory, with a target price of $50 per tonne by 2022
rrrhnn
LOl UVrr nrinino'
Pr rLrr16 Can take One Of two fOrmS: a Cafbon tax Or a
pollution permit (also known as cap andtrade)' Under a cap-and-
trade
LlquL model
lffvulLi nermits are created for
ylrrrrrru * nermissible level of pollution
a
^-_ r

(a cap). Compantes then trade permits among one another, creating

fnr nn'll,rrj6n nermits and an inCentiVe tO inVeSt in gfeenef
d. -nrl'nr lUl
^ I11d.1NCL PWLLULTwff PLrfrrtLJ

technologv for a reduction in carbon. In2OI7 , a total of 42 countries,

including Mexico, Chile, China, Australia, South Korea, the European
Union, and Canada had adopted some form of carbon pricing. By
inrrpntino:nd innorratinO jn Oreenef lprhnnlnoioq pr-nnnmiC OfOWth
' *----o --- o- - ----- - -lrrrrvLv6fL

can occur as energy-efficient products will be demanded, reducing

pollution while stili growing the economy.
 Globalization and the financial crisis have both contdbuted to the
decline of organized labour. Higher unemployment rates mean that
unions have less influence; workers want to keep their jobs and will
make salary and benefit concessions to do so. Many co-purrie, ur. .

now building factories in other countries so they can use cheaper,

non-union labour to manufacture products or offer services once
provided by local labour.
The labour culture of many foreign countries is very different
from the labour culture in North America. China, India, Japan,
Mexico, and other countries do not have a labour-movement history
and do not support collective agreements or labour negotiations.
Employees in many countries work together with their supervisors
and company owners to make their firms successful. This workplace
culture is much more co-operative than union shops in Canada,
A worker assembles the
dashboard ofa car at a GM planl Great Britain, France, and the United States, where adversarial
in Mexico. relationships between owners and management are the norm.
The san in wases of Mexican autoworkers
compared to wages of their Canadian and
American counterparts has been a major issue in
renegotiating NAFTA-one that could contribute
to the termination of the NAFTA agreement. In
2017, General Motors faced its first employee strike
in 2l years at its Ingersoll, Ontario, manufacturing
plant, which produces the Chevrolet Equinox.
Approximately 2,800 workers walked off theiob
for almost one month. The union representing the
workers, Unifor, had been pushing for better working
standards for Canada, the United States, and Mexico
durlng the NAFTA renegotiations. Eventuaity, the GM
workers at the Ingersoll plant ended their month-long
strike and voted in favour of accepting the company's
new contract. The workers were unable to secure
a letter from the company that would protect
the possibility of moving more production of the
Chevrolet Equinox to Mexico. As labour continues to
shift from heavily unionized countries to non-union
countries, the labour movement in Canada will
continue to decline and outsourcing will increase,
contributing to even greater unemployment in
Canada.

394 | Chapter 10: Global lssues and International Business Trends

 The retail market is one of the most competitive industries in North
America. In2017, Sears cl0sed lts brick-and-mortar stores in Canada,
ioinins Target, Mexx, Jacob, and Sony. Sears Canada announced
r g!o!-i - ------

that it would be closing all of its Canadian locations after seeking

hcnlzr'nrnrr
UoIINI nrnrentign
UP LLJ Pf v LLL Lf ffOm cfeditOfS. ThOUsands of SeafS employees
\

lost their jobs as a result of the company's inability to find a buyer

and its ultimate decision to leave Canada. Sears had also bought
a Quebec-based appliance retailer, Corbeil Appliances, in 20O5 A
wholly owned subsidiary of Sears canada, Corbell has locations in
both Ontario and Quebec. Sears declded to also sell the Corbeil chain.
Many Canadian businesses are studying how the automation
indrrctrrr
llluuDLIJ frrr6iiL q:rrp
rnioht Lrrsrrr mnnp\/
Juv ! thpm rffvrr!i psneciallrr as nrovinces raise the

mrnimum wage. For example, MontreaL-based grocery chain Metro

announced it would be updating and modernizing its distribution
network in ontario, eliminating almost 3oo futl- and part-time jobs
by 2O2L Workers in retail are among the highest at risk of losing
jobs due to automation. In 2015, McDonald's Canada started to
bring self-service kiosks to its restaurants. Walmart expanded its
technolosv in a number of Canadian locations to Stay competitive
Seif-service kiosks were rolLed c-
with rivals such as Amazon. The move toward automation will internationally bY McDonaid's,
continue to threaten jobs in the retail sector. a sign of increasing automaiion
and decreaslng (thorrgh not
Frrrther disnrotins the retail environment is the trend by yet eLimirarinS) the need fo'
manufacturers to deal directly with consumers. Nike, for example, fror--L.ne -a-I Hele the t.' -.-
are shown in South Korea
announced tn2Ol7 that it would focus more on e-commerce t0
grow its future business, and less
on dealing with traditional retailers
such as Foot Locker, SPort Chek,
rnd uLysr
urru dpnertment
La sfores such as HBC
nr
vI Qorrq
uLur r. Rrr'lprror:
.-
gino technoloov
"_y '

and moving to an omnichannel (see

chenter 9)
J/J manrrfacturers
rrrurrsrs! like Nike are
able to connect more personally with
the final consumer and helP them to
make nrrrchase decisions. In an attempt
f
to compete with eBaY, ToYs "R" Us
launched an online marketpLace for
,l ?Ol R :ftpr dprlrrjnOo hrnlzrrrnfnrl
uqrl^r uP LLi , fhp
LlrL

cnmnAn\/ nlans to focus its business

rvIill/urrJ

onllne, where it will aim to increase the

number of products it offers.

Around the world, groups and
indivlduals are promotlng the
idea of UBI in unique ways
lvlichae Bohmeyer from Berlin
Germany, ls the founder of
Mern Grundeinkommen ("My
Basic lncome crowcfunding
), a
otfery r hat raffles off oasic
I
rncome-1,OOO euros per month
for a year In its first two years,
nearLy 100, O0 lndividuaLs
O
bought tickets and about
190 people have won
396 | Chapter 10: Global tssues and International Business Trends
Universal basic income
Atthough poverty levels have decreased across the worLd, milhons of
people still work for an income that does not provide an adequate
standard of living. Unemployment, inequality, and automation have
meant that the individuals who own the technology and automation,
as well as governments are increasin under pressure to provide
socral assistance to citizens. Many leading economjsts, poLiticians, and
business executrves are proposing a solution: universal basic income.
The concept behind universal basic income (Ugt) is that every person,
whefher ttnemnlorred or Wealthv r/, receives
rrLLf a friviiLrlLj
vLO u government
monthlv 6vvLrrirtlLl
payment. Executives such as Tesla's Elon Musk and Facebook's Mark
Zuckerberp'are
_--,..,--_.o among the strnnortprs of fhe nrooramiurqrifLLlt!
as e mefhod of
q p
ad dressi n o th e ornrnri n trpn d nf in rnm inpnr r nl itrr
-----""'-o
Canada is currentLy testing UBI, a concept that has its opponents
and supporters from all politicaL stripes. In2OI7, Ontario launched
a UBI piLot pro.;ect in the communities of Hamilton, Brantford,
Lindsay, Thunder Bay, and Brant County to test the idea that a basic
levet of income can improve the prosperity, health, and education
of Low-income and vulnerable citizens. Ontario's government is
measurinsthe imnact of its IIBT nilof on the following
vv rr16 catesories:
LqLt6vf
o
Housing
. Food security
. Stress and anxiety
o Mental health
. HeaLth and health care
o Education and training
. Employment and participation in the labour market
TTRT nrnorernc elc6 gaigl heingnlanned
areL
Or qr
urli16 in the
yLqrrf tLu tll nrorrinCe Of
Lllg pIwvIll
British Columbia, in Brazil, Finland, the Netherlands, and Indla,
and in the state of CaLifornia in the United States. As technology
continues to disrupt a wide range of industries, and as the notion
of work as a requirement to earn an income erodes, universaL basic
income is tikeLy to be adopted by more and more governments,
uwLrl l^^^rl-.
1.,^+L ir^hallrr
^-,r StuL
ruLoLLy ollu *--l.
 ilililItltI I ffiL]ilililr1

Increasing minimum wage

ontarlo and Alberta have introduced mandatory increases to the
hourly mintmum wage, with $15 per hour as the target. Mlnimum_
wage increases are designed to heip tow-income workers. According
to Statistics Canada, 9 percent of workers in Canada earned
minimum wage in 2016. In ontario, it was estimated that one in four
workers that year earned less than $15 per hour. Many businesses,
particulariy food-servrce businesses and retail businesses such as
grocery stores, have complalned that the minimum-wage increase
will cause highe r costs and layoffs.
Global competition and the aftermath of the recession are keeping
businesses focused on the bottom line, and technoiogy is offerlng
alternative ways to get things done. These are certainly issues for
alLworkers, particularly youth. Although youth unemployment jn
Canada was at a 40-year 1ow ln 2OL7,the number misrepresents the Ralslng the rrinirn;:_ ::.
job market facing many Canadians under the age of 25 That is because -OSI5
Po-1r-l'.r' ...c -'
many youths have opted not to look for work, or are underemployed lmpact on workers in ,:--
fasl iood indrrslry, amo:.'a
(working in jobs that are not in careers they are training for).
others

€
,q

Concept of how a heads-up
disptay (HUo) woutd appear to a
driver on the windshield of a car
equipped with thjs technologv
398 | chapter 10: Grobar rssues and rnternationar
A new technology catted augmented reality (en) is also
changing the
way businesses interact with consumers. Unlike virtual reality,
which
creates computer-generated environments, augmented
reality adds
computer graphics, sound, and feedback to the natural world.
eR
(sometimes referred to as mixed reality)
combines both the virtual
and the real. whereas virtual reality completely immerses
the user in
adigitat environment, AR users are still able to sense the real world
around them. Perhaps you have encountered augmented
reatity in
your life already. General Motors and other auto manufacturers
now
offer a heads-up display (Hul)-a feature that projects information
on the windshield for the driver that can be seen without
takins
one's eyes off the road.
An example of augmented rearity is the projection of a phone pad
onto a table-or even your hand-that ailows the user to make
a
phone call with h ket. Video games
and cell phones g faugmented
reality. In2)IT, t toolkit for
buitding augmented reality appllcations (nRrit). Swedish Furniture
retailer IKEA built its own app with Apple's ARKit that allows
the
consumer to browse through the app,s catalogue of over 2,OOO
products' using their phone camera, consumers can prace
digital
furniture anywhere in a room while focusing the camera in that
direction. Augmented reality ailows IKEA to make the buying process
less stressful, thus improving their customers'buying
experience.
Business Trends
 The Internet of Things (IoT) 1s about connecting the physlcal and
the digital, and integrating physical objects that consumers use
every day with the Internet. MiLlions of devices, such as cameras,
kptflpc frofrjoorefarc rn.] rlu-Lrre
Lf rf6LrqLvlD, d.1111 l"^-^ rledLilIB
1-,^^r;-x.-,]
d.l_ttl aII -^^,t;+;^^j^- can
^';. colloltlonlng,
be turned on and off remotely. The IoT is atready estimated to have
connected more than B billion devices, and some expect this number
to almost triple by the year 2020. Consumers can interact with these The rrseofAIhas im:. :- _,.
beyond Lhe auro incu-- _. ..--
devices from their smartphones, offering a new level of convenience. roDoilcs In 2at /. Japar - :. ::
However, this has also created a security concern as attackers could Flkoi u Mutual Life -rsu:.' .

potentially controt IoT devices by hacklng Wi-Fi. Company announced it r.uas

laying off 34 employees,
Japanese automaker Toyota has launched the Toyota Research repLacing them wtth an AI
system that calcuLates payo-,:
Institute, which focuses on research in autonomous vehicles, artificial
to policyhoLders, effectlveiy
lntelLigence (et), and home robotics. Based in the United States, taking the declsion maklng o.;:
the company sees an opportunity in self-driving cars and robotics ofthe hands ofhumans The
firm said it would save ovef i4C
given the rapldty aging poputation ofJapan and North America. Top
miLLion yen (about 91 65 rnillior
gtobal auto-parts suppLiers are also investing heavily in AI. German CAD) a year. They are noi
multinational Bosch has pledged to invest over 1billion euros in sensors alone in the lnitiative; more
companies across the gLobe are
and software needed for self-driving vehicies and coltision-avoidance taking similar steps
systems. Canadian automotive
narts
r-- suonlier Masna International
-- -*rr'*
Inc. recently introduced MAX4,
a self-drivins nlatform that uses
camera, radar, L1DAR (a detection
-) _-____,,
srrstem) lnd rrltrrcnr')]C SenSOrS,
and can be used with any vehicle.

Another srowins market for

AI is in robotics for nersonal
use. Pepper, a humanoid robot
developed by Japan-based
SoftBank Robotics (see the
chapter- opening photo), is
designed to read human emotions.
Its stated purpose is "to make
r,_r.-
npnnlp hrnnrr" hrr intc
_),,,.Jractlng
with them in a lively, responsive,
cheerfui way. It was introduced
in 2015 and has been used in both
personal and educational contexts.
 ti

Artificial lntelligence
The video game industry is bigbusiness
in canada. our country ranks
third in the world (after the United States
development, according to the Entertainment
;;,;;;.r.
a,.O.lapani
Software Association of
Canada Canadian games are known
as some of the best in the world.
The Canadian government supports
the deveiopment of digital
technology, including video gu,n.r,
through its Canada Media Fund,
which has hetped jump_start the vidbo game
industry in Canada.
According to the Entertainment Softwaie
Association of Canada,
more than 20,ooo people work for
atmost 5oo media studios that
contribute $3 bittion to Canada's GDp.
Technol0gy and video games
contribute to other areas of the economy.
Given Canada,s diversity,
strong education system, pubric health
care, and high standard of
Living, it's not surprising that students,
researchers. and scientists
make Canada their home.

400 | Chapter 10: Global tssues

and International Business lrends
 Canadiancitiesarequicktygaininginternationalattentionas
leaders in new technologies, with institutions such as
the A\berta
for
Machine Intelligence Institute and the Montreal Institute
LearningAigorithms.AlthoughmanyCanadianbusinessesalenot
who
currently investing in AI innovation, Canadlan entrepreneurs
dowillfindCanadaopentoitsdevelopment'In2OI7'Canada's
more than
federal government announced' that it would invest
$tzsmillionintheartificialintelligence(At)lndustry.
the
Montreal is becoming a hub for Ai in the music industry;
city is home to AmpMe, a machine-learning platform
that aliows
product' In Ontarto'
amateur musicians to create a professional
around
communities such as Waterloo are working on projects
' Ai and in Toronto, Ryerson's DMZ is hetping start-ups in the area
ofinnovation'DeepMind,Google,sAlresearchdivisionbasedin
home to its
London, England, announced it would make Canada
Alberta'
first international research centle at the University of
CanadiansalesomeofthebrightestinthefieldofAland
Canada has been at the forefront of machine
learnlng for over
an alternative
30 years. As a result, Canada is quickly becoming
to Caiifornia's Silicon valtey (an area in California
that r's home to
many of the world"s ieading tech companies)'

Check Your Understanding

to
I Describe the importance of the video game industry
Canada's economy'

2 How d.oes Canada's government support digitat media?

3 Which Canadian cities are becomlng known for AI
technologY?
4WhyisCanadaSeenaSanattractiveplacetoliveforpeoplein
the technologY sector?
5 How large is Canada's vldeo game industry?
5 What is AmPMe?
TWhatisSiliconValleyandhowisCanadabecominglikeit?
 engine ruled the
For more than 10O years, the internal combustion
of the transition toward
auto industry, driven by oit. Ironical$, some
car company
greener vehicles can be attributed to the German
waq a public
ilolkswagen and what has been dubbed Dieseigate. This
guilty of installing
relations nightmare for Volkswagen, found
emission.cheatingsoftwareinitsdieseivehicles.Thescandaiis
expectedtocostthecompany$3Obiltionasitfixesthehardware
customers in North
issue and, in some .ur.r,t,ty'back cars from
Other companies have been accused of using
similar
America.
cheatingdevicesintheirvehicles.Aspartofthelegalsettlement
scandal, Volkswagen was forced to invest
for the emission-cheating
heavily in electric vehicles.
Asthepriceofelectricvehiclesgoesdownandtheinfrastructure
and technology to support them continues to
improve' many
to purchasing
business leaders predict that consumers will shift
are
more electric vehicles. Global automotive manufacturers
hybrid vehicles'
investing heavily in the development of electric and
to hit Canada,s
Although ful$ autonomous vehicles ale not expected
roadstomorrow,thetechnologytheywitluse(suchasradar,Camelas,
are already
and sensors) is alread,y a booming business. Businesses
investinginandtestmarketinghowthesetechnologiescanimprove
their operations and customer experiences'
Uber began testing autonomous vehicles in Toronto
tn2077 '

andautomotivemanufacturerFordMotorCompanyandfast-food
pizza chain Domino's are testing delivering pvzaswith self-driving
cars in Michigan. Domino's customers are able to
participate
the
in the test market by unlocking their pizza delivery from
The test
autonomous vehicle using a code sent to their smartphones-
marketisformorethanjustpizzadelivery.Fordintendsonusing
information from this project in its plan to launch a delivery service
for commercial use of seif-driving cars. German logistics and
mail
delivery company Deutsche post (lHL) will begin testing seif-driving
deliverytruckswithequipmentfiomtechcompanyNVlDlA.The
trucks could in theory follow its delivery workers as they make
deliveries walking down streets.
oneofthemostanticipatedvehiclesofalltimeenteredthe
market in2077.with just a prototype, caiifornia cal company Tesla
received almost 40o,ooo pre-orders (worth more than $10 biltion
ootential in sales) for its Tesla Model 3. Tesia started production of

{t2 '10: Global lssues and International Business Trends

| chapter
the Model 3 ahead of time and the company reieased
the first 3O vehicles inJuly 2017. The Model3 is an
electric car made for the masses. With an estimated
nrice tas of $44 0OO CAD before o"'-^.."'
sovelnment rebates
and incentives, the car has the potential to make the
electric car the new standard for the auto industry. It
can also travel a distance of up to 500 km without being
charged. Atthough a transition to full-electric cars is still
some years away, all auto manufacturers are quickly
moving toward more hybrids and electrics, including
GM and Swedish automaker Volvo.

China is the world's largest market for electric vehicles,

more than double that of the United States, and accounted
for 40 percent of hybrid and electric vehicle sales in
2016. These vehicles currently only account for a small
percentage of globaL sales, but demand is growlng. Over the
nawt lO rroerc crlpq nfthpco rrohirlpq erp onnprtpd tn trinlp
by some industry estimates. More charging stations will
be built by engineers across Canada, and an electric "smart
srid" willbe made accessible to consumers.

A Iesla SrrnercLarger Srat ion ir

tltwangen, Gernany Charging
Uberization and the sharing economy qtrtinnq Jilro r hp<p :rp : nnperinp
all over the world as the use of
The automotive industry is being disrupted not only by the
electric cars lncreases As of
introduction of hybrid, electric, and self-driving vehicles, but also 2018, there are over 1,250 Tesla
through ownership of vehicles. Car sharing, car rental, and car clubs charsins
'-''*'b_-'b stalions across North
nlrlcrrLd, nJ14, f.-r^h^
LuluPc, ..C
crl( the
^.-^?i--
are all different terms for renting a car on an as-needed basis. ^-i^
Middle East
Consrrmers are heginning to use ride-hailins and car-sharing
"''*-^"o' services
instead of buying a new car. Young consumers, aged 18 to 30, are
accelerating on-demand
--r *,---qrru Drrqr1116 nro--^*^
ride-sharino
rruL prwE;]d.I]IJ JULII ^- rrL^-
^''-L d.J U Utr] c'ind

I :rff Tjncar has nnerxfgd in North America for over lO vears relvinp'

on technology and a growing network of members.

Automakers such as General Motors, Mercedes-Benz, and BMW
are responding to this trend by investing in car- and ride-sharing
companies. In2017, General Motors launched a car-sharing seruice
called Maven, and German automaker Daimler AG (parent company
of Smart and Mercedes-Benz) operates Car2Go, a car-rental company
in Europe and North America. BMW made a second attempt at
entering the car-sharing business in North America with a new brand
name, location, and technology. ReachNow was launched in 2016 in
thp TT q r-itrr nf Spettle The rnmnan\r rrscs brand-new BMW and Mini
vehicles, with approximately one in five being electric cars.
 and blockchain
A trend in global business that is disrupting the way buyers and
sellers around the world trade is crlrptocurrency. Cryptocurrency
'io;'idif.l nr rrirfrrnl .rtrron.\r
IJ \-L151LO,l. UI VIlLUOL LUrlLffLji fhtf
LffqL rrcpq
UJLJ r"nrntnclrenhrr
LljyLv6lqyrli
(rndinO
\rvurr16

and decoding of information) for security. The first known

cryptocurrency was Bitcoin. Cryptocurrencies such as Brtcoin
can be used to buy things electronically, functioning tike national
currencies such as the yen, euro, or doLlar. What sets cryptocurrencies
apart from conventional currency is that they are decentralized,
meanino no sinole institrrtion (srch
\u qrrr as A gn\/crnment nr a central
su

bank) controls them. Bitcoins are produced by peopLe and businesses

around the worLd that run computers solving mathematicai
nrohlems
yrvurLlrlu. f rfL creation
The !rLuLrvf of Bitcoin bv jts cnmmttnifrr mpmhers OVef a
.^rnnrrtor npfrnrnrlz iq knnrnrn rc "minino "
The
rrrL anonvmorrs
qrrvrrjrrrvuJ natrrre
r-*-*,, -, crvntocrrrre*-"
of *,Jf ,-**---]]Ly "-^l'^^ i+
llld'^CJ ^^^"1^-with
lL PUPuLql
While Bitcoln ATMs aren't as
common as yoLr t^^-t
^-..^..- ^.,-.
tocal cJrrency criminais. While many experts in the banking industry view Bitcoin
ATMs, as of 2O1B there are over as a fraud, other businesses, such as Goldman Sachs (one of the
3,200 Bitcoin ATMs located
across 7O countries, includlng
largest investment banking businesses on Wall Street) is considering
Canada ways to trade Bltcoin and other digital currencies.
Canada's centrai bank, the Bank of
Canada, as well as chartered banks such
as the Royal Bank ofCanada, acknowledge
that digitat currencies such as Bitcoin are
changinsthe financial indttstrv The Bank
of Canada has considered developing its
own digital token; however, security issues
and concerns will need to be resolved first.
Some countries such as Russia, China, and
India are investigating their own national
cryptocurrency, yet many businesses leaders
beiieve these cryptocurrencies will not
replace money.
The technologv hph jnd cnrnfocttrrencies
such as Bitcoin and Ethereum is known
as blockchain. What makes blockchain
technology unique is that it allows the
digitat information to be distributed, but
not copied. Essentially, this has created the
foundation for a new tvpe of internet.

404 | Chapter 10: Global lssues and International Business Trends

Blockchain technology and the supply chain
Businesses such as IBM and Microsoft are focusing on developing
blockchain technology for the globat market. In theory, blockchain
technology can help businesses solve supply chaln problems that
have impacted. international business for decades. Food companies
such as Nestle are working with iBM on using blockchain technology
to create a transparent digital system that can track food soulce
transactions and can qulckly identify and pinpoint food souICe
contamination. Because international businesses depend on multiple
suppliers from vanous locations, it is sometimes dlfficult to pinpoint
the location where the contamination occurred in a precise way.
some retailers are asking for product traceabllity codes on all
imported products that they sell. These codes would lead directly
to the manufacturer of contaminated products purchased from
abroad, and would cut through the complex distribution layers
often associated with goods from other countries. Goods are often
repackaged by distributors, which makes traceability difficult.
Blockchain technology can keep an independent common ledger that
updates and constant$ shares information, thus adding tlanspalency
to the entire supply chain by creating a tracking record that no single
company owns. It gives each member of the suppty chain timely and
visible information of all activity. The Chinese e-commelce cOmpany
Alibaba, for example, has heavily invested in biockchain technology to
help address the country's food security issues'
Blockchain technology is disrupting tladitional functions of
business, including finance and the supply chain' Celsius, for
example, is a New York-based non-profit organization that uses
cryptocurrency to offer peer-to-peer loans. Its platform uses
blockchain technology that replaces lending, from banks with
friends, colleagues, and other Celsius usels. Each Celsius usel
has a digital identity and footprint. The concept aims to cleate
a community of borrowers and lenders, where lenders receive a
higher interest rate on their lending, and borrowers pay iower
interest on their loans when compared to traditlonal borrowing
metho ds - e s s entiaily bypassing banks and traditional fi nancial
institutions. The company targets millennials, who are often
indebted from student loans.
Cryptocurrency and blockchain technology could transform
rro* .o.rumers and businesses borrow andloan money around
the worid. The EU is also using this technology as it helps refugees
fiom underdeveloped countries who have immigrated to EU
countrles.

Equifax issued several updaLes
through 2017 as the scope
of its data breach became
public and new measures were
taken to safeguard against
new cybersecurity threats
Scandal hit Equifax when it
was reveaLed that the company
had been aware ofthe breach
lor months before makins the
news public
406 | chapter 10: Global lssues and International Business Trends
The emergence of social media and digitalization has meant
that businesses have access to more personal data than ever
before. Businesses can explolt these data or have it exploited by
cyberattacks, political interests, and other businesses.
Several international businesses have had customer data
breaches. rn2or4, Home Depot experienced one of the largest data
breaches in history-more than 5O million customers using the
company's self-checkout terminals had their email or credit card
information stolen. The breach cost the company $25 million in
damages. In2017, consumer credit repoft and rating company
Equifax experienced a massive theft of data impacting over
140 million consumers in the United States, Canada, and Britain.
The breach included names, social security (or social insurance)
numbers, birth dates, addresses, credit card numbers, and driver,s
licence numbers-the very buitdlng blocks of identity theft. lveeks
later, grocer whole Foods announced its consumer data had also been
breached. This increase in data breaches has some lawmakers calling
for greater regulations and laws to protect consumer privacy. Data
protection and security will continue to be an area of importance
for international buslnesses as new technoLogies and further
ctlhprqprr r ritrr h rort, conttnue to emerge.
_r f__.,-*.i
 Eliminating the gender
t.
ga in
DUStness
Aithough the number of women working as upper-level managers or
as entrepreneurs in business continues to grow, the gender gap still
exists. Men stilL occupy more upper management positions and make
more money compared with women. International businesses need
to consider the long-term factors that wilt aliow women to succeed
at an equal pace rn a global marketplace, and gender parity (equal
opportunity and equal pay for equaL work) in the workplace is a key
factor toward achieving this goal.

Women in senior management

In 2017 , Grant Thornton, one of the largest accounting and consulting
firms in the wor1d, released a report showing that gender balance in
the workplace is improving, but very slowly (see Figure 10-2 for a
breakdown by region). According to the repoft, women account for

Figure 10-2 senior Management Roles Held by Men and women by Region,2017

I rvr.n in senior management I wor.n in senior management

BTolo

..o 6
"{9
""t."
""'C

:108 I Chapter 10: Global lssues and International Business Trends

25 percent of senior leadershlp positions globally, up only percent
1

since 2016 and 6 percent since the research began, more than a
decade earlier. Countries that score highest in the report ln terms
of balanced male-female ratios in senior management are Russia,
Indonesia Estonia, and Poland; countries that score the lowest
include Japan, Argentina, India, and Germany.
However, a number of iarge multinational businesses are led
by women in top executive positions, and Forbes, for example,
publishes an annuai list of top the 1O most powerfuL women in
business. The list has featured large firms such as Facebook, Xerox'
Hewlett-Packard, and PePsiCo.

The Government of Canada has also made the advancement of

women in business a priorlty and offers various Iesoulces to assist
female entrepreneurs. In 2017, Business women in International 1 Explain the connection
Trade (gWtf) celebrated its twentieth anniversary. Since its creatlon between the Canadian dolia:
and gtobal oil Prices.
as the first-ever women-focused trade misslon to washlngton,
BWIT has supported the advancement of women in business. As 2 What is carbon Pricing?
How does it helP reduce
part of the Canadian Trade Commisstoner Service, BWIT helps pollution?
female entrepreneurs expand and compete in global markets whlle
3 How has international
advancing gender equality, and assists them with resources and labour affected NAFTA
mentorship. renegotiatlons?
l. How is the retail industrY in
Canada changing? WhY?
Women-owned small to medium-sized enterprises
i What do some governments
Representing one of the fastest-growing segments of snnali to believe universal basic
rnedium-sized enterprises (Smrs), women-owned SMEs are income can accomPiish?

becoming more active in international trade. According to the 5 How is augmented realitY
changing the waY businesse s
Canadian Trade commrssioner Service ,tn2oI4 women-owned sMEs
interact with consumers?
accounted for 11.1 percent of ail SME expolting, and that number Drnrririp en pvnmnle
appears to be growing. Key expoft industries such as wholesale trade
7 What do AI and IoT stand
and manufacturing are hlstorically less likely to be female-owned. f.or?
However, industries such as retail trade, health, information, and the 8 What was Dieselgate?
arts have an increasing number of female-owned SMEs' How did it affect the au::
stlli a lot of progress industry?
As you can see from these numbers, there is
to be made, rn Canada and abroad, for gender parity across the 9 What sets cryPtocurrei-:-::
nnori rlulrl
qP4IL frnm nnnrrcn-' g 1 :-

business world to become a reality. Initiatrves in both public and currency?

private sectors are key contributors to achieving this goaL'
10 Why is cybersecu:.:"-
important in inte:,--= --: - '
business?
11 What has the C=-:-.--- =:.
governmen: :. ---: --: -
"
women i::'-:--=-. --
 t. Geopolitical tensions
Geopolitics refers to the influence offactors such as geography,
politics, and economics on a country, especially as it relates to their
foreign policy. International busrnesses need to consider and plan for
rlsks that occur as a result of geopolitical tensions.
we have touched on several geopotitical issues throughout this
resource, but here we will take a look at three more:
. Terrotism
. Pandemics
. The Russia-Ukraine crisrs

-C
: i:' lssues and International Business Trends
The threat ofterrorism has a direct influence on tourism and
transportation. Under the shadow of terrorism, foreign goods are
more expensive because of increased costs of security in shipping.
Foreign air travel requires extended luggage searches, increased
bureaucracy, and special airport security taxes, all of which make
flying more complicated, more expensive, and much less pleasant.
International business travellers have had to adapt to the higher cost
of air travel, as well as longer wait times to clear security at airports.
Many countries continue to deal with terrorist threats, including the
United States, Britain, Germany, and France.
Terrorism is not only a threat to developed economies. In
October 20L7, atruck bomb targeting a crowded street in Somalia's
capital city of Mogadishu k1tled 276 people and injured 3OO others.
The attack was linked to an Islamist extremist group that had
earlier vowed to increase attacks in response to American and
Somalian military efforts, including drone strikes, against the
group. International businesses must be prepared for security risks
The 2017 truck bomb attack in
in their business operations, wherever they are located. Some hire Moo:diqhr r (nmeliq
pdvate secunty when there is
insuffi cient police presence.
International terrorism and
terrorist activity can disrupt
the gtobat financial system.
The international c ommunity,
guided by policy from the
United Nations, has imposed
various policies to reduce the
threat of terrorism. Canada has
also implemented a number of
measures aimed at reducing
international terrorism,
including an arms embargo
that nroh jhjts the exnort of
weapons and arms and related
materials and the freezing of
assets or funds, which can
occur against anyone who
ttses assjsts or nrnmOtes
international terrorism.

Geopolitical tensions j 411


A ;researcher analyzes
the Zika vlrus
Pandemic protec ion
Globalization has brought people together across the world,
sharing
each other's products, culture, and countries. Increased gtobal
travel
has brought something erse as weil: gLobat pandemics,
oi epidemics
of disease that can spread around the world. Increased
u*ur.,r.r,
of the possibility of pandemics by national health organizations
and co-ordination with the world Health organization (wuo)
has
prevented some diseases, notably severe acute respiratory
syndrome
(sens) and the avian flu, from spreading
around the worrd. The SARS
epidemic reached Canada, however, and 1ed to travel restrictions
and
other protective measures by other countnes to prevent
its spread
gtoba1ly. Toronto, in particular, was hard
hit by the sudden decrease
in tourism, and suffered economica[y until the travel ban
was tifted.
More recently, the Zika virus posed a similar threat to
slobal
travellers, including Canadians. First identified in humans
in
the 1950s, the Zika virus infection was generaily contarned
to
African and Asian countries, until being reported in2oo7
in the
southwestern pacific. The first
major outbreak occurred in 2013
on istands ln the pacific. The
virus is particularty dangerous
to pregnant women and unborn
children, causing severe birth
defects. In 2013, an internationai
outbreak of the Zika virus began
and by 20i5 it had arrived in
Brazll and Colombia. Travel
advisories for Canadians are
still in ptace for many South
and Centrat Amerlcan tourist
destinations such as Costa Rica,
Mexico, Cuba, and the Dominican
Repubtic. Although travel
advisories have been lifted for
popular U.S. states such as Texas
and Florida, scientists are still
tracking the heatth issues linked
to Zjka and workrng on a vaccine
for the virus.

:'I thapter 1 0: Global lssues and International Business

Trends
 A cholera outbreak in Yemen, a country
in the Mlddle East, became the fastest and
largest outbreak in modern history. Cholera is
transmitted by eating food or drinking water
contaminated with the bacteria and can cause
PUTI
severe dehydration and death. In 2017, the
\,r/Ho rpnorfed more than BOO,OOO cases and
2,OOO deaths in Yemen from cholera. Within
six months, this outbreak was surpassed in
Halti with 815,000 cases reported from 2OlO
to 2OI7. Cholera mostly strikes children under
the age of18, 25 percent ofcases involve
children under five. Canadians travelling
to international destinations, partrcuLarly
Asia, Africa, and Latin America, need to take
precautions to avoid getting lli when abroad.
h
Visiting their doctor for vaccination, foLiowing
proper handwashing procedures, and drinking
tn$ bottled or boiled water are just a few of the
take.
AI
oreventive measures Lo

A demonstratlon 1n Niew York

Ci'y agairsr F ^'slo s :f-".4)-o
-Il
of Uklaine, 1n 2C14

In earlier chapters, you read that in 2014, Russia annexed (took over
by force) an eastern portion of Ukraine territory known as Crlmea.
The Russia-Ukraine conflict became the largest crists between
Eastern and Western economies since the Cold War' The Unlted
States, the European Union, and Canada lmposed various sanctions
on Russia, eventually removing the country from the GB.
More than two years after the annerarion and an economic
downturn, the Ukraine economy began tc recover Ukraine ts an
innovative country with a highty educar:d workforce. Its main
industries are manufacturing and ene :1. and it is a major pLayer in
the world's food supply and renewab.e energy sectors. The country
1 How does terrorism imPact
international business?
remains an ideal logistics and transpo:tation hub for the EU and
nartner wi[h Canada. The Canada-Ukraine Free Trade
is a tradins r*"^-"-
2 What is the Zika virus? How
rli.l
urs it imn2.t
rr rlrrtsvve lrntrel?
!!q ' -..

Agreement (CUFTA) was implemented tn 2OI7 .

3 How did the annexation

of Crimea affect Ukrai:::
economy?
4 Why would Ca:-. -: -,
fiee trade a(:::-:-'-.
Ukraine?

113
 ri

T .4 The global traveller

There are three main reasons to travel outside of Canada: vacatlon,
study, work, or any combination of these three. It is always a good
idea to find out as much information as possible about the country
to
which you plan to traveL, and whether or not you could encounter a
I potential safety issue, health hazard, or even a natural disaster while
you are there. Gtobal Affalrs Canada provides travel advisories and
warnings, as well as heatth advisories for internationaL trave[ers.
whatever your reason for travel, you will need to ensure that you
have the proper documentation such as a passport, visa, or work
permit.
In thls section, we'l11ook at passpofts, visas, working and studying
abroad, and things to consider when traveiling for business.

-11-l lchapter 10: Global lssues and International Business Trenos

 without showing a valid Passport'
You cannot enter another country
a document issued by the
Canadian govemment that contalns
to
are a Canadian citizen' Prior
your picture and proves that you
the United
June 2009, travellers
fiom Canada were allowed to enter
cases'
bus without a passport' In those
by car, truck, train' or
,ir,.,
allthatwaslequlredwasablrthcertificateandaacceptablephoto
identification(suchasad.river,sticenceorcitizenshipcard).This
Canadian
States now requires all
is no longer the case; the United
a valid passpofi'
visitors, includ,ing children' to have
requires that visitors and returning
The Canadian govemment also
are requued to show their
citizens have passports' Travellers
passports to an immigration agent
whenlhty to-t back into Canada
have rules and procedures for
after being away. Iutoi gout'nlents
you must prove that you are who
issuing a passpoft. In every case'
a citizen ofthe country that
ls
you say you are, and' that you u" the
Canada' you can download
providing you with a passport ln
Canada online'
forms you need,t;;;t fi'
u pu"port fiom Passport

(cese) was part ot a

Canada Border Services A$ency
reality TV Program , Border
which informed Canadian
activities between travellers a
rS'

was seen by millions of

The unscri.pted television senes
Canadians and the show aired
in dozens of other countries'
off the air after the federal
However, the show was puiled
foun olated the
prlvacy commissioner
labourer of the episodes'
irgfr,, of a migrant
its
The commissioner recommen
SA end

program' The CBSA agreed to

partrcipation with the television
r ot return for a fourth season'
the recommendation and did'
desPite the Pro gram's PoPularttY'

The global trar ell:r- !'1;


-hp TT q ^il<-^mq.hpr krorn[ aL
l-e 'o'- M'-* jpar at the borde'
'!rgrrr-srrl
with Ontario Cross-border
iravei between Canada and the
ITnifpn Sr:rps s rnmnar:tirrelrr
<-1'.1'o\'f6'y721-d 'n" cil' ens
of boih countries with valld
passports
Issrres and International Business Trends
isas
T\/T^-f ^Fr^^ dPdJJPU'
^-a.h^rt is not- enough
^ if-- vou Lv wOrk in
StUdv fff
.t"IU)L UILtr]I, *^--*o-- J -u WiSh
vvlD1l tO Or oLuui
vvvr^ vr
another country. You will need a visa as well. Some countrles require
Canadian citlzens to obtain a visa even if they are only tourists. A
visa is a certificate issued by the country one wishes to visit that
indicates that the department of immigration in that country has
checked vorrr credenfials and oiven vou nermission to visit their
collntrv temnorarilv for a snecified nurnose.
llA ,rion arnnf..'^"
vt)d. Brd.rlLJ J/uu nermission
r *------ to arrive af an entrv noint ---' the
r ----- intO
host country. Permission to enter the country always depends upon
the irrdsment of the immioration officer volr meet when vou go
fhrnrrOh
Lffrvu6rr LuJLvfrfr inqnpr.finn nA rriCa
r.rrqfnrnq frrrPLlLrVlr. 6]6pq nnf
VfOq UVLJ nrrfnmcfincllrr nrqpf y611
llvL dULUIIIOLTLqLLJ 6lqrlL Ji vu
into F corntrv' the immigration officer can sfill send vou back.
cntrrr fffLv
LrrLrJ
There are severaL tvoes of visas. The most common are tourist visas,
residence vlsas, and work visas.
Tourist visas
As a Canadian citizen, you need only a passpoft to enter the United
States, the United Klngdom, Mexico, and 150 other countries as
a tourist. Canada is sixth on the Henley Visa Restrictions Index,
which shows the international travel freedom of citizens in various
countries and the status of these individuat countries relative to all
the others.
To determine whether you need
a visa to visit a country, research
the website of the Internatlonal
Air Transnort Association (tRtR).
rt ^-^"i.]^- .^.--1".h]^
^ Jtrd.l Lrldu lC ;]rtnhnon
U d LdUclJC
-LL Pl U V I(-LCJ d.
+hnl- nrrl-linnc rrion
LIId.L UULLlIICD rar;llifpmpnfC
VlJc1 lCqurr!rrrLrrLU
for Canadians in other countrles.
Fnr pwemnlp Cenrdirns rricifino
Eritrea, a small North African
LULrr.rLly,
*.,^+ o'PPLy
^^..-+-.. rlluJL ^^^r,, fOr a tOUriSt
visa. The visa must be requested
L.- r^-^r
^ ruLd.r JPUTTJUT oL
uy d. ^* the Erttrean
Immigration Authority at least
48 hours before arrival. You must
also prove that you have a return
ticket.
Residence visas
to live in a country
A resid.ence visa provrd.es you with permrssion
you from working there'
for a specific period of time, but prohibrts
easy to obtain
This j,s often called a student visa, and is relatlvely
withproofofacceptancetoarecognizedschoo-''collegeoruniversity
ln the host country Most countrles welcome
s-':l:llts' as they do
the '::= =--r:my' and
not take local jobs, their spend'i'ngboosts
(schooi e::l: l- :=> ':cal food
they provide employmt"i fo' others
vendors, landlords, etc')'
-"-
lf you \'r::: -:1--:"':-: -:
You would. aiso need- a residence visa
studl ':l=
your partner who had employment or was
.-:-
.o,-,nity. This visa is also granted frequentiy'
as
'::
there' but l- l-- - ---i':
"c:a'
boost irom people who live and spend

Work visas
(or, in the United States' a green cord)' a work
Also called awork permit
host country Some work
visa grants you permisslon to work in the
or type ofjob (construction
visas are specific to a certain industry
you have a specific skili
workers, for example) and require that
professlonal (tN) visa ailows
that the Country need,s. The NAFTA
States' Every year' Canadian
Canadian workers to enter the United
workers, many in high-skilted
occupations, such as engineering'
cross borders to find highel-paylng
jobs in the United States' The
movement of workers across borders
is referred to as tabour mobilitY'
Canada lssues more than
3OO,OOO work visas for skiiled
labourers every Year' ExPress
Entry is a sYstem that manages
how skiiled immigrant workers
can aPPIY to settle in Canada and
contribute to Canada's economY'
The Province of Quebec has its o eot
own sPecial agreement with
the Government of Canada on
immigration ruies, including
apPlYing to the Quebec government
for a CSa (Certificat de seiectlon du
Quebec).

The -ol:::
 Foreign workers in Canada
The temporary forelgn workers program (TFWP) allows Canadian
busrnesses to hire foreign workers when rhere are \abour shoruages
on a te orary basis. The TFWP is designed to meet short-term
gaps, and most of these foreign workers have a four-year limit before
heino renrrirpd fn rpfrrrn tn thpir hnmp rnrnf nr Mnci vrnf fLfhpqp
f LrL fAroion
rvl !t61r

workers have the opportunity to apply to the Covernment of Canada

for nermanent residence.

Canada's TFWP provides a faster way for businesses in Canada

to hire htghty skitied foreign workers when Canadiars or permanent
residents in Canada are unabLe to provide these skilLs. The GiobaL
Talent Stream can process a work permit, as well as a v jsa and travel
authorization, in as llttLe as two weeks. Canadian employers who
hire foreign workers under this program are required rc oblain a
document that proves that there is a shortage of the ski .s for the
posrtion rhey wish to hire for. The basic process for parLicrpating in
the program is outlined in Figure 10-3.

Health requirements
Many countries, lncluding Canada, have heaLth requiremenrs for
certain work vrsas, and if so they wiLl require a medicaL exam.
Tourjsl visas in some countries require visitors to obtain specific
vaccinations against malaria, yellow fever, hepatitis, or other
diseases

Figure 10-3 Participating in Canada's TFWP

Step 1 Step 2 Step 3 Step 4

Employer submits Seryice Canada 0nce the LM0 is Onra :nnrnvorJ
a [abour Market reviews the LMO pre-a pp roved, and with the
0pinion (tM0) application and the Employef can employer's
application to either recruit TFWs and nttiAaneo iha TF\A/

Service Canada tor pre-approves the complete an can now apply for
+^
plr-dppluvdr
^.^ ^^^-^.,-l LU hiring of a TFW, LMO contract for a work permit to
hite a Temporary or rpiorts thp anvnnp srrrrpqqlrrllv work tor the Ll\ 0
Foreign Worker application recruited, stating emprOyer 0nry
(rFW). NOUIS OT WOTK, and rf npr-pssarv
wages, etc , and a temporary
submit it to Service resident visa
Canada for final
approval

_: : _-7 lssues and International Business Trends

Many countries place restrictions on the goods that Canadian
travellers can bring with them (in addition to restrictions that apply
to what can be brought onto a plane, such as liquids and knives).
Firearms, tobacco, and alcoholic beverages are the most commonly
restricted items. In many countries you ale not allowed to enter
with a large amount of cash (usually $1O,OOO or more), any type of
fresh fruit or vegetable, or any live animais. Australia, for example,
does not allow visitors to bring any food products into the country,
and has sniffer dogs at airports to ensule that all food items
are

d.iscovered and confiscated. Travellers should research what

they can
and cannot take with them when travelling abroad'
Returning Canadians must declare what they have purchased
while away. There are quantity limits associated with alcohol and
tobacco, as well as doliar limits associated with items that are
not
duty free. D -free items are non-restricted items made within
ttre borders of a country that has signed a free trade agreement
with
Canada. They have no restrictions as long as they are for
personal
however, individuals may be required to pay both federal and
use;
provincial sales taxes on the items.
Travei is perhaps the best teacher in the world, especially for
students of international business. Plan to travel as much as Anyone who has travelled
lnternatlonallY w111 be familiar
possibie. Make sure that you do your homework, however' and with the dutY fiee shoPs located
find out as much as you can about the countries you will visit well within airPort terminals and
before you go. Globat Affairs Canada is a useful lesoulce from the accessible onlY to those with
valid boardlng Passes
Govetnment of Canada.
 Many occupations provide opportunities to work abroad.
For
example, you might:

' h/ork in other countries as part ofyourjob. Foreign service

workers, anthropologists, archaeologists, missionaries,
marine
biologists, and those serving in the military are among the
peopte whose occupations may require foreign placements.
. Work in other countries fult time. Engineers, geoiogists,
architects, teachers, bankers, and journarists are amongthe
people
whose occupations give them opportunities to work
abroad.
' work in other countries part time. writers, artists, editors,
foreign business owners, and others wrth careers that
do not
require a fixed home base can do their work wherever they
wish, as long as they return home for six months of every year
to maintain their Canadian citizenshin.

Advantages of working abroad

There are many reasons peopre choose to work abroad.
For example,
living and working in a foreign country may create an opportunity
to learn a new tanguage. Living and working in a foreign
country can
also expand your cultural awareness. Tourists only
see the superficial
trappings of a country, in most cases. when you live
and work with
people in another country, you appreciate how
a culture operates
on a day-to-day basis. Habits, beliefs, festivals, customs,
and the
routines of everyday tife are only visible to those who
live there.
Many Canadians working abroad are paid a Canadian
salary that
is often higher than the salaries typically earned by
citizens of those
countries. This gives canadians working in those countries
increased
purchasing power to save more money while away,
or to afford a
more affluent lifestyle overseas.
Worklng abroad provides a valuable addition to a resum6.
Employers are often impressed by applicants who
have shown the
initiative and courage to work outside of Canada. working
abroad
shows that you have had drverse experiences, and
that you might
have a different life perspective from other candidates.

420 | Chapter 10: Globat tssues and International

Business Trends
 Living and rnrorking in another
Disadvantages of working abroad ccuntry allours You tc see

its unique c re

homesickness.
t language can
will exPerlence
a country where
said'
you do not understand much of what is being

severeiY lacking.

The global traveller J2

 ec nolo an ravel
In2OlT,the United States implemented new security measules for all
flights into the country. Under the new measules, travellers entering
the United States could experience more screening of mobile
phones and laptops or be intervlewed at check-in or at the alrport
gate. These new procedures replace a previous ban on laptops
in
Saudi
pianes originating in Middle Eastern countries, such as Egypt'
travel
Arabia, andJordan. The measures ale not expected to disrupt
from Canada into the Unlted States; however, Canadians should
be prepared to have their electronics inspected and arrive earLler
to the airport, as some convenlences such as self-check in could
be

suspended.
Newtechnologytoincreasethelevelofsecurityforpassengels0n
airlines includes:
. cT (computed tomography) scanning, which gives officers a 3D
viewofapaSsenger,sluggageandallowsfortheeasydetection
of weapons and illegal items
. Fingeryrrnt boarding, currentiy being tested, which allows
travellers to scan their fingerprints to identify themselves and
access thelr boarding Passes
. Automated screening lines designed to improve screening by
automatlng previous manual work, such as the automated exit
line for foreign natlonals visiting the United States
. Screening separately all electronics larger than a mobile phone
for hazardous contents
' Facial recognition, currently used by some airlines to
eliminate the boarding pass procedure and baggage check-in
and clalming

other countries are following the united States in increastng

the use of advanced technology to improve the safety of
travellers. Germany, for exampie, is testing the use of video
cameras that are equlpped, with blometric technotogy in subway
systems. In response to an increase in terIOI attacks in Germany,
the government is hoping to install the technology across all train
stations in GermanY.

422 | ChaPter 10: Global lssues and Intetnational Business Trends

 .i,.Ll...ll.lil.l::riJ, I : :,:'
tJlI

i,

'rlr
J'l
'l
I

rl
tt,
.,1
lr,i

li:,.',:'-:
alrla'::al

International traveL and international business often go hand in 5:!a: l-:

hand whethe- vorr Lravel abrOaC fOr bUS * pc. reerjnos ro soUICe
rrodrrrfs or lo rnrotk in:norhpr rnr---- One wavto rJ -- find LouL
----u
qL wheLher L

\^rorkino
" " '-'b ahro:d is an onfion 1/or \^/o rld likp rn nrrrqr p ic f n cfrrdrr nr
Lake aworking vacation ab-oad. Many un'versities offer Ll^e oplton
of studying at a srsler university in anotner country as part of rheir S e ,u** r,-BYi€:+,r

curriculum, or have co op programs rr here sruoenls can speno a te-m

jn another r-ountrv wh j'e ga'n'ng va'uab'e wetk eunerience I What is the main purpose of
Worki-g
''",''''-o,".',..b*,'',, e ne qqnnrt?
in thpir fipld nf <trrdr'
2 List the different types of
Global Affajrs Canada has signed agreenents wirn nary visas for entering a host
rnttnfrjpc g.r- T-r: nno (n:i^ rnJ country.
LvurrL--LJ, crrrhJu.rr :c A rrqt\.r:li:
qr n-e - | -,n anO j apan, I0 maKe
easv for vor no fanadians to obtain temnn-a-v M/n1L' no-1i19
if'..*"-,t 3 What are duty-free shops?

rn those countries. Their program offers ass sLance ro young 4 What are the advantages and
jdrvcr rnd '.' floLlulLat^-r LU-up. disadvantages of working
n-ofessiona]q rvl wnrkjrg
iu,J fn- vvur_\i.r5 ho' r-v-ruej _ttu -rlLqf ^- ^^ ctnd iS abroad?
the best nlace
IJ.u!L I!vo beg'n
r-
JLbrrl juur r', r 1 , "
JvulllqJ
.\- '- -t
LU 5( in vaLuabLe internaLional
r^/nrk pYnpri on.tr 5 Howhas newtechnology
incrcased secrrritv for air
travel?
5 Why do many universities
offer programs to work or
strrdrr rhrned?
 Chapter Review

1 why did the financial crisis of 2oo8 not impact Canada

gLobal s
economy to the same degree as that of the United States and
OINEIS 1

How can blockchain technology help businesses solve supply chain

problems?

Why do so many countries encourage programs for foreign

students? List three advantages ofinviting foreign students to
your local university.

Gender parity in business is not yet a reality. Summarize the

current status of this goal in Canada, and tist three major
initiatives in place to change this for the better.

5 How is the global automotive industry changing as a result of

advancements in greener technology?

in in
Research NAFTA and provide a current update ofthe negotiations.
what stage of the business cycle is each NAFTA country's econonry
currentLy in?

Calculate your carbon footprint using an online calculator. Create a

poster on ways that businesses can reduce their carbon footprint and
improve the use of thelr resources.

Uslng online research, compare Canada's economy to that of the

Unlted States based on the following:
. Inflation
. Unemployment
. GDP
. Exchange rates

Using online research, provide an update on Britain leaving the

European union. Create a T-chart comparing the costs and benefits of
doing so.

424 | chapterl0: Global tssues and lnternational Business Trends

l0Usingonlineresearch,createaT-chartontheadvantagesand
(Ugt). Whlch countries are
disaJvantages of universal basic income
have tested
testing o, uiirrg the program? which Canadian provinces
one-page repoft
UBI? Should Canada adopt this program? Write
a
position'
supportlng or opposing UBI ln Canada' Justify your
Temporary Foreign
11 What are the advantages and disadvantages of the
Workers Program (rrwP) in Canada?

12Whatfreetradeagleements(FTAS)hasCanadasignedsince2OlT?
How many FTAs does Canada current$ have?

government to
13 Research the preparations made by the Canadian
protect people in Canada from public health epidemics' Create
a

poster informing Canadlans about public health ln Canada'

Compare Canada's immigration policy to that of the

United
14
States.Basedonyourfindings,writeaone-pagereflectiononthe
differences.

Research the difference between carbon pricing

and "cap and trade'"
15
advantages and
Using technology, create a biochure explaining the
disadvantages of each for Canadian businesses'

16 Given the changes in the automotive industry'

should Canadians
and
stop ownlng cars? Create a T-chart on the advantages
your perspectlve'
disadvantages of glving up car ownership from

lTlngroups,cleateadlgitatpresentationaboutoneofthefollowing
of Things,
technologies: artificial intelligence, robotics, the Internet
autonomous vehicles, or digital cufiency'

18 Interview a female entlepreneur or business executive. Prepare

10 intewiew questions, including questions related
to the successes
andchallengesinthelrCaleer.Presentyourfindingstotheclass'

Chapter Review J2;

 Application
19 Select a country outside of North America. What are the requirements
for you to be abie to .. .

a Enterthe country as atourist?

b Attend school in that country?
c Work in the country?

20 What is the current prlce of oil? How does the price of oil affect the cost
of dolngbusiness? How are oil prices impactingthe Canadian dollar
and Alberta's economy?

21 Identify a busrness, product, or service neal you using aiternative

energy sources, and outline how they save energy'

22 Describe two or more protectionlst activlties that are taking place in

canada. Then describe two or mole plotectionist activities that are
measures?
tekins r'*-"'- ---' United States. How successful are these
nlace in the

23 Use a website such as Transitions Abroad to research available

opportunities to work, study, volunteer, or live abroad' Select
otte oppottunity that interests you and prepare a brief summary'
Explain why you think the experience would be lnteresting and
valuable to You.

24 Create a timeline of the rise of digital currencies, beglnning with

Bitcoin in 2009. List as many different digitat currencies as you can
find, and include dates and major developments'

426 | Chapter 10: Global lssues and International Business Trends

Inquiry Activity

In this chapter you learned that many new technologies are

disrupting inte rnational business and giobatization. Augmente d
reality, self- driving vehicles, artificial inteiligence, automation,
robotics, blockchain, and drone technology are innovating traditional
businesses and creating new ones.
In groups, create a preseniad3n ';5ir$ Dresentation soffware
(PowerPoint or Keynote, for exa::r:',e' ::l rew technologies and
international business. Choose two :i=e fcliorving topics:
. Electric cars
. Self-driving cars
Drones in the supply chair
Artifi cial inteliigence
Augmented reatity
3D printing
For each technology, complete a chart like the one be'cw::
organize your findings. Be sure to give yourselves plenq'cf :cc': '-
your chart to include your ideas.

Rank the top three most important Rank the top three most important
advantages the technology offers disadvantages the technology offers
Canadian consumers and businesses. Canadian consumers and businesses.

Advantage 1 Disadvantage 1

Advantage 2 Disadvantage 2

Advantage 3 Disadvantage 3

6loup conclusion:

Inquiry Activity 1427

 in
Email is one of the most important forms of communicatiori
business.Theaverageworkercanrecelvedozens'ifnothundreds'
purposes is very
of emarls each day. Using email for professional
and fami$.
different from using it on a casual basis with friends
Your email
Many professionals d,on't use email appropriately'
*.rr"g. is a reflection of you, and your email behaviour has the
and
potential to positively or negativeiy impact your professional
and is key to
personal reputation' In business, perception matters
achieving success.

Tips for email wtiting

. The subject line should be short and cleariy related
to your
message. Avoid using all caps'
. Use an email address that features your full
name so that the
email recipientimmediately knows who sent the message'
.,helio,, ,.good
. USe professional greetlng such as
or morning.,,
"Hi guys "
lagaq, Tan Avoid, slang such as "Hey folks" or
Egct
. Use short sentences and paragraphs, and keep
your
under
language clear and simple' Try to keep your message
10 sentences.
ffi,68 . that includes your Contact information'
Set up a slgnature
=rbavens,
3I . Avoid humour. Humour can be misunderstood if
it is not
as factor communicated in Person'
2n
. Avoid emoticons, chat abbrevtattons
(such as "1o1"), colourful
4rpces
l=and fonts, and all caPs.
2o2 . Avoid multiple attachments. in general, keep it to
no more
Ieem named'
than 2 attachments, under 5 MB in size' and clearly

=cmbgr
. Proofiead your email. If your message is fuli of
mistakes and
professional'
disorganized, it reflects poorly on you as a
-Uogr
=rEE[ . Be sure to check the recipient's name and email address
before hitting send.
!-yt . Beware of "reply a11." Keep privacy in mind
when using email
and only cc others on an as-needed basis'

6.1
 a*-.

Activity
Select two of the following scenarios, and create
an email message on
how you would resPond to each.
. you have just finished an tntervlew for a dream job with a
multinationalbusinesslookingforanewsalesrepresentative
the
in your area. You have decided to follow up with an email
next daY.
. you are the regional service manager for a car company and
his money
have received an email from a customel demanding ..lemon,,-in
back after claimlng the used car he purchased is a
other word's, it doesn't work as expected'
.Youareexcltedtoattendaconcertbyyourfavourttemusician
tomorrow evening. Your boss sends you an email marked as
,,priorlty." She has double-booked her scheduie and is tetling
yo,-, to attend a supplier meeting in her place You
are to fly out

tomorrow for three days and will miss the concert'

.Youareaproductionmanagerandweleplesentedwithbids
fromthreedifferentlogisticssupplierstoprovideshippingand
you
transport for your business' Write an email to the supplier
email
have chosen, awarding them the contract' and write an
your
to the suppliers you have not chosen, informlng them of
decision to select another company'
::::emailmessagemusthavethefollowing:subjectline,greeting,
:':-lse, closing, and signature'
 LIL

GlossarY
A
ability of one country to
Absolute advantage: The goods
nufacturing andior sale of
useitslesoulcestomakeaproductorservicemore needs of
satisfY the wants and
efficient$ than other countries'
purchase ofanother consumers to make a Profit'
Acquisition strategy: The and
market' often with the 6cc ,^\r.lp' RecurrinA periods of increased
company ln an international
and galning
purpor. of eliminating competition
and culturai
employe es, *"n"gt*!"t' reputation'
expansloll" arru PtrqN'
four stages: recession' trough'
expertise. that
of rules or guidelines
Cooperation (RpgC): e Business ethics: R set
Asia-Pacific Economic when making
in 1989' that unites 21 or individuals follow
trade organizatton, created -""rg.-."t comPanY'
decisions facing their
ofthecountriessuround'ingthePacificOceanto process that ensures a steady
is not established Business logistics: A
on regional trate epfC
and' information to
co-operate all
UV but is based on consensus'
ir..,t.t,
and flow of needed' materials
commitments are voluntarY'
by a single individual
Autocracy: A state governed (B
with unlimited power' Business-to-business
o, ,-uff gtoup of people businesses ln Canada'
B2B is
" businesses sell to other
than B2C (see next term)'
a more common
B "'"ttgy (gZC): A situation in which
Batance of trade: The
difference in v e between a Business-to-consumer
Ultrirr.rr.rsetldirect$fromproducertoconsumer'
exports'
country's imports and its
document that indicates
Bill of tading: The official c
of the financial system
tnat
Capitat markets: Part
gives the value of the taisesmoney,accessesmarkets'managesrisk'andkets
their quantity and wei$ht' purchases or disposes of assets
the name' bilting address'
shipment, and provldes irurrton of a bank buYs and
sell
anJ shipping ad"d'ress of
the buyer'
and commodities' Its
customel
around the
and high-value clients
Blockchain:Acollectionofdigitalrecords,called
and secured Blockchain
data ;;;;;;."ts,
blocks, that are linked world
modify' thus helping to
ensure carbon
are very d'ifficult to on those who emit
Carbon pricing: A tax be paid on
of record-keeping' as an amount to
the safety and transparency dioxide (COr), catculated
of CO' lnto the atmosphere
n the emission of l tonne

a subsidiary factory
;
(abranch ptant) in London'
fl:, Carrier: A company hired
to transport goods'

Any group of independ'ent

o t,"ttu"iheir profits
pro.ducers who
by manipulating the
Ontarto

430 lGlossarY
 slt-lnlt/ nr -trirp nf onndq A drrro.:r1-ol i< : r-:-'-:'
enterprise whereby independent traffickers unite rc
rnnf'nl
lvrrLrvL fho crrnnl', dll*
.ld nrir.p
L]]tr JuppLy r. -__ nf rloq
_- d*.*b,.
Centralized marketing strategy. A marketlng
sfrategv
--.*"'b-/ in which all of a comnen\/'s manrrf:rtrrrino repurauon.
and marketing is performed in one 10cat1on.
Counterculture: A c;-:::: --:-:_:_:: : _:_ _.
Centratly planned economy: Also known as lifestytes that oppose mai:-:::==:- .': -:_ -- -
communism oT commond economy, an economic
attitudes, usualLy wlth a vier';:: -:__-_-*::-_: :---: =:
system in which the government conLrols all
Members of a counterculture ope: , := :__ _-:
elements of the economy, including prices, wages,
established cuttural values that su::: *:: -_-::
and productlon.
Circular flow model: A model of the economy in
Crowd-sourced delivery: A digital-bas:: :: ___=_

seryice that matches demand with the s'i::.-.- :_'

which exchanoes Are renrpstrntpd ec flnrnic nf
ur rn^no\r
r11vi1! j,
goods and services in various locations.
goods, and services between economic decrsion
makers, represented in a simple way as households Cryptocurrency: Digltal or virtual curency
or c0mpan]es. lhaf ttses r-nrntoorenhvr (r'ndrno
.-- *---o rnd
*-'* dprndi
*'---.ng C:

Clickstream data: Data that show which websites information) for securlty.
and web pages a person has visited, in what order, Cultural dimensions: Identified by Geert
and hornr lnno pech rricit l:ctpd Tho nrfhr^rr
"*yan Hofstede, a Dutch anthropologist who conducted
individuaLtakes through various websires and pages a comrrehensivc sfrrdv of how valrres in lhe
ls known as the clickstream. wotkolace are inflr renced bv crrlfrrre fhe five cultural
Commoditlr: A raw material or primary agricultural drmensions provide a framework for understanding
nrnrlrrrj- fhof
pruuuLL nnn 1-'^
LrrdL carr ue l-'^"<Lt
DOugjrL ano -^l,l .
^-l soLo,coppel
sucn
^,,-L as the differences amono narlicrrlar asnecfs nf cuLture
0r c0IIee. in different societles. They are Low power distance
Comparative advantage: The ability of a country versus high power distance; low uncertainty
to produce a good at a lower opportunjty cost than :rrnirln^.o
dv uruilr.rLc vers ub f.i^h
r1 t glr "--^'i
uilce r
nin+rr
La.LI.tLy r'aiJ^-
d v0 toance :

another country. Comparative advantage is the ma sculi n itv ve-sl t s

femininitv, ind i vi du al i sm versus
foundation for specialization and trade. collecttvism: and long-term orientalion versus
Competitive advantage: The ability of a country short-term orientation.
or company to produce a product more cheaply or
Cultural intelligence. The capability to adapt,
efficientlv than
!rrrLrLrrLLj its comnpfil-nrc Thp :drze nr
LriqrrrLD!v-^,r--.--.-,*-,.agemay
reLate, and work effectively across various
be based on technology, access to raw materials.
cultures.
markelinS. mAnaoemenl nrrelil rr, HII!!'
...-...-....o, nrino nrndrrri'irritrr
yivuuLtlvlL],

warranty, or servtce. Cultural norm: Attitudes and behavrours that are

rnncidoro,.l
Lvrrrf uLf Lu frrnirrl
LjyiLqr nr
vr -^.--l
rlut lJtqr '.'ir1-'i^
vvrLllltt ^ ^^-ft-UlaI
d pdILt\
Containerization: The use of standard-sized
cuLtural group These attitudes and behaviours
reusable mefal hoxes desisned to Lv rfif on ton
]L vrl LvP of each

other, to store and shlp fieight.
Corporate corruption: The rnvoLvement in ittegal
activities, such as bribery and fraud to furtner one
busrness interests
Corporate sociat responsibility (CSn): A form
can be expressed in personal, social, or business
situations.
s
Cultural relativisrn: A view of culture based cl:
the idea that a cuLture's different values shcr,: :=
respected, as the ethics of one culture are a: - : = _:- _

- i ^a1n6.1f6 co-f ron,.1311On than those of another

rL6uLuLlw and oLLvull
I qrfu
I aCCOUntabiljfv
toul.l-j
--:a: ::tany businesses are incorporating into their
 lilill: il

Culture. -::e <norvledge, experience, beliefs, values, Discount pricing: A pricing strategy often used
:---j:< -p-ioion arls svmhols and nosspssions by producers wishing to selL hlgh volumes of goods
--":-^) iJ
-:---*-=u x-^"- Ur
^'- d^ SruuP ^f neoole over time. Some to a wholesaLer or retailer. One example is the cash
r,-r
:::::--s of culture are transmitted fiom one discount-an enticement to the customer to pay
;:::e:ati.on to the next through education and by within a speci.fied time period in return for a price
:-ia;nple; other aspects are acquired through changes discount.
-:: beliefs and norms, and through exposure to new
Discretionary income: The amount of money
-oeas and influences. fpmeininO -^l^-.. ur
^-,.-.d.c .fj-6r
- ----*------o frnm :n ---urvluucll
inli--i1,,^l'^ J Jd.Ld.ly vvd.ScJ dlLgr
Currency dev ation: The decrease in value of all essential living
"''-'b exnenses.
'--r"- inclrrdins renl and
a- CuTTencv
- *-- ----J becairse -.rE ^..--t--
th^ -uPPly ur^r+L^r
LrldL -^-*,:Ulat
Pqr L| procerles harre heen pn1d.
currencv
- -- - ---'J is sreater than the demand for it.
Disposable income: The amount of money
Currency speculating: Buying, hoLding, or selllng rnmninina
remalnln8 f.^-
Irom an ih,li"i,l"^l'.
^^ Inu.LV.Luuar s salary
-^l^-.' or wages
^- '.'.
fnrpiOn LurrLrilj
rvrL16rl alrrpnat/ in qrlLlLlPoLlull
iI] nnfinincfinn nf tLJ
uI ifo rrrlrro
voLuL
after taxes and other mandatory charges such
changing in order to profit from fluctuations in the
pIlCe OI Currency.
*'
as emolovmenl
--"r'"_/ insrrrance nrpmirrms have been
deducted.
Domestic business: A business that makes most of
D
its transactions within the borders of the country
Decentratized marketing strategy: A
in which it is based. A domestic business in Canada
marketing strategy in which a company sets up a
is owned by Canadians, relies primarily on products
manufactrrring nlant ln anolher counfrv
!vurrLr or hires
/, v.
and services made in Canada, and sells the products
a sales force there, or even licenses its brand to
it makes or services it provides to people who Live in
a local manufacturer, rather than performing all
Canada.
manufacturing and marketing in one location.
Domestic market: The customers of a business who
Democracy: A state governed by atl eligible
live in the cottntrv wherc fhe hrrsiness onplates.
members of the nonrrlation throush elected
r^6'^-^^+^+i"^- r^mocrtarr is r-h:nr"tprizpd hrr
^ Lttr,..-
r cPr cJtrlrLd.LL v cJ. f1 Dumping: In an international business context,
free and fair elections, the rule of 1aw, free speech scllino nrodrrcts in n foreign countrv below the
"-...,,b
and Dress the righf to assemhlrr nnd freedg6 6f cosf of orodrrction or helorru fhe nrice in fhe home
retigion. country.
Demographics: Statistical data about various Du$r: Also known as atarilf , a tax most countdes
characteristlcs of the population, including age, "'- foreisn imnorfs to increase
r'*'' on
Dlace thpir nrice and
opndpr:nd inrnrnp make the nricp nf dnmestic goods comnetjtive.
Developed economies: Also known as industrialized Du$r-free: Refers to goods that are exempt from
countries, countries that are characterized by a payment of customs fees.
high ner canita income or strono gross domestic
vrr uvrr.
6r
product, and have moved from a reliance on primary
E
rndustries into predominantly tertiary industries.
)eveloped countries have high standards of living e-business: A business that conducts its sales and
:-,': i:'or..-r
:::c rrf^.
: .eldcy rates, marketing on the internet.
anu -^1.^ rrrajor
^-,1 rrraKe -^i^. auvancements
^1"^^-, in
:::a,--:: care and technology. Economic system. The way a country organlzes its
Developing economies: Economies that are resources and distributes goods and services to its
mn\lin- r-,-r.r
t:luvl-16 c,', cv fr^- naria"l+"-^
IIOlll a$l I(uLLuie dIIU *^r"-^l
^^,1 IIaLUIaL I€SOUICeS
citizens.
torgard rno:e industrialization, manufacturing, and Econornies ofscale: A theory that suggests that
technology. the more products you can make in one factory,

432 lGlossary
 -:'1-- -: -- --' -- = -
costs' the Ftoating rate. '-:: :-i::-::-;: :).---= ' --
using the same labour and other overhead
in reiatton to othel c;::::-:-:: -:-'::"= =---- --
cheaper each indlviduai unit wilt be to
make' --'-- -
curlency with a floating:a:= -- ::--=:-:
Ethicat dilemma: A sttuation in which an fluctuates according to sup:'-' a:-: -=:---:
make a
individual, government, or buslness must (FDI): -: :- =
of which Foreign direct investment
choice between two alternatives, neither
"=-=-::''-:--
'- ----- -
company that is located in a differe :: - - -:- -- ';'
provldes a completely satisfactory soiution' ::-: :::-:-::: :
the investor to control some or all of
operatlons.
- -" :- -
that are Foreign markets: The customers of a bus-::=-
there are ceftaln universal truths or values whe :- --:-=
is wrong ln Iive in different countries than the one
standard. across all cultures; if something
business oPerates.
one country, it is wrong in ail countries av/r-t -"'
culture' Foreign subsidiary: Often referred to as
Ethnocentrism: The belief that one's own ownei subsidiory, abranch of a company
that -s :::-
the right way
values, beliefs, and customs represent as an independent entity in a country
outside c: --:-=
of doing things, and that value systems of other one in which the parent company
is located'
countries are not imPortant' price' and
Four Ps of marketin$: Product, place'
by
Euro: The European currency unit adopted promotion-ali of whlch directly affect how a
of the EU
the European Union and used in most product or a service is marketed'
countrles. individual
Franchise: An agreement granted to an
trade agreement signed name'
oI group by a company to use that company's
omPassing 28 countrtes
servlces, Products, and marketing'
a blllion
in Europe and a population of almost half Freight consoiidation: The process through
which
people. It has its own flag, anthem' and currency' goodi from dlfferent sellers movlng to the
same
and common financial, security' and
foreign lolicies' warehouse and
f,estinatlon are collected in a single
The amount of one country s FTL) to
,t tpp.a together (often in a full truckload' or
tion to the currencY of another save money.
country.
Exctusive distribution ri$hts: A form of licensing G
and
Gender parity: Refers to equal opportunity
of gender'
equal pay for equal work, regardless
area or country. It addresses the historic inequallty between
women
Exporting: To send goods or services to another opportunities and pay between men and
country, esPecial$ for sale' Geopolitics: Internatlonal relations that
are
regions
Exports: Products or services sold to another influenced by the politics of specific
or
country. Globalization: The process whereby natlonal
become
Ex Works (gXW): Term of saie that lndicates regional economies and cuitures have
that the buyer is responsible for carrler selection' integrated through new global communication
customs documents, and ali charges technologies, foreign direct investment'
cl
lnternational trade, migration' new lorms
F
tlansportation, and the flow of money
Globat sourcing: The process of buylng::'.*-::-:--
capitai goods, raw materials' or sen'i:e -:::- " -
s = '-

the world.
spends money.
l-

l:=-r: -:-= -=:::: ::-:::-i:g:c the possibltlty of index of Economic Freedom: An index that
- -'^ -"-n'ro;r ur.rvrrr hroloht
--:: -: :-'------= ---: -L1-u1Lo-r TTnion urvu6rrl about has heen measrtrlng the imnacf of lihertv and

- -:-=.--.-=::-gn debt crisis of 2009. free markets around the globe for more than
G:oss domestic product (Cpp): The totaL goods and two decades. The Index addresses 12 different
freedoms in 186 countries.
.=:,- :=s ::cduced in one country in one year.
Group of Seven (CZ): n group of industrialized
Inflation: An lncrease in prices accompanied by a
dprrprqo rn fhp nrrrrh2sino
*".'^o nnI^Ipr
r" nf mnnprr
:.::::tiacies (Canada, France, Germany, Italy Japan,
-; - lrited Kinsdom and the United States) that Influencers: In marketlng. the practice of
___::L> dllrlUdLLy ^- d.Ll
^-^"^rr-' Ulr ^ -otational basis to discuss esses al i on i n s th pm splrrcq \^/i fh hl oooeIS
hr r si n

-;s-r:s such as terlorism and organized crime, energy
- "- icrz
'-,/ tmdp :nd oloh:l onrrprn:nap
,
--
Group bf Twenty {CZO). A trade organization
esfablished drrring the economic crisis of the
,1990s
to provide a discussion forum for the major
economies of the worid beyond the G7. The G2O
focuses on economic and employment growth,
elimination of trade barriers, reforming financial
institutrons and regulations, and restructuring gtobal
A---^i^r U1
lllrdt1LrOL ^?d^hi-nri^frs
ECr114OLrU1 such as the Internatlonal
Monetarv Fund and the World Bank.
H
Hard currencies: Stable currencies, such as the
euro, and the U.S. and Canadlan doLLars, which are
easilv converted to other currencies on the world
ovnhnndp m:rlzotq
Horizontat integration: A method of expandlng
.n mnDnv hrr cnrr r irirg jf q aOmntrtil-nf q or corporation that conducts business in other
LwllrPolry u) oLqur r 1116
F{uman Development index {FIpf): A statistic
nroduced bv the United Nations and used to rank
countries, which measules three elements: health
(life expectancy at birth), education (llteracy rate
and schooL enrolment), and standard of Living (GDP
:er caplta).
I i^ --^^- ^"-1.. ^- 1-^-l-i^<
ImrortinE: To hrinp n-odrrcts or qervices into a
or YouTubers who have a large following These
individuals, often skilLed in communications and
promotions, can help businesses lncrease their
customer base.
Inshoring: A company's contracting out of
functions to other businesses wlthin its own
country, for exampLe, to businesses in another state
n- nrnv'rre r^/hp-e lrhnrrr iq cheane- n- facilities are
better.
Insourcing: A company's eslablishment of a specific
division within the business, such as an advertising
denarfment or customer call centre, to handle a
function that is normally outsourced.
interdependence: The reLiance of two oI more
countries on each other for products ot services.
international business: (a) The economic system
of transactions conducted between businesses
located in different countries. (b) A specific company
a
countries
International Monetary Fund (IMF): An
organization with 189 member countries whose
purpose is to promote financral stability, prevent
and solve economic crises, encourage growth,
erd :sqrraoe tovprlv hrr enr'orrreping corrnlries
to adopt responsible economic poLicies, lending
money to emerging and developing countries, and
rnrovidinO
- - , - *-- .o fpr-hnir:l lT^i^i-<
-- d11111 16 111 d.l Cd) J t,tLll d) UOI lNr116
rnx--lrlinnc
ICBULdLIUIl)
nn,.l o-rhq66p r:fp
d.llu C^Lllqrlb! ruL! noliripc
/vLrLrlu.

,
r uJtr "'-
rll ' ''^' ^rotherbusiness
Uy dl or [or resale
Imnorts l-r-drrt< or se-rrices nrrrclased from t
I

::: -:-=: :: -:::1r Joint venture: A common type of lnternatlonal

Inbound distributron The process of recelving business, in which a new company with shared
dnnn i -.:_ :-: ::_ _ _.
-- *: .nmn:n\/
-.----r*--J ornrt^ prqhin is fo-tned hri frrrn hr-qinpssps nn.e Ol

434 lGlossary
which j,s usu located i,n the country where the M
new comDanv is established.
Market econo : Also known as .:_:-:-. .i- - -
Just-in-time (Jlt) inventory systems: A strategy privote enterprise, an economic syster- --. -=:::----: -
fhet renrrirps srrnnlierc f n mekp :nd shin fhe
LlluL rr9urrL hii free comnetition in which business=.
.nnerrmprq :nd onrrprnmpnf L rat inderprr.--
' ---
materials thaI a factory or Ietailer needs quickly !vIfJull ILIJi uflu 6v v sl rrrrrLI

enoush that ""*'

the
-"- soods and materials arrive at the
ov!-
one another, and market forces and self-inle :=. -
r^rnrlqfrtinn
vv vt l\ o LuLrvrr F:rtnrv flnnr or rptail sfore irrst as thev determine what goods are created and sold
:ro rpnrrirpd Market researeh: Research that collects and fiii.
information needed to successfully sell a produc:
K and solve marketing decisrons. It can be used to
better understand customer preferences, identify
Keystone XL pipeline: A planned 1,897-km pipeLine dptprt.hanges anC
6ruvvLr vrrL gpnn-trrnifioc
O.oWth and OfOfit vyyvr
runnins from Aiberta's oil sands to Nebraska that
trends in the market, and observe the competition
rnrrld
LvuLu rrrnr R3o OOO harrpls of oil each dav
Lurrj
Ivlarketing. The sum total of all the activlties
inrrolrred in settins goods and services from the
L
r- " **-*''-to the ultimate consumer.
orloinal nroducer
Labour mobiiity: The movement of workers across These acttvities include market research, product
internationaL borders. development, plicing, advertising and promotion,
Letter of credit: A financia gua:aa-:- -.s:ei by a sales, and logistics.

uuytr.L ) l-'rnlr
1-,.,.'^-'o udIlN, flrct
LlloL fheVS:_:C-el: aCrLateIaL On
L-l / haVe Markup: Adding an extra percentage to the cost to
donncit t^ fnr: o <hirmcni
n:1r rvl rrllyrrrL-11 doterrninp
ULLLf irrr-iL thp
Lli! nricp
yrrr! q nrndtrrt rnd ensttrp n-ofil
vr r
nf
ucyuJlL LU yoy Prvuu!L
\r^-r-,,- a^nira i.
]VId,I KUP P ILI]IB LJ ""pd snecificallv bv re[atlefS
UJtrU JYLLIIIIqLL)
Licensing agreement. An agleene:: Ihat grants
L

tn trstr a lodt-ct, SefVlCe, because it would be almost impossible to make a

np.mission
ycl rrlfDDrvll to u comn2nrr
Lv a LvrrrHqrr
yr rL 1116 dpr'isinn For ench indirridrtal nroduct.
nrir"ind
hrend n:mp or natenf in exchange for a fee or
rnrrrlfrr Maslow's Hierarchy of Needs: A theory that states
thni" hrrmnns exnerience five levels of needs-
Lobbying: The process through which companies, hinlnoir:l qafptrr hplonoing esfeem. and self-
uivLv6r!uL,
special-interest groups, or individuals attempt to
actualization. Maslow's theory states that consumers
inflrrpnr-p oorrernment nffir-ials end nersttade them to
f f rv v L thrnrrdh
rnnrrp Lf f !vu6rr the
urL fhporr/
LtlLUr starfing at biolopical need
endorse public policy favourable to these groups. and move upwards, and that a satisfied need is not a

Logistics: The management of the flow of goods and motlvator.

services both into and out of an organization, from Microcredit: The granting of very small loans
LlIE nninf
thp nf nrioin to thp nnint nf ronsttmnlion Tt
PVrrrL vf vr16rlr (often as little as $100) to those in poverty to spur
oioto nf trrn cnnr'^ri i^"^6 +^'-, ',.
-^h I i5I5
LU LJ Ul LLdII>IJU ^- r, IIIV cIlLUIy
L Ld'LIUI ^lAdpmpntr!r-Lr
lrlot'u6Lrr entrepreneulship. Entrepreneurs, who do nol
\^rrrahnlcino end stnreoe r nd nackaOing
r*-"*o---D' require a down payment or a credit history, use :::
Luxleaks: Also referred to as Luxembourg mlcroloans to start small businesses such as fa:::--.
Leaks. A financial scandal revealed in 2014 by an Mixed econorny: Also known as amodif,e1,+::
investisation-- bv the International Consortium of enterprise system, an economic system ll-= - . ---:
-J -"-
Torrrnalists revealing that a secrel tax
TnrrpslioafiveLJVUIIIqLTULU between a market economy and a cer-::= : :: - - -
edrppmpnt annrorred L-. r ,..-^-L^..-^ ^,,'horities economy, combining government -:-,.:' =:-- - - 1'
- -
-rr-- -J Uy L|.-tACrllUUUlSquLr
had nrorrided tax avoidance for more than 350 private enterprise.
cnmnanies around the world
 ||||||]||i|l||l|]|||||lilli].llill]ll]llili,

.l,i: :1::er;
.-----q-J nolicv -np nrnrtr<q hrr rnihirh. :* rJOUnLfy S
yvrrr)i seamless consisLent shopping experience regardLess
.: -::: =:-.-::: Tenr Lhrough its central bank, makes of rhe chanrer thev rrse.
-:--:_:ls:c determine the money supply (the Opportunity eost: The value of what is forgone, or
::-: ::-: of money rn circulatron in the country), rr'- -^--'rxi"r--
Lrrf LU)L Ur ^^^-tefhing rn
JUtt--_-----o *r to oet sompl hino
51V1.t18 -_ o_
-t-:=::st rates, and the inflation rate. The goal of else For example, the opportunity cost of being in
--".o-rrr ^nlirv ic onrln6ppi6 ct:hiiif'r end ,g ensUf
;tudent could make working at "
,_y y""tj rvirfrL rLuuf LrLj qttu e -l^..;-
-r +l^^ *^-^,,
-rrc r rrurlcy a^ -.
L
L.dr)
--- rf in fhp rrrrrpnnr
a job
Monochronic: A view of the world in whlch time
Optimization: The process of making the supply
-) seen as linear and sequentiai, and focus is placed chain hiohlrr pffir^ipnf ronnprfind m:nrr [:r.r
-r onp thins e',a time in a logical nrogression ThiS -.--o -----_*. - - -u-lng
plan[s. suppliers, and cusLomers. Oprimization
afproach is common in cultures with luropean
aLlows for fewer delays and difficulties in moving
influences. incl rrdins Canada
products from one place to another.
Grganisation for Eeon*mie Co-operation and
N
Devetopment {OECD): A trade organization
Nearseurcing: Sourcing particuLar business
with 3O member countries, estabLlshed in 1961to
fttnrtinnc nr qpnrir-aq
vr oL- qrrrh
v rLLJ, vslrr rc lclemerlzolinc
.,,,3 tO a
DromoLe lhe advance-ncnt of dpmncrenr :nd markeL
-.- -r *''/
Con^Danv 'n a foreion coltntr\/ I hat is rplrrirrplrr rlocp
economies OECD members have worked together
in distance.
to eliminate bribery, money laundering, and fraud
Ifon-governmental organizations {NGOs) .
and to create a code of conduct for multinational
Non-proflt organizatlons with a service and c0mpanres
dpvplonmpni forrrq th:l rrp rnm lllvJrL) lv VI
nncpd mn<i
LullrPvoLu nf
Crganizaticn of the Petroteum Exporiing
volunfeers These oroanizations work for the benefit
e cuntsies (OPEC). A permanent, intergovernme ntal
cf their members or other groups in the world's
orsp n izarion .nnsisfing of 14 countries, created
uuP uLd^+i^-
^^^"1 Lru1I.
in 1960 lts mandate is to co-ordinate petroleum
iriorth Arnerican Free Trade Agreernent {l+efge): policies among its members in order to secure the
'adp aorppmenf
Llr f fLriL larrnchpd
ro ur r!rr!u in /l:ul nrI uar
ir- r:nrjr _J Ja \ot'.,oo-
lQQ4 UCLVV CC I L

hpcl nrrrc fnr nplrnlprrrn nrndrrrprc

Canada, the United States, and Mexico, which sets
Outbound distribution: Refers to arranging the
-:-e rules surrounding the move ment of goods
qhinmenf of ooods frnm r r^omnNnv'n rts rl]stomers.
.:rylces, and investments across North Amerrca.
-: e countries involved in NAFTA form the world's Outsoureing: A company's strategic use of outstde
: -::(f [-ee fradinp' area rpsnrr-rpq fn nprfnrnr ar^firlitics th:t rnrerp nrerrinrrqltr
hendled intern:llrr hv f hp r"nmnrnrr itcplf
0
P
l:ishorins The transfer of certain business
-._-__ - r _- ,--_ company Paris Agreement: An agreement reached through
---:- -: .::ated in another country, usually to save on the United Nations Framework Convention on
Climate Change (UNFCCC) deaiing wlth greenhouse
:-::caannel: The integration of traditlonal gas emissions and how countries can reduce them
-^

--.: :-, -^: -- aar,'ertisingwith interactive media using voluntary targets.

, -:- 1^:
- -=::-::: Passport: An officlal document issued by
--ocial media, email offers, sociaL a
-' -'.., :---= -: :=-..= :--: -:aditional ohysicaL stores. oovern m erf r-e-fi fvi n p' th e h ol d er's d enritv and
1

- - =:= ---r:-:-:'.: rlll-,. the Same message ci'izonshin and enfit'ing the holder fo travel under
-
' - = :-.=:- ::-- :: - ^:-- lrd cuSLOmerS \ave a 'ls nro'prl'or lo ard fiom foreign counlries.
l:-:-r:tjnn -n-6-:'^ a Iiicl-r:- j- : .:.,:l
nricinO L:t,ci.llS
------ r--,---D.
- - -:: -:-::- :ne C0 mpetition.
mrtnzi : - - "'-- -
Point-of-sale terminai: A system that tracks retarl
saies by recording the code or stock number of each Protectionism: -ne -'a-=-a::::-:---- - -

st0cK-Keeplng untt t5K ul. dom industrie s fror - : -: . =:. -

es Lic

Pctitical sysien:: The type of government by wnich Lhroush trade barr'ers such a-: at::--
a country rs run. Psyehoiogical pricing: Settlng a ;: := t'. : - :
UnOef a IOUnO nUmDeI (b199 ralner '.L:,-. : - - -
i la-^^
Poflution: The contamination of the environment --.
caused bv the manufacture or use of commodities. nrdpr
vruL- rn coll mnro
Lv o!rr 616,.lrrrf Thic
i.rvf ! prUUULL Iill) o'-.t..
)LidLCBJ
-,-
Tt can take many forms such as ozone depleLion; an illusion of Less money because consune :: -=:- -
acid rain; air, water, and Land pollution; and nuclear to concentrate on the first number rather th.: ::,=
waste. whole number.
Polyehronie : A view of the world that sees trme as
inrrnlrli n o m : n v t h in os h :nnpn i n o si mr rl f .r n onr r cl v R
,.,;rl.
vvlLll rl-^
Lrltr ^-r+i-ihn+;^f O[manVOeOnle Time .... iS
PqrLlLlPqLLUt. -- ---*--J r__r__ Rationaiization: Any attempt to increase a
seen as flexible, and schedules are not of primary
.omnan\/'q effprti vpn pss nr pffiricn nr in rlr rdr n o
'mnorfance This ne-cenfion of imp 's.nost .l^,.,-.i-i-d l^,,^{+-
uOWIIslZlllB, -,,fl.,^-1,.
CuLUdCKS, LayOIlS, an0 -^l^-^+i-
^-,1 Ie-OtaLlng
common ln Mediterranean and Latin cultures
corporate functions and activlties to countries that
Portfol.io investment: The purchase of stocks, -f
harrp f heanpf hottr znrl €ar.r n- nn rrninn ^'OblemS
bonds, and other financial instruments issued by
.^^^,r:^^ ft--- L,, r^-eipne.s Resouree depleticn: The consumption of scarce or
!ql rouratl IIllIlD uy lulLr6i v/f frLf f dops
rL_r. whjr-h uu!J roL
,. result
jn non-renewable resources These include fossil fuels,
.-'--'''.).'
fo"ejon manaoempnt or controL.
minerals, forests, fish, and water.
Predatorlr dumping: An anti - competltlve busine ss
practice in which foreign compantes price rheir
5
products below market value to increase sales and
force domestic competition out of business, then Seeandary researehr. Data collected by someone
ralse Inerr pnces. other than the user, for example, c€nsuses and
Premiurn prieing: Pricing that is higher than the surveys.
competition's price to evoke an iLlusion of luxury $ingie-window system: A system that enables
:nd hioh nr.alitrr internationai (cross-border) traders to submrt
-rpOttl:tOry dnrrrmpnf",,J +^
LU d -;hdl^ l^-^+i^-
- JlIlBtt pnfitrr
^r Lrr-rLj
LULd.LlUll Ur
Frice skimrning: Entering a market at a hlgh prtce -o*.*---J
dttri n g 1-he inlrodr rctorv nhasp fhprphv foqtpri no r hp
..*' ,''o in order to comnlefc an international transactlon.
image that the product is rnnovative and excLusive Customs declarations and applications for permits,
r-ertif cales of nrioin and lnvoices are examDleS Of
Primary research: Data observed or collected by
documents lhat canbe submitted using this sysler:
a businessthat reLate sDecrficallv to rts needs or
nrnhlpmq Smali to medium-sized enterprises {SP:E::: th:
Froduction logistics: Loglstic processes wlthin a term used by tnduslry Canada to refer to bu s:r-=, - =:
company, usually a manufacfuring business, rhat wirh fewer than 5OO employees
ensure that each machine and workstation in a Softcurrencies: Acurrencybelongin< -- : -. -- -
nlrnrhnctlas th^.iaLt
PLdIIL
mnInr;nI i- fL^.i^l^r
LlIe IIEIIL IIlaLetlat.LI.L Ltie Il8llL q.rilnllty
^,,^ with an economy that is small, vr:a-- . - - -
and crralilrrar lhe righrnoinf in limp Tfs mern oo:l
*"*'1**'-'-/ fluctuates often, and is diffrcu,: -l -,:- : -.
is to max jmize a factory s outpur wh jle malntaining currencies, such as tht ? ^.
product oualitv yuan
I
j_:
==a. :e:ception. -:-:-,--;;a, ccilfort ieveis with
- =-. - --=, :::-= 1:-: ::r, sicai contact, which are often
- - -=-=- -:- :al, : .- :.titural standards
<-=<phnldpr ,.-orrrq affecl ed hvthe o.ganization
l-:: :-:-,-: = s:ake in jls success and profitabitity.
. :-:-=:.-' -akeholders, including customers,
: -- ,.-=-J, !UrllyELrLVlDr qliu LiiryLvjLLO, uri!rLtj/
:J:--
1-=,, :ho .Amnln\/
,IIC LUIIIPdlly cnrl ifc nrnfifehilitri Qoennr-lrrrr
dlI(.L ILJ PIUIILd.UILILy. JCLUltuory
: ---e hoLders, including the local community,
.:=:iaL-interest grouDS, and the media, also have
-- :--h^-+ UII
:-- .llllPdLL ^- Ltr1.^ -^-n2nr/ hrrt
LC LUI]IPcllj, uv nof
uuL do f dirpr-flrr
urr!!-,J
-vL
-::.uence its success or contribute to ils profitability.
Subcutture: A cultural group within a larger or
:redominant culture, distinguished flom it by
ractors such as class, ethnic background, religion, or
lifpcrrrlp (rrhr-r rltrrrps erp dpnprrllrr rrnified hir sh:red
beliefs and interests.
Subprime mortgage: A type of mortgage granted
to borrowers with lower credit ratings who would
not normallv be able fo cnralifv for conventional
mortgages. As these borrowers are seen as havlng
e h'sher-than-averaop risk of defarrltinp on their
loans, banks often charge higher lnterest lates on
qrrhnrirnp morfoAdpc
Subsidizing: Financial assistance from a
foreion oovernment drrrino lhe imno-tation of a
good. Examples of subsidies include loans with
irlprest -dLC),
n-cferenl-ial rr-LLTLJL
p-LrLrrrrLrqr "-h+-
r^+^- 6l ^-'^"'^:entives
d.llLJ, uI LoA Ill\
Supplier management: Often referred to as sourcing
ar Droatrpm?nf the nractice of finding'eliable
sources for the products and services that a business
needs.
Suppiy chain: The sum total of aLl activities
inrrnlrrpd in rnnrrind rrr^r rn2tpri2l< nrnrpq<.trd daodq
and frnished products into an organizatton, and
rrovino t he semi-nrocesscd or finished oonds out of
the organizatron toward the end consumel
Supplg chain rnanagement (SCPI): The overseeing
:f information, materials, and finances as the
:::duct moves through its supply chain, typically
-:-: supplier to manufacturet, to wholesaler,
:=-=--::, and finatty, consumer.
S -stainabilii,,'. The collective effort, both tocally
-:-- =.r:= .. :: reet the needs of the present
oenerafion wifhorrf destroving the ablliLv olfuture
generations to meet their needs.
Sweatshops: Factories in underdeveloped and
dprrelnnino corrntries in vrhich emnlnvees work in
unsafe environments, are treated unfairly, and have
no chance to address these conditions.
T
Target rnarket: The segment of the consumer
mrrLar
IlldiNcL t^
LU r^'hi.h : PqrLrLuLqr
vvlrrLlr q ncrticrrlrr 6vvu iq lerOeledt TrrOFt
Onod rr
markets are lrrnicallv dpfined hv demopranhic
rnformation such as age, gender, and income 1eve1.
Tariff. See dut1r.
Telecommuting: The use of computers and other
technology to work from one's home for a company
located almost anywhere in the wor1d.
Ternporary Forei.gn Workers Prograrn (rrwp):
5'^d7^l- -l.'.,.|^r",.
f\^ ptuBId.Ill -^-^ri^^ slrrPLUycrJ
LIIdL dLLUW) \,drlduld.lL ^-^l^,,^-- to hire
(^-^:^^ +^*^^-^-,,l^L^,,.
+^ Fil
^^-;^^^1. LU lrtL LCrlrPUrdly Louuur or
IUICIBll -ildLIUIldL> ^rd skiil
shortages when qualified Canadian citizens or
nprr:npnf rpsidenls are not avallable.
Terms of trade: The ratio between prices paid for
imnnrtc rnd thnqp rprpirred fnr pxnnrts
Third-party logistics (gpfs): The outsourclng of
supplier co-ordination and distribution functtons to
' namnnnina Third-nartv
^d;nL;'' LUIllPd.Llrc)
tuBI)L1L> r---,* r*. -J iosistics increases
.-o-- ---- --
the number of links in the supply chain, but
rpdrrr"pq
I LUULLJ m:n.rdpmpnf cnntrnl nf prrpnrdarr Ioois1-ics
operations.
Thorndike's Law of Effeet. The theory that people
rr,rrhase yIvuuLLJ
/utLlloJL
nrodrrr-1-S tO d^rh ^- F;-F^-+i^- Ul
Lw E;d.Ill. )dLlJIdLLIUlt ^. tfLl aVOid
punlsnmenr.
Totalitarianism: A centralized system of
government in which the government, led by a
dlctator, controLs aLl aspects ofthe state, and citizens
are subservient.
Trade agreement: An enforceable treaty between
two or more countries that involves the movement
of goods and services, eLimination of trade barriers,
establishment of terms of trade, and encouragement
of foreign investment.
Trade defieit: The amount by which the vaLue of a
countly's imports exceeds the value of its expofts.
Trade embargo: A government-imposed ban on U
trade of a specific product or with a specific country. Universal basic income (UBI;. -:-:-'.=:----== - -
Trade embargoes are often declared to pressure -
of money given by the govel:::-c:-- -: 1-- :---:---
fnroion oorrcrnments fo change their oolicies oI to
rvi li6ri
regardless of lncome, with the g:a- ::::=-'-=------. -:
protest human rights vlolations. reducing povefiy.
Trade organizations: Groups established to help
with the free flow of goods and services These V
ar<rnirnf inno lllOy
u.LBdllIZd.LtUII) nD\r ho Olnh:l in
utr 6LvuoL if I fhpir
Lff!rr "r-One SUCh
Value added: The amount of worth that -s =::=:
as the WTO or APEC, or they may be national
to a product at each stage ofprocesslng. It is ::=
organizations created by individual govelnments to
difference between the cost of the raw materla-: ---
IiLLy dnmpsfir
holn UUTTTLJL r-omnanies exnand into international
the cost ofthe finlshed goods.
markets
Vending machine: In marketing, one of the mcs-
Trade quota: A government-imposed llmlt on the
successful speclaLty channeis worldwide. Vending
cmnrrnf nf
oLllvurrL vr n'nd'rrt
ylvuuLL thFl cen be imnofted in a Ceftain
machines selL a huge variety of products and even
norind nf
PCIIUU UI timp
LlIlIq, vvf frLrl nrntprtq
rnrhich yrvtLLLU dnrnpstic
uvrllruLl! ntodUcef
rr' S
suppty some services.
by decreasing foreign competition.
Vertical integration: A form of business
Trade sanctions: Economic action taken by
organization in which a company owns the whole
a country to coerce another to conform to an
supply chain, or significant poltions of it, from
rnternational agreement oI norms of conduct
acquisition of raw materials to retailing.
Trade show: A coLlection of manufacturers and
Visa: A certificate issued by the country an
distributors of stmilar products who rent space,
individual wishes to visit that indicates that the
set up dlsplay booths, and sell to registered buyers
department of immigration in that country has
seeking products for their retail bustnesses
checked the individual's credentials and given him
Trade surPlus: The amount by which the value of a
or her permisston to vlsit their country temporarily
country's expofts exceeds the value of its impofts. for a specified purPose.
Trading partner: One of two or more countries
involved in a business relationship with another W
LUUllLr ^r
.^rntrlpq. When a bUsiness in Canada
.n rrnfrr/y vI rvqrrLrrru
World Bank:An organization of 189 member
develops a relattonship with a business in another
countries that provides monetary and technical
country, that country ls then considered to be
support for developing countries. The World
Cenrde's tradin g nartner.
Bank is composed of two separate institutions:
Transaction:The exchange of things of value. the International Bank for Reconstruction and
Transitioning economies: Countries that are Development (IBRD) and the International
mnr/ind
lIM from ur cpnfrallrr nlanned economv toward
1116 rrVfrl DeveLopment Association (IDA).
a market economy, resuiting in decreasing the role World Trade Or$anization (WtO): An internationa
of government, privatizing government as sets, organization established in 1995 (which now has
reducing tariffs, and liberallzing markets. more than 160 member countries) that promotes
Two Cs of marketing. Consumers and competitlon trade liberalization throughout the world The
are the two external factors that determine demand three main purposes of the WTO are to provic: =
and thus influence the marketing of a product or forum for countries to negotlate trade, to l:: '--:=
serulce. ruies that guide trade between countries, a:-: -: :-: :
settle disputes that arise ovet the interol:-:--::- - -
trade agreements.

G:;::-' :4,
I
Cre *€s
cover photo, dan prat/lstockphoto com
Chapter 1 Pages 88-89, Facto Photo/Shutterstock com; 90, Chase Clausen/
Pages 2-3, PixieMe/Shutterstock com; 4, ValeStock/Shutterstock com; 5,
:=rer86/istockphoto com; 7 (Figure 1-l), Statlstics Canada CANSIM table
i75 O1O5; 8, Thompson Educational Publishing, 9 (Figure 1-2), Based
:r data found at Trade Data Onl]ne, innovation, Science and Economtc
)evelopment Canada; 9, Caron Badkin/Shutterstock com; 10 (Figure
1-3), Based on data found at Trade Data Online, Innovatlon, Science and
:conomic Development Canada, 11, Eric Buermeyer/Shutterstock com;
12 (Figure 1-4), Based on data found at Trade Data online, Innovation,
Science and Economic Development Canada; 12, Yoshio Tsunoda/,lFLo/
Alamy Live News; 13 (Figure 1-5), Based on data found at Trade Data
Online, Innovation, Science and Economic Development Canada; 13,
Ionyv31l2/Shutterstock com, t+ (rigure 1-5), Based on data found at
:rade Data OnLine, Innovation, Science and Economic Development
Canada; 14, Jonathan Weiss/Shutterstock com; 15 (Figure 1-z), Based
on data found at Trade Data Online, Innovation, Science and Economlc
Development Canada; 15, AP Photo/Rafiq Maqbool/The Canadian Press;
15 (Figure r-8), Based on data found at Trade Data online, Innovation,
Science and Economic Development Canada, 16, Jose Ramon Cagrgas/
Shutterstock com, 17 (Figures 1-9, 1-10), Based on data found at Trade
Data On1lne, Innovation, Science and Economtc Developmenl Canada,
u P.cruregly ShutrerrtocL 18 (Figures l-11,1-12, t-tg) ga'"d r Rodrick Beiler/Shutterstock com, 127, arindambanerjee/Shutterstock
Caia found at Trade Data Online, innovation, Science and Ecclorric
Development Canada, 19 (Figure 1-14), Based on data found at Trade
lata Online, Innovation, Science and Economic Development Canada,
19, dpa picture aliiance/Alamy Stock Photo, zO (figure 1-t5), Based on
::ra found at Trade Data Online, Innovatlon, Science and Economtc
l:,elopment Canada; 21, Joerg Beothling/ALamy Stock Photo, 22, Andre
Q:.riien; 24, Felix Lipov/Shutterstock com; 25 (Figures 1-16, 1-17), Based
-: Caia found at Trade Data OnLine, lnnovation, Science and Economic
-= 'eLopment Canada; 25, Gunter Marx/Alamy Stock Photo; 29, Darren
: ,:e/Shutterstock com; 3I (left) Twocoms/Shutterstock com; 31 (centre)
:-. :,' Hutchins/Shutterstock com; 31 (right) Debby Wong/Shutterstock
--r,, 31 (Figure 1-19), Statistics Canada, CANSIM table 376 0051; 34, AF
-:--":'Alamy Stock Photo; 35, Chrlstian Bertrand/Shutterstock com;
37 -=::rah Baic/the ciobe and Mail/The Canadian Press; 38, Bloonicon/
i--.-.,=:s:ock com, 39 (logos), rvisoft/Shutterstock com;39 (Figure 123),
-.
-. - r:m htlp I lJortune comlglobal5aa, 39 (Figure 1-24), Adapted
: --- :-:: G':obal Brands 2016 Rankings" lnterbrand; 40, Sam Dao/Alamy
. .m--: 42, LouLinwel/Alamy StockPhoto; 44, MarkKerrison/
-. : -. Proto;5l,AndreyPopov/AlamyStockPhoto
3 ro/A amy SLoc^ Phoio 54. -SlockphoLo cor
Inc ; 55 The Canadian Press/Aaron Harris; 57,
;9
Shutterstock com; 68, Hachi8B8/Shutterstock comi 59, Poravute
Siriphiroon/Shutterstock; 70, istockphoto com/Extreme-Photographer;
?1, Gagliardllmages/Shutterstock com, 72, Sam Dao/Alamy Stock Photo;
?3 (top) Andrli Atanov/Shutterstock com, 73 bottom) deslgn56/
Shutterstock cam, T4,Temizyurek/istockphoto com; 75, dalmingo/
Shutterstock com; 76, CarpathlanPrince/Shutterstock com/Bank note
image reproduced wlth the permission of the Bank of Canada; 80, Calln
Tatu/Shuiterstock com; 87 Blue Planet Studlo/Shutterstock com
Chapter 3
Shutterstock com; 91 (Figure 3-z), Statistics Canada, table -la O2O4 |
Oi Average weekly earnings by lndustry, annual; 93, Chrisplctures/
Shutterstock comi 94, BravoKlloVldeo/Shutterstock com; 94 (Figure
3-4) based on Statistics Canada, table 36-10 OO06-01 International
j-ransactions 1n senrlces, commerclal services by category, annual;
95 (left) meunierd/Shutterstock com; 95 (centre) Kathy Hutchlns/
Shutterstock com; 96 (right) taniavolobueva/Shutterstock com, 97,
Atlaspix/Alamy Stock Photo, 98, Veweridis Vasilis/Shutterstock com;
99, Pictorlal Press Ltd/Alamy Stock Photo, 10O, JHVEPhoto/Shutterstock
com; 101, SF photo/Shutterstock com; 102, J Louis Bryson/Shutterstock
com, 105, liotYourAverageBear/Shutterstock com, 105, Brownstock/
Alamy Stock Photo; 108, Creative Lab/Shutterstock com; 109 (figure
3-5), Ihe WotldFoctbaak2OlB Washington, DC: Central Intelligence
Agency, 2018; 111,1 i g h t p o e t/Shutterstock com; 112, Paul McKinnon/
Shutterstock com; 114, bbernard/Shutterstock com; 121, ProStockStudro/
Shutterstock com
Chapter 4
Pages 122-123, less Kraft/Shutterstock com; 124, GTS Productions/
Shutterstock com; 125, Sergei Bachlakov/Shutterstock com; 126, Ryan
com; 128, Vincent St Thomas/Shutterstock com, 129, Alf Ribeiro/
Shu-terstock com; 132, RaymondAsiaPhotography/eiamy Stock Photo;
133 Creati./e Pixels/'shutterstock com; 134, Business plus/Shutterstock
com; 135, Kzenon/Shutterstock com; 135, Jan Butchofsky/Alamy Stock
Photo, 137, Natalia Kupreychenko/Shutterstock com; 138, AlliftAtoz22O5/
Shutterstock com; 139, Homeland photos/Alamy Stock Photo; l4l,
Inspired By Maps/Shutterstock com; 142, John Lehmann/The GLobe and
MaiL/The Canadian Press, 143, Diego C Diazlshutterstock com; 144-145,
rm:oF\:n.l toyl rpnrnnr,cd r'-l I olFrr's-nnot'f Ld^no''(-a-1o'ite
Training lnc ; 146, Cosmo Condina/Shutterstock com; 147, wdeon/
Shutterstock com; 148, Marc Bruxelle/Shutterstock com, 149 (Figure 4-1)
Data taken fiom Statlstics Canada, CANSIM Table OO1 OO0B; 149 (Figure
4-2) Data taken from Statistics Canada, CATSNeI, June 2016; 150' De
Visu/Shutterstock com; 151 (Figure 4-3) adapted from Global Estimales
of ChitdLabour: Results and Trends 2A12-2A16, Table 1, p 9; Internatlonai
Laboui office (tLo), ceneva, 2017; 151, Andrew Aitchison/A1amy Stock
Photo; 152, VTT Studio/Shutterstock com; 153, ELnur/Shutterstock com,
154, Marle Kanger Born/Shutterstock com, 157, Monkey Business Images/
Shutterstock com; 158, Vitchanan Photography/Shutterstock com; 160,
nd3OOO/Shutterstock com; 154, Canadapanda/Shutterstock com; 165,
Dragon Images/Shutterstock com; 165, Roberto Galan/Shutterstock com;
u3, Stephen Coburn/Shutterstock com
Chapter 5
Pages u4-175, Drop ofLight/Shutterstock com; 175, Drop ofLight/
Shutterstock com; u7 (Figure 5-1, illustrations) Jacky Co/ShLrtterstock
com; 178, Zullu InFocus/Shutterstock com; 179, danm12/Shutterstock
com; 181 BMJ/Shutterstock com; 183, LMspencer/Shutterstock com; 184,
leungchopan/Shutterstock com; 185, bibiphoto/Shutterstock com, 187,
BrazilPhotos com/A1am1, Stock Photo; 187 (Figure 5-3), Based on data
 irom
a,iarla3le om, ry
The
Fund, and 188 (left), KathyHutchil> S:--*_: :___. _,:- 291 I:.rF. -_-, .
Shutterstock.c m/S forWE Day; 292,JHVEpic.. S:_:-.=::,_:. _,: 29t ts_ . -
'

Shutterstockcom;294(centre)-:::=:-:__ : __- .,-j _ Er

^! (right) st djura/Shutterstock com; 301, : r=:--.::--- : _-. . _
Shutterstock com

Aqnus Febriyant/Shutterstock.com; 19g, Gerald McDonald photography

Shutterstock.com; 199, Stefan Dahl Langstrup/Alamy Stock photo; 2OO
(Figure 5-12), Do rng business 2a17 by WorLd Bank,
copyright zOtz by wor
Bank, reproduced with permlssion via Copyright Clearance Center;
2Ol,
Chapter 8
Pages 302-303, JHVEphoto/Shutterstock com, 304,
-g=:-:_ .
Fotografi czna Caro/Alamy Stock photo; 305 (illustration) __:- :
:
Vector/Alamy Stock photo, 306, Used under Creattve Com::::.
BY SA 4 0 Contributer Dschwen,http:/lcommans wikimediG ct, ,.....
FiLe:Shampoo Net euantity jpg,3O7, James Davidson/A1amy Stc:.:

Chapter 6
Pages 2f2-2f3, Joseph Sohm/Shutterstock com; 214, paul McKinnon/
Shutterstock com; 215, Eyesonmilan/Shutterstock com; 216, B
com; 322 (composite), mighty chiwawa/Shutterstock com (gravestone)
Chdstopher/Alamy Stock photo; 217, gnoparus/Shuttersiock.com; 21g,
and tanuha2001/Shutterstock com (pepsi togo); 323, Radu Bercan/
.com /Alamy Stock photo, 32G, Angela
rure photo; 329, Sergey Ryzhov/

Online,
.com rstock.com; 330, economic
rmages/Alamy Stock photo; 331, robertharding/Alamy Stock photo; 332,
(Figure
Dmitriy Shironosov/Alamy Stock photo
Voroby I
Shutterstock com; Goksi/Shutterstock com; 224,Keith DannemiLLer/
Alamy Stock Photo; 225, Rena Schild/Shutterstock com, 227, SOpA Chapter 9

Welss/Shutterstock com; 347, CandyBox Images/ShutterstocK com;

" _8),
d 351, Jasmin Brutus/Alamy Stock photo; 352 (icons), artist Elizaveta/
o ,t,
8 lin.,
Innovation, Science and lconomic Development Canada; 232 (list),
Adapted from data @ European Union, 1995 2018; 238, ricochet64/
s ;240, Y
S ;244(E
E 7,2014,
d 7, Alexa
Golf chalermchai/Shutterstock com; 250, Nat_Natto/Shutterstock
com; 251, Pacific press/Alamy Stock photo, 251 (Figure 6-24) Based
348, IanC66/3hutterstock com; 349, Halfpoint/ShutterstocK com;
Shutterstock com; 353, wavebreakmedia/Shutterstock com; 354,
rustycanuck/Shutterstock com; 356, EvrenKaLinbacak/Shutterstock com;
357, MOLPIX/Shutterstock com, 359, meunierd/Shutterstock com; 361,
BaLkansCat/istockphoto; 3G2, zhu difeng/Shutterstock com; 364, EFE
2/ Canada, CATSNet,July 2Ot7; 369, US N tock photoj
369 (Figure 9-8 window illustration), tock com, 370,
Grigvovan/Shutterstock com; 323, OlegDoroshin/Shutterstock com; 381,
WeStudio/Shutterstock com

Chapter 10

Press/Alamy Stock photo; 388, Jeffrey Blackler/Alamy Stock photo; 3g9,

251, B A E Inc/Alamy Stock photo Vytautas Kielaitis/Shutterstock com; 390, MAD veftise/Shutterstock com;
391, Photographee eu/Shutterstock comj 392 (Figure 1O_l), Statistics

Chapter 7 SIM ; 394, Keith Dann k

orbi om; 395, dpa plct
Pages 252-263, Mohamed Abdulraheem/Shutterstock com;
264, 397 erstock.com; 398,
Matthew Chattle/Alamy Stock photo; 2G5, paul McKinnon/Shutterstock
Shutterstock com; 399, Et5ah Lovkoff/Shutterstock com; 400, yurcha:,_::=
Siarhei/Shutterstock com; 403, yato Kenshin/Shutterstock com; 404
JeremyWord/Shutterstock com, 406, piotr Swat/Shutterstocr cc:::

Shutterstock com, 411, AMISOM/Alamy Stock phot a., 4L2 -:. . _ _- ,

com/ALamyStockphoto; 413, akatz/Shutterstockc:t: 414 :, . l
Shutterstock com;415,Jim parkln/Shutterstock :: r 416 _ _ ._.
Frazier Photolibrary, Inc /Alamy Stock photo 4L7 -,_ __. : - _. ,:..
Inc/Alamy Stock photo; 287, Greg Taylor/Alamy Stock photo; 288,
com; 419,Grey82/Shutterstockcomi 421 a.: =.::-_'-=- _: , _ 423
Jake katatonia82/Shutterstock com; 429 ?,.- -:,._=. , : _ '.: - ---

Credits 1441
 tisto -r Thp l(( ---- r:^ r-*--i-r ---,-
Ldltdutdtt - tttlPclldt
a is
DdlrK tf commerce
L Flexe Inc., 348
(CIBC), 94 Flr rke r-ransnortat'nn Ltd , 342
nA Canadian paclfic (CP) Railway, 105, 360 Fo-d Mofor Comoanv.27 28f,29,402

----:--- -::: -:i0, 360

Canadjan Tire Corporatjon. Ltd 56, IOII]S lNC, JJI
- J5Y 282,360 Fnqrln { tntl2l l.Tnttn qx
!rverr ?-
-:::
CtsC See Canadlan Broadcasttng trrpnrh's Fnnd Cnmnenii ll
l-nrnnnl-inn {CRC) Freshil Inc.,27
----: 1:: C:ci-rp Holding Limited, 405
' ---- -^-L:,,^.^-^r-. 32
Cclqirrc Hn'.ings Inn 4O! Fukoku Mutual Life Insurance
Children's lnc , 282
PLace Company,399
:41 ?qq f h ira Frrprr-i o't- f.rorn 52-63
China National Offshore Oil Corporation G
---:-::-:an Airlines, 17
Limited (cNooc), 13
CF Antares Caniial Co-o 33f
-:-::.e Inc ,39f ,164,325
Cirque du Soleit, 92, 98
General ELec[ric Company, 33f
B Clairoi, 322
General Motors Comnanv, 17,27.2Bf ,36
Coca-Cola Compary, The, 323, 324,330,
:=-:r Bil\eo VtTcava Aroentalia r40,394,398,403
373
leeve), r+z GiLdan Activewear Inc, 292 93
CoLumbia Pipeline Group, Inc , 33f
:=:< of Montreai (BMO), 30,94,95,I47 Goosle Tnc 44 115 2O5 325
Convoy, 360
::,, Canada Telecommunications Grameen Bank, 289
l nrnort anntrtnaoe {q\
l'nmnrnrr 5Q Grant Thornton LLP, 408
Corner Brook PuLp and Paper Ltd ,190
::<'Rrrr fn Ine \6
Crate and Barrel, 58
H
:--:? Bllliton Ltd, 32 CraveTV, 59
: -.' \I nr^rrn tAC ,4 n'l Hershev Co-nnarv lhe 23,321
--.!lU]vuF/J
l^;rrQhnn Tho 7) D Hewlett-Packard Company, 409
::e:ng Company, The, 387, 389 Hexoskin (Carrd Technologies Inc.,) 100
Daimler AG, 403
l:::rbardier Inc.,9, 67, 186, 387 _Hnllinopr
'- ""'b- _ Inr' ?RS
Danone S A., 180
: ::::bardier Sifang (Qingdao)
Day & Ross Transportation Group, 345
Home Depot, Inc,II2,406
T-^---^*-^+;^-
r1drl)PUrLqLrulr '*r
LLU. (BST), 66 rrrndr Mntnr Cn-nerrr l-td.,5 2Bf .37
Deutsche Post DHL, 402
::S:f,399 Domino's Pizza, Inc., 139, 215, 2I9, 402 HSBC Bank PLC, 3BB
l:s:on Pizza International Inc , 61, 92 HInc^n c P.r' I
^m.!r" HUL), d, )b.

--:-_-i Aln^IAIIq lnf

" "J ") -'-'
I / /
' -"
E 282,395
::=-X 286 Hrron Rnqq AG ?ql
eBay Inc , 164, 395
:"-::-Kino ?6 346 H -J Ltd
unsru Tack's PLv . 138
Emera Inc., 33f --- ' --
Httar\/ Fnoror/ lna 19)
Fnhridop Tnn !'lf
( H1|tna2t l.rnttn l4
Enron, 286 !!vgr,'

l''..= : * depOt et placemenl, La, 9B Equifax Inc., 406

aa-nr-n+inn ntrl I
-a- -:- J sulPUidLIUIl, ZJZ Etsy, 310
:'-r:-':ge Anatytica Ltd., 407 IBM. See lnternational Buslness

---=:= C:cse, 5, 292,293 F Machines Corporation (lBM)

-i::_:: -:s: gu FedEy Corno-alion 145 359 IKEA Group, 140, 304, 322, 398
- --- : i -:<_inOi f nTnnfAtinn
=- :_^::
- -__--_----b --'r-'-__"' fia- Chrrslpr Arrro-nhiles N V., 5 29, Imperial Tobacco Canada LimiLed, 267
341, 365 Inco Limited, 197
 Multimatic Inc, 29 Spectra Energy CorP., 33f
lndlgenous CorPcia:=
Stapies Inc., 112
r44-45
-:-- N Starbucks CorPOration, 72, lO2, Il)
]f:.-:-r'.- : :-- --..--- -

-:-.:-.:. -..:l- ::: 14r,265,280, 331

National Bank of Canada, 94
i--- :^ Sun Life Financial, Inc., 62-63, 268
.l :-.--: - , - :------'
---:: 'L Nestld S.A., 23, 217, 405
Suncor Energy, 392
_ :, ---,:: Netflix, Inc., 59
Swatch GrouP AG, The, 62, 63
New Hope GrouP, 62
Sykes EnterPrises Inc., 56
) New York Fries, 92

::--=:::- - .lOIatOfieS, 27 Nexen Inc., 13

T
' NexGen EnergY Limited, 252
- : --.;-: and Associates, 59
'=. -- Takata CorPoration, 216
- )R) Nike, Inc, 219, 269, 282, 323' 395
-:::i Nordstrom lnc , 102, 323 Target Coryoration, 1i2, 347, 352, 395
Hancock Financial CorPoration,
North West ComPanY, B TD Canada Trust, 30, 67, 94, 95, 3BB
)JL
Nvldia Corporation, 402 TECO Energy Inc., 33f
Jotllbee Foods CorPoration, 3O
TeleTech Holdings, Inc., 57

K 0 Tesla, Inc., 396,402-3

OlymelSEC,365 Tiffany [r Co., 62
KFC,314
Tim Hortons Inc., 36, I97,272'346
Kia Motors CorPoration, 14 OMsignat, Inc., 100
Toronto Stock Exchange (rsx), 55, 103
Klva Microfunds, 289
P Toyota Motor CorPoration, 5, 2Bf, 39f,
Kraft Heinz ComPanY, 3i
67,399
Panasonlc CorPoration, 12
Toys "R" Us, 395
L PayPal Hoidings, Inc., 310
TPG ViI CDS Hotdings, 98
Lee Vailey Tools Ltd , 310
People's Bank of Chlna, 147
TransCanada CorP, 33f , 225
Lenovo GrouP Limlted, 56 Pepsico, Inc., 322, 323, 330, 409

Llvent, 284 Pierre Cardin, 351

U
Loblaw ComPanies Limited, 265, 346' Popeyes Louisiana Kitchen, 346
Uber Technologies Inc., 360, 361, 402,
361 Potash Corporation of Saskatchewan
403
Longo Brothers Fruit Markets Inc , 361 Inc , 32
Under Armour, Inc., 132
L'Ordal S.A , 180 Procter & Gamble Co , 325
Under Martian, 132
lululemon athletica inc., 92, 93, 323 Procycle GrouP, 328
Unilever, 218
Lyft,403
R United.Parcel Service (UPS), 359
United WaY, 265
M ReachNow,403
MacDonald, Dettwiler and Associates Red Bul1 Australia PtY, Ltd., 216
V
Ltd, 32 Reebok, 323
VIA Rail Canada, lBO
Macy's Inc., 323 Restaurant Brands lnternational, 346
Rogers Communications Inc., 60
Virgin Mobile Canada, 59
Magna International inc , 5, 29, 57' 399
Volkswagen GrouP, 19, 39f,286,402
Manullfe Financral Corporation, 33f Roots Ltd, 56, 102, 265, 292' 3IO
Vrvana Inc., 100
McCain Foods Limited, 345 RoyalBank ofCanada (Rec), g+, gs

McDonald's Corporation, 42, 6I' 72' I39, w

s
r97,264,331, 395
Scotiabank,94,95,I47 Walmartlnc.,39f, 40,270 2a' :--
Mercer Human Resources Consulting,
348, 361, 395
106 Sears, Roebuck and ComPanY, 395
Westjet Airlines Ltc 2a:
Metro lnc , 361, 395 Shaftesbury Films, 98
Microsoft Corporatlon, 325, 405 Shomi,59
X
Mondel€z International, inc., 23, 365 Shoppers Drug Mart, 346
v^f^va^---=-'-'
ACI U.\ ' .
Mossack Fonseca, 44 Siemens AC,2B4 --:

Mountain EquiPment Co-oP, 282, 310 SoftBank Robotics CorP , 399

lndex
f orrolnnmonf rr \ nf aloe tric end hrrhrid challenges to,244
-..: -:: : :.:.'€ and BuirdingSafeLY
- -
. uL v LLvPrrr!

gross domestic product GOp) of Z++f

:. . .:::l), 282 cars in, 402-3
rn.o tn pronomv i7 Breton Woods Conference fu1y, 19 a),
3PLs :.: third-party logistics (3PLs) imnn
i LrrPwrrfLqrrru C2 n2diA n

in Mexlco, 16 220
North American Free Trade Brexit See United Kingdom withdrawal
Agreement (NAFTA) and, 394 (a k a Brexit) fiom EuroPean
absolute advantage, 195 Union (EU)
Automotlve Innovation Fund (AIF), 37
acquisition strategy, 330 bribery,286
Autonomous Vessel Protection
::r:s:ace industry, 101
Detachments (evPls), :oe BRICS economies See Brazii, Russia,

Aztec peoples, 22 India, China, and South Africa

-:ading in, 21 (BRIcs) economies
--- See artiflclal lnteLligence (AI) Broadcasting Act, 72
B
--- rerta Machine Intelligence Institute, Brooklyn (movie),96
401 balance oftrade, T
Brost, Milowe, 285
-- .rance for Bangladesh Worker Safety, Bank Act, The,72,94 Bubld, Michael, 97
282 Bank of Canada, 193, 385 Budman, Michael, 292
---::rbassador bridge, 198 banking industry, 94-95 Burtynsky, Edward, 97
-:::erican RevolutionarY War, 10 Banksy,126 business,4
Base Erosion and Profit Shifting (BEPS)
-- :::nesty Internatlonal, 290 compared to trade, 6
r:::i fiee trade, 214 Action P1an, 230 business cycle, 18B-89 ,192-93
.:::i bribery, 73 Bateman, Robert, 97 coincident indlcators of, 192
APEC See Asia-Pacific Economic B2B Seebusiness-to-business (gzg) expansion as stage in, 189
Cooperation (aPrc) B2C. S ee business-to-consumer (B2C) fiscal policY ln, 193
- ?. See augmented reality (AR) Bieber, Justin, 30, 97, 124 lagging indicators of, 192
- -::ade Fire, 35, 97 Big Mac Index,322 teading indlcators of, 192
--,::5imedes, 238 bill of tading, 354 as measure of GDP, 18B

---:3entina, Brazll, ParaguaY, and bin Salman, Mohammad, 391 monetary PolicY ln, 193
U rrguay (MeICosur trading bloc)' biometric technologY, 422 peak as stage in, 189
'i7,227 Black, Conrad, 285 recession as stage in, 189
..';_- movle/, J4 Blade Runner 2049 (movie), 97 trough as stage in, iB9
.- ----craL intelligence (et), :Sg, +Ot blockchain, 4O4, 4O5 business ethics, 270-7i
Asia-Pacifi c Economic Cooperation Bohmeyer, Michael, 396 coffee industrY and, 273
(APEC) r04,238,24r Bord,er SecuiLy: Conada's Front Line (TV cultural relativtsm and, 27 4
a - a'r /4 series), 415 ethical imPerialism and, 274
--=:: :::shiP timeline, 241f branch plants, 36 business logistics, 342
';-Jerpt q6
"- brand equitY, 325 business skills,
- b-.. 'r

1-=:-: -:: :eallty (AR), 390, 398 Branson, Richard, 59 effective coilaboratlon tlps, 260 - 61
-,.1- ra! BTazlt, effective networking tips, 30O -301
3qluLroLj
-:- IQQ affluence and PovertY in, 187 email etiquette, 428-29
. " ..- .:;l '195
history of trade with Canada, 17 good presentation tips, 336-37
i rl rt 1,4 f7 rail service imProvements in, 130 lmportance of etiquette for
Brazii, Russia, Indla, China, and South international business, f7 2-73
-
::-'-:- Africa (BRIcs) economies, 238'244 professional dress codes, I2O-2I
: .= -03

t | ! Index
 report writjng guidelines 210-lI 1vl-jd httr'ro h:h"c'n ']65
") --'.. "") Canada Korea Free Trade Asreement
risk manap'erFnf 38o-81 immigration policies tn lO7,I27 (CKFTA),14
tinc fnr nncilirro firct ir
,,,,. ,,npresstons, impact of Chines= growth on. 389
Canada Ukraine Free Trade Agreement
50-51 importance of er:c:..-l::: 57
(CUFTA),413
fins fn imnrnr/p, l-imp r
..,,,- ,,tanagement imnnrt:nep niin-.-^-'--
-____.-::':CelO
sk1lts, B6 B7 Canada-United States Automotive
54-55
hrtsjress qlArf-iln<, lqq )00f imnnrl:nepnfnli-- Products Trade Agreemenr (t96S)
Business Women in Internattonal Trade PYnnTfq rnr ha-h- 2B
(ewrr), +og 'm^^7+ah-^
r rrrPUl Lorrtq ^f
ut
t.^A.
Lldutr c:.: j !aradian Association of Petroleum
business-to-business (B2B), 308
22r Producers, 205,392
business-to-consumer (B2C), 308
influences of U S eco:-::::-.-,: i- - ---=:-an Banker's Association, 205
ih+^,h rr i^-. --. :-_) - - '-- - .- -
lllLclllOL:U:-C. :a_::-. - :___: ___,
,.--.:-r: Ccnstitution, 106
c
-= :=-_=:- l::venience Store
Cameron, David,44
--i- - --: lO/
Cameron, James, 96
Canada, Productron Tax

advantages of in1 ernational busrness

26-27,30-37 Dprrplnnmpnl-
after 2008 global financiaL c:ts_: l:_
auiomof've rrd. s'-r.r i^. )B-- : : _1_--1 _ -_ --, ---< ___ J _ ar-^-i--
Lc.-dut:__ ____:.. :-_-__:. -.:,:
i^ T-iL.,-^l
_ilJUtLdt
balance oftrade, 7 :--,----
Cancon content ru.es j j
.-,--3
- ----_5 ----.._ rn:ro.n lo(
rcITT),249f )8 ::-
s-rang
" 'o ir:n<nnri:finn <r/cipm< in lO(
corn cereai shuttle beiween U S and,
--_ ----."r" a--^li^^ I-+^--^+
n^^:--
Larla(]rarr lnrernet Keg_s::a .: l:
recn sector In, tuu
223 Authority (CIRA) i65
trade agreement wjth lsrael, 2O
cuLtural and identification effects of Canadian Radio-television and
trade surplus with U S. 7
internationai trade, 34-35 TeLecommunications Commission
trade with African countries, 21
ctt'tttral divprsrl-rr ir 1O7 (CRTC), 34, 35
flraP lilllh F d\/nl ,f l
current trade with Europe, 9
trade with f irst Natjons peop.es B Canadlan Trade Commissioner Service
current trade with U.S., l0-11
trade with Mlddle East, 19-20 (rcs), :zz, +og
di fferences between doi ng business
trade wlth Morocco, 25 Canadion Trade Index ,375
in U.S and, 112
trade wlth South Africa, 25
ellects ot low doLtar on,77 Cancon content rules, 36
trade with UAE, 20
--__ -_ o_^_o na-ker s and 19
emersins capital markets, 95
tradlng reLationship wlth U.S , 104
expofts to Japan, 134 capltaLism, 178
foreign direct jnvestment (FDI) in 3l
travelljro-n ll S f-nm 416
Cara, Alessia, 30, 31
frrriis : nd rrpoot:hloc imn^rl o.l r^ tA Canada Border Serujces Agency (CeSn),

geography of, 90, 100 287,37A,37r,375,4r5

Canada Business Network, 374 carbon pricing, 390, 393
history oftrade in, B-9
history of trade wlth Brazil, 17 Canada Consumer ProducL Safety Act, CARE, 290

history of trade wlth Chile, tB 342 Caribbean Community (CeRtCOt'4), Z:z

history of trade wirh CoLombla, 1B
Canada Media Fund, 99, 400 Carr, Emily, 97
history oftrade with Europe, 9 Canada Pensron Plan Investment Board, carrlage anc lnSulance palC (L I P _'r r
history of trade with India, 15 33f
carrier, 354
l-i-+^*,
nrs Lo ry or rraoe wr,i+L
^F+-^l^, tn Ir^,
apa n. 12 Canada-Chile Free Trade Agreemenr, l8
cartel, 248
history of trade with Mexico, 16 Canada-Colombia Free Trade
cr<h-flnrnr m2n)dom j- :: -
history of trade with South Korea, 14 Agreement (FTA) 18, 366
history of trade wlth Unlted States, Carada Errrnrcar F-cc Trxjg Castro, Fidet, 71

10 Associatlon (EFTA) Free Trade C D Howe inst::*:= --_:-

history of trade with VenezueLa, 17 Agrppmpnf ??1f centralized marketing strateSi i i -

Index I .145
.-r.tpbed@rtry _-: competitive advantage, 92, II3, 324 cryptocurrency,4O4 5
::=:a:::-'- _-9 Canadian, 92-93 Bitcoin, 404
----'--t --- -rJ sweatshops as result ol 281 CSR See corporate social
::::_::: _t, v Comprehensive and Progressive responsibility (CSR)
l=::: ic: lnternationai Governance Agreemeni for Tra rs-Pacific CT qc: nq .Spp cnmnrrtpd inmndrenhv
Innovation ICICI), 249f Partnership (TPP), 45, 227 (CT) scans
CIiTA .Spp Cn-nnrphpnqirre ECOnomiC Comnrehens've F.cnnnmiC TJade Cuba,
Trade Asreement (CETA)
_^*-'"b__-_'_-_.' \-' Agreement (CETA), 9, 7 0, IO4, 220, trade embargo by Lhe United States,
{ n2lrn I lt\rc FrocTa thh 237 7I
Charter ofRights and freedoms, 106 nnqcihlp hpnpfif< nf r?7
cultural dimensions, 160
chemicals industry, 101 computed tomography (CT) scans, 422 in Canada, 167
I nlannn \?/n lJmac /!\ consumer market, 10 comparison of between U.S. and
child labour, 23, 150, I5I,274 containerization, 357 Canada, i67
Chite, corporate corruption, 27 6, 284-86 global strategy weakness ln, 216
history oftrade with Canada, 18 -__-___r'-" nT -/xlr-x\
trYAmntpq
lndividualism vs. collectlvism (1DV),
China, forms of, 286
160,162,166,767
economic development in, 43 LesisLation to orevent 286
lndulgence vs. restrainl (tNO), t0O,
nq Pmproino
-- "'_-'o_'_bmrrkpl 1Q anrnnr2fp dnl/prlrn.tr aTlf
163, 166
fnrpidn
'-_-_o'_ Fvch:noc Tr:dp Srrstpm in C orp orate Re sp 7nsibilit'j Rep ort (Loblaw
long-ierm vs shorf-lerm Orientation
r47 Companies Limited), 265
(LTO), 160, 162, 166, 167
history of trade wjth Canada, 13 corporate social responsibility (csR),
masculinity vs. femininity (MAS),
impact of growth in on Canada, 389 264-68
160, 163, 166
investment in Saudl Arabia, 20 benefits of, 265
in Mexico, 166
Mtntsln/ nr Reil\^rnrrq 66 Canadian companies and, 266f
power olstance rnoex tyljl,t, lbu, 1b1,
rperrrlino in ,LA criticisms ol 267
166,167
cnotera, 412 definition of,264
uncertainty avoidance index (UAI),
CIAWoTId Factbook. See World Factbook, domestic vs. international strategies,
160, 161, 166
fu.k.a CIAWorld Factbook)
The 268
1n U.S., 167
circular flow model, 176,I77f cmnlnrrppq enA )AQ
clickstream data, 315 aq marforrnd tnnl /A\ cullural indrrstrv 96-97 I24
climeic chanop 39O ?q?
!-'gr ro! Corrin, Matthew, 27
cultural intelligence, 128
'

cncn: nrndrretinn ?? ?1 Corruption of Foreign Offi cials Act, 286 cultural norm, 151
Code, The foyce), SA Cortds, Hernando, 320 difference in workplace, 153

code ofethlcs,26B cosL, lnsurance, and trelgnl (L1ll, 355 non-verbal communicatlon and, 159
Cotd War, 413 cosf ard freioht (cFR) 355 snetiel nprcpntinn end lJg
Colombla, CounclL ofthe European Union, 232 cultural relativism, 274
history oftrade with Canada, lB counterculture, 126 _-"_r.-''* 1o cthiral imneri:liqm ?74
comnared
-t-,,mhrrc fhrictnnhar Q culture, 124-27
see also culture; subculture
*:.'rrLte, Atex, 9 / ovamnlaa At lrA see also subculture; counterculture
l:-.e fion Awoy (musical), 99 mainqi'ro2m rrc 1?? atlitudes towards money based on,
l:::-rg ofAge Day, Japan,I4i street art as form ol 126 r47
- ^--:nd pcnnnmr/ 17O Coupland, Douglas, 96 business meetings and, 157, 158
commodiBr, i40 ( rnnPnhPrd l)ar/r11 qF, cultural mosalc, 126
-_-__-__".4br

- -*---.icm l7q crowd-sourced detivery, 361 oennlllon oI, 1z)

-prdprc'l? compared lo outsourcing, 361 discrimination and, 152
CRTC See Canadian Radio-television effects of on labour force, 150
comparative advantage, 19 6 - 97 and Telecommunications mainstream vs. countercultve, I27
-. :: ::-:=:::- -:: -:aie specialization Commisslon (CRTC) multiculturalism, 126
Cruz,Ted,407 _-r _'-" nt tjmc Fn.1, 156-57
nprcpntjon
t'_

^e€r
 :: -. :-
-:t .lternational products and. -f\iTo iia1,-,_ \,. 1-.- _-_: _._ _ _-:
E
services choices, \46 _ 4i
currency devaluation, 78 Ebola vrrus, 43
European Centrar Ba:--. -:: -:-
e-business, 310 European Citizen s pr_zz ): -
currency speculating, 81
customs brokers, 375 e commerce, 395 European Parliament, 232 2:-
cybersecurity, 406 Economic Commisslon of Iurope (ICE), European Union (EU), 9, 44
Czapka, Tony, 29 250 see also Greece withdrawal (c.i :
economic development, Grexlt) from the European U::-::_
D developed level in terms of, 184, 185 (Eu); united Klngdom withdrai,...
devetopinglevel in terms oi 184, lB6 (a k a. Brexit) fiom European
Daily Telegraph,285
transition
ieveL in terms ol lB4, 185 Union (EU)
Danby, Ken, 97
economic freedom index. See Index of adoption ofeuro by, 233
data protectlon, 406
Economic Freedom, 187 Brexit and, 45, 3BB
decentralized marketing strategy, 330
Economic Survey of Canada (OECD),
deforestation, 279 Canadian services exported to, 95
245
Degrasst franchise, g6 CounciL ol 232
economic system, U6
delivered duty paid (opp), :Ss current trade with Canada, 9
delivered duty unpaid (OpU), :SS comparison of types ol t8lf exports and imports with Canada,
Deltour, Antoine, 230 definitlons of a country's, 177 aa-a
z)/l
democracy, 182 market economy g/pe, 178, i8lf
GDP of, 231
demographics, 318 economies in transition, 185
economies of scale, 324
history of, 231
Department of Foreign Affairs, Trade
Economtst, The, 322 history oftrade with Canada, 9
and Development (DFATD), 372
lntelligence Unit, 103, 385 labe1l1ng 1n, 306
Department of Foreign Affalrs and
Eg)?t, organizations within, 232
International Trade (DFAIT), 372
trading relatlonships in, 2O Paris Agreement and, 255
devaluation, Bl
developed economies, 185 electronlc data interchange (f U), :SO purposes ol 231

developing economies, iB6 emerging markets, l9 refugees and technoLogy in, 405
Dleselgate scandal, 402 Employment Equlty Act, 152 soveretgn debt crlsis chaLlenges in,
Digttal Orca (sculpture, Douglas Entertatnment Software Assoclation of 235
Coupland),96 Canada, 4OO timehne, 231
digitalization, 362, 369 envrronmental damage, 27 B _79 as trade agreement, 231
cybersecurity and, 406 oi1 pipelines and, 392
tradingpartners 236f
Dion, C€line, 97 oil tanker spilLages, 278
e-waste, 279
discount pricing, 312 Unlon Carbide poisonous gas ieakage,
Ex Works (Exw), 354
discretionary income, 322 278
exchange rate, 76
discrimlnation, 152 envrronmentat protection, 73
European Unlon (EU) and, 234
disposable income, 322 see also environmentaL damage;
Doctors Wlthout Borders, 290 factors involved in, 78
pollutlon; resource depletion
Doian, Xavier, 96 as ethical lssue in international trade,
fluctuations in as challenge to suppiy
domestic business, 4 276,277-80 chaln, 364
domestic market, 15 ethical dilemma, 270, 282, 286 politics and, 79
DowJones Sustainability World Index, test ofexposure method for,27I psychological factors in, 79
293 ethical imperialism, 274 travel and tourism and, 228
Drabinsky, Garth, 284 compared to culturaL reLailvism, 274 exclusive distribution rights, 60
Drake, 30, 31, 97 ethnocentrism, 216, 3I7 Executive Ptanet, 327
dumping,276,2B7 EU See European Union (tU) Export Development Canada (:l I :--
predatory, 287 euro, 233 374
duty (tariff), 16 advantages provided by, 234 exporting, 54, 57
duty-free items, 419 disadvantages provided by, 234 '_--:
absoLute advanta:. =^:.:
 I
finopmrint hn^rAin6 A), diqerirrenteops ni 6l
f'rret Nlahnna na^nloc X Fraser lnstitute, The, 249f
:.--A:::: 3:=z-- and Canada, 17 see aLso Indigenous peoples Frasers (online directory), 375

-=-=:=. :-i,ural industry, 96-99 development and damage of lands of. fiee carrier (FCA), 355
'='r:z < -on cottnl-rv 57f r42,r43 fiee on board (FOB) points, 353, 354-55
menlp qrrrrrn end l4R Free the Children. See WE ChariLy
-=:,,-ee:: Clule and Canada, 18 "_*r '' -j
:.r,reen China and Canada, 13 nil ninplinoq an,'l Aq LtAOlana I nfiraTlD ))tl

- :--;np indrrstrv 29) -93

.-_-......_'_b
"'!4e!'J
1J1 trade with Canadian Europeans, B freight consolidation, 360
'

lerr'een Colombia and Canada, 18 fiscal policy, 193 Friedman, Milton, 267
:-ecfronics, \64-65 trln<hnnint (T\/ cpriosl qq Fukushima earthquake (2011), 364
:etween EU and Canada, 9 FLO See Fairtrade Labeiling full truckload (FTL), 360
-nportance of oil for Canada, 64-65 Organizations lnternational (f L0) frrr trndins
-*- --*----o, R-
between India and Canada, 15 floating rate, 78 Furtado, Netly, 3O
betweenJapan and Canada, 12 Fonsl, Luis, i24
lumber and forest products, 190-91 t^tna< tvnnnTlnD 4t I
G
mrnlp qrrrrrn 14A-49 Ford, Doug,45
G7 countries. See Group of Seven (G7)
between Mexico and Canada, 16 foreign direct investment (FDI), 31, 54
countrles
between Mlddte East and Canada, Brexit and, 3BB G20 countries See Group ofTwentyr
r9f ,20f disadvantages to Canada of, 36-37 (G20) countries
between Morocco and Canada, 25f reasonc fnr warriro 'l02
GDP See gross domestic product (GDP)
rpdrctinn nf frnm fnroion hr:nnh Saudi Arabia and, 391 gender gap, 408-9
plants, 37 stable econorny as attraction for, 103 gender parity, 408-9
rubber, 111
standardlzation challenges, 73 opnrpntrism ?lQ
services, 95 sl n.)nrf'vp hrrsiness environment aS geopolitics,4l0 13
between South Africa and Canada, attractron for, 103 Gladwelt, Maicolm, 96
25f \^/A\/<. nf zll'e.fird lnt 3 Global Affairs Canada, 204, 3I7, 327, 4I4,
between South Korea and Canada, 14
foreign markets, 27 4r9,42].,423
travel and tourism, 228, 229f advantages of worklng overseas, 420 global flnancial crisis (2008), 1r,44,55,
uranium,252-53 li-^1,,^^, ^f ,-,^-1.'
^x^^ 0l
olsaovanLaSes w0rKlng Overseas, 94, 363, 384, 385, 386, 394
between U.S. and Canada, 10 42r see also recession
between Venezuela and Canada, 17
forelgn portfollo investment, 54, 55 global sourcing, 56
video games, digital media, and aanrtAtmAtrota \\
Global Strategic Maple Syrup Reserves,
artificial intelligence (AR), 400 I mnnpr/ mrrkptq 55 .1,4
0
EXW See tx works (EXW)
IEASONS fOI, 55 Global Talent Stream, 418
Exxon VaIdez oit spllt, 278
restrictions on, 72 Global Trade Tracker, 134
foreign subsidiaries, 54, 67 Global Vlslon, 204
F Fortune GIobaI 500,10, 39f globalization,38 9
faciel rccnonifion
_-'^*'_'--o"__ L)) four Ps of marketing, 305 BRICS economies and, 244
Fair Labor Association, 293 market research and, 326 comnared ro in I ernational business.
fair trade practices, 155, 273. 283, 294, rlrrc mndi5nrt innc fn1 inlefnatjOnal 4I
295 trade, 3OB, 310 cdticlsms ol 44
Fairtrade Canada, 22, 23, 294 nrirc modifi carinns for internatlOnal ofculture,124
Fairtrade Labelli ng Organizations trade, 3i1-13 decline oforganized labour and, 394
International (FLo), 29 4 PlUUUL -^riG^^rr^- - fOf
^.^r,,^r L lrrUUllrLdLlVttJ pmnlnrrpoq rnd 115

--:-:.aew terminal, Halifax, 354 international trade, 306 -7 example ol 214

FDI. Sae foreign direct investment nromot'on modifrcarions for olohal sirateo'es 215 216
(FDI) lnternational trade, 314-15 innrpnqp nf nacp in iR-9
c) roa franchise, 54, 60, 61 multidomestic strategies. 2I5 2I7
1 t'7 eirrenteopq nf 6l nepal ive effects of. 43.2I4

Index
 pandemics and, 41I
trade agreements and, 221
positive effects ol 41, 214 as part of subcuir:: _l j __-
of U.S., 10B, 109
problems with,226 xenophobia and, 127
in U S. after 2OOB globat financial
process of, 214 importing,54, 56
crrsis,3B6
recession and,44 absolute advantage and, 195
gross national product, 243
transnational strategies, 2I5, 2fg business-to-business (B2B), 55
Group ofSeven (G7) countries, 103, 3gB
GLOBE Foundation of Canada, 249f replacing damaged or poor qua .
fu1rue of,242 -..
Goodyear, Charles, 111 goods, 70
members of,238,242
Gosling, Ryan, 97
purposes ol 242 imports, 5, 7
Gottlieb, Myron, 284
Group ofTwenty (CZO) countries, 290 between Brazil and Canada, 17
Government of Canada, 32
Africa partnership, 243 Canada's top country, 57f
consular services, 2OO _2OI
forum, 185, 230 between Chile and Canada,
passports from, 415 18
gross natlonal product and, 243 between Chlna and Canada,
Quebec's immigration rules and, 417 rmportance ol 243
13

temporary foreign workers program chocolate as,22_23

members of, 243
(TFWP)and,41B coffee,272-73
purposes ol 243
trade mlssions, 204 between Colombla and Canada, iB,
GTA. See Greater Toronto erea (GtA)
trade offices, 2OO lBf
women in business and, 409 between EU and Canada, 9
H
Grace, Leslie, 325
flowers, 366-67
Grameen Foundation, 289 HaLey, Ntkkl, 251
tmportance ofoil for Canada, 64_65
Great Pacific garbage p atch, 27 9 Handmqid's TaIe, The (TV serles), 96
between India and Canada, 15
Greater Toronto Area (cTA), 2:t hard currencies, 79
H arv ard Business Revtew,
betweenJapan and Canada, 12
Greece withdrawal (a k a Grexit) from 26g
HDI. See Human Development Index between Mexico and Canada, 16
the European Union (EU), 235
Green, Don, 292 (HDI) between Middle East and Canada,

Greenpeace, 290 heads-up display (Huo), :sa r9f,20f

Grexit. See Greece withdrawal (a.k.c Heartland (TV series), 99 between Morocco and Canada, 25f
Grexit) from the European Union Henley Visa Restrictions Index, 416 between South Africa and Canada,
(EU) Heritage Foundation, The, 187 25f
gross domestic product (GDp), Hetl, Sheila, 96
18 between South Korea and Canada, 14
29,78 Hill, Lawrence, 96
tea, 202-3
Asia-Pacifi c Economic Agreement Hofstede, Geert, 160, 16I, 162,163, i66,
travel and tourlsm, 228,22gf
(APEC) and, 241 167
between U.S. and Canada, 10
BRICS economies and,, Holmes on Homes (TV series),
244f 99
horizontal integration, 346 vanilla, 320-21
business cycle as measure of, 18B
HUD. See heads-up display (HUD) between Venezuela and Canada,
ofCanada, 90, 911 100, 106, 1OB, 109 17

in Canada after Human Development Index (HDI), 106 inbound distribution, 353
2OOB global financial
crisis, 385 Human Rights Watch, 282 income dlstribution,
countries per capita, 109f Humboldt University, Berlin, 423 as global trend, 390, 396_97
in developed economies, Hurricane Irma ZAIT), 364 mtnlmum wages and, 397
185
difference between U.S and Canada, Hyena Road (movie), 96 universalbasic income (UBl) and, 396
109-10 hypoxia, 278 Income properqz (TV series), s9
ofEuropean Union,23l Index of Economic Freedom , IB4, fB7
high, 108 I
India,
North American cumuiative, 104
ice wine, 146 business clothlng in, 135
North American Free Trade
IMF. See International Monetary Fund economic deveiopment ln, 43
Agreement and,223 (IMr)
history of trade with Canada, 15
rn recessron, 189
immigratlon, 107
labour markets in, 150

lndex I aas
iT--
--=€:c;:eoples, 126 Canada's role ln, 92
T-+^--^+i^- ^l n-d^-i'^ts1^
lflIeIIldLIOOot UI Jdlr--d.:t l. . O.

:z c'sa F-rsi Nauons peoples comparative advantages in, 196-97 5Lanoar0lzatrol \l)ul, zv)
:--::.ietleS and, 392 compared to globalization, 41 international time zones, 74
-Aa!-s of working co-operatively with, considerations for, 5 internet, the, 33
!M-45 corporate corruption as ethical issue sr nrl'pr ranagpmPnt and, 350

'r riustrial Revoiutlon,

22 in,276,284-86 internel of Thinps (1oT). 399
inflation, TB currency variatlons as barrier to, irver'orv manapement. 341
rrrgrrgo!'------r - 3L9
ia European union (f,U), 233 76-79 irrqt-r'n-r imp {l l1 ) inrrent orv/ svstems
"J""' -'
influencers, 315 deflnition, 5 4,1 a

information, communication, and d isadvFn f ades from. 3a-35 vendor managed invenlorY, l/7
technolosv (lCT) sector, 100 r..*-:- i ^^ cLrrlLdL
uurllPlIlB d) ^-L;^^r,^-,,t
rJJuc in, 276, 287 Investin Cqnado website, 102
information management, 352 environment as ethical issue in, 276, Investmenr Canada Act (1985), 32 72
muitichannei vs. omnichannel 277-BA IoT. 5ee InLernet o'T hings (loT)
strategies, 352 ofhicel roeqnnino in 274 Iran,
Innovation, Science and Economic oti.rottpin 1(a 17?-73 as 'orrrd in g -nember of O PEC, 19
Tlorrclnnmpnf
vs v u(vyrrrLrr! Canada
vsrrss (ISED), 327, dn\/Prnmcnl's rnles in l98-201, Iraq,
373 204-5 es f nrrndiro *e'nber oi OPEC 19
inshoring,351 government's rules and regulations ISO See lnternationaI O-ganizaLion for
insourcing,35l and,199-200 Standardizatlon (tso)
intpllpctrral nrnnertv 2i9
importance of tlme management in, I srae1,
interdependence, 6
B6 frPdP apreerent with Canada 20
interest rates, 78, 103 imnn-i^n.P nf ro Carada, 54-55 It's anty the End of the World (movie), g6
Intergovernmental Panel on Climate
marketing concepts and, 305-B
Change (lPCc),254f
meelinos and negotiations, 156 I
intermodal shipping, 358-60 )
nnl/prt\r as plhiral issrre in, 276,
^;- F-^idr.+
dll ^- .-^-.^^-tatiOn
IlCrBlrL A) LldlrJyurL mOde in, Japan,
2BB_89
358, 3s9 as auto maker, 28
reasons fol success of in India, 15
motorized carriets as transportation Canadian imports to, 134
role of crrltrr re in oroducts and
mode ol 358, 360 earthquake in, 364
services choices, 146- 47
ninplinpq
yryL (rrr! u rc ire.snnrl-atiOn mOde Of.
as emerging market, 19
standardization challenges for, 73
3sB, 360 history of trade wtth Canada, 12
srrhsidizins as erhical issue in, 276,
rail as transportation mode of, 358, investment in Saudi Arabia, 20
287
360
q\^rpatshons es ethrcal issue in, 276, Jennings, Maureen, 9B
International Air Transport Association
281-83 Jepsen, Carly Rae, 97
(IATA),416
tax treaties as factor in, 230 JIT inventory systems See
International Bank for Reconstruction just-in-time (JIT) inventory
end Dcrielonmeni) See World Bank tlme zones as barrier to, 75
es of, 54-55 systems
international business, 5
'l94-95 U.S. cultural and identlfication Johannesburg Declaration on
ehsolrrfe advantages in,
influences from, 34-35 Sustai naole DeveioPmenr (2002r,
advantages of cuitural diversity fiom,
wages and, 155 280
30
i^L lrrLr International Chamber of Commerce joint ventures, 54, 62-63
-i,,--+^x^- ^€
duv4rLdStrJ ur Jvu ih^reases from, 3O
(ICC) 249f,290,3s4 advantages of, 62
;dventaces nflower nrices for, 27
international labour, 390, 394 disadvantages of, 62
atrraitages of new markels for, 27
culture differences and, 394 faiLures, 62
a1'.-arlages of new technologies for,
International Monetary fund (IMF), reasons for, 62
220, 235, 238, 243, 244, 247, 3BB Joseph, Bob,144 45
advan,ages to Canada of,26-27,
30-3-r criticisms ol 247 Joseph, Cynthia, I44-45
-:-{'ig rnd-:srr 94-95 purposes of, 247 Joyce, G B., 9B

450 Index

Junior Team Canada, 204
just-in-time 0IT) inventory systems'
348
K earthquake in, 364
Karsh, Yousef, 97
Kenya,
tea industry in, 203
Keystone XL PiPeline, 225
Kielburger, Craig, 291
Kielburger, Marc, 291
Klein, Naomi, 96
Kuwait,
as founding member of OPEC,
Kyoto Protocot (1997), 257, 254f , 2Bo
t competition in,
labour cultures,153
labour mobititY, 417
labour unions, 150, 153
see olso internationai labour
Lagarde, Christine, 247
Le Pen, Marine, 45
least-develoPed countries, 186
Lepage, Robert, 97
lesbian, gay, bisexual, transgender' and
questioning/queer (LCetQ), lsz
less than-truckload (LTL), 360
tetter of credit, 350
LGBTQ See lesbian, gaY, bisexual'
transgender, and questioning/
queer (LGetq)
licensing agreements, 54, 59
exclusive distribution rights
of, 60
in manufacturlng Processes' 60
living wages, 281
lobbYing,205
LobbYing Act of Canada, 205
logistics, 340-43
definition of, 340
domestic, 34O,34If
forward, 342-43
international, 340, 341f
reverse, 342-43
third-PartY, 346
iumber industry, 10, i1
softwood lumber disPute, 24O'287
Luxleaks (the Luxembourg Leaks)' 230
M
Maastrlcht Treaty (November 1,
23r
Macron, Emmanuel,45
Madoff, Bernard, 285
MAPL sYstem. See Music, Artlst'
(MAPL)
Performance, and LYrics
sYStem
Maqulla SolidaritY Network, 282
maquiladoras (U.S -owned factorles in
19 Mexico), 224
market economy, L7B
centrally planned economy type' 179'
iBif
17B
mixed economY type, lB0 1B1f
private ProPerty in, 178
profit in, uB
market resea tch, 326 - 27
four Ps of marketing and, 326
primary,327
secondary, 327
two Cs of marketing and, 326
marketing, 304-B
four Ps of, 305
pian comPonents, 304-5
puryoses of, 304
tWO CS OI 305
marketing strategies'
acquisition, 330
centralized, 330, 331
form
decentralized, 330, 331
as
markuP, 312
100
MaRS Discovery District, Toronto'
Masih,Iqbal, 291
MaslanY, Tatiana, 99
Mastow's HierarchY of Needs, 319
Mayan PeoPies, 22
medical devices industry, 101
(MY
Basic
Mein Grundeinkommen
lottery)' 396
Income crowdfunding
Mendes, Shawn,97
Mercosur trading bloc. See Argentina'
Brazii, ParaguaY, and UruguaY
(Mercosur trading bloc)
.-- *=:--::--'-
ailc=c-*-.-: -::::s=- -: -: -:
culturai dirne::--:::' :- -i:
drug cartels in, 363
1993)'
as emerging market, 19
historY of trade with Canada' 16
North American Free Trade
Agreement (NAFTA) and' 45'222'
223,224,225'363,394
microcredit, 2BB'289
as response to globai PovertY' 289
workings of,2B9
minimum wages, 154, 397
mining industry, 10, 25, 10f
Mistry, Rohinton, 96
mixed economY, 180
comPetition in, 180
private ProPeftY in, 180
profit in, 1Bo
modified fiee enterprise system' 18O
MommY (movle),96
monetary PolicY, 193
ln EuroPean Union (EU), 233
monochronic culture s, 156 - 57
Montreai Institute for Learning
Algorithms,40l
Motocco,
trade with Canada, 25
MuironeY, Brian, 222, 226
multinational corporations
(tull'JCs)' Z:'
43
gender gaP and, 409
Munro, A1ice,96
MurdochMYsteries
(TV series)' 9B
Music, Artist, Performance, and Lyrics
(MAPL) sYslem, 35,35f
Musk, Elon, 396
(movie)' 96
My Big Fat GreekWedding
N
NAFTA See North American Free
Trade Agreement (NAFTA)
NationaL Post,2B5
(NR$, 205
National Rifle Association
NATO See Nofth Atlantic TreatY
organizatlon (nero)
351
nearsourcing
Index 1451
 oil market, 19,20, 37, 24Bf compared to crowd-sourced delivery,
:= . :.- l.!---=,l ::-:ge, iorannesburg,
361
see olso Organization of Petroleum
(NDP) of Atbefta, Expolting Countljes (oPEC) outsourcing, 351
l.=-,,. -=::-:::a:-c Party
::L crisis in, 28

NGOs. S33 non-governmental effects of on Nigerian PeoPles, 21 P

organizations (NGos) importance of imPorts and exPorts Panama PaPers, 44

l.-:-<:eoack,97 for Canada, 64-65 pandemlcs, 4I0,4I2-I3
pipelines and, 65, I43' 225, 27 6' 358'
noD- governmental organizations Paris Agreement on climate change
(NGos), 73,29o-9r 360, 392 (December 12, 2015), 242' 25r' 253,
plastics and, 391 254f,255,280, 393
-ocus of, 290
I ::cn-verbal communication, 159 pollution and,277 passports, 4I4,4I5
prlce fluctuations as globai trend,
North American Free Trade Patel, Nadir, 15

Agreement (NAFTA), 16, 68, 104, 390, 391-92 penetration Pricing, 312

155, 164, r9I, 222, 236, 240, 363, price volatility ofas challenge to pharmaceutical lndustrY, 101

387 suPPLY chain, 362,363 Pinoy Flesta, Vancouver, 125

Aiberta tar sand develoPment and, value ofCanadianvs. U S doilar and, piracy, 362, 368
225 BO plastlcs industry, 101

Canada and, 222, 223, 224, 225 Olmec PeoPles, 22 point-of-sale terminal, 347
economic growth advantages of, 223 omnichannel strategy, 352 political sYstem, 176

envlronmental destruction ondaatje, Michael, 96 autocracy, 182, 183

disadvantages of, 225 onilne shoPPing, 164-65 democracY, 182
human rights issue disadvantages Ontario Fllm & Televlsion Tax Credit, Potley, Sarah, 96
of,225 99 pollution,277
job creation advantages of, 223 Ontario Ministry of International Trade, poiycentrism, 217
job loss disadvantages of, 224 103 polychronic cultures, 15 6 - 57
lower wages disadvantages of,224 OPEC See Organization of the Ponzi, Charles, 285
Mexico and, 222, 223' 224, 225 Petroleum ExPorting Countries Ponzi schemes, 285
as newsworthY deal'227 (oPEc) popuiism, 45
price reduction advantages of, 223 opportunitY cost, 196 definition, 45
professional (TN) visa, 417 optimization (of suppty chalns), 362, effects of on trade agreements, 45
renegotiation of, 226 369 xenoPhobia and,l27
trade increase advantages 0f,223 O'Reitty, Terry, 304 portfolio investment, 31

United States and, 222' 223, 224' 225 Organisation for Economic potash industry, 17

North Atlantic Treaty Organlzation Co-oPeration and DeveloPment povertY, 23, 41

(NATo),242,368 (oEcD), 106, 230, 238, 245' 327 coffee growers and,273
North Korea, Business and IndustrY AdvisorY as ethical lssue in international trade'
autocracY in, 183 committee (BIAC) 245 276,288-89
trade sanctlons against, 71, 251 memDers or, l+tl global numbers of PeoPle livlng in,
NM See National Rlfle Assoclation mission of, 245 28B
(NRA)
workings of, 245 microcredit to helP against, 289
Organization of the Petroleum predatory dumPing, 287
0 Exporting Countries (OPrc), tg premium Pricing, 312

64,238,248 Prentice, Jim, 392

l:ara, Barack, 71, 225
Prestige oi1 sPitl, 278
as a cartel, 248
occ ::ational changes, 115
members of'248 price skimmirq 3I2
Occupy inovement, 126
workings of ,248 primarY research, 327
OECD Sea Organisation for Economic
Orphanglock (TV series), 99 private enterPrlse, 178
Co-oPeration and DeveloPment
outbound distribution, 353, 354 Prlvate Eyes (TV series), 9B
(oEcD)
outsourcing, 4l'394 production logistics, 34i
offshorin$, 351

452 | lndex
productivity, 108, 110 Rio Declaratlon on Envlronment and nrnmnTinn mndificatinnS fof

Progresslve Conservative Party of Dprrclnnr.cnt (tqqr) 280 international trade and, 315
ALberta, 392 Riopelle, Jean-Paul, 97 Snapchat, 124
Progressive Conseruative Party of risk ma nagemerr. lB0-Bl Twitter, 124

Ontario, 45 robotics, 399 YouTube,124

cnarrL rocnnnQtnt!trr/ / t
Promoting Green and Inclus[ve Growth [n ,100m tmovLel,9b
Canadq (OECD),245 Rotary Club, 300 soft currencies, 79
Property Brothers (TV series), 99 Russia, solar power, 101

protectionism , 45, 68 , 226 imnosed on

sancf ons ---.r---- -''r 413 SOmalra trucH DOmD \/uL/) +L
n..-^:- r-r.-^;^^
nu))lq uNrdltlg ^^ri+:^^' \:rlsis, 365, 413 Sorenson, Gary, 285
effects on Canadian dollar, 81 PvLrLlLcL
Prrernft M:ffhprnr ?5] South Africa,
deflnition ol 387
Ryder, Serena, 97 trade with Canada, 25
North American Free Trade
South Korea,
Agreement (NAFTA) and, 387
as auto maker, 28
tariffs as trade barriers, 6B-69 5
re amprdind merkpl lQ
r-ade erhargocs as I rade barriers, 7l
Sakharov Prize for freedom oI Thought h'storu of I rade wirh Canada, 14
tradc r-'-olas as trp.p }-rarriefs, 70
230
spatial perception, 156, 158
trade sanctions as trade barriers, 71
SARS See severe acute respiratory (roe ipl Tnnnrf Mpasl'Ps ACl ,2B7
psychological pricing, 313 syndrome (SARS) Spotltght (movie), 96
Saudi Arabia, SS United States, 268
n
x ciothing in, 136 stakeholders, 269
foreipn investmenr in 20 analysis of,269
Qatar, 20
/J
as founding member of oPEC, l9 standardization, 73
Llu4tlLy JLdllUArUJr
oil reserves in, 64 Statistics Canada, I25, 164, 397
Vision 2030, 20, 391 stock markets, 55
R
schitt s CreekTY serles), 99 ctocl.-Leenrngiln'ls (\KtJSJ. J4 /
D^^^
(ana nl^-^ flazd k..illi-a
UU.tULIIB -^ll^
t-uLLapSe
SCM See supply chain management Stratford Festival, 97, 99
(Bangladesh, 2013), 283 (scM) Stronach, Frank, 29
rationalization, 150 \orFmnToeQnr|<nl| //x
subculture, 125
recalls, 342-43 secondary research, 327 see also counterculture; culture
recession, 17, 44 Serbia, definition of, 125
<cp nlso slohal frnancial crisis (20OB) as economy in transition, lB5 ^^* ^'
^^ Per L Ur, \25
l111rrr1B14r1LJ dJ
in Canada, 94 <onrieo indrrql'rrr Q5
subprime mortgage, 384, 386
consryneT snend i rg dechne indicalor Sesame Streef (TV series), 124 subsidizing, 276,287
of, 189 Seven Years War, 9 Suicrde Sqr-,ad (movle), 96
government economic stimulation Jqvqltr oLuLtr r^_^:r^ ts^ -, crrn d rnm
| qJPlrdLUly
p
)uLPItUl
--^*-^^.-^..^-
-,.r^L,,- LldtrJPUr LOLlulr, -359
during, 193 (SARS), 412 supplier management, 350 51
harcware sLores as exompres of SHARE Microcredit Foundation, 289 nrndrref qnrrreino'l\l
recessjon proof businesses, lBB Shaw Festival, 97 supply chain, 344-48 350-55
as stage in business cycle,189 single-window system, 369 hloekchain lechrologv and, 405
inUS,94 \K I ls \pp stn.k-kppnrrg Unlts (5K US/ currency fl ucruation challenges, 362
recycllng, 343 small-to-medium-sized enterprises 364
rpnor^r2hlc pnprorr'lOl
_'_.'_oi , _'_ (sMrs), +os dioital'zal ion challerses
"'.."-_'o to, 362. 369
repackaging, 343 Snow, Michael, 97 factors involved in chooslng physical
-esearch and develooment (R&D), 37, soclal medla, distribution, 356
100, 200 cvbersecurrtv
'J " "'-- -'__J
and. 406 natural disasters challenges to 36)
resource depletion, 277 Facebook, 39, 396, 4A7,409 364
restricted goods for Lravellers, 419 Instagram, 124 oll price volaliiity chaLLenge to. 362
returns, 342 LinkedIn, 300, 301 363

tndex l4s3
 ::-_-_a:3n chaitenges to, 362, 369 ferrorism 41O 411 4r1 Softwood Lumber Agreement (SLA),
:_:=r-,- ::a.lenges to, 362, 368 TFWP See Temporary Foreign r9r,240
:-^, ^L;r;L_ ^L^llcnOpq tn
_- - _-l3t 111)LdulLlLy Ltld..-.-o-- _-, Workers Program (TFWP) WorLd Trade Organization (WTO),
third-party logistics (3PLs), 346 238,239-40
<^"'rp rpliehilitv ehellpnopq tn '16, This I Know (O'Reitly), 304 trade assistance organizations,
363 Thomson, Tom, 97 C.D. Howe Institute, 249f
supply chain management (SCM), Thorndike's Law ofEffect, 318 Centre for International Governance
344-48,350-55 I nrnn ln Prralp n2-;.lp ,t.)0 Innovation (CICI), 249f
cash flow link in, 345, 350 ToronLo Region Board ofTrade,204 Fraser Institute, The, 249f
horizontal integratjon in, 346 totalitarianism, 183 GLOBE Foundation of Canada, 249f
information tink in, 345, 352 Tonr Tnhn ?O4 trade deficit, 7
rnvenlnr\/ lrnf. rr 34\ 347 TPP .Spa(-nmrrchcn<iirc trn6[ trade embargoes, 7l
physicaI distribution link in, 345, Prno'pssi vp Adrecmenl fOI trade missions, 102
353-ss l rans-faclnc Partnersnlp ( I PPI trade organizations, 238 - 49
storape link in 345 348 trade, 6 Asia-Pacific Economic Cooperation
slrnnl'er
" -tl'_.-' lrnk'n '14\ 't50-51 cnmnared ln hrrsircss 6 (eprc), r04,238,24r
verliral irteprairon rn 345 fur, B BRICS economies, 238, 244
sustainability, 277, 2BO, 393 TCASONS fOI, 6 Canadian International Trade
sweatshops, 273, 27 6, 281-83 trade agreements, 220 Tribunal (CITT),249f
disasters, 282 Canada Chile Free Trade Agreement, Group ol Seven (G7) counLries, 238,
reasons for, 281 rB,22rf 242
Sweden, Canada Colombla Free Trade Group 01 I wenLy (G2Ol c0unLrres,
as mixed economy model, 181 Agreement (FTA), 18, 22If ,366 238,243
Canada Frlronean Frpp Trade International Chamber of Commerce
T Association (EFTA) Free Trade lrco,249f
Tagaq, Tanya, 97 A1rtrPrr'cnt ))1f International Monetary Fund (llt4 F),

target market, 3U Ldrldud NUtcd Ttrr ''I -^alo Adrpomant

td-_ --o---------. 238,247
.lpr'.norAnhics Anrl 317 318 (CKFTA), 14,220,22r Ar<nnion+inn
urBar rzaLron f^- E-^-^
r or Lcoilomlc

economics and,3I7,322 Canada. Ukrarne Free Trade Cn-nnprrtinn end Dprrplnnmpnt

motivation and, 317, 318-19 Agreement (CUFTA), 413 (oECD),238,245
tariffs, 68-69, 387 Canada-United States Automotive nrdrniTatinn nF Pof rnlprrm Fynnrf ind
tax havens, 230 Products Trade Agreement (1965)
'_--' .'o'-' Countdes (OPEC), 238, 248
tax treaties, 230 2B World Bank, 238,246
as factor in international business, ,----r,-.,_..-
l-nmnrphpnsi r,p end ,,sgressrve
Dr, World Economic Forum (WEF), 94,
230 Agreemenl [nr Trars-Pacific 176,244,249f
purposes ol 230 Partnership ffpp), +s zzl trade quotas, 70
Tea and Herbal Association of Canada, Comnrehenqivp Ecnnnmic Trade trade sanctions, 71
202 Agreement (CETA), 9, 70, Io4, 22o, trade show, 3OB
Team Canada (trade mlsslon), ZO +, ZOS 237 trade surplus, 7
technological developments, 113 definition, 220 trade wars, 387
ipchnnlnorr
__-'-"- ''b/ indrrstnr lOO Frrtnnoen TTninn rc ?Q] trading partner, 6
tec::clogv'rnovatjons
-''''_-'''bi 33 (lrailn -' Str\ren (C7) cnrrntripq
.-.'-r nf ?-lR Traglcaily H1p, 97
-:: .:uiel,422 242 transaction, 4
- :.::::.:lnication s Act, 72 importance ofto Canada, 221 lnternational, 5
telecommuting, 108, 113 North American Free Trade T,^h-h^,+^+i^- A^+ ?l
l rolrJPUl LOLlUtL 11L) |L

Temporary Foreign Workers Program Agreement (NAFTA). 16 45, 68, I rotrlt nr I t<nnn / fh

(TFWP)
22. 1rB 104, 155, 164, 191, 220, 22r, 240, Trudeau, Justin, 385, 393
^t--<:-: -,-- aOpc 795 363, 387, 394 Trump, Donald, 45, 71, 214, 225, 226
terms of rade 79 nnnrrliqm :nd 4\ 242, 255 , 28O, 387 , 407

Index
Twain, Shania, 97 North American Free Trade
Twilight Saga, The (movies), 96 Agreement (NAFTA) and, 45, 222,
two Cs of marketing, 305, 316-19 223,224,225,363,394
comDetit ion modificaf ions for oiL imports from Canada, 64
international trade, 323-25 .^. ---^f,;^lq
poDJpur LJ LvMI]dU]ql.-
consumer modifi cations for trade deficit with Canada, 7
international trade, 316-19, 322 trade economy increases in, 9
market research and, 326 trade embargo of Cuba by, 71
tradingrelationship with Canada, 104
U travelling fiom Canada to, 416
cultural effects on, 150
dlffering cultural norms in, 153
faiLh-based practices and, 153
nlerr makino in Il4
visitind
. ---_---o,,-_ 4ls
World Association of
Non- Governmental Organizations,
29r
World Bank, 18,41, 96, 220,231,238,"
243,246,290, 368
criticisms of,246

UAE. See Unlted Arab Emirates (UAE)

wltndrawaL from TPP, 45 goats ol 246
universal basic income (UBD, 396 institutions of,246f
UN See United Nations (UN)
Universal Declaration of Human Rights, workings ol 246
Under the Influence (radio program). 3Oa
274,275f World Economic Forum (wEF), 94, 176,
unemproymenr, /6,91
unlversat serrat Dus (u 5 B,, /J 244,249f
youth, 397
U S. Securities and Exchange W orld F actb o ok, The (a.k. a. CIA World
United Arab Emirates (UAE), 20
Commission (SEC),285 Factbook),56, 57, 108, t09f
United Kingdom withdrawal (a.k.a.
World Health organization (WHo), 412,
tsrextt) trom European Union (EU),
V 4r3
4s,2r4,226,236,388
World Nuclear Association, 252
UN Conference on Trade and value added, 58, 92
(uncfal) World Trade Organization (WTO), 72,
Development zso vending machine, 3OB, 309
N Economic Commissjon or Europe
238,239 40
U vendor managed inventory, 347
(ECE),
Denents oI, 2J9
2s0 Venezuela,
criticisms of,239-4O
UN Office for the Coordinatlon of as founding member of OPEC, 19
nlttnnaa< nt / {u
Humanitarian Affairs (OCHA), 250 hlstory oftrade with Canada, 17
T--r^ F^-it:,^,:^6
f lGUC r OLrtrLOLtUtI nSrC
^
_-.empnr (TFA)
united Natlons (uN), 184, 274,280,286, oil reserves in, 64
240
290,4rr nnltrtczl arrqrc rn {A\
World Vision, 151, 290
international business rote of, 250-51 recession in, 17
World War I, 28
oearekppnjns role nf 251 vertical integration, 345
nttTn^eo< nt /\t World War II, 12, 38, 250
I
VjcLoria Indigenous Cultural Festival,
WTO. See World Trade Organization
124
(wro)
Year of Microcredlt (2005), 289 Villeneuve, Denis, 96, 97
United Natlons Convention against rrirtrr:l rp:lii'rr ?qO ?qR
Corruption (2005), 286 Virtual Trade Commission, 200 X
United Nations Framework Conventlon visas, 414, 416-18 xenophobia, 127
on Climate Change (UNFCC), 251, resroence,4tl
2s4f tourist, 416 Y
United States (U.S.), work,417-18
Yankee, Daddy,124
after 20OB global financial crisls, 386
Yunas, Muhammad,2B9
corn cereal shuttLe between Canada W
and, 223
Walkerville Wagon Works factory, 2B z
current trade with Canada, 10-11
Wa1t,Jefl97
differences between doin g busl n ess Zambia,
WE Charity,29l
ln Canada and, 112 .onner nrndrrctior in '194
Weeknd, The, 30, 31, 97
economic influences ofon Canada, Zika virus, 42,4I2
WHO. See World HeaLth 0rganization
7:tekcrhcro Mrrk ?Q6
(wHo)
economic recnvFru in l1
workplaces,
history of trade with Canada, 10
changes in, 113, 115
lnhhrr
'-'-J ornrrnq in ?o(
6- - -v"

Index l4sS

ir iI