Chapter 4: International BusinessWhat Is International Business?

What does domestic mean?

Existing or occurring inside a particular country.

What does international mean?

Existing, occurring, or carried on between two or more nations.

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Chapter 4: International BusinessWhat Is International Business?

A domestic transaction is the selling of items produced in the same country.

An international transaction is the selling of items produced in other countries. These items contribute to the global economy.

Benefits for Business

• access to markets

• cheaper labour

• increased quality of goods

• increased quantity of goods

• access to resources2

Benefits for Business

Access to Markets

By trading abroad, Canadian businesses can gain access to markets (more customers). .

Customers in other parts of the world have different needs and wants. Businesses must make adaptations to their products and services to be successful in other countries.

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A global product is a standardized item that is offered in the same format in all countries.

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Cheaper Labour

Lower prices as the result of cheap labour in other countries is the number one reason why consumers buy items made in different parts of the world.

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Minimum Wage Rates:

Canada $11.25/hourChina $2.12/hourPakistan $0.62/hourMexico $0.62/hourIndia $0.31/hourUS $7.25/hour

Increased Quality of Goods

International business can help producers improve the quality of the products they sell.

Increased Quantity

As long as a product has international appeal, so does the potential for increased sales.

Access to Resources

Connections to international markets provides businesses with increased access to the three types of economic resources: natural, human, and capital.

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The Five Ps of International Business

All countries benefit when businesses produce specialized goods and services that appeal to consumers.

International business provides increased markets for businesses and offers them a broader choice of products, services, and prices for its consumers.

The Five Ps of International Business

1. Product

2. Price

3. Proximity

4. Preference

5. Promotion7

ProductA country’s resources determine what goods and services it produces.

PriceThe cost of producing goods and services varies from country to country. Sometimes it may be more profitable for Canadian businesses to produce products overseas and then ship them here to sell to consumers.

ProximityIt may be more advantageous and profitable for some businesses to sell products and services to consumers near a neighbouring country’s border rather than to its domestic customers.

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PreferenceConsumers often purchase foreign goods and services based on their reputation and specialization, even though similar products are produced domestically. Two examples are Swiss watches and Belgium chocolates.

Promotion

Technology, especially the Internet, makes it easy

for businesses to promote their products and services internationally.

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