The 5 P’s of International Business
If you’re wondering why nations trade with each other. It’s because of the 5 P’s: Product, Price, Proximity Promotion, and Preference.
No country can produce all its own goods and services, a trade is obvious solution. A country’s resources determine what goods and services it can produce.
PriceDue to wages, taxes, fuel and other transportation costs, the costs of producing various goods from country to country may vary. Businesses in foreign countries may be able to produce products cheaper, which they can sell their products at a lower price at Canada. ProximityBorder cities such as Windsor and Ontario are tremendously influenced by their American counterparts. Businesses from both sides of the border share and exchange goods and services.
With global technology such as the internet, business can let people far away know about the goods and services they are selling.Factoring Affecting The Flow Of Goods ; ServicesConsumer Needs and IncomesThe amount of money that consumers have to spend has a direct impact on the flow of goods and services in a country. In some parts in the world some people have a lot of money to spend while in other places people’s income barely cover basic needs.
Most nations have their own kind of currency. The exchange rate refers to the value of one’s country’ currency against the currencies of other countries. It helps determine how much we pay for imported goods and services and how much we receive for what we export. When the Canadian dollars falls, imported goods become more expensive, and we tend to reduce the volume of our imports. How To Convert To Other CurrenciesConverting Canadian To Another Currency:Canadian dollar is trading at 80 US Cents How many US dollars will purchase $40 worth of Canadian products?Amount = Fund x Rate1 Can = 0.8 US1 x 40 Can = 0.8 x 40 US40 Can = 32 US$32
American to buy $40 worth of Canadian products.Converting Another Currency To Canadian:Given that the Canadian dollar is trading at 90 US cents. How many Canadian dollars will purchase $70 worth of American products?Amount = 1 divide Rate x Fund1 Can = 0.9 US1 divide 0.9 CAN = 0.9 divide 0.9 US1.11 x 70 Can = 1 x 70 US77.78 CAN = 70 US$77.78
Canadian to buy $70 worth of American products.Advantages And Disadvantages Of International BusinessAdvantages: increased markets for businessesa broader choice of products, services, and prices for consumerscreate jobsexchange knowledge which results in new approaches to production, marketing, and selling.political benefits: partners in trade seldom go to war with each otherimprove understandingincrease the level of respect people have for one another.
Disadvantages: less money to spend on domestic goodsnew industries will not be able to compete with well-established industries in other countriesunfair competition due to cheap foreign labourcompetition from foreign enterprises may lead to losing of jobsBarriers To International BusinessTariffCountries place a tax called a tariff on-in-coming goods to protect domestic manufacturing. A tariff barrier slows the entry of foreign goods by making them more expensive.QuotaThis is a limit on the number of products in a category that can come into a country.
The quota on clothing and textile import.EmbargoEmbargo is a complete stop to the transfer goods and it is often used as a form of political or social protest. Health and Safety Standards Countries can set such high health and safety standards for imported goods that it becomes more difficult for foreign competitors to enter the market. Trade Agreement & PactsOne of the earliest trade agreements the GATT ( General Agreement on Tariffs and Trade) brought over 100 major trading nations in 1947.It was based on 3 major principles:equal non-discriminatory treatment for all member nationsgeneral reduction of tariffsthe eliminations of non-tariff barriers