Why Do Companies Engage in International Business

1.  Four ways that international business helps Canadians:

• Variety of products:

• Provides them with a wider variety of products and services to choose from.  E.g. TVs made in various countries.

• New Markets and more jobs –

• When Canadian businesses open branch plants in other countries it helps the Canadian economy since the head office is in Canada and leads to more jobs in Canada as well.

• Foreign investment

• Non-Canadians are investing either in local businesses (Portfolio investment) or opening or acquiring businesses here which leads to more money being invested in the Canadian economy which can help the local Canadians.

• New Processes and Technologies –

• Canadians have access to new technologies and processes that originate from foreign countries.  Canadian can benefit from these since it can lead to more efficiency in the business processes.

2. Six ways that foreign-owned businesses hurt Canada:

- Reduction in # of Canadian Businesses: Drive local small businesses out of business since Canadians might buy cheaper foreign products instead of locally made more expensive products.  A new foreign owned business can only be successful at the expense of existing local businesses.

- Reduced Exports:  Foreign owned businesses are usually interested in selling in Canada and not to other nations which leads to reduction in exports.  There is more likelihood that a local company would export to other countries than a foreign owned business.

- Lack of Research & Development:  R&D is usually staffed using foreign workers and not Canadians which leads to more foreign jobs and profit for the foreign businesses in their home country.

- Buy less Canadian products and more imports from other countries – CEOs of these foreign companies want to show high profit and they have the motivation to lower costs/expenses so that they can have higher profits.  As a result, they have the incentive to import low cost items from other countries to sell in Canada than buy them from local businesses.

- Lower taxes for Canadian government – Foreign companies use the revenues earned in Canada to pay for company head office expenses in their home country.  Sometimes, Canadian government gives subsidies to foreign companies if they experiencing tough times e.g. GM, Chrysler.

- Economic destabilization – Canadians rely heavily on foreign-owned businesses and if the global economy experiences any setbacks then it can have big impact on foreign-owned businesses which in turn have an effect on the Canadian economy.

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