Tag: globalization

Foreign Trade

With all the news on trade negotiations and globalization, many of us are confused about how this whole thing works. Here’s a simple view that should help.

Big three

A nation’s economy can be broken into three parts: local, national, and international. Local economies include what goes on near your home (within your city or province), national means business activities within your country, and international involves selling to the world—which brings about currency concern and the balance of trade. Examples are as follows:

  • Local – dry cleaners, dentists, donut shops
  • National – telephone carriers and grocery stores
  • International – natural resources and automobiles

Of course, there is always a mix. Developed nations typically have numbers like this: 40% local, 30% national, and 30% international. And when it comes to international, there are usually two types: companies that export, and organizations like Walmart and McDonald’s who operate within another country’s economy sending profit and head office jobs back home.

Global

Doing business internationally has always had requirements. Political stability, property rights, and the rule of law are essential. That’s why the third world can’t compete. But once African countries finish their internal fighting and attain some fertile environment for capitalism, this planet will be running on all cylinders. (You think we got smog now!)

International competitiveness is about more than just ports, natural resources, and infrastructure. It involves business, politics, and culture intertwining together. For example, when it comes to women in the workforce, Canada operates on a different plane than most Asian nations.

  • Canada – 90% of mothers work full-time, 1 year paid maternity leave, subsidized daycare 
  • Asia – 50% mothers work full-time, no maternity leave, no daycare (they use grandparents instead)

Because Canada is at a different place along the culture curve, it’s more expensive to operate here. That’s why globalization gives away all the cheap stuff. And there are differences between us and the States.

  • Canada – government hospital care, 1 year paid maternity leave
  • USA – private hospital care, no paid maternity leave

The US competes more closely with the developing world, especially in the South. But as the world continues to advance, everyone will eventually see things our way.

Manufacturing

You also hear lots about manufacturing and again there are two types: durable goods and inexpensive items that are easy to make. Durable goods are things like washing machines and other products made from metal. Stuff easily made includes all the crap you find at the dollar store. Initially, countries like China and Mexico only made cheap goods but as time went by, they turned their skills toward the better paying jobs that come with durable goods. That’s when we moved the cheap stuff to Bangladesh.

And every nation has protected industries. Ones excluded from facing international competition. Farming is popular since it aligns with national pride but some choices are much more practical. For example, auto factories can be converted into making tanks for times of war. Same goes for steel. You can’t be buying from the enemy.

Summary

Everything is always a balancing act. Because Canada has government healthcare, sometimes companies like Toyota prefer to operate here. It’s not just the hassle of managing American plans but what if you have to lay somebody off? Do you really want the stress of wondering whether they’re still covered?

Recent NAFTA renegotiations had lots to do with maintaining well-paying jobs here in Canada (like, making auto parts). Not everyone can work in tech and we’re serious about our middle class. On the other hand, super woke Liberal governments have put a stake in the ground with respect to oil production. They’ve pretty much capped us at 4 million barrels a day. As a result, international investors have moved elsewhere.

Hopefully, when it comes to trade, our progressive values haven’t put us too far ahead of the pack. In case they have, you can always work at the dry cleaner.

Business Basics

Understanding business can be confusing, especially for young people. There’s so much going on, how can anyone generalize? Easy, let’s start with basics. The outputs are only twofold: goods and services. Business is either selling something you can touch or providing a service. That’s why we have two types of companies, and some that are a mix.

Types of companies

Product companies make and sell hard goods; service companies concentrate on the benefits of labour. Product companies are either involved in natural resources, manufacturing, or distribution. Service companies include law firms, dental clinics, and repair shops. And some do a little of both (like a car dealership).

Service companies deal direct with the end user, while product companies employ a delivery system where multiple companies touch the goods. The traditional flow for retail (e.g., food and clothing) is:

Manufacturer ==> Wholesaler ==> Retailer ==> Consumer (the public)

The delivery system to get products to a business or institution (e.g., schools and hospitals) is:

Manufacturer ==> Distributor ==> Business or Institution

Types of people

In terms of personnel, you’re either a product person, a marketer, or in administration.

Product people work closely with the goods or service. They include lawyers and factory workers, those who design things (like, engineers and architects), and everyone in shipping (warehouse staff, truck drivers). The marketing department holds people who generate potential customer interest and then interface with them. True marketers generate the interest (say, through advertising) and sleazy salespeople close the deal.

Administrators include accountants, secretaries, bankers, clerks, H/R folks, and anyone else who pushes a pencil. These folks never work directly with a product, service, or customer.

Globalization

When globalization moved repetitive manufacturing overseas, those jobs were lost. Jobs associated with the distribution and repair of those products remained at home, and so did the jobs pertaining to custom manufacturing. But the simpler employment of repetitively performing the same duty over and over, moved away.

Globalization also affected the service industry. For example, many computer programming and support positions moved to countries like India. The more difficult task of design (the architecture) stayed behind, but the programming and support components (the bricklaying) got moved.

We’ll talk more about globalization in a future article. For now, understand there are two kinds of companies and globalization affected both.

Breadth of skills

Many businesses (especially smaller ones) suffer from a lack of skills. They could be strong in product or service, but only marginal in the other two. For example, Marty was a great carpenter who opened his own shop, only to find he knew nothing about marketing or admin.

Larger companies also suffer from this condition. Their people are usually only able in one area. So if your president is an administrator, the company may be weak in product vision or sales.

And different types of people fit different kinds of positions. Those attracted to sales typically have strong people skills. They sense the ways of others and know how to effectively communicate. But salespeople are commonly light in terms of technical skills and admin. Product people are usually specialists. They love delving into details but aren’t necessarily good at interacting with others. And administrators are crazy in their own way. So it takes a variety of people with a variety of skills to run a business (and few of us cross over, which is a problem).

Summary

Young people entering commerce should always know who they’re talking to and what type of business they’re in. Then they should develop skills across departments because that’s mostly what’s lacking. Good luck.