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Chapter 4:??Changes in?Canada’s Global Business4.2 THE GLOBAL MARKETPLACE Part 1?The Automotive IndustryThe automotive industry in?Canada?has been intertwined?with the industry in the?United States?for the past century. The “Big Three”?auto makers?(Ford, GM, and Chrysler) have always been the foundation of the U.S auto industry.?Canada?and the?United States?signed the Canada-United States Automotive Products Agreement in 1965 to protect the automotive industry. This agreement?can also be referred?to as the Auto Pact.?The Auto Pact encourages?Canada’s relationship with the U.S automakers and made trade in vehicles and auto parts with any other country less attractive. Most?importantly?it secured jobs for Canadians in the auto industry.?In the beginning of the 1970’s there was a gasoline?shortage which?brought up the price of gas. This caused North Americans to seek out smaller,?fuel efficient?cars. This turned many Canadians away from North American cars to imports. The Big Three became more competitive in areas other than price so that people would go back to buying their vehicles.?The Auto Pact still gave the North American car companies an edge. No matter where a car was made in the world, if it was North American,?it was protected by the Auto Pact.?On February 28,?2002?the Auto Pact was changed due to Japanese complaints to the WTO. The WTO ruled in favor of Japan, so Canada‘s Department of Finance published the final regulatory changes needed to implement the WTO ruling against the provisions of the Auto Pact.?Cellular CommunicationCanada’s major contribution to the communications industry was Alexander Graham Bell’s discovery of the telephone.??This began the telecommunications industry in Canada.??Telecommunication is communication over a distance.??Telecommunications changed the lives of people all over the world in a very significant manner.??New BusinessesCell phones are growing quickly in?Canada.??In 2001, 1 in 5 Canadians owned a cell phone, with this number expected to increase by 50% within 5 years.??This growth allowed improved technology to make phones lighter, more portable, and less expensive.??Cell phones need?3?things to work:-Mobile units-Cellular transmission/reception site- has antennas to transmit & receive signals-Mobile telephone switching office- gets the signal from the receptor site and automatically sends it to the number called by the customer.??Wireless networks require an expensive infrastructure to operate.??Transmission sites require leasing of land, electrical hook ups, security, and maintenance.??The placement of antennas must ensure a good transmission and reception coverage over as large an area as possible?Since a wireless infrastructure is less expensive than a landline infrastructure, some places are going directly to wireless. Wireless technology has allowed many new businesses to open.??New ways to Do BusinessSatellites and wireless networks have made communication much easier than landlines and easier for poorer nations to access.??Countries that have had poor landline services now may acquire better communications ability.??In?Europe, the cell phone is the main phone for business and for home use.?This means it is easier for?Canada?to communicate with them.??Global ImpactWith increased cellular phone usage in everyday life, legislation?has been passed?in some countries to regulate cell phone usage while driving a car. You are distracted while talking with one hand and driving with the other so you can be more vulnerable for accidents. This has leaded to increased R&D in the hands free communication industry. The cellular phone has even lead to the destruction of the environment in some countries. A mineral called?coltan?is an essential ingredient in wireless technology. With the increase in demand for cell?phones?areas in the?Congo?are being mined for this mineral and in the process many trees are cut down and animals lives are lost.?InformationThe use of information has brought about significant changes in the way Canadians do business today. With the invention of complex information data-basses and the internet, information is more accurate for a business manager and therefore it can be used a business decision-making tool. Information as a commodity?is also licensed or sold as patents and copyrights, licenses, consulting services and joint ventures.?Information as a Decision-Making ToolThere are many sources of information: television, radio, internet, newspapers, magazines, etc. The challenge is how to manage information after you have obtained it.?Businesses use information to identify consumers who may be interested in buying their product or service.?The Department of Foreign Affairs and International Trade (DFAIT) provides trade data, country profiles, and market studies by sector or country. Any business can access this information to further their business. Anyone can create their own website that is open to a market of millions over the internet. Internet advertising is becoming an efficient way to advertise because it?is done?electronically so not much money is spent on producing flyers, billboards, or radio announcements.??4.2 THE GLOBAL MARKETPLACE Part 2?Information as a Commodity?Many countries develop technology, invent new products, and create new processes.??All of these have the right to be?granted, licensed, or sold to other businesses.??This is good for those countries that do not have technological expertise.?Patents and CopyrightsA patent is a grant of property right by law to give exclusive rights to the inventor and to protect the rights of the inventor and prevent others from making, using, or selling the invention. A patent exists for a period of 20 years from the date of application.?Patents?are only granted?if the invention is new, useful, and it must show inventive creativity and not be obvious to someone skilled in that area.??The inventor can be any persons, institution, agency, or company.??A patent can be a document protecting the rights of the inventor and a repository of useful technical information for the public.??There are about 25 000 patent applications done each year.??Patents provide incentives for research and development.??To stop foreign companies from copying someone else’s invention?Canada?has signed the international Patent Cooperation Treaty. (PCT)?By filling out the Patent Cooperation Treaty, Canadian companies can get the protection for an invention in more than 100 countries throughout the world.??Once an idea?has been protected, the owner can sell the patent, license the rights to use the idea, form a joint venture, or charge a fee for consulting service.?Copyright is a form of legal protection provided to the authors of original works, including literary, dramatic, musical, artistic, and certain other intellectual works, such as software programs.?Once a patent is sold the original?owner?can no longer profit from the invention, no matter how the new owner uses the patent.??LicensingAlthough, it takes a lot of time and effort setting up a license agreement is a safer way to deal with patents and copyrights.?Licensing means that patent or copyright owners allow other organizations (individuals, governments, or companies) to use their idea or invention for a fee or royalty.?The fee may often be in the form of a fixed sum with or without a percentage of the sales or profits of the license (the business that pays?for the?right to use the invention) paid to the licensor (the owner of the patent or copyright.)? The licensee can also pay a negotiated amount, all at once or at set intervals during the use of the patent or copyright.?There are many “collectives around the world; these are organizations or agencies that act on behalf of their members. The Canadian Copyright Licensing Agency, acting on behalf of publishers and creators (writers, photographers, and illustrators), is a not-for-profit agency established in 1988 by Canadian creators and publishers to license public access to copyright works. On behalf of its?members?it negotiates reproduction and digital licenses with educational institutions, governments, libraries, organizations and private companies to reproduce material legally and for a negotiated fee.?International licensing agreements are becoming increasing popular. A business in one country licenses new technology, ideas, or processes from another country to use in its factor. For?example?the Coca-Cola Company licenses its formula to local bottlers around the world and is active in nearly 200 countries.?Patents and copyrights provide legal protection but do not ensure it. On the streets of?Toronto?or?Vancouver, sellers of fake Rolex watches,?Prada?handbags, or Oakley sunglasses try to convince tourists of the outstanding “value” of their counterfeit products while trying to escape the notice of the local police.?Joint VenturesOften one country has capital, technology, expertise, or knowledge that?is needed?by a business in another country. Sometimes a foreign company can proceed, by local regulations or expectations, with a local company in that country. A joint venture is a shared agreement between two or more businesses or organizations to share assets and control of a new business for mutual gain. Usually a joint venture is a cooperative agreement to share certain technology or manufacturing facilities. These do not necessarily require a financial investment. That arrangement occurs when the one company has the technology but not the capital or desire to start manufacturing, so it shares its technology with a manufacturing company that wants to start a new product line. In some?situations?joint ventures have to be approved by the local government, which may insist on a percentage of local workers, and on training and safety.???Consulting ServicesCanadian businesses that have developed new processes or new technologies often provide technical consultants to assist the licensees in setting up the new systems and training new employees. It is?not uncommon?for employees of Canadian firms to be asked to relocate for a year or two to help another nation assist clients or to start up branch plants in another country.?Many other fields of business and independent firms take advantage of the growing need for experts in other nations. For?example:?construction companies, software developers, computer technicians and environmental specialists may all take advantage of a chance to expand into another nation.?The Canadian government assists Canadian consulting service companies working internationally. For example: the?Canadian International Development Agency (CIDA), which is a federal organization government agency, funds 10 Canadian consultant trust funds at the World Bank. The CIDA uses funds to hire Canadian experts to help identify and prepare projects in places that have commercial importance for?Canada.?Each trust fund?is designated?to a certain priority. This include;?environment, education, health, infrastructure, energy, telecommunications, transportation and issues concerning international waters etc.?BankingBanking was once a heavily regulated industry that had fewer than 10 competitors, but recent laws have eliminated some of these regulations and allowed foreign banks to operate in?Canada. Banks?are categorized?as Schedule I, Schedule II, or Schedule III to determine share distribution, voting rights, and who controls the bank.?Schedule I banks are domestic banks that operate in?Canada?under government charter, resulting in the term, “chartered banks”. The eight major Canadian-owned banks are widely held, which means they hold equity greater than $5 billion and the shares are distributed so that no one shareholder or group of shareholders holds enough shares to give them power over the bank.?Schedule II banks are international banks that operate in?Canada. Foreign bank subsidiaries are allowed to accept deposits from the?general public, referred to as retail deposits.?Schedule III banks are foreign bank branches that operate either full-service branches or lending branches. Full-service branches on accept deposits that are greater than $150 000. Lending branches, as the name suggests, lend money to institutions and do not accept deposits. Both Schedule II and III banks are closely held banks, which mean they have equity between $1 billion and $5 billion and?are typically controlled?by one shareholder.?Foreign business makes up approximately 40 percent of revenue for Canadian banks.?For the past two decades,?Canada?has been reshaping the rules and regulations for foreign branches to enter and operate in?Canada. Although it is becoming easier for foreign banks to open branches in?Canada, they must obtain the approval of the Minister of Finance and the Superintendent of Financial Institutions.?Banking industry deregulation has made doing business with foreign countries much easier.?Canada?could not be a major participant in the global marketplace was it not for the changes to the banking industry. ................
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