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RSM100 Final Exam Notes

Exam Breakdown:
2 Hours (BEGIN ON THE HOUR NOT U OF Tears TIME)
Location details online
Standard pens, pencils, eraser, photo ID and non-programmable calculator
EXAM NOTES FROM LAST HOUR OF RSM 100 (IM FREE!!!)
- r/UofT is mater strat, side note: KHAAAAAAAN
- 57 MCs worth 1 mark each (57% of exam)
- 4 short answers worth 43 marks total(other 43%)
- ALL MC’S COME FROM TEXTBOOK knowledge = MC
- 80% of MCs are Khan textbook
- 20% MC are OESch textbook
- Q1 3 marks
- Q2 10 marks
- Q3 10 mark
- Q4 (3 parts) 20 marks
- Short answer is ALL Khan and ALL from lecture….. FUCK
- Any of companies, learning points, videos talked about in class
- Stuff not on slides (based on notes and what you heard/understood in class) (fuck you khan)
- We should probably try to guess which questions it will be (he said we can probably guess it if we were in class)
- All content is fair game (fuck you khan)
- Assigned text chapters and readings
- In-class lectures
- Lecture slides
- Videos
- What’s new in world of business
- Other
- Exam will focus on material after the midterm (unfuck you khan but still kind of fuck you)
- GONNA GUESS THE SAs WITH THE CLASS
- Guesses (also i put some quick notes on most options here for ppl who missed the sessions, if you remember the
conversations please add things)
- Euro debt crisis
- Greece has economic crisis and rest of EU is hurt (good notes below)
- Yahoo ceo (working from home) (probably Q1?)
- Yahoo ceo made it so that telecommuting is not allowed (note: she was a pregnant woman and
later had a nursery constructed next to her office solely for her child)
- Move was to try and promote productivity, more effective groups, etc.
- Move made life hard for parents and people with issues travelling
- Walmart and the whole case study
- Walmart sets super low prices and makes suppliers sell to walmart at low prices or go to china
- Is it ok that it helps consumers but hurts suppliers?
- Ashley Madison
- Ethics of making a business around cheating
- Wells Fargo fake account scandal
- Wells fargo execs made employees sign up clients for pre approved cards and stuff without their
knowledge
- Did this to get better bonuses
- Steps management takes after a crisis
- Maple leaf foods? On John? WTF (probably not on exam)
- How different business practices vary throughout the world
- Different business practices, belief sets, etc.
- Enron accounting scandal
- Enron is on slides
- Working at google
- Google has nice fun campuses
- Believes it helps foster innovation and hard work
- Stuff like gmail came out of it
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- Costs a ton to set up and can be argued they can lower productivity
- Ethical issues with doing business internationally
- Is bribery in a country where you need to bribe to get anything done ok?
- Globalization vs internationalization
- “International companies import and export goods and think internationally”
- “Global companies are working in all 5 major regions/produce locally what you sell
locally/dispersed business unit headquarters”
- What’s new in the world of business
- Cheesecake factory
- Cheesecake factory opened in canada (what does it need to do to be successful)
- Tesla trucks and patent releases (i remember the topics but not the discussions someone help)
- Tesla has automatic trucks
- how does this affect truck drivers(?)
- Tesla released engine patents and stuff
- Tesla being good business leaders?????????
- WE GOT ALL THE 43 MARKS SOMEWHERE IN THIS LIST DONT FUCK WITH THE LIST
- How to study
- Balance prep time between text review and lecture notes
- Go over wiley plus (AFTER UNDERSTANDING ALL THE CONTENT FIRST)
- Make study notes and review them then go to wiley plus
- Study in groups for small amounts of time (lol)
- Don’t take your eyes off the book unless you’re taking a break
- Take a 10 min break every hour
- Turn off cell phone
- Focus on weak areas
- Sleep
- How to write test
- Use a system that works for you, else do MC first
- No form letter for MC
- DON’T FORGET SEQUENCE NUMBER AND WRITE IT ON TOP OF EVERYTHING SUBMITTED
- Feel free to write it down and bring it with you
- Use full sentences or bullet points for SA (bullets preferred)
- Some points worth 1 mark, some ½ mark, assume it is ALL ½ mark,
- For example, if a question is worth 3 marks write 6 points
- Questions about format or what’s examinable
- Write about why something can be ethical, why it might not be and then make a conclusion, explain both
sides (no right/wrong answer)
- Not a bunch of accounting (only what we learned in-class/textbook)
- Do we need to memorize accounting ratios (none in SA maybe in MC, probably not that big of a worry)
- PERT ratio
- Dont worry about specificity of coke (only worry about specificity of companies khan used as examples)
- Whats new in the world of business only tested about whats discussed in class
- Specific statistics is not really on the exam (i.e. women business owners percentage)
- No numeric question on comparative advantage
-
- Long story short
- hes an asshole that wants to force us to attend class and listen to his bullshit (fuck you khan)

Session 8 - Business Ethics and Corporate Social Responsibility

READINGS

Warren Buffet Wells Fargo:

- Warren Buffet’s company Berkshire Hathaway lost a lot of money in Wells Fargo since the bank was fined by regulators
for creating fake accounts.
- Berkshire Hathaway owns nearly 470 million shares of Wells Fargo, a 9.5% stake. Buffet owns ~2 mil shares.
- The combined value of that investment dropped nearly 1.5 billion since the fine.
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- Media wants statement from Berkshire and Buffet, no comment.
- Berkshire Hathaway applied to Federal reserve for approval to boost its stake in Wells Fargo above 10%

The Collapse of Enron:

- Enron, America’s 7th largest company declared bankruptcy on december 2.
- Enron was an electricity and natural gas company. They also provided financial and risk management services worldwide.
- In the white house, the focus is on how close the chairman of Enron Kenneth ay was to George Bush and other Texas
Republicans.
- Three quarters of the senate took Enron money in donations.
- The American campaign-finance system puts too many politicians in debt to big business.
- There is need for systemic reform in three areas:
- 1) The regulation of auditors, self regulation and peer review is not enough.
- 2) Eliminate conflict of interest in accounting firms that also audit companies.
- 3) Toughen up accounting practices, GAAP standards used to be very rigorous, and companies would not get
away with the lax accounting they do now.
- Most top execs were tried for fraud after it was found they grossly overstated profits by several hundred million dollars.
- Stock dropped from $91 to $0.67 per share.

Ashley Madison:
- In 2015, hackers called the “Impact Team” released the data of millions of cheaters who were on ashley madison.
- Some guy killed himself because he was on the list
- Ashley Madison targeted users based on many factors to make them more likely to cheat.
- They created fake profiles to lure men and test which ads were more likely to make men cheat.

John Stumpf Retires from Wells Fargo After Fake Account Scandal:
- The Wells Fargo boss steps down after regulators accused the bank of creating as many as 2 mil accounts.
- The company fired over 5300 workers over the years.
- Elizabeth Warren said “You should resign, you should be criminally investigated, and return every nickel he made during
the scam.
- Stumpf declared there was no “scheme” to screw over customers.
- Stumpf worked for Wells Fargo for 34 years, and was CEO since 2007.
- Stumpf made $19.3 million in 2025, but he forefitted most of his salary and $41 million in stock awards and his bonus.

SLIDES/CLASS NOTES
- Ethics reflects people’s proper relations with one another and how people should treat others
- Laws are more narrow and protect us from fraud, theft, and violence
- Technology expands the impact of unethical behaviour
- An individual’s stage of moral and ethical development is determined by: experiences, family, education, culture, religion,
company environment
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Responsibilities to the General Public:

- Public Health Issues - What to do about dangerous products like alcohol, tobacco, vaccines, and steroids
- Protecting the Environment - Using resources efficiently, minimizing pollution. Eg: Green marketing, Sustainability
- Developing the Quality of the Workforce - Enhancing quality of the overall workforce through education and diversity
initiatives
- Corporate Philanthropy - Cash contributions, donations of equipment and products, and supporting the volunteer
efforts of company employees

Responsibilities to Employees
- Workplace Safety - Managed mostly at the provincial level by organizations such as the Workplace Safety & Insurance
Board in Ontario and the Worker’s Compensation Board of Alberta
- Quality-of-Life Issues - Balancing work and family through flexible work schedules, subsidized child care
- Ensuring Equal Opportunity on the Job - Providing equal opportunities to all employees without discrimination
regarding age, sexual orientation, physical disabilities, etc,; regulated by the Canadian Human Rights Commission.
- Sexual Harassment and Sexism - Avoiding unwelcome actions of a sexual nature; equal pay for equal work without
regard to gender
Responsibilities to Investors
- Obligation to make profits for shareholders
- Expectation of ethical and moral behaviour
- Protection of investors by provincial regulators such as the Ontario Securities Commission and the Alberta Securities
Commission
Codes of Ethics
- Compliance Based
- Increase control and penalize wrongdoers
- Integrity Based
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- Define guiding values
- Support Ethical Behaviour
- Shared Accountability.
Enron:
- Founded in 1985 when Houston NAtural Gas and InternOrth joined together.
- Was 7th biggest company in the US when it declared bankruptcy in 2001.
- Starting in 1997, Encron begins creating off balance sheet Special Purpose Entities (SPE’s) and small partnerships like
ChewCo to hide debt and inflate earnings.
- The shady accounting practices threaten to ruin the company and Enron is forced to declare massive losses in its 2001 3rd
quarter results.
- The Securities and Exchange Commission (SEC) becomes suspicious and launches an inquiry of Enron’s finances.
- Enron hide their losses and inflated profits through:
- SPE
- Hedges
- Derivatives
- Swaps
- Forward Contracts
- Pre-paid contracts
- Wash Trading
- Prepays
- Tax Avoidance
- Fake trading rooms
- Fees to accountants, lawyers, bankers, etc.
- Payments to directors.
- Increased stock price
- Eventually, whistleblowers.
- When the SEC unraveled the scheme, the auditors were in on it.
- Arthur Anderson served as both auditor and consultant for Enron, and they helped destroy thousands of Enron
documents in the coverup.
- Where Enron went wrong:
- Breached fiduciary duty
- Conflicts of interest
- Compensation
- Independence
- Oversight
Six Steps to Improve Ethics
1. Top Management Support
2. Expectations begin at the top
3. Ethics embedded in training
4. Ethics office set up, whistleblowers must feel protected.
5. External stakeholders informed.
6. Enforcement.
Why Should Businesses be Managed Ethically?
- To maintain good reputation
- To retain existing customers
- To attract new customers
- To avoid lawsuits
- To reduce employee turnover
- To avoid government intervention
- To do the right thing.

TEXTBOOK (Chapter 2)
Concern for ethical and societal issues
- If an org wants to do good it needs to consider
- Business ethics - standards of conduct and moral values that lead to our action and decisions in the business
environment
- Wide range of social issues including how a decision will affect environ, employee, customers.
- All These issues are part of corporate social responsibility
- Used to enhance society’s well being through philosophies. Policies, procedures, and actions
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- businesses must find balance between doing what is right and what is profitable

- Tim Hortons (one of top 50 cdn companies demonstrating exceptional csr)

- Requires its Cdn millwork suppliers to use only wood certified by Forest Stewardship Council for its restaurants
- Also diverting 80% of its waste from landfills through recycling and waste diversion programs
- BMO
- Board diversity policy
- ⅓ of bank’s board of directors to be female
- Funds financial literacy program - goal to educate 45k students in personal finance

- Deciding what is right and wrong is not easy

- Firms have many responsibilities to
- Consumers, employees, investors, and general public
- Trying to serve all needs can lead to conflict
- Ethical values of execs and employees can influence a business's decisions and actions
- Not black and white
- Biz ethics also shaped by ethical climate within an org or country (i.e. minimum age to work)
- Ethics goes beyond what is legal and not legal
- Codes of conduct and ethical standards play important roles in biz that support doing the right thing

Contemporary Ethical Environment

- Business ethics very prominent now
- Companies need to work hard to earn the public’s trust
- Movement towards CSR should benefit everyone (consumers, environMENT, companies)
- MOST biz owners and managers have succeeded without breaking the rules
- Johnson & Johnson, most admired pharma maker and 19th most admired company in the world according to
Fortune
- Worked with same basic code of ethics, CREDO, for over 50 yrs
- Many biz schools include programs on ethics and csr in their curriculum
- MBA students from Uottawa Telfer School of Management (ew) are required to swear an ethics-related oath upon
grad.
- Many biz are aware of how ethics can translate into concern for environ and society at large
- Shelley Broader (President and CEO of Walmart CA)
- Environmental sustainability
- People
- Ethical sourcing
- Community giving and investment
- Walmart CA sells fresh produce
- Efficient, cost-effective, sustainable process by sourcing produce locally where possible
- Local sourcing means less transport cost, less pollution, supports the locals
- Walmart also surveys its suppliers about their sustainability practices
- First step in developing “sustainability index” to help its customers measure the impact of Wal-
Mart products on environment and society
- 2013 Walmart topped list of companies using solar energy
- CSR is important for walmart because of ongoing controversy about some of its business practices
- Not all companies set and meet high ethical standards, but ethical climate is improving despite recession
- 41% of employees surveyed “witnessed misconduct on the job” (2013) , down from 55%(2007).
- HOWEVER, only 63% said they reported it(2013), versus 65% (2011).
- 25% of employees said recession had negative impact on their company’s ethical culture.
Sarbanes-Oxley and Bill 198
- Sarbanes-Oxley Act of 2002 established new rules and regulations for securities trading and accounting practices
- Companies required to publish code of ethics, and inform public of any changes to it
- Apply to Cdn companies who trade on any American stock exchange
- Similar legislation has been enacted in Canada, known as Bill 198 of 2003. (C-SOX)
- Today’s ethical environ for biz also includes new corporate officers who are appointed to deter wrongdoing and ensure
ethical standards are met
- Ethics compliance officers - responsible for conducting employee training programs that help spot potential fraud
and abuse, investigating sexual harassment and discrimination charges, and monitoring potential conflicts of
interest.
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- Practicing CSR is more than just monitoring
- Many companies now adopt a three-pronged approach to ethics and social responsibility
- Engaging in traditional corporate philanthropy, such as giving to worthy causes
- Anticipating and managing risks
- Identifying opportunities to create value by doing the right thing
Individuals Make a Difference
- Individuals can make the difference in ethical expectations and behaviour
- Employees, managers, and executives show their personal ethical principles - or lack of
- Their behaviour affects the expectations and actions of those who work for and with them
- Ethical behaviour can be difficult to track or define in all situations
- Evidence suggests that some individuals act unethically or illegally
- Putting personal interests ahead of organization, lying to employees, misreporting hours worked, internet
abuse, safety violations
- Tech may have expanded the range and impact of unethical behaviour
- Anyone who has pc access to data may be able to steal/manipulate the data or shutdown the system, even from a
remote location.
- Target - alerted customers that a data breach compromised 40 mil credit card numbers
- Led to CIO and CEO being fired
- Cost of dealing with a data breach can be up to 5.4mil per incident
- Some ppl might not be concerned about these breaches, but they can affect how investors, customers, and
general public view a firm.
- Difficult to rebuild trust
- Lose long term customers
- Nearly every employee will face ethical questions at some time
- Some people explain by saying “Everybody’s doing it”
- Feel pressured in their jobs, try to meet performance goals
- Some avoid unethical behaviour because it doesn't fit with personal values and morals

Development of Individual Ethics

- Result of many factors
- Experience, family, education, cultural/religious backgrounds, environment within the firm
On-the-Job Ethical Dilemmas
- Fast paced world of biz, you will sometimes be asked to consider the ethics of your decisions
- Can affect your future and future of coworkers, company, customers.
- Decision is very tricky when needs and concerns of two or more parties conflict
- In the past, some CEOs who were accused of wrongdoing simply claimed they had no idea crimes were being
committed
- Today, top execs make a greater effort to be aware of all activities taking place in their firms
- Many clothing retailers donate unworn, unsold garments to charities such as clothing banks.
- Grad student discovered H&M on NYC 34th street was destroying unsold clothing.
- She tried to speak to store officials and then at company headquarters in Sweden
- Requests for info and offer to put HM in contact with aid organizations unanswered
- Contacted NEw York Times
- Published story about how HM was damaging unsold garments before discarding them to make them
unusable to black market sellers or vendors
- AFter, HM promised to stop destroying unsold clothing and donates them to charity
- “It will not happen again. We are committed 100% to make sure this practice is not happening anywhere
else, as it is not our standard practice.”
- The New York City Clothing Bank, founded by the city’s major during 1980s
- Accepts unsold garments and slightly defaces them to protect retailers by negating the garments’ street
value
- Businesses sometimes refuse to purchase goods or services from particular country because of civil rights abuses by that
country’s government
- Some large, prestigious jewelers, including Cartier and Tiffany & co, announced they would not purchase rubies
and gems from Myanmar (Burma)
- Because of govts civil rights violations and severe measures it has taken against protests by students and
monks
- US and EU also agreed to ban imports of gems from Myanmar.
- Muh blood diamonds
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- Solving ethical dilemmas is not easy
- Each possible decision can lead to both good and bad outcomes
- 4 common ethical challenges
- Conflict of interest, honesty and integrity, whistle-blowing, loyalty versus truth.
- Conflict of interest
- WHen a businessperson is faced with a situation where an action that benefits one person/group has potential to
harm another
- May pose ethical challenges when they involve the person’s own interest and interests of a person/party to whom
the person has a duty
- Ex. lawyers, consultants, advertising agencies
- Face conflict of interest if they represent two competing companies
- Conflict may also exist between someone’s personal interests and the interests of an organization or its customers
- Offer of gift/bribes for special treatment
- When one person holds two or more similar jobs in two diff workplaces
- Can be handled ethically by
- Avoiding them
- Disclosing them
- Some companies have policies against taking on clients who are competitors of existing clients
- Most govt agencies and biz have written policies against employees accepting fits, or species a max gift value
- Members of board of directors or committee might abstain from voting when they have a personal interest in the
decision\
- Honesty and INtegrity
- Employers value this
- Employee with integrity goes beyond truthfulness
- Behaving according to one’s deeply felt ethical principles in biz situations
- Doing what you say you will do and accepting responsibility for mistakes
- Behaving with integrity inspires trust, build longterm relationships with customers, employers, suppliers,
and the public.
- Employees in turn want their managers and company to treat them honestly and with integrity
- Violations of this are common
- Misrepresent academic standing and previous work experience on resumes
- ADP survey revealed ⅕ Cdns lied on his/her resume
- Some employees steal from employers,
- Taking home supplies/products without permission
- Carrying out personal business while being paid to work
- Internet misuse
- Some employers resort to electronic monitoring and surveillance
- Employers have another reason to monitor employees, complying with the laws regarding the
privacy and security of client information
- Loyalty vs Truth
- Business people expect employees to be loyal and act in the best interests of the company
- When the truth of a company is not favourable, an ethical conflict can arise
- Employees may need to decide between loyalty to the company and truthfulness in biz relationships
- Some place the highest value on loyalty, even at the expense at truth
- Others avoid volunteering negative info but answer truthfully when asked a direct question
- People may emphasize truthfulness and disclose negative info, especially when cost of silence is high -
such as malfunctioning aircraft or tainted food
- Whistle-Blowing
- When an employee encounters unethical or illegal action at work, they must decide what action to take
- Maybe only solution is to blow the whistle
- Whistle-blowing - employee’s disclosure to company officials, government authorities, or the media of
illegal, immoral, or unethical practices.
- Ex. May 2014, Robert Buckingham, University of Saskatchewan dean, fired and escorted by cops from uni
grounds after alerting the public to planned university budget cuts (TransformUS) and expressing his opposition
to the cuts. Buckingham said that the former uni president Ilene Busch-Vishniac “expected her senior leaders to
not publicly disagree with the process or findings of TransformUS”; she added that if we did our tenure would be
short.””.
- In a few days the Uni of Saskatch reconsider the decision to fire Robert
- Tenure was reinstated, but he was not allowed to return to being dean.
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- Lots of protesting by students staff and alumni to hold the school accountable.
- Brett Fairbairn resigned from his position as provost, Ilene was fired as president.
- No specific laws protect whistle-blowers in Canada, many Canadian companies (air canada) have policies to
protect whistleblowers.
- In 2004, bill C-25 Public Servants DIsclosure Protection Act
- Protect people who expose problems in government’s bureaucracy - help ensure transparency,
accountability, financial responsibility, and ethical conduct.
- Whistle blowing has risks
- Zues Yaghi from Edmonton said casino video slot machines could be made to pay on demand due to
backdoor in program.
- Yaghi was sued by the company for 10mil, warrant was issued to search his home, few days later, gag
order was issued to prevent him from saying how a player could make the slots payout. Company offered
50,000 for his silence but he asked for more money.

How organizations shape ethical conduct

- Corporate culture that supports business ethics develops on four levels
- Ethical awareness - bottom
- Ethical education - third
- Ethical action - second
- Ethical leadership - top
- If any of these 4 are missing, ethical climate in an org will weaken

Ethical Awareness
- Employees need help identifying ethical problems when they occur, also need guidance about how the firm expects them
to respond
- One way is to develop a code of conduct - formal statement defines how the org expects its employees to resolve ethical
questions
- Basic level - ground rules for acceptable behaviour, laws and regulations
- Other companies identify key corporate values and provide frameworks to guide employees to resolve moral and
ethical dilemmas.
Ethical Education
- Code of conduct can provide an overall framework, but does not have solutions.
- Businesses should provide the tools employees need to evaluate options and arrive at suitable decisions
- Some firms have started their own ethnic trainings programs, some have hired organizations such as
- The Skald Group, Hamilton, provides outsourced ethics programs to businesses
- Debate over whether ethics can be taught
- Ethics training is helpful, b/c employees can practice applying ethical values to sample situations before they face
real world situations.
- Walter Pavlo - convicted white-collar criminal, former employee of MCI (telecommunications).
- Worked with other MCI staff to hide 6million in offshore accounts
- Now spokesperson at colleges and universities about his experiences in the firm and in prison.
Ethical Action
- Firms must allow decisions to turn into ethical actions.
- Texas Instruments gives its employees a reference card to help them make ethical decisions
- Is the action legal?
- Does it comply with our values?
- If you do it, will you feel bad?
- How will it look in the newspaper?
- If you know it's wrong, don't do it
- If you're not sure, ask.
- Keep asking until you get an answer.
- Businesses often set goals for whole business and also for individual departments and employees.
- Can affect ethical behaviour
- Ex. firm manager sets unrealistic goals for employee performance
- Leads to increased cheating and lying as employees try to protect themselves
- Ethical decisions often require careful and quiet thought which is hard in the fast-paced business world
- Some companies encourage ethical action
- Common tool is an employee hotline, ethics compliance officers.
Ethical Leadership
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- Executives must not just talk about ethical behaviour, they also need to show it in their actions
- Recent recession exposed executive level misdeeds that damaged entire organizations ; some people lost their life savings.
- After hearing of these misdeeds, two Harvard BUsiness School students interviewed corporate leaders they
regarded as being highly moral. Concluded that ‘ethical mavericks’ follow a moral code with three simple
characteristics:
- Clear, explicit language rather than euphemisms for corrupt behaviour
- Encourage behaviour that generates and fosters ethical values
- Practice moral absolutism, insisting on doing right even if it proves financially costly
- Ethical leadership should go further, every employee should be charged with responsibility to be an ethical leader.
- Not all orgs can build a solid framework of business ethics
- Damage from ethical misconduct can affect a firm’s stakeholders - customers, investors, employees, public -
businesses are pressured to act in acceptable ways.
- When businesses fail, law must step in to enforce good business practices.

Acting Responsibly to Satisfy Society

- Social responsibility - management's acceptance of its obligation, when evaluating firm performance, to consider profit to
be of equal value to other qualitative indicates, such as employee satisfaction, consumer satisfaction, and societal well-
being.
- Businesses may exercise social responsibility for many reasons
- Required by law
- Enhances company image
- Management believes it is ethical course of action
- Business is often judge by interactions with the community
- To demonstrate their social responsibility, many corporations highlight their charitable contributions and
community service in their annual reports and on their websites.
- PricewaterhouseCoopers Canada (PwC) has “Team Volunteering” program that sets up teams to work with
charities throughout Canada in day-long projects.
- Upon request, PwC will send up to 50 employees to volunteer for a day to registered Cdn charities.
- Tim Horton Children’s FOundation established 1974, provides camp environments for children from
disadvantaged homes.
- One day each year is set aside as Camp Day, every tim hortons store donates the value of that day’s
coffee sales to the Foundation. In 2013, 11.8million was raised.
- Some firms measure social performance by conducting social audits - formal procedures that identify and evaluate all
company activities related to social issues, such as conservation, employment practices, environmental protection, and
philanthropy.
- Outside groups may do their own evals of businesses
- Reports on many of these evals are available to general public
- Canadian Business for Social Responsibility (CBSR) organization offers CSR assessments that examine internal
activities of a company and compares them to industry CSR best practices.
- Also offers advisory services to assist firms in creating a company wide CSR strategy.
- Businesses’ social responsibilities can be segmented by their relationships to the general public, customers, employees,
investors, and other members of the financial community.
Responsibilities to General Public
- Health issues, environment, quality of workforce
- Support charitable and social causes that work towards greater public good
- Businesses should give back to the communities in which they earn profits (corporate philanthropy)
- Public Health Issues
- What businesses should do about dangerous products like tobacco and alcohol
- 10year study in Toronto revealed that cardiovascular hospital admissions dropped by 39% after smoking
was banned in public places.
- Rate of heart disease, diabetes, and obesity have been increasing.
- 1.6million Cdn children (26%) are overweight or obese
- ¾ of obese teens will become adults who are at risk for heart disease and diabetes
- Soft drink companies have been highly criticized for contributing to this
- Coca-Cola FOundation provided a 3million grant to establish the COca-COla Troops for Fitness,
fitness program with classes instructed by military veterans. SUPPORT OUR TROOPS
- Coca-Cola also supports Boys and Girls Clubs of America’s Triple Play program, healthy
lifestyles program geared to youth and families.
- Substance abuse is another serious health problem
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- Many of drugs used by athletes are similar to chemicals that are naturally present in the body
- Therefore detecting can be difficult
- Professional players who fail drug tests face tough penalties
- Ben Johnson, Cdn athlete, stripped of his gold medal for the 100metre sprint at the 1988
Olympics for having used the anabolic steroid stanozolol.
- Protecting the environment
- Acid rain has been tracked for many decades, companies are still being identified and punished.
- Mount Polley Mining Corporation currently faces fines of up to 1million for mistakes leading to the
breach of a dam in BC that resulted in the release of 4.5million cubic metres of metals-laden fine sand
that contaminated several lakes, creeks, and rivers in the Cariboo region.
- Dumping took place same day that Ottawa promised to improve environmental monitoring of the
Canadian oil sands.
- VW tricking emissions testing in diesel vehicles.
- Company faces potentially billions of dollars in fines and lawsuits, but more immediate fallout is
suspension of senior managers and resignation of its CEO
- Waste materials
- Few manufacturers are equipped to deal with recycled materials, some refurbish products and sell
them abroad.
- HP makes its scanners with a combo of new and recycled plastics
- Lead, mercury, cadmium will soon be banned from new equipment manufactured in Europe.
- As stricter laws on electronics recycling are passed, many retailers and manufacturers offer take-
back programs for discarded electronic equipment (best buy)
- For many managers, minimizing pollution and other environmental damage is an important economic,
legal, and social issue.
- When GM unveiled the Chevrolet Volt - entirely electric - it became more popular than
traditional hybrids.
- 2014, Elon Musk announced that “Tesla will not initiate patent lawsuits against anyone who, in
good faith, wants to use our technology”
- BMW i3
- Companies find they can be environmentally friendly and profitable too
- Solution to pollutants is recycling - reprocessing used materials for reuse.
- Stats Canada - diversion of discarded electronic items away from landfill sites has increased by 115% in 2
years.
- Manufacturers and federal agencies are struggling to devise a workable system to further manage the
problem of electronic waste
- Some provinces consumers pay a surcharge on certain electronics purchases
- In ON, surcharge is part of the Waste Electrical and Electronic Equipment (WEEE) Program.
- Many consumers like to support environmentally conscious businesses
- Companies use green marketing - strategy that promotes environmentally safe products and
production methods
- Competition Bureau has guidelines for environmental claims
- Ex. firm must be able to prove that any environmental claim can be supported by
reliable scientific evidence.
- Also states how various environmental terms can be used in advertising and
marketing
- Degradable - be photodegradable or biodegradable within a given period
of time under normal disposal conditions for that type of product or
package
- Compostable - biodegrade, generating a relatively homogeneous and
stable humus-like substance
- Recyclable - be able to be processed and returned to use in the form of
raw materials or products
- Refillable - refillable with the same or similar product.
- Many firms focus on other environ issues, such as renewable sources of clean energy and developing
sustainable agriculture
- Vinod Khosla, founder of Sun Microsystems, working with group of high-powered entrepreneurs
and investors in Silicon Valley.
- Hope to develop a new generation of energy
- Pacific Biodiesel started with one plant and now has branches across US.
 12
- Canadian Pacific is likely to match their growth in Canada, especially with support of the
government which has spent nearly 5 billion on the ecoENERGY Innovation Initiative that
encouraged Cdn companies and Cdns to use and develop cleaner technologies.

Developing the Quality of the Workforce:

- In developed economies, many jobs require advanced training and skills, in the form of a degree.
- Organizations are responsible for helping women, members of various cultural groups, and disabled people to fully
contribute to the economy.

Corporate Philanthropy
- Not-for-profit organizations play an important role in society by serving the public good, they provide the human
resources that enhance the quality of life in communities around the world.
- To contribute, firms donate billions of dollars yearly to not for profits, this is called Corporate Philanthropy. These
donations include cash, equipment, products, human labour, etc.
- Corporate Philanthropy can lead to, increased employee morale, enhanced company image, and improved customer
relationships.
- Companies often want to tie in their charitable giving in to their marketing, this is called cause-related marketing.
- In a recent survey, 9/10 people said companies have a duty to support social causes, and 7/8 said they would switch
brands to support a company that does support social issues. Consumers will also pay a higher price for a good if they
know some proceeds are going to a good cause.

Responsibilities to Customers:
- Consumerism is the public demand that a business consider the wants and needs of its customers when making decisions,
it is based on the belief that consumers have certain rights.
- In 1962, US president JFK outlined 4 consumer rights, called the Consumer Bill of Rights.
- The CAC (Consumers Association of Canada) was formed in 1947., it helps educate and inform customers on issues
related to buying products and services.
- Consumer Rights:
- Right to be heard.
- Right to be safe.
- Right to choose.
- Right to be informed.

- Right to be safe:
- Businesspeople have a moral and legal obligation to ensure their products are safe to use, consumers should know
the products they but will not cause harm in normal use.
- Product liability refers to the personal responsibility of manufacturers for injuries and damages caused by their
products.
- Items that lead to injuries or death, directly or indirectly, have lasting consequences for the manufacturers.
- Recall: 2008 Maple Leaf Foods listeria outbreak.

- Right to be informed:
- Consumers should be able to get enough info to make responsible buying choices .
- The Competition Act contains provisions against false or misleading advertising and deceptive marketing.
- Health Canada supports the Food and Drug Act, this act defines the standards for safety and advertising to be
followed by makers of drugs, cosmetics, and therapeutic devices. The act also mandates the ingredients be clearly
labelled on products.
- Labels also include toll free phone numbers that customers can call to have their questions answered.

- The right to Choose:

- Consumers should have the right to choose the good/service they prefer.
- Socially responsible firms try to preserve this right, even if it means reducing their own profits.

- The right to be Heard:

- Consumers should be able to express their valid concerns to the appropriate people.

Responsibilities to Employees:
 13
Businesses have a wide range of responsibilities to their employees, domestically and abroad. These responsibilities include
workplace safety, quality of life issues, ensuring equal opportunity, avoiding age discrimination, and preventing sexual
harassment.

Workplace Safety:

- Safety for workers on the job is important.

- The Canadian Centre for Occupational Health and Safety (CCOHS) promotes workplace health and safety.
- According to a 2010 study, 1 in every 53 workers injured on the job and receives workers comp.
- Most fatalities occur as a result of unsafe equipment, inadequate safety training, or dangerous work.

Quality of Life Issues:

- Workers are now working longer hours and balancing work and family is becoming increasingly difficult.
- A sandwich generation has arisen, this term refers to people caring for two generations at once, their children and their
aging parents.
- Workers can be accommodated by offering flexible work schedules so people can complete their jobs and care for their
families.
- At some innovative firms like IBM, they have done away with vacation time altogether, employees are free to take as
much time off as they reasonably want as long as their assignments and work still gets completed on time.

Ensuring Equal Opportunity on the Job:

- The Canadian Charter of Rights and Freedoms addresses discrimination in Canada. Various rights protected by laws in
Canada are:
- Equal rights; states every individual is equal under the law
- Physical and Mental Disabilities; Forbids age discrimination, and forces employers to make reasonable
accommodation for those with disabilities
- Equal pay for equal work; #CLOSETHEGAP, #74CENTSONADOLLAR, #HASHTAG
- Pregnancy and parental leave; Employers cannot penalize employees for taking parental leave.
- Family Medical Leave; Allows an employee to take up to 8 weeks off in a 26 week period to care for a seriously
ill family member.
- Reservists; something unimportant about military

- The Employment Equity Act (EEA) was created to increase job opportunity for women and members of minority
groups, and to help end discrimination in any personnel action based on race, etc.
- To ensure fair employment laws, this act is overseen by the Canadian Human Rights Commission.

Age Discrimination:

- The average age of the Canadian worker is rising, companies like hiring younger workers because they have less medical
bills and lower salaries, but lack the experience older workers have.
- The Canadian Human Rights Act (CHRA) prohibits age discrimination except in very specific cases.
- Job satisfaction is very high with those 65 and older because they mainly work because they enjoy their jobs, not because
they need the money.
- It is estimated that the retirement of the baby boomers will result in an $11,500 per capita loss in productivity,

Sexual Harassment and Sexism:

- Sexual Harassment is all unwelcome and inappropriate actions of a sexual nature.

- Both men and women suffer from sexual harassment and both genders do report it.
- There is 2 main types of sexual harassment:
- When an employee is pressured to go along with unwelcome advances and requests for sexual favours in
exchange for job security, promotions, raises, etc.
- When an employee feels harassed or degraded because of lewd comments unwelcome flirting, or obscene jokes.

- Many firms have policies and employee education programs aimed at preventing these problems, effective policies should
include:
- Specific policy prohibiting sexual harassment
 14
- A complaint procedure for workers to follow
- A work atmosphere that encourages victims to come forward.
- A commitment to investigate and resolve complaints quickly.

Responsibilities to the Investors and the Financial Community:

The fundamental goal of any business is to make a profit for its shareholders, but the investors and community require that the
business behaves ethically and legally. Provincial regulators such as the Ontario Securities Commission protect investors from
financial misdeeds, the regulators invest suspicions of unethical or illegal behaviour by publicly traded firms.

Session 9 - Strategic Human Resource Management

READINGS
Dom Price, “When Companies End Remote Work, This is What They’re Really Saying (Hint: It’s About Trust)”
- People are still debating over the logistics of remote work - working in distant locations
- How can collaboration work, and therefore extension, creativity, and innovation?
- Some believe that teams are more effective when working together in person
- Yahoo and Best Buy banned remote work in 2013, along with Reddit recently, but disallowing full-time remote work is
actually flawed

- People problems vs proximity problems

- Collaboration does not require co-location → no company would ever have more than one single office site
→ expansion of office sites
- Given the right environment, remote workers enhance business
- If they are ineffective, it’s a people problem where the workers themselves are not working, thus
minimizing output and increasing effort to find source of unproductivity
- Focusing on open communication, autonomy and trust will make people effective no matter where their
desk is → engage and empower
- Think “why”, then “how”
- Understand why you are distributed in different locations (context)
- Evolve these practices (ex: video conferencing, sharing updates online, shared docs, messaging etc.)
- Relationships matter
- Relationships are a sound investment → psychological safety & belonging important
- Building relationships from scratch takes a long time; may be setbacks due to misunderstandings
- BEST to create relationships in person and MAINTAIN them remotely
- Companies fly people out for interviews and then hired as a remote worker with some face time to start
- Getting to know others’ quirks, working styles, communication and personalities helps with cohesion in a
team → people can be authentic and are able to suggest new ideas / speak up
- Matter of trust
- Collaboration and trust is rooted in trust no matter how much work gets done
- Give people boundaries to work in AS WELL AS autonomy to make decisions for best performance
- Check in once in awhile and give clear directions
- Remote work is here to stay → it may be complicated but the key is evolving your practices

SLIDES/CLASS NOTES
*does not include slides repetitive of textbook
How to foster originality within a big company
- Google working environment → some good ideas come from employees’ time for themselves (ex: G-mail) and
friendly environment motivates employees
- Drawbacks may include the costs, too much freedom → no work done, leadership might have significant control
over coordination and less control over employees

Historical overview
- Craftspeople & apprenticeships → Industrial Revolution → personnel administration → Human Resources Movement
→ strategic management of people in organizations
 15
Strategic management: process for analyzing a company’s competitive situation, developing the company’s strategic goals, and
devising a plan of action and allocating resources that will increase the likelihood of achieving these goals

Strategic human resource management: pattern of human resource deployments and activities intended to enable an organization
to achieve its goals

Social media and hiring process

- Companies look at social media to get a sense of how an individual is
- Judging on personal level is different than a business level (privacy risk for others and self)
- Working for a company means you and your behaviour represent them
- Jobs caring about personality (ex: customer service, teamwork, etc.) will ask for social media handles

Why millennials hate traditional companies

- Millennial workers:
- Want to feel like they’re making a difference
- Want job satisfaction instead of future planning
- Are creative, diverse and more dynamic
- Want flexibility
- Don’t want political corporate culture
- Therefore management should:
- Understand their needs and organize their structure to cater
- Give them autonomous decisions to make (within reason)
- Give them job flexibility and upward mobility
- Provide a good work environment (ex: casual work clothes)
- Provide incentives that aren’t monetary
- Provide team opportunities
- Hire people that compliment instead of conform to corporate culture

TEXTBOOK (Chapter 8)
Human resources: the people behind the people
- Company is only as good as its workers
- Successful companies value their employees (who are eager to work there) just as much as their customers
- Important to have good, top-quality workers to have the best goods/services
- Human resource management → the function of attracting, developing, and retaining employees who can perform
the activities needed to meet organizational objectives
- Must also achieve job satisfaction and dedication among employees
- Small companies may not be large enough to have a human resources department because of limited financial resources
- The five core responsibilities of human resource management are:
1. Planning for staffing needs
2. Employee recruitment and selection
3. Employee training and performance evaluation
 16
4. Employee compensation and benefits
5. Employee separation
- The objectives met with these responsibilities are:
- providing qualified employees,
- maximizing employee effectiveness, and
- satisfying individual employee needs through monetary compensation, benefits,
- opportunities to advance and job satisfaction
- HR plans must be based on overall competitive strategies, and HR managers should use other managers to predict
the number of employees in each department → involved in planning

Recruitment and selection

- Finding qualified candidates: companies with great reputation for benefits or working conditions will get more job
applications → identify narrowed job requirements
- Traditional methods of recruiting workers include college fairs, referrals, and ads
- Recruiting techniques continue to change as technology advances (ex: blogs, podcasts, internet)
- Internet is the best way to reach new graduates for employee recruitment
- Selecting and hiring employees: the HR manager selects and hires employees often by working with department
managers or supervisors
- Have to follow provincial/federal laws against discrimination to make competition for jobs fair → failure to
comply results in costly legal fees, fines, bad publicity and poor employee morale
- Unintended consequences if HR doesn’t have careful consideration to choose candidates → interviewing
candidates have to incorporate these laws
- Dealing with hiring restrictions is hard; some firms require drug testing for job applicants for public safety (not always
accurate and may be an invasion of privacy)
- The hiring process can be expensive (advertising, interviewing, employment testing, and then costs for training and
equipment)
- Bad hiring decision is more expensive because they would have to go through more to get the right person
→ employment tests to avoid this
 17

Orientation, training, and evaluation

- After being hired, employees need to know their responsibilities, provided through orientation, training, and evaluation
- Employees learn about company policies regarding rights and benefits in orientation, and may get an employee manual
for code of ethics and conduct, followed by training to prepare employees and employers for new skills and job
opportunities
- Training programs - training helps a company gain a competitive edge in marketplace (Accenture invests in employees a
lot)
- On-the-job training - employees perform tasks under guidance of experienced employees → similar to
apprenticeship training where they are the assistant (for more blue-collar work)
- Classroom and computer-based training - classroom instruction like lectures, conferences, workshops or
seminars → focus on classroom learning, experiential learning, and coaching → computers allow for
consistent presentations that simulate work environment and interactive learning
- Management development → provides training designed to improve the skills and broaden the knowledge of
current or future managers and executives → increases specific technical or general knowledge like
leadership
- Performance appraisals - evaluations of and feedback on an employee’s job performance
- Best way for a company and its employees to improve in assessed goals
- Manager can make decisions about compensation, promotion, training needs, transfers
- Argued that they may be subjective based on personal opinion
- Effective performance appraisals:
- Take place several times a year
- Be linked to organizational goals
- Be based on objective measures
- Take place in the form of two-way conversation
 18
- Peer reviews and employee reviews of managers also take place in some firms
- The 360-degree performance review gathers feedback from a review panel of 8 to 12 people including
coworkers, supervisors, team members, sometimes customers → lot more work but employee benefits and is
more involved since it is in-depth and works with their own likes and dislikes

Compensation
- Compensation: the amount employees are paid in money and benefits
- One of the greatest issues HR faces → how much employees are paid including benefits which affects where
people live, etc. as well as job satisfaction
- Benefits of paying employees more is better reputation (ex: Fortune magazine, “100 Best Companies to Work
For”
- Wage: pay based on an hourly rate or the amount of work accomplished (wage earners are factory workers,
restaurant staff, retail workers, etc.) → can earn overtime pay
- Salary: pay calculated on a periodic basis, such as weekly or monthly (set amount of pay that does not change with
the number of hours put in) (salary earners are office personnel, executives, professional employees) → cannot earn
overtime pay
- An effective compensation system should attract well-qualified workers and keep them satisfied and inspired to
succeed → minimum wage laws also enforced
- Base compensation on:
- 1. What competing companies are paying,
- 2. Government regulation,
- 3. The cost of living,
- 4. Company profits,
- 5. Employee productivity
- Balancing profits with rewarding workers by paying superior performance workers more
- Incentive compensation programs include:
- Profit sharing - awards that are bonuses based on company profits
- Gain sharing - whereby companies share the financial value of productivity gains, cost savings or quality
improvements with workers
- Lump-sum bonuses and stock options - like one-time cash payments and right to purchase stock in company based
on performance
- Pay for knowledge - distributes wage or salary increases as employees learn new job tasks

- Employee benefits: additional compensation paid entirely or partly by the company such as vacation time, retirement
savings plans, profit-sharing, health insurance, gym memberships, child and elder care, and tuition reimbursement
- Could be 30% of employee’s earnings
- Some benefits required by law like pension contributions → Canada Pension Plan
- Large companies often pay for supplementary healthcare benefits like gym memberships and doctor visits, as well
as compensation programs or unemployment insurance
- Flexible benefits: often called cafeteria plans, they offer choice of benefits like types of medical insurance, dental / vision
plans, life insurance. Each employee has a set allowance like flex dollars to pay for benefits. There is also paid time off
accounts (PTO) with set number of days for holidays, vacation days, sick days
- Flexible work: plans allowing employees to adjust their own working hours or place of work → flextime, compressed
workweeks, job sharing, telecommuting which reduce employee turnover and absenteeism
- Flextime allows employees to set own work hours within certain limits → outside of core hours, and work
well with independent workers not team members as well as small number of employees
- Compressed workweeks allows employees to work longer hours on fewer days
- Job sharing program allows two or more employees to divide up tasks of one job (people like part-time like
students or older workers)

Employee separation
- Employee separation: a broad term for the loss of an employee for any reason, voluntary or involuntary
- Voluntary and involuntary turnover - turnover occurs when employees leave their jobs
- Voluntary is when they resign of their own accord → HR will ask for reason of leave providing valuable info
to firm (like low pay, maybe offer raise)
 19
- Involuntary is when they are terminated due to poor job performance or unethical behaviour in business
practices, or as a cost cutting measure for the firm → not easy because of angry reactions or coworkers taking
sides; HR must remain calm and professional
- Downsizing - the process of reducing the number of employees within a firm by eliminating jobs
- Done by offering early retirement or voluntary severance programs
- Might improve profits, market share, productivity, quality, customer service (positive)
- Might result in anxiety/health problems and lost productivity, expensive severance packages to laid-off
workers, and domino effect in the economy (unemployed workers spend less → less demand → increases
more layoffs and failure in businesses)
- Outsourcing - using outside vendors to produce goods or fulfill services and functions that were previously handled in-
house or in-country
- Jobs are transferred from inside a firm to outside
- Ex: office maintenance, delivery, security, accounting, IT, etc.
- Will happen if the jobs are not a part of core business as means to save on expenses and remain flexible

Motivating employees
- One of the manager’s main goals is to motivate employees to be loyal to company and to perform their best
- Starts with good employee morale which is employees’ mental view toward employer and jobs
- Occurs when they feel valued, opinions are heard, and empowered
- Generally managers will use rewards and punishments to motivate employees
- Extrinsic rewards that are outside of work like praise, pay, fringe benefits
- Intrinsic rewards are feelings related to performing the job like pride for meeting a deadline
- Punishment involves negative outcome responses and undesirable behaviour
- Many theories of motivation like a basic process
- Recognizing a need, moving toward the need with motivation, leading to goal-directed behaviour, and satisfying
the need

- Maslow’s hierarchy of needs theory: a theory of motivation proposed by Abraham Maslow, based on assumptions that
people’s needs depend on what they already possess, only needs that remain unsatisfied can influence behaviour, and
people’s needs are arranged in a hierarchy of importance
- According to the theory, people have five levels of needs:
1. Physiological needs - basic human needs like food, shelter, clothing → satisfied by salaries and wages and at
workplaces with heated/cooled workplaces
2. Safety needs - desires for physical and economic protection → satisfied by provided company benefits like
health insurance and safety standards in workplace
3. Social (belongingness) needs - people want acceptance by family, friends, and co-workers → satisfied by
managers by encouraging teamwork and group lunches
4. Esteem needs - people like to feel valued and recognized by others → satisfied by offering special awards or
privileges or praise
5. Self-actualization needs - drive people to seek fulfillment of their dreams and capabilities → can be satisfied by
offering challenging or creative projects and opportunities for education and advancement

- Herzberg’s two-factor model of motivation

- Certain factors are important for job satisfaction, but not necessarily motivation
- Hygiene factors (maintenance factors) refer to aspects of work that do not directly relate to the task
but relates to the environment (ex: pay, job security, working conditions, etc.) → extrinsic
- Can result in satisfaction
- Motivator factors produce high levels of motivation like job responsibilities, achievement and
recognition, opportunities for growth → intrinsic

- Expectancy theory and equity theory

- Expectancy theory - the process people use to evaluate the likelihood that their efforts will lead to the results they
want and the degree to which they want those results
- First factor is a person’s subjective prediction that a certain effort will lead to the desired
- Second factor is the value of the outcome to the person
- Third factor is how likely a successful performance will lead to a desirable reward
 20
- Equity theory - an individual’s perception of fair and equitable treatment
- Considering effort and rewards compared to others’ (maintained effort if same, decreased if yours is
better than theirs, and increased if yours is worse than theirs)

- Goal-setting theory and management objectives

- Goal: a target, objective, or result that someone tries to accomplish
- Goal-setting theory: the idea that people will be motivated to the extent to which they accept specific, challenging
goals and receive feedback that shows their progress toward goal achievement
- Components: goal specificity, goal difficulty, performance feedback, goal acceptance
- Management by objectives (MBO): a structured approach that helps managers to focus on reachable goals
and to achieve the best results based on the organization’s resources to increase organizational
performance
- Aligns the individual’s objective with goals of organization
- Principals include:
- A series of related organizational goals and objectives
- Specific objectives for each person
- Participative decision-making
- Set time period to accomplish goals
- Performance evaluation and feedback

- Job design and motivation

- Way to motivate employees through jobs
- Job enlargement - expands employee’s responsibilities by increasing number and variety of tasks
- Job enrichment - expands an employee’s job duties to empower an employee to make decisions and learn new
skills leading toward career growth
- Job rotation - moving employees from one job to another to increase employees’ range of activities and learning
with different tasks

- Managers’ attitudes and motivation

- Manager’s attitude influences their motivation
- Theory X - assumes that employees dislike work and try to avoid → managers need employees to do
their jobs and believe that the average worker prefers to receive instruction, avoid responsibility, and
take little initiative as well as only want money and job security as an incentive
- Theory Y - assumes the typical person actually likes work and will want more responsibility → enjoy
creative work-related problems and will want opportunities to participate in decision making → self-
control and self-direction are main incentive
- Theory Z - assumes key to increased productivity and employee quality of life is worker
involvement → firms should ask workers for suggestions on how to improve their jobs and give them
the authority to implement it

Labour-management relations
- Development of labour unions
- Labour union - a group of workers who organize themselves to work toward common goals in the areas of
wages, hours and working conditions
- Found at local, national, international unions
- Approximately 600,000 Canadian employees are represented by the largest union in Canada, Canadian
Union of Public Employees (CUPE)
- Canadian based labour groups all combined to form Canadian Labour Congress (CLC)
- Collective bargaining: the process of negotiation between management and union representatives
- Issues include: wages, work hours, benefits, union activities and responsibilities, grievance handling and
arbitration, layoffs, employee rights and seniority
- Labour relations board
- A type of judicial organization responsible for overseeing workers’ group that apply to become a union and
activities that occur during a labour dispute
- Settling labour-management disputes
- If a disagreement occurs it is usually settled through a grievance procedure, mediation or arbitration which are
quicker and less expensive than a strike
 21
- Union contract is a guide to relations between the firm’s management and its employees stating the rights to
each party, but disagreements are still possible → beginning of a grievance (disagreement)
- Mediation is the process of settling labour-management disagreements through an impartial or objective third
party
- If the dispute cannot be settled, then they can turn to arbitration, where an outside arbitrator must be acceptable to
the union and management
- Competitive tactics of unions and management
- Union tactics - strikes, picketing, boycotts as a means of making their views known to gain support
- Strikes involve temporary work stoppage by workers until a dispute has been settled / contract signed
- Picketing involves workers marching in a public protest against their employer (pressure on union)
- Boycotts are organized attempts to keep the public from purchasing goods or services of a firm
- Management tactics - competing with organized labour when negotiations break down → use the lockout, a
management “strike” to put pressure on union members by closing the firm
- The future of labour unions
- Canada, US, Western Europe, and Japan have shifted from manufacturing economies to information and
service economies → union membership and influence has declined
- Public sector unions have grown to include more than 70% of all employees
- Unions need to be more flexible to adapt to a global economy and diverse workforce
- Largest unions in Canada include: Canadian Union of Public Employees (CUPE), the National Union of
Public and General Employees (NUPGE) and Public Service Alliance (PSA)
- Unions can set up relationships with HR managers and recognize prosperity for everyone (management
and union workers)

Session 10 - Strategy and Operations Management

SLIDES/CLASS NOTES

- Integrated E2E View of Supply Chain

- Key attributes of excellent supply chains

- End to end focus and scope
- Alignment of supply chain strategy with corporate goals and business strategy
- Segmented operating models to compete effectively in the local markets
- Synergy and integration with customers and suppliers as well as within company’s functions
- High value collaborative supply networks with supply chain partners
- Demand driven network for market responsiveness
- The End to End Supply Chain
 22

- Supply Chain Management Hierarchy

- Production and operations management

- Overseeing the production process by managing the people and machinery that convert materials and resources
into finished goods and services
- 4 facility layouts
- Process
- Group equipment based on functions
- Product
- Set up assembly lines
- Fixed-position
- Product is in one place and everything comes to it
- Customer-oriented
- Facilities are arranged to make better interactions between customers and services
- To carry out the production plan you need to
- Decide on making, buying or leasing parts
- Select suppliers
- Different types of inventory
- Raw materials
- Components
- Work-in-process
- Finished goods
- Reasons to hold inventory
- Time varying demand or supply patterns (seasonal)
- To balance against uncertainty (safety)
- Customer demand
- Supplier quantities, costs, or lead time
- Processing and movement (pipeline)
- Delivery lead times
 23
- Economies of scale in transportation, production, or
purchasing (batch)
- To ensure a high level of customer service (location)
- Speculation on future events, including price increases (speculative)
- Ways to handle inventory
- Perpetual inventory system
- Constantly keep track of inventory coming in and going out
- Periodic inventory system
- Periodically (i.e. monthly) check how much inventory you have
- Just-In-Time system
- Bring in parts just as they are needed for production
- Overall Equipment Effectiveness
- OEE is a popular measure of manufacturing performance
- OEE = Availability x Performance x Quality
- Performance management: Balanced Scorecard
- Balances performance review between
- Financial
- Internal business process
- Learning and growth
- Customer
- Cash-To-Cash Cycle
- Going from spending cash to making products/services to receiving cash for that
- Calculation of EVA/Economic Profit

- Final thoughts on operation leadership

- Supply chain leader need holistic, end-to-end understanding of the supply chain
- Successful supply chain need to identify the “right” supply chain for your specific environment
- The “right” supply chain needs to be demand-driven, segmented, aligned properly to strategic business objectives,
and integrated with other functions
- Can create high value in supply chain network through collaborations with your suppliers, customers, and other
supply chain partners

TEXTBOOK (Chapter 10)

10.1 The Strategic Importance of Production

- 3 different types of production
- Mass production
- Manufactures large quantities of similar products
- Uses specialized workers for small tasks
- Developed the assembly line
- Very inefficient at producing small batches of different items
- Can cause companies to focus on increasing production efficiency rather than a product customers want
- Boring jobs for workers
 24
- Flexible production
- More cost effective than mass production for small batches
- Uses 3 resources
- Information tech: to share details of customer orders
- Programmable equipment: to fill orders
- Skilled people: to carry out tasks to complete order
- Requires communication
- Works better with lean production methods using automation and infotech to reduce workers and
inventory
- Customer-driven production
- Assesses customer demands then makes connection between products that are manufactured and products
people want
- E.g. set up computer link between retail scanners and factory, sales data makes forecasts and designs
production schedules to meet the forecasts
- Another example: waiting until customer orders to make the product
10.2 Production Processes
- Types of production process systems
- Analytic
- Reduce raw material to component parts to extract marketable product(s)
- E.g. petroleum to crude oil
- Synthetic
- Combine raw materials/parts to make finished product
- E.g. making a camera
- Types of production processes based on time requirements
- Continuous
- Creates finished product over long period of time
- Shutdowns pretty much never happen
- E.g. steel factories
- Intermittent
- Creates products in short production runs
- Machines shut down frequently or are changed to produce different products
- Includes most services
- E.g. accountants or restaurants that cook to order
10.3 Technology & the Production Process
- Green manufacturing
- Processes that result in less waste, lower energy use, little/no pollution, etc.
- Helps public image
- Can reduce other costs
- E.g. clean fracking chemicals can allow the reuse of fracking water
- LEED (Leadership in Energy & Environmental Design) certification is offered by the Canada Green Building
Council to show that construction companies are being green
- Robots
- Robots are replacing boring and dangerous jobs in manufacturing
- Robots are becoming less expensive and more useful
- Computer-Aided Design & Manufacturing
- CAD (computer-aided design) allows engineers to design parts and products on computers
- CAD is faster and makes less mistakes than traditional methods
- CAM (computer-aided manufacturing) analyzes the steps that a machine must take to manufacture a product
- Flexible Manufacturing System
- FMS is a production facility that can be quickly changed to manufacture different products
- Often uses computer-controlled machining, robots, etc.
- Computer-Integrated Machining
- Uses CAD/CAM, FMS and other tech to apply CIM (computer-integrated machining)
- Computers help workers to design and create products
- Everything is based around a centralized computer system
 25
10.4 The Location Decision

10.5 The Job of Production Managers

- Planning the Production Process

- Choose goods/services to offer
- Choose how to produce products
- Selecting Facility Layout
- Process layout
- Keep machines grouped by the processes they perform
- Good for nonstandard items in small batches
- E.g. all the drilling machines are next to each other, all the welding machines are next to each other, etc.
- Product Layout
- Assembly line style
- Good for standard items in large batches
- Fixed-Position Layout
- Never move the product and bring everything to the product
- Good for big/heavy/fragile products
- Customer-oriented layout
- Built to create the best customer experience
- Carrying out the Production Plan
- Do you buy/make/lease products or parts
- Select best suppliers for materials
- Control inventories to keep just the right amount in stock
- Just-in-Time systems avoid having inventory by delivering parts right before it is needed for production
- Materials Requirement Planning
- A computer-based production planning system that ensures firms have right amount of parts/materials for
production
- Can create schedules from MRP programs to help organize with suppliers
10.6 Controlling The Production Process
- Production control: creating well-defined procedures for coordinating people, materials, and machinery to provide the
greatest production efficiency
 26

- Planning
- Managers decide on amount of resources needed to produce certain output
- Plan which machines need to be free for production
- Etc.
- Routing
- Manager decides on sequence of work throughout facility
- Who does what work, where is work done, etc.
- Two factors to these decisions
- Nature of good/service
- Facility layout
- Scheduling
- Develop timetable that shows how long each process in production takes
- Can use a Gantt Chart
- Tracks projected vs actual work progress over time
- Other projects can use a PERT Chart (program evaluation and review technique)
- PERT reduces delays by coordinating all parts of the production process
- Dispatching
- Each department is instructed on work it needs to do and deadlines
- Follow-up
- Spot problems in production process and fix it
10.7 Importance of Quality
- Benchmarking: look at how other companies work and use their performance as a standard for measuring other companies
- Quality control: measuring output against quality standards
- ISO: International Organization of Standardization
- Developed voluntary standards for lots of different stuff
- Help encourage global trade and cooperation
- ISO 9000 standards are for improving and maintaining quality products and services
- ISO 14000 standards are for improving and maintaining a minimal impact on the environment

Session 11 - International Business

SLIDES/CLASS NOTES

Globalization
- “The process by which businesses or other organizations develop international influence or start operating on an
international scale” - Oxford Dictionary
- “Globalization is the increasing interdependence, integration and interaction among people and corporations in disparate
locations around the world… refers to a complex of economic, trade, social, technological, cultural and political
interrelationships.” - Wikipedia

What evidence do we have that business is actually becoming more “global”?

- In 1979 avg. overseas telephone call cost $2.43/minute
- In 1980, it cost $1.34/ minute
- In 2004, it was 14 cents
- Today, if we take advantage of Voice Over IP… it is slightly over ZERO
- As measured by Trade, Foreign Direct Investment, and Financial Transactions relative to the world’s Gross Domestic
Product (Global GDP)
1. Trade
- Currently - trade a % of global GDP approx. 30%
- 1970 - trade as a % of global Gross Domestic Product (GDP) < 10%
2. Direct Investment
- Current total Foreign Direct Investment (FDI) approx 10% of global GDP
- Total FDI in 1980 < 5% of global GDP
3. Financial Transactions
- Annual cross- border transactions of stocks, bonds
 27
- <5% of GDP in U.S., Germany, and Japan in 1970
- Recently - more than 200% of GDP in U.S., Germany and Japan
BUT… the world is not “going global” at the same pace - parts of the world lags behind, and many individuals consider
themselves to be impacted by globalization negatively.

What is an “International” or a “Global” Company? - Many perspectives & definitions

- “An international company exports a significant amount of its products or services to one or more countries”
- “International companies can also import from abroad - not just export”
- “International companies THINK internationally, even if they do not yet undertake significant international activities.”

International Trade - Why Do Nations Trade?

2 perspectives from which to examine trade - nations, companies
- To obtain goods they need & want AND cannot produce themselves:
- Trade with Asia for silk, tea - recall Marco Polo and “The Silk Road” from China to Europe
- Europeans trading with the “new world” for furs, sugar, cotton, coffee - and, tragically, slaves
- To obtain gold/ “hard” currencies by running a trade surplus
- Filling the treasuries of the king
- Enables them to pay the armies they need to wage wars
- Some countries have natural, “absolute advantages” in producing some goods over other countries
- Relatively little trade today can be explained by absolute advantage
- Often countries will trade even though they can both produce the same goods/ natural resources →
comparative advantage

The “International Division of Labour”

- Whereas Europe had an absolute advantage in manufacturing production during the industrial revolution
- Less developed countries acquired a comparative advantage in labour intensive goods, such as textile weaving,
because of the relatively low cost of labour
- How will Western countries replace their manufacturing advantage?

Why do Companies Trade?

- In reality, “nations” (or governments) don’t actually do the trading - it’s companies
- “Canada’s” top imports AND exports include auto parts, petroleum & electricity; these choices can only be
explained by individual business strategies
- Undoubtedly, it’s easier & less risky to do business domestically than internationally
- Greater familiarity for companies in home country than in foreign markets
- More risks involved with int’l than domestic business

Free trade
- Why does achieving free (or freer) trade matter?
- Consumers will ....
- “Free(r) trade” is a key driver of globalization
- Canada is a participant in free trade agreements: FTA, NAFTA

Why are currencies “trusted”? - Managing across currencies

- International Financial System has existed for as long as International Trade - the two inter-operate closely & trade is
dependent on the financial system
- One of the characteristics of sovereign states (nations) is that they issue their own currencies, representing the wealth of
the nation
- For more than one hundred years, currencies were pegged to the value of gold - the “gold standard”
- Currencies represented a certain amount of gold, and could be exchanged for that much gold

“Culture” & International Business

- Culture is a key factor in determining what we decide to do and how we go about doing it
- In international business - people from different cultures:
- Potential room for conflict, cultural misunderstandings - many of which are actually avoidable

The challenges of cultural diversity

What challenges can people of different cultures - working together - sometimes experience?
 28
- Misunderstandings based on the speed of building business relationships
- In different languages - words can mean two (or more) different things - can result in embarrassing (and damaging)
outcomes
- Other language “context” barriers - technical, legalistic language
- Unintended offenses - culturally inappropriate gestures, “un-funny” jokes
- Biases, stereotypes & discrimination by some people
- Yet cultural misunderstanding are not inevitable
- Just as culture is “learned” & adopted by children as they grow, anyone can be educated about a culture they
will be working in or with - becomes part of the global manager’s “toolkit”

Cultural diversity & Canada

- Cultural diversity - an issue not only “over there” - also, within Canada & its institutions, probably more than anywhere
else on earth:
- For Canada, a natural incentive to adapt to cultural diversity & leverage our collective skills in operating within culturally
diverse institutions
- A key strategic asset for Canada

International Business & Ethical Contexts

“ The ethics of our decisions and actions are defined societally, not individually”
- International businesses operate in more than one society; therefore, they must consider the ethical standards of societies
in both the home country & host country

- How might “ethics” differ between countries?

What ethical issues do international businesses face?

1. Different labour - ex. Child labour
2. Corruption - ex. bribery
3. Environmental - ex. Pollution

What benefit is there to corporate social responsibility: at home and in foreign operations?
- Reputation in the host country
- Although standards may be lower in foreign countries, actions of an international company will be scrutinized and
compared to behaviour in home country
- In the age of the Internet & instant global communications it is impossible to hide
- Reputation in home country
- Many citizens & NGOs are concerned about global corporate responsibility
- The media often writes about poor conduct in foreign operations - use the “Globe & Mail Test” as a quick test of decision
making
- The actions of suppliers, vendors, partners scrutinized

Some companies are “doing good” while also “doing well” in international operations
- More companies now understand that doing good in international business can also help the company to do well
Examples include:
- Employee benefits - paying wages above the local market, reasonable hours, medical benefits, transportation
- Community development - philanthropy, environmental stewardship - applying similar standards as in home countries
- Positive stakeholder relationships for the long-term - with local customers, employee leaders, local governments,
suppliers

Foundations of the Canadian Economy

- Why is Canada so “internationally-oriented?”
- Rich natural resource endowments - water, timber, coal, oil, minerals, arable land for agriculture - all goods which
are in demand around the world
- Canada has, and has always had, a relatively small population - currently about 36 million, versus 356 million
(almost 10x) in the U.S.
- Canada 2.9 people/km(squared)
- US 28.7 people/km(squared)
- Japan 373 people/km(squared)
- India 292347357384 people/km^2
 29
- Has forced Canada to look beyond domestic markets for growth opportunities
- Political, economic, trade relationships with Europe - particularly United Kingdom and France - b/c of immigration
- A “nation of immigrants”
- Since European settlement began in the 17th/18th centuries, Canada has become a “cultural mosaic”
- This trend continues as Canada welcomes almost 1% of its population as new immigrants each year
(approx. 250,000)
- More than 50% of GTA’s population born outside of Canada; transformational in Canada’s largest cities
- Global relationships often result in business opportunities for immigrants

Early International Business & Trade

- Earliest settlers came to Canada to engage in resource extraction for export back to Europe; Fur trapping - sending beaver
and seal furs to Europe to satisfy fashion demands
- Fishing - East-coast cod fishery was largely an export business

International Business & Trade

- Hudson Bay Company - established to trade with native population of “Canadian territories, created a market for surplus
British goods
- Agriculture - the cultivation of wheat and grains - exports to UK and elsewhere in Europe
- Following WWII, Canada’s economy took-off in global economic boom, “hitched” to the US - increasingly, the global
economic engine

What happens to protectionist type policy, don’t want to trade as much with other parts of the world?
- Other countries tend to respond, “if you’re not gonna buy our stuff, we won’t buy your stuff”
- Globalization doesn’t work

Currencies
- We used to trade with gold
- Take to bank, issue a certificate that showed how much gold, trade certificate → where paper money came from

How does a low Cdn. dollar affect international trade? (past exam question)
- Exports will increase, imports will decrease
- Cdn. GDP increases, there is a trade surplus, therefore more money enters canada than leaves

Canada & the development of Free Trade

The Auto Pact (1965)
- Free trade b/w Canada and the US in automotive parts, allows a regional market for vehicle assembly

Free Trade Agreement b/w Canada & the US (1989)

- Major reductions in tariff & non-tariff barriers throughout the ‘90s
- Causes considerable debate & controversy within Canada; Partly Anti-Americanism, also fear of being absorbed,
overwhelmed

NAFTA - North American Free Trade Agreement (1994)

- Extends “Continentalism” into Mexico, as well as Canada & US
- 1989 FTA absorbed into this broader agreement
- As of 1998, most Canada-US trade became tariff-free
- Tariffs remain in supply-managed sectors (dairy, poultry)
- Some protection remains around “cultural sensitive” industries - publishing, broadcasting
- Why did Canada participate?
- US sought free trade with Mexico for political reasons
- Canada did not want to risk a better agreement being forged with Mexico than it had achieved with the U.S. in
1989
- NAFTA effects for Canada
- Canada-US trade extremely important, approx. 86% of Canada’s total exports
- Canada-Mexico trade doubled, but remains small overall, approx. $14 billion (just 3% of Canada’s trade)

Canada: “A Nation of Joiners” in the International System

- Canada was one of the “architects” of the modern international system:
 30
- Founding member of the UN, and its many agencies
- Founding member of the World Bank (international development funder) and the International Monetary Fund
(currency stabilization body)
- After WWII, Canada was a founding member of the General Agreement on Tariffs & Trade, which in 1994
became the World Trade Organization (WTO)
- Member of many regional arrangements - Asia-Pacific Economic Cooperation (APEC), Organization of American
States (OAS)
- Military Arrangements: NATO (w/ US & Europe), NORAD (w/ US)
- Free-Trade Areas - 1989 Free Trade Agreement with US; 1994 North American Free Trade Agreement (NAFTA) with
US & Mexico
- Why are these international engagements important for understanding Canada’s stature in international business?
- They have helped create trust in Canada by other countries
- They are indicators of our international mindset
- They have provided Cdn. officials with skills in dealing with other cultures and markets (which they also use to
assist Cdn. companies)

***European Debt Crisis video

- The failure of the euro, the currency that ties the european countries together
- Europe has always been a continent of trade barriers, different currencies, at war → did not do much business before
(stifled economic growth)
- Barrier to trade in europe was because of so many different currency and tariffs
- WW2 devastated Europe → fastest way to rebuild was to take down trade barriers
- Unified Europe, union
- Lowering costs of doing business
- 27 countries - EU
- Countries took the Euro, took down individual monetary policies → solely one monetary policy but still different
fiscal policies

- Monetary policy - controls money supply, how much money is in the economy
- Fiscal policy - how much gov’t spends and collects taxes
- Deficit spending
- Greece and other countries were able to increase spending at rates that would have been impossible before
- Jobs and pensions were all being paid by the new money
- Countries like Greece kept borrowing and spending money because of the new currency → created unbalanced
fiscal policies
- The economies of Europe became tightly intertwined
- French banks lending to Spanish companies, country to country etc.
- Things continued this way as long as credit continued
- Until 2008, collapse of US → Greece couldn’t repay debts which affected all other countries → all countries started to
suffer, everyone looked to Germany
- Germany would step in → if all countries agreed to Austerity Measures (borrowing less, cutting gov’t spending)
nobody likes this because people lose jobs and get angry
- Austerity doesn’t necessarily balance people’s budgets
- When earnings are reduced, gov’t still can’t pay back debts

- Cultural differences in Europe

- Germany is very financially responsible, work hard
- Greek’s enjoy state benefits, don’t pay taxes → never collected majority of the taxes it imposes on citizens,
joining EURO only amplified them
- German’s told Greece that if they want their money, they need their morals

- Fiscal Union or Breakup

- The problem is that even though Germany pays the countries’ debts or austerity measures are put in place, there is
no system from preventing this from happening again
- Ultimately, the Euro needs a political organization (Fiscal Union) to have the power to cut spending, raise taxes,
set laws (create fiscal policy that matches with monetary policy)
 31
- However very complicated and unpopulated
- It means surrendering sovereignty to a higher power
- United State of Europe

*****Difference b/w fiscal and monetary policy - exam

Why was there agreement to create the European free trade zone and Euro currency?
How did Germany and Greece benefit from European monetary union and creation of the Euro?

How did Germany and Greece benefit from the Euro/ what is the problem for these countries ?
- Made it easier for Germany to trade with other countries in Europe
- Greece → borrow more at lower interest, they were leveraging off the credit of countries like Germany
- All of the countries are linked to each other, domino ripple effect
- Germany was stuck in a position to bail out Greece
- Greece can’t borrow any and can’t pay back
- Germany says they’ll help if Greece becomes more fiscally responsible → austerity measures

Why is it unlikely that the member countries will agree to fiscal policy controls?
- Don't’ want to lose sovereignty

Do you think the Euro can survive?

- Might go back to what they started with b/c too much dependency
- A lot of countries who are unhappy with the interdependence
- If all the countries are willing to fix, then yes
- Fixing would be implementing EU wide monetary AND fiscal policy.

Challenges of cultural diversity - test questions

**Mukesh Ambani Indian CEO guy spending billions of dollars to provide internet to billions of Indians
- Can consumers wages actually be able to pay for internet?
- Help people significantly
- Why is Ambani so interested in mobile internet in India?
- Can give access to consumers, but be able to control all of it → monopoly

Why is India a key market for online sales?

- Large untapped market

Do you think he will be successful?

- Yes, large young population will be more likely to use internet
- It’s possible that international competitors can come in to

TEXTBOOK (Chapter 4,16)

CHAPTER 4
Why Nations Trade
- Trading with other countries economic growth in two ways:
- By providing a new market for products
- By providing access to needed resources
- Companies can explain their markets, seek growth opportunities in other nations, make their production and distribution
systems more efficient.
- Reduce dependence on the economies of their home nations

International Sources of Factors of Production

Business decisions to operate abroad depend on the basic factors of production in the other country: the availability, price, quality
of labour, natural resources, capital and entrepreneurship.
- Ex. many other companies outsource their info. Tech. and customer service jobs to Indian companies there are highly
qualified computer scientist and engineers
 32
- Trading with other countries also spreads risk, b/c different nations may be at different stages of the business cycle or phases of
development
- If demand falls in one country, the company may find demand in another country

Size of the International Marketplace

- Companies attracted to int’l business b/c size of global marketplace
- When firms in developing nations increase global business, they also increase ability to reach new groups of customers
- Looking for new revenue → usually attracted to big markets like China and India
- Population size does not guarantee economic prosperity
- People in developing nations have lower per capita incomes than people in highly developed economies of NA and
Western Europe
- Huge populations in developing countries represent profitable markets for some companies, despite low incomes
- Higher income may only be a small percentage of the entire country’s population
- North American firms are setting up operations in the developing countries that are expanding and increasing standards of
living
- Benefit from local sales
- Canada is overwhelmingly tied to the US and vice versa
- Similar in social and cultural values
- That means when a business finds a market in one country, it will most likely find buyers in the other country too.
- Easy to transport goods and to communicate, helps develop cross-border trade
- Much of our trade with the US is resource based → oil, natural gas, hydroelectricity (will all continue to
grow as long as the US needs safe, secure and reliable sources of energy)

Absolute and Comparative Advantage

- A country has absolute advantage in making a product when it has a monopoly on making that product or when it can
produce the product at a lower cost than any other country
- Absolute advantage is rare today
- Some countries almost have absolute advantages in some products (ex. Growing certain plants because of climate
differences like growing Saffron in Spain only)
- A nation can develop a comparative advantage when it can supply its products more efficiently and at a lower price than
it can supply other goods, compared with the outputs of other countries
- Ex. China profits from its comparative advantage in producing textiles
- A nation can also develop a comparative advantage in skilled human resources by ensuring that its people are well
educated
- India has comparative advantage in software development b/c of its highly educated workforce and low wage
scale

Measuring Trade Between Nations

- Look at two ideas: the balance of trade and the balance of payments
- A nation’s balance of trade is the difference between its exports and imports.
- More exports than imports → trade surplus
- More imports than exports → trade deficit
- Canada tends to maintain a balance b/w exports and imports by running trade surplus with US and trade deficit with other
trading partners, particularly China
- US has run trade deficit since 1976

- A nation's balance of payments - the overall flow of money into or out of a country
- Also affected by overseas loans and borrowing, int’l investments, profits from int’l investments, and foreign aid
payments
- To calculate nation’s balance of payments → subtract the monetary outflows from monetary inflows
- More money has moved into country than out of it → Balance of trade surplus
- More money has gone out of the country than entered it → Balance of payments deficit

Major Canadian Exports and Imports

- Canada’s top merchandise exports in 2014 were energy products, motor vehicles and parts, and consumer goods.
- Canada’s top imports were consumer goods motor vehicles and parts and electronic and electrical equipment and parts
- In 2014, Canada exported over $84 billion of services and imported over $106 billion worth.
 33

Exchange Rates
- An exchange rate is the value of one country’s currency in terms of the currencies of other countries
- Value of currency is an important economic measure for every country
- Many factors can affect foreign exchange rates: economic and political conditions, actions by the central bank, balance of
payments position, and speculation over future currency values
- Currency values fluctuate depending on the supply and demand for each currency in the world market.
- In this system of floating exchange rates, currency traders create a market for the world’s currencies based on
each country’s trade and the likelihood of investments. The idea is that exchange rates can go up and down freely
as supply and demand change.
- But exchange rates do not float in total freedom → national gov’t often step in to change their exchange rates
- Nations can affect exchange rates in other ways:
- May for currency blocs by linking exchange rates to each other Commented [1]: que
- Canadian and american currencies are linked
- Gov’ts practice protectionist policies that try to protect their economies against trade imbalances
- For example, nations sometimes take actions to devalue their currencies as a way to increase exports and
encourage foreign investment
- Devaluation - a reduction in a currency’s value in terms of other currencies or in terms of a fixed standard.
- For an individual business, the impact of currency devaluation depends on where the business buys its materials
and where it sells its products
- Exchange rates can quickly create- or destroy - a competitive advantage. They are important factors when
investors decide whether to invest in other countries
- In Europe, a declining Cdn. or American dollar means that the price of euros go up, so European companies are
pressured to lower their prices to keep foreign customers who generally pay for goods in US dollars.
- When value of Cdn. dollar, falls, European vacations are more costly for Cdn. tourists because their dollars are
worth less in terms of Euro.
- Hard currencies - currencies that easily convert into other currencies (Ex. euro, US dollar, Japanese yen)
- Soft currencies - Russian ruble, central european currencies (exporters here usually bargain, accept payment not
in cash but in goods)
- The foreign exchange market is the largest financial market in the world, the most liquid and efficient financial
market in the world.

Barriers to International Trade

1. Social and Cultural Differences
- Language, customs to educational background, religious holidays and attitudes, social values
- Businesspeople can win customers and meet their business goals by being sensitive to local views, to how people
like to be addressed, and to suitable ways of dressing, using body language, and being on time.
- Communication barriers - bad translations, mistakes by presenting messages using unsuitable nmedia,
overlooking local customs and regulations, ignoring differences in taste
- Cultural sensitivity is especially important in cyberspace
- Certain symbols (ex. Hands, thumbs in different cultures can be offensive)
- Gift-giving traditions (number of flowers, certain items → no clock in china, yellow flowers mean death to
Mexicans)
- Being sensitive to religions are also very important

2. Economic barriers
- Managers must think of economic factors when deciding whether a country is right for an international business
venture
- Infrastructure - the basic systems of communication, transportation and energy facilities (internet and
technology can also be considered)
- Financial Systems provide a type of infrastructure for businesses → in canada, we use a lot of credit,
debit, cheques etc. where as in many african countries like Ethiopia don’t
- Currency Conversion and Shifts
-
3. Legal and Political barriers
· Int’l businesses need to be familiar with the legislation that affects their industries

· Some countries have general trade restrictions; others have detailed rules that state how foreign companies can operate
 34
· Political climate – important factor is the stability of the political situation

o Political structures of many nations promote stability similar to the political stability in Canada

· Legal environment – when doing business internationally, managers must be familiar with three dimensions of the legal
environment: Canadian law, international regulations, and the laws of the countries in which they plan to trade

o Some laws protect the rights of foreign companies to compete in Canada, others spell out the actions allowed
for Cdn. Companies doing business in foreign countries

o Canada’s Corruption of Foreign Public Officials Act and the U.S Foreign Corrupt Practices Act make it illegal
for companies to bribe foreign officials, political candidates, or government representatives.

o Corruption continues to be an international problem à bribery scandals

· International Regulations – Canada and many other countries have treated and signed agreements that describe the
expected conduct of international business

o Canada has entered into many friendship, commerce and navigation treaties with other nations à rights to
conduct business in the treaty partner’s home market, standards, patents, trademarks, international
communication etc.

o Many rules affect actions of managers in international markets à worldwide producers and marketers must
keep required minimum levels of quality in all countries where they operate, comply with numerous local
regulations (Ex. Made in Italy label)

Types of Trade Restrictions

- Create additional barriers to international business

- May limit the products and services available to consumers and can increase the costs of foreign-made products

- Also used to protect citizens’ security, health and jobs

- Other trade restrictions are used to promote trade with certain countries, other restrictions protect countries from unfair
competitions

- May be used for different political reasons, most are in the form of tariffs

- Gov’ts also impose some nontariff barriers called administrative barriers à include quotas, embargoes, exchange controls

Tariffs - Taxes, surcharges, and duties on foreign products

- Two types of tariffs à revenue tariffs and protective tariffs (both make imports more expensive for domestic buyers)

- Revenue tariffs generate income for the gov’t (Ex. Crossing the border 24-48 hours up to $200 goods tax free and then
after 48 hours up to $800 worth of goods or else charged revenue tariff)

- Protective tariff - has one purpose to raise the retail price of imported products to match or top the prices of similar
products made in the home country (try to limit imports and give local competitors an equal chance to succeed)

- Tariffs are a disadvantage to companies that want to export to the countries that have the tariffs

- Canada, like most countries, has a tariff on foreign competitors selling products in Canada at prices lower than Canadian
manufactures charge

Nontariff Barriers – aka administrative barriers

- Restrict imports without using the strict rules that tariffs use
 35
- In the form of quotas on imports, restrictive standards for imports, export subsidies

- Quotas – limit set on the amounts of particular products that can be imported during specified time periods

o Quotas help prevent dumping - selling products in other countries at prices below production costs or below
typical prices in the home market to capture market share from domestic competitors

- Embargo – more severe than a quota, total ban on importing a specified product

o Can also be a complete stop to trading with a particular country

o Many countries including Canada have trade embargoes with North Korea and Iran (durations vary depending
on the foreign policy)

- Exchange control – a restriction on importing certain products or a restriction against certain companies to reduce trade
and the spending of foreign currency

o Central bank or gov’t agency applies the exchange controls, which affect both exporters and importers

o Firms that gain foreign currencies by exporting must sell those currencies to the central bank or another
agency.

o Importers must buy foreign currencies to pay for their purchases from the same agency

o Exchange control authority then assigns, expands, or restricts foreign exchange, depending on the national
policy

Reducing Barriers to International Trade

- The world is generally moving towards free trade

Organizations Promoting International Trade

- The General Agreement on Tariffs and Trade (GATT) – an international trade accord.

o Sponsored a series of negotiations, called rounds, that have greatly reduced worldwide tariffs and other
barriers

o Aim is to work toward reducing tariffs and relaxing import quotas

o World Trade Organization (WTO) - 157-member international institution that monitors GATT agreements
and mediates international trade disputes

- World Bank – an organization established by industrialized nations to lend money to less-developed countries

o Primarily funds projects that build or expand nations’ infrastructure (include transportation, education, and
medical systems and facilities)

o World Bank and other development banks provide the largest source of advice and assistance to developing
nations

o Some say the World Bank makes loans with conditions that ultimately hurt the borrower nations. When
developing nations need to balance gov’t budgets, they are sometimes forced to cut vital social programs.
Critics says that the World Bank should consider the impact of its loans on the environment and working
conditions

- International Monetary Fund – established a year after the World Bank

o An organization created to promote, trade, eliminate barriers, and make short-term loans to member nations
that are unable to meet their budgets.
 36
o Makes short term loans to member nations that cannot meet their expenses.

o Operates as a lender of last resort for troubled nations

o IMF has worked to prevent financial crises by warning the international business community when countries
face difficult meeting their financial obligations

o IMF lends to countries to keep them from defaulting on prior debts, help to prevent economic crisis in one
country from spreading to other countries

International Economic Communities

- Reduce trade barriers and promote working together to create regions that share economic benefits

- Countries may establish a free-trade area where they trade freely among themselves without tariffs or trade restrictions.

o Each country maintains its own tariffs for trade outside this area

- A customs union sets up a free-trade area and specifies a tariff structure for members’ trade with nonmember nations.

- In a common market, or economic union, members go beyond a customs union and try to bring all of their trade rules
into agreement

The North American Free Trade Agreement (NAFTA) is an example of a free-trade area

- Agreement among the US, Canada, Mexico to break down tariffs and trade restrictions

- Became effective in 1994, world’s largest free-trade zone

- US, Canada, Mexico removed all trade barriers and investment restrictions over a 15-year period

- NAFTA opened more doors for free trade, eased rules about services, such as banking, set up standard legal requirements
for protecting intellectual property.

- In 2015, Canada, US and Mexico signed on to the Trans-Pacific Partnership (TPP) with Pac rim countries working
towards reducing trade restrictions

o Meant to counter the tremendous trading power of China in the region

- Other examples of regional trading blocs include the Mercosur customs union (Brazil, Argentina, Paraguay, Uruguay)
and the 10-country Association of Southeast Asian Nations (ASEAN)

CAFTA-DR

- Central America-Dominican Republic Free Trade Agreement (CAFRA-DR) – an agreement among the US, Costa Rica,
Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua.

EU

- European Union – 28-nation European economic alliance

- goal to promote economic and social progress, to introduce European citizenship as a complement to national
citizenship, and to give the EU a major role in international affairs

- removing barriers to free trade among its members, involves standardizing business regulations and requirements,
standardizing import duties and taxes, and getting rid of customs checks so that companies can transport goods from England
to Italy or Poland as easily as goods can be moved from St. John’s to Vancouver

- Bringing standards and laws together can contribute to economic growth

- adopting Euro eliminates thee economic costs of currency exchange and simplifying price comparisons
 37
Going Global

Before deciding to go global, a company must make many key decisions, such as following:

- which foreign market(s) to enter

- the costs of entering a new market

- the best way to organize the overseas operations

These issues have more or less importance depending on the level of involvement a company chooses.

Companies take time to do research on which markets to enter à local demand for firm’s products, availability of needed
resources, ability of local workforce, quality products, potential competition, tariff rates, currency stability, investment barriers

Levels of Involvement

After a firm has completed its research and has decided to do business overseas, it can choose one or more strategies:

- Exporting or importing

- Entering into contract-based agreements such as franchising, licensing, and subcontracting deals

- Choosing direct investment in the foreign market through acquisitions, joint ventures, or by setting up an overseas
division

Importers and Exporters

- Importer – brings in goods produced abroad to sell at home

- Exporter - companies that produce or purchase goods at home and sell them in other countries

- An importing or exporting strategy provides the most basic level of international involvement and the least risk and
control

- Exports are often handled by export trading companies

o These firms search out competitively priced local merchandise, and then resell these items abroad at prices
high enough to cover expenses and earn profits

o Exporting can be: indirect or direct.

o Indirect exporting – when a company makes a product that become a part of another product sold in foreign
markets

o Direct Exporting – occurs when a company tries to sell its products in markets outside its own country (often
the first step or companies entering foreign markets, most common form of int’l business à once succeeded,
move onto other strategies)

- Export trading companies are one way to reach foreign markets

- Two other methods are to use export management companies or offset agreements

- Export management company – can give an exporting firm advice and expertise, help with paperwork, make contacts
with local buyers, comply with local laws for labelling, product safety and performance testing

- Offset agreement - matches a major international firm with a smaller business, small firm becomes a subcontractor to
the larger firm

Countertrade
 38
- An international barter agreement whereby trade b/w two or more nations involves payment made in the form of local
products instead of currency

- Common reason for using international barter is poor access to the needed foreign currency.

- To complete international sales agreement, seller may agree to accept part or all of the purchase cost in merchandise
instead of in currency

- Seller may try to find a buyer for the bartered goods before the transaction is completed

- Countertrade is sometimes a firm’s only way to enter a certain market

- Countries with heavy debt also use countertrade

Contract-based Agreements

- Country may decide to enter into contract-based agreements once gained some experience à includes franchising, foreign
licensing, subcontracting

Franchising – a contract-based agreement in which a franchisee can produce or sell the franchisor’s products under that
company’s brand name if the franchisee agrees to the operating terms and requirements

- Franchisor also helps with the franchisee with marketing, management, and business services

Foreign licensing - an international agreement in which one firm allows another firm to produce or sell its product or use its
trademark, patent, or manufacturing processes in a specific geographical area in return for royalties or other compensation

- Can be good for a small manufacturer that wants to launch a well-known product overseas

- Small manufacturer gets a proven product from another market, and just a little or no investment is needed to start
operating

- Licensing can also allow a company entry into a market that would otherwise be closed to imports because of gov’t
restrictions

Subcontracting – an agreement that involves hiring other companies to produce, distribute, or sell goods or services; in
international subcontracting, local companies in a specific country or geographical region are hired to produce, distribute, or sell
goods or services

- Allows foreign firm to use subcontractor’s expertise in local culture, contacts, and regulations.

- Key downside is that companies cannot always control their subcontractor’s business practices

Offshoring

- The moving of business processes to a lower-cost location overseas

- Changes mainly to manufacturers

International Direct Investment

- Highest level of control is investing directly in another country’s production and marketing.

- Over time, a firm may become successful at doing business in other countries through exporting and contract-based
agreements.

- In an acquisition, a company purchases another firm in the host country. It means that a mostly domestic business
operation can quickly become an international company
 39
- In a joint venture, (a partnership between companies for a specific activity) a company shares risks, costs, profits, and
management responsibilities with one or more host-country companies

From Multinational Corporation to Global Business

A multinational corporation (MNC) – a firm with many operations and marketing activities outside its home country

- Many US multinationals, including Nike and Walmart, have expanded their overseas operations

- They believe that domestic markets are peaking, and foreign markets offer greater potential for sales and profit

Developing a Strategy for International Business

Managers must first evaluate corporate objectives, organizational strengths and weaknesses, and strategies for product
development and marketing to conduct international business

Global Business Strategies

- The offering of a standardized worldwide product and the selling of it in basically the same way throughout a firm’s
domestic and foreign markets

- Many companies simply change their domestic business strategies by translating promotional brochures and instructions
into the languages of the host nations

Multi-domestic Business Strategies

- A plan to develop and market products to serve different needs and tastes in separate national markets

- Some companies do not change their strategy for different markets because they don’t pay attention to global nature of
the Internet à causes problem for potential customers

Chapter 16 – The Financial System

Understanding the Financial System

Financial system – the mechanism by which money flows from savers to buyers

Households, businesses, government, financial institutions, and financial markets all together form what is known as the financial
system.

In the financial system there are two types of consumers. There are savers and users.
- Savers have excess funds, choose not to spend all of their current income, so they have surplus of funds
- Users à spending needs are greater than their current income, so they have a shortfall, need to obtain additional funds to
make up difference

In Canada,
- Households are typically net savers à as a whole, households save more money than they use
- Businesses and government are net users à generally use more funds than they save
- How much an individual saves depends on many factors, especially age.
o As people age, they often move from being net borrowers to being net savers

Net worth – the difference b/w what you own and what you owe

Funds can be transferred between savers and users in two ways: directly and indirectly.
- Direct transfer – user raises the needed funds directly from savers, it happens but not common (most funds flow through
either financial markets or financial institutions)
 40
- Indirect transfer – through financial institutions, banks will pool or combine customer deposits and use the funds to make
loans to businesses and households (borrowers pay the bank interest and the bank, in return, pays its depositors interest for the
use of their money)

Types of Securities

When businesses and government want to borrow money from savers, they can offer securities, also called financial instruments,
represent the obligations of the issuers to provide the purchases with the expected stated returns on the funds invested or loaned.
Securities can be categorized into three groups, money market instruments, bonds, and shares (stock).

Money Market Instruments

- Money market instruments are short term debt securities issued by government, bank, or large firms. They all mature in
one year from the issue date. These are very low risk and examples are Canadian treasury bills, commercial paper, and bank
certificates.

Bonds, Types of Bonds, Quality Ratings for Bonds

· Bondholders are creditors of a corporation or government. Their claim on the firm’s assets must be satisfied before
shareholders. There are 4 types of bonds:
· Government bonds: bonds sold by Cdn gov’t, least risk (backed by full faith and credit of gov’t)
· Provincial/local Government (Municipal bonds): two types à corporate bonds, mortgage-backed corporate
bonds Generally low risk
§ Corporate bonds include a diverse group of bonds and often vary depending on the collateral pledged
by the owner. Businesses also offer debentures, which are only backed by the financial reputation of
the company.
§ Mortgage backed securities are backed by a pool of mortgage loans purchased by lenders such as
banks. These are usually very safe because they are backed by all of the mortgages in the group.
· Corporations: Risk depends on issuer, they are rated in terms of risk (AAA, etc.) Secured bonds: backed by
specific assets, unsecured bonds(debentures): backed by financial health and reputation of issuer
· Financial Institutions: Generally low risk

· Bond prices are affected by two factors, the risk and the interest rate.
Risk
· Bond investors use a tool called bond rating to assess the risk of a bond.
· Lowest level of risk à AAA, as ratings descend, risk increases
· Bonds with ratings of BBB and above are classified as investment-grade bonds
· Bonds with ratings of BB and below are classified as speculative bonds or junk bonds

Interest rate
· All other things equal, the higher the interest rate, the higher the price of the bond
· Another factor that influences bond prices is the market interest rate, as the market interest rate increases, bond prices fall,
and vice versa.

A call provision allows the issuer to cash the bond before its maturity date at specified price. Usually, issuers call bonds when the
interest rates decline to save money.

Shares
- Basic form of corporate ownership is common shares
- Purchasers of common shares are the true owners of a corporation à vote on major company decisions
- In return for the money they invest, common shareholders expect to receive some sort of return
o Can be cash dividend payments, expected increases in the value of the shares, or both

Preferred Shares
- Some companies also issue preferred shares
- Preferred shareholders receive preference in the payment of dividends.
- If the company is dissolved, preferred shareholders have first claims on assets before common shareholders do.
- Preferred shareholders do not have much voting rights though.
- They are paid fixed dividends, regardless of how profitable the firm becomes
 41
- Preferred shares are legally classified as equity, but investors consider preferred shares to be more like a bond than
common shares

Convertible Securities
- Companies may issue bonds or preferred shares than include a conversion feature à convertible securities
- Gives the bondholder of preferred shares the right to exchange preferred shares for a fixed number of common shares.
- Convertible bonds pay less interest than bonds without conversion features, which helps to reduce the issuing firm’s
interest expenses
- Investors are willing to accept lower interest rates b/c they value the possibility of additional gains if the price of the
firm’s shares increase

Financial Markets

Financial Markets - markets where securities are issued and traded

There are two types of financial markets:

1. Primary Markets
o A financial market where firms and gov’ts issue securities and sell them initially to the general public
o A company may sell a bond or issue shares to the investing public when it needs capital to purchase inventory,
expand a plant, make a major investment, acquire another firm etc.
o When a company offers shares for sale to the general public for the first time it is known as the Initial Public
Offering (IPO).
o For-profit corporations and gov’t agencies rely on primary markets to raise funds by issuing bonds
o Announcements of new bond and share offerings appear daily in business publications in an ad called
“tombstone”
o Securities are sold to the investing public in two ways, in open auctions and through investment bankers.
Securities are typically bought by financial institutions like TD and then they resell the issue to investors, this
process is called underwriting.

2. Secondary Markets
o A collection of financial markets where previously issued securities are traded among investors
o For example, the TSX is a secondary market. The secondary market is 4-5x bigger than the primary market.

Understanding Stock Markets

Stock market (exchanges) – markets where shares of stock are bought and sold by investors

Stock markets, or exchanges are the best known financial markets in the world.

The Toronto Stock Exchange

- Canada’s largest stock exchange
- For a company’s share to be traded on the TSX, firm must apply for a listing and meet certain listing requirements

Foreign Stock Markets

- New York Stock Exchange (NYSE) is sometimes referred to as the “big board” – most famous and one of the oldest
stock markets in the world, world’s largest
- NASDAQ Stock Market is world’s second largest stock market (National Associated of Securities Dealers Automated
Quotation)
o Computerized communications network that links member investment firms
o World’s largest intranet, traded on intranet not on trading floor
- LSX (London Stock Exchange) is the most international of all stock markets à handles 2/3 of all cross-border trading in
the world

ECNs and the Future of Stock Markets

- For years, a fourth market existed à the direct trading of exchange-listed stocks off the floor of the exchange.
- Recently, limited to institutional investors who were buying or selling large blocks of shares
- Begun to open up to smaller, individual investors through markets called electronic communications networks (ECNs)
 42
o Buyers and sellers meet in a virtual stock market and trade directly with one another

Investor Participation in the Stock Markets

- The most common type of order is a market order. This order purchases a share at the best possible price, and if the
market is open is filled within seconds.
- Another popular order is a limit order. A limit order has a price floor and ceiling when buying and selling, if either are
not met the transaction does not go through.

Financial Institutions
- Financial institutions – intermediaries b/w savers and borrowers that collect funds from savers then lend the funds to
individuals, businesses and gov’ts

Commercial Banks
- Commercial banks are the largest and possibly most important financial institution. There is 28 domestic banks and
foreign institutions in Canada and together they manage over 4 trillion dollars.
- Banks currently hold more than 75% of residential mortgages and over $900 billion in commercial loans.
- Banks make money mostly b/c the interest rate they charge borrowers is higher than the rate of interest they pay
depositors
- Electronic funds transfer systems (EFTSs), ATMs
- Cdns. can choose from two types of online banks: internet-only banks, and traditional bricks-and-mortar banks
- Most commercial banks are insured by the CDIC up to $100,000.
- The Canada Deposit Insurance Corporation is a federal agency formed in 1967 to build public confidence in the banking
system.
- Before deposit insurance, banks experiences “runs” where everyone would withdraw money due to rumours about
instability.
- As banks experience more and more withdrawals in a short period, they would reach a point where they were unable to
meet all the demands for cash and closed their doors

Credit Unions
- Cooperative financial institutions that are owned by their depositors, all of whom are members (not-for-profit, so
consumers prefer it over commercial banks or financial institutions)
- Credit unions are designed to serve consumers, not businesses
- Raise funds by offering members several different chequing and saving accounts, then lend these funds to members
- CUs often pay higher rates of interest on deposits, charge lower rates of interest on loands, and charge fewer fees
- Credit unions offer most of the same services commercial banks offer, but are owned by shareholders, which are the
members.
- Credit unions are smaller, offer better rates and less fees for banking, they are insured at the provincial level.

Nondepository Financial Institutions

Nondepository financial institutions accept funds from businesses and households and then invest the funds, usually these
institutions do not offer chequing accounts. Examples are insurance companies, pensions, finance companies, etc.

Insurance Companies
- Households and businesses buy insurance to transfer risk from themselves to the insurance company
- Insurance companies accept the risk of loss of property in exchange for premiums.
- Typically, insurance companies collect more in premiums than they pay in claims, and then after operating costs they
invest the rest of the money to grow the fund.

Pension Funds
- Pension funds provide retirement benefits to workers and their families. Since the inflow and outflow of cash is very
predictable, pensions invest heavily in assets like stocks and real estate.

Finance Companies
- Consumer and commercial finance companies offer short-term loans to borrowers
- A commercial finance company supplies short-term funds to businesses that use their tangible assets (inventory, A/r,
machinery, property) as collateral for the loan
- Consumer finance companies raise funds by selling securities or by borrowing funds from commercial banks
 43
Mutual Funds

- Mutual funds are financial intermediaries that raise money from investors by selling shares
- They then use the money to invest in securities that meet the mutual fund’s objectives
- Mutual fund investors are indirect owners of a portfolio of securities
- As the value of the securities owned by the mutual fund changes, the value of the mutual fund’s shares will also change.
- Investment income, such as bond interest and stock dividends, is passed through to mutual fund shareholders

The Role of the Bank of Canada

BofC – the central bank of Canada

The bank, once privately owned, became a gov’t owned Crown corporation in 1938
- BofC has 4 major responsibilities:
- regulating monetary policy,
- issuing bank notes,
- regulating the financial system, and
- managing funds for the government and other clients.

Monetary Policy
- Bank’s most important function is regulating monetary policy à controlling the supply of money and credit
- The bank’s job is to ensure that the money supply grows at a sustainable rate so the economy can expand and inflation
remains in check.
- Bank uses its policy tools to push interest rates up or down
o If bank pushes interest rates up growth rate in the money supply will slow, economic growth will slow,
inflationary pressures will ease
o If bank pushes interest rates down, growth rate in money supply will increase, economic growth will pick up,
unemployment will fall

- There are two common measures of the money supply: M1 and M2.
o M1 consists of all currency in circulation plus the balances in bank chequing accounts.
o M2 equals M1 plus balances in savings accounts and money market funds.

- The bank has two main policy tools for controlling growth and the supply of money and credit, the discount rate and
open market operations.
o The discount rate (bank rate) is the interest rate at which banks make short-term loans to member banks.
§ An increase in the bank rate slows the growth rate in the money supply
§ An increase in bank rate pushes interest rates up and slows economic growth
§ Used only with open market operations
§
o The second tool is open market operations, which is controlling money supply by buying or selling Canadian
government securities. Buying and selling securities speeds up or slows down the economy, respectively.
§ Selling gov’t securities reduces bank reserves and slow the growth rate in the money supply
§ Selling gov’t securities pushes interest rates up and slows economic growth
§ Used frequently
§ When B of C buys/sells bonds. In an inflation, the B of C will SELL bonds. Many will come out of
cbank accounts, reserves decrease, ability to loan decreases. In a recession, B of C BUYS bonds, and
the reverse occurs

- Historically, the Bank also influenced money supply by controlling reserve requirement à the % of cash that banks
were required to maintain for immediate withdrawal by customers
o The lower the reserve requirement, the more the money supply would increase

Regulation of the Financial System

Bank Regulation
- Ensure public confidence in the safety and security of the banking system
- Banks are critical to the overall functioning of the economy
 44
- Department of Finance, BofC, Office of the Superintendent of Financial Institutions, CDIC are involved in regulating

Gov’t Regulation of the Financial Markets

- Provincial organization coordinated by Canadian Securities Administrators (CSA) to reduce duplication of efforts
from Manitoba and Ontario Securities Commission à provides more consistency
- Pay particular attention to insider trading – use of material, nonpublic information about a company to make profits

Industry Self-Regulation
- All securities markets use a variety of methods to spot possible violations of trading rules or securities laws.
- The TSX outsources market surveillance to an independent third party, the investment industry regulatory organization
of canada, or the (IIROC).

Session 12 Walmart video and readings

SLIDES/CLASS NOTES
- Walmart has opened dozens of new stores in developing countries from China to Brazil
- Employs 2.2 million workers in 11 000 stores worldwide
- Walmart International is currently the fastest-growing segment of walmart’s business
- More than 90% of Wal Mart's overseas stores operate under a local banner
- Superstore is Walmart’s current competitor (in Khan’s opinion)
- Why Zeller’s failed while walmart succeeded: prices, could not keep up with walmart’s volume (purchasing volume)
- Why target failed in Canada while Walmart has been successful: expanded too quickly, products differed from American
stores, packaging had to change (US to Canadian packaging), attempted to sell higher priced stuff, what khan said: go
big or go home doesn't work in a large retail store, did not give customers what they wanted, was not bringing anything
new, they did not bring their private brands, did not want to spend money on changing the labels, they were stocking out
(shelf depth was smaller), promotional differences between Canada and the US (canada is bigger on fliers where US is
bigger in coupons), their prices were higher than market price, they did not listen to Canadians in the Canadian market,
the costing was higher in Canada than the US (salary, transportation), lack of online presence.
- Reasons Target failed
- Target entered an environment where walmart was already dominant
- they just pumped a bunch of money in and were not being efficient because no economies of scale since they had
stores far from each other
- bad product choices (target store brands were not brought in for example, they didnt bring american brands, only
brought stuff canada already had)
- They were making smaller stores and they were constantly running out of stock and had terrible shipping
- Tried to use coupons (which americans like) and not flyers (which canadians like)
- All the costs associated with running target were higher than the US
- Had an american management team running the canadian branch
- Bad online presence
- Why people LOVE Walmart:
- Walmart is very close to most consumers, within 10-15 mins.
- Can buy a variety of goods and groceries now
- Good customer service
- Is the opening Price Point Strat unethical?
- It is ethical because it is the consumer’s responsibility to price compare
- Technically Walmart calls it “always low prices” not “lowest”
- Clearance rack is hidden in the back past all the opening price point
- Does walmart help small suppliers by forcing focus onto consumer needs or hurt them by squeezing their ability to earn
small profits?
- Helps if you can sell at the walmart price point because your business becomes lean and can sell to walmart +
others at low cost
- But if you can't you get outsourced to chinese hypercompetition
- Who does walmart care about on the stakeholder analysis?
- Its the investors
- Next is customers
- At the bottom is the public (specifically suppliers, and i assume other businesses that suffer because china)
- Was what walmart did to rubbermaid ok?
- Have to do what you have to do?
- Walmart should've helped them out and allowed the price increase?
 45
- Rubbermaid should have fixed it?
- Is Walmart good for China and is China good for Walmart
- Walmart good for china: Yes, it helps develop their economy, gets jobs, china become more efficient
- Walmart bad for china: Worker exploitation and cheap labor exploitation (Not good cause pay is super low)
- China good for walmart: Walmart gets cheap stuff from china
- China bad for Walmart: bad reputation for using chinese labor and killing ?
- China is not good for Walmart because their reputation is shitty now, chinese shills
- Can Walmart deal with increased Cost (10% increased Cost Of Goods Sold || SORRY OK I TRIED)?
- Insert basic accounting here
- Gross profit margin of walmart is 25%
- Increase of 10% would still let them be making a gross profit
- But walmart makes small net profit - shhhhhhh
- And if COGS got increased by 10% then walmart would be making a loss
- Is walmart going out of business ok?
- Bunch of ppl lose jobs
- DUN DUN DUN ETHICS!

TEXTBOOK (Chapter 15,17)

CHapter 15
- Accounting - process of measuring, interpreting, and communicating financial information to enable people inside and
outside the firm to make informed decisions.
- Language of business
- Accountants gather, record, report, interpret financial info in a way that describes the status and operation of an
organization
- Over 200,000 people in Canada work as accountants or auditors
- One of the most in-demand disciplines on uni campuses
- b/c availability of jobs and high starting salaries
- CPA average more than $141,000/year.
Users of Accounting Information

- People who support open-book management believe that allowing employees to view financial info helps them to better
understand how their work contributes to the company’s success
- Outside of the firm, investors evaluate accounting info to help them decide whether to buy a firm’s share.
- Any company whose shares are traded publicly must report its financial results on a regular basis.
- CRA and provincial tax officials use it to calculate a company’s tax liability.
- Largest organized programs is Community Volunteer Income Tax Program (CVITP), organized by CRA.
- More than 16,000 volunteers help more than half a million canadians complete provincial and federal tax returns.
Business Activities Involving Accounting
- All organizations perform these three basic activities
- Financing activities provide necessary funds to start a business and expand it after it begins operating
- Investing activities provide valuable assets that are needed to run a business
- Operating activities focus on selling goods and services, but they also view expenses as important elements of
sound financial management.
 46
- Brian Hill, CEO of Vancouver-based Aritzia performed all these activities during the startup
- Targets women between 15 and 30
- His success in Canada led to US expansion
- Seeked financing from Berkshire Partners, who took a majority stake in the company
- Aritzia moved toward a more vertically integrated model
- To benefit from “a bigger piece of the pie” cutting out third-party retailer.
- Believes Aritzia’s success is that the company understands customers’ needs.
Accounting Professionals
- Public Accountants
- Provides accounting services to individuals or business firms for a fee
- Most public accounting firms provide 3 basic services
- Auditing, and/or examining, financial records
- Tax preparation, planning, related services
- Management consulting
- Because they are not part of a specific client firm, they can provide unbiased advice
- Canada has hundreds of public accounting firms, four largest are
- Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers
- Collect almost 5 billion annually from clients
- In contrast, Grant Thornton, 5th largest accounting firm, only has annual revenues of approx 500 million.
- Some years ago, public accounting firms were criticized
- When a firm does both auditing and management consulting a conflict of interest is created.
- May weaken confidence in the quality of financial statements that accounting firms audit.
- Bankruptcies of some high-profile firms increased pressure on public accounting firms to end the
practice.
- Legislation also set strict limits
- A firm that audits a company’s books cannot provide any other services to the company,
including tax services.
- Result, ¾ largest public accounting firms sold large portions of their consulting practices
or created separate consulting companies
- PricewaterhouseCoopers, sold much of its consulting biz to IBM.
- Some public accountants are being certified as forensic accountants - focus on uncovering potential
fraud in many different organizations.
- CPAs (Chartered Professional Accountants) are Canada’s most recognized group of professional accountants
- Meet provincial requirements for education and experience and successfully complete thorough testing
- Other recognized accountants, Certified Fraud Examiner (CFE) or Certified Internal Auditor (CIA - wow id get
this cert just to have the acronym)

· Management Accountants
· Employed by a business other than a public accounting firm
· Collects and records financial transactions and prepares financial statements used by the firm’s managers in
decision making
· Provide timely, relevant, accurate, and concise information that executives can use to operate firms more
effectively and profitably
· Should be able to provide answers to:
· Where is the company going?
· What opportunities are in the company’s future?
· Will certain situations expose the company to excessive risk?
· Does the firm’s information system provide detailed and timely information to all levels of
management?
· Specialize in different aspects of accounting, usually involved in the development and enforcement of
organizational policies
· Government and Not-for-Profit Accountants
· Similar services provided by management accountants
· Concerned primarily with how efficiently organizations work to meet objectives

The Foundation of the Accounting System

GAAP (Generally accepted accounting principles) – principles that outline the conventions, rules, and procedures for deciding
on the acceptable accounting practices at a particular time
 47
- All GAAP standards are based on several basic qualitative characteristics
o Consistency
o Relevance
o Representational faithfulness
o Reliability
o Timeliness
o Understandability
o Verifiability
o Comparability

· 1. The Business Entity Concept:

· Accounting for a business must be kept separate from the personal affairs of its owner
· No personal assets or liabilities are included on the business balance sheet
· 2. Cost Principle and Continuing Concern Concept → (Going concern concept):
· Assumes that the business will continue to operate, unless it is known that such is not the case
· Dollar values at cost (Assets)
· 3. Principle of Conservatism:
· Accounting for a business should be fair and reasonable
· Do not overstate or understate the affairs of the business
· 4. Objectivity Principle:
· States that accounting accounting will be recorded on the basis of objective evidence
· Accounting entries will be based on fact, and not on personal opinion or feelings.
· 5. The Time Period Concept:
· Providing that accounting take place over specific time periods known as fiscal periods
· Fiscal periods are of equal length
· 6. Revenue Recognition Principle:
· Provides that revenue be taken into the accounts at the time the transaction is completed
· Means recording revenue when the bill is sent to the customer or in cash transactions revenue
is recorded when the sale is completed and cash is received
· 7. Matching Principle:
· States that each expense item related to revenue earned must be recorded in the same fiscal period as the
revenue it helped to earn
· 8. The Consistency Principle
requires that a business must use the same accounting methods and procedures from one period to the next
· 9. The Materiality Principle
requires accountants to follow generally accepted accounting principles except when to do so would be expensive or
difficult, and where it makes no real difference f the rules are ignored.

· 10. The Full Disclosure Principle

o states that all information needed for a full understanding of the company’s financial affairs must be included
in the financial statements

Accounting Standards Board (AcSB) – organization that interprets and modifies GAAP in Canada for private and not-for-profit
businesses

Canadian public companies are required to use International Financial Reporting Standards (IFRS)
- The standards and interpretations adopted by the IASB

International Accounting Standards Board (IASB) - the organization that promotes worldwide consistency in financial
reporting practices

In the US, Financial Accounting Standards Board (FASB) sets GAAP.

The Corruption of Foreign Public Officials Act is a federal law that prohibits Cdn. Citizens and companies from bribing foreign
officials to win or continue business.

The Accounting Cycle

- The set of activities involved in converting information and individual transactions into financial statements
 48
- Recording, classifying, summarizing transactions
o Transactions recorded in journals
o Journal listings posted to ledgers à shows increase or decrease in specific accounts
o Ledger sued to prepare financial statements which summarize financial transactions

The Accounting Equation: (Assets = Liabilities + Owner’s Equity (A=L+O))

· Assets: economic resources of a business
· Liabilities: claim of creditors against assets of a business
· Owner’s Equity: the funds that owners invest in the business plus any profits not paid to owners in the form of cash
dividends claims of the owners against the assets of a business
· Double-entry bookkeeping – the process used to record accounting transactions; each individual transaction is
always balanced by another transaction

Financial Statements
- Provide managers with the information they need to evaluate the firm’s profitability, overall financial health and its
liquidity position – the ability to meet its current obligations and needs by converting assets into cash
- Four financial statements:
o Balance sheet à only permanent statement, amounts are carried over from year to year
o Income statement, statement of changes in equity, and statement of cash flows are temporary statements b/c
they are closed out at the end of each year and therefore are not cumulative in nature

The Balance Sheet - a statement of a firm’s financial position – what it owns and claims against is assets – at a particular point in
time
Information a Balance Sheet Reveals:
· 1. Accounting Entity
· Name of the firm
· A business firm is a distinct unit separating from its owners
· 2. Provides a summary of the firm's assets, liabilities and owner's equity
· 3. Ability of the firm to pay its debt
· 4. The firm’s ability to carry on business operations. (Examine fixed assets)
· 5. Strength of the owner’s claim on the assets

What a Balance Sheet Does Not Reveal:

· 1. Profit
· 2. How the owner’s invested money is used by the business
· Market value or worth of a business (local)
· All assets are recorded at cost on the day of acquisition

The Income Statement – a financial record of a company’s revenues, expense and profits over a specific period of time AKA profit
and loss statement, or statement of comprehensive income (under IFRS)
- Helps decision makers focus on overall revenues and the costs needed to generate these revenues
- Shows the net income or net loss of a business for a given period of time
- Summarizes financial performance over a specific period of time

Statement of Changes in Equity - a record of the change in equity from the end of one fiscal period to the end of the next fiscal
period
- Uses info from both balance sheet and income statement
- Begins with shareholders’ equity, add net income, subtract cash dividends, additional capital is added to equity,
withdrew capital is subtracted from equity
- New amount of owners’ equity is then reported on the balance sheet for the current year

Statement of Cash Flows – a record of the sources and uses of cash during a period of time
- All public companies must prepare and publish this
- Provides investors and creditors with information about a firm’s cash receipts and cash payments for its operating,
investing and financing activities during an accounting period
- Companies prepare statement of cash flows because of wide use of accrual accounting
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- Accrual accounting – an accounting method that records revenues and expenses when they occur, not when cash
actually changes hands

Financial Ratio Analysis

Liquidity Ratios – measure a firm’s ability to meet its short-term obligations, such as loans, when they are due. (two common
types)

- Current Ratio:
· Measures a business’s ability to pay its debts
· Current ratio = current assets / currentliabilities
·
Current
Assets:
Converted
into cash within one year
or
used up within one year

Current
Liabilities:
· Liabilities
which must be paid within one year
· Ratio = 2.5 Interpretation:very good
· Ratio = 2 Interpretation:good
· Ratio = 1.5 Interpretation:fair
· Ratio = <1 Interpretation: poor

- Acid-test ratio – measures ability of firm to meet its debt payments on short notice
- = (current assets – inventory – prepaid expenses) / current liabilities

Activity Ratios – measure how effectively management uses the firm’s resources

Inventory turnover = cost of goods sold / average inventory

Receivables turnover = credit sales / Avg. AR

Total asset turnover = Sales / Avg. Total assets

Profitability Ratios – measure organization’s overall financial performance by evaluating its ability to generate revenues that are
greater than its operating costs and other expenses

Gross profit margin = Gross profit / Sales

Net profit margin = Net income / sales = Net income / Avg. equity

Leverage Ratios – measure how much a firm relies on debt financing, provide interesting info. To potential investors and lenders

Debt ratio = total liabilities / total assets

Long-term debt to equity = long term debt / Owner’s equity

Budgeting
A budget is an organization’s plans for how it will raise and spend money during a specific period of time. Specifically, it shows
the firm’s expected sales revenues, operating expenses, cash receipts, and cash expenses

The budget can be thought of as a short-term financial plan. Budget planning involves many people from various departments
within the organization. Accounting department provides much of the data for budget development.
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Most important budgets prepared by firms is the cash budget. à tracks firm’s cash inflows and outflows, prepared each month.
Cash budget produces a tangible standard against which to compare actual cash inflows and outflows
Exchange Rates
- Accountants who deal with international transactions must take care when recording their firm’s foreign sales and
purchases
- In Canada, GAAP requires firms to adjust their earnings to reflect changes in exchange rates.
- A weakening dollar generally increases the earnings of a Cdn. Firm that has international operations
- A strengthening dollar will have the opposite effect on earnings – the same number of units of a foreign currency will
translate into fewer dollars

Chapter 17

Finance - the business function of planning, obtaining, and managing the company’s funds to accomplish its objectives as
effectively and efficiently as possible

The Role of the Financial Manager

Financial managers - the executives who develop and carry out their firm’s financial plan and decide on the most appropriate
sources and uses of funds, they are among the most vital people on the corporate payroll
- (Top) CEO, then CFO, then VP of Financial Planning, Treasurer and Controller
- Chief Financial Officer reports directly to CEO
o In some companies, CFO is also member of board of directors, CFOs often serve as independent directors on
other firm’s boards
- Three senior managers often report directly to CFO
o VP of Financial management or planning – responsible for preparing financial forecasts and analyzing major
investment decisions related to new products, new production facilities and acquisitions.
o Treasurer – responsible for all of the company’s financing activities, including cash management, tax planning
and preparation and shareholder relations, also works on the sale of new security issues to investors
o Controller – is the chief accounting manager. Functions include keeping the company’s books, preparing
financial statements, and conducting internal audits
o The “Hit and Miss” feature explains the increasing importance of financially sound IT management
- In their jobs, financial professionals continually balance risks with expected financial returns
o Risk – the uncertainty of gain or loss
o Return – the gain or loss that results from an investment over a specified period of time
o Financial managers maximize wealth of their firm’s shareholders by striking the right balance between risk
and return which is called risk-return trade-off

Financial Planning

Financial Plan – a document that specifies the funds needed by a firm for a period of time, the timing of cash inflows and
outflows, and the most appropriate sources and uses of funds
- Strategic plans – financial plans that have a much longer time horizon, up to five or ten years
- Operating plans – short-term financial plans that focus on no more than a year or two in the future

- A financial plan is based on forecasts of several items: production costs, purchasing needs, plant and equipment
expenses, and sales activities for the period covered
- Financial managers use forecasts to decide on the specific amounts needed and the timing of expenses and receipts
- Build financial plan based on three questions:
o What funds will the firm require during the planning period?
o When will the firm need additional funds?
o Where will the firm obtain the necessary funds?

- Funding needs vary, the financial plan must reflect both the amounts and timing of inflows and outflows of funds
- In general, there are three steps in preparing a financial plan:

1.Forecast of sales or revenue over some future time period

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- key variable in any financial plan b/c without an accurate sales forecast, the firm will have difficulty accurately estimating other
variable such as production costs and purchasing needs

2.Use sales forecast to decide on the expected level of profits for future periods
- involves estimating expenses such as purchases, employee compensation, and taxes

3.After coming up with sales and profit forecast, the CFO then needs to estimate how many additional assets the firm will need to
support the projected sales
- Depending on the type of industry, some businesses need more assets than other businesses to support the same amount of sales
- This is called asset intensity
- A good financial plan also includes financial control à process of comparing actual revenues, costs and expenses with
the forecasted amounts
- This comparison may show differences b/w projected and actual figures

Managing Assets

Short-Term Assets
- Also called current assets
- Consist of cash and assets that can be or are expected to be converted into cash within a year
- Major current assets à cash, marketable securities, A/R, and inventory

Cash/Marketable Securities
- Cash is to pay for day to day expenses, most organization try to keep a minimum cash balance so they have funds
available for unexpected expenses à earns little if any return
- Most firms invest excess cash in marketable securities à low risk securities that either have short maturities or can be
easily sold in secondary markets

Accounts Receivable
- Can represent a significant asset, financial manager’s job is to collect the funds owed to the firms as quickly; as possible
while still offering sufficient credit to customers to attract and generate increased sales
- A more liberal credit policy means higher sales but also increased collection expenses, higher levels of bad debt, and a
higher investment in AR
- Management of AR is composed of two functions: deciding on an overall credit policy and deciding which customers
will be offered credit
- Calculating AR turnover assesses how well receivables are being managed

Inventory Management
- Inventory represents largest single asset, managing inventory can be complicated
- Cost of inventory includes more than just the cost of acquiring goods à also includes costs of ordering, storing, insuring,
and financing inventory
- Financial managers try to minimize the cost of inventory
- Trends in inventory turnover ratio can be early warning signs of difficulties ahead
Capital Investment Analysis
- Firms also invest in long-lived assets à expected to produce economic benefits for more than one year. (involves large
amounts of money
- Capital investment analysis – the process financial managers use when deciding whether to invest in long-lived assets
- Firms make two basic types of capital investment decisions: expansion and replacement
- Replacement decisions involve upgrading assets by substituting new assets for older assets
- Companies should only pursue investments that offer an acceptable return – difference between benefits and costs

Managing International Assets

- Firms often have assets worldwide, the most important challenge is dealing with exchange rates
- Many global firms are involved in activities that reduce the risks associated with exchange rate ups and downs
- Reducing risk of exchange rate fluctuations will improve the financial performance of the firm, positive impact on its
share price

Sources of Funds and Capital Structure

Asset = Liabilities + Owner’s Equity

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There are only two types of funding: debt and equity

Debt capital – consists of funds obtained through borrowing
Equity capital – consists of funds provided by the firm’s owners when they reinvest their earnings, make additional contributions,
liquidate assets, issue shares to the general public or raise capital from outside investors
Capital structure – the mix of a firm’s debt and equity capital

Companies take very different approaches to choosing a capital structure

Leverage and Capital Structure Decisions

- Raising needed cash by borrowing allows a firm to benefit from the principle of leverage, increasing the rate of return
on funds invested by borrowing funds
- Key to managing leverage is to ensure that a company’s earnings remain larger than its interest payments, which
increases the leverage on the rate of return on shareholders’ investment
- Relying too much on borrowed funds may reduce management’s flexibility in future financing decisions
- Downside of equity capital à when new equity is sold, control of existing shareholders is weakened and outcome of vote
could potentially change ALSO more expensive than debt capital
- Key part of the financial manager’s job is to weight the upsides and downsides of debt capital and equity capital, and
then create the most suitable capital structure for the firm

Mixing Short-Term and Long-term Funds

- -Financial managers face another decision: deciding on the suitable mix of short-term and long-term funds
- Short-term consists of current liabilities
o Generally, less expensive than long-term, but higher risk b/c needs to be renewed or roller over
o Short-term interest rates can be unstable
o Availability is another risk, difficult to borrow money
- Long-term consists of long-term debt and equity
o b/c of risks of short-term funding, most firms choose to finance all long-term assets and even a portion of their
short-term assets but using long-term funds

Dividend Policy
- ---Dividends - periodic cash payments to shareholders à most common is regular dividend
- Firms have no legal obligation to pay dividends to shareholders
- Many factors are considered when deciding on a company’s dividend policy
o Investment opportunities

Short-term Funding Options

Three major sources of short-term funds (Large firms rely on a combination of these three short term financing):

Trade Credit
- Extended by suppliers when a firm receives goods or services and agrees to pay for them at a later date
- Common in retailing and manufacturing industries
- Trade credit is recorded as AR
- If suppliers do not offer a cash discount, trade credit is effectively free

Short-Term Loans
- Often use these loans to finance inventory and AR
- Borrowers can choose from two types:
o lines of credit – specifies max amount the firm can borrow over a period of time, usually a year à bank has no
obligation to lend money and will lend money if funds are available
§ requires borrower to repay original amount, plus interest within one year
o revolving credit agree – a guaranteed line of credit à bank guarantees that the funds will be available when
needed
- Financing is another form of short-term financing that uses AR
o Business sells its AR at a discount to either a bank or a finance company called a factor
o Factoring allows firms to convert its receivables into cash quickly without worrying about collections

Commercial Paper
- Short-term IOU sold by a company
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- Sold in multiples of $100,000 to $1 million and has maturity date ranging from 1 to 270 days
- Most commercial paper is unsecured
- Attractive source of financing because large amounts of money can be raised at interest rates that are usually 1 to 2
percent less than the interest rates charged by banks
- Only small percentage of business can issue, limited to large financially strong corporations

Sources of Long-Term Financing

Organizations acquire long-term financing from three source, repaid over many years unlike short-term
1st source – long-term loans from financial institutions such as commercial banks, life insurance companies, pension funds
2nd source – bonds, certificates of indebtedness, sold to investors
3rd source – equity financing acquired by selling shares in the firm or reinvesting company profits

Public Sale of Shares and Bonds

- major source of funds for corporations
- provide cash inflows for the issuing firm and either a share in its ownership or a specified rate of interest and repayment at a
stated time
- Many companies sell securities publicly through investment bankers using a process called underwriting
- Investment bankers purchase the securities from the issuer and then resell them to investors
- Issuer pays a fee to investment banker called underwriting discount

Private Placements
- Some new share or bond issues are not sold publicly but are offered instead to a small group of major investors such as
pension funds and insurance companies à private placements
- Involve corporate debt issues
- Private placements subject to fewer gov’t regulations b/c registration with the Cdn. Securities Administrators is not
required
- Institutional investors buy private placements b/c they carry slightly higher interest rates than publicly issued bonds
- Also, terms of issue can be designed to meet specific needs of both the issue and the institutional investors

Venture Capitalists
- Business firms or groups of individuals that invest in new and growing firms in exchange for an ownership share
- Important source of long-term financing, especially for new companies

Private Equity Funds

- Similar to venture capitals
- Investment companies that raise funds from wealthy individuals and institutional investors
- They then invest those funds in both public and privately held companies
- Unlike venture capital funds (fund small startups), private equity funds invest in all types of businesses, including
mature companies
- Sovereign wealth fund owned by gov’t à variation of private equity funds
o Invest in variety of financial and real assets, real estate
o Make investments based on best risk-return tradeoff
o Decisions influenced by political, social and strategic considerations

Hedge Funds
- Private investment companies that are available only to qualified large investors
- Do not make direct investments in companies like venture capitalists or private equity funds à prefer to purchase
existing shares and bond issues

Mergers, Acquisitions, Buyouts, and Divestitures

- Acquisition: one firm buys the assets of another firms and assumes that firm’s obligations
- Merger: includes buyer and a seller
o Seller referred to as target
- Tender offer: a proposal made by a firm to the target firm’s shareholders specifying a price and the form of payment
- Leverage buyouts, or LBOs - transactions where public shareholders are bought out and the firm reverts to private
status
o many LBOs occur b/c private companies enjoy benefits that public companies do not
- Divestiture – the sale of assets by a firm, reverse of a merger
 54
o Company sells its assets, such as subsidiaries, product lines, or production facilities
o Two types:
o Sell off: assets are sold by one firm to another
o Spinoff: assets sold form a new firm
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Frontline Walmart Video

- Said to have lots of controversy as the most powerful company in US history, possibly increasing income for Americans
in some eyes and putting people out of work in others’ due to the negative change in American economy with the low
market prices and low cost production in China
- Raise the question: Is Walmart good for America?
- Recently, Walmart had reached $286 billion dollars in sales
- Worth 1 IBM, 1 Dell, 1 Microsoft, 1 Cisco system with an additional $2 billion leftover
- Not just a retail business, but for companies all across the corporate landscape
- By the 19th century, it was the standard of the world
- Firms started to follow Walmart's standards since they are becoming the nation’s principles
- Previously, big multinational manufacturers had the most power in the economy (ie. General Motors, General Electric).
Today, global retailers are the biggest companies in global economies

- In present day, Walmart is the epitome of ~ one-stock~ shopping (they hold everything as a retail
giant) → originated in Bentonville, Arkansas
- In one week, they estimate to have 100 million American shoppers in 3400 stores
- Walmart's success is due to its striving strategy of low costs for customers to maintain reasonable profits
- Buy cheap, sell at a lesser price, and make profit at a high volume and fast turnover
- They achieved their success through a technology called the Telxon, a barcode scanner that would give you the sale price
of an item, the number of items in stock, its history, each sale as it occurs, and its future based on trends
- For over 120,000 items
- It helps to overcome problems like getting the right mix of products in the store by tracking items, including sales,
product types, sizes, colours, and all other subcategories
- A super computer of some sorts, allowing for optimal supply chain of communication as the fastest system of
delivery from plant to shelf
- Has made Walmart the world leader in logistics, increasing their efficiency and productivity more than any other
retail store
- Walmart has changed the economy from PUSH production to PULL production
- Push = manufacturers deciding what to produce and trying to get retailers to buy/sell for them
- Pull = retailers (like Walmart) deciding what is being sold (collecting info) and telling manufacturers what to
produce and when to produce it

- Suppliers go to Bentonville, where the Walmart Visitor Center and company headquarters is located, for bargaining
sessions
- Walmart knows all the numbers of every manufacturer, and so they call the shots in terms of offering the
figures and prices → they drive down the cost of goods sold
- Before, manufacturer was powerful and determined the price → now Walmart has price decision-making
power
- Changes the game for established name brand new retailers
- Rubbermaid was one of the the best-known brand names in America
- CEO of Rubbermaid: Gault → through the early 90s bet Rubbermaid’s future on big-supply chains like
Walmart, who wanted growth through the volume of sales
- Important to him to have a good relationship with Walmart, and had to be important to the retailer since
they were relied on them as Rubbermaid’s largest customer
- Walmart fuelled their growth for a while, increasing sales / profits of Rubbermaid products
by emphasizing the quality → were voted Most-Admired Company by Fortune Magazine
- Rubbermaid struggled with their goals → the price of resin (a huge component of plastic products) in
the industry skyrocketed, so they had to increase their prices to retailers, but Walmart would not take the
price increase, but other retailers would
- Resulted in CEO of Rubbermaid meeting to try and win Walmart back, but Walmart was
persistent and didn’t care
- Rubbermaid lost volume and had to drop some of their products (negative impact)
- Eventually, Rubbermaid had to sell out to Newell for $5.8 billion and was auctioning its birthright
(machines, plant, etc.) 5 years later to foreign countries like China
 56
- Showcasing the set of corporate values dying
- Shift from admired Rubbermaid to now most admired Walmart
- 2 different economic models are displayed:
- Rubbermaid = innovation and high road to American competitiveness
- Walmart = cost-driven, low road, and low price toward American competitiveness

- Walmart culture → meetings and pep rallies each week in Walmart locations, where they talk about pulling in
customers and sales margins
- The foundation of Walmart’s tactics is implementing their opening prices at the rock bottom price
- Best products at the best value at the best price for them → based on last year’s sales and customer’s
requests
- Opening prices are the lowest; other items in that category found further in Walmart will be much higher
in price
- Perception is that everything in Walmart is the lowest possible price, but this is not true
- In 1950s, Sam Walton of Walton’s tried the same approach with extremely low prices, which worked because he targeted
the areas that big competitors ignored
- Walmart had to compete, and therefore went overseas to find superior products (even though it was the most
publicized retailer at the time) → low cost imports from Asia that were an important part of their opening price
strategy
- Emphasis on global cost-cutting and internal efficiency → became better than early retailers like Sears,
KMart, etc. because they were more aggressive
- Expanded to be the biggest retailer
- In 1992, Sam Walton died and a year later, Walton’s stores struggled with sales
- Stores were inundated with inventory to bring in more profits with a high margin (margins coming in
from Walmart import item were great)
- Walmart made bigger profits on low-wage countries and therefore became more dependent on
them → American suppliers had no choice but to chase competition and follow Walmart to Asia, where
China was the lead supplier
- The pressure of costs and low market prices made it hard to stay in America, forcing them to set
up facilities in China just to meet these figures
- This led to American president Bill Clinton to sign a permanent trade agreement with the Chinese
- China was a big emerging market for US exports and US workers/companies could profit greatly from the
opening of trade flows with a large country like China
- China is now urbanized → dramatic lowering of export prices due to its currency devaluation as a
communist country, opening to Western business created a boom in China
- More Chinese migrant workers in their economy → became a supermarket for manufacturing in
southern China
- Mass corporate migration from America to China → Walmart has about 35 store locations in China
and 6000 global suppliers, 80% of which are in China

- Walmart gives Chinese suppliers the specifications of their products and teaches them how to meet them based on price,
quality, delivery schedule
- Chinese learn how to export to US market through large retailers like Walmart
- Walmart is very specific/shrewd → they demand anything in negotiation booths → Walmart auctions for
suppliers at the lowest cost possible (very high pressure)
- Better for retailers than consumers and suppliers
- Even though China is a low-cost supplier, they are going high-tech
- TCL (TVs and electronics) paired with French supplier Thomson, are the largest TV makers in the world →
Walmart, as their customer, matters to them the most due to their low inventory in TVs and fast turn around, forcing them
to speed up production to keep up with the international market
- Walmart is also China’s biggest customer as a retailer in the US → together, Walmart and China are a joint venture that
both want to dominate the US economy as much as they can
- Walmart imports about $15 billion worth of Chinese products each year
- Walmart is providing a gateway for the American economy for overseas suppliers on an unprecedented scale
 57
- Long Beach in California brings in $36 billion worth of consumer products from China and ship out about
$3 billion worth of raw materials → they export raw materials and in turn bring in manufactured goods (ex:
export cotton, bring in clothing, export metal, get machinery)
- China and US are in a trading partnership that benefits China more than the US because China will always be able
to sell more goods than Americans since Americans have the incomes to buy Chinese products but China doesn’t
have the incomes to afford American products
- TWO views on this
- Larry Mishel, pres of Economic Policy Institute: there is a growth deficit in America, and
conservatively, there are more than a million jobs lost to China since the 1990s
- Brink Lindsey, economist of Cato Institute: trade policy doesn’t have an affect on job numbers;
they affect the kinds of jobs in America → some have been eliminated due to Chinese
competition but other jobs have been opened because Chinese consumers can save / have
more money, creating business opportunities for other businesses that hire workers that wouldn’t
have been hired otherwise
- Theoretically, gains from trade offset the losses but nothing says there are more winners than losers
- Impact of China’s exports were huge and felt all across the US → example: Circleville, Ohio → firms and
factories with middle class citizens, many of which work at Thomson, a big efficient plant producing
electronics
- With China’s dominance, plants in Circleville like Thomson would be forced to close → China was
selling at prices the US market couldn’t afford to sell at, so the manufacturing market was largely
driven by Chinese producers
- Many suppliers lost contracts because Walmart demanded specific prices → these price deals forced
suppliers to go upstream to look for price concessions, and when there weren’t any they had to go to
China to compete
- Tom Hopson, President of Five Rivers Electronics, a TV maker in a competitive market and last American
producer in the market, had wanted to create jobs in Tennessee
- However, competition was too strong with foreign imports dominating the market → $30 million in
products supplied by the Chinese
- Competition would lead to Five Rivers shutting down
- Hopson had to file a complaint to Washington, charging the Chinese for dumping high-end TVs in
the American market, selling below the free market cost → not fair trade since they built their
advantages with their devalued currency of 40%, unfair treatment of employees, and government
subsidies provided to suppliers at low interest costs that probably don’t even have to be repaid →
accused them of rigged system
- Walmart had sided with the Chinese → raises question: why would an American company
fight an American company on providing jobs -- if not for profit -- to support jobs in
China?
- Five Rivers won the case on the illegal dumping of high end TVs → imposed import duties to make
Chinese prices higher and making Five Rivers more competitive (would have shut down if they
hadn’t won though)
- Already too late for some plants like Thomson, who had to shut down due to competition in China
- Job opportunities for kids coming out of high school now in this area are much lower than they were 10 years ago
- Ironically, Walmart also provides jobs with its new superstore where Thomson used to be in Tennessee
BUT it supports foreign competition that had originally put Americans out of business
- For former employees at Thomson, Walmart represents the steep cut in pay; almost half of the $15/16 /hr
pay they earned at Thomson at Walmart
- Also a far cry from the employee benefits, pension plans, and insurance that was normal of the
US industry

- “Creative destruction” → one form of capitalist economies / mode of production coming into play as the more efficient
and powerful destroys other forms of production and other firms
- Walmart, with its low wage model, high tech, and global reach of world capitalization destroys creativity,
innovation, and other competitors

- Is Walmart good for America?

 58
- 1st view: Walmart is good → they are doing what the American market is all about (offering what consumers
want to buy), which is a wide range of goods at a low cost price
- 2nd view: If people were only consumers buying things, lower costs would be good, but people are also workers
who need jobs and a good standard of living. The low costs of things undercuts the abilities of Americans and
their job opportunities to have a more stable life
- Walmart VP Bob McAdam
- Believe that Walmart is raising the standard of living by lowering costs and that people judge them too
harshly for negative effects

- Low costs → go to Walmart → putting people out of work → lowering standard of living

- Walmart in 2005
- Sales: $314 billion, increase in 23%
- Projected 2005 US trade deficit with China: $205 billion, increase in 70%
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Exam Questions Discussed in class:

- What are the positives and negatives of Mayer’s decision of banning working from home? (first question of exam)

Tested on Euro debt/crisis visualized (video)

- https://m.youtube.com/watch?v=j4_tyEl84IQ
- Difference between monetary and fiscal policy: monetary deals with control of money supply and interest rates and fiscal
deals with tax dollars
- How did Germany and Greece benefit from the euro: Greece: increase trade at lower costs, Europe:
- The problem now with countries with Germany and Greece: Germany is on the hook for greece’ debt, Germany says to be
like them
- Why it's unlikely that member countries will agree to fiscal policy controls:
- Can euro survive?
-
Video on Mukesh Ambani
- Does he have it right?: yes because “it's like a drug deal” they can get hooked on the internet.
- Why is Ambani so interested in mobile internet in India?:
- Why is India a key market for online sales: huge market on computers
- Do you think he will be successful:

Davesh’s Garbage Notes from Sessions 2-4 (at the request of Evan and Hugo)
Cocaine Guest speaker

● Coke is offering lots of different commitments to help stop obesity

○ low/no calorie versions of all new drinks
○ Provide clear nutritional info
○ Market beverages responsibly
■ Don't advertise to children under 13
○ Support active healthy living programs

Production/Operation management
● Simply has lots of different types of juices in many different sizes (2.6L, 1L, etc.)
● Simply has been growing while competitors have been dropping in NFC Orange Juice sales
● Supply chain (end to end view)
○ Functional excellence
■ Plan
■ Source
■ Make
■ Deliver
■ Customer management
■ Post sales support
■ New product launch
○ Operational excellence
○ Strategic excellence
○ Leadership excellence
■ Connects the rest of the excellences
○ Key attributes of excellent supply chains
■ End to end focus and scope
■ Alignment of supply chain strategy with corporate goals and business strategy
■ Segmented operating models to compete effectively in the local markets
■ Synergy and integration with customers and suppliers as well as within company’s functions
■ High value collaborative supply networks with supply chain partners
■ Demand driven network for market responsiveness
○ End to end supply chain pic goes here
○ Supply chain management hierarchy
■ 1. Supply chain strategy
■ 2. Supply chain operations planning
■ 3. Supply chain execution
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● Apparently bread memes are being replaced with oranges
○ I thought i escaped the orange obsession once I got out of Florida
● production
○ Inputs
■ Resources
■ Raw materials
○ Conversion process
■ Add value
○ Outputs
■ Goods
■ Services
● Types of equipment layouts
○ Process layout
■ Groups machinery and equipment according to their functions
■ Lets you produce non-standard items in small batches
● Ie. laundromat
○ Product layout
■ Sets up production equipment along product-flow line and the work moves past equipment in this line
○ Fixed position layout
■ Places product in one spot and everything comes to it
● Ie construction
○ Customer oriented layout
■ Arranges facilities to enhance the interactions between customers and its services
● Ie. grocery store
● Buy, make, or lease manufacturing parts
○ Factors in decision
■ Cost
■ Availability of reliable outside suppliers
■ Duration of firm’s supply needs
■ Need for confidentiality
○ Selection of suppliers
■ Based on comparison of
● Quality ~~~ gangs all here
● Prices
● Dependability of delivery _SKKKKRT
● Services offered by competing companies
● DOIP
○ Demand, Operations, and Inventory planning
○ Consider insight from the different sections of the business
○ Must consider shutdown prices Psd minimum avc
○ Need reliable/continuing relationships with suppliers to prevent production delays
● Types of inventory
○ Raw materials
○ Components
○ Work-in-progress
○ Finished goods
■ Need to know how to balance all the different types of inventory with other investments, paying staff, etc.
● Why hold inventory
○ Seasonal issues
■ time varying demand/supply rates
○ Safety
■ to balance against uncertainty in customer demand/supplier quantities, costs or lead times
○ Pipeline
■ processing and movement
○ Batch
■ economies of scale are a thing that’s good
● To improve system performance
○ Lead time + uncertainty = inventory
○ Reduce lead times or uncertainty to improve system performance
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● ABC approach
○ Graph
○ Class A
■ Continuous review, tight control, great accuracy
○ Class B
■ periodic review, less tightly controlled
○ Class C
■ no or low inventory, simple controls
● How to transport stuff
○ Need to ship it, hold it in inventory, etc.
● Performance management
○ Look at not just financial health but also customers, internal business processes and learning & growth of
employees
● Cash to cash cycle
○ Cash
○ Purchase materials
○ manufacture/hold
○ Sales on credit and cash (cash ends here)
○ A/R
○ Collections (and repeat back at cash)
● Calculation of EVA/Econ. Profit (good pic on the slides)
○ Gross Rev - Op. costs
○ EBIT - Tax
○ Net operating profit after tax (NOPAT) - Capital Charge
○ Economic Profit
● Final thoughts on operations leadership
○ To be supply chain leader need holistic end-to-end understanding of supply chain
○ Identify right supply chain for your specific environment for success
○ Supply chain is Demand-driven, segmented, aligned properly to the strategic business (think about customer first)
○ Appropriate collabs with suppliers

Strategic Human Resources Management

● Working at Google
○ Google treats interns well
○ Google’s way of treating employees can contribute to their success
○ Improves morale and fosters innovation
○ Drawbacks would be costs to set up/maintain
● Strategic HRM
○ Pattern of planned HR deployments to meet company goals
● Core of HRM
○ Hiring
■ Companies/public servants use social media in hiring
■ Is social media ok to ask for???
● Different personal/professional personalities
● People are faces for the company
● Isn't just access to your account but access to DMs sent to you by other people
■ Need to follow legal requirements (stuff that you cant ask about)
○ Performance appraisals
■ Balanced scorecard categories
● Financial
● Customer
● Learning + growth
○ Training
○ conferences
● Internal business process
○ Efficiency improvements
○ Cycle time
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○ Compensation
■ Wages (hourly)
■ Salary (lump sum)
■ Compensation factors
● Competing company prices
● Govt regulation
● Cost of living
● Company profits
● Productivity
■ Forms of incentive compensation
● Profit sharing
○ Bonus based on company profits
● Gain sharing
○ Stock options (i think)
● Lump sum bonus
● Pay for knowledge
■ Employee benefits can reach up to 30% if employee compensation
■ Flexible benefits are a thing
● So is flexible work
● Weird video about telecommuting
○ Yahoo CEO banned telecommuting
■ Bad for parents (and the CEO created a nursery for her kid wow wtf)
■ Tries to help create a more work focused day
■ Bad for time working because commuting is garbage
■ Can try to force innovation by forcing interaction between employees
■ THIS IS AN IMPORTANT THING!!!!!!!!
● Employee separation
○ Voluntary turnover (quitting)
○ Involuntary turnover (firing)
○ Downsizing
○ Outsourcing
● Maslow's hierarchy of needs
○ Basic needs
■ Food, water, shelter, etc.
○ Safety + security
■ Employment, health, etc.
○ Love + belonging
■ Friendship, intimacy, etc.
○ Self-esteem
■ Confidence, achievement, respect of others, etc.
○ Self actualization
■ Morality, creativity, acceptance, purpose, etc.
○ Employers help with all levels of this
● Herzberg’s 2 factor model of motivation
○ Hygiene factors (→satisfaction)
■ Salary
■ Job security
■ Working conditions
■ Status
■ Interpersonal relations
■ Technical supervision
■ Company policies
○ Motivator factors (→high levels of motivation)
■ Achievement
■ Job responsibilities
■ Recognition
■ Growth opportunities
○ Sometimes hygiene factors can be motivator factors
■ I.e. extreme situation jobs
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● Expectancy theory
○ Individuals evaluate likelihood that efforts = results and degree they want results
● Equity theory
○ Individual's perception of fair + equitable treatment (you bring work level up to down to what you think you
should get for salary)
● Goal setting theory
○ Reward based on goals met(?)
● Management by objective
○ Motivate individuals by aligning objectives with goals of organization
● Job enlargement
○ Expands an employee’s responsibilities by increasing the number and variety of tasks assigned to the worker
● Job enrichment
○ Expands job duties to empower an employee to make decision, learn skills leading toward career growth
● Job rotation
○ Systematically move from one job to another
● Unions
○ Collective bargaining
○ Labor disputes
■ Mediation
■ Arbitration
■ Strikes
■ Picketing
■ Boycotts
■ Lockouts
● Why millennials hate traditional companies
○ Move companies more
○ Want to feel like they have an impact
○ Want job satisfaction
○ Flexibility is valued
■ hours
○ Want fast paced lifestyle
○ Dont like bureaucracy + corporate culture
○ Non-monetary incentives

International Business

● Exam stuff
○ 80% of exam on Khan , 20% on Oesch (MC i think)
○ Coke dude is on it but his stuff is in the textbook anyway
● Omg he used the wikipedia definition for globalization as his explanation of what globalization is why am i paying for
this
● Evidence of globalization
○ Foreign trade
○ Foreign direct investment
○ Financial transactions
● What is “international” vs “global” company
○ Different beliefs of what makes a global company compared to international
○ 2 perspectives of international trade
■ Why do Nations trade?
● Nations trade because comparative advantage and ECONOMICS (insert gazalle pic here)

○ Bringing coal to newcastle example to explain CA

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○ WTF NOW HE JUST TURNED ON AN INVESTOPEDIA DEFINITION VIDEO AND
LEFT
■ Why do Companies trade?
● Have excess resources/capacity
○ I.e. Saudi Arabia
● Cost reduction
○ Economies of scale are a thing
● Particular foreign market demand
○ I.e. swiss watches, french wine/cheese, prada watches, champagne
● Managing across currencies
○ International financial system
○ Currencies are pegged to the value of gold
○ How does low canadian dollar affect economy
■ More exports, less imports
○ Euro debt visualized video (important)
■ Failure of euro
● Greece, portugal, ireland and spain are doing badly and bringing down eurozone
● Before the european countries hated each other
○ So they tore down borders to make war less common
■ And thus the European Union and Euro were born
● One unified monetary policy between EU but countries still control own fiscal policies
● Small countries overborrowed at low rates because they were a part of the EU and Eurozone
● Financial institutions believed the EU (read: Germany) would pay off debts of other EU countries
if they defaulted
● Greece took a bold approach that was the equivalent of paying off your credit cards with more
credit cards - m a s t e r s t r a t
● Lehman Crisis hit world economy in 2008 and caused EU countries to default
● Germany agreed to pay the bill if other countries implemented “austerity measures”
○ Less govt spending, paying off debts, increased taxes, stuff like that
● Lots of cultural differences between countries
○ Germany has PTSD of their hyperinflation days
■ Like when it was literally cheaper to burn money than buy firewood
○ Greece doesnt exactly do taxes
○ And they are tied by the Euro and if one country defaults it has a domino effect
● Video suggests EU needs either a fiscal+monetary union or neither
○ Difference between fiscal vs monetary policy
■ Fiscal = taxes and govt spending
■ Monetary = inflation and money supply
○ Why was there agreement for the EU and Euro
■ To encourage trade between nations and prevent war
○ How did germany and greece benefit from euro
■ Germany got to trade more at lower cost
■ Greece got strong borrowing power
○ Whats problem for germany and greece
■ Germany is on hook for greece
■ Greece needs to pay back debts and take austerity measures
○ Why no fiscal union
■ Sovereignty issues
○ Do you think euro can survive
■ Meh, i expect so because worst case they just kick out the countries bringing it down
● How does having ancestors from elsewhere have to do with globalization/Canada
○ CULTURAL MOSAIC
○ MELTING POT
○ International business means people from different cultures interact really closely
○ Culture is a key factor in deciding what we do and how we do it
○ Room for potential conflict
● Challenges of cultural diversity
○ Misunderstandings
○ Language mishaps/barriers (Pocari Sweat in US/CAN or Chevy Nova in Mexico)
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○ Other language “context” barriers - technical, legalistic language
○ Examples of what do we need to know when doing business in other parts of the world
■ Asian countries give things with both hands
■ Japanese dont want you to write on a business card or put it in your pocket and sit on it
■ Koreans expect you hold down your soju
■ No tipping in japan
■ Sexuality, PDAs, banned clothing when in other countries
■ Measurements
■ Talking about business during a meal or having food during meetings
■ Idk why im listing all of this im just bored and lonely
■ Gender equality
■ Greeting practices (France vs. Saudi)
■ Bribery
■ Stuff being covered, closed, open late, etc. during Ramadan in Dubai
■ Giving clocks (all of Khan’s watches are ok RIP, NVM international students say watches are ok)
■ Colors (white = death in asia)
■ Numbers to love/avoid
○ Cultural diversity in canada is present in
■ Businesses
■ Schools
■ clubs/religion/community organizations
■ Cities
● How do ethics change between countries and how does that affect intl businesses
○ Child labour
■ Oh god the video he had for this one was physically painful
■ It exists because of extreme poverty
○ Bribery
○ Environmental standards
○ Reputation in home country
○ Doing good in another company can raise your international reputation
● Why is canada so internationally oriented
○ Lots of natural resources
○ Not a lot of people
○ Right next to the USA
○ Historical relationship with Europe and being a country of immigrants
○ NAFTA, Commonwealth, NATO, etc.
● Walmart in digital and buying Indian company + Indian rich dude
○ Indian rich dude pumping money into bringing mobile phone internet across India
○ Indian dude says he is trying to help country’s youth
○ Khan just compared this man to a drug dealer (“first hits free man”)
○ India is a big sales opportunity even if you have to price it low
○ The venture seems to have been successful so far