Explain how the COVID-19 virus has impacted the multiplier in Canada.

Explain how the COVID-19 virus has impacted the multiplier in Canada.

            Arguably, the unexpected coronavirus that has shaken the entire world has posed serious threats to the economic ability of countries. For instance, Covid-19 has numerous impacts on the multiplier of Canada, which led the government to respond by injecting more funds into the economy. The pandemic has negatively affected the multiplier in Canada because it reduced the rate of investment since there is reduced movement of people hence adversely affecting the market for goods and services. Fundamentally, income multiplier, employment multiplier, money multiplier, and tax multiplier have experienced adverse effects of coronavirus (Baldwin & Tomiura, 2020). The Covid-19 has negatively impacted the multiplier effect in Canada because the public, as well as private investment, has greatly reduced since more funds are directed to combat the pandemic. Business people in Canada are more concerned with preventing themselves from contracting the deadly virus than increasing investment.

Consequently, the Canadian government has come in handy to prevent the economy from the effects of the coronavirus by providing an economic stimulus package of 27 billion dollars. It has offered the funds to manage the cash flow during coronavirus pandemic. The move by the government will increase investment multiplier, which would increase the investment rate of both private and public entities in the country. With increased investment multiplier realized by injection of 27 billion dollars by the government, the general economy of the country will grow despite the adverse effects of the Covid-19 (McKibbin & Fernando, 2020). Moreover, the funds provided by the government will increase the income of the Canadians hence increasing their spending power, thus improving economic growth. The funds will prevent employers from laying off employees because of the devastating effects of the Covid-19. The economy of Canada will not be struck by the pandemic because the government has provided funds to businesses in the country.

What is globalization?

            Globalization is the process that involves the interaction and integration of local as well as the national economy into the global market economy. It is also an economic process of interaction and integration primarily associated with cultural and social features or aspects. There could be social, cultural, economic, and political globalization. For instance, economic globalization entails the movement of goods, services, and other economic resources such as capital and technology across the world. In simple terms, globalization is the process of interaction among people, companies, and governments in the global arena. Globalization has grown because of the development of both transport and communication technology.

Globalization comes with numerous advantages and disadvantages. For example, it is advantageous to the economy because it has ensured an unlimited market for goods and services like, amidst Covid-19, doctors from Cuba are able to fly to Italy and Spain to offer medical services. It creates employment opportunities for people from different countries because there are no barriers to import or export markets. It is essential because it encourages free trade among different nation-states. Globalization removes trade barriers hence providing a large and available market for goods and services (Gözgör & Can, 2017). It allows countries to pull together their resources for full exploitation, reduces the prospects of tyranny, leads to the development of transport and communication, and, lastly, helps developing countries to progress faster. Despite the advantages, globalization is disadvantageous in several ways. Foremost, it benefits wealthy countries more than in developing countries. It may encourage the transfer of diseases like, for instance, the Covid-19 is spread to other countries in the world through globalization. Since globalization entails interaction and interaction in various aspects, the Covid-19 has spread from the Wuhan city in China to other parts of the world with European countries and the United States hit hard by the pandemic.

What are the main methods of entering a foreign market?

            Entering into a foreign market, especially where a country has strict rules and regulations, is difficult, and therefore one needs sound strategies to penetrate. There are main methods of easily entering into a foreign market. Foremost, franchising your brand is a proper method of entering into an international market. Franchising is a situation where you create a successful brand like a restaurant then allow people in that foreign country to open branches of your restaurant, and then the owner of the branches will be submitting a certain fee to you as the original pioneer of the idea. The most advantageous bit of franchising is that it is possible to enter any foreign market despite their strict regulations. The franchising method is disadvantageous because the other branches might be more successful than yours, thus forcing you out of the market.

Direct exporting is another method of entering into the foreign market (Surdu et al., 2019). This is the populous method of entering into a foreign market, and it is arguably simple because an organization sales directly to the market is trying to enter. For instance, an organization might find an agent and a distributor in a foreign country to open a store for selling its products. It is an advantage for the direct exporting method since the trusted agent and distributors have close contact with the entire market hence increasing the sales volume. The disadvantage part of direct exporting is the cost of shipping logistics. It is very expensive to export goods to a foreign country, especially where long distances are involved. It might be difficult to enter the foreign market through this method because it is expensive and may adversely affect the company’s growth.

What is the function of Letters of Credit?

            Letters of credit have several functions in a business corporation or any type of business enterprise. The main function is to ensure successful transactions in the business between buyers and sellers. Ordinarily, a buyer makes a commitment to pay a seller immediately when goods are received, and the seller agrees the buyer’s promise because of the bank-issued letter of credit guarantees payment of supplied goods. Another function of the document is payment assurance. The letters of credit assure a seller that he or she will be paid for goods supplied, and it mostly gives assurance to parties operating from distant places like overseas companies. In this function, the buyer agrees with the issuing bank to pay the seller the agreed amount of money in the letter of credit. The seller puts his or her trust to the bank once he or she establishes its creditworthiness then goes ahead to supply the goods to the buyer

Another function is setting payment terms (Jones, 2018). The letter of credit sets the payment terms reached between the buyer and the seller.  The delivery time and address are captured in the letter of credit, which must be agreed by both the seller and the buyer. The seller must also prove that he or she has complied with the terms captured in the document. The Bill of lading is a receipt that the seller receives from the shipper to notify the bank that goods have been received by the buyer.

It serves as a buyer and seller protection. The letter of credit involves a significant transaction in which the buyer ought not to take chances of losing it. The letter of credit functions as a source of security whereby a bank acts as an intermediary between the seller and the buyer. Therefore, here the bank is essential because it can assist in reducing the risk of non-compliant because it will only process payment after it confirms that everything is in order.

The importance of cultural understanding relative to International Business.

            Ideally, understanding culture is essential in global or international business. As companies grow and enter into the global market, understating culture is inevitable for any business enterprise aspiring to go global. It is understandably crucial for businesses to be conversant and comprehend the culture of their foreign market for them to increase sales volume. To avoid a clash between clients and businesses, it is vital for companies to deeply understand the culture of the target population. Cultural understanding will enable business representatives to present themselves in foreign markets in the proper way without offending their customers effectively.

Communication is important for any business wishing to enter the foreign market. Arguably, the language of communication will determine the successful entry of business in international business. It will be difficult for a business to maneuver in the global market if their representatives are not conversant with the local language of the community or the target population. The language barrier will hinder an individual from communicating with his or her new market (Brannen et al., 2017). Another issue is dominant customs, manners, and gestures that are accepted in the culture of the foreign market. Some behavior such as gestures might be offensive to the people in the new market hence finding it difficult to penetrate and convince the people to buy your products. Business corporations should learn the attitude of the new market is anticipating to enter because the different culture has varying attitudes towards certain businesses and products. Apart from the attitude towards certain products, work etiquette is of major concern for businesses to be successful internationally. Workplace etiquette is indispensable for international business. Business enterprises should research how to communicate with clients in different cultures. For example, one should determine whether the new market is comfortable with the way they approach individuals like if they prefer first name or surname accompanied by titles.

References

Baldwin, R., & Tomiura, E. (2020). 5 Thinking ahead about the trade impact of COVID-19. Economics in the Time of COVID-19, 59.

Brannen, M. Y., Piekkari, R., & Tietze, S. (2017). The multifaceted role of language in international business: Unpacking the forms, functions, and features of a critical challenge to MNC theory and performance. In Language in international business (pp. 139-162). Palgrave Macmillan, Cham.

Gözgör, G., & Can, M. (2017). Causal linkages among the product diversification of exports, economic globalization, and economic growth. Review of Development Economics, 21(3), 888-908.

Jones, S. A. (2018). Standby Letters of Credit. In Trade and Receivables Finance (pp. 271-293). Palgrave Macmillan, Cham.

McKibbin, W. J., & Fernando, R. (2020). The global macroeconomic impacts of COVID-19: Seven scenarios.

Surdu, I., Mellahi, K., & Glaister, K. W. (2019). Once bitten, not necessarily shy? Determinants of foreign market re-entry commitment strategies. Journal of International Business Studies, 50(3), 393-422.