RSM100 - Chapter Textbook Notes PDF

MIDTERM IS CHAPTER 1,2,4,5,6,7,8 Chapter 1: Overview: - Growing economies are important because they yield more income for business owners, their employees, and governments in the form of tax payments - Firms organise the resources, the know-how, and the financial incentive to bring...

MIDTERM IS CHAPTER 1,2,4,5,6,7,8 Chapter 1: Overview: - Growing economies are important because they yield more income for business owners, their employees, and governments in the form of tax payments - Firms organise the resources, the know-how, and the financial incentive to bring about real innovations - Businesses requires physical inputs, accumulated knowledge and ability to change - Flexibility is key to long term growth Areas of Business: - Management Functions - Planning and managing of organisational goals - Marketing functions - Understanding customers, building and maintaining relations - Finance functions - Accounting process, sales behaviour, performance indicators Forces: - Social and cultural forces - Technological forces - Government and legal forcess - Globalisation forces - Economic forces Goals of business activity: - Profit - Promoting positive social environment 1.1 What is Business - All profit seeking activities and enterprises that provide goods and services necessary to an economic system - Drives economic pulse of a nation - Provides means for improving standards of living - Exchange between a buyer and a seller - Not-for-profits operate in both private and public sectors (museums, libraries) - Not-for-profit organizations place public service above profits, although they need to raise money to operate and achieve their social goals 1.2 Economic Factors of Production - An economic system requires certain inputs to operate successfully - 4 basic inputs: - Natural resources - rent for land leased for operations - Capital - Interest for money used to acquire capital items - Four types of capital are technology, tools, information, and physical facilities. - Human resources - Wages for employees - Entrepreneurship - Profit for starting and managing operations 1.3 The private Enterprise System - In Canada businesses function within the Private Enterprise System (or capitalism, market economy), an economic system that rewards firms for the ability to identify and serve the needs and demands of consumers. Minimise government interference - Market economy includes the rights to private property, profits, freedom of choice and competition - Fair competition, allows public to set rules for competitive activity however government has set some ground rules (price discrimination, fraud, deceptive packaging) - Entrepreneur: a risk taker who is willing to start, own and operate a business 1.4 Seven Eras in the History of business - North American business history is divided into 7 time periods: 1. Colonial period (nineteenth century maybe earlier idk) - Rural and agricultural production - Success or failure of crops influence every aspect of the economy 2. Industrial Revolution (became around 1750) - Businesses moved to a factory system, mass produced items - Produced raw materials more cheaply in larger lots 3. The age of industrial entrepreneurs - Industrial revolution created opportunities increasing entrepreneurship in Canada - ‘Golden age of business’, increased overall standard of living 4. The production era (1920s) - Focus on production as demand for goods increased (more factories) - Assembly Line, Henry Ford - Businesses decide what products were available - did not pay attention to consumer needs/wants - Labour intensive factories, work became more specialised 5. The marketing era (Great Depression, 1930s) - Focus on designing and advertising products to meet consumer needs - Developed consumer orientation - analyse desires before producing - Heavy focus on branding increased consumer choices - After WW2 demand increased for all consumer goods 6. The relationship era (2000s) - Transaction management - promoting and building products in hopes to gain interest and earn profit - Promote customer loyalty and relationships by investing in them - Reduces marketing and sales costs, don’t have to offer as many discounts - word of month from existing relationships are important 7. The social era - Incorporates relationship management with consumers to maintain ties - Tailor specific promotions through social platforms 1.5 - Current Trends Related to Business COVID-19: - Opened opportunities to online means of marketing, selling and working Growing Partnerships and Relationships: - Strategic Alliance: partnership to create competitive advantages for both businesses - Alexa AI in major automobile companies, Starbucks and Chapters Changes in the Workforce: - Companies need to consider several factors when developing a workforce - Aging populations - Broad age diversity (boomer to millennials) brings management issues due to varying life styles and work expectations - Changing nature of work - Technological advancements - Shift from manual labour to service industries - Offshoring - moving business processes to lower-cost locations - Increasingly Diverse Workforce - People from different backgrounds bring different opinions and expertise - Often enhances chance of success - Flexibility and Mobility - New workers seek flexibility, training and diversity more, care less about money - More open to remote working and flexible hours - Innovation through Collaboration - More collaborative work rather than individuals - Employees build their own careers, don't stay at the same company whole career - Managers are trained to listen and respect employees 1.6 - Skills and Attributes Needed by Today’s Managers Importance of Vision: - Ability to perceive marketplace needs and what must be done to satisfy them - This is an increasing need in businesses in order to predict and plan for the future Importance of Critical Thinking and Creativity: - Critically analyse situations and draw connections to develop unique solutions that beat out competitors - especially important in an era of international business and ever growing competition - Applies to all levels of employees Ability to Lead Change: - Guide through changes from technology, marketplace demands, change in consumers and competition 1.7 - What Makes for a Successful and Admired Company? - Achieve desirable goals - Consistent with contributions to better society - Satisfy consumer needs with social responsibility in mind  - Good and ethical work culture and practices - Solid profits, stable growth, a safe and challenging work environment, high quality goods and services and business ethics and social responsibility Chapter 2: Overview: - Different economic systems includes policies and choices nations make to allocate resources - Economic scarcity is the gap between limited resources and limitless wants - Forces efficient resources allocation - Everyone makes economic decisions everyday - Microeconomics: study of behaviour of small economic units - Families, individuals, businesses - How this behaviour impacts allocation of limited resources - Macroeconomics: study of country’s overall economic issues - How economy as a whole uses resources and government’s impact on this - GDP, Unemployment, Inflation 2.1 - Microeconomics: Forces of Demand and Supply: - Individuals weigh benefits/costs related to buying/selling decisions to maximise benefit and minimise cost - Information based on decisions of small economic units is important to companies as they need to understand demands of consumers to sell the right products at the right prices - Pricing and other company information is important to consumers, as they use it to make decisions about what to buy from which companies (what best meets their need) - Buyer: recognize need for good or service, and willing to pay for it - Seller: sell products to buyers to gain profit - Demand: willingness and ability of buyers to purchase goods and services at different prices - Supply: amount of goods and services available for sale at different prices Factors Driving Demand: - Factors that influence how people spend their money (consumer preferences, price) - Factors that impact outside circumstances or larger economic events - Demand Curve: graph of amount of products purchased at different prices, typically slopes downward (buy more when price falls)  - Goods are complements if increase in price of one causes fall in demand for other (PB & J) Factors Driving Supply: - Supply Curve: shows relationship between different prices and quantities that sellers will offer to sell - Prices rise - supply rises, prices lower - supplies lower How Supply and Demand Interact: - Shifts in demand and supply affect prices and availability of products - Equilibrium is where price is acceptable to buyers and sellers - Prices are set by the intersection of the 2 curves - Disequilibrium results in surplus or shortage 2.2-Macroeconomics: Issues for the Entire Economy: - 3 categories of systems: - Private enterprise systems (capitalism or market economy): - Government plays hands off role to control business ownership, profit and resource allocation - Competition amongst businesses regulates economic life - Businesses pay tax for government to serve - Planned economies (socialism and communism): - Government controls business ownership, profits and resource allocation - Socialism: government ownership and operation of major industries - too important to be left to private enterprises - Communism: all property is shared equally by people under direction of the central government - classless society. Government bureaucracies control most parts of daily life - Mixed economies: - Systems that draw inspiration from both types of economies - Proportion of private vs public enterprises varies in mixed economies - Privatisation: conversion of government-owned companies into privately held businesses 2.3 - Evaluating Economic Performance: - Economic systems should provide 2 benefits: - Stable business environment - Overall supply of needed goods/services aligned w overall demand for these items - Consumers have ample access to products and money to buy what they demand - Sustained growth - Steady change directed to continually expand goods and services produced - leads to increased job opportunities, improved wage and standard of living Flattening the Business Cycle: - Nation’s economy grows w demand for more products from growing population - Business and consumer decisions differ at different stages of business cycle - During economic prosperity: low unemployment, high consumer confidence, businesses expand by hiring, investing and making more purchases - During recession: consumers postpone large purchases. Businesses slow production, postpone expansion, reduce inventory/workforce. Continued recession leads to depression.  - During recovery: consumer spending increases, high levels of growth in GDP, employment and corporate profit Productivity and the Nation’s Gross Domestic Product: - Productivity: relationship between goods produced in a nation each year and inputs needed to produce them - Productivity up - economy grows, productivity down - recession - Technology often boosts productivity - Total Productivity = Output (goods/services produced) / Input (human/natural resources, capital) - GDP (Gross Domestic Product): sum of all goods and services produced within borders - measure of economic strength - GDP per Capita = GDP / number of citizens. Measures average wealth of individual citizen in the country Price Level Changes: - Inflation: rising prices caused by excess consumer demand and increased costs of production materials. It devalues money over time - Core Inflation Rate: inflation rate after energy and food prices are removed. It is an accurate prediction of inflation that consumers and businesses can expect - Excess consumer demand causes demand-pull inflation - Increases in costs of production create cost-push inflation - Investments in real estate, gold, oil and stocks are used to hedge against inflation - Low interest rates encourage: - Major purchases - Companies to invest in R&D and capital improvements - Increased productivity keeps prices steady - Deflation occurs when inflation rate is negative (falling prices) - can weaken economy Measuring Price Level Changes: - Consumer Price Index (CPI): measures monthly change in price of goods/services - Producer Price Index (PPI): average change over time of prices of goods/services received by producers Employment Levels: - Indicator of economic strength - Types of unemployment: - Frictional: temporarily not working but job-seeking - Seasonal: not working during some months and not job-seeking - Structural: not working due to no demand for their skills, may need retraining for a new job - Cyclical: not working due to economic slowdown but job-seeking 2.4 - Managing the Economy’s Performance: Monetary Policy: - Government actions to increase/decrease money, change banking requirements and interest rates - Expansionary monetary policy: increases money to cut the cost of borrowing. Encourages new investments and economic growth - Restrictive monetary policy: reduces money to stop rising prices and overexpansion - Quantitative easing: when central banks buy back set amounts of government bonds or financial assets to increase liquidity in the economy - Changes in interest rates charged to commercial banks (made my Bank of Canada) affects interest rates charged to borrowers Fiscal Policy: - Used to encourage economic growth and control inflation - includes government tax collection and spending - Increased taxes restrict economic activities, low taxes and high government spending fuels economic expansion International Fiscal Policy: - Changes in fiscal policies in developing countries to stimulate economies The Federal Budget: - Includes various government spending categories - Budget is funded by taxes, fees and borrowing - When they go over budget (budget deficit), government sells treasury bills/notes/bonds to make up the money in their debt - Budget surplus: takes in more money than they spend - Balanced budget: money gained is same as proposed spending 2.5 - Global Economic Challenges As international business is more common, businesses need to compete globally by addressing challenges in these areas: 1. Economic 2. Environmental 3. Geopolitical 4. Societal 5. Technological Top economic risks: 1. Climate action failure 2. Extreme weather 3. Loss of biodiversity 4. Erosion of social cohesion  5. Livelihood crises 6. Infectious Diseases 7. Human environmental damage 8. Crises of natural resources 9. Debt crises 10. Geoeconomic confrontation - Increased competition requires companies who are seeking growth to look in foreign markets - Can potentially lower labour costs - but must keep supply chain management in order to sustain ethical behaviour Chapter 3: Why Nations Trade: - Economic growth - Expands markets - More efficient production and distribution - Less dependence on domestic economies - Export: Domestic goods sold in other countries - Import: Foreign goods purchased by domestic consumers International Sources of Factors of Production - Decisions to operate abroad depend on: - Labour - Natural resources - Capital - Entrepreneurship Size of International Marketplace - Opportunities grow as developing nations expand (high GDP growth rate in less developed countries means markets are expanding) Absolute Advantage: - when a country can maintain monopoly or when it can produce at a lower cost than other countries Comparative Advantage (OC): - When it can supply products more efficiently and at lower price than it can supply other goods, compared with output of other countries Measuring Business & Trade between Nations - Balance of Trade: difference between nation’s exports and imports - Balance of Payments: overall money flows into or out of a country - Balance of Payments Surplus: More money into country than out of it - Balance of Payments Deficit: More money out of country than into it Exchange Rates: value of one nation’s currency compared to others - Influenced by - Domestic economic and political conditions  - Central bank intervention - Balance of payments position - Speculation of future values - Values fluctuate depending on supply and demand - Governments can influence exchange rates (devaluation) to stimulate foreign investment - Transactions usually occur in the currency of region they happen in - Rates can quickly create or wipe out competitive advantages Barriers to International Business and Trade - Social and Cultural Barriers - Language: mistranslation, inappropriate messaging, differing customs and tastes - Values and Religious Attitudes: differing values about employment levels, business efficiency, religious practices, values on different issues - Economic Barriers: - Infrastructure: basic systems of country’s communication, transportation, energy facilities - Currency Shifts: fluctuating values can make pricing difficult and affect market desirability and investment opportunities - Political and Legal Differences - Political Climate: stability is a key consideration - Legal Environment: regulations, climate of corruption - International Regulations: - Treaties between Canada and others - Product standards, patents, trademarks - Enforcement issues Types of Trade Restrictions - Tariffs: taxes, surcharges, duties - Revenue tariffs generate income for government - Protective tariffs raise prices of imports to level playing field from domestic companies - Nontariff Barriers: administrative trade barriers - Quotas: limits amount of products that can be imported during time periods - Dumping: selling products in other countries at prices below production costs or below typical prices in the home market - Embargo: Ban importing specific products or half to trading with particular country - Exchange control: restrictions on important products or against certain companies to reduce trade and spending of foreign currencies Reducing Barriers - Movement towards free trade - Trade policy organizations - WTO - Institutions that offer monetary assistance  - World Bank - International Monetary Fund (IMF) - Trade agreements International Economic Communities - Reduce trade barriers and promote regional economic cooperation - Free-trade area: members trade freely among themselves without tariffs - Customs union: establishes free trade area and uniform tariff structure - Common market: members attempt to bring trade rules into agreement - CUSMA: world’s largest free trade zone, replaced NAFTA - CAFTA-DR (central America and Dominican Republic) - EU (European Union): common market Levels of International Business Operations - Decisions made before going global: - Growth potential in each potential foreign market - Analyze expenditures needed to enter new markets - Understand operation complexities and best way to organize them - Understand foreign regulations/standards Levels of Involvement - Strategies of involvement: - Exporting/importing - Indirect exporting: manufacture product that becomes part of another product sold overseas - Direct exporting: companies seek to sell their own product in foreign market - Countertrade: involve payments made between nations in form of local products - Contract based agreements (franchise, licensing, subcontracting) - Franchising: agreement where retailer (franchisee) gains right to sell franchisor’s products under their name - Foreign licensing: one firm allows another to produce or sell its product in a specific area in return for royalties/other compensation - Subcontracting: hiring local companies to produce/distribute or sell goods and services - Offshoring: relocation of business processes to lower-cost overseas locations - Direct investment through acquisitions, joint ventures, overseas divisions - Directly operating production and marketing in foreign country - Acquisition: Purchasing another existing firm in host country - Joint Venture: Allows companies to share risks, costs, profits and responsibilities with one or more host country nationals Developing Strategies for International Business - Global business strategy: sells same product in essentially same manner throughout world  - Multidomestic business strategy: treats each market differently and develops products and marketing strategies accordingly Chapter 4: 4.1 - Concepts of business ethics and social responsibility Business Ethics: standards of conduct and moral values that lead to our actions and decisions in business environment - Consider social issues - how will it impact customers, employees, environment, society - CSR - Must balance doing what is right and what is profitable - Absolutism: insisting on doing the right thing even if it may be costly 4.2 - The Contemporary Ethical Environment: - High profile investigations and arrests are headlined - Majority of businesses act ethically - New corporate officers are charged, which deters wrongdoing and ensuring ethical standards - Walmart broke it down to 4 categories: - Opportunity - Sustainability - Community - Ethics and Integrity - Sarbanes-Oxley Act 2002: - US established rules and regulations for securities trading and accounting practices - Applies to Canadian companies trading on US stock exchange - Bill 198 of 2003: - Canadian version of Sarbanes-Oxley: ‘C-SOX’ - Individuals make a difference in ethical expectations and behaviour - Putting own interests ahead of organization - Lying - Misrepresenting hours worked - Violating regulations - Abusing internet - Development of individual ethics - Experiences shape responses - Family, educational, cultural, religious background - Company/corporate environment - On-the-Job ethical dilemmas - Conflict of interest (Can be handled by avoiding them or disclosing them) - Honesty and integrity  - Whistle-blowing - Loyalty vs truth 4.3 - How organisations shape ethical conduct - Ethical leadership - model behaviour in their actions. Employees will be more motivated if leadership aligns with company’s core values - Ethical action - develop ethical recognition to turn it to ethical action - Ethical education - training for ethical reasoning - Ethical awareness: code of conduct - promote organization expectations 4.4 - Acting Responsibly to Satisfy Society and 4.5 - Responsibilities to investors - Social responsibility: management’s acceptance of their obligation while evaluating firm performance - consider profit equal to other factors (employee satisfaction, consumer satisfaction, contribution to society) - Measured through social audits to consider qualitative factors - Responsibility to: - General public - Protect public health - Protect environment: green marketing (promotes safe products and productions), sustainability - Develop workforce quality: diversity initiatives, education - Corporate philanthropy - donations of equipment and products to support efforts of employees - Benefits employee morale, company image, customer relationships - Consumers - Right to be heard - Right to be safe - Right to choose - Right to be informed - Employees - Workplace safety: WSIB, workers comp - Quality of Life issues: work-life balance, benefits - Ensure equal opportunity without discrimination - Sexual harassment and sexism - Investors and financial community - Shareholder profit - Model ethical, legal and moral behaviour - Regulated by securities commissions Chapter 5 5.1 - Most Businesses are Small Businesses  - Small Business: independent business with