Understanding Canadian Business Chapter 1 PDF

CHAPTER 1 The Dynamic Business Environment Prepared by Dr. C. McLarney, Dalhousie University © 2022 McGraw Hill Limited  Learning Objectives 1. Illustrate the importance of key business fundamentals to wealth generation....

CHAPTER 1 The Dynamic Business Environment Prepared by Dr. C. McLarney, Dalhousie University © 2022 McGraw Hill Limited  Learning Objectives 1. Illustrate the importance of key business fundamentals to wealth generation. 2. Identify business stakeholders and their importance to non-profit organizations and business activities. 3. Explain how entrepreneurship is critical to the wealth of an economy, also list the five factors of production that contribute to wealth. 4. State the six elements that make up the business environment and explain why the business environment is important to organizations. 5. Give examples of how the service sector has replaced manufacturing as the principal provider of jobs, but why manufacturing remains vital for Canada. © 2022 McGraw Hill Limited 2  Business Fundamentals Success in business is finding a need for some goods, or services, and filling that need Goods are tangible products – things you can touch and see Services are intangible products – like car insurance, the feeling of a good vacation © 2022 McGraw Hill Limited 3  Business Fundamentals, pt. 2 A business is any activity that seeks to provide goods and services to others while operating at a profit. An entrepreneur is a person who risks time and money to start and manage a business. Profit is the amount of money a business earns above and beyond what It spends for salaries and other expenses. Since not all businesses make a profit, starting a business can be risky. © 2022 McGraw Hill Limited 4  Entrepreneurship and Wealth Building A business is any activity that seeks to provide goods and services to others while operating at a profit. An entrepreneur is a person who risks time and money to start and manage a business. © 2022 McGraw Hill Limited 5  Risk Reward Trade-Offs Starting a business involves risk. Risk is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable. © 2022 McGraw Hill Limited 6  Matching Risk With Profit Risk is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable. Profit, is the amount of money a business earns above and beyond what it pays out for salaries and other expenses. © 2022 McGraw Hill Limited 7  Standard of Living and Quality of Life The term standard of living refers to the amount of goods and services people can buy with the money they have Canada enjoys a high standard of living partly because of the wealth created by its businesses The term quality of life refers to the general well-being of a society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure, and rewards that add to the satisfaction and joy that other goods and services provide © 2022 McGraw Hill Limited 8 Stakeholders: Those Who Stand to Lose or Gain © 2022 McGraw Hill Limited 9  Stakeholders: Those Who Stand to Lose or Gain, pt. 2 Customers want value Employees want security Stockholders want returns Suppliers want to be paid Dealers want support Bankers want returns Community groups want “equity” Governments want compliance © 2022 McGraw Hill Limited 10  Offshoring and Outsourcing Offshoring entails sourcing part of the purchased inputs outside of the country. In Canada, most of the offshoring that occurs is with the United States. Outsourcing means contracting with other companies to do some or all of the functions of a firm, such as production or accounting. Insourcing is a relatively new term used to describe the situation where a company has functions that could be outsourced. © 2022 McGraw Hill Limited 11 Offshoring and Outsourcing, pt. 2 Hare the terms outsourcing and offshoring that different? A Statistics Canada report highlights the distinction. “Outsourcing decisions affect the boundaries of the firm what production takes place within the firm and what is purchased from outside the firm. (Baldwin & Gu. “Outsourcing and Offshoring in Canada”) © 2022 McGraw Hill Limited 12  Non-Profit Organizations A non-profit organization is an organization whose goals do not include making a personal profit for its owners or organizers. Non-profit organizations—such as schools, hospitals, and charities—also make a major contribution to the welfare of society. Examples include – Heart and Stroke Foundation – Cancer Society – Canada Blood Services (for organizing blood donors) © 2022 McGraw Hill Limited 13  Non-Profit Organizations, pt. 2 Social entrepreneurs are people who use business principles to start and manage non-profit organizations and help countries with their social issues. Microlending is an example © 2022 McGraw Hill Limited 14  Entrepreneurship versus Working for Others THERE ARE TWO WAYS TO SUCCEED IN BUSINESS: 1. Work within a company and rise to the top. 2. Start your own business. © 2022 McGraw Hill Limited 15 Entrepreneurship versus Working For Others, pt. 2 The advantage of working for others is that somebody else assumes the entrepreneurial risk and provides you with benefits. When you consider Canada’s wealthiest citizens, you will find that they arrived at their wealth as a result of this entrepreneurial spirit. © 2022 McGraw Hill Limited 16  Creating Economic Wealth Five Factors of Production: 1. Land (natural resources) 2. Labour (workers) 3. Capital (physical assets not money) 4. Entrepreneurship 5. Knowledge © 2022 McGraw Hill Limited 17 The Five Factors of Production © 2022 McGraw Hill Limited 18  Business Environment The business environment consists of the surrounding factors that either help or hinder the development of businesses. © 2022 McGraw Hill Limited 19 Legal and Regulatory Environment Regulations are laws and rules (made by politicians) which effect how business can operate. People are willing to start new businesses if they believe that the risk of losing their money is not too great. Part of that decision is affected by how governments work with businesses. Freedom of ownership Contract laws Elimination of corruption © 2022 McGraw Hill Limited 20  Legal and Regulatory Environment, pt. 2 Governments can do a lot to lessen the risk of starting and running a business through laws Examples of laws include the Canada Small Business Financing Act, the Consumer Packaging and Labelling Act, and the Trade Unions Act. © 2022 McGraw Hill Limited 21  Legal and Regulatory Environment, pt. 3 Starting a business, in some countries, like India, can be very bureaucratic because of all the government people you have to deal with to get the proper permits to operate © 2022 McGraw Hill Limited 22  Economic Environment The Economic Environment looks at income, expenditures, and resources that affect the cost of running a business. Businesses review the results of major economic indicators such as consumer spending, employment levels, and productivity. Tradable currency Minimum taxes and regulation Imports and exports Employment levels and productivity © 2022 McGraw Hill Limited 23  Economic Environment, pt.2 Foreign Exchange - the movement of a country’s currency relative to other currencies also pertains to the Economic Environment. Entrepreneurship - Another aspect of the economic environment is the degree of entrepreneurship that is present In some countries, the government owns most businesses and there is little incentive for people to work hard or create a profit. © 2022 McGraw Hill Limited 24  Technological Environment Technology refers to inventions or innovations from applied science or engineering research. Information and technology Databases Bar codes The Internet Wireless communications Social media © 2022 McGraw Hill Limited 25  Technological Environment, pt. 2 The use and application of technology affects productivity. Productivity is the amount of output you generate given the amount of input. The more you can produce in any given period of time, the more money you are worth to companies. © 2022 McGraw Hill Limited 26  Technological Environment, pt. 3 Productivity Effectiveness means producing the desired result. Efficiency means producing goods and services using the least amount of resources. © 2022 McGraw Hill Limited 27  Technological Environment, pt. 4 E-commerce There are several major types of e-commerce transactions: Business-to-Consumer (B2C) Business-to-Business (B2B) Business-to-Government (B2G) Government-to-Consumers (G2C) © 2022 McGraw Hill Limited 28  Technological Environment, pt. 5 B2C is the regular business that companies do online with individual customers B2B is business doing business with other businesses, like suppliers of materials to a manufacturer B2G means the business that companies do with government agencies and departments to supply goods and services. Like a web hosting service supporting the ministry of health G2C refers to the business that government does online with people, such as renewing licenses or applying for permits. © 2022 McGraw Hill Limited 29  Technological Environment, pt. 6 E-Business Refers to a wide range of business activities on the web from simple posting of product photos to B2B marketplaces. E-commerce Refers to the websites that allow transactions so that customers can buy products online. Generally, e-commerce is considered a subset of e- business. © 2022 McGraw Hill Limited 30  Technological Environment, pt. 7 E-commerce A consequence of millions of people using web- based content is the rise in risks associated with personal security Identity theft is the act of obtaining personal information about a person, such as social insurance number and/or credit card number, and using that information for illegal purposes, such as making purchases © 2022 McGraw Hill Limited 31  Technological Environment, pt. 8 Social Media Marketing YouTube Facebook Twitter Instagram Blogging and microblogs and forums Pinterest © 2022 McGraw Hill Limited 32  Competitive Environment All the environments are important, but the degree to which you need to deal with them depends on whether you do or do not have competition. Customer service Stakeholder recognition Employee service Concern for the environment © 2022 McGraw Hill Limited 33  Competitive Environment, pt. 1 Competing by giving employees decision-making authority: empowerment. To meet the needs of customers, firms must give their front-line workers (office clerks, front-desk clerks at hotels, salespeople, etc.) the responsibility, authority, freedom, training, and equipment they need to respond quickly to customer requests and to make other decisions essential to producing quality goods and providing good service. © 2022 McGraw Hill Limited 34  Competitive Strategies Exceed customer expectations Business is becoming customer-driven Deliver faster (speed) Service, new product introduction Restructuring and empowerment Responsibility, authority, autonomy, training, and equipment to front line Concern for environment © 2022 McGraw Hill Limited 35  Social Environment (also referred to as the Social-Cultural Environment) We are particularly interested in the demographic trends that most affect businesses and career choices. Demography: the statistical study of the human population with regard to its size, density, and other characteristics such as age, race, gender, and income. Diversity Demographic changes Family © 2022 McGraw Hill Limited 36  Social Environment, pt. 2 The Aging Population More people are living longer due to: better medical knowledge and technology better health habits, including: proper nutrition more exercise a reduction in the number of smokers © 2022 McGraw Hill Limited 37  Social Environment, pt. 3 Managing Diversity Canada has a strong multicultural population. In the last ten years, it has welcomed close to 2.7 million permanent residents. © 2022 McGraw Hill Limited 38  Global Environment How do global changes affect you? As businesses expand to serve global markets, new jobs will be created in both manufacturing and service industries. Global trade also means global competition. Rapid changes create a need for continuous learning. © 2022 McGraw Hill Limited 39  Ecological Environment Few issues have captured the attention of the international business community more than c Climate change is the movement of the temperature of the planet up or down over time. The issue now is global warming. A positive outcome of the COVID-19 pandemic was the fact that carbon emissions were reduced by 7 percent as major industrial and transportation activities were forced to slow down. © 2022 McGraw Hill Limited 40  Evolution of Business Agricultural The modern farming industry has become so efficient through the use of technology that the number of farms has dropped. © 2022 McGraw Hill Limited 41  Evolution of Business, pt. 2 Goods includes the manufacturing, construction, utilities, agriculture, forestry, fishing, mining, quarrying, and the oil and gas industries Manufacturing includes food, beverage, clothing, chemical, machinery, wood, and petroleum and coal products manufacturing. © 2022 McGraw Hill Limited 42  Evolution of Business, pt. 3 Service Industries Services are intangible products (i.e., products that cannot be held in your hand), such as education, health care, insurance, recreation, and travel and tourism. In the past, the dominant industries in Canada produced goods such as steel, railroads, and machine tools. Today, the fastest-growing firms provide services in areas like health, telecommunications, entertainment, and finance © 2022 McGraw Hill Limited 43  Chapter Summary 1. Business profit/risk assumption Since not all businesses make a profit, starting a business can be risky. 2. Stakeholder roles Your stakeholders want you to succeed. 3. Role of entrepreneurship in wealth creation Many of Canada’s wealthiest citizens got their wealth as a result of having entrepreneurial spirit. © 2022 McGraw Hill Limited 44  Chapter Summary, pt. 2 4. Elements of business environment Legal and Regulatory Environment Economic Environment Technological Environment Competitive Environment Social Environment Ecological Environment 5. Rise of the service sector Intangible products © 2022 McGraw Hill Limited 45