Midterm ADM 1100

Organizational Boundaries

Boundaries set by organizations to distinguish themselves from environment. (The physial change in environment, walking in and out of a grocery store)

Organizational Environments

Differing aspects of society that influence and affect the performance of a business

Components that lead to key economic goals

Economic growth, Stability, Full employment

The business cycle

Alternating periods of economic expansion and economic recession

aggregate output

the total quantity of goods and services produced in an economy in a given period

standard of living

the total quantity and quality of goods and services people can purchase with the currency used in their economic system

national debt

The amount of money a national government owes to other governments or its people (creditors)

Outsourcing

obtain (goods or a service) from an outside or foreign supplier, especially in place of an internal source.

CEO (Chief Executive Officer)

The person responsible for the firm's overall performance.

Economic Environment

relevant conditions that exist in the economic system in which a company operates

productivity

The value of a particular product compared to the amount of labor needed to make it.

GNP (Gross National Product)

the total value of all goods and services produced by a county in a time period regardless of location

GDP (Gross Domestic Product)

the total value of goods produced and services provided in a given time

GNI (Gross National Income)

The amount of money earned by everyone in a country.

real growth rate

takes into account adjustment in prices, such as inflation. Growth is the true indicator for economic success, if ouroutput increases at a faster than population.

GDP per capita

Gross domestic product divided by the number of people in the population.

Real GDP

GDP adjusted for inflation

balance of trade

the difference between a country's total exports and total imports

economic stability

maintain stable growth of money availible, quantity of goods and prices are in unison

Threats to economic stability

inflation, deflation, unemployment

Inflation

a general increase in prices and fall in the purchasing value of money.

CPI (Consumer Price Index)

a measure of the overall cost of the goods and services bought by a typical consumer

Deflation

a decrease in the general level of prices

unemployment

Measures the number of people who are able to work, but do not have a job during a period of time.

Fiscal Policies

policies used by a government regarding how it collects and spends revenue

monetary policies

efforts to regulate the economy through the manipulation of the supply of money and credit; America's most powerful institution in this area of monetary policy is the Federal Reserve Board

Technological Environment

all the ways by which firms create value for their constituents; Knowledge, work methods, physical equipment

research and development (R&D)

a set of activities intended to identify new ideas that have the potential to result in new goods, processes and services

Technological environment Example with MCdonalds

Mcdonalds has become enhanced by technological developments; purchasing a big mac with your phone or at a kiosk

Politcal-Legal Environment

the relationship between business and government, usually in form of government regulation

pro-anti business sentiment

influences how restricted companies can be, governments always have control

political stability

The degree to which a government is free from turmoil

international relations

The relationships among the world's state governments and the connection of those relationships influence trade relationships

Socio-cultural environment

Conditions including the customs, values, attitudes, and demographic characteristics of the society in which an organization operates.

Why do customers across the world think differently

Customer preferences and tastes vary across and within national boundaries

Ethical compliance and responsible business behaviour

Critical element to practice ehical conduct and social responsibility

Five Forces Model

A model developed by Michael Porter that helps us understand the five competitive forces that determine the level of competition and profitability in an industry.

Five Forces

Consumer Barganing power

Supplier Barganign power

Threat of substitute products or services

Threat of new entrants

Rivalry among existing competitors

Emerging Opportunities

Outsourcing, Social media, Business process management

social media

any tool or service that uses the internet to facilitate conversations

business process management

moving toward process oriented teams.

Redrawing Corporate Boundaries

Joining together with other companies to develop new goods and services

friendly takeover

the acquired company welcomes the acquisition because they need cash or benefits

hostile takeover

the acquiring company buys enough of the other company to take control

poison pill

defensive provisions to deter hostile takeovers by making the target firm less attractive

Employee-Owned Corporations

Employee stock ownership programs (ESOP)

strategic alliance

two or more organizations collaborate short-term for mutual gain

Subsidiary and Parent Corporations

Subsidiary corporation owned by another corporation, parent corporations own subsidiary corporations. Parent:good sub: youtube

small business

owner-managed business with fewer than 100 employees that does not dominate their market

new venture

A recently formed commercial organization, opened within the last year, that provides goods and/or services for sale.

Entrepreneurship

the process of starting, organizing, managing, and assuming the responsibility for a business capitalizing on market opportunities

Entrepreneur

A person who starts up and takes on the risk of a business as well as seizes opoprtunities

intrapreneurs

creators working inside big companies (At TELUS, a recent redesign of the company's website was accomplished by a small intrapreneurial team that was given the mandate to operate in a creative manner)

Role of Small Business

- 98% of all employer businesses in Canada are small (fewer than 100 employees)

- main source of job creation

- leaders in innovation and new technology

- increases female entrepreneurs (50% of all new businesses)

entreprenurial process

indentifying opportunities, the idea, developing opportunity (business plan)

indentifying opportunities

generating ideas

screen ideas - finding the best idea -

the idea

adds or creates value

competitive advantage

marketable and financially viable

low exit costs

business plan

a formal written document that describes the nature of a business and how it will operate

Bootstrapping

Doing more with less in terms of resources invested in a business, and, where possible, controlling the resources without owning them.

incubators

centers that offer new businesses low-cost offices with basic business services

fiancial debt resources

Using collateral, assests that borrower can use to maximize

debt - loans or credit from finnancial institutions

equity - purchasing power from saving, family, private investors, venture capitalists,

Alternative approaches to starting a business

Buying an already existing business

Taking over a family business

Buying a franchise

Buying an existing business

- Business has a proven ability to draw customers and make a profit.

- Networks are already established.

- Negative: New owners inherit existing problems.

family-owned business

Ongoing management, who has control, how does pay work, are they suited for the job

who takes over?

franchise business

allows a company to distribute its products or services through retail outlets owned by independent operators.

Franchising Benefits

Minimizes risks to franchiser:

Does not have to put up a large capital investment

Revenue stream is fairly consistent because franchisees pay a fixed fee and royalties

Retains control of its name and increases global penetration

Franchise agreements ensure a standard of conduct and protect the franchise name

franchising agreement

Stipulates the duties and responsibilities of the franchisee and the franchiser.

Reasons for success

Hard work, drive, and dedication

Market demand for the products or services being provided

Managerial competence

Luck

Reasons for failure

managerial incompetence or inexperience, neglect, weak control systems, insufficient capital

Forms of Business Organization

sole proprietorship, partnership, corporation, cooperative

Sole Proprietorship Advantages

Easiest to start

Least regulated

Single owner keeps all the profits

Taxed once as personal income

Sole Proprietorship disadvantages

unlimited liability, lack of continuity, lack of money, limited management skills, difficulty in hiring employees

Partnership

A business in which two or more persons combine their assets and skills

- general partners

- limited partners

Genral partnership

parts who split the business 50/50

limited partnership

liability is limited to the amount invested in the partnership

Partnership Advantages

larger talent pool

larger money pool

ease of formation

tax benefits

Partnership Disadvantages

- unlimited liability

- lack of continuity

- prolonged decision-making

- lack of harmony

Corporations

separate legal entities, property rights and obligations, indefinete lifespan

public corporation

a corporation whose stock anyone may buy, sell, or trade

private corporation

business whose shares are not traded publicly on the stock market

board of directors

Governing body; responsible for shareholder interests • Appoint management, set policy, make major decisions

shareholders/stockholders

Investors who buy shares of ownership in a company • May share in profits through dividend

Corporations advantages and disadvantages

1. ADVANTAGES:

- Limited liability

-continuity

- professinoal management

easier to raise money

2. DISADVANTAGES:

-start-up costs

- double taxation

- regulations

stockholder revolts

cooperatives

an organization formed to benefit its owner through reduced prices and distribution of surpluses

Co-operative advantages

limited liability, owner continuity, equal voice, income tax at individual member level

Co-op disadvantages

no inventive to invest

members simoply benefit from usage

Major World Marketplaces

North America, Europe, Pacific Asia

emerging markets

south korea, thailand, indonesia, ukraine

competitive advantage

a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition

absolute advantage

A country can produce more of a good than another country

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

four key conditions of competitve advantage

factor conditions, demand condition, related and supporting industries, strategies, structure, rivalries

trade surplus/deficit

situation where a nation either imports more goods than it exports(deficit) OR exports more goods than it imports(surplus)

import

products made abroad but sold domestically

export

grown or made domestically sold abroad

Globalization

economy becoming a single interdependent system

balance of payments

the flow of money into and out of a country

Exporters

Firms that make product in one country and sell in another.

Importers

businesses who bring goods in from another country to resell

international firms

Conducts much of its business abroad in foreign coutnries