RSM100 Midterm 1: Study

What is a Business

All profit seeking activities and enterprises that provides goods and services necessary to an economic system

How does businesses improve the standards of living?

Drives the economy, nation’s engine for economic growth and prosperity, countries depends on the wealth businesses generate (income for businesses, employees, + taxes to governments)

To succeed a business must..

know what their customers want and supply it quickly and efficiently

Products firms produce reflects: 

changes in consumer tastes and promotes technology and other changes

“When a business succeeds, everybody wins” because

they organize resources, know-hows, and finances for new technologies, medicinal breakthroughs, environmental improvements etc.

Key for long term success + growth of a business

flexibility: ability to change with times and marketplace

Every Business has what type of Interaction?

One between a buyer and seller

The reward for people who take on the risk of business is..

Profits

Profits serve as an ____ to start and maintain businesses

Incentive

Quest for profit = 

central focus of business

Functional Areas of Business Activity (3)

Management: planning organizing resources to achieve goals (sales, profits)

Marketing: handling customers, building long term relationships, understanding concern and buying behavior

Financial: accounting process, keeping financial records, documents for analysis and use, knowing product sales behavior is critical info with pricing

Non-profit Organizations place what above profits?

Public Service

The Two Types of Non-profits

1. Private Sector

2. Public Sector

Examples of Private Sector Non-profits

museums, libraries, charitable organizations

Examples of Public Sector Non-profits

government agencies, political parties, labor unions

How many Non-profits are there in Canada, their revenue, and jobs they provide?

160 000 non profits with $112 billion revenue, 2 million job and 2 billion volunteer hours

Economic requires ___ inputs for successful operations

Four basic inputs: Factors of Production

What are the 4 Factors of Production

• Natural resources

• Capital

• Human resources

• Entrepreneurship

**Government must make sure these inputs are good and exist for economies to reach full potential

Factors of Production: Natural Resources Definition

All production inputs useful in their natural states, therefore places with more natural resources have an economic advantage

Factors of Production: Natural Resources Examples

Agricultural land, building sites, forests, water, mineral deposits

Factors of Production: Capital Definition (4 types)

Technology, tools, information, and physical facilities

Technology helps companies operate and improve products —>

To be competitive firms need to continuously acquire, maintain, and upgrade its capital (needs $$)

Factors of Production: Human Resources Definition

Anyone who works, inputs physical labor and intellectual effort

companies rely on employee idea, innovation, and physical inputs

Talents employees are harder to acquire than smth like technology, can be your best assets

Factors of Production: Entrepreneurship definition

Willingness to take risks to create and operate a business

• Entrepreneurs sees opportunities to make profits and create plan to earn those profits successfully

Most business activities are about..

securing four-key inputs or developing substitutes

Canadian Businesses operate on an economic system called..

• the private enterprise system/capitalism

• the type of economic system a business is in affects patterns of resources they use

No business operates completely freely on its own it: 

operates within larger economic system of rules + constraints, directs how goods and services are produced, distributed, and consumed

Characteristics of a Private Enterprise System/Capitalism (4)

• rewards firms meeting and identifying consumer demands

• minimal government interference needed

• businesses that meet consumer = gain access to necessary means of productions and profits

• success depends on business and ppl involved

Who and What: Adam Smith

Father of Capitalism

Invisible Hand Concept

the economy is regulated by the “invisible hand”

The basic principle of the private enterprise system

• that being, competition (the battle among businesses for consumer acceptance

Benefit of Competition

• competition forms the best possible products and prices as less efficient firms are driven out

Competitive Differentiation

Unique combo of organization abilities, products, and approaches, sets companies apart

Combining Business and Tech in Fashion: Nordstrom

set up a tech lab with IT professionals to coming up with innovative ideas to change the way customers chop

• TextStyle: messaging app between salesperson and customers

• known for outstanding service + tech integration (competitive differentiation)

Basic Rights in the Private Enterprise System (4)

1) Private Property

2) Profits

3) Right to Freedom of Choice

4) Right to fair competition

Basic Rights in the Private Enterprise System: Private Property

• right to own, use, buy, sell, and hand down property (land, buildings, patents, possessions and intangible properties

Basic Rights in the Private Enterprise System: Profits

• right to all after-tax profits earned through activities, legally and ethically entitled to any income greater than costs

Basic Rights in the Private Enterprise System: Freedom of Choice

• maximizes individual wealth by providing options

• citizens choose own employment, purchases, investments

• able to change jobs, choose amongst difference brands for goods + service, etc.

Basic Rights in the Private Enterprise System: Fair Competition

• public sets rules for competitive activity, CAD gov. passed laws to prohibit excessively aggressive competitive practices designed to remove competition 

• the following is illegal (price discrimination, fraud in financial markets, deceptive advertising and packaging)

All Parties can’t be satisfied with gov. decisions: Canadian Radio Television and Telecommunications Commission (CRTC)

• increased costs to charged to small internet service providers buying access to larger ISP networks of Bell, Bell Aliant

• allowed larger ISPs to control network traffic

• began charging “usage based bills”

• smaller ISPs, forced to introduce limits and charge more, ended competitive advantage over larger ISPs which typically charge more for high volume users

• Smaller ISP complained, compromise pricing model was introduced but.. limits usuage but allows them to unlimited use packages to the demanded

• complicated marketplace

• Canada pays among the highest cellphones rates in the world, 13x higher than France

Canadian economy depends on small businesses for..

growth and strength

• of all new businesses created in Canada, 99% are small businesses

• 98% of businesses in Canada are small businesses (1.2 million)

Entrepreneurship can.. (3)

• create jobs and sells products

• leads to innovation (less competitors, more flexible)

• bring values existing companies with enhanced flexibility, improved innovation, new market opportunities (exp: Apple gets entrepreneurships to design stuff for them)

Canada’s largest technology hub

Toronto-Waterloo Corridor, 100km, 200 000 employees, 15 000 tech. companies, 5 000 recent start ups

Seven Eras on the History of Business

1) Colonial Period (1600s-1700s)

2) Industrial Revolution (1750s-mid-1800s)

3) Age of Industrial Entrepreneurs (late 1800s)

4) Production Era (late 1800s-1920s)

5) Marketing Era (1930s-1950s)

6) Relationship Era (late 1900s-today)

7) Social Era (2000s today)

Seven Era in the History of Business: Colonial Period

• rural and agricultural production, small towns

• marketplaces of farmers an craft men

• Economic focus: rural area, output of farms = success

• British investors provided money to developed North American business system —> trade of furs, fish, old-stock large timber —> sought in Europe —> close relationships with Indigenous people (North West Company, Hudsons Bay)

Seven Era in the History of Business: Industrial Revolution

• factory system, mass production from numerous skilled workers (improved production through limiting workers to specific tasks)

• savings from large-scale production (raw material cheaper in larger quantities), increase machine use

• England industrialization —> Canada

  • mechanized agriculture, factories in cities

  • railroads opened up transported goods and people

Seven Era in the History of Business: Age of Industrial Entrepreneaurs

Industrial revolution created opportunities for entrepreneurship in Canada

• new production methods, + commercially useful products

• Alexander Graham Bell + Bell Canada

• Eli Whitney: interchangeable parts —> mass productions

• entrepreneurship raised living standards, boosted demand for manufactured goods

Alexander Graham Bell (Industrial Entrepreneurs)

Alexander Graham Bell + Alexander Melville Bell + Reverend Thomas Henderson

• (1877) short-distance telephone services between office buildings + warehouses

• Later became Bell Canada Inc.

Seven Era in the History of Business: The Production Era

• ↑ demand for manufactured goods

• business focused more on production activities

• work: more specialized, huge, labor intensive

• Henry Ford: assembly lines

• new managers: produce goods at higher efficiency + speed

• marketing was rare, focus on internal processes, not much focus on what customers wanted/needed

• businesses decided what products were available for purchase

Seven Era in the History of Business: The Marketing Era (1930s - 1950s)

• Great Depression of early 1930s

• incomes drop, business can’t sell supply —> managers paid more attention to markets —> sales and marketing = important

• atp: selling = marketing

• After WW2 —> demand + consumerism grew, competition increased

• Marketing is now more than just selling —> designing products to meet needs (consumer orientation)

Consumer Orientation

a business philosophy that focuses on the unmet wants + needs of consumers, produces to meet those needs

The Marketing Era Introduced Branding which is..

process of creating in consumer’s minds an identity for a good, service, or company

• important marketing in contemporary business

• a brand can be a name, term, sign, symbol, design, or combination that identifies products/firms

Transaction Management

• transaction management: building and promoting products so customers buys products and cover costs + generate profits

Seven Era in the History of Business: Relationship Era (late 1900s - today)

• actively promote customer loyalty

• long-term customers: reduces advertising and sales costs + customer spendings increase over time = firms revenue grow + understand what they want and prefer = increased chance of competitiveness

• age of connections between customers, employer employees, technology + manufacturing, separate companies —> interconnectedness, people expand internationally

• new techniques for managing networks of people, businesses, information, tech. 

Seven Era in the History of Business: The Social Era (2000s - Today)

• new approach to interaction, connection, communication, and exchange of info. w virtual communities + networks

• organizations create value though connections with groups or networks of people with similar goals and interests (immense opportunities thru use of technology for relationship maintenance)

• Social media: social-professional networks (LinkedIn), blogs, picture sharing platforms, content communities —> mobile strategies using real-time data and location —> market research, communications, sales promotions, loyalty programs, etc.

Current Trends Related to Business (3)

• partnerships between businesses = taking full advantage of available opportunities —> strategic alliance

• aging population, those with experience and expertise are retiring

• more diverse workforce —> more effective performance + better solutions

Strategic Alliance

partnership between organization to create a competitive advantage for the businesses involved

Oursourcing

hiring external company to handle task, produce goods, or provide services that were previously done in-house

• who is doing the work?

Offshoring

relocating certain business operations or production to another country, usually because costs are lower there

• where is the work done?

Nearshoring

Moving outsourced activities to a nearby country rather than one far away

• outsourcing closer geographically and culturally (sometimes)

Changes in the Workplace (3)

• increasing focus on collaboration (less individual work)

• employees are less loyal to one company or would hold a position for their entire career

• employers encourage teamwork, problem solving, innovation

Modern Managers must be

intelligent, motivated, capable of creating/sustaining a vision for organizational success

Qualities of Managers: Vision

ability to perceive marketplace needs and what an organization must do to meet them

• exp: James Cameron with Titanic and Avatar

• Danny Meyer: cult following for shake shack dining experience

Vision: Danny Meyer and Shake Shack

“enlightened hospitality”

warmer, friendlier, more engaging customer service experience

• identify and serve needs and demands of customers: all-natural menu, great customer service

Qualities of Managers: Critical Thinking

Ability to analyze and assess information to pinpoint problems or opportunities

• look at a variety of information, develop future-oriented solutions, draw connections between dissimilar information

Qualities of Managers: Creativity

capacity to develop novel solutions to perceived organizational problems

• being able to see better and different ways of doing business

• crisis calls for creative leadership

Creative Managers: Captain Chesley Sullenberger

• guided US airways Flight 1549 to safe landing in Hudsons River

• both engines quit after hitting birds on takeoff

• quick thinking saved lives

Qualities of Managers: Ability to Lead Change

Business leaders must guide employees and organization through changes from tech., marketplace demands, global competition

• managers must be skilled at recognizing employee strengths + motivating people towards common goals + able to make tough decisions

Sources for organizational change: External

• feedback from customers, developments in the international marketplace, economic trends, new technologies

Sources for organizational change: Internal

new company goals, emerging employee needs, labor union demands, production problems

Business traits that bring upon admiration (5)

Businesses brings products and services that satisfy consumer needs in a socially responsible manner

• solid profits,

• stable growth

• safe and challenging work environment,

• high-quality goods and services,

• business ethics and social responsibility

Business Ethics

standards of conduct and moral values involved in decisions made in the work environment

Social Responsibility

management philosophy that includes contributing resources to the community, preserving natural environment, developing or participating in not-for-profit programs that better society

Volkswagen Emissions Scandal

Second largest automobile manufacturer in the world behind Toyota

• was “cheating on emissions tests”: placed in cars software’s that turn off emissions controls when driving normally and turns them on when the car is undergoing an emissions test

  • diesel cars were emitting up to 40x more pollution that allowed under US standards, when car recognizes its being tested, adjusts how car is running to reduce emissions to legal levels

Results of Volkswagen Emmissions Scandal

• CEO abruptly resigned

• Fines ($18 Billion penalties EPA) and lawsuits (criminal prosecutions)

• 11 million loyal customers loss

• stock price drop 20%

Fortune Publications of Most-admired companies

yearly, US based firms

• complied from surveys and research of the Hay Group (global human resources and organizational consulting firm)

• Criteria: innovation. people management, use of corporate assets, social responsibility, quality of management, quality of products and services

• Apple ranked #1 in 2022

Economics =

analyzes the production, distribution, and consumption of goods and services, and the choices people and governments make in allocating scarce resources

• affects all of us

Microeconomics

study of the behavior of small economic units, such as individuals, families and businesses in making decisions regarding allocation of limited resources

• studies human decision and resource allocation

Heart of Business: 

Interaction between buyer and seller

• Buyer: need, want good/service willing to pay for it

• Sellers: require exchange to earn a profit and stay in business

The Exchange Process Between Buyer and Seller involves

demand and supply

Demand

willingness and ability of buyers to purchase goods and services for sale at different prices

• driven by price and consumer preferences

Demand is Affected by (5)

• consumer preferences

• incomes

• prices of substitutes + complementary

• number of buyers in the market

• strength of the buyers future outlook

Any of these factors can produce a new demand curve

Demand Curve

graphs the amount consumers want to buy at different prices

• typically slope downwards, signifying at lower prices consumers are willing to buy more

• change in quantity demanded = movement along the curve

• change in market demand = shift of curve

Supply

amount of goods and services for sale at different price

Factors Driving Supply

willingness and abilities of sellers to provide goods and services at different prices affected by:

• costs of inputs

• costs of technologies

• taxes

• number of suppliers

Economics Dilemma

what we want VS what we can afford

• decide what to spend and save + what to spend on (which good? which service)

Macroeconomics

study of a country’s overall economic issues

• how economy as a whole uses its resources and how government policies affect people’s standards of living

Macroeconomic issues

help shape the decisions made by individuals, families, and businesses

• gross domestic product, unemployment rates, national income, inflation, price indexes

Types of Competition in a Private Enterprise System(4)

• pure competition

• monopolistic competition

• oligopoly

• monopoly

The Private Enterprise System also known as..

capitalism/market economy

• rewards businesses for meeting the needs and demands on consumers

• governments more hands-off

• competition regulate economic life, creating opportunities and challenges for business people

Pure Competition

Large number of buyers and sellers exchange homogenous products, no on e has a significant influence on price

• prices are set by the market, bc no one dominates

• buyers see little difference between goods and services offered by sellers

Exp: agricultural products: wheats, grains

Monopolistic Competition

Large numbers of buyers and sellers exchange differentiated/heterogeneous products, sellers has some control over price of own goods/services

• differentiates products bases on price, quality, etc.

Exp: Pet food, different flavors, prices, health benefits

Oiligopoly

Few sellers compete and high start up costs = barriers of entry for new competitors

• some may offer similar products (steel), some not (cars, aircrafts)

• limited number of sellers = more firm control over price

• competitors usually sell at similar prices, price cuts by one firms are met by competitors

• prices may vary between markets (e.g. geographically)

Monopoly

Single seller dominates trade in a good or service, buyers have no close substitutes

• firm has such unique characteristics, no other can enter

• full price control

• many companies have short-term monopolies (google, FaceBook)

• lacks benefits of competition —> regulated by governments

How Canadian Government Regulate Monopolies

• issues patents for new applications

• limits lifes of patents

• pure monopolies are illegal (Antitrust legislation: Competition Act)

• now allowing big companies to merge

• some monopolies are allowed, given government regulation

Regulated Monopoly

local, provincial, or federal government grants exclusive rights in a certain market to a single firm, a monopoly heavily controlled by the government

• pricing decisions controlled by regulatory authorities

• Ontario Energy Board sets electricity and natural gas rates

Deregulation of Regulated Monopolies

starting 1980-1990s by US gov.

• transportation, energy, and communications industries

• idea: increased competition to improve customer service and reduce prices

Not as followed in Canada

Planned Economy

gov. controls determine a businesses ownership, profits and resource allocation to accomplish government goals rather than those set by individual firms

Two Forms of a planned economy

• communism

• socialism

Socialism

characterized by government ownership and operation of major industries (energy, communications)

• argue major industries are too important to a society to be left in private hands, governement better serves interests

• allows private ownership in less crucial industries (retail, resturants)

Exp: Denmark, Sweden, Finland, some African Nations, India

Communism

all property shared equally by people in community under the direction of a strong central government

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