BU111

Political Factors (5)

Laws and regulations

Taxes

Trade Agreements

Political System

Politcal Stability

These 5 Factors Impact

Protect Customers

Support Domestic Businesses

Create Opportunities in Foreign Market

How Governments Affect Business

Promotes Competition

Promotes Innovation

Protects Customers

Acheives Social Goals

Protect the Environment

6 Roles of Government

Law Maker & Regulator

Customer

Competitor

Taxation

Service Provider

Business Support

How Business Influence Government

Lobbyists

Trade Associations

Industry Contacts

Advertisments

Sole Proprietorship

Company ran by one person

Pros: Keep all profit, easy to form, full control

Cons: Unlimited liability

Tax: Personal tax

Partnership

Company ran by 2 or more ppl

Pros: Shared costs, resources, easy to form

Cons: Unlimited liability and can have disagreements with partners

Tax: Personal Tax

Private Corporation

Legal entity without public IPO

Pros: Limited Liability, privacy, low regulation

Cons: Other shareholders care who you sell shares to, moderately complex to form

Tax: Double taxation (divideds taxed on personal, profits on corporate)

Public Corporation

Legal entity with public trading

Pros: Limited liability, easy financing

Cons: No privacy, need regulation, very complex to set up

Taxation: Double taxation

Social Enterprise

Businesses that prioritize social or environmental impact over profit maximization. They aim to tackle societal issues through innovative solutions while generating sustainable revenue.

3 Components of International Strategy

1. Should we go international?

2. Barries to entry

3. Entry Strategy

Should we go international?

1. Is there a demand for our product in new market?

2. Can our product be modified to fit the foreign values?

3. Is the foriegn business climated suited to imports?

4. Does the firm have or can they get the knowledge and skills we’ll need to be successful in new market?

Barries to Entry

Political: Quotas, tarrifs, subsidiarys

Economic: Exchange rates, foreign GDP

Social: Adapting to customer needs, values, language, norms,

Technoloigcal: IP laws, tech formats

Strategies to enter a foreign market “FLALSI”

Foreign Subsidiary

Local Sales Agent

Alliance & Joint-Venture

Licensing & Franchising

Sales Agent

Indirect Export

Factors to identify where to expand internationally “PADCALC”

Population (more is better because because TAM)

Average spending

Distance (shipping costs)

Customer reachability (will they be persuaded into buying)

Adminstrative barriers

Liability of foreigness (how diff the culture is)

Competion in market

Social Factors Elements

Customs (norms)

Habits

Values & attitudes

Demographics

Why is this important?

Customer preferances

Employee behaviour and attitudes

Standards of business conduct

CSR

example: Coke

Stakeholders

“People affected by company”

Society

Environment

Investors

Customers

Employees

CSR

What an organization does to and for their stakeholders and how it balances conflict stakeholder interests

4 Levels of CSR

Proactive: looks for opportunities

Accomodative: does more than bares min if asked

Defensive: Changes only when legally required to do so

Obstructionalist: Does nothing even if they caused the problem

Why should a company focus on CSR?

Making the environment more manageable

Improving profitability

Socially responsible and aligning with environment that stakeholders expect

Improves trust for stakeholders (employees will want to work at a company that does GOOD)

Demographics

Study of cohorts (generations) and used to predict their behaviours & trends, supply+demand, inform decisions regarding environmental anaylsis, HR decisions

Boomers

Prefer in person transactions

Work overtime and work the same career with same company for whole life

Gen X (1960 to 1980s)

Research online but buy in person, brand loyalty

Flexible work and want a linear work timeline (teacher → principal → board). they value opportunities to develop their career within the company (training)

Millenial

Digitally savvy with quality > brand, want authencity and renting

Flexible, meaninful work and will change jobs (no overtime)

Gen Z

Experience > assets, value uniqueness, brand recognition

Meaningful, flexible work and will have several careers (good wages, career advancement, recognition)

What product feature each gen cares about?

Gen X: the brand

Milllenails: high quality, authentic materials, renting option, customizable

Gen Z: brand name, social impact, low price

Implications of current demographics

Baby boomers are agin so high demand for care

More ppl retiring than entering work force so labour shortages and fewer workers supporting pension (less funding for healthcare & pension)

Children of boomers are moving in back home so they have more money to spend

Ethnic Composition

Immigration increasing over past decades

Immigrants are younger, less likely to live in cities

Opporuntiy to take advantage of new market but difficult to adapt to them

Households

More single-person houses (no children) = lost economies of sale in living and shopping (living is more expensive on average per person)

How does technology impact business decisions?

Changes what we can make, how we make it and how we sell it

Creates a number of opportunities & threats

Opporunities Tech creates (PICC)

Products: Innovation, uniqueness (ex. bluetooth)

Informtion: Improve infor use, access & sharing (ex. Email)

Competitive Advantage: Creates barries to entry for competitors (ex. Google SEO)

Customization: ex. on TESLA’s website you can add features you want on ur car

Threats Technology Creates

Imitation: Information is costly to develop but easy to share

New Entrants

Information overload & security: causes incorrect focus on data

How to mitigate threats

Create a virtuous cycle with network effects

Innovate with one of the four types of innovation

Strategize by size (large vs small player)

Vicious vs virtuous Cycle

Attrativeness to producers of complementary goods

Availability of complementary goods

Attrativeness to users

# of users

Direct Network Effect

value of product increases as user base grows

Indirect Network Effect

value of product increase due to complementary goods

More apps are compataible with Apple ios which makes ios more attrative

How to exploit the cycle?

Product is compataible

Alliances

Incentive for complementary goods (direct network effect by building good user base)

Lock in Effect

Extent to which a customer is commited to a product or a service

Larger = greater resistance to switch

Complementary good

Goods that are compatible with others

Technology standard

Established technological norm for products enables compatibility of complementary good

Installed base

# of sers of a product

Innovation Types (RAMI)

Radical: Totally rewrites the rules

Architectural: Works the same but components are reconfigured

Modular: major rework of some core part

Incremental: enhances whats already there

4 Pillars of Finance

Charted Banks

Alternate Banks

Specialized spending & saving intermediaries

Investment dealers