Chapter 1 The Dynamic Business Environment: Fundamentals, Stakeholders, and Global Trends

Learning Objectives and Core Business Fundamentals

• Foundational Learning Objectives:

  • Illustrate the critical importance of key business fundamentals to the generation of wealth within an economy.

  • Identify and understand business stakeholders and their significance to both non-profit organizations and commercial business activities.

  • Explain the critical role of entrepreneurship in contributing to the wealth of an economy.

  • Identify and list the five factors of production required for wealth creation.

  • State the six distinct elements that constitute the business environment and explain why this environment is vital to organizations.

  • Provide examples of the transition where the service sector has replaced manufacturing as the primary provider of employment, while explaining why manufacturing remains a vital component of the Canadian economy.

Business Fundamentals!

• The Essence of Business Success:

  • Success in business is defined as finding a specific need for goods or services and successfully filling that need.

• Defining Goods and Services:

  • Goods: These are tangible products that can be physically seen and touched.

  • Services: These are intangible products that cannot be held. Examples include car insurance or the experiential feeling of a good vacation.

Business Fundamentals pt 2

• Formal Definition of Business:

  • A business is defined as any activity that seeks to provide goods and services to others while operating at a profit.

• The Role of the Entrepreneur:

  • An entrepreneur is a person who risks both time and money to start and manage a business.

• Understanding Profit and Risk:

  • Profit: This is the amount of money a business earns above and beyond the total it spends for salaries and other operational expenses.

  • Risk: Starting a business is inherently risky because not all businesses successfully generate a profit.

The Five Factors of Production

Wealth creation is driven by five essential factors of production:

• Land: This refers to natural resources used in production.

• Labour: This refers to the workers and human effort involved.

• Capital: This refers to physical assets utilized in production (such as machinery and tools) but does not include money.

• Entrepreneurship: The initiative and risk-taking required to combine resources into a productive enterprise.

• Knowledge: The information and expertise applied to the production process.

• LLCEK - Land, Labour, Capital, Entrepreneurship, Knowledge

Organizational Stakeholders and Non-Profit Entities

• Non-Profit Organizations:

  • A non-profit organization is one whose primary goals do not include making a personal profit for its owners or organizers.

  • Examples include schools, hospitals, and charities.

  • These organizations make significant contributions to the overall welfare of society.

• Stakeholders:

  • Stakeholders are individuals or groups who stand to lose or gain based on the activities and success of a business.

  • Typical Stakeholders for a Canadian Business include:

    • Customers

    • Employees

    • Shareholders

    • Suppliers

    • Dealers (Retailers)

    • Bankers

    • Media

    • Government Leaders

    • Environmentalists

    • The Surrounding Community

Dimensions of the External Business Environment

• Definition of Business Environment:

  • The business environment consists of the surrounding factors that either help or hinder the development and operation of businesses.

• The Multiple Organizational Environments:

  • Economic Environment: Factors affecting consumer purchasing power and spending patterns.

  • Technological Environment: Forces that create new technologies, products, and market opportunities.

  • The Legal Environment: Laws, government agencies, and pressure groups that influence or limit various organizations.

  • Socio-cultural Social Environment: Institutions and other forces that affect a society’s basic values, perceptions, and behaviors.

  • Competitive Environment (Global Environment): The forces and entities that compete for market share and organizational survival.

  • Ecological Environment: Factors involving the natural environment and sustainable resources.

Competitive and Technological Environments

• The Competitive Situation:

  • Porter’s Five Forces Model: This specific framework is used to analyze the competitive situation and attractiveness within a given industry.

• The Impact of Technology:

  • Technology affects productivity, which is defined as the amount of output generated relative to the amount of input provided.

  • $Productivity = \frac{\text{Output}}{\text{Input}}$

  • The more an individual or company can produce in a given period of time, the more money you are worth to companies.

• Modern Technological Marketing Platforms:

  • Social media marketing has become essential, utilizing platforms such as:

    • YouTube

    • Facebook

    • Twitter

    • Instagram

    • Pinterest

    • Blogging, Microblogs, and Forums

The Social and Cultural Environment

• Demography:

  • This is the statistical study of the human population regarding its size, density, and characteristics such as age, race, gender, and income.

• Key Trends in the Social Environment:

  • Diversity: Managing a multicultural population.

  • Demographic Changes: Shifts in the makeup of the population.

  • Family Structures: Changes in household dynamics.

• The Aging Population:

  • More people are living longer due to improved medical knowledge and technology.

  • Health habits have improved, including proper nutrition and increased exercise.

  • There has been a notable reduction in the number of smokers.

• Diversity Management in Canada:

  • Canada possesses a strong multicultural population.

  • Over the last ten years, Canada has welcomed nearly $2.7 \text{ million}$ permanent residents.

The Ecological Environment

• Climate Change:

  • Climate change is defined as the movement of the planet's temperature up or down over time. The primary focus of the international business community currently is Global Warming.

• The Impact of COVID-19:

  • One positive outcome of the COVID-19 pandemic was the reduction of carbon emissions.

  • Carbon emissions decreased by $7\%$ as a result of the forced slowdown of major industrial and transportation activities.

Evolution of Business and Industry in Canada

• Agricultural Development:

  • Modern farming has become highly efficient due to technology.

  • This efficiency has led to a decrease in the total number of individual farms.

• Transition to the Service Sector:

  • Service Industries: These provide intangible products such as education, healthcare, insurance, recreation, travel, and tourism.

  • Historical Context: In the past, the Canadian economy was dominated by goods-producing industries such as steel, railroads, and machine tools.

  • Current Reality: Today, the fastest-growing firms are in service sectors like health, telecommunications, entertainment, and finance.

Questions & Discussion

• Group Exercise: Analyzing the Business/Competitive Environment:

  • Task: Form small groups of 4-6 people and use Porter’s Five Forces framework to analyze the competitive environment of specific brands.

  • Brands for Analysis:

    • Lululemon (Clothing)

    • Netflix (Video Streaming)

    • Skip the Dishes (Food Delivery)

  • Requirements:

    1. Illustrate or describe the framework, showing each force interacting with the industry.

    2. Explain how each of the five forces specifically affects and interacts with that industry.

• Group Discussion: "When in Rome…" (Cultural Intelligence):

  • Scenario: A foreign manager has recently moved to Canada to manage a swimwear company. The manager states, ‐I know very little about Canadians and Canadian culture. What can I expect?‐

  • Task: Discuss and take notes on how you would answer this manager’s question and provide feedback to the class regarding cultural expectations in Canadian business.