Chapter One

The Idea of Business and Profit

- Learning Objective (LO 1.1): Understand the definition of Canadian business and its main objectives.

- Shopify Case Example:

- Entrepreneurship and Innovation: Shopify illustrates how a business can be built from a simple idea into a significant player in the tech and e-commerce space.

- Adaptability: Businesses must stay updated on evolving industry trends to remain competitive and relevant.

- Key Strategic Elements for Business Success:

- Corporate Strategy: Planning for growth and aligning operations to meet long-term goals.

- Brand Strategy: Building a recognizable brand identity to attract and retain customers.

- Business-Government Relations: Managing relationships with government agencies to ensure regulatory compliance and capitalize on potential partnerships or incentives.

- International Business Opportunities: Expanding into global markets to diversify revenue and reduce dependence on a single market.

- Understanding 'Business':

- A business is any organization established with the goal of generating profit by producing or providing goods and services.

- Examples of Canadian Businesses:

- Large, well-known corporations: Shoppers Drug Mart (retail pharmacy), Amazon (e-commerce and cloud services).

- Local businesses: Small shops like neighborhood supermarkets or restaurants contribute to the community and meet local needs.

- Recognized brands: Netflix (streaming services), lululemon (apparel), CN (transportation), TELUS (telecommunications).

- Economic and Social Role of Businesses in Canada:

- Goods and Services Production: Businesses create the majority of products and services used by consumers daily.

- Employment Generation: They provide jobs across various sectors, employing a large portion of the Canadian workforce.

- Tax Contributions: The taxes paid by businesses fund government operations, infrastructure, education, healthcare, and other public services.

- Community Support and Leadership: Many businesses contribute to charitable causes, promote community welfare, and set standards in corporate social responsibility.

- Profit:

- Definition: The remaining amount after all operating expenses have been deducted from total revenue.

- Purpose of Profit: Profit serves as a reward for business owners who take financial and operational risks to establish and run their companies.

- Example of Profit in Entertainment Industry:

- Lionsgate’s Success with The Hunger Games: The film series generated approximately $3 billion in revenue, motivating Lionsgate to produce a prequel, The Ballad of Songbirds and Snakes.

- Not-for-Profit Organizations:

- Definition: Organizations that operate to serve the public rather than to generate profit.

- Funding Sources: Not-for-profits often rely on government grants or revenue from services provided.

- Examples of Canadian Not-for-Profit Organizations: Charities, schools, hospitals, labor unions, and government agencies.

- Application of Business Principles: These organizations can benefit from business practices in areas like finance, marketing, and operations to achieve their service goals more effectively.

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Economic Systems and Factors of Production

- Learning Objective (LO 1.2): Describe the variety of global economic systems and how they manage the factors of production through input and output markets.

- Overview of Global Economic Systems:

- Differences Across Countries: Businesses operate differently depending on the economic structure of their respective countries, such as Canada, China, Japan, France, and Argentina.

- Core Function of an Economic System: To allocate resources within a country based on ownership and control over factors of production.

- Factors of Production:

- Definition: Resources essential for producing goods and services; these include labor, capital, entrepreneurs, natural resources, and information.

- Labor:

- Definition: The workforce or human resources used in a business.

- **Example of Labor in Canada:** Suncor Energy requires a wide range of skills, from managerial expertise to specialized roles like geologists and truck drivers.

- Capital:

- Definition: The financial assets needed to start, sustain, and grow a business.

- **Example of Capital in Use:** Petro-Canada needs substantial capital to cover operational costs like annual drilling expenses.

- Capital Sources: Personal investment, sale of stock, profits from goods and services, and loans from banks.

- Entrepreneurs:

- Definition: Individuals who recognize opportunities and are willing to take risks to start and run businesses.

- **Examples of Entrepreneurs:** Sergey Brin and Larry Page (Google founders), Mark Zuckerberg (Facebook founder), Tobias Lütke (Shopify founder), and Rihanna (Fenty Beauty founder).

- Natural Resources:

- Definition: Physical resources such as land, minerals, water, and trees.

- **Example of Natural Resources in Canada:** Suncor Energy requires oil, land for refineries, and infrastructure for its business.

- Canada's Resource Wealth: Companies like West Fraser Timber and Cenovus Energy are major players, competing globally by investing in resources and expanding operations.

- Information:

- Definition: Specialized knowledge, data, and insights that help businesses make decisions.

- Value of Information: Unlike physical resources, information can be shared and expanded without losing its original value.

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Types of Economic Systems

- Command Economy: A centralized government controls production, allocation, and resource distribution.

- Communism:

- Based on Karl Marx's vision where the government owns all production and allocates resources to fulfill societal needs.

- Example Countries: China and Cuba incorporate some elements of command economy but have market-based practices.

- Political Dynamics: The Chinese government, for instance, retains strong political control, limiting economic freedom.

- Socialism:

- Government owns and operates selected large industries, while smaller businesses may remain privately owned.

- Labor in Socialist Economies: Many citizens work in government-operated sectors, and high taxes often fund social welfare programs.

- Efficiency Challenges: Political appointees in managerial roles may reduce operational efficiency in public enterprises.

- Market Economy: Decisions on resource use, production, and pricing are largely driven by supply and demand with minimal government intervention.

- Market Mechanism: Buyers and sellers interact to determine pricing, creating competition that encourages efficiency.

- B2C Transactions: Business-to-consumer exchanges, like buying products from Amazon.

- B2B Transactions: Business-to-business sales, often larger in value than B2C and essential for the supply chain.

- Consumer and Producer Freedom:

- Example: At a fruit stand, customers may choose to buy apples based on quality or price, encouraging sellers to compete on these factors.

- Pandemic and Economic Disruption:

- Discussion of how the COVID-19 pandemic led to significant changes in business models, with a series in the text exploring the nature of disruptive economic events.

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Input and Output Markets

- Circular Flow Model in Market Economy: Describes interactions between households and businesses, illustrating how resources and goods flow.

- Input Market: Households supply labor and capital to firms, which utilize these inputs for production.

- Output Market: Firms provide goods and services to households in response to demand.

- Example:

- Ford Motor Company purchases labor from households and sells cars to consumers, creating a continuous cycle.

- Capitalism (Free-Market Economy):

- Private Ownership: Individuals and businesses own resources and make production decisions.

- Entrepreneurial Incentives: Profit opportunities encourage individuals to innovate and create businesses.

- Contrast with Command Economy: In capitalist systems, businesses and consumers have choice, while in command economies, the government dictates production, pricing, and consumer options.

Mixed Market Economies

LO 1.3 Describe the interactions between business and government in Canada.

• Definition: Mixed market economies feature characteristics of both command and market economies, balancing government and private sector roles.

• Privatization: Began in the 1990s, this process involves converting government enterprises into private companies to improve efficiency and competition.

  • Examples in Canada: The privatization of Canada's air traffic control system, Petro-Canada, Canadian National Railway, and Air Canada.

  • The OECD recommends further privatization, suggesting an end to the Canada Post monopoly for greater market efficiency.

• Deregulation: Refers to reducing laws and the reach of regulatory bodies to enhance business activity and competition.

  • Example: A Conference Board of Canada study linked deregulation with improved productivity in sectors like freight and airlines, aided by privatization and increased competition.

Interactions Between Business and Government

LO 1.3 Describe the interactions between business and government in Canada.

1. Government as a Customer

• Role: The government purchases a wide array of goods and services, providing a stable revenue source for many businesses.

• Products/Services Bought: Office supplies, buildings, infrastructure (highways, bridges), consulting services, and more.

• Example: In 2019, government spending reached $428.3 billion, with $180 billion dedicated to infrastructure improvements like better internet access for remote areas.

2. Government as a Competitor

• Crown Corporations: Government-owned businesses accountable to ministers that operate in direct competition with private firms.

• Examples: Hydro-Québec and Canada Post, which generate billions in revenue and play a large role in Canada's economy.

• Provincial and Federal Levels: Crown corporations exist at both provincial and federal levels, highlighting the government's role as a competitor in various markets.

3. Government as a Regulator

• Purpose: Regulations ensure fair competition, protect consumers, help achieve social goals, and safeguard the environment.

  • Competition Regulation: Enforced under the Competition Act, which prohibits agreements that reduce competition and enforces fines for violations.

  • Example: Loblaw and Shoppers Drug Mart faced regulatory action over anti-competitive practices. The bread price-fixing scandal also highlighted the need for competition oversight.

Types of Regulations

• Promoting Competition: Government mandates fair competition to prevent monopolies.

  • Example: Restrictions on Loblaw during its acquisition of Shoppers Drug Mart to prevent supplier price manipulation.

• Consumer Protection: Laws protect consumers through accurate labeling and health standards.

  • Examples:

    • Tobacco and Vaping Products Act: Limits advertising for tobacco products.

    • Weights and Measures Act: Ensures accurate measurements in products.

    • Food and Drugs Act: Prevents the sale of food containing harmful substances.

• Achieving Social Goals: Government policies support universal health care, safe workplaces, and pensions, aiming to improve societal well-being.

• Environmental Protection: Government controls for pollution and resource protection.

  • Key Laws: Canada Water Act (water quality), Fisheries Act (water pollution), Canadian Environmental Protection Act (airborne toxins).

4. Government as a Taxation Agent

• Types of Taxes:

  • Revenue Taxes: Income taxes fund government services; progressive taxes target higher incomes more heavily.

  • Regressive Taxes: Sales tax affects lower-income individuals disproportionately as they spend a larger income share on these taxes.

  • Restrictive Taxes: Taxes on items like alcohol, tobacco, and gasoline are levied for revenue and to discourage usage.

  • Example: Both revenue and restrictive taxes serve to generate funds and control consumption of certain goods.

5. Government as a Provider of Incentives and Financial Assistance

• Purpose: Governments offer incentives to stimulate business growth and support economic stability.

  • Examples: The federal government and provinces spend over $29 billion annually on incentive programs, with specific support for struggling sectors.

  • Case Study: In response to COVID-19, the government offered $95 billion in loans and tax deferrals to businesses, plus a wage subsidy covering up to 75% of employee salaries to ensure economic resilience.

• Government Services to Businesses:

  • Export Development Canada: Provides insurance and loans to Canadian exporters.

  • Innovation, Science and Economic Development Canada: Supports small businesses with various development programs.

  • Municipal Incentives: Local governments offer rebates and assistance to attract businesses to specific areas.

Summary

These interactions represent a balanced relationship between Canadian businesses and the government, where government acts as a regulator, competitor, customer, taxation agent, and provider of financial assistance and incentives. These roles are essential in shaping Canada’s mixed market economy, which blends competitive markets with necessary government oversight.

Government as a Provider of Essential Services

Learning Objective (LO 1.3): Explain how the Canadian government supports business through essential services and stability.

1. Federal Government Services

   • Highways, postal services, minting of money, armed forces, and statistical data provision.

   • Fiscal and monetary policies to maintain economic stability.

2. Provincial and Municipal Government Services

   • Streets, sewage, sanitation systems, police, fire departments, utilities, hospitals, and education.

   • These public services contribute to a stable environment that encourages business activity.

3. Public-Private Partnerships (P3s)

   • The government contracts private companies to build and operate essential services (e.g., hospitals, transit).

   • Studies indicate P3s can be more expensive than traditional government-funded projects.

How Business Influences Government

Learning Objective (LO 1.3): Discuss methods by which businesses attempt to shape government policy in Canada.

1. Lobbying

   • Companies and industries hire lobbyists to represent their interests in government.

   • Example: Association of Consulting Engineering Companies advocating for the inclusion of private engineers in government projects.

2. The Federal Lobbying Act

   • Requires lobbyists to register, ensuring transparency and accountability in lobbying efforts.

   • Mandates reporting on communications with key government figures.

3. Trade Associations

   • Small businesses unable to hire lobbyists may join trade associations to influence legislation.

   • These associations also offer training, organize trade shows, and publish industry updates.

The Canadian Market Economy

Learning Objective (LO 1.4): Show how demand and supply influence resource distribution in Canada’s market economy.

1. Market Basics

   • A market is an exchange process between buyers and sellers.

   • Production decisions are determined by numerous exchanges within the economy.

2. Laws of Demand and Supply

   • Law of Demand: Buyers purchase more as prices decrease.

   • Law of Supply: Producers supply more as prices increase.

   • Real-World Example: The pandemic led to a surge in demand for sanitizing products, while oil prices fell sharply due to reduced demand.

3. Demand and Supply Schedules

   • These tables help businesses understand how varying prices affect demand and supply.

   • Pizza Example: At a high price, the pizzeria produces more pizzas; at a low price, it produces fewer.

4. Demand and Supply Curves

   • Graphs show the relationship between price and quantity demanded/supplied.

   • Equilibrium Price: Where supply equals demand.

5. Surpluses and Shortages

   • Surplus: More supply than demand, leading to wasted resources.

   • Shortage: Higher demand than supply, leading to potential customer dissatisfaction and lost profits.

Private Enterprise and Competition

Learning Objective (LO 1.5): Identify the core elements of private enterprise and distinguish among competition types in Canada’s economic system.

1. Private Enterprise Components

   • Private Property: Individuals control resources and wealth generation.

   • Freedom of Choice: Consumers and producers can freely choose what to buy, sell, and produce.

   • Profits: The potential for profit motivates people to start businesses.

   • Competition: Businesses compete for resources and customers, driving efficiency and innovation.

2. Degrees of Competition

   • Perfect Competition: Numerous small firms, identical products, and open market entry and exit.
     Example: Canadian agriculture, where many farms produce similar crops.

   • Monopolistic Competition: Many businesses, product differentiation, easy market entry/exit.
     Example: Small coffee shops competing with large chains like Tim Hortons.

   • Oligopoly: Few large firms dominate, high entry barriers, similar prices.
     Example: Console market dominated by Sony, Microsoft, and Nintendo.

   • Monopoly: Single firm dominates, controls pricing.
     Example: Natural monopolies like provincial utilities regulated by provincial boards.

Chapter 2

Organizational Boundaries and Environments

LO 2.1: Explain the Concepts of Organizational Boundaries and Multiple Organizational Environments

• External Environment:

  • Definition: Encompasses all external factors that can impact an organization’s performance and decision-making.

  • Importance: Understanding the external environment is crucial for businesses to adapt and thrive. It includes market trends, consumer behavior, competition, regulatory changes, and socio-economic factors.

  • Example: McCain Foods has successfully adapted to changes in the external environment over its 70-year history by strategically responding to new opportunities and challenges.

• Organizational Boundaries:

  • Definition: The physical and conceptual limits that distinguish an organization from its environment.

  • Physical Structure:

    • For example, in a neighborhood grocery store, boundaries might include the physical storefront, storage areas, and the owner’s office.

    • Crossing these boundaries signifies moving from the external environment into the organization.

  • Dynamic Interaction:

    • External entities (e.g., suppliers, distributors) often enter the organization, blurring the lines of these boundaries.

    • Distributors replenishing inventory may be perceived as part of the store by customers, highlighting the complex nature of boundaries.

  • Complex Organizational Structures:

    • Larger companies, like GM Canada, operate within intricate networks involving domestic and international relationships.

    • Example: GM Canada works with suppliers for parts (tires, glass, steel) while also being a part of the global General Motors structure, demonstrating how organizational boundaries can intersect with broader corporate networks.

• Multiple Organizational Environments:

  • Influence of Various Conditions:

    • Organizations operate within multiple environments, each influencing performance in different ways.

    • General economic conditions (e.g., unemployment rates, inflation) affect all businesses, while local factors (e.g., competitive pricing strategies) specifically impact businesses like the neighborhood grocery store.

  • Adaptive Strategies:

    • Organizations must be proactive in analyzing and responding to changes within their multiple environments to remain competitive and relevant.

Economic Environment

LO 2.2: Explain the Importance of the Economic Environment to Business and Identify the Factors Used to Evaluate Economic Performance

• Economic Environment:

  • Definition: The overarching conditions and factors that characterize the economic system in which a business operates.

  • Current Trends:

    • Recent trends highlight a landscape of low economic growth, low unemployment rates, and controlled inflation.

    • Recessionary Effects: Rising unemployment leads to reduced consumer confidence and spending, which can stagnate economic growth.

• Impact of Economic Conditions on Consumer Behavior:

  • Rising Unemployment:

    • Consumers become cautious, often postponing non-essential purchases (e.g., new vehicles or luxury items).

    • Economic uncertainty can lead to reduced aggregate demand, adversely affecting businesses.

  • Positive Economic Periods:

    • Increased consumer confidence leads to higher spending, positively impacting business revenue and reducing unemployment rates.

• Business Strategies in Response to Economic Pressures:

  • Adapting to Cost Increases: Businesses may raise prices, alter product offerings, or reduce operational hours in response to economic pressures (e.g., rising minimum wage).

  • Examples of Resilience:

    • Companies like Dollarama and Costco thrive in challenging economic times by catering to consumers’ desire for lower-priced goods.

• COVID-19 Pandemic Effects:

  • Market Shocks: The pandemic led to panic buying and significant fluctuations in demand and supply chains.

  • Government Regulation: Authorities aimed to stabilize markets and protect consumers from price gouging during the crisis.

Economic Growth and Indicators

• Aggregate Output:

  • Definition: The total quantity of goods and services produced in a specific time frame; a critical indicator of economic performance.

  • Relation to Standard of Living: Economic growth is characterized by aggregate output growth outpacing population growth, leading to improved living standards.

• Business Cycle:

  • Phases:

    • Peak: High economic activity and employment levels.

    • Recession: Two consecutive quarters of economic decline.

    • Trough: The lowest point of economic activity, signaling the end of a recession.

    • Recovery: Gradual improvement in economic performance following a trough.

  • Variability: The length of each phase can vary significantly, impacting business planning and strategy.

• Gross Domestic Product (GDP):

  • Definition: The total monetary value of all finished goods and services produced within a country’s borders in a specific period.

  • Importance: A rising GDP indicates economic growth and is used as a primary indicator of economic health.

  • Comparison with GNP:

    • GNP (Gross National Product) measures production by a nation's companies regardless of location, highlighting the importance of understanding where economic activity occurs.

• Real GDP vs. Nominal GDP:

  • Nominal GDP: Measures economic output using current prices, which can be misleading due to inflation.

  • Real GDP: Adjusted for inflation to provide a more accurate representation of economic growth and performance.

• GDP per Capita:

  • Definition: GDP divided by the population, offering a clearer view of economic well-being on an individual level.

  • Global Rankings: In December 2020, countries like Macao and Luxembourg led in GDP per capita, while Canada ranked 24th.

• Purchasing Power Parity (PPP):

  • Concept: A theory that suggests exchange rates adjust so that identical goods cost the same in different countries.

  • Significance: Offers a more accurate picture of living standards by considering local price levels and purchasing power.

• Productivity

  • Definition: Productivity is an economic measure that compares the output of goods and services to the inputs used to produce them. It assesses how efficiently resources (labor and capital) are utilized in the production process.

  • Example:

    • Canadian Worker: Produces 10 pairs of leather boots, costing C$50 each, in 8 hours of labor.

    • Spanish Worker: Produces the same 10 pairs, costing C$60 each, also in 8 hours.

    • Conclusion: The Canadian industry demonstrates higher productivity since it generates the same output at a lower cost, indicating more efficient resource utilization.

  • Factors of Production: Two primary factors influencing productivity are:

    • Labor: The human effort involved in production, including physical and intellectual contributions.

    • Capital: The machinery, tools, and technology used in the production process.

  • OECD Rankings:

    • Canada ranks 14th among OECD countries, with a productivity ratio of 50.8%, meaning Canadian workers produce about half of what the most productive countries do.

    • Top Countries:

      • Luxembourg (116.6% productivity)

      • Ireland (85.3%)

      • Switzerland (72.4%)

    • Impact on Consumers:

      • Increased productivity leads to more goods and services available in the market at lower prices, enhancing the overall standard of living for consumers by providing access to affordable products.

  The Balance of Trade and the National Debt

  • Balance of Trade:

    • Definition: The balance of trade represents the difference between the economic value of a country's exports and its imports over a specific period.

    • Historical Context:

      • 2006-2008: Canada experienced a positive trade balance, ranging from $43 billion to $47 billion, indicating that exports exceeded imports.

      • 2009: A trade deficit of $6 billion emerged, largely due to the appreciation of the Canadian dollar, making Canadian exports more expensive abroad.

      • 2019: Canada reported an overall trade deficit of $21.5 billion, reflecting challenges in maintaining a positive balance.

    • Cause: A significant factor contributing to the trade deficit has been the trend of increased manufacturing outsourced to countries with lower labor costs, particularly China.

    • Impact: A persistent trade deficit means that money earned from exports is insufficient to reinvest domestically or in international markets, potentially leading to economic vulnerabilities.

  • National Debt:

    • Definition: The national debt is the total amount of money that a country's government owes to creditors, including individuals, businesses, and other governments.

    • Revenue Sources: The primary means of generating revenue to manage national debt is through taxation, which includes income taxes, sales taxes, and corporate taxes.

    • Current Status:

      • As of 2020, Canada's national debt surpassed $685.45 billion, a significant increase due to financial measures implemented to support the economy during the COVID-19 pandemic.

      • The national debt exceeded $1 trillion in early 2021 and is projected to reach approximately $1.4 trillion by 2025, raising concerns about fiscal sustainability.

    • Economic Impact: Increased national debt means the government must compete for loanable funds, leading to higher interest rates and potentially crowding out private investment, limiting capital available for businesses and economic growth.

  Economic Stability

  • Definition: Economic stability is achieved when the money supply and production levels grow at comparable rates, preventing significant fluctuations in economic performance.

  • Threats to Stability:

    • Inflation:

      • Definition: Inflation occurs when there is an excess of money in circulation compared to the actual output of goods and services, leading to a rise in prices.

      • Effects: Higher prices diminish the purchasing power of consumers, making it more challenging to afford goods and services.

      • Bank of Canada Target: The Bank of Canada aims to maintain inflation between 1%-3%, with a midpoint target of 2%, to promote economic stability and growth.

      • Global Examples of Extreme Inflation:

        • Zimbabwe: Experienced inflation exceeding 40 million percent in 2019, leading to economic collapse.

        • South Africa: Recorded a CPI of 3.2% at the end of 2020, illustrating moderate inflation.

        • Venezuela: Faced staggering inflation rates of 344,509.5% in 2019, contributing to severe economic hardship.

    • Consumer Price Index (CPI): The CPI measures the average change in prices over time for a fixed basket of goods and services typically purchased by households. It serves as an essential indicator for tracking inflation and assessing the cost of living.

  The Sociocultural Environment

  Definition and Importance

  • The sociocultural environment encompasses the customs, values, attitudes, and demographic characteristics of the society where a company operates.

  • It significantly influences:

    • Customer Preferences: Shapes what goods and services consumers prefer.

    • Business Conduct Standards: Establishes what behaviors are deemed acceptable in the marketplace.

  Customer Preferences and Tastes

  • Variability Across Regions:

    • Customer preferences can vary widely both within and across national boundaries.

    • Example: In some countries, consumers are willing to pay premium prices for designer labels (e.g., Armani), while these same products may have little to no market in others.

    • Product usage also differs by nation (e.g., bicycles viewed as transportation in China vs. recreation in Canada).

  • Avoiding Stereotypes:

    • It's crucial to avoid stereotypical assumptions about consumer behavior.

    • Example: Canadian lingerie brands like La Senza have successfully entered markets in the Middle East despite conservative dress codes, revealing an underlying demand for such products.

  • Changing Consumer Preferences:

    • Consumer tastes evolve over time.

    • Example: Loblaw's introduction of cricket flour reflects growing global interest in alternative protein sources, despite Canadians being part of the minority who do not traditionally consume insects.

  Ethical Compliance and Responsible Business Behavior

  • Ethical conduct and social responsibility are central to the sociocultural environment.

  • Businesses face increasing pressure to maintain high ethical standards, especially in fast-paced, complex environments.

  • Stakeholders (employees, consumers, shareholders, etc.) require transparency in financial reporting to make informed decisions.

  • The evolution of ethical compliance emphasizes social justice and fair treatment of all individuals.

  The Business Environment

  • Characteristics:

    • The contemporary business environment is fast-paced, complex, and demanding.

    • There’s a trend towards higher-quality products, increased product cycles, and customer expectations for instant gratification.

  • Consumer Expectations:

    • Consumers demand high-quality, customizable products at lower prices with immediate delivery.

    • Employees seek flexible work arrangements, and shareholders expect increased productivity and profits.

  • Public Demands:

    • The public increasingly demands honesty, fair competition, and environmental respect.

  The Industry Environment

  • Each business operates within a specific industry characterized by different competitive dynamics.

  • Competitive Analysis:

    • Managers must understand their industry’s competitive landscape and develop strategies accordingly.

    • Michael Porter’s Five Forces Model is a widely used tool for analyzing competitive pressure. The five forces are:

    1. Rivalry Between Existing Competitors:

       • Varies across industries; characterized by price competition, marketing efforts, and customer service.

       • Example: Tim Hortons faces increasing competition from Starbucks and McDonald's in the coffee industry.

    2. Threat of Potential Entrants:

       • New competitors can alter industry dynamics.

       • Some industries are capital-intensive and difficult to enter (e.g., automobile manufacturing), while others (e.g., home cleaning services) are easier to penetrate.

    3. Bargaining Power of Suppliers:

       • The number of suppliers relative to buyers influences supplier power.

       • Fewer suppliers lead to greater bargaining power. The availability of substitute products can also impact this dynamic.

    4. Bargaining Power of Buyers:

       • A limited number of buyers with many suppliers increases buyer power.

       • Example: Walmart exerts significant pressure on suppliers due to its purchasing power.

    5. Threat of Substitutes:

       • The availability of substitute products increases competition.

       • Example: The rise of synthetic fibers as substitutes for cotton impacts the cotton industry negatively.

  Emerging Challenges and Opportunities

  • Viral Marketing:

    • A strategy where information spreads from consumer to consumer, often facilitated by social media platforms like YouTube and TikTok.

    • Engages customers actively in spreading brand messages through contests and challenges.

  Business Process Management

  • Definition:

    • Business process management focuses on organizing activities that add value to inputs, transforming them into outputs.

  • Advantages:

    • Facilitates faster decision-making and a more customer-oriented approach.

    • Involves coordinating materials and operations for quicker product delivery.

  Redrawing Corporate Boundaries

  • Successful companies are redefining traditional boundaries in response to external challenges by focusing on core competencies.

  • Trends Include:

    • Outsourcing: Firms increasingly outsource non-core activities to focus on core competencies.

    • Social Media: Companies leverage social media for consumer engagement and brand promotion.

• Mergers and Acquisitions

  • Acquisition vs. Merger

    • Acquisition: One firm purchases another (e.g., Hudson’s Bay Company buying Saks for $2.4 billion).

    • Merger: A collaborative consolidation of two firms.

      • Horizontal Merger: Companies in the same industry merge.

      • Vertical Merger: One company is a supplier or customer to the other (e.g., Essilor merging with Luxottica).

      • Conglomerate Merger: Merging companies are in unrelated businesses.

  • Types of Takeovers

    • Friendly Takeover: The acquired company welcomes the acquisition (e.g., Cenovus Energy's acquisition of Husky Energy).

    • Hostile Takeover: The acquiring company takes control despite opposition.

  • Defensive Strategies Against Takeovers

    • Poison Pill: A tactic to make a company less attractive for a takeover (e.g., Air Canada’s poison pill provision allowing shareholders to buy stock at a discount if a potential acquirer seeks more than 20% ownership).

  Divestitures and Spinoffs

  • Divestiture: Selling part of a business to another corporation (e.g., Pfizer selling its infant-nutrition unit to Nestlé for $11.85 billion).

  • Spinoff: Creating a new independent company from a business unit (e.g., PepsiCo spinning off Pizza Hut, KFC, and Taco Bell into Yum! Brands).

  Employee-Owned Corporations

  • Employee Stock Ownership Plans (ESOPs): Corporations owned by employees to increase motivation or fend off hostile takeovers.

    • Mechanism: The company secures a loan to buy shares, and future profits help pay off the loan. Employees gain voting rights immediately but may not physically possess the stock initially.

  Strategic Alliances

  • Definition: Cooperation between two or more enterprises in research, development, manufacture, or marketing (e.g., Magna International partnering with Lyft to develop self-driving systems).

    • Reasons for Strategic Alliances:

      • Spread the risk of a project.

      • Gain valuable resources or expertise from partners.

  Subsidiary and Parent Corporations

  • Subsidiary Corporation: Owned by another corporation.

  • Parent Corporation: The corporation that owns the subsidiary (e.g., TELUS as the parent of Koodo).

Summary of Learning Objectives

LO 2.1: Organizational Boundaries and Multiple Environments

• All businesses operate within an external environment that impacts them, separated by organizational boundaries.

• Businesses navigate multiple environments: economic, technological, political-legal, social, global, ethical/social responsibility, and other emerging challenges.

LO 2.2: Economic Environment and Performance Factors

• The economic environment includes the economic system within which businesses operate, aiming for growth, stability, and employment.

• Key measure: Gross Domestic Product (GDP), representing the total value of goods and services produced domestically.

• The government influences the economy through fiscal and monetary policies.

LO 2.3: Technological Environment and Business

• Technology encompasses methods of value creation, such as knowledge, equipment, and processing systems.

• Research and Development (R&D) drive innovation, resulting in product, service, and business process technologies.

LO 2.4: Political–Legal Environment’s Role in Business

• This environment reflects the interaction between business and government, with laws and regulations guiding acceptable conduct.

• Regulatory agencies oversee areas like advertising, safety, and health, while government sentiment (pro-business or anti-business) can influence business operations.

LO 2.5: Sociocultural Environment’s Role in Business

• Comprising societal customs, values, and demographics, the sociocultural environment affects business by shaping markets, workforce attitudes, and acceptable business standards.

LO 2.6: Emerging Challenges and Opportunities

• Companies thrive by focusing on core competencies and adapting to new challenges through strategies like outsourcing, leveraging social media, and business process management.

LO 2.7: Trends in Corporate Boundaries

• Acquisition: One firm buys another.

• Merger: Two firms combine into a new entity.

• Divestiture: Selling part of a business or creating a new, independent entity.

• Spinoff: Selling a business unit to raise capital.

• ESOP: Employee Stock Ownership Plan allows employees to own shares via a trust.

• Strategic Alliance: Collaboration between firms on projects for shared benefit

Chapter 3

Ethics in the Workplace

• LO 3.1 - Personal Codes of Ethics and Importance of Ethics in the Workplace

  • Ethics: Beliefs about what is right/wrong or good/bad; influenced by individual values, morals, and social context.

  • Ethical behavior: Conforms to personal beliefs and social norms about what is right.

  • Unethical behavior: Opposes individual beliefs and social norms.

  • Business ethics: Refers to ethical or unethical actions by business managers or employees.

• Individual Ethics

  • Ethics vary by person, situation, and culture, though some ethical standards (e.g., not stealing) are common across societies.

  • Ethical vs. illegal behavior: Actions can be ethical and legal, ethical and illegal, unethical and legal, or unethical and illegal.

  • Ethical judgments may be complex due to cultural and situational differences (e.g., practices like Brazil’s jeitinho).

• Influences on Individual Ethics

  • Individual values and morals: Shaped by family, peers, and media; influence ethical decisions.

  • Ethical standards can be rationalized differently based on personal priorities, such as financial gain or family importance.

• Business and Managerial Ethics

  • Managerial ethics: Guide managers in their work and are divided into three main categories:

    • Behavior Toward Employees: Hiring, wages, working conditions, and privacy.

      • Ethical hiring practices should focus on job qualifications, not personal bias.

      • Managers must balance employee rights (e.g., fair wages, privacy laws) with organizational needs.

    • Behavior Toward the Organization: Issues of honesty (e.g., stealing, padding expenses).

      • Conflict of interest: Occurs when employee benefits at employer’s expense (e.g., accepting gifts from suppliers).

    • Behavior Toward Other Economic Agents: Relationships with customers, competitors, shareholders, etc.

      • Global differences: Practices like bribery may be standard in some cultures but are generally illegal and unethical in Canada.

• Assessing Ethical Behavior

  • Three-Step Model:

    1. Gather relevant factual information.

    2. Determine the most appropriate moral values.

    3. Make a judgment based on the proposed action's rightness/wrongness.

  • Ethical norms:

    • Utility: Does the action benefit affected parties?

    • Rights: Does it respect individuals' rights?

    • Justice: Is it fair?

    • Caring: Does it reflect responsibilities to others?

  • Example: Submitting receipts for non-business expenses might seem unethical, while replacing a lost receipt for reimbursement of actual business expenses could be more debatable.

• Technological Advances and Ethical Dilemmas

  • Innovations like cloning, social media, and bioengineering create ethical challenges regarding privacy, safety, and fairness.

Key Concepts and Actions to Promote Ethical Behavior

1. Identifying Factors Behind Unethical Behavior: Managers should understand the pressures (personal challenges that cannot be solved legitimately), opportunities (use of one's position to resolve these issues covertly), and rationalizations (justifying unethical acts as exceptions) that drive unethical actions. Recognizing these elements can help in addressing the root causes of unethical behavior within an organization.

2. Top Management Commitment: Demonstrating a clear commitment to high ethical standards by top management is crucial for fostering an ethical culture. This "tone at the top" serves as a model for all employees, as seen in Mountain Equipment Company’s commitment to ethical sourcing.

3. Written Codes of Ethics: A formal code of ethics reinforces the organization's intention to conduct business ethically, helping to build public trust and guiding internal responses to ethical dilemmas. Enforcement is key, as demonstrated by Boeing's experience with their 737 MAX project, where adherence to the code was reportedly inconsistent.

4. Ethics Training: Ethics can be reinforced through training, especially in businesses where employees might face pressures to act unethically. Training often includes workshops led by former executives who share their experiences with ethical missteps.

Corporate Social Responsibility (CSR)

CSR represents a company’s obligation to balance its commitments to key stakeholders. While some argue that businesses should focus solely on profit-making (managerial capitalism), others support CSR, emphasizing the broader social responsibilities that accompany corporate influence.

1. Commitment to Sustainable Practices: CSR is exemplified by TELUS's recognition as one of the world’s most sustainable companies and B Corp certifications, which signal a company’s commitment to standards in inclusion, equity, and environmental responsibility.

2. Social Return on Investment (SROI): This measure helps companies evaluate the social impact of their actions beyond financial returns, underlining the value created for stakeholders such as customers, employees, and communities.

3. Stakeholder Model of Responsibility: Companies focus on responsibilities toward customers, employees, investors, suppliers, and local communities. Ethical practices include protecting consumer rights, ensuring fair pricing, and promoting honesty in advertising.

Unfair Pricing and Competition

1. Illegal Pricing Practices and Collusion

   • Interfering with competition through unfair pricing practices is illegal and involves activities like price-fixing.

   • Example of Collusion:

     • In 2017, Loblaw Companies Limited admitted to conspiring with other grocery chains to fix bread prices from 2001 to 2016.

     • Sobeys and Metro immediately denied any involvement in this scheme.

   • COVID-19 Pandemic Price Markups:

     • During the early stages of COVID-19, some retailers raised prices on essential items like hand sanitizer, home cleaning products, and toilet paper.

2. Recent Legal Changes in Price-Fixing Penalties

   • Recent laws aim to ease the process of convicting companies involved in price-fixing.

   • Increased Penalties:

     • The maximum prison sentence for price-fixing offenses has tripled to 14 years.

     • The maximum fine has also increased, from $10 million to $25 million.

Ethics in Advertising

1. Truth in Advertising

   • Ethical advertising requires all claims to be verifiable, but violations are common.

   • Example:

     • Sony created a fictitious movie critic to give positive reviews for films from its Columbia Pictures label, misleading consumers.

2. Stealth Advertising

   • Stealth advertising involves secretly paying individuals to promote products in everyday interactions.

   • Example:

     • An advertising agency hired models to pose as tourists using a new cell phone camera. The models interacted with actual tourists, praising the product in what appeared to be a spontaneous recommendation.

3. Morally Objectionable Advertising

   • This form of advertising involves content that may offend ethical or moral standards.

   • Common Examples:

     • Targeting young people with ads for products like alcohol and vaping devices.

     • Depicting women or minors in revealing clothing or exploiting gender stereotypes in video games.

4. Counterfeit Brands

   • Counterfeit items such as perfume, pharmaceuticals, clothing, and even cancer drugs have become pervasive.

   • Notable Incidents in Canada:

     • Louis Vuitton sued Dr. Flea’s Flea Market in Etobicoke for repeatedly selling counterfeit goods, seizing over $1 million in fake merchandise in just one raid.

     • The Pacific Mall in Markham, Ontario, was flagged by the U.S. government for widespread counterfeit sales, though local authorities were slow to take action.

     • Canada Drugs, an online pharmacy, was fined $5 million for selling counterfeit drugs in the U.S.

Corporate Responsibility Toward Employees

1. Ethical Treatment and Fair Employment Practices

   • Socially responsible businesses must ensure fair treatment, a non-discriminatory environment, and provide a safe, harassment-free workplace.

   • Additional Practices:

     • Ethical companies support work-life balance, emphasize mental health, and pay fair wages.

     • Many progressive businesses hire and train the “hardcore unemployed”—those with limited education and a history of unemployment.

2. Employee Privacy

   • Companies must balance employee privacy with safety and productivity monitoring.

   • Examples of Controversial Practices:

     • Amazon employs AI algorithms to monitor warehouse productivity, tracking how quickly workers fulfill orders.

     • Some companies use tools like Social Sentry, a software that monitors employees’ social media, flagging leaks or disparaging comments.

3. Whistle-Blower Protection

   • Employees reporting illegal or unethical practices should feel protected.

   • Risks for Whistle-Blowers:

     • Despite federal protections, around 50% of whistle-blowers face retaliation, such as termination, family estrangement, or even home loss.

Responsibility Toward Investors

1. Improper Financial Management

   • Managers may misuse company resources for personal gain, leading to diminished earnings for investors.

   • High-profile Example:

     • In 2017, top executives at Bombardier received a nearly 50% pay increase, despite the company’s reliance on government aid and ongoing financial challenges. Public backlash led to delays in some of these pay increases.

2. Misrepresentation of Financial Information

   • Financial misrepresentation can take forms like fraud or Ponzi schemes.

   • Recent Case:

     • The QuadrigaCX cryptocurrency exchange in Canada ran a Ponzi scheme. Its founder, Gerald Cotten, created fake accounts to inflate holdings, and when he passed away, $215 million was lost.

3. Cheque Kiting

   • This scheme involves using multiple accounts to temporarily “borrow” funds by floating cheques between accounts.

   • Example:

     • BMO sued several businesspeople involved in a cheque kiting scheme that cost the bank $20 million.

4. Insider Trading

   • Insider trading occurs when individuals trade stocks based on confidential, non-public information for personal gain.

   • Notable Cases:

     • Executives from Grande Cache Coal Corporation were charged for selling company stock before a negative sales report was made public.

     • Raj Rajaratnam of Galleon Group and Mathew Martoma of SAC Capital Advisors were sentenced to lengthy prison terms for insider trading.

Critical Thinking Reflection: Consumer Responsibility and Actions

1. Assessment of Actions and Behaviors

• Group Discussion:

  • Reflect on Personal Consumption Habits:

    • Discuss how our daily choices contribute to environmental issues such as pollution, waste, and resource depletion.

    • Explore personal motivations for consumption (e.g., convenience, cost, brand loyalty) and how they align with ethical considerations.

  • Evaluate the Importance of Informed Choices:

    • Assess the impact of consumer education on sustainable practices. How can we improve our understanding of product sourcing, production methods, and overall environmental impact?

    • Share personal stories of instances where our consumption choices either positively or negatively affected the environment.

2. Actions to Impact Consumption Patterns

• Reduce and Reuse:

  • Single-Use Plastics Reduction:

    • Actively refuse plastic straws, utensils, and bags when dining out or shopping.

    • Invest in high-quality, reusable alternatives (e.g., stainless steel straws, glass containers).

  • Product Reusability:

    • Consider second-hand or refurbished items instead of new purchases (e.g., clothing, electronics).

    • Implement a “buy nothing” group within the community to exchange items.

• Recycling:

  • Participate in Local Recycling Programs:

    • Familiarize ourselves with local recycling guidelines to avoid contamination of recycling streams.

    • Organize neighborhood recycling drives to promote recycling efforts in the community.

  • Educate Others:

    • Create informational materials on recycling best practices to distribute in schools or community centers.

• Sustainable Choices:

  • Local and Organic Purchases:

    • Support farmers’ markets and local food co-ops to reduce carbon footprints associated with transportation.

    • Research the benefits of organic farming, such as reduced pesticide use and improved soil health.

  • Eco-Labels and Certifications:

    • Familiarize ourselves with trusted eco-labels (e.g., USDA Organic, Fair Trade, Energy Star) to make informed purchasing decisions.

• Transportation Alternatives:

  • Promote Eco-Friendly Transportation:

    • Coordinate group biking or walking events to encourage reduced reliance on cars.

    • Advocate for better public transportation options in the community.

  • Carpool Initiatives:

    • Set up a carpool system for school or work to decrease individual vehicle usage and associated emissions.

• Energy Efficiency:

  • Home Energy Audits:

    • Conduct energy audits to identify areas for improvement in home energy efficiency (e.g., insulation, HVAC systems).

    • Share resources on how to access incentives or rebates for energy-efficient upgrades.

  • Renewable Energy Support:

    • Research local renewable energy providers and consider switching to green energy options.

    • Explore options for installing solar panels or supporting community solar projects.

• Support Ethical Companies:

  • Research Corporate Social Responsibility (CSR):

    • Use resources like ethical consumer guides to evaluate company practices regarding labor rights, environmental impact, and community involvement.

    • Support businesses with transparent supply chains and fair labor practices.

  • Engagement with Companies:

    • Write to companies to express support for sustainable practices and inquire about their environmental policies.

• Educate and Advocate:

  • Share Knowledge:

    • Host workshops or discussions on sustainability topics (e.g., DIY projects, sustainable cooking).

    • Leverage social media to raise awareness about environmental issues and responsible consumption.

  • Political Advocacy:

    • Get involved in local advocacy groups pushing for environmental legislation.

    • Participate in campaigns to encourage government action on pollution control and sustainability initiatives.

3. Positive Actions Already Taken

• Personal Commitments:

  • Transitioned to a zero-waste lifestyle by composting, reducing food waste, and making products from scraps.

  • Joined local clean-up efforts and educational workshops on environmental conservation.

• Community Involvement:

  • Volunteered with local environmental organizations to plant trees and restore habitats.

  • Assisted in organizing community events focused on sustainable living practices (e.g., clothing swaps, repair cafés).

• Political Actions:

  • Engaged in advocacy by signing petitions supporting environmental policies at the municipal and provincial levels.

  • Attended town hall meetings to voice concerns about local environmental issues and promote sustainability initiatives.

4. Challenges Faced

• Greenwashing:

  • Recognition of Misleading Claims:

    • Discuss the prevalence of greenwashing in marketing, where companies exaggerate or misrepresent environmental benefits.

    • Share tips for identifying credible certifications and reliable sources of information.

• Financial Constraints:

  • Cost Barriers to Sustainable Products:

    • Acknowledge that many eco-friendly products come at a premium price, making them less accessible for some consumers.

    • Explore budget-friendly alternatives and bulk purchasing options to lower costs while promoting sustainability.

5. Commitment to Change

• Continuous Improvement:

  • Regular Reflection:

    • Establish regular check-ins to discuss and assess progress on sustainability goals within the group.

    • Set measurable targets (e.g., reducing waste by a certain percentage or committing to buying a specific number of sustainable products each month).

  • Community Engagement:

    • Foster an open dialogue about challenges and successes in adopting sustainable practices, creating a supportive network for ongoing improvement.

Notes on Learning Objectives

LO 3.1: Personal Codes of Ethics

• Personal codes of ethics are shaped by social standards of right and wrong.

• Ethical behavior aligns with accepted social norms regarding beneficial and harmful actions.

• Organizations are implementing formal statements of ethics due to the impact of employee behavior on business.

• Unethical behavior can lead to serious consequences, including loss of business, fines, and imprisonment.

LO 3.2: Ethics vs. Social Responsibility

• Ethics: Individual beliefs about right and wrong.

• Social Responsibility: A firm's efforts to balance commitments to its stakeholders.

• Stakeholders: Individuals, groups, and organizations affected by a company's practices.

  • Key stakeholders: investors, employees, customers, local communities.

• Businesses are increasingly considering a broader range of stakeholders due to public pressure and regulations.

LO 3.3: Social Responsibility in Business Relationships

• Customers: Firms must provide quality products, fair pricing, and respect consumers' rights.

• Employees: Organizations should respect employees as valuable resources and fulfill their needs.

• Investors: Companies must manage resources responsibly and provide honest financial representations.

• Environment: Businesses should minimize pollution and actively work toward environmental protection.

LO 3.4: Approaches to Social Responsibility

• Obstructionist Stance: Does as little as possible regarding social/environmental issues; may deny or cover up problems.

• Defensive Stance: Complies with legal requirements but does not go beyond them.

• Accommodative Stance: Meets legal and ethical standards and goes further if requested.

• Proactive Stance: Actively seeks opportunities to contribute to social projects.

• Managing social responsibility includes formal activities (policy development, planning, appointing directors) and informal activities (organizational culture, employee involvement).

• Social audits are used to monitor the effectiveness of social responsibility efforts.

LO 3.5: Ethics and Social Responsibility in Small Businesses

• Small business managers and employees face similar ethical questions and social responsibility issues as larger firms.

• The main differences stem from the scale of operations and resources available for addressing these issues.

Chapter 4 → 4.1,4.2,4.3

Small Business, New Venture Creation, and Entrepreneurship

Definitions and Distinctions

1. Small Business:

   • The term “small business” generally refers to owner-managed enterprises with fewer than 100 employees.

   • These businesses can vary widely in nature, including local restaurants, dry cleaners, and service providers.

   • According to Canadian statistics, small businesses account for approximately 97.9% of all businesses in Canada, significantly contributing to the economy by providing jobs and innovations.

   • The criteria for classifying a business as small can include the number of employees, annual sales revenue (usually at least $30,000), and the nature of ownership (e.g., incorporated or not).

2. New Venture:

   • A new venture is defined as a recently established commercial organization that offers goods or services for sale and has typically been operational for less than 12 months.

   • It can take various forms, including proprietorships, partnerships, or corporations.

   • New ventures are crucial to the economy as they are a primary source of job creation and innovation, with small businesses responsible for a significant portion of private-sector job growth.

3. Entrepreneurship:

   • Entrepreneurship refers to the process of identifying market opportunities and mobilizing the necessary resources to capitalize on them.

   • Entrepreneurs are those who recognize and act on these opportunities, often taking risks to bring their ideas to fruition.

   • The motivations for pursuing entrepreneurship can vary widely, ranging from a desire for independence and financial security to ambitions for growth and large-scale impact.

Interrelationship of the Concepts

• Small Business and Entrepreneurship:

  • While many small businesses embody an entrepreneurial spirit, not all are driven by entrepreneurship.

  • Some small businesses operate on established models without seeking significant growth or innovation.

  • However, entrepreneurial small businesses often lead to the development of innovative products and services, thereby enhancing the overall economy.

• New Venture Creation and Entrepreneurship:

  • New ventures are the practical output of entrepreneurship.

  • The entrepreneurial process typically begins with identifying an opportunity, followed by the creation of a new venture to exploit that opportunity.

  • The success of new ventures largely depends on the entrepreneur's ability to recognize market needs and leverage resources effectively.

• Role of Small Businesses in Economic Development:

  • Small businesses and new ventures are vital to job creation and innovation in the economy.

  • For instance, from 2014 to 2019, small businesses accounted for 35.8% of all private-sector jobs in Canada.

  • Small businesses also contribute significantly to GDP, with estimates suggesting they contributed about 30% over the last decade.

Characteristics of Entrepreneurs

• Entrepreneurs often share common traits that contribute to their success, including:

  • Resourcefulness: They creatively manage limited resources and adapt to changing circumstances.

  • Customer Orientation: Successful entrepreneurs prioritize long-term relationships with customers, striving to meet their needs.

  • Risk Tolerance: They are comfortable navigating uncertainty and are willing to take calculated risks to achieve their goals.

  • Initiative: They demonstrate proactive behavior in identifying opportunities and acting on them.

The Entrepreneurial Process

1. Identifying Opportunities:

   • Entrepreneurs generate ideas by challenging conventional assumptions and seeking unmet needs in the market.

   • Most ideas originate from personal experiences, work-related issues, or casual discoveries.

2. Accessing Resources:

   • Once opportunities are identified, entrepreneurs must gather the necessary resources (financial, human, etc.) to establish their new ventures.

   • This includes securing funding, recruiting staff, and acquiring materials or technology.

3. Screening Ideas:

   • Entrepreneurs assess potential venture ideas to determine which ones hold the most promise.

   • Key characteristics that indicate a viable opportunity include the idea’s ability to create customer value, potential for competitive advantage, and sustainability in the market.

The Idea Is Marketable and Financially Viable

• Customer Demand and Profitability

  • Assessing market demand is crucial for ensuring a product or service is financially viable.

  • Identify the target customers, their needs, and how the product/service meets those needs better than competitors.

  • Success relies on understanding competitors who provide similar products/services.

• Sales Forecasting

  • After analyzing competition and customer needs, prepare a sales forecast.

  • This forecast estimates potential sales over a specific period (typically one year) and is calculated by multiplying expected unit sales by the selling price.

  • The sales forecast is foundational for determining financial viability and required startup resources.

• Financial Viability Assessment

  • Involves preparing financial forecasts (2-3 year projections) detailing startup costs, cash budgets, income statements, and balance sheets.

  • Financial forecasts guide decisions on proceeding with the venture and determine financing amounts/types.

  • Include optimistic, pessimistic, and normal scenarios for potential success.

  • The COVID-19 pandemic impacted many businesses, with some experiencing unexpected sales booms (e.g., medical equipment, leisure products) while tourism-related businesses suffered.

• Exit Costs

  • Low exit costs indicate a venture can be shut down without significant losses in time, money, or reputation.

  • High exit costs arise if the venture is not expected to turn a profit for an extended period, making it hard to abandon.

Developing the Opportunity

• Business Concept and Entry Strategy

  • As unsuccessful venture ideas are eliminated, refine the business concept and develop an entry strategy.

  • The original business plan may evolve based on market needs and competitive advantages.

• Entry Strategies

  • New ventures can:

    • Introduce a completely new product/service.

    • Compete with existing offerings with added features (customization).

    • Buy a franchise (rights to sell a seller’s product/service).

• Research and Planning

  • High capital requirements or complex operations necessitate thorough research and planning.

  • Attracting investors typically requires a comprehensive business plan detailing the venture’s opportunity, marketing plan, operational and financial details, and managerial skills.

• Adapting to Rapid Market Changes

  • In fast-changing markets, extensive research may become obsolete quickly.

  • Innovations may require less market research as they create needs rather than respond to existing ones.

• Early Action and Relationship Building

  • Action can begin before completing the business plan, especially in areas with skilled labor shortages.

  • Building relationships with potential employees and stakeholders early on can be beneficial.

Accessing Resources

• Bootstrapping

  • Entrepreneurs often practice "bootstrapping," or doing more with less, utilizing available resources efficiently.

  • This may involve using personal resources, acquiring materials or space for free or at low cost, or borrowing from customers/suppliers.

• Example: Omeed Asadi and Sherpa.Tax

  • At 26, Omeed Asadi founded Sherpa.Tax, using bootstrapping to attract attention from major news outlets.

  • Living at home helped him manage expenses and focus on his entrepreneurial goals.

Financial Resources

• Types of Financing

  • Two primary financing types: debt and equity.

  • Equity is often preferred during startup due to its accessibility and lower risk compared to debt.

  • Entrepreneurs often prefer debt to retain control, requiring adequate personal investment (typically 20% of business value) and collateral.

• Impact of COVID-19 on Financing

  • Many small businesses struggled during the pandemic due to insufficient financial reserves.

  • Government aid programs like the Canada Emergency Business Account (CERB) provided assistance but increased debt levels.

• Common Sources of Equity Financing

  • Personal savings: Entrepreneurs save extensively to start their businesses.

  • Love money: Investments from friends and family based on relationships rather than business merit.

  • Private investors (angels): Wealthy individuals investing in promising ventures, often from entrepreneurial backgrounds.

  • Venture capitalists: Professional investment pools looking for high-growth opportunities, typically requiring substantial returns.

• Common Sources of Debt Financing

  • Financial institutions: Banks primarily fund established businesses, making it challenging for startups to obtain loans. Personal loans can be more accessible.

  • Suppliers: Offering trade credit allows businesses to acquire inventory before payment, supporting cash flow.

• Bootstrap Financing Alternatives

  • Entrepreneurs can secure advance payments from customers, lease equipment, rent office space, or subcontract manufacturing to minimize upfront costs.

Other Resources

• Government Assistance

  • Federal and provincial governments offer financial assistance programs, including low-interest loans, guarantees, and wage subsidies.

• Crowdfunding

  • Online platforms like Kickstarter enable entrepreneurs to raise funds from many investors for innovative projects.

  • Notable success: Montreal-based Revols raised over $2.5 million for custom-fit earbuds, later acquired by Logitech.

• Crowdfunding in Canada

  • Crowdfunding has seen restrictions, limiting equity fundraising. The 2014 easing of regulations allowed for broader access to capital.

  • Women reportedly have a higher success rate in crowdfunding, while men dominate large campaigns.

Building the Right Team

• Collaboration and Decision-Making

  • Ownership sharing involves decisions about stakeholder contributions, ownership distribution, and conditions.

  • The legal structure of the business influences how ownership can be shared and resources accessed.

• Team Composition

  • Forming a team depends on the venture’s needs and the entrepreneur’s skills.

  • Teams can form organically as the venture grows or be established at the outset based on shared ideas or experiences.

  • Ideally, a team has complementary skills across key business areas (marketing, finance, production).

• Size and Complexity of Ventures

  • Smaller teams often work better than larger ones, with successful ventures frequently starting with two key individuals (e.g., a craftsperson and a salesperson).

  • For solo ventures, simplicity may allow for success without additional team members.

  • A team approach can improve survival, growth, profitability, and capital attraction.

Assessing Fit in the Entrepreneurial Process

• Ongoing Assessment

  • Continuously evaluate the fit between opportunity, resources, and team as the venture develops.

  • Adaptability is crucial as opportunities evolve and change.

LO 4.1: Meaning and Interrelationship of Small Business, New Venture Creation, and Entrepreneurship

• Small Business:

  • Defined as having fewer than 100 employees.

• New Firm:

  • A new firm is one that has become operational within the last 12 months.

  • It can adopt one of four main organizational forms:

    • Sole proprietorship

    • Partnership

    • Corporation

    • Cooperative

  • Engaged in selling goods or services.

• Entrepreneurship:

  • The process of identifying a market opportunity and accessing resources to capitalize on it.

  • In relation to small or new businesses, it refers to the creation of a small business or new venture.

LO 4.2: Role of Small and New Businesses in the Canadian Economy

• Small Business Statistics:

  • 98% of employer businesses in Canada are classified as small (fewer than 100 employees).

  • Approximately half of the private-sector labor force is employed by small businesses.

• Industry Variation:

  • Employment distribution varies across different industries.

• Economic Contribution:

  • The small business sector drives entrepreneurship and innovation, significantly contributing to job creation.

  • Startups are responsible for most of the economic growth.

• Women's Role:

  • Women are increasingly contributing to the growth of small businesses.

• Importance of New Businesses:

  • New businesses are vital as they are the main source of new products and services in the economy.

LO 4.3: Key Characteristics of Entrepreneurial Personalities and the Entrepreneurial Process

• Entrepreneurs:

  • Individuals who assume the risk of business ownership.

• Entrepreneurial Goals:

  • Some entrepreneurs seek independence and financial security; others aim to grow ventures into large businesses.

• Successful Entrepreneur Traits:

  • Resourcefulness and a focus on customer relations.

  • Strong desire for autonomy.

  • Ability to handle ambiguity and surprises.

• Modern Entrepreneurs:

  • Often open-minded leaders who rely on networks, business plans, and consensus.

  • Gender-diverse: equally likely to be female or male.

• Risk Perception:

  • Successful entrepreneurs understand the role of risk but don’t necessarily view their activities as inherently risky.

• Entrepreneurial Process:

  • Occurs within a social, political, and economic context.

  • Consists of three key elements:

    • The Entrepreneur: The individual initiating the business.

    • The Opportunity: The market gap or need identified.

    • Resources: Necessary inputs (financial and nonfinancial) to pursue the opportunity.

• Resource Acquisition:

  • Entrepreneurs often use bootstrapping—doing more with less.

• Types of Financing:

  • Two main types of financing:

    • Debt Financing: Borrowed funds that must be repaid.

    • Equity Financing: Raising capital by selling shares in the business.

Chapter 5

Growing Complexity in the Global Business Environment

The global business landscape is increasingly complex, influenced by various factors including political changes, technological advancements, economic fluctuations, and shifts in consumer behavior.

1. Trade Volume: The scale of world trade has reached staggering heights, exceeding $19 trillion in annual merchandise trade. This reflects the interconnectedness of global markets and the reliance of countries on imports and exports.

2. Globalization vs. Nationalism: Globalization has facilitated the emergence of a single, interdependent world economy. However, countertrends such as Brexit and rising economic nationalism pose significant challenges. Nations are reassessing their trade agreements and domestic policies, leading to potential disruptions in established trade relationships.

3. Impact of COVID-19: The pandemic has revealed vulnerabilities in global supply chains, as seen in the disruptions within the auto industry. For instance, the Port of Montreal faced potential strikes that could disrupt shipments of over 400,000 tonnes of vehicles annually. The interconnected nature of supply chains means that disruptions in one area can have ripple effects throughout the industry.

4. Electric Vehicle Production: The global auto industry is undergoing a transformation with the shift towards electric vehicles (EVs). Major companies are ramping up production, with Volkswagen planning to produce 1.5 million electric cars by 2025. However, the lack of infrastructure, such as charging stations in Canada, presents a challenge that needs to be addressed to facilitate this transition.

5. Innovation and Investment: Companies like Linamar are adapting by investing in the production and development of EV technology and establishing innovation centers focused on AI and robotics. For Canada to remain competitive in the global economy, all stakeholders—including industry players, governments, and suppliers—must collaborate and evolve.

Major World Marketplaces

Understanding the global economy requires knowledge of its primary marketplaces, categorized by economic status and geographic clusters.

1. Distinctions Based on Wealth:

   • High-Income Countries: Countries with a per capita income greater than $12,536, including Canada and the United States, dominate international trade.

   • Upper-Middle-Income Countries: Nations such as China and South Africa, with incomes between $4,046 and $12,535, are increasingly influential in the global economy.

   • Low-Income Countries: These nations face challenges such as low literacy rates and unstable governments, making them less attractive for international business.

2. Geographic Clusters:

   • North America: The U.S. remains a leading economic power, although it faces challenges from trade policy shifts. Canada plays a vital role in the global market, with many successful Canadian firms operating internationally.

   • Europe: The EU has transformed Western Europe into an integrated economic system, enhancing its importance in global trade. Eastern Europe is gaining significance, but challenges like governmental instability persist.

   • Asia-Pacific: This region is characterized by rapid economic growth, particularly in China, which is projected to surpass the U.S. economy by 2028. Countries like Japan and South Korea are also key players in global markets.

Emerging Markets: BRICS and Beyond

Emerging markets, particularly the BRICS nations (Brazil, Russia, India, China, and South Africa), are reshaping the global economic landscape.

1. BRICS Nations: Initially formed by four countries, BRICS has evolved into a significant political and economic coalition. Each member plays a crucial role in global trade:

   • Brazil: A leader in agriculture and commodities.

   • Russia: A major energy supplier.

   • India: A hub for service industries.

   • China: The world’s manufacturing powerhouse.

2. Emerging Economies: The growth of consumer markets in BRICS countries presents significant opportunities for international businesses. For instance, the acquisition of Jaguar and Land Rover by Tata Motors signifies a shift in traditional trading patterns.

3. New Development Bank: BRICS has established a development bank to support its members and compete with the World Bank, reflecting its desire for greater economic autonomy and collaboration among emerging markets.

4. Future Outlook: The evolving dynamics of global trade indicate a shift away from reliance on traditional Western economies. Emerging markets are expected to contribute significantly to global consumption, projected at $30 trillion annually by 2025.

Barriers to International Trade

Overview

International trade involves various barriers that businesses must navigate to succeed in foreign markets. These barriers can stem from differences in social, cultural, economic, legal, and political environments, each impacting how a business operates globally.

Social and Cultural Differences

• Understanding Culture: The cultural context of a market can heavily influence consumer behavior and business practices. Businesses must adapt their marketing strategies, product designs, and communication styles to align with local customs.

• Language Barriers: Effective communication is critical in international trade. Misunderstandings can arise from:

  • Brand Names: A product's name may have unintended negative meanings in another language. For example, the name "Esso" translates to "stalled car" in Japanese, which can deter potential customers.

  • Meaning of Words: The same word can have different connotations in different cultures. In Japanese, "hai" can mean “yes,” “I agree,” or simply acknowledge understanding, potentially leading to miscommunication in negotiations.

  • Idiomatic Expressions: Phrases that are common in one culture may not make sense in another. For instance, American expressions like “kick the bucket” (to die) could confuse non-native speakers.

• Physical Differences: Demographic differences, such as average height and body types, affect product design and sizing. For example:

  • Clothing Sizes: A clothing brand may need to adapt its sizing for markets where the average body size differs significantly from its home market.

  • Ergonomics: Products like furniture may need to be designed differently based on the average stature of the population.

• Shopping Habits: Cultural differences can influence purchasing behaviors:

  • Shopping Frequency: In European countries, consumers often shop daily for fresh produce, while in North America, bulk buying is more common, leading to different inventory and supply chain strategies.

  • Payment Methods: Different cultures may prefer various payment options, such as cash, credit, or mobile payments.

• Behavioral Norms: Norms around professional and personal interactions vary widely. For example:

  • Dining Etiquette: In Portugal, discussing business during a meal can be seen as disrespectful, while in the U.S., it may be common to discuss business over lunch.

  • Body Language: Gestures considered polite in one culture may be offensive in another (e.g., pointing with the finger).

Economic Differences

• Government Involvement: The extent of government intervention in the economy can significantly affect trade dynamics. For instance:

  • In countries like France, the government plays a substantial role in regulating industries, which can create barriers for foreign businesses seeking entry.

• Economic Development: Countries at different stages of economic development exhibit varying consumer behaviors and market conditions:

  • Consumer Preferences: A younger population may prioritize technology and electronics, while an older population might focus on healthcare products and services.

  • Financial Infrastructure: The availability of credit, banking systems, and payment methods can vary, impacting how businesses operate in different markets.

• Inflation and Stability: Economic instability, such as high inflation or currency fluctuations, poses risks for businesses:

  • For example, Venezuela has experienced hyperinflation, making it difficult for businesses to set prices and predict costs.

Legal and Political Differences

• Tariffs and Quotas: Tariffs are taxes imposed on imports, making foreign goods more expensive, while quotas limit the volume of specific products that can be imported:

  • Examples: The U.S. has imposed quotas on certain agricultural products, like sugar, to protect domestic farmers, impacting the market for foreign producers.

• Subsidies: Governments may provide financial assistance to local businesses to enhance competitiveness, leading to uneven playing fields:

  • Example: The Canadian government has provided subsidies to Bombardier, a major aerospace manufacturer, which has led to tensions with foreign competitors.

• Protectionism: This policy involves using tariffs, quotas, and other regulations to protect domestic industries from foreign competition. While it can benefit local businesses, it often results in higher prices for consumers and strained international relations.

• Local-Content Laws: These regulations require a certain percentage of a product to be produced locally, impacting foreign investment and manufacturing strategies:

  • For instance, countries like Brazil have implemented local-content requirements for automotive industries, compelling foreign manufacturers to source components locally.

• Business Practice Laws: Navigating local laws and regulations can pose challenges for foreign businesses:

  • Example: Walmart's exits from Germany and South Korea are examples of challenges faced when local market conditions and regulations did not align with their business model.

• Bribery and Corruption: Companies may encounter ethical dilemmas regarding bribery to secure contracts or gain favors:

  • In countries with high corruption perceptions, businesses may feel pressured to engage in unethical practices to succeed.

Cartels and Dumping

• Cartels: Groups of producers that coordinate to control supply and price of goods, often resulting in higher prices for consumers. For example:

  • The Organization of the Petroleum Exporting Countries (OPEC) is a well-known cartel that influences global oil prices.

• Dumping: This practice involves selling products in a foreign market at prices lower than in the home market, which can undermine local businesses and lead to trade disputes:

  • Countries may impose anti-dumping duties to counteract such practices, as seen in cases involving steel and aluminum imports.

LO 5.1: Growing Complexity in the Global Business Environment and Major World Marketplaces

Overview of the Changing World Economy

• The global economy is experiencing significant shifts as emerging markets gain influence in international trade.

• Traditional power dynamics are evolving, leading to more complex business relationships and trade patterns.

Major World Marketplaces

• North America: Comprising the United States, Canada, and Mexico, this region is characterized by a large consumer base, advanced technology, and high levels of innovation. It remains a leading destination for international trade due to its economic size and stability.

• Europe: The European Union (EU) consists of multiple member countries with a common market that facilitates free trade among them. Europe is known for its strong regulatory framework and emphasis on consumer protection, which influences trade agreements.

• Asia: Home to rapidly growing economies, including China, Japan, and India, Asia is a key player in global trade. The region has a diverse range of markets and is a hub for manufacturing and technology.

LO 5.2: The Evolving Role of Emerging Markets and the Importance of BRICS Nations

Shifts in International Trading Patterns

• Historically, Western companies primarily engaged with still-industrializing markets for resource acquisition and basic manufacturing.

• This trend has evolved, with emerging markets now seeking to leverage their resources and labor for strategic advantages in global trade.

The Role of BRICS Nations

• BRICS: This group includes Brazil, Russia, India, China, and South Africa, representing significant emerging economies that collectively influence global economic dynamics.

• Economic Influence: Each BRICS nation contributes to a sizable portion of global GDP and has unique strengths:

  • Brazil: Rich in natural resources, particularly in agriculture and mining.

  • Russia: A major player in energy supplies, especially oil and gas.

  • India: Known for its service industry and technological advancements.

  • China: The world’s largest manufacturer and a critical export market.

  • South Africa: A gateway to African markets, rich in minerals and resources.

Opportunities in Emerging Markets

• Countries like Thailand, Indonesia, South Korea, and Ukraine are emerging as new trade opportunities due to their growing economies and strategic positions in the global market.

• The increasing interconnectedness among these nations creates potential for new partnerships and investment avenues.

LO 5.5: Barriers to International Trade

Social and Cultural Barriers

• Language: Language differences can lead to miscommunication, impacting negotiations and marketing efforts. For example, product names or advertising slogans may not translate effectively across cultures.

• Social Values: Different cultural values influence consumer behavior. For instance, collectivist societies may prioritize group preferences over individual desires in purchasing decisions.

• Traditional Buying Patterns: Established shopping habits can vary significantly between cultures, affecting how products are marketed and sold. For example, some cultures favor face-to-face transactions, while others may prefer online shopping.

Economic Barriers

• Government Relationships: In many emerging markets, businesses may need to cultivate relationships with local governments to navigate regulations and gain permission to operate.

• Economic Systems: The presence of varying economic systems (e.g., capitalism vs. socialism) can create challenges in market entry and operational strategies.

Legal and Political Barriers

• Quotas and Tariffs: Quotas limit the amount of a product that can be imported, while tariffs are taxes on imported goods, both of which protect local industries but can hinder international trade.

• Subsidies: Governments may subsidize local industries to make them more competitive against foreign companies, distorting market dynamics.

• Local-Content Laws: These laws require that a certain percentage of a product be sourced locally, complicating the supply chain for foreign businesses.

• Business Practice Laws: Differences in business laws, such as regulations regarding advertising, labor practices, and environmental standards, can make compliant operations challenging for international firms.

Chapter 6 → 6.1 - 6.4, 6.6

Who Are Managers?

Managers are individuals responsible for planning, organizing, leading, and controlling the operations of an organization. Effective management is crucial across all types of organizations, including businesses, charities, educational institutions, and government agencies. Notable examples of managers include:

• The Prime Minister of Canada

• The Executive Director of the United Way

• The Dean of a business school

• The Chief Administrator of a local hospital

Regardless of the organization’s nature or size, managers are essential resources that contribute significantly to the organization’s success.

The Management Process

LO 6.1: Four Activities Constituting the Management Process

Management consists of four primary functions:

1. Planning: The process of determining organizational goals and devising strategies to achieve them.

   • Steps in Planning:

     1. Establish organizational goals (e.g., an airline sets a goal to fill 90% of seats).

     2. Assess the gap between desired and actual performance (e.g., only 73% of seats are filled).

     3. Develop strategies to close the gap (e.g., reduce fares).

     4. Implement the plans (e.g., a 10% fare reduction).

     5. Evaluate effectiveness (e.g., measure seat occupancy after changes).

   Example: During the COVID-19 pandemic, airlines like Air Canada had to implement drastic measures due to a 90% decline in sales.

2. Organizing: Mobilizing resources, including human resources and material, to achieve tasks.

   • Managers create organizational structures that clarify roles and relationships.

   • Larger organizations like Starbucks manage complex structures with multiple divisions and products.

3. Leading: Engaging with subordinates to inspire and guide them toward achieving the organization’s objectives.

   • Effective leaders motivate employees, unite them toward common goals, and foster trust and respect.

   • Leadership styles and effectiveness can vary among renowned leaders such as Clive Beddoe (WestJet) and Steve Jobs (Apple).

4. Controlling: Monitoring and adjusting performance to ensure goals are met.

   • Managers track performance indicators like on-time arrivals and customer satisfaction.

   • The controlling process begins with establishing standards, measuring actual performance, and making necessary adjustments.

   Example: During COVID-19, drastic decisions were made to ensure survival amid significant operational challenges.

Management: Science or Art?

Effective management involves both scientific and artistic elements. While many decisions can be made using rational and systematic approaches, others require intuition and interpersonal skills. Managers often blend these elements to make informed decisions, especially in complex situations like navigating a pandemic.

Becoming a Manager

Acquiring the skills necessary for effective management typically involves a combination of education and experience. Key points include:

• Education: A degree in management or related fields is often essential for career advancement. Continuing education through workshops and executive programs is common.

• Experience: Day-to-day management experiences are crucial for developing practical skills. Companies often rotate employees through different roles to provide comprehensive exposure.

• Mentorship Programs: Initiatives like the CEOx1Day program allow students to learn from experienced executives, gaining insights into management responsibilities.

What to Expect in a Management Job

New managers often face challenges when transitioning from technical roles to management. Key shifts in thinking include:

1. Changing focus from individual performance to team performance.

2. Developing skills in communication, influence, and team leadership.

3. Avoiding favoritism towards former colleagues.

4. Delegating responsibilities to empower subordinates.

5. Acting with integrity, as managerial decisions significantly impact others.

Types of Managers

Levels of Management

1. Top Managers

   • Roles: Guide company fortunes, set policies, formulate strategies, oversee decisions.

   • Common Titles: President, Vice-President, COO, CEO, CFO.

   • Responsibilities: Report to board of directors and shareholders; overall performance and effectiveness.

2. Middle Managers

   • Roles: Implement strategies and policies set by top managers.

   • Common Titles: Plant Manager, Operations Manager, Division Manager.

   • Responsibilities: Make decisions to meet targets set by top management, such as product development and cost management.

3. First-Line Managers

   • Roles: Supervise employees directly; day-to-day operations.

   • Common Titles: Supervisor, Office Manager, Group Leader.

   • Responsibilities: Oversee the work of non-managerial employees, ensuring operational efficiency.

Areas of Management

1. Human Resource Managers

   • Responsibilities: Hiring, training, evaluating performance, compensation, and labor relations.

2. Operations Managers

   • Responsibilities: Oversee the production of goods and services, manage inventory, and ensure quality control.

3. Information Managers

   • Responsibilities: Design and implement information systems to manage data effectively.

4. Marketing Managers

   • Responsibilities: Manage product development, pricing, promotion, and distribution to consumers.

5. Financial Managers

   • Responsibilities: Plan and oversee financial resources, including budgeting and accounting.

6. Other Specialized Managers

   • Examples: Research and development managers, public relations managers, diversity and inclusion officers.

Management Roles and Skills

Mintzberg’s Management Roles

• Interpersonal Roles:

  • Figurehead: Ceremonial duties.

  • Leader: Responsibility for the unit's work.

  • Liaison: Contact with others outside the chain of command.

• Informational Roles:

  • Monitor: Scanning for relevant information.

  • Disseminator: Sharing information with subordinates.

  • Spokesperson: Communicating with external parties.

• Decision-Making Roles:

  • Entrepreneur: Driving performance improvements.

  • Disturbance Handler: Addressing unexpected issues.

  • Resource Allocator: Deciding distribution of resources.

  • Negotiator: Facilitating agreements on various issues.

Management Skills Overview

1. Technical Skills

• Definition: Skills that enable managers to perform specialized tasks.

• Examples: Typing for an executive assistant, drawing for an animator, auditing for an accountant.

• Development: Gained through education and experience.

• Importance: Crucial for first-line managers who supervise specific tasks; less critical for top managers.

2. Human Relations Skills

• Definition: Skills that help managers lead, motivate, communicate with, and get along with subordinates.

• Importance: Essential at all management levels; poor human relations can lead to conflict and low morale.

• Key Qualities: Good self-awareness, strong written and verbal communication, critical thinking.

3. Conceptual Skills

• Definition: The ability to think abstractly, diagnose, and analyze various situations.

• Importance: Vital for recognizing new market opportunities and threats; most crucial for top managers.

4. Time Management Skills

• Definition: The ability to use time productively.

• Importance: Essential for all managers, particularly those in high-paying roles.

• Causes of Wasted Time:

  • Paperwork

  • Phone interruptions

  • Meetings

  • Email and SMS overload

5. Decision-Making Skills

• Definition: Skills that help managers define problems or opportunities and select the best course of action.

• Types of Decisions:

  • Problem decisions vs. opportunity decisions

  • Programmed decisions vs. nonprogrammed decisions

• Decision-Making Conditions:

  • Certainty

  • Risk

  • Uncertainty

Steps in the Rational Decision-Making Process

1. Recognizing and defining the decision situation.

2. Identifying alternatives.

3. Evaluating alternatives.

4. Selecting the best alternative.

5. Implementing the chosen alternative.

6. Following up and evaluating results.

Behavioral Aspects of Decision Making

• Organizational Politics: Actions taken to gain advantages, which can influence decision making.

• Intuition: Decisions based on gut feelings or hunches, often informed by experience.

• Escalation of Commitment: Persisting with a decision despite evidence suggesting it is wrong.

• Risk Propensity: The degree of risk a manager is willing to take when making decisions.

The Importance of Goal Setting and Strategic Management in Organizational Success

Strategic Management Overview Strategic management involves aligning an organization with its external environment through a structured process. The foundation of strategic management is effective goal setting, which guides the organization's direction. While setting goals is crucial, managers must also determine the actions that will lead to those goals, rather than making decisions reactively or on a case-by-case basis. The overarching plan that integrates these decisions is known as a strategy.

Setting Business Goals Goals act as performance targets that help organizations measure success at various levels. They clarify desired outcomes and serve distinct functions compared to plans, which outline how to achieve those outcomes. Notable examples of goal-setting in companies include Merck's focus on revenue growth and General Motors' emphasis on advancements in alternative fuel technologies and autonomous driving.

Purposes of Goal Setting Goal setting serves four primary purposes in organizations:

• Direction and Motivation: It provides guidance and motivation for managers. For instance, Fluid Life set a goal to help clients save $250 million by 2025.

• Resource Allocation: It aids in distributing resources effectively. Companies like 3M allocate more resources to projects with high growth potential.

• Defining Corporate Culture: It shapes corporate culture. General Electric strives for each division to be a market leader, fostering a competitive environment.

• Performance Assessment: It enables managers to evaluate performance based on specific benchmarks. For example, reducing container dwell time at Port Metro Vancouver showcased improved operational efficiency.

Additionally, organizations are increasingly setting sustainability goals. Companies like Scotiabank and Coca-Cola have established goals related to environmental impact, reflecting a broader commitment to corporate social responsibility.

Types of Goals Goals vary based on a company's vision and mission. Organizations typically have a vision that outlines their purpose and an associated mission statement that describes how to achieve that purpose. For instance, Facebook aims to empower sharing and connectivity. Companies may have long-term (5+ years), intermediate (1-5 years), and short-term (1 year or less) goals.

• Long-Term Goals: E.g., American Express aiming to double its participating merchants in 10 years.

• Intermediate Goals: E.g., a technology company aspiring for 700% revenue growth by 2024.

• Short-Term Goals: E.g., increasing sales by 2% this year or cutting costs by 1% next quarter.

Research indicates that managers who set SMART goals (Specific, Measurable, Achievable, Results-oriented, Time-framed) tend to achieve higher performance.

Formulating Strategy

Steps in Strategy Formulation Once goals are set, organizations must develop strategies to achieve them. The strategy formulation process involves three key steps:

1. Setting Strategic Goals: These long-term goals stem from the organization’s mission statement. For example, Disney’s strategic goals focus on expanding its family entertainment offerings.

2. Analyzing the Organization and Its Environment: This involves conducting a SWOT analysis to identify internal strengths and weaknesses and external opportunities and threats. For example, PepsiCo’s strength in beverage distribution allowed for rapid market entry with its Aquafina brand.

3. Matching the Organization and Its Environment: This step entails leveraging strengths to exploit opportunities and addressing weaknesses to mitigate threats. Successful firms use their strengths to navigate their market environment effectively.

Hierarchy of Plans Strategic management requires a hierarchy of plans across three levels:

• Strategic Plans: Created by top management to guide resource allocation and meet strategic goals.

• Tactical Plans: Developed by upper and middle management to implement specific aspects of the strategic plan.

• Operational Plans: Short-term plans established by middle and lower-level managers to set performance targets for daily operations.

Levels of Strategy There are three levels of strategy in a business firm:

• Corporate-Level Strategies: Focus on the overall scope and direction of the organization, such as concentration on one product or growth through market penetration or diversification.

• Business-Level (Competitive) Strategies: Identify how a company competes within its industry, using strategies like cost leadership, differentiation, or focus.

• Functional Strategies: Support the competitive strategy by detailing the actions of various departments.

Understanding Corporate Culture

Corporate culture represents the collective identity of an organization, defined by the shared experiences, beliefs, values, and norms that shape how employees interact and work together. Often described informally as “the way we do things around here,” corporate culture can significantly impact employee satisfaction, organizational performance, and overall business success. It encompasses everything from company policies and work environment to employee behaviors and expectations.

Examples of Corporate Culture

1. Costco:

   • Learning Environment: Costco fosters a culture of continuous learning, encouraging employees to enhance their skills through various training programs. This commitment to professional development contributes to employee retention and satisfaction.

   • Customer Service Orientation: The company places a high value on exceptional customer service, which is embedded in its culture. Employees are trained to prioritize member satisfaction, leading to strong customer loyalty.

   • Employee Satisfaction: By offering competitive wages and benefits, Costco creates a work environment where employees feel valued. This approach results in low turnover rates and a motivated workforce.

   • Collaboration: Internal collaboration is encouraged, allowing teams across departments to work together effectively, which enhances problem-solving capabilities.

2. W.L. Gore:

   • Innovation Focus: W.L. Gore, known for its Gore-Tex fabric, emphasizes innovation as a core cultural value. The establishment of the Gore Innovation Center reflects this commitment, where employees can propose and develop new ideas.

   • Team-Based Structure: The company employs a flat organizational structure, minimizing hierarchy and promoting open communication among employees. This structure encourages collaboration and empowers employees to take ownership of their work.

3. Google:

   • Culture of “Yes”: Google fosters a culture that emphasizes positivity and innovation, where employees are encouraged to focus on the potential of new ideas rather than immediately identifying their flaws. This supportive environment encourages creativity and experimentation.

   • Work-Life Balance: The company supports employee well-being through flexible work arrangements and wellness programs, helping to maintain high levels of job satisfaction.

4. Mountain Equipment Co-op (MEC):

   • Workplace Design: MEC’s Vancouver headquarters is designed to reflect its commitment to an active lifestyle, featuring amenities such as yoga studios, bike lockers, and fitness spaces. These design elements enhance employee engagement and well-being.

   • Community Involvement: The company encourages employees to participate in environmental and community initiatives, aligning its corporate culture with its core values of sustainability and social responsibility.

5. The PÜR Company:

   • Fun and Playful Atmosphere: The PÜR Company’s bright and vibrant office design reflects its commitment to a lively corporate culture. The playful environment fosters creativity and enjoyment among employees.

   • Health-Conscious Culture: As a producer of aspartame-free gum, the company promotes a culture of health and wellness, which extends to its workplace practices.

Homogeneity vs. Subcultures

• Organizations that focus primarily on a single product or service often exhibit a more uniform corporate culture. For instance, Starbucks maintains a consistent culture centered around customer experience and quality.

• In contrast, larger companies like the Royal Bank of Canada (RBC) may develop diverse subcultures across different divisions. Each division targets distinct goals and serves various customer segments, leading to unique cultural characteristics that reflect their specific operational needs.

Importance of a Strong Corporate Culture

• Alignment: A strong corporate culture aligns employees towards common goals, fostering a collaborative atmosphere that enhances overall performance.

• Guidance for Newcomers: In a well-defined culture, newcomers can quickly learn the accepted behaviors and expectations. For example, in a results-driven culture, employees understand that working long hours is valued, whereas in a culture that prioritizes work-life balance, employees may feel comfortable taking time for personal activities.

Factors for Developing a Strong Corporate Culture

At a Small Business Summit sponsored by the Globe and Mail, entrepreneurs identified five crucial factors for cultivating a robust corporate culture:

1. Create Careers, Not Just Jobs: Providing opportunities for growth and advancement fosters employee motivation and commitment to the organization.

2. Lead by Example: Leaders should embody the values and behaviors they wish to instill in their teams, serving as role models for employees.

3. Tailor the Workplace: Adapting the work environment to meet the diverse needs of employees enhances job satisfaction and productivity.

4. Emphasize the Mission: Clearly communicating the organization’s mission helps employees understand the larger purpose of their work and fosters a sense of belonging.

5. Define Unacceptable Behaviors: Explicitly outlining behaviors that are not tolerated within the organization promotes a safe and respectful workplace.

Cultural Conflicts in Mergers

The issue of corporate culture becomes particularly significant when two organizations with differing cultures consider merging. For example, the proposed merger between Vale, a Brazilian mining company with a risk-averse culture, and Glencore, a Swiss miner known for its risk-seeking approach, was ultimately abandoned due to these fundamental cultural differences. Such conflicts can hinder integration efforts and lead to operational challenges.

Monitoring Corporate Culture

Many organizations do not systematically assess their corporate cultures, but some, like Starbucks, actively monitor employee sentiment. Every 18 months, Starbucks conducts a Partner Perspectives survey, allowing employees to provide feedback on various aspects of the workplace culture. The high participation rate (approximately 90%) indicates that employees feel their voices are heard, and the company takes their feedback seriously. For example, after discovering that employees were unclear about career advancement opportunities, Starbucks organized career fairs to provide more information.

Communicating and Managing Culture

Effective communication is essential for nurturing and maintaining corporate culture. Managers must:

1. Understand the Culture: Leaders must have a clear understanding of the desired culture and how it aligns with the organization's mission and goals.

2. Transmit the Culture: Communication is key during employee training and orientation. A clear statement of the organization’s mission serves as a valuable tool for conveying cultural values.

3. Reward Alignment: Managers should recognize and promote individuals who embody the desired culture, reinforcing positive behaviors and attitudes.

Managing Change in Corporate Culture

Organizations sometimes need to evolve their cultures to remain competitive. For instance, Ontario Hydro traditionally operated with an “engineering” culture, characterized by meticulous planning and risk aversion. However, as the market landscape shifted, the organization adopted a more consumer-oriented, risk-taking culture to address financial challenges and adapt to market demands.

Changing an organization’s culture is often challenging. The Royal Canadian Mounted Police (RCMP) undertook a visioning process to establish new core values and a mission statement. However, reports of a toxic culture persisted, revealing systemic issues of sexism, workplace bullying, and discrimination against marginalized groups. A class action lawsuit resulted in significant compensation for affected employees, highlighting the need for a thorough examination and overhaul of the organization’s culture.

The Role of Diversity and Inclusion

A positive corporate culture values diversity and creates an inclusive environment, recognizing that diverse perspectives enhance creativity and decision-making. According to Senator Howard Wetston, there may be a need for government legislation to enforce diversity targets on corporate boards if insufficient progress is made by organizations.

The Management Process

Management is a comprehensive process that encompasses four fundamental activities: planning, organizing, leading, and controlling. These activities are essential for optimizing an organization’s financial, physical, human, and information resources to achieve its goals effectively.

1. Planning:

   • This involves determining the organization’s objectives and deciding on the best course of action to achieve them. Planning includes identifying goals, assessing current situations, forecasting future conditions, and devising strategies to navigate challenges. Effective planning enables organizations to allocate resources efficiently and set a clear direction for their teams.

2. Organizing:

   • Organizing entails arranging the organization’s resources, including personnel and physical assets, into a coherent structure. This includes defining roles and responsibilities, establishing reporting relationships, and creating a framework for collaboration. A well-organized structure enhances efficiency, clarifies expectations, and ensures that resources are optimally utilized.

3. Leading:

   • Leading focuses on guiding and motivating employees to work towards the organization’s objectives. This involves influencing team members, fostering a positive work environment, and facilitating communication. Effective leaders inspire their teams, resolve conflicts, and create a culture of collaboration and trust, enabling employees to perform at their best.

4. Controlling:

   • Controlling involves monitoring the organization’s performance to ensure that it aligns with established goals and standards. This process includes measuring actual performance, comparing it to set benchmarks, and taking corrective actions when necessary. Effective controlling helps organizations identify areas for improvement and maintain accountability within teams.

Types of Managers by Level and Area

Managers can be classified based on two key dimensions: level and area of focus.

1. By Level:

   • Top Managers: These individuals are responsible for setting organizational policies, formulating long-term strategies, and making high-level decisions. They have a broad perspective on the organization and are accountable for overall performance.

   • Middle Managers: Middle managers implement the policies and strategies formulated by top management. They oversee departments or divisions, coordinate activities, and serve as a bridge between top management and first-line managers.

   • First-Line Managers: These managers directly supervise employees and oversee day-to-day operations. They focus on managing teams, ensuring tasks are completed, and providing guidance to staff.

2. By Area:

   • Managers can also be categorized by their areas of specialization, such as:

     • Marketing Managers: Responsible for promoting products and services, conducting market research, and developing marketing strategies.

     • Financial Managers: Focus on managing the organization’s finances, including budgeting, forecasting, and investment analysis.

     • Operations Managers: Oversee production processes, supply chain management, and service delivery to ensure efficiency and quality.

     • Human Resources Managers: Manage employee relations, recruitment, training, and organizational development.

     • Information Managers: Handle the organization’s information systems, data management, and technology integration.

Basic Management Skills

Successful managers possess a range of essential skills, which can be categorized into five basic areas:

1. Technical Skills:

   • These skills involve specialized knowledge and the ability to perform specific tasks. Examples include expertise in accounting, IT, engineering, or other fields relevant to the organization. Technical skills are particularly crucial for first-line managers who need to guide their teams effectively.

2. Human Relations Skills:

   • Human relations skills enable managers to interact effectively with others, fostering positive relationships and facilitating teamwork. These skills include empathy, communication, conflict resolution, and the ability to motivate employees.

3. Conceptual Skills:

   • Conceptual skills allow managers to understand complex situations, think critically, and visualize the big picture. These skills involve analyzing information, diagnosing problems, and developing innovative solutions that align with organizational goals.

4. Decision-Making Skills:

   • Managers must be adept at identifying problems, evaluating options, and selecting the best course of action. This skill is critical for navigating challenges and making informed decisions that drive organizational success.

5. Time Management Skills:

   • Effective time management skills enable managers to prioritize tasks, delegate responsibilities, and make the most productive use of their time. This ensures that managers can meet deadlines and accomplish objectives efficiently.

Importance of Goal Setting and Strategic Management

Goal Setting:

• Goals serve as the performance targets for an organization and can be classified into long-term, intermediate, or short-term objectives. Setting clear goals is vital because it provides direction for managers, assists in resource allocation, defines corporate culture, and establishes benchmarks for performance assessment.

Strategic Management:

• Strategic management involves three key activities:

  1. Setting Strategic Goals: Establishing long-term objectives that align with the organization’s mission and vision.

  2. Analyzing the Organization and Its Environment: Conducting internal and external assessments to identify strengths, weaknesses, opportunities, and threats (SWOT analysis).

  3. Matching the Organization and Its Environment: Developing strategies that leverage organizational strengths to exploit opportunities while mitigating threats and addressing weaknesses.

The strategies formulated through strategic management are subsequently translated into tactical and operational plans that guide day-to-day operations.

The Idea of Corporate Culture and Its Importance

Corporate Culture:

• Corporate culture encompasses the shared experiences, stories, beliefs, and norms that define an organization. A strong and well-defined culture can significantly influence management styles, employee behavior, and overall organizational effectiveness.

Significance of Corporate Culture:

• A robust corporate culture can drive an organization towards achieving its goals by fostering employee engagement, enhancing communication, and promoting a sense of belonging. The culture is shaped by several factors, including:

  • Top Management Influence: Leadership behaviors and values set the tone for organizational culture.

  • Organizational History: The company’s past experiences and milestones contribute to its cultural identity.

  • Stories and Legends: Narratives that reflect the organization’s values and successes help reinforce cultural beliefs.

  • Behavioral Norms: Established expectations regarding employee behavior and interactions shape the workplace environment.

Managing Corporate Culture:

• A carefully communicated and adaptable corporate culture can be effectively managed to benefit the organization. Leaders must ensure that cultural values align with business strategies, encourage open communication, and remain responsive to change to cultivate a thriving organizational culture.

Chapter 12.1-12.6

What Is Marketing?

LO 12.1: Explain the concept of marketing and identify the five forces that constitute the external marketing environment.

Marketing is often misunderstood as merely advertising or promotion; however, it encompasses a much broader range of activities. It can be defined as an organizational function and a set of processes focused on creating, communicating, and delivering value to customers while managing customer relationships in ways that benefit both the organization and its stakeholders.

The core of the marketing concept revolves around understanding and fulfilling customer needs profitably. Companies that effectively implement this concept must closely monitor consumer preferences and evolving market trends. Collaboration among various departments—such as marketing, production, finance, and human resources—is essential for achieving unified customer satisfaction.

Five Forces of the External Marketing Environment:

1. Competitors: The actions and strategies of rival firms in the market.

2. Customers: The target audience whose needs and preferences drive marketing strategies.

3. Suppliers: Entities that provide the resources necessary for producing goods and services.

4. Regulatory Agencies: Governmental and non-governmental organizations that impose laws and regulations affecting marketing practices.

5. The Economy: Economic conditions, including inflation, unemployment rates, and consumer spending patterns, that influence market dynamics.

Delivering Value

Understanding Value and Benefits: The question of what attracts consumers to certain products over others is pivotal in marketing. Although the demand for various goods and services may be limitless, financial constraints lead consumers to choose products that offer the best value in meeting their needs and wants.

• Value: Defined as the ratio of benefits received to the costs incurred. The formula can be expressed as: Value=Benefits/cost

• Benefits: Include not only the product's functional advantages but also emotional satisfaction derived from ownership or usage.

• Costs: Encompass the monetary price, time spent, and emotional strain related to the purchasing decision.

A satisfied customer perceives the benefits of a purchase to outweigh its costs, reinforcing the importance of value in marketing strategies.

Strategies to Increase Customer Value: To enhance value for customers, companies may:

• Develop innovative products with superior performance.

• Extend store hours during peak shopping seasons for added convenience.

• Implement price reductions to lower costs for consumers.

• Provide informative content on alternative uses for products at no extra cost.

Value and Utility

Types of Utility Provided by Marketing: Understanding how marketing creates value involves recognizing the benefits customers gain from products. These benefits are categorized as utility, which reflects the ability of a product to satisfy human wants or needs. Marketing generates four types of utility:

1. Form Utility: Involves designing products that incorporate desired features. For instance, the Microsoft Xbox One X includes advanced artificial intelligence, while Sony’s PlayStation 5 boasts enhanced graphics and resolution.

2. Time Utility: Created by ensuring products are available when customers want them. Companies often generate anticipation through marketing tactics that hint at release dates without providing specifics.

3. Place Utility: Achieved by making products available in locations convenient for customers. Both Xbox One X and PlayStation 5 can be purchased through online platforms and physical retail stores.

4. Possession Utility: Involves transferring ownership to customers through pricing strategies, credit terms, and ownership documentation. For example, Xbox One X is priced around $599, while the PS5 is approximately $629 in Canada.

Marketers must anticipate customer desires and adapt quickly to changing preferences, particularly in competitive sectors like gaming.

Goods, Services, and Ideas

Marketing is not limited to tangible products; it also encompasses services and ideas.

• Consumer Goods: Tangible items bought for personal use, exemplified by clothing or groceries. The marketing of these goods is known as B2C (business-to-consumer) marketing.

• Industrial Goods: Physical products utilized by companies to produce other goods, such as machinery or raw materials. Marketing aimed at businesses is referred to as B2B (business-to-business) marketing.

Some products may fall into both categories, like coffee beans, which can be sold directly to consumers or to coffee shops.

Service Marketing: Focuses on promoting intangible offerings, such as consulting or hospitality services, and is a growing sector in Canada. Businesses like airlines and health clinics utilize service marketing strategies.

Marketing Ideas: Promotes concepts or messages, such as public health campaigns or political initiatives. For example, during the COVID-19 pandemic, many companies shifted their marketing focus to demonstrate support and understanding for consumers' challenges.

Relationship Marketing and Customer Relationship Management

While marketing often targets immediate transactions, it increasingly emphasizes long-term customer relationships.

Relationship Marketing: A strategy aimed at fostering enduring connections with customers and suppliers, which enhances customer satisfaction, loyalty, and retention. Recent studies indicate that a significant percentage of consumers have switched brands in the past year, highlighting the necessity for effective customer engagement strategies.

Customer Relationship Management (CRM): An organized approach that businesses use to improve their interactions with clients. The rise of digital communication allows marketers to analyze customer data, which informs their understanding of preferences and purchasing behaviors.

• Data Warehousing: Involves compiling customer information to identify trends and preferences.

• Data Mining: Automates the analysis of large data sets to uncover patterns in consumer behavior. For example, Fairmont Hotels utilized data mining to tailor marketing efforts and enhance customer relations by identifying vacation preferences.

Fairmont’s CRM initiatives include personalized promotions, enhancing guest loyalty, and increasing direct bookings, ultimately improving profitability by reducing commission costs.

The Marketing Environment

Marketing strategies are shaped by external forces that influence a business's operations and decisions. Understanding these forces is crucial for effective marketing planning.

1. Political–Legal Environment

• Political activities at both global and domestic levels significantly affect marketing.

• Environmental Legislation: Regulations can alter entire industries (e.g., renewable energy).

• Example: India’s Suzlon Energy is thriving due to the political push for alternative energy.

2. Sociocultural Environment

• Changing social values prompt companies to innovate and promote new products.

• Health Trends: The rise in demand for organic foods has led to their availability in traditional supermarkets (e.g., PC Organics at Loblaws).

• Market Growth: Whole Foods has expanded due to increased consumer interest in healthy eating, notably after Amazon's acquisition.

• Small Business Success: Chickpea Pasta, a B Corp, capitalizes on health trends by providing gluten-free options made from organic peas and lentils.

3. Technological Environment

• Technological advancements lead to the creation of new goods and services, sometimes rendering older products obsolete.

• Impact on Lifestyle: New technologies (e.g., smartphones) change consumer behaviors, leading to further product innovation.

4. Economic Environment

• Economic conditions, including inflation, interest rates, and recessions, shape consumer spending patterns and, subsequently, marketing strategies.

• COVID-19 Impact: Businesses had to adapt their marketing approaches due to shifts in consumer demand and spending during the pandemic.

5. Competitive Environment

• Marketers must differentiate their products to persuade buyers to choose their offerings over competitors'.

• Types of Competition:

  • Substitute Products: Different products fulfilling the same need (e.g., fitness programs vs. medication).

  • Brand Competition: Similar products vying for consumer preference (e.g., Google vs. Bing).

  • International Competition: Domestic products competing against foreign ones, intensified by trade agreements like USMCA and CETA.

Developing the Marketing Plan

Purpose of the Marketing Plan

• The marketing plan serves to outline marketing objectives and strategies necessary for reaching target markets.

Components of the Marketing Plan

1. Objectives: Clear goals that guide all marketing activities.

   • Example: Starbucks aiming to increase its market share by 5% globally by 2025.

2. Strategy: A detailed approach to achieving objectives through planned marketing programs.

   • Ongoing Process: Marketing planning is iterative, learning from past successes and failures.

3. Marketing Mix (4 Ps): The tactical components that marketers utilize to satisfy customer needs.

   • Product: Development and differentiation of goods/services.

   • Pricing: Establishing a price that balances profitability and consumer appeal.

   • Place (Distribution): Decisions about how products are delivered to consumers.

   • Promotion: Techniques for communicating product information, including advertising and sales promotions.

Product

• Marketing starts with a product designed to meet customer needs.

• Example: Apple's iPhone continuously evolves with new features to maintain market leadership.

Pricing

• Effective pricing balances the organization’s costs with market demand.

• Example: WestJet’s Swoop offers low-cost flights to attract price-sensitive consumers.

Place (Distribution)

• Involves logistics decisions, including how to get products to consumers.

• Distribution strategies vary, including direct sales or partnerships with retailers.

Promotion

• The most visible aspect of marketing, focused on communicating product benefits.

• Promotional Tools: Advertising, personal selling, sales promotions, publicity, and direct marketing.

Detailed Notes

Marketing Strategy: Market Segmentation, Target Marketing, and Positioning

Market Segmentation

• Definition: Dividing a market into categories of customer types or segments.

• Purpose: Recognizes that products cannot appeal to all consumers; leads to identifying target markets with similar needs and wants.

• Strategy: Companies may target multiple segments with different offers or focus on a narrow range (e.g., Ferrari vs. General Motors).

Positioning

• Definition: The process of fixing, adapting, and communicating the nature of the product to appeal to the target segment.

• Example:

  • Tim Hortons: Standardized products, fast service.

  • Starbucks: Customized products in a leisurely environment.

Identifying Market Segments

• Market segments share traits that affect purchasing decisions. Five important segmentation approaches:

1. Demographic Segmentation

   • Characteristics: Age, income, gender, ethnicity, marital status, race, religion, social class.

   • Example: Wellwise by Shoppers Drug Mart targets aging baby boomers with a positive experience.

   • Notable Differences:

     • English vs. French Canadians: Varied consumer attitudes and behaviors.

     • Indigenous Peoples: Diverse subcultures influencing market needs.

2. Geographic Segmentation

   • Focus: Location influences buying behavior.

   • Example: Rainy climates increase umbrella sales; urban vs. rural preferences affect vehicle types.

3. Geo-Demographic Segmentation

   • Combines geographic and demographic traits.

   • Example: Young Urban Professionals—well-educated, high-income individuals in urban areas.

4. Psychographic Segmentation

   • Based on lifestyle, opinions, interests, and attitudes.

   • Example: Environmentally conscious consumers vs. thrill-seekers.

5. Behavioral Segmentation

   • Divides markets based on knowledge, use, or response to a product.

   • Variables include:

     • Benefits sought

     • User status (ex-users, current users, non-users)

     • Usage rate (heavy vs. light users)

     • Loyalty status

     • Occasion for use

Marketing Research

Purpose of Marketing Research

• Helps understand customer needs, leading to informed marketing decisions.

• Involves studying marketplace trends to improve competitiveness.

The Research Process

1. Study the Current Situation: Identify needs and existing solutions.

2. Select a Research Method: Consider effectiveness and costs.

3. Collect Secondary Data: Utilize existing data to save resources.

4. Analyze the Data: Organize data into actionable information.

5. Prepare a Report: Summarize findings, alternatives, and recommendations.

Research Methods

1. Observation: Collecting data through watching consumer behavior; can be low-cost.

2. Survey: Gathering data through questionnaires; can vary in accuracy and cost.

3. Focus Groups: Discussions with a small group led by a moderator; captures qualitative insights.

4. Experimentation: Testing different variables to see consumer responses (e.g., product variations).

Understanding Consumer Behavior

Influences on Consumer Behavior

• Psychological Influences: Motivations, perceptions, learning ability, attitudes.

• Personal Influences: Lifestyle, personality, economic status.

• Social Influences: Family, opinion leaders, reference groups.

• Cultural Influences: Culture, subculture, and social class.

The Consumer Buying Process

1. Problem/Need Recognition: Identifying a need (e.g., thirst after exercise).

2. Information Seeking: Searching for information to address the need (e.g., researching cars).

3. Evaluation of Alternatives: Comparing products based on attributes (e.g., price, quality).

4. Purchase Decision: Final decision influenced by rational and emotional motives.

5. Post-Purchase Evaluation: Assessing satisfaction with the purchase, affecting future buying decisions.

Market Segmentation

• Dividing markets into segments based on customer characteristics.

• Purpose: Identify target markets with similar needs.

Positioning

• Communicating the product’s nature to target segments.

• Example: Tim Hortons vs. Starbucks.

Segmentation Approaches

• Demographic: Age, income, gender, etc.

• Geographic: Location-based purchasing behavior.

• Geo-Demographic: Combining demographic and geographic traits.

• Psychographic: Based on lifestyle and attitudes.

• Behavioral: Based on product knowledge and usage.

Marketing Research

• Purpose: Understand customer needs and improve decisions.

• Steps: Identify need, select method, collect data, analyze, report.

Research Methods

• Observation, Survey, Focus Groups, Experimentation.

Consumer Behavior Influences

• Psychological, Personal, Social, Cultural.

Consumer Buying Process

• Stages: Problem recognition, Information seeking, Evaluation, Purchase, Post-purchase evaluation.

Organizational Marketing and Buying Behavior

Overview

• Organizational Markets: Unlike consumer markets, organizational markets (or commercial markets) involve transactions that are not always visible to the public. These markets focus on entities that purchase goods and services for production or resale, impacting consumer products.

Categories of Organizational Markets

1. Industrial Markets

   • Definition: Comprised of businesses that purchase goods to convert them into other products or use them up during production.

   • Examples:

     • Manufacturers: Companies that buy raw materials to create finished goods (e.g., computer manufacturers purchasing microchips).

     • Farmers: Buy equipment and supplies for agricultural production.

     • Retailers: Purchase goods that may be used in their operations but are not directly sold to consumers.

   • Purpose: The goods bought in this market often include office supplies, tools, and factory equipment, which are essential for production processes.

2. Reseller Markets

   • Definition: Consists of intermediaries (wholesalers and retailers) who buy finished goods and resell them to end consumers.

   • Examples:

     • Wholesalers: Purchase large quantities of products from manufacturers to sell to retailers.

     • Retailers: Sell directly to consumers and include businesses like supermarkets and online retailers.

   • Purpose: They facilitate the distribution of products from producers to consumers and play a critical role in the supply chain.

3. Government and Institutional Markets

   • Definition: Involves various levels of government (federal, provincial, municipal) and institutions that buy goods and services.

   • Examples:

     • Government Purchases: Federal governments spend significantly on infrastructure, defense, and public services (e.g., Canadian federal government spent approximately $303.6 billion in 2020).

     • Institutions: Non-governmental organizations, such as charities, hospitals, and educational institutions, that also require supplies and services.

   • Purpose: Government and institutional markets have substantial purchasing power and create regulations that affect the overall business environment.

Characteristics of B2B Buying Behavior

• Relationship Dynamics: B2B buying behavior often involves long-term relationships between buyers and sellers, contrasting with the impersonal, one-time interactions typical in consumer markets.

• Purchasing Volume: Organizational buyers typically purchase in large quantities, necessitating different pricing and negotiation strategies compared to individual consumers.

• Professional Buyers: B2B buyers are often specialized professionals who are well-informed about the products they purchase. They leverage expertise and research to make informed decisions.

• Rational Decision-Making: Unlike consumer purchases, which may be driven by emotional factors, B2B buying decisions are predominantly rational. Factors influencing these decisions include:

  • Performance: How well a product meets the specific needs of the organization.

  • Cost: Total cost of ownership, including purchase price, maintenance, and operational costs.

  • Efficiency: The ability of products to improve productivity and operational processes.

• Complexity of Decisions: Organizational buying processes often involve multiple stakeholders and require consensus, leading to a more intricate decision-making process.

Conclusion

Understanding the characteristics and dynamics of organizational markets and B2B buying behavior is crucial for effective marketing strategies. Businesses must recognize the unique needs and behaviors of organizational buyers to develop successful marketing approaches that cater to these distinct markets.

Chapter 11.1 - 11.3

Accountants and Their Roles

Role of Accountants

• Accountants manage a firm's accounting activities, ensuring that the Accounting Information System (AIS) provides necessary reports for planning and decision-making.

• The main fields of accounting are financial accounting and managerial accounting.

Financial vs. Managerial Accounting

• Financial Accounting

  • Serves external users (e.g., consumers, unions, shareholders, government agencies).

  • Prepares and publishes financial statements (income statements, balance sheets) for public viewing.

  • Focuses on the company as a whole rather than individual departments.

• Managerial Accounting

  • Serves internal users (e.g., managers, employees).

  • Provides information for decision-making, monitoring projects, and planning future activities.

  • Includes cost data relevant for engineers, sales goals for salespeople, and material costs for purchasing agents.

Professional Accountants in Canada

• Historically, three organizations certified accounting professionals:

  • Chartered Accountants (CA)

    • Focus on external financial reporting and auditing.

    • Work in CA firms and industry.

    • Required to pass a national exam and complete an educational program.

  • Certified General Accountants (CGA)

    • Work primarily in private companies.

    • Can audit financial statements in most provinces.

    • Complete a national exam and require accounting job experience.

  • Certified Management Accountants (CMA)

    • Focus on management practices and strategic management.

    • Work in organizations of various sizes.

    • Require passing a two-part national entrance exam and completing a strategic leadership program.

• In 2021, these organizations unified under the Chartered Professional Accountant (CPA) designation.

CPA Services

• Common Services:

  • Auditing: Ensuring compliance with accounting rules and examining financial records.

  • Tax Services: Preparing tax returns and planning to optimize tax liabilities.

  • Management Consulting Services: Range from financial planning to corporate mergers.

Private Accountants

• Salaried employees responsible for daily accounting tasks.

• Roles can vary widely depending on business size and type.

• Accounting Cycle:

  • Six-step process to analyze financial reports:

    1. Analyze data from business operations.

    2. Enter transactions into a journal and then a ledger.

    3. Prepare a trial balance to assess accuracy.

    4. Prepare financial statements (balance sheet, income statement, cash flow statement).

    5. Analyze financial statements using ratio analysis.

The Accounting Equation

• Definition: The accounting equation is the foundational formula that underpins all accounting practices. It reflects the relationship between a company's assets, liabilities, and owners' equity.

• Formula:

  Assets=Liabilities+Owners’ Equity\text{Assets} = \text{Liabilities} + \text{Owners' Equity}Assets=Liabilities+Owners’ Equity

• Importance: This equation ensures that the financial records remain balanced after every transaction. Each transaction impacts at least two accounts, maintaining the balance.

Key Components:

1. Assets:

   • Definition: Economic resources owned by the company that are expected to provide future benefits.

   • Types:

     • Current Assets: Cash, accounts receivable, inventory, and other assets expected to be converted into cash within a year.

     • Fixed Assets: Long-term resources such as land, buildings, and equipment. These assets depreciate over time, reducing their book value.

     • Intangible Assets: Non-physical assets with monetary value, such as patents, trademarks, and goodwill.

2. Liabilities:

   • Definition: Debts or obligations that the company owes to outside parties.

   • Types:

     • Current Liabilities: Obligations that need to be settled within one year, like accounts payable and short-term loans.

     • Long-Term Liabilities: Debts that are due beyond one year, such as bonds and mortgages.

3. Owners’ Equity:

   • Definition: Represents the residual interest in the assets of the company after deducting liabilities.

   • Components:

     • Invested Capital: Funds initially invested by the owners.

     • Retained Earnings: Profits that are reinvested in the business instead of being distributed as dividends.

Financial Statements

Financial statements provide a summary of a company's financial performance and condition. The three primary financial statements are:

1. Balance Sheet:

   • Purpose: Offers a snapshot of the company's financial position at a specific point in time.

   • Structure:

     • Assets: Listed in order of liquidity.

     • Liabilities: Divided into current and long-term liabilities.

     • Owners’ Equity: Includes common stock, paid-in capital, and retained earnings.

   • Example: For Apple Inc., as of 2020:

     • Current Assets: $143,713 million

     • Current Liabilities: $105,392 million

     • Owners’ Equity: Total of common stock, paid-in capital, and retained earnings.

2. Income Statement:

   • Purpose: Summarizes revenues and expenses to show profitability over a period.

   • Formula: Net Income=Revenues−Expenses\text{Net Income} = \text{Revenues} - \text{Expenses}Net Income=Revenues−Expenses

   • Components:

     • Revenues: Total income generated from sales (e.g., Apple’s $274,515 million in 2020).

     • Cost of Goods Sold (COGS): Direct costs of producing goods sold (e.g., Apple’s COGS was $169,559 million).

     • Gross Profit: Revenue minus COGS (e.g., $104,956 million for Apple).

     • Operating Expenses: Costs not directly tied to production, such as marketing and administrative expenses.

     • Net Income: The final profit or loss after subtracting all expenses.

3. Statement of Cash Flows:

   • Purpose: Details cash inflows and outflows from operating, investing, and financing activities.

   • Components:

     • Cash Flows from Operations: Cash generated from core business operations.

     • Cash Flows from Investing: Cash used in or generated from investing activities (e.g., buying/selling assets).

     • Cash Flows from Financing: Cash received from borrowing or paid out as dividends.

   • Importance: Helps stakeholders understand how the company manages its cash.

The Budget: An Internal Financial Statement

• Definition: A budget is a detailed report estimating a company's future revenues and expenses for a specific period, usually one year.

• Purpose:

  • Planning: Helps in forecasting financial performance and allocating resources.

  • Control: Enables monitoring of actual performance against the budget to identify variances and make necessary adjustments.

• Process:

  • Coordination by accounting staff, with inputs from various departments.

  • Comparison of actual results with budgeted amounts to assess performance.

• Example: Procter & Gamble evaluates its business units monthly by comparing actual financial results against budgeted amounts, allowing for timely corrective actions.

Human Resource Management (HRM) Notes

Definition:

• HRM involves organizational activities aimed at attracting, developing, and maintaining an effective workforce.

Strategic Importance of HRM:

• Increased legal complexities and the recognition of human resources as vital for productivity improvement have elevated the importance of HRM.

• Companies are increasingly laying off employees in declining areas while hiring in growth areas (e.g., AI replacing certain roles, and demand for social media content managers rising).

• Effective HR functions significantly impact a firm's performance; poor management can lead to high costs from unemployment compensation, training, and low morale.

• The chief HR executive typically holds a vice-president role directly accountable to the CEO, reflecting HR's strategic role in business planning.

Human Resource Planning:

• Purpose: To attract qualified human resources through job analysis, demand and supply forecasting, and matching supply with demand.

1. Job Analysis:

   • Components:

     • Job Description: Details job duties, working conditions, and tools used.

     • Job Specification: Lists necessary skills, abilities, and credentials.

   • Uses: Helps develop selection methods, performance appraisals, and equitable compensation.

2. Forecasting HR Demand and Supply:

   • HR Demand: Managers assess trends in HR usage, organizational plans, and economic trends to predict future needs.

   • Internal Supply Forecasting: Adjust staffing levels for turnover/promotions. Techniques include:

     • Replacement Chart: Lists managerial positions, incumbents, and potential successors.

     • Employee Information Systems/Skills Inventories: Contain data on employees' skills and career aspirations.

   • External Supply Forecasting: Predicting labor availability involves analyzing population demographics and educational statistics.

3. Matching HR Supply and Demand:

   • If shortfalls are predicted, options include hiring new employees, retraining, or extending the tenure of retiring employees.

   • For overstaffing, options include transferring employees or laying off workers.

Recruiting Human Resources:

• Internal Recruiting: Considering current employees for openings can enhance morale and reduce turnover.

• External Recruiting: Attracting candidates outside the organization through various methods:

  • Advertising, campus interviews, employment agencies, referrals, and “walk-ins.”

  • Nontraditional methods include social media campaigns and interactive hiring events.

  • Online job search platforms like Glassdoor and LinkedIn facilitate recruitment.

Selecting Human Resources:

• Selection Process Goals: To predict job success through various selection techniques, focusing on validating predictive information.

1. Application Forms:

   • Gather applicants' work history and demographics; avoid irrelevant personal questions.

   • Simplifying the application process can enhance candidate experience (e.g., Home Depot's 15-minute application process).

2. Tests:

   • Ability, skill, and knowledge tests are strong predictors of job success; personality tests may also be useful.

   • Assessment centers provide real task simulations observed by expert evaluators.

   • Video assessments involve candidates responding to realistic work scenarios.

3. Interviews:

   • Common yet often poor predictors of success due to biases; structured interviews improve validity.

   • Techniques include behavior-based interviewing that assesses past behavior to predict future actions.

4. Other Techniques:

   • Physical examinations for fitness-related jobs.

   • Reference checks can be limited due to biases towards providing positive recommendations.

   • Drug testing policies vary; Canadian law restricts random drug tests, particularly after the legalization of marijuana.

Developing Human Resources

Organizations employ various methods to enhance the capabilities of employees and managers, focusing on their development and performance. Key strategies include new employee orientation, training, performance appraisal, and compensation structures.

New Employee Orientation

The initial period after hiring is crucial for employee retention and satisfaction. Research indicates that the first 30 days significantly influence whether an employee will remain with the company. A survey found that 50% of workers felt they didn't fit in well during this period. Effective orientation introduces new employees to the company's policies, programs, co-workers, supervisors, and their specific job roles. A well-structured orientation can enhance job satisfaction, performance, and retention, while a poorly executed one can lead to dissatisfaction, anxiety, and turnover.

Training

After orientation, employees often require further training to improve their work quality and efficiency. This begins with a needs analysis to identify the organization's training requirements and assess the current workforce's capabilities. Various training methods include:

• On-the-Job Training: Employees learn tasks in a real work environment, often with guidance from supervisors or experienced colleagues. This can be informal or formal, depending on the task complexity.

• Job Rotation: Employees rotate through different positions, gaining diverse skills and preparing for potential promotions.

• Off-the-Job Training: This occurs outside the workplace, often in classrooms or simulated environments. For example, CAE creates flight simulators for pilot training, while McDonald's Hamburger University trains management staff in practical skills.

• Management Development Programs: These enhance analytical, conceptual, and problem-solving skills and can occur through formal programs or informal methods like networking and mentoring.

Networking facilitates informal discussions among managers, while mentoring pairs less experienced employees with seasoned mentors. Reverse mentoring involves younger employees teaching older colleagues about new technologies.

With teams increasingly central to organizational structure, companies are also focusing on training programs designed for teams rather than individuals.

Evaluating Employee Performance

Performance appraisal involves assessing employee job performance to inform decisions about promotions, pay raises, and further training. This process is essential for providing employees with constructive feedback. Appraisals can be:

• Objective: Based on measurable outcomes like production rates or sales figures, though they may be affected by external factors like market conditions.

• Subjective: Based on managerial judgment, which can include ranking employees or using methods like the graphic rating scale or critical incident method.

A comprehensive approach to performance appraisal is the 360-degree feedback, which gathers insights from various sources, including supervisors, peers, and subordinates. As traditional appraisal methods face criticism for being too rigid, many organizations are moving towards a more conversational "check-in" approach, emphasizing ongoing feedback rather than annual reviews.

Compensation and Benefits

Importance of Compensation

Compensation encompasses the rewards employees receive for their work, including salaries, bonuses, and benefits. This is crucial for attracting and retaining skilled workers.

• Basic Compensation: This can be hourly wages for lower-level positions or annual salaries for professional roles. Companies may use pay surveys to benchmark compensation against competitors and ensure fairness through job evaluation.

• Impact of Education: Higher educational qualifications typically correlate with higher salaries and lower unemployment rates. However, an increasing number of individuals with advanced degrees are finding themselves in low-paying jobs.

• Gender Pay Gap: Studies indicate persistent wage disparities between men and women, with women often earning less for comparable positions.

Incentive Programs

To motivate performance, organizations implement incentive programs that provide financial rewards tied to individual or team achievements. While many Canadian companies offer these programs, effectiveness measurement remains low.

• Individual Incentives: These include bonuses and piece-rate pay systems, rewarding employees for their direct contributions.

• Pay-for-Knowledge Plans: These incentivize employees to acquire new skills, enhancing their proficiency and flexibility within the organization.

• Pay-for-Performance Systems: These systems tie managerial rewards to business unit performance, fostering accountability and driving results.

Individual Incentives

• Forms of Incentives: Includes additional time off or recognition (e.g., points awarded by supervisors). Points can be converted into money for merchandise or trips from a catalogue.

• Workforce Management Systems: Used by retailers to schedule productive staff during busy times. Employees can view performance metrics (e.g., average sales/hour) at cash registers. Less productive employees receive fewer hours, which may lead to dissatisfaction.

Team and Group Incentives

• Profit-Sharing Plans: Profits above a certain level are distributed among all employees (e.g., Great Little Box Company shares 15% of profits).

• Gainsharing Plans: Bonuses are awarded to employees when company costs are reduced through improved efficiency or productivity, emphasizing shared goals.

Benefits

• Definition: Rewards and incentives beyond direct financial compensation. Valued by employees, even if not expressed in monetary terms.

• Top Benefits: Gift cards, extra vacation days, fast-tracked promotions, and career coaching (e.g., Shopify's in-house coaching).

Mandated Protection Plans

• Employment Insurance: Provides subsistence payments to unemployed individuals actively seeking work. Covers parental leave.

• Canada Pension Plan (CPP): Offers income for retired individuals, funded through payroll taxes. Recent changes increased maximum benefits.

• Workers' Compensation: Covers job-related injuries/illnesses, with premiums based on an employer's accident history.

Optional Protection Plans

• Health Insurance: Coverage has expanded to include various health services. Rising costs and concerns about coverage sustainability.

• Paid Time Off: Includes vacation days, sick leave, and personal days. Seniority often influences vacation time.

Other Types of Benefits

• Wellness Programs: Focus on preventing illness rather than just covering expenses. Recognized by the Employee Recommended Workplace Award.

• Cafeteria-Style Benefit Plans: Employees choose benefits based on a fixed budget, allowing customization according to their preferences.

Legal Context of HRM

• Key Legal Issues: Equal employment opportunity, comparable worth, sexual harassment, employee safety and health, retirement regulations.

Equal Employment Opportunity

• Goal: Protect against unfair discrimination. Discriminatory actions must be job-related and applied objectively.

• Canadian Human Rights Act (1977): Aims to ensure equal job opportunity; prohibits discrimination based on various factors.

• Employment Equity Act (1986): Addresses discrimination and mandates reporting for designated groups (women, visible minorities, Indigenous peoples, and those with disabilities).

Comparable Worth

• Definition: Legal concept advocating for equal pay for jobs of comparable value. Focus on job evaluation based on skills.

Sexual Harassment

• Definition: Involves unwelcome sexual advances creating a hostile work environment. Organizations must monitor and control harassment, with potential liability for managers' actions.

Employee Safety and Health

• Programs: Aim to reduce absenteeism and improve productivity. Each province has regulations to ensure worker safety.

• Right to Refuse Unsafe Work: Employees can refuse unsafe tasks, and inspectors enforce safety standards.

Retirement

• Changes in Mandatory Retirement: Most provinces have abolished mandatory retirement ages.

• Pension Plans:

  • Defined Benefit (DB): Guarantees a specific retirement income. Preferred by employees but challenging for employers.

  • Defined Contribution (DC): Employers contribute a fixed amount; retirement income depends on fund performance. Employees face uncertainty regarding retirement income.

  • Target Benefit Plans: Hybrid of DB and DC, providing a target benefit based on contributions and market returns.

Challenges in the Evolving Workplace

Managing Workforce Diversity

Workforce diversity encompasses the range of employees' attitudes, values, beliefs, and behaviors influenced by factors such as gender, race, age, ethnicity, and physical ability. In Canada, approximately 22% of the population comprises visible minorities, projected to increase to between 24.5% and 30% by 2036. Organizations are recognizing that embracing diversity can provide a competitive advantage by hiring from a broader talent pool, resulting in a higher-quality workforce that brings diverse perspectives and insights. For instance, companies like Royal Bank of Canada and Alberta Health Services actively promote diversity, and successful practices include targeted recruitment, mentorship programs, and inclusive workplace initiatives.

Managing Knowledge Workers

Knowledge workers—such as engineers and software developers—require specialized training and continuous skill development to maintain their competitive edge. Firms that fail to invest in their knowledge workers risk losing them to competitors who offer better training opportunities. The high demand and limited supply of knowledge workers lead companies to adopt attractive benefits and perks to recruit top talent.

Managing Contingent Workers

Contingent workers, who are not employed on a permanent basis, include part-time employees, freelancers, and temporary staff. Organizations often increase their use of contingent workers during economic uncertainty. While contingent workers can help reduce labor costs, it is crucial to understand their productivity levels and to integrate them effectively into the organization. The management of contingent workers also raises issues concerning their rights and treatment, as highlighted by the challenges faced by migrant agricultural workers during the COVID-19 pandemic.

Working with Organized Labour

The Development of Canadian Labour Unions

The Canadian labor movement emerged during the Industrial Revolution, addressing workers' grievances regarding long hours, low pay, and unsafe conditions. The first national labor organization, the Canadian Labour Union, was established in 1873, paving the way for further union development. The Canadian Labour Congress, formed in 1956 from previous rival unions, represents a significant consolidation of union strength.

Unionism Today

While nearly 5 million Canadian workers belong to unions, union density is less than one-third of the non-agricultural workforce, with significant variation across sectors. Unions are more prevalent in the public sector, where about 75% of workers are unionized. Despite their historical successes, unions face challenges such as increasing workforce diversity, the shift towards service-oriented jobs, and aggressive anti-union tactics from some companies.

The Future of Unions

Unions are confronting several challenges, including job losses due to globalization and technological advancements, as well as difficulties in organizing contract and part-time workers. To adapt, unions have begun merging and restructuring, such as the formation of Unifor from the merger of the Canadian Auto Workers and the Communications, Energy and Paperworkers Union.

The Legal Environment for Unions in Canada

Historically, political and legal barriers hindered collective bargaining. Legal frameworks have evolved to provide workers with more power in negotiations, ensuring a more balanced employer-employee relationship. Legislative changes and public concern over labor rights have contributed to the establishment of a legal environment that supports unionization and collective bargaining in Canada.

Union Organizing Strategy

• Reasons for Organizing:

  • Firms expanding into new geographical areas.

  • Existing union members want to represent more workers.

  • Competition between unions.

  • Increasing union membership.

• Examples:

  • UFCW organizing at Shoppers Drug Mart and Sobeys.

  • International Association of Machinists’ unsuccessful attempt at Boeing.

  • Successful organizing drive by the Air Line Pilots Association for WestJet pilots.

• Conflict Creation:

  • Management may resist union organizing, as seen with UFCW's efforts at Walmart.

  • Internal union conflicts can arise, exemplified by Unifor's split with the Canadian Labour Congress.

• Certification Process:

  • Unions must demonstrate at least 50% membership to the Manitoba Labour Board for certification.

  • Issues may arise over who is included in the bargaining unit (e.g., supervisors vs. non-management workers).

  • Employees can also decertify their union representation.

Union Security

• Types of Union Security:

  • Closed Shop: Only union members can be hired.

  • Union Shop: Non-union workers can be hired, but must join within a certain timeframe.

  • Agency Shop: Employees must pay union dues but are not required to join.

  • Open Shop: Employers can hire both union and non-union workers without union dues required.

Types of Unions

• Craft Unions: Organized by specific trades (e.g., plumbers, electricians). Members typically require specialized skills.

• Industrial Unions: Organized by industry (e.g., steel, auto), including semi-skilled and unskilled workers. These unions address broader workplace issues.

• Local Unions: Basic unit of union organization, either craft or industrial based.

• Independent Local Unions: Not formally affiliated with larger organizations; negotiate locally.

• National vs. International Unions:

  • National unions operate across Canada.

  • International unions operate in multiple countries.

Collective Bargaining

• Process:

  • Begins with union recognition as the exclusive negotiator.

  • Must negotiate in good faith.

  • Focuses on reaching a bargaining zone where both parties find compromise.

• Common Contract Issues:

  • Compensation: Includes immediate wages and future adjustments (e.g., COLA clauses).

  • Benefits: Health care, retirement, paid time off, etc.

  • Job Security: Often determined by seniority.

  • Management Rights: Unions often seek to limit management's control over certain policies.

When Bargaining Fails

• Impasse: Occurs when no agreement can be reached after several sessions.

• Union Tactics:

  • Strikes: Employees walk off the job; can include picketing and boycotting.

  • Wildcat Strikes: Unauthorized strikes that occur during existing contracts.

  • Slowdowns and Sickouts: Employees work slower or call in sick to disrupt operations.

• Management Tactics:

  • Lockouts: Employers prevent employees from accessing the workplace.

  • Hiring Replacements: Use of temporary workers during strikes (illegal in some regions).

  • Contracting Out: Reducing union workforce by outsourcing work.

Conflict Resolution Methods

• Conciliation: Neutral party clarifies issues without imposing a settlement.

• Mediation: Neutral party advises on steps toward resolution without imposing a settlement.

• Arbitration: Neutral party imposes a settlement; can be voluntary or legally required.

LO 8.1: Define human resource management, discuss its strategic significance, and explain how managers plan for human resources.

• Human Resource Management (HRM):

  • Set of organizational activities focused on attracting, developing, and maintaining an effective workforce.

  • Strategic role in enhancing organizational performance.

• Steps in Planning for Human Resources:

  1. Conduct Job Analysis: Identify the duties and requirements of jobs.

  2. Forecast Demand and Supply: Estimate future HR needs and the availability of qualified candidates.

  3. Match HR Supply and Demand: Align workforce capabilities with organizational needs.

LO 8.2: Identify the issues involved in staffing a company, including internal and external recruiting and selection.

• Recruiting: Attracting qualified candidates to fill job openings.

  • Internal Recruiting: Considering current employees for new positions.

    • Benefits: Builds morale, rewards top performers.

  • External Recruiting: Attracting candidates from outside the organization.

• Selection Techniques:

  • Use of application forms, tests, and interviews.

  • Techniques must be valid predictors of job performance.

LO 8.3: Discuss different ways organizations develop the capabilities of employees and managers.

• Initial Orientation: Most employees undergo an orientation process to familiarize themselves with the organization.

• Skill Development: Opportunities for acquiring new skills through:

  • Work-based programs (on-the-job training).

  • Instructional-based programs (formal training).

LO 8.4: Discuss the importance of wages and salaries, incentives, and benefit programs in attracting and keeping skilled workers.

• Compensation Components:

  • Wages and Salaries: Competitive pay is crucial for attracting talent.

  • Incentives: Programs to motivate higher productivity.

  • Benefit Packages: Include health care, retirement plans, and other perks; vital for retaining employees.

LO 8.5: Describe some key legal issues in hiring, compensating, and managing workers in today’s workplace.

• Legal Compliance:

  • Must adhere to federal and provincial laws concerning:

    • Equal opportunity and pay.

    • Sexual harassment policies.

    • Safe working conditions as outlined in occupational health and safety acts.

LO 8.6: Discuss workforce diversity, the management of knowledge workers, and the use of contingent and temporary workers.

• Workforce Diversity:

  • Emphasizes the variety of attitudes, values, beliefs, and behaviors among employees (e.g., gender, race, age).

  • Seen as a competitive advantage by many organizations.

• Management of Knowledge Workers:

  • Addressing issues like increasing salaries and turnover rates.

• Contingent Workers:

  • Hired to supplement the permanent workforce; provide flexibility.

  • Often not eligible for company benefits, leading to their growing prevalence.

LO 8.7: Trace the evolution of, and discuss trends in, unionism in Canada.

• Historical Overview:

  • Early unions formed in the 19th century, gaining traction in the 20th century.

  • Since the mid-1970s, union membership as a percentage of the workforce has declined.

  • Unions increasingly recognize the importance of collaboration with management.

LO 8.8: Describe the major laws governing unionism.

• Key Legislation:

  • Privy Council Order 1003: Established collective bargaining rights.

  • Constitution Act, 1867: Allowed federal and provincial governments to pass labor legislation (e.g., Canada Labour Code, Ontario Labour Relations Act).

LO 8.9: Identify the steps in the collective bargaining process.

• Collective Bargaining Process:

  1. Union Certification: Once certified, the union negotiates a labor contract.

  2. Contract Demands: Focus on wages, job security, management rights, etc.

  3. Negotiation Tactics:

     • Unions may strike, boycott, or slow down work.

     • Management may use strikebreakers or lockouts.

  4. Dispute Resolution: Mediation or arbitration may be employed to resolve conflicts.

Gant and Pert Charts
Gantt Charts

• Definition: A Gantt chart is a visual representation of a project schedule, outlining the steps or activities required to complete a project along with the estimated time needed for each step.

• Features:

  • Lists all activities necessary for project completion.

  • Estimates time for each activity.

  • Tracks progress against the timeline.

• Management Use:

  • If the project is ahead of schedule, resources can be shifted to other tasks.

  • If behind schedule, additional workers may be added or deadlines adjusted.

PERT Charts

• Definition: The Program Evaluation and Review Technique (PERT) chart is a project management tool that provides a graphical representation of a project’s tasks and the sequence in which they need to be completed.

• Features:

  • Breaks down projects into smaller, manageable activities.

  • Specifies the required sequence of activities.

  • Identifies the critical path, which determines the longest stretch of dependent activities and the minimum time needed to complete the project.

• Management Use:

  • Highlights tasks that could delay the project if not completed on time.

  • Allows managers to reassign resources to expedite critical tasks and maintain the schedule.

Key Differences

• Focus:

  • Gantt Chart: Primarily focuses on the timeline and progress of individual tasks.

  • PERT Chart: Emphasizes task dependencies and critical paths that affect project completion.

• Visualization:

  • Gantt Chart: Displays activities along a timeline with bars indicating the duration.

  • PERT Chart: Uses nodes and arrows to illustrate tasks and their interdependencies.

Example Application

• Classroom Renovation Project:

  • Gantt Chart: Would show the timeline for tasks like removing tiles, reworking furniture, and completing renovations.

  • PERT Chart: Would identify the critical path, such as completing tile installation before returning furniture, ensuring timely project completion.