Chapter 2 - intro to business

Chapter 2: The Environment of Business

2-1 Overview

  • Focus on understanding various environments affecting business operations.

2-2 Learning Objectives

  • Explain organizational boundaries and multiple organizational environments.

  • Importance of the economic environment and performance evaluation factors.

  • Description of technological environment and its role in business.

  • Understanding the political-legal environment’s impact on business.

  • Overview of the sociocultural environment and its influence.

  • Identification of emerging challenges and opportunities in the business environment.

  • Insights into recent trends in the redrawing of corporate boundaries.

2-3 Organizational Boundaries and Environments

  • External Environment: Factors beyond an organization that cannot be controlled (e.g., competition).

  • Organizational Boundaries: The line separating an organization from its environment.

2-4 Dimensions of the External Environment

  • Multiple Organizational Environments:

    • Economic Environment

    • Technological Environment

    • Political-Legal Environment

    • Sociocultural Environment

    • Business Environment

    • Global Environment

    • Emerging challenges and opportunities.

2-5 The Economic Environment

  • Definition: Conditions of the economic system where an organization operates.

  • Key Economic Goals:

    • Economic Growth

    • Economic Stability

    • Full Employment

2-6 Economic Growth Overview

  • Key Concepts:

    • Business Cycle

    • Aggregate Output

    • Standard of Living

    • Gross Domestic Product (GDP) and Gross National Product (GNP)

    • Productivity

    • Balance of Trade

    • National Debt.

2-7 Business Cycle

  • Definition: The typical pattern of economic activity, including:

    • Peak

    • Recession

    • Trough

    • Recovery.

2-8 Aggregate Output and Standard of Living

  • Aggregate Output: Measure of economic growth, showing total goods/services produced within a period.

  • Standard of Living: The quantity and quality of goods/services purchased by a country’s citizens.

  • Productivity: Comparison of output with resources used, leading to improved standard of living through higher productivity.

2-9 Measuring Economic Growth

  • Gross National Product (GNP): Value of all goods/services produced by a national economy during a period regardless of location.

  • Gross Domestic Product (GDP): Value of all goods/services produced by production factors located within the national territory in a given period.

  • Real Growth Rates: Insights into GDP per capita and real GDP trends.

2-10 Balance of Trade and National Debt

  • Balance of Trade: Difference between the value of exported and imported products.

  • National Debt: Total amount owed by a government to creditors, influenced by budget deficits/surpluses.

2-11 Economic Stability

  • Definition: A condition where the growth rates of money and goods/services are balanced and consistent.

2-12 Inflation and Deflation

  • Inflation: Widespread price increases within the economy.

  • Consumer Price Index (CPI): Tool for measuring inflation.

  • Deflation: A general decrease in prices.

2-13 Recent Trends in Inflation

  • Example: Canada’s inflation scenario, particularly during the COVID pandemic with a spike at 4.7% in October 2021 due to high demand and supply shortages.

2-14 Unemployment

  • Definition: The level of joblessness among those actively seeking employment in an economic system.

2-15 Managing the Canadian Economy

  • Fiscal Policies: Government taxation and spending decisions.

  • Monetary Policies: Management of money supply, such as interest rates.

  • Stabilization Policies: Measures to stabilize the economy post-variances.

2-17 The Technological Environment

  • Technology: Various methods (knowledge, methods, equipment) a company utilizes to create value.

2-18 Role of Research & Development (R&D)

  • R&D leads to new product ideas and innovations (e.g., demand for canola oil in Canada).

2-19 The Political-Legal Environment

  • Definition: Relationship between business and government, including regulations, sentiment, stability, and international relations.

2-20 The Socio-Cultural Environment

  • Definition: Customs, values, attitudes, and demographic factors affecting an organization.

  • Variations in customer preferences and ethical compliance are significant.

2-21 The Business Environment

  • Industry Environment: Analyzed through Porter’s Five Forces Model to assess competitive situations within industries.

2-22 Emerging Challenges and Opportunities

  • Successful firms focus on core competencies to enhance competitiveness and value creation.

2-23 Outsourcing and Process Management

  • Outsourcing: Using external suppliers/distributors for specific processes.

  • Social Media’s Role: Integral for communication and content engagement.

  • Transition from department-oriented organizations to process-oriented teams.

2-24 Redrawing Corporate Boundaries

  • Acquisitions and Mergers: Can be horizontal, vertical, or conglomerate, and may involve friendly or hostile takeovers.

2-25 Takeover Types

  • Friendly Takeover: The acquired company agrees to accept the acquisition.

  • Hostile Takeover: Acquiring company obtains enough stock to take control, with defenses like poison pills.

2-26 Employee-Owned Corporations and Strategic Alliances

  • Employee Stock Ownership Programs (ESOP): Enable employees to own shares in their company.

  • Strategic Alliances: Temporary collaborations between companies, often referred to as joint ventures.

2-27 Subsidiary and Parent Corporations

  • Definition: A subsidiary corporation is owned by another entity known as the parent corporation.