~2.1 ORGANIZATIONAL BOUNDARIES~

• all businesses deal with an external environment that affects/determines their potential success and failure

• External environment: things that take place outside the organization that could affect it

  • managers must identify these elements and operate to proactively compete with it

• EXAMPLE: distributors may walk into the store to restock their products onto the shelves and customers may assume they’re employees

  • even though they’re not part of the organization but the environment, when they’re inside the store, they become part of the business

• organizational boundaries: separates the organization from its environment

~Multiple organizational Environment~

• Organizations have multiple aspects/environments that could affect them

  • economic environment

  • technologic environment

  • political-legal conditions

  • socio-cultural issues

  • global

  • emerging business challenges

    • out-sourcing

    • growing role of social media

    • business process management

  • business environment itself

  • issues of ethical/social responsibilities

~Economic Environment~

• economic environment****: describes conditions of the economic system in which the organization operates

• in recent years, economic system has been described by low growth, low inflation, and low unemployment rates

• key economic goals: economic growth, economic stability, and full employment

  • example****: during the rise of unemployment rates, people tend to make less unnecessary purchases. which means less demand for said purchases, leading to those not being produced and employees being let go = more unemployment

    • momentum pushes unemployment down as consumers spend more

  • example #2: despite low inflation, rising cost (rising minimum wage) has put pressure on many businesses

    • restaurant/grocery stores have reduced shifts, reduced packaging sizes, and increased prices to continue operating

    • Costco/Dollarama have been thriving since consumers are looking for cheaper prices

~Economic Growth: Aggregate output~

• aggregate output: the measure of economic growth. Total quantity of goods and services produced by an economic system during a given period

• What happens when output increases more than the population?

  • Output per Capita increases

  • The system is able to provide more goods/services that people want

    • which means: people living in the economic system benefit from a higher standard of living

~standard of living~

• total quantity and quality of goods that a country’s citizens can purchase with their currency

~GDP vs GNP~

• gross national product (GNP): value of all goods and services produced by a national economy within a given period regardless pf production location

• gross domestic product (GDP): value of all goods and services produced by a national economy within a given period with domestic factors of production → real growth rates, GDP per capita, Real GDP

~Productivity~

• measure of growth that compares the output of an economic system with the resources that are needed to produce the output → standard of living improves through increased productivity

~balance of trade~

• balance of trade: value of all exported products minus imported products (EXPORTS -- IMPORTS)

~national debt~

• national debt: amount of money that gov’t owes its creditors → increases/decreases based on the budget deficit/surplus

~business cycle~

• business cycle: the typical pattern of short-term ups and downs in an economy → peak, recession, trough, and recovery

~economic stability~

• economic stability: condition when the amount of money available and the quantity of goods/services produced are growing at about the same rate

• threats to economic stability: inflation, deflation, and unemployment

• inflation: occurs when there are widespread price increases in an economic system

• consumer price index: tool used to measure inflation

• deflation: a period of generally falling prices

• unemployment: level of joblessness among people actively seeking work in an economic system

• types of unemployment: frictional, seasonal, cyclical, and structural

• stabilization policies: fiscal policies and monetary policies

• fiscal policies: taxes and spending

• monetary policies: money supply (ex. interest rates)

~technology~

• technology: all the ways a company creates value for its customers, ex. knowledge, work methods, physical equipment

• research and development: provides new ideas for product services and processes, both basic and applies

~political-legal environment~

• political-legal environment: reflects the relationship between business and gov’t (ex.regulations) → pro- or anti-business sentiment, political stability, and international relations

~socio-cultural~

• socio-cultural environment: customs, values, attitudes, and demographic characteristics of the society in which an organization functions

• customer preferences and tastes vary within and across national boundaries

• ethical compliance and responsible business behaviour

~contemporary global economy~

• globalization: integration of markets globally, the world is becoming a single interdependent system

• imports: products purchased in Canada that are manufactured abroad

• exports: products manufactured in Canada and sold abroad

• major world marketplaces: north America, Europe, and pacific/asia

• north America: canada’s larger trading partner is the united states, trading with Mexico is increasing

• europe: traditional view (west vs east) and emerging view (north vs south)

• pacific/asia: japan, china, india

• barriers to international trade: social + cultural differences, economic differences, and legal and political differences

• social and cultural differences: language, population demographics, religious differences, social beliefs, and shopping habits

• economic differences: role of the gov’t in the economy and planned vs market economies (socialist, capitalist, and communist)

• legal and political differences: quotas, tariffs, subsidies, and protectionism

• quotas: limitations on importation of a product class + embargo forbidding export/import from a nation (united states vs cuba)

• tariffs: a tax on imported goods, raises gov’t revenues as well

• subsidy: gov’t financial assistance for domestic firms

• protectionism: protects local business at the expense of free market competition

• local-content laws: requires that at least part of the product be made in the foreign country/area (possible joint venture)

• questionable business practices: bribes, dumping, and cartels

• bribes: seen as “gratitudes” to officials in some nations

• dumping: selling goods abroad for less than a firm charges at home; illegal in most countries

• cartels: associations of producers created to control supply and demand (ex. OPEC)