Understanding Canadian Business Chapter 1 Managing Within the Dynamic Business Environment

Learning Objectives After you have read and studied this chapter, you should be able to: Describe the relationship of businesses’ profit to risk assumption. Discuss the importance of stakeholders and non-profit organizations to business activities. Explain how entrepreneurship is critical to the wealth of an economy, and list the five factors of production that contribute to wealth.

Learning Objectives After you have read and studied this chapter, you should be able to: Review the six elements that make up the business environment and explain why the business environment is important to organizations. Understand how the service sector has replaced manufacturing as the principal provider of jobs, but why manufacturing remains vital for Canada.

Business and Entrepreneurship: Revenues, Profits and Losses One of the best ways to become successful is to have a career in business. A business is any activity that seeks to provide goods and services to others while operating at a profit. Profit is the amount of money a business earns above and beyond what it spends for salaries and other expenses.

Matching Risk with Profit Revenue > Expenses = Profit Revenue < Expenses = Loss

Risk What is your tolerance for risk? Risk is the chance an entrepreneur takes of losing time and money on a business that many not become profitable. What is your tolerance for risk?

Responding to the Various Business Stakeholders Stakeholders are all the people who stand to gain or lose by the policies and activities of a business.

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The Business Environment The business environment consists of the surrounding factors that either help or hinder the development of businesses.

The Business Environment Businesses grow and prosper in a healthy environment. Job Growth Wealth High Quality of Life Wrong Environmental Conditions Business Failure and Job Losses Poor Quality of Life

The Business Environment Creating the right business environment is the foundation for social progress of all kinds, including: Good Schools Clean Air & Water Good Health Care Low Rates of Crime

The Business Environment Companies should continuously assess the business environment for changes in trends. Trends could affect the organization’s ability to: Achieve its objectives, Steer clear of threats, or Take advantage of new opportunities.

The Legal and Regulatory Environment Governments can lessen the risk of starting and running a business through the laws (also known as Acts) that are passed by elected officials. Competition Act is to maintain and encourage competition in Canada. To ensure that small- and medium-sized enterprises have an equitable opportunity to provide consumers with competitive prices and product choices.

The Legal and Regulatory Environment Other examples of laws include the: Canada Small Business Financing Act Consumer Packaging and Labelling Act and Trade Unions Act Each legislation authorizes an agency (such as Industry Canada) to write regulations that interpret the law in more detail and indicate how it will be implemented and enforced. Regulations serve to carry out the purposes of or expand on the general laws passed by elected officials.

The Economic Environment The economic environment looks at income, expenditures, and resources that affect the cost of running a business. Businesses review the results of major economic indicators such as consumer spending, employment levels, and productivity. The movement of a country’s currency relative to other currencies also pertains to this environment. Currency movements are especially critical for countries, such as Canada, that generate a great deal of business activity from exports.

The Technological Environment Information Technology (IT) has had a lasting impact on businesses including: Computers Modems Cellular phones Internet etc.

The Technological Environment Term Definition Technology Everything from phones and copiers to computers, medical imaging devices, personal digital assistants, and the various software programs that make business processes more efficient and productive. Productivity The amount of output that is generated given the amount of input. E-Commerce The buying and selling of goods and services over the Internet.

How Technology Benefits Workers & You Efficiency means producing good and services using the least amount of resources. The more you can produce in any given period of time, the more money you are worth to companies. Companies look to technology to allow them to be more efficient, effective, and productive.

The Growth of E-Commerce One of the most important changes of recent years is the growth of e-commerce, the buying and selling of goods and services over the Internet. There are two major types of e-commerce: Business-to-consumer (B2C) Covered Bridge sells directly to the customer Business-to-business (B2B) Covered Bridge sells directly to Sobey’s Traditional businesses will have to learn how to deal with the new competition from B2B and B2C firms.

Using Technology to Be Responsive to Customers The businesses that are most responsive to customer wants and needs will succeed. Bar codes can be used to tell retailers what product you bought, in what size and colour, and at what price. The information is stored in a database. Unfortunately, the gathering of personal information about people has led to identity theft. Identity theft is obtaining personal information about a person and using that information for illegal purposes.

The Competitive Environment When developing their strategies, companies must consider the factors that drive competition. Entry Additional producers increase industry capacity and tend to lower prices. Power of Buyers & Suppliers Exist when they are few in number, there are low switching costs, or the product represents a significant share of the buyer’s total cost. Existing Rivalries & Substitutes Competitive pressure among existing firms depends on the rate of industry growth.

Competing by Exceeding Customer Expectations Companies have to offer both high-quality products and outstanding service at competitive prices (value). A customer-driven organization is Disney amusement parks. Adventures by Disney - Norway Successful organizations must now listen more closely to customers to determine their wants and needs, then adjust the firm’s products, policies and practices to meet those demands.

Competing by Restructuring and Empowerment Empowerment is giving front-line workers the responsibility, authority, and freedom to respond quickly to customer requests. To implement a policy of empowerment, managers must train front-line people to make decisions within certain limits, without the need to consult managers. Empowering employees leads to developing entirely new organizational structures to meet the changing needs of customers and employees.

Research Questions What is the Competition Act and how does it benefit small to medium sized businesses? How does technology benefit workers and customers? When developing business strategies, companies must consider the factors that drive competition. What are the three factors a business owner should consider. What is empowerment? Name a local company that encourages employee empowerment.

The Social Environment The Canadian population is going through major changes that are dramatically affecting: How people live Where the live What they buy and How they spend their time.

The Social Environment Term Definition Demography The statistical study of the human population with regard to its size, density, and other characteristics such as age, race, gender, and income. Baby-boom echo A demographic group of Canadians that were born in the period from 1980 to 1995; the children of the baby boomers. Baby boomers A demographic group of Canadians that were born in the period from 1947 to 1966.

Population Distribution By Age Group

Millennium Business Moguls Age 16 to 33

Managing Diversity Canada has a strong multicultural population. From 1996 to 2001 more than 1.2 million immigrants entered Canada. Companies have responded to this diverse customer base by hiring a more diversified workforce to serve them. Today, more than 75% of Fortune 1000 companies have some sort of diversity initiative.

Families Two-Income Families Single Parents Approximately 54% of all families in Canada are made up of dual-income earners. The high costs maintaining a comfortable lifestyle and the cultural emphasis on “having it all” have made it difficult if not impossible for households to live on just one income. The growth of single-parent households has increase to almost 16% in 2001. It is a tremendous task to work full-time and raise a family. Single parents have encouraged businesses to implement programs such as family leave and flextime.

The Global Environment Important environmental changes in transportation and communication have been the growth of international competition and the increase of free trade among nations. Better technology, machinery, tools, education, and training enable each worker to be more productive. In 2002, the federal government launched a ten- year innovation strategy which “aims to move Canada to the front ranks of the world’s most innovative countries.” Companies such as Bombardier are as good as or better than competing organizations anywhere in the world.