Understanding Canadian Business Chapter 1 The Business Environment

The business environment consists of the surrounding factors that either help or hinder the development of businesses. Business Growth & Job Creation Legal & Regulatory Environment Economic Environment Technological Environment Social Environment Competitive Environment

Today’s Dynamic Business Environment Legal and Regulatory Environment 1.Freedom of ownership 2.Contract laws 3.Elimination of corruption Economic Environment 1.Tradeable currency 2.Minimum taxes 3.Imports and exports 4.Employment levels & productivity Technological Environment 1. Information and technology 2. Databases 3. Barcodes 4. The Internet Social Environment 1. Diversity 2. Demographic changes 3. Family changes Competitive Environment 1. Degrees of competition 2. Components of competition 3. Stakeholder recognition

The Business Environment Businesses grow and prosper in a healthy environment. The results are job growth and the wealth that makes it possible to have a high quality of life. The wrong environmental conditions lead to business failure, job losses and poor quality of life Creating the right business environment is the foundation for social progress of all kinds, including good schools, clean air and water, good health care and low rates of crime. Companies should be aware of these elements and make it a practice to continuously assess the business environment for changes in trends. These 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 its elected officials. Competition Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small- and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to promote 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 Few technological changes have had a more comprehensive and lasting impact on businesses than the emergence of information technology (IT) that includes: – Computers – Modems – Cellular phones – Internet etc.

The Technological Environment TermDefinition TechnologyEverything 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. ProductivityThe amount of output that is generated given the amount of input. E-CommerceThe 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: 1.Business-to-consumer (B2C) 2.Business-to-business (B2B) 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. A scanner at the checkout counter can read that information and put it into a database. – Database is an electronic storage file in which information is kept; one use of databases is to store vast amounts of information about customers. 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 Today’s customers are very demanding. Companies have to offer both high-quality products and outstanding service at competitive prices (value). Customer-driven organizations include Disney amusement parks and Moto photo. 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.

Progressive Assessment What are four ways in which the government can foster entrepreneurship? How does technology benefit workers and customers? Describe the components of competition. What is 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 TermDefinition DemographyThe statistical study of the human population with regard to its size, density, and other characteristics such as age, race, gender, and income. Baby-boom echoA demographic group of Canadians that were born in the period from 1980 to 1995; the children of the baby boomers. Baby boomersA demographic group of Canadians that were born in the period from 1947 to 1966.

Population Distribution By Age Group

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 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. Single Parents The growth of single-parent households has increase to almost 16% in 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 Two important environmental changes have been the growth of international competition and the increase of free trade among nations. Two things that have led to more trade are the improvements in transportation and communication. As well, 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 and Research In Motion are as good as or better than competing organizations anywhere in the world.BombardierResearch In Motion