copyright © 2006 pearson education canada inc. 2-1 chapter 2 understanding the environments of...

2-1

Copyright © 2006 Pearson Education Canada Inc.

Chapter 2Chapter 2

Understanding the Environments of Business

2-2 Copyright © 2006 Pearson Education Canada Inc.

Learning ObjectivesLearning Objectives

Explain organizational boundaries and multiple organizational environments

Explain the importance of the economic environment and identify the factors to evaluate the performance of an economic system


Learning ObjectivesLearning Objectives

Discuss the current economic picture in Canada

Describe the technological, political-legal, and socio-cultural environments and their impact on business

Identify emerging challenges and opportunities in the business environment


Organizational Boundaries Organizational Boundaries

& Environments& Environments

External environment Everything outside an organization’s

boundaries that might affect it

Organizational boundary That which separates the organization from its environment


Dimensions of the External Dimensions of the External EnvironmentEnvironment


The Economic The Economic Environment Environment

The conditions of the economic system in which an organization operates

Key economic factors: Economic growth Economic stability Full employment



Economic growth

Aggregate output

Standard of living

Gross domestic output

Productivity



Economic stability

Inflation

Measuring inflation: the CPI

Deflation

Unemployment



Full employment

Frictional unemployment

Seasonal unemployment

Cyclical unemployment

Structural unemployment


Economic GrowthEconomic Growth

Business cycle The typical pattern of short-term ups

and downs (expansions and contractions) in an economy

Four phases: peak, recession, trough and recovery


Economic GrowthEconomic Growth Aggregate output Measure of economic growth Total quantity of goods & services

produced by an economic system during a given period

Standard of living Total quantity & quality of goods &

services that a country’s citizens can purchase with their currency


Measuring Economic Measuring Economic GrowthGrowth

Gross domestic product (GDP) Value of all goods & services produced

within a given period by a national economy through domestic factors of production

Gross national product (GNP) Value of all goods & services produced

by a national economy within a given period regardless of production location



Real growth rates

Adjust for inflation & currency fluctuations

GDP per capita

Real GDP

Nominal GDP

Purchasing power parity



Productivity Measure of economic growth that compares how

much a system produces with the resources needed to produce it

Balance of trade The total of a country’s exports minus its imports

National debt The total amount of money that a government owes

its creditors


Economic StabilityEconomic Stability

Condition in an economic system in which the amount of money available and the quantity of goods and services produced are growing at about the same rate

Threats to economic stability Inflation Deflation Unemployment


InflationInflation

Inflation Widespread price increases in an economic

system

Consumer price index (CPI) Measures the prices of typical products

purchased by consumers

Deflation A period of generally falling prices


Recent CPI FiguresRecent CPI Figures


UnemploymentUnemployment

Level of joblessness among people actively seeking work in an economic systemWhen unemployment is low, there is a shortage of labour available, and wages tend to rise


Full EmploymentFull Employment

Everyone who wants to work has an opportunity to do so In reality, full employment is impossible, because there will always be people looking for work


Managing the Canadian Managing the Canadian Economy Economy

Fiscal policies Policies whereby governments collect and

spend revenues

Monetary policies Policies whereby the government controls

the size of the nation’s money supply


The Business EnvironmentThe Business Environment

Three most serious issues facing Canadian business: Globalization/international

competitiveness Taxation Productivity


The Industry EnvironmentThe Industry EnvironmentPorter’s five forces model is used to analyze the competitive situation in an industry Rivalry among existing

competitors Threat of potential entrants Suppliers Buyers Substitutes


Redrawing Corporate Redrawing Corporate BoundariesBoundaries

The most successful firms are getting

leaner by focusing on their core

competencies

Core competencies The skills and resources with which an

organization competes best and creates the

most value for owners


Emerging Challenges and Opportunities in the Business Environment

Outsourcing Paying suppliers & distributors to

perform certain business processes

Vertical Integration Strategy of owning the means by

which an organization produces goods or services


Emerging Challenges and Opportunities in the Business Environment

Viral marketing Using the internet and word-of-mouth

marketing to spread product information

Business process management Moving away from department-oriented

organizations toward process-oriented teams

copyright © 2006 pearson education canada inc. 2-1 chapter 2 understanding the environments of...

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