Dynamic Business Environment - Dynamic Business Environment

Dynamic Business Environment

1. Prepared by Michael Wade, Seneca College CHAPTER 1 The Dynamic Business Environment

2. Learning Objectives After you have read and studied this chapter, you should be able to: LO1 Illustrate the importance of key business fundamentals to wealth generation. LO2 Identify business stakeholders and their importance to non-profit organizations and business activities. LO3 Explain how entrepreneurship is critical to the wealth of an economy, and list the five factors of production that contribute to wealth.

3. Learning Objectives, cont’d. LO4 State the six elements that make up the business environment and explain why the business environment is important to organizations. LO5 Give examples of how the service sector has replaced manufacturing as the principal provider of jobs, and why manufacturing remains vital for Canada.

4. LO1 Business Fundamentals Goods: tangible products such as computers, food, clothing, cars and appliances. Services: intangible products (i.e. products that can’t be held in your hand) such as education, health care, insurance, recreation, and travel and tourism. Business: any activity that seeks to provide goods and services to others while generating a profit. Entrepreneur: a person who risks time and money to start and manage a business.

5. Revenues, Profits, and Losses Revenue: total amount of money received during a given period for goods sold and services rendered, and from other financial resources. Profit: the amount a business earns above and beyond what it spends for salaries and other expenses. Loss: when a business’s expenses are more than its revenues. Risk: the chance of loss, the degree of probability of loss, and the amount of possible loss (i.e., time and money)

6. Standard of Living and Quality of Life Standard of living: the amount of goods and services people can buy with the money they have. Quality of life: the general well-being of a society in terms of its political freedom, natural environment, education, health care, safety, amount of leisure, and rewards that add to the satisfaction and joy that other goods and services provide.

7. LO2 Responding to Various Stakeholders Stakeholders: all of the people who stand to gain or lose by the policies and activities of a business. Customers Employees Financial institutions (e.g., banks and credit unions) Investors (e.g., shareholders) Environmentalists Governments Suppliers Dealers (e.g., retailers) Surrounding community

8. Stakeholders

9. Changes in International Trading Patterns Offshoring: sourcing part of the purchased inputs outside of the country. Outsourcing: assigning various functions, such as accounting, production, security, maintenance, and legal work to outside organizations. This helps the company to be more competitive but may impact the local community because jobs may be lost. Insourcing: Assigning various functions that could to an outside organization to employees in the company.

10. Using Business Principles in Non-Profit Organizations Non-profit organization: An organization whose goals do not include making a personal profit for its owners or organizers. Revenues greater than expenses (surplus) are used to carry out the social or educational goals of the organization. Social entrepreneurs: use business principles to start and manage non-profit organizations and help address social issues. Non-profit organizations are run as regular businesses without the profit motive .

11. LO3 Entrepreneurship Versus Working for Others Advantages of working for others include: risk is assumed by others. workers receive benefits such as paid vacation time and health insurance. Entrepreneurs assume all the risk of starting and running a business. there may be great financial rewards, but many new businesses fail.

12. The Importance of Entrepreneurs and the Creation of Wealth Factors of Production include: Land ( or natural resources) Labour (workers) Capital goods such as machinery, tools, buildings. Money to purchase these goods is not considered a Factor of Production. Entrepreneurship Knowledge

13. The Five Factors of Production

14. LO4 The Business Environment The business environment includes the surrounding factors that either help or hinder the development of businesses. These factors include: legal economic technological competitive social global

15. Business Environment

16. The Legal Environment Regulations: restrictions that provincial and federal laws place on businesses with respect to the conduct of their activities. They exist to protect both consumers and businesses Governments encourage business through lower taxation and regulations affecting contracts, corruption, and illegal activities both domestically and internationally .

17. The Economic Environment The economic environment looks at income, expenditures, and resources that affect the cost of running a business. Economic indicators include: consumer spending, employment levels, and productivity. Currency fluctuations affect imports and exports. A lower Canadian dollar relative to the US dollar makes our exports cheaper, therefore positively impacting companies that produce goods and services for export. When the Canadian dollar is high relative to the US dollar, our exports become more expensive, therefore loosing their competitive advantage. Entrepreneurship is promoted by governments by allowing private ownership of businesses. Not all countries do this.

18. The Technological Environment Technology : Everything from phones and copiers to computers, mobile devices, medical imaging machines, and the various software programs and apps that make business processes more effective, efficient, and productive. Productivity: the amount of output that is generated given the amount of input (e.g., hours worked. Higher productivity means employers need fewer workers leading to higher unemployment.

19. The Growth of Electronic Commerce (E-Commerce) E-commerce encompasses: the buying and selling of goods and services over the Internet. B2C: business to consumer B2B: business to business E-business refers to: any information system or application that empowers business processes.

20. Using Technology to be Responsive to Customers Database: an electronic storage file for information. Identity theft: obtaining an individual’s personal information, such as their Social Insurance Number and credit card numbers, for illegal purposes. In Canada federal privacy laws have been created. You can protect yourself by restricting whom you give personal information to, installing anti-virus and anti-spy software, and a firewall on your computer. You should monitor your credit report on a frequent basis.

21. Social Media Marketing The most common tools or platforms used by both consumers and organizations are social networking sites (e.g., Twitter and Facebook) blogs, wikis, podcasts and other shared media sites such as YouTube. Social networking sites are used to connect and communicate with current and potential customers. Crowdsourcing: using the expertise of a large group of people to solve a business problem.

22. The Competitive Environment Components of competition: entry, power of buyers, power of suppliers, existing competition and substitutes Companies compete by: exceeding customer expectations restructuring and empowerment Empowerment: giving front-line workers the responsibility, authority, and freedom to respond quickly to customer requests.

23. How Competition Has Changed Business Traditional Businesses Modern Businesses Customer satisfaction Delighting the customer * Customer orientation Customer and stakeholder orientation ** Profit orientation Profit and social orientation † Reactive ethics Proactive ethics ‡ Product orientation Quality and service orientation Managerial focus Customer focus *  Delight is a term from total quality management.  Bewitch and fascinate  are alternative terms. **  Stakeholders include customers, employees, investors, suppliers, dealers (e.g., retailers), and the community; the goal is to please  all  stakeholders. †  A social orientation goes beyond profit to do what is right and good for others. ‡   Proactive  means doing the right thing before anyone tells you to do it.  Reactive  means responding to criticism after it happens. 

24. The Social Environment Demography: the statistical study of the human population with regard to its size, density, and other characteristics such as age, race, gender, and income. Demographic shifts include: An aging population Changes in the workforce Diversity due to growing numbers of immigrants

25. Population Distribution by Age Group YEAR 0–4 5–19 20–34 35–64 65 AND ABOVE 2016 5.7% 16.3% 20.5% 41.2% 16.3% 2021 5.6% 16.5% 19.3% 40.1% 18.5% 2026 5.5% 16.9% 18% 38.8% 20.8% 2031 5.2% 16.8% 17.5% 37.7% 22.8% 2036 5% 16.5% 17.7% 37.1% 23.7% Source:  Adapted from “Population Projections for Canada, Provinces and Territories 2009–2036," Cat. No. 91–520–X, June 2010. Retrieved from http://www.statcan.gc.ca/pub/91–520–x/2010001/t370-eng.htm.

26. The Global Environment Important to all other environmental influences due to: increased growth of global competition. increased free trade among nations. development of efficient distribution systems. communication advances such as the Internet. improved living standards due to globalization.

27. How Global Changes Affect You Businesses expand to serve global markets. New jobs are created in both manufacturing and service industries. Rapid changes create a need for continuous learning. More job opportunities for graduating students.

28. The Ecological Environment Climate change: the movement of the temperature of the planet up or down over time. Current issue is global warming. Greening: a trend of saving energy and producing products that cause less harm to the environment. Sustainability: development that meets the needs of present and future generations.

29. LO5 The Evolution of Canadian Business Due to increased efficiencies, global competition, and improved technology, jobs are being lost in the manufacturing sector. The number of Canadian farms has dropped due to technology, and have been replaced by some larger farms, and some small but highly specialized farms. Many workers who cannot find work may need retraining and further education to become qualified for new and existing jobs.

30. Importance of the Services-Producing and Goods-Producing Sectors in Canada Number of Employed (thousands) Total Workforce (percent) TOTAL EMPLOYED IN CANADA 18,464 100.0 Services-Producing Sector 14,541 79 Trade 2,809.6 15.2 Health Care and Social Assistance 2,383.2 12.9 Professional, Scientific & Technical Services 1,448.8 9.9 Goods-Producing Sector 3,876 21 Manufacturing 1,724.8 9.3 Construction 1,409.3 7.6 Forestry, Fishing, Mining, Quarrying, Oil & Gas 329.6 1.7 Source:  Statistics Canada. Employment by Industry and Sex, 2017, accessed May 19, 2018, http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/labor10a-eng.htm.

31. Progress in Service Industries Unlike the past, the services-producing sector now employs almost 79 percent of Canada’s working population. Technological improvements have helped businesses reduce their workforce, while increasing their efficiency. Large manufacturing companies are outsourcing services, creating more opportunities for service oriented people. Women entering the workforce have increased demand for services such as day care, food preparation and household maintenance.

32. What is the Service Sector? There’s much talk about the service sector, but few discussions actually list what it includes. Here are some examples of businesses in the service sector. (See Figure 1.9) Amusement and Recreation Services Amusement parks, Ice skating rinks, Bowling alleys Business Services Collection agencies, Window cleaning, Public relations Legal Services Lawyers, Paralegals, Notary public Educational Services Schools, Libraries, Online schools Health Services Chiropractors, Nursery care, Dentists

33. Chapter Summary LO1 Profit is money earned over and above expenses. Risk is assumed in the pursuit of profit. LO2 Stakeholders are affected by what businesses do. Non-profit organizations raise funds and use them to support charitable activities. LO3 Entrepreneurs risk time and money to start and manage a business. The five Factors of Production include: land, labour, capital goods, entrepreneurship, and knowledge.

34. Chapter Summary cont’d. LO4 The six elements of the business environment include: legal, economic, technological, competitive, social, and global. LO5 The service sector has replaced manufacturing as the principal provider of jobs, although manufacturing remains vitally important for Canada.