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Lecture 2

BUSI 1800 - week 2.docx

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Carleton University
BUSI 1800
Richard Clayman

BUSI 1800 – Week 2, Chapter 2 The Environment of a Business External environment - Factors beyond an organization’s boundaries that might affect it - Organizational boundary – what separates an organization from its environment - PESTEL o Political o Economic o Socio-demographic o Technological o Environmental o Legal/regulatory - Economic growth is required under capitalism o Aggregate output and standard of living  Measure of economic growth  Total quantity of goods and services produced by an economic system over a given period o GDP  Values of all goods and services produced by a national economy within a given period through domestic factors of production o GNP  Value of all goods and services produced by a national economy within a given period regardless of production location o Productivity  Measure of economic growth that compares the production with required resources o Balance of trade o National debt  How much money the govt owes to its creditors - Real growth rates – adjusting for inflation and currency fluctuations - GDP per capita - real GDP – includes price associated with the volume produced - purchasing power parity - threats to economic stability o inflation o deflation o unemployment - CPI measures changes in the prices of typical products purchased by consumers - Stagflation – a period of slow economic growth accompanied by relatively high unemployment UNEMPLOYMENT - Level of joblessness within country - Types of unemployment o Frictional o Seasonal o Cyclical o Structural - Fiscal policies are about how the govt collects and spends its revenues - Monetary policies look at the size of a nations monetary supply o High interest rates lead to tight monetary policy o Low interest rates lead to easy monetary policy Tech Environment - Technology / R&D - Product and service technologies o Technologies employed for creating products – both physical and services – for customers o Tech transfer – getting tech out of a lab and into the market place Political-Legal environment - Relation between business and government - Pro or anti business sentiment - Political stability - International relations Socio-cultural environment - Customs, values, attitudes and demographic characteristics of the society in which an organization functions - Customer tastes and preferences and how they vary - Ethical compliance and responsible business behaviour are crucial concepts The business environment Important issues: - Value of the Canadian dollar - Skilled labour shortage - The environment Porter’s 5 Forces o Relative size of competitors (balance) A model used to see the competitive situation in an industry o Industry growth rate - Rivalry among existing competitors o Fixed costs vs. variable co
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