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Commerce 1B03 Notes.doc

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Rita Cossa

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Commerce 1E03: Business Environment and Organization
January 11, 2012
Chapter 1: Managing Within the Dynamic Business Environment 2
·Business: any activity that seeks to provide goods and services to
others while operating a profit.
·Starting a business can be extremely risky behavior.
·Business provides people the opportunity to be wealthy.
·Business are not solely there just to help entrepreneurs to make mon-
ey, they also exists to provide people with necessities such as food,
clothing, housing, medical care, transportation, etc.
·Profit: the amount a business earns above and beyond what it spends
for salaries and other expenses.
·Entrepreneur: a person who risks time and money to start and man-
age a business.
·Risk: the chance an entrepreneur takes of losing time and money on a
business that may not prove profitable.
·Revenue: the total amount of money a business takes in during a giv-
en period by selling goods and services.
·Loss: when a business’s expenses are more than its revenues.
·Business failures or closures are not always bad, but most business
failures are due to poor management or problems associated with cash
·When some companies file for bankruptcy, it means that the business
is unable to pay outstanding debts, and after a lot of legal paperwork,
the assets that the company holds will go towards paying its debts,
and after all of the assets are spent, the debtor is relieved of the debt
obligations incurred prior to filing for bankruptcy.
·Even companies that do manage to make a profit, none of those profits
are the same amount; the companies that make more risks usually
make more profit.
·As an entrepreneur, you need to read business articles and talk to busi-
ness professionals to find a happy medium between risk and profit that
suits you best. The more risks you take, the more successful you may
become, but be wary, because a risk is a risk, and it could turn out
·Stakeholders: all the people who stand to gain or lose by the policies
and activities of a business (customers, employees, financial institu-
tions (i.e. banks and credit unions), investors (i.e. stock holders), envi-
ronmentalists, government (i.e. federal, provincial, and municipal), etc.
The products, policies, and practices of businesses affect all of these
groups, and their concerns need to be addressed by the business. Usu-
ally stakeholders will conflict with each other, and the business needs
to address these conflicts and try its best to resolve them for the sake
of the business.
·A big challenge for business’s to handle is balancing the needs of all
the stakeholders (ex. the need for businesses to make profits must be
balanced against the needs of employees for sufficient income).

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·Offshoring: sourcing part of the purchased input outside of the coun-
·Outsourcing: assigning various functions, such as accounting, produc-
tion, security, maintenance, and legal work to outside organizations.
·Outsourcing decisions affect the boundaries of the firm – what produc-
tion takes place within the firm and what is purchased from outside the
·Changes in offshoring may be, but are not necessarily, related to
changes in outsourcing.
·A lot of companies are now outsourcing a lot of their research and de-
velopment and design functions, which is a risky decision, giving differ-
ent countries your research, which they could potentially use to pro-
duce their own competitive products.
·The US feels safe to offshore their products to Canada because they
know they will receive the same education, a concern for privacy and
individual rights, as well as polite, friendly, and helpful people at a less-
er cost – this is most often the case when it comes to software develop-
ment related to business intelligence, industry-specified applications,
business process outsourcing, and customer-service oriented call cen-
·Non-Profit Organization: an organization whose goals do not include
making a personal profit for its owners and organizers (ex. schools,
hospitals, and charities).
·Non-profit organizations make a contribution to the welfare of society.
·Non-profit organizations do strive towards financial gains, but these
gains are not for the business, they are for meeting the social or edu-
cational goals that the organization has set.
·Social Entrepreneurs: people who use business principles to start
and manage non-profit organizations and help countries with their so-
cial issues.
·If you want to start work for a non-profit organization, you still need
business skills such as information management, leadership, market-
ing, and financial management.
·Starting any business is risky, and once an entrepreneur has started a
business, there is usually a need for good managers and others to work
to keep the business running.
·There are two ways to succeed in business
1. Rise up through the ranks of large companies such as Royal Bank of
Canada or Manulife Financial. There is an advantage to this as
somebody else assumes the entrepreneurial risk and provides you
with benefits like vacation time and health insurance.
2. Start your own business and become an entrepreneur. This choice
can make you extremely wealthy, but it is extremely risky. You need
to be brave and realize that you may fail, as many small businesses
fail every year. You also won’t receive any benefits; you will have to
provide them yourself.
·Business’s grow and prosper in a healthy environment, which results in
a high quality of life.

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·The right business environment is the foundation of social progress,
good schools, clean air and water, good health care, and low rates of
·There are five factors that contribute to wealth of a country, and they
are known as the factors of production.
·Factors of production:
1. Land (or natural resources)
2. Labour (workers)
3. Capital Goods (this includes machines, tools, buildings, or whatever
else is used in the production of goods. It does not include money.
Money is used to buy factors of production – it is not a factor itself)
4. Entrepreneurship
5. Knowledge
·There used to only be 4 factors of production, but according to Peter
Ducker, the most important factor of production is and always will be
·Information is not the same as knowledge.
·Even if countries have some of the factors of production, it will not
make them wealthy. What makes countries wealthy is the combination
of entrepreneurship and the effective use of knowledge.
·Business Environment: the surrounding factors that either help or
hinder the development of business.
·There are 6 elements in the business environment, and they are:
1. The legal and regulatory environment
a. Tax laws
i. The government sets low taxes on businesses so that
entrepreneurs will get a high return on investment
(ROI), so that entrepreneurship is more attractive.
b. Contract laws
i. People are a lot more willing to start businesses if the
risk is great, and there are acts set up by the govern-
ment that help lessen the risk of starting a business
(ex. Canada Small Business Financing Act, Consumer
Packaging and Labeling Act, Trade Union Act, etc.)
ii. Each legislation authorizes an agency to write regula-
tions that interpret the law in more detail and indicate
how it will be implemented and enforced.
iii. Regulations: rules or orders made by the govern-
ment to carry out the purposes set in statutes. These
regulations exist to help protect the consumer and the
c. Elimination of corruption
2. The economic environment
a. Income and expenditures
b. Currency shifts
i. A currency shift will make either the dollar stronger or
weaker compared to other countries, and that will im-
pact our imports and exports.
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