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Textbook Summary Chapter 2 Concise notes following the textbook, without the extra examples, stories and data sets. Purely what you need to know!

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Rotman Commerce
John Oesch

21.9.10 RSM 100 Y1 Chapter 2 Organizational Boundaries and Environments External Environment: Everything outside an organization’s boundaries that might affect it. Organizational Boundaries: Separates the organization from the environment. Example: A supermarket has its physical boundaries. However, even within the structure, there are distributors who bring in the products the supermarket sells. These distributors are usually the “environment” but when they are within the physical structure of the supermarket, they are part of the business and therefore, the organization. Multiple Organizational Environments: External environments are, in reality, not single entities. There are multiple environments. 21.9.10 The Economic Environment Economic Environment: The conditions of the economic environment the business operates in. Economic Growth: Increase in total output. Ways to Measure Growth: 1. The Business Cycle 2. Aggregate Output and Standard of Living Standard of living only improves through increases in productivity 3. Gross Domestic Product & Gross National Product a. GDP per capita: PER HEAD b. Real GDP: ADJUSTED FOR INFLATION c. Purchasing Power Parity: PRINCIPLE THAT EXCHANGE RATES ARE SET SO PRICES OF SIMILAR GOODS IN FOREIGN GROUNDS ARE ABOUT THE SAME. 4. Productivity Any activity that adds value to some input, transforming it into an output for a customer. There are factors that hinder or help the growth of an economy. a. Balance of Trade: Balance of Exports – Imports. b. National Debt: The money a country owes to its creditors. Economic Stability: Amount of money available and the quantity of goods and services produced grow at the same rate. Threats: 1. Inflation: Price increase throughout the economy. a. Measuring Inflation: Consumer Price Index – A basket of typical family consumption. Changes of these products are measured annually to see price differences. 2. Deflation: Price decrease through the economy. 3. Unemployment: People without jobs who are actively seeking jobs. 21.9.10 Managing the Canadian Economy 1. Stabilization Policy 2. Fiscal Policies: Tax regulations 3. Monetary Policies: Money supply, Interest rates The Technological Environment Technology: All the ways firms create value for their constituents. Research and Development (R&D) 1. Basic (Pure) R&D: Improving knowledge in an area without primarily focusing on whether any discoveries that might occur are immediately marketable. 2. Applied R&D: Focusing specifically on how a technological discovery can be put to use to produce goods and services to be sold in the marketplace. Product and Service Technologies The use of technology in both manufacturing and service sectors to improve the production of goods and services. R&D intensity: the percentage of company sales revenue that go to fund R&D. Technology Transfer, the process of getting new technology into the marketplace, generates more profits. Process Technology: Used to improve a firm’s performance internally (accounting, managing, activity reports, etc) and to create better relationships with customers and suppliers. 1. Enterprise Resource Planning (ERP): Large-scale information system for organizing and managing a firm’s processes across product lines, departments, and geographic locations. 21.9.10 The Political-Legal Environment The government and business relationship in the form of government intervention. Government can restrict competition. Political stability important to firms setting up their facilities abroad, as they need political stability to be sure that their business will not fail. The Socio-Cultural Environment
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