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ADMS1000 Mid Term Exam Review.docx

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Administrative Studies
ADMS 1000
Eytan Lasry

ADMS 1000 - Mid Term Exam Review - Sunday October 13 , 2013 - 40% Introduction (Week 1) • The External Context of business: • What are the different external (7) forces and how do they influence organizations? • The Canadian Context • Textbook Chapter 1 (Case: Sam the Record Man) Economic Forces > Influence on present and future prospects of an organization > Organizations forced to adapt to changing economic conditions > Downsizing leads to laying off employees (affect employee relationship)  GDP (Gross Domestic Product) – total value of a country’s output of goods and services in a given year, general trend is to reduce share of GDP  GDP annual growth rate of 2.5% until 2025  Employment rate increased sharply in the early part of the 1990s. Competitive Forces > Globalization – floodgates for competitors – leads to innovation > The number of competitors and nature of competition dictate changes in organization strategy  Canada focuses on extraction and processing of natural resources , believed we have to develop entrepreneurial and technological aspect Technological Forces > Affects how an organization obtains resources and how it competes > Relationship between technological and industry evolution > Change in technology is constant and permits organizational change > Benefit of technology – increased flexibility in work arrangements as employee can work at home  Canada is resources based – agriculture, mining, forestry, fisheries, minerals and energy (affected by any fluctuations in the global or world market)  Employment shifted away from agricultural sector because of technological advances and moved to manufacturing and service sectors  Productivity Improvement – increased mechanization of manufacturing facilities reduced need for human labor in this sector  Knowledge worker – importance of higher education and value of transferable skills Labor Forces > Multitude of cultures and demographic backgrounds > Immigrants – 70% of total growth of the labor force in recent years > Women account for almost half the employed work force and union members > Growing presence of older workers > Organizations must understand demographic conditions  Demographics comprise the characteristics of a population (e.g. age, sex, income, employment, status etc.)  Small market in Canada – difficult for domestic manufacturers capable of competing on world markets  Baby boom affected housing, furnishing, children’s clothing industries  More women, races and nationalities in the workforce Global Forces > Embedded in general economic, political, technological or societal forces > Global events impact local organizations (example 9 11) > International trade agreements – change the nature and functions of businesses > Global forces – domestic and foreign competitors, domestic and foreign workers, domestic and foreign industry, government, national cultures and economies  Trade agreements with U.S and influence defines our business sector  Canada exports over 40% of its total annual production (GDP)  Foreign Ownership is huge in Canada Political Forces > Influence specific and general levels - Deregulation and privatization > Political environment of business dictates changes in how business competes, what services it offers and how they can be offered > Telecommunications, banking, energy, aerospace – affected by political forces > Recently – reduction of government control and influence in business sector  Canada has a mixed system – capitalist economy with gov’t playing important role Societal Forces > Human rights, organizational justice > Greater laws governing fairness in the workplace > Aging population suggests greater emphasis needs to be placed -> health care  Canada is expected to be the best country in the world in which to conduct business in the coming years, invests a lot of money into education Sam the Record Man attached as rough copy The Economic Context (Week 2) • The Economic Context: • The Factors of production • Types of economic systems • Types of competition • Economic indicators • Textbook chapter 2 Factors of Production – basic resources that a country’s businesses use to produce goods and services Labor • Also called human resources • Labor is the mental and physical capabilities of people Capital • Refers to the funds needed to start a business or keep it operating • Examples: personal investment by owners, sale of stock to investors, profits from the sale of products, funds borrowed from banks Entrepreneurs • People who accept the opportunities and risks involved in creating and operating businesses Natural Resources • All physical resources such as land, water, mineral deposits, trees Information Resources • Includes specialized knowledge and expertise of people who work in businesses • Creation of new information or the repackaging of existing information for new users Types of Economic Systems manages the factors of production in different ways Command Economy • 2 basic forms are communism and socialism • Communism – system in which gov’t owns and operates all sources of production • Socialism – gov’t owns and operates only selected major industries Market Economies • B2C and B2B exchanges take place without much gov’t involvement • Buyers and sellers enjoy freedom of choice • Input market – firms buy resources from households • Output market – firms supply goods and services in response to demand on the part of the households • Political basis for free market economy is capitalism – private ownership of the factors of production and encourages entrepreneurship by offering profits as an incentive • Private Property – ownership of resources used to create wealth • Freedom of choice – sell your labor to any employer • Profits – profits influence choices of goods or services to product • Competition – motivates them to operate those business efficiently Mixed Market Economies • Privatization – converting government enterprises into privately owned companies • Nationalization – converting private firms into government-owned firms • Gov’t intervenes in economic system to stabilize it Types of competition have 4 basic degrees within a private enterprise system Perfect Competition • Undifferentiated products • Infinite buyers and sellers • Perfect information • No entry/exit barriers • No market power - firms are price-takers • e.g. commodities, financial assets Monopolistic Competition • Products are close but imperfect substitutes • Many firms • Some market power to set prices • e.g. restaurants, dry-cleaning Oligopoly • Small number of firms • High entry barriers • Firms are price setters • e.g. aircrafts (duopoly), beer brewing, wireless Monopoly • Only one producer • High market power to set prices – maximum profits • Absolute product differentiation • Absolute barriers to entry • e.g. Microsoft (quasi-monopoly), LCBO (government monopoly), Enbridge (natural monopoly) Economic Indicators Productivity • measure of economic growth, compares how much a system produces with the resources needed to produce it Balance of Trade • economic value of all products that a country exports minus economic value of its imported products National Debt • amount of money that the gov’t owns its creditors Economic Stability Stability • condition in which the amount of money available in an economic system and quantity of goods and services produced in it are growing at about the same rate Inflation • amount of money injected into an economic system outstrips the increase in actual output • people have more money to spend, but there will be the same quantity of products available for them to buy Deflation • (falling prices) is evident when the amount of money injected into an economic system lags behind increases in actual output • Prices may fall because industrial productivity is increasing and cost saving are being passed on to consumers or because consumers have high levels of debt and are therefore unwilling to buy very much Unemployment • Level of joblessness among people actively seeking work • Employment is low – shortage of labor available for businesses Textbook chapter 2 The Societal Context (Week 3) Corporate Governance and Social Responsibility (CSR) • The Corporate form of organization • What is it? Benefits and drawbacks • The Components of corporate governance • Shareholders, Board of Directors, Managers… • The problem of agency (Principal – Agent) • What is it and why does it exist? • Solutions: Aligning incentives through stock options… + Effective monitoring by independent Board of Directors Advantages of Corporation • Access to capital • Infinite Life • Limited Liability • Transferability and liquidity of ownership Disadvantages of Corporation • Double taxation • Costs and disclosure • Principal/Agent Problem – GOVERNANCE! Corporate Charter • Provides right of & terms for existence Shareholders • Elect the board of directors • Degree of control relates to number of shares held and corresponding voting rights Board of Directors • Elected by shareholders to oversee organizational management • Issues arise when board is ineffective due to lack of independence because of insiders, conflicts of interests (CEO = chairman) Managers • People hired by the board to run the company and report to board of directors • Establishes organization policy us
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