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ADMS 1000 - midterm notes.docx

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York University
Administrative Studies
ADMS 1000
Eytan Lasry

ADMS 1000 – MIDTERM EXAM NOTES Chapter 1: The Context of Business: A Framework For Study • What makes a business environment? And what factors make it successful or fail? • What is an organization? o 3 types: Public/Gov’t – Private/NGO – Private o What are the common characteristics?  Orgs are social entities – made of people, involve human interaction  Orgs are created to achieve goals -  Orgs interact with the environment • An organization can be considered as a social construct – an organization is a more of an abstract concept • An organized body, system or society  System is interdependent element working together  Open system are influenced and I and dependent on their surrounding area  Organizations environment includes all elements outside the organization itself o These element can potentially influence or affect the organization in someway  Organizations are dependent on their environment  Organizations are created in response to environmental need o With out the right input they will not survive o If they can’t generate what is needed by the environment they will not survive  External context of business is their environment  Environment defined as o Organizations specific or task environment  Things that have direct influence on ability to obtain resources and generate outputs o Organizations general environment What are the different external (7) forces and how do they influence organizations?  Shape the specific environment • Economic • Competitive • technological o central role in function, how it obtains resources and how it competes • labour • societal • global • political forces o deregulation  Both of those exist in 2 spheres o Specific sphere or environment  Environmental area o General sphere or environment Canadian context Economic forces  Indicators of the health of the Canadian economic scene o One is GDP  Total value of country’s output  Future health is continually subject to speculation Competitive forces  Happens at two levels for any organization  Organizations have their own set of competitors  Both domestic and foreign competition  It demands cause for accelerated innovation  We have an open economy  We mainly trade our resources internationally  Canada focused mainly on extracting and processing natural resources technological forces  Central role in how an organization functions and how it obtains resources  Change in technology is constant and is a force that permits and demands organizational change  traditional resource based economy  influenced by world market  in Canada we need to catch up in area of technology and innovation  knowledge worker – increasing importance of higher education and transferable skills labour forces  demographics  we have a small market making it hard to develop domestic manufacturing  40% more women are in the work force than there were in the 20s o now it’s at 60% global forces  can be embedded in economic, political, technological and societal forces  it create increasing nmber of player n a industry o domestic and foreign competitors, workers industry etc.  adds another dimension to business  proximity to the USA influences our business environmet  we export 40% or total annual GDP and 85% of that goes to the USA  key component to our international business activity is whether we are exporting more than importing  foreign ownership in Canada is relatively high in comparison to world standards  branch plants o Canadian subsidiaries produce or market products, they are generally designed outside of Canada with imported components Political forces  Mixed economic system o Capitalist economy but government plays a big role  On going issue of concern about how the government should help businesses compete  Deregulation and regulation Societal forces  Nature of society in important part of an organizations environment  Business must respond to society o Consumer taste change  Most of Canada’s economic strength lies in it’s diversity of natural resources o We supply natural commodities world wide  Understanding the business environment is the only way to get a sense of where we are headed Sam the Record Man 1. What factors inside this organization may have contributed to the company’s demise? 2. What factors outside the organization may have contributed to the company’s demise? competitive forces, societal forces? 3. Which factor do you think played the greatest role in this bankruptcy: factors inside or factors outside the organization?And why? Chapter 2 – the economic context  Nature of economic systems  Business – an organization that produces or sells goods and services in order to make profit o Profit – what remains after business expenses  The prospect of earning profit is what encourages people to start and expand their business  Non-profit organizations – don’t try to make profit rather they use funds to provide services  It is the kind of economic system the defines the country  An economic system allocates a nation’s economic resources among citizens  Economic systems differ in terms of factors of production o Factors of production – who owns and controls the resources Factors of production (5)  Labour o People who work for a company o First factor of production  Capital o Funds need to start and keep a business running and growing  Entrepreneurs o People accept the risk and opportunities in creating a business  Natural resources  Information resources o Specialized knowledge and expertise of people who work for business Economic systems (4)  Different system manage different factors of production in different ways  Command economies o Relies on centralized government o Gov. controls most or all factors of production and makes most or all of production and allocation decisions o Communism  Government owns and operates al sources of production o Socialism  Government own and operates only select major industries but small businesses are privately owned  Market economy o Individuals control production and allocation decisions through supply and demand o Market – mechanism of exchange between buyers and sellers of a particular good or service  Pure market economy o Input market get resources from the household who supply them, then the business produces what the household wants  Mixed market economy o Combo of command and market economies o Most countries rely on this form o Privatization is began  Converting government owned companies to privately owned o Nationalization  Converting private firms to government o Governments intervened in the economy to attempt to stabilize but the now have higher deficits  Understanding Canadian economic systems is crucial to understand Canadian business  Decisions of what to buy and sell are determined by forces of supply and demand  Demand willingness and ability for people to purchase products o Law of demand - as buyers buy more prices drop  Supply willingness of producers to offer good and services o Law of supply producers offer more as prices rise  Equilibrium point – right combination of supply and demand  Market economies rely on private enterprise o Allows individuals to pursue their own interests with minimal restriction  Requires 4 elements o Private property  Resource ownership which creates wealth o Freedom of choice  You can chose what you want, where u work, where you buy etc. o Profits  Lures people to entrepreneur ship for profits o Competition  Motivates efficiency  When one or more business wants same resources or customers  Forces businesses to products better and cheaper Degrees of competition  4 degrees in private enterprise o perfect  large number of small firms  almost identical product  both buyer and seller know prices of others  easy for firms to leave and enter  no one firm can influence prices • eg agriculture o monopolistic  fewer seller than above but many buyers  products a little more varied , or they seem to be  businesses can be large or small  easy to enter and leave market o oligopoly  small number of larger sellers  fierce competition  actions of one can influence market significantly  entry to difficult – large capital investment is required o monopoly  one producer  complete control over prices  only constraint is consumer demand  natural monopolies (hydro) • largely control and monitored by government  economic environment is the conditions an economic system operates in  aggregate output is the main measure of growth o total goods and services produced by an economic system during a given period of time  increase in aggregate out put is economic growth  when out put grow, out put per capita goes up and system provides more goods and services o this lead to a high standard of living ? economic indicators ? business cycle  growth pattern of short-term ups and downs – business cycle  4 phases o peak, recession, trough and recovery  recession – 2 consecutive quarters where economy shrinks o starts after peak  depression – when trough extend 2 or more years  GDP – total value of goods and services produced within a given period by a national economy through domestic factors of production o Goes up nation experiences economic growth o Measures all activity with in borders o Key measure of economic growth because it tracks economies performance over time  GNP – total value of goods and services produced by nations economy regardless of where factors of production are located  Real growth rates o Preferred method of calculating national income and output o The growth rate of GDP adjusted for inflation and changes in value of country’s currency o Growth is depends on output increasing at a faster rate than population  GDP per capita  Real GDP ????  Purchasing power parity o Calculate real GDP and account for changes in currency and price changes o When adjustment is made account for both GDP an purchasing power parity  Principle of exchange rates o Give us a better idea of what people can actually buy  Gives better sense of standard of living across the globe  Productivity is a major factor o Measure of economic growth that compares how much system produces with resources needed to produce it  Several factors help or hinder economic growth, 2 of them being o Balance of trade  Economic value of all exports minus the value of all imports  Negative balance – trade deficit  Positive balance – trade surplus • Helps with economic growth o National debt  The amount of money the government owe to it’s creditors (Canada bonds)  Less government borrows the high increase in productivity ? Economic indicators ? Economic stability  Key goal of economic system is stability  It is a condition where the money available in the system and the quality of goods & services are growing at the same rate  Factors that threaten stability o Inflation  When the amount of money going into the system exceeds the increase in actual output  Occurs when theres more to be spent on the same number of items (housing market – prices go up but number of houses stays the same)  Prices go up  CPI • Customer price index • Measures changes in cost of goods and services that typical family buys o ‘Basket’ o Deflation  When the money being put into the system is lower than that coming out of the system  Falling prices  Productivity increase an consumers pay less for stuff or consumers have less money and aren’t buying as much o Unemployment  Level of joblessness among people actively looking for work  Different types • Frictional, seasonal, cyclical, and structural Chapter 8 (174 – 187) – societal context Governance and CSR  Managing societal forces in business requires attention to stakeholders  business and society - Corporate social responsibility (CSR)  Increasing concern in erosion of business responsibility and unethical; activities in organizations  Numerous companies worldwide have undermined public confidence in the integrity of business through their scandalous activities stakeholders  Managing stakeholders in business is important  Stakeholder – individuals or groups that business interacts with and who have a ‘stake’ or vest interest in the company  The concept has become central to understanding the business and society relationship  2 broad groups o external stakeholders  government, consumers and community members o internal stakeholders  business owners and employees (principle group)  fundamental responsibility of management is to address and manage needs of different stakeholder groups as well as the most obvious (owners/investors or shareholders)  stakeholders can be affected by actions or decision of business but they can also influence them  management of stakeholder interests is critical o not only do owners/investor/shareholders but employees customers, competitors, suppliers, community, special-interest groups, media and society in general  some also say the environment and future generations corporate social responsibility  social responsibility refers to obligations or responsilibities of an organization that involve going beyond production of good/services (profit) and requirement of competition and legal regulation or customs  involves obligation to create policies, make decisions and engage in action that are desirable in terms of society’s values and objectives  4-part definition – social responsibility of business encompasses the economic, legal, ethical and discretionary expectation that society has for the organization at a given point in time  Archies Carroll’s definition o economic responsibility  must create goods and services o legal responsibility  must fulfill legal responsibilities o ethical responsibility  standards or expectation that reflect what the societal stakeholders regard as fair o discretionary (voluntary or philanthropic) responsibilities  while voluntary reflects part of the implicit agreement between business and society • can include corporate donations, volunteerism, and any kind of voluntary involvement  there has been much debate on the degree that business should practice CSR Benefits and drawbacks against CSR  business is business o profit maximization is the primary purpose and to have any other purpose is not social responsible  a manager is an employee of the owner and consequently is directly responsible to them  business plays by it’s own rules o business can not be judged by the same set of rules or standards of moral conduct that we apply outside of business  poke analogy  business should not dictate morality o they are made to maximize profit o they are economic institutions and they should leave social policy to government o not skilled in social policy and should not be held responsible to carry out the duties or social responsibility  organizations cannot be held accountable o entity responsible for these actions is not and individual but a corporation o some say that it is not the organizations but the corporations leaders and their constituents  because unethical business behaviour is the result of personal and business ethical standards for CSR  conform to societal expectations o business and society need not be seen as distinct entities but rather that business play a role within society o business is largely dependent on acceptance by society and therefore obligation is not to violate societal beliefs regarding social responsibility, especially i
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