Chapter 1 : external context of business
What are the different external (7) forces and how do they influence organizations?
1. Competitive forces
-operate at two levels for any organization
-globalization opens gates for competitors
-number of competitors and nature of competition will dictate changes in the
-domestic and foreign competitors has demanded an acceleration in innovation among
firms in many industries
-organizations must create new and better methods of serving customers
2. Technological forces
-central role in how an organization functions
-how it obtains resources and ultimately how effectively it competes
-technology environment exerts influence across industries
-change in technology is a constant and is a force that permits and demands
-benefit; technology has increased flexibility in work arrangements
3. Labour forces
-Canadian business operates within a diverse society
-Canadian population reflects many cultures and demographics backgrounds
-immigrants took up much of the work force/ women as well
-these factors demand that organizations understand the demographics context within
which they operate
-forces that could be embedded in general economic , political, technological or societal
forces - but are international in nature
-important impact on local organizations
-globalization ; a process ; that is a process involving the integration of world economies
-international trade agreements, and global agreements among governments that are
changing within the domestic borders, but may have a significant consumer market overseas ;
this demands knowledge of global societies , global competitors, and other forces that exist on
an international level.
5. political Forces
- can exert influence at both the specific and general levels
-reduction trade barriers worldwide has opened the doors for increasing presence of
foreign competition in many industries
-political environment of business can dictate changes in how businesses compete, on what services it offers and how they can be offered.
6. Societal forces
-Nature of a society certainly is an entrenched part of any organization general
-workplace increasingly emphasizes organizational justice
-businesses must respond to society
-organizations that serve societal demands can change
-strong influence on the present and future prospects of any organization
-many questions organizations must answer regarding economy in order to obtain
The Canadian Context
Economic forces in canada
Indicators of current state
-GDP : gross domestic product
-total value of a country’s output of goods and services in one year
-money goes to employees
Canada’s economy is unpredictable
-short term changes in the domestic economy and on going trends in the nature of the
business enterprise system
-Unemployment rate goes up
Competitive forces in Canada
-developed a large open economy
-international trade -> natural resources
Perfect Competition/pure competition
- when there are small firms producing an identic
al product, no producer has the power to affect the price of the product
-example ; agriculture
-large number of firms whose product or service is perceived as slightly different
-each firm influence prices
-where there are a small number of producers with a different product
-example; car manufacturers Monopoly
-only one seller or producer
Technological forces in Canada
-Economy is resource based
-agriculture , mining, forestry, fisheries, minerals, energy
-Canada needs more tech.sector
-economy is transforming
Canada’s employment shifting from agriculture sector
-reduced need for human capital
-tech.advancement ->humans no jobs
-tech. gives similar output
Employment shift in the manufacturing / service sector
- following ww2
-because of tech.
-these shifts occur
-need more employment in service to maintain relative levels of output
-underscores the increasing importance of higher education and the value of
-comprises the characteristics of a population
-growth in population causes industries to rise
-women in the workforce
Global forces in Canada
-trade agreements have a heavy influence on the business secotor
- canada exports over 40 percent of its total (GDP)
-major trading nation
-exports more than we import
Political forces in canada -mixed system
-government plays an important role
-involvement in business
Societial forces in canada
- best country to do business in
- best place to invest
Chapter 9: Strategic management
The five-forces model- allows us to systematically assess the industry environment.
-relationships between the five forces and incumbent firms determine the attractiveness
of the industry environment
-helps make strategic decisions in terms of how to achieve organizational goals or to find
a position in the industry where we can best defend ourselves against competition
- FIve forces include ; (Threats of new entrants, \bargaining power of suppliers,
Bargaining power of customers, threats of substitute products or services, and rivalry
among existing firms)
1. THREATS OF NEW ENTRANTS
- either new startups and diversification of existing firms in other industries.
-they bring new desire to gain market share and resources and capabilities.
(5 major sources of entry barriers from the potential new entrants’ point of view.
Economies of scale - refer to spreading the costs of production over the number of units
-the cost of a product per unit declines as the number of units per period increases.
-They can provide the incumbents cost advantages to compete with the new entrants on
the price, if necessary
Capital Requirements - some industries such as airlines, required capital to establish a new
firm is significantly high.
-the threat of new entrants is reduced as the level of required capital increases. Switching Costs - refers to the costs (monetary or psychological) associated with changing
from one supplier to another from the buyer perspective.
-when switching costs are minimal, customers can easily switch buying products from
one firm to another.
-creates an opportunity for potential new entrants, new entrants can easily acquire
customers from incumbents.
-threat increases (decreases) as the switching costs decreases.
Access to distribution channels - Can be an entry barrier for potential new entrants.
-situation where new entrants control most of the distribution channels, potential entrants