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Chapter 1

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McMaster University
Rita Cossa

Chapter 1 – Managing Within the Dynamic Business Environment  A business is any activity that seeks to provide goods and services to others while operating at a profit  Profit is the amount of money a business earns above and beyond what it spends for salaries and other expenses  An entrepreneur is a person who risks time and money to start and manage a business  Matching Risk With Profit: o Revenue is the total amount of money a business takes in during a given period by selling goods and services o A loss occurs when a business’s expenses are more than its revenues o Approximately 125,000 business exist the marketplace each year o Only a small proportion of firms that exit the marketplace end up filing for bankruptcy, which refers to the liquidation of the business debtor’s assets and the end of commercial entity’s operations o Most business failures are due to poor management or problems associated with cash flow o Risk is the change an entrepreneur takes of losing time and money on a business that may not prove profitable  Responding to the Various Business Stakeholders: o Stakeholders are all of the people who stand to gain or lose by the policies and activities of a business o The challenge is for firms to balance the needs of all stakeholders o Offshoring is sourcing part of the purchased inputs outside of the country o Outsourcing means contracting with other companies to do some or all of the functions of a firm, such as production or accounting  Using Business Principles in Non-Profit Organizations: o A non-profit organization is an organization whose goals do not include making a personal profit for its owners or organizers o Social entrepreneurs are people who use business principles to start and manage non-profit organizations and help countries with their social issues  E.g., Jeff Skoll, e-bay’s first president  Factors of Production: o Factors of production are the resources used to create wealth: land, labour, capital goods, entrepreneurship, and knowledge o What makes countries rich today is a combination of entrepreneurship and the effective use of knowledge  The Business Environment: o The business environment is the surrounding factors that either help or hinder the development of businesses o Six major elements are:  The legal and regulatory environment  The economic environment  The technological environment  The competitive environment  The social environment  The global environment o Creating the right business environment is the foundation for social progress of all kinds, including good schools, clean air and water, good health care, and low rates of crime  The Legal and Regulatory Environment: o The purpose of the Competition Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy o Regulations are rules or orders made by government to carry out the purposes set out in statuses o Entrepreneurs are looking for a high return on investment (ROI) o High taxes tend to drive entrepreneurs out, while low taxes attract them o Many laws in Canada that are intended to minimize corruption  The Economic Environment: o The economic environment looks at income, expenditures, and resources that affect the cost of running a business o One way for governments to promote entrepreneurship is to allow private ownership of businesses  The Technological Environment: o Technology refers to inventions or innovations from applied science or engineering research o Information technology (IT) includes computers, modems, cellular phones, and so on o Productivity is the amount of output you generate given the amount of input (e.g., hours worked) o Effectiveness means p
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