Study Guide for MGTA03, Chapter 2

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Management (MGT)
Ingrid L.Stefanovic

Chapter 2: Understanding the Environments of Business N All businesses operate within a larder external environment o LoL]}LKL }LZ]ZZ}Z]L2}Z]L}2L]]}L[Z}L]ZZ might affect it o It plays a major role in whether business has success or failure N Economic Environment refers to the conditions of the economic system in which an organization operates. o Example: McDonalds Canadian operations are functioning in an environment where these id moderate unemployment, low inflation and moderate growth o This shows people can afford to buy McDonalds, but McDonalds must pay higher wages to attract employees o McDonalds also have fairly constant prices and they cannot increase it. N Economic Growth o One time, half population was involved in producing food, now less than 2.5% o Which means that agricultural production has grown The Business Cycle N Experts call the pattern of short-term up and downs as the business cycle peak, recession, trough, recovery o Recession: output declines o Depression: a prolonged Recession Aggregate Output and the Standard of Living N Aggregate Output is the main measure of growth in business cycle: the total quantity of goods and services produced during a given period N When output grows quicker than population, two things follow o The quantity of goods and services per person(Output per Capita) goes up and the system provides more goods and services of what the people want this leads to a higher standard of livingthe total quantity and quality of goods and services that they can purchase with the currency used in their economic system N To know your standard of living, you have to know how much your L]}L }L}K] Z[ZZK]Z2}]L2 N Gross Domestic Product (GDP)
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