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Canada (161,966)
RSM100Y1 (431)
Chapter 2

MGTa03 Chapter 2

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Rotman Commerce
Chris Bovaird

120913 Understanding the Environments of Business 1TEEM TIE 2Outline THE ECONOMIC ENVIRONMENT Economic Growth Economic Stability Managing the Canadian Economy THE BUSINESS ENVIRONMENT Industry Environment Emerging ChallengesOpportunities in Business Environment 3The External Environment 4 All business operates within larger EE Def Everything os an org boundaries that might affect it Major role in determining success or failure Managers must understand this environmentstrive to operate in it Be proactivetry to influence their environment 5What is Economic Growth and how do we Measure it 6 Economic Environment Def Conditions of the ES that orgs operate under Eg McDonalds Canadian operations Moderate growth unemployment low inflation Economic Growth Agri efficiency improved bec devised better ways of producing productsinvented better technology for getting 1 the job done How do we Know an Economy is Growing 78 THE BUSINESS CYCLE Def Pattern of ST upsdowns 4 Phases Peak Recession Trough Recovery Recession A period which aggregate output declines as measured by real GDP Depression Severe and longlasting Recession ExpansionContraction varies months to years Aggregate OutputSOL 910 Main measure of growth in Business Cycle Def TQ of GS produced by ES during a given period Increase in Aggregate OutputEG GrowthPop increase 1Output per Capita amt of GS per person increases 2More of GS peep want produced increases 3SOL Total amount of GS a countrys citizens buy with currency used in ES11GDP GNP GPI 12 GDP Def Total value of all GS produced in given period by a national economy through domestic FOP Cisco TT in US included GNP Def Total value of all GS produced in given period by national economy through internalexternal FOP Bomardier TT in US included in CDN GNP not GDP CDN manufacturing plant in Brazil GNP not GDP etc GPIDef Treats activities harmful to environment as costs gives negative values EXXON Valdez GDP rise but GPI falls 13ECONOMIC CONCEPTS REAL GROWTH RATES GDP PER CAPITA REAL GDP PURCHASING POWER PARITY 14REAL GROWTH RATES GDP is preferred method of calculating national income DEF growth rate of GDP adjusted for inflation in changes in value countrys currency If rate of GDP rate of pop growth then SOL should be improving GDP per Capita 1516 GDP per person Formula Total GDPTotal Population Better measure of economic wellbeing then just GDP USA Ireland Switzerland Canada best GDP per capita 17REAL GDP18GDP has been adjusted Pizza example 101000 units 05 and 111000 06 means no growth since same amount in both yrs Nominal GDP Def GDP measured in current dollars or with all components valuedcurrent prices if 06 s not adj 19PURCHASING POWER PARITY20 In our eg current prices06 prices Real GDP computed by GDP calculated to account for changes in currency value and price changes When we adjust this we account for 1GDP 2PPP Def Exchange rates are set so that prices of similar products in difft countries are equal ipods PRODUCTIVITY 2122 Major factor in growth of ES DEF measure of EG compares how much ES produces with the resources needed to produce it Eg Soccer balls 2 FOP labor capital more productive If more GS produced with less FOP then prices fall and SOL goes higher SOL improves only with increases in productivity Real Growth in GDP reflects growth in productivity 23FACTORS HELP IN ES GROWTH24BALANCE OF TRADE DEF Total of countrys ExportsTotal ImportsBOT if exportsimports trade surplus Canada BOT if importsexports trade deficit USA NATIONAL DEBT DEF Total amount ofgovt owes its creditors Budget Deficit result of govt spending more in 1 yr than it takes in the same yr How does national debt affect EG Hint Bonds ECONOMIC STABILITY 25ECONOMIC STABILITY26 Households enjoy higher SOL if balanced growth in Quantity of GS demandedQuantity supplied Measure growthproductivity by GDP SOL by PPP SOL is stable if PPP is stable DEF Condition ESQSQ GS produced growrate 3 Factors threaten Stability 2728 1Inflation DEF Occurrence of widespread price increases When amt ofinjected in economyactual increase in output peep have morespend but same products so PPP declines CPI DEF 2Deflation DEF Period of generally falling prices Occurs when central bank reduces r rate to increase consumer demand Prices fall because industrial productivity rises cost of savings passed on good but if high debt bad 29UNEMPLOYMENT 30 DEF Period of joblessness among peeps actively seeking work in an ES TYPES 4 CONDITIONS OF LOW EMPLOYMENT SHORTAGE leads to higher wages leads to lower TT leads to higher prices leads to lower PPP leads to hi wages leads to fall employment leads to fall demand leads to higher unemployment What if GOVT MITIGATES tries to inject capital lower taxes Prices rise cuz demand rises leads to inflation rises leads to PPP falls 31MANAGING THE CANADIAN ECONOMY FISCAL POLICY MONETARY POLICY STABILIZATION POLICY 32FISCAL POLICY 33 DEF Policies by means of which govt collectsspends revenues Tax Increases are fiscal policies to increase revenues Tax Decreases to stimulate new EG to bring stability to ES if declining 34MONETARY POLICY 35 DEF Policies by means of which govt controls size of MS Using BOC influence lending by banks Influence MS by raisinglowering rates Higher interest rates Tight MP more expensive to borrow reduce spending by producers of GSbuyers too restricting MS Lower interest rates Easy MP less expensive to borrow increase spending by producers and consumers buy more as prices fall 36STABILIZATION POLICY 37 DEF GOVT policy embracing fiscalmonetary policy GOAL smooth out fluctuations in outputunemploymentstabilize prices Diagram P hugs MF to smooth in outputunemploymentStabilize prices 38BUSINESS ENVIRONMENT39ID EMERGING CHALLENGESOPPORTUNITIES IN BIZ ENVIRONMENT BIZ today is fast paced 3 most serious issues Taxation Value of CDNNeed for educatedskilled workforce Inventory obsolescence has been measured in weeksmonths rather than years instant gratification 40INDUSTRY ENVIRONMENT41SEARS Every biz operates in industryeach has difft characteristics Intensity of Competition has influence on operations Managers must understand competition develop competitive strategy Michael Porters 5 forces Model Helps anlayze 5 sources of competitive pressuresdecide on competitive strategy 42EMERGING CHALLENGESOPPORTUNITIES 43 1CORE COMPETENCIES DEF Skillsresources org competes bestcreates most value for owners Outsourcing Rely on suppliers Coordination Globally dispersed processessupply chains 2OUTSOURCING DEF Strategy of paying suppliers Payroll training RD Business Process Management no more dept oriented org
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