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Chapter 1

Chapter Chapter One Textbook - ADMS 1000One The Context of Business.docx

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York University
Administrative Studies
ADMS 1000

ADMS1000 {Chapter 1} The Context of Business Jan 7th, 2013 What is an organization? 1) Public/governmental organization that provides goods and services without necessarily generating a profit 2) Private/non-governmental organization, includes voluntary organizations, that offer goods or services without necessarily generating a profit 3) Private organizations that produce goods or services with the intent of making a profit for the benefit of their owners or shareholders What makes these organizations? 1) Organizations are social entities they have been generated and are maintained by people; they involve some level of human interaction 2) Organizations are created to achieve goals  all have some kind of goal or objective they were designed to achieve 3) Organizations interact with the environment obtains inputs from its environment, whether in the form of people, raw materials, technology, or financial capital. These inputs are transformed by the organization to become outputs: goods, services, or knowledge the organization generates Organizations as Open Systems  System: interdependent elements working together to achieve a goal o The interdependence of the elements creates an entity that is more than just the sum of its parts o The notion of the open system asserts organizations are entities that are embedded in, and dependent on, exchanges with the environment they operate within o Closed system asserts that the function and survival of an organization depends on their ability to remain divorced from their environment  Organizations are created in response to societal or environmental needs; and ultimately, it is the environment that will determine the organization’s fate “How an organization chooses to respond to its environment encompasses the notion of business strategy.” The External Context of Business  The environment of an organization is separated into 2 dimensions 1) Specific or Task Environment a. Within which the organization directly operates 2) General Environment a. Encompasses the external environments of all organizations in a society Indicates Canadian specificity Economic Forces  Organizations must assess the economic environment to establish its how it runs ADMS1000 {Chapter 1} The Context of Business Jan 7th, 2013  The economic environment acts as a strong influence on the present and future of all organizations o Indicator of Canadian economic health: GDP- the total value of a country’s output of goods and services in a given year. The money earned from producing goods and services goes back to the employees who produce them, business owners, and the governments through taxation  2.5% estimated compounded annual growth till 2025 Competitive Forces  Domestic and foreign competition (especially as caused by globalization) forces innovation  Globalization has opened up markets but the competition has also increased o Focused mostly on extraction and processing of our natural resources o Views competition as an important part of the business enterprise system o Perfect competition: many small firms producing an identical product ensuring no one producer has the power to affect the price of the product  forced to obey set prices in market  agricultural industry exemplifies this o Monopolistic competition: large number of small firms whose product is seen as slightly different  each firm has some influence on the prices o Oligopoly: small number of producers with a different product  car manufacturers have significant control over prices, yet the competition plays a role in the prices set o Monopoly: only one seller, complete market dominance o Our economic system is based on the assumption that sufficient competition exists and is encouraged to ensure goods and services requested by society are of a fair price invisible hand o Critics believe Canada hasn’t made as much of an effort at America to avoid industry concentration  Canadian government-legislated competition policy attempts to
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