Learning Objectives

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Chapter 1
The Dynamic Business Environment
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Learning Objectives

1. Businesss profit/risk assumption
2. Stakeholder roles
3. Role of entrepreneurship in wealth creation
4. Elements of business environment
5. Competitive strategies
6. Rise of the service sector

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Objectives of Business
Survival
Social Responsibility
Profit
Growth
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Earning a BuckRisk Reward Trade-Offs

• Risk is often defined as variation in expected
  returns
• The Capital Asset Pricing Model (CAPM) suggests
  that for increasing levels of risk there should
  be increasing returns
• The firm manages risk to reduce variability and
  to match the organizational level of risk with
  the market.

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Stakeholders Those Who Stand to Lose or Gain

• Customers want value
• Employees want security
• Stockholders want returns
• Suppliers want to be paid
• Dealers want support
• Bankers want returns
• Community groups want equity
• Governments want compliance

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Creating Economic Wealth

• Five Factors of Production
• Land (natural resources)
• Labour (workers)
• Capital (physical assets not money)
• Entrepreneurship
• Knowledge

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Entrepreneurs Create Wealth By

• Joseph Schumpeter (Active)
• Initiators who create instability through their
  actions in a process known as creative
  destruction.
• Israel Kirzner (Passive)
• Alert individuals who look for disequilibria in
  the market place to act on.

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Canadian Entrepreneurs
Name Worth Company
Kenneth Thompson 21 B Thompson Corp.
Galen Weston 9 B Superstores
Jeff Skoll 5 B eBay
J, A J Irving 4 B Irving Oil J.D. Irving
Bernard Sherman 3 B Apotex Group
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Business Environment
Geographic Environment
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Economic Environment

• Tradable currency
• Minimum taxes and regulation
• (effects of the political environment)
• Imports and exports
• Employment levels
• Productivity
• Ability to make stuff easily

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Technological Environment

• Information
• Machines and technology for manufacturing
  communication
• Databases
• Bar codes
• The internet

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Social Environment

• Ethinic Diversity
• Languages spoken
• Demographic changes
• Family

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Competitive Environment

• Customer service
• (warrantys, product selection, sizes)
• Stakeholder recognition
• Employee service
• Concern for the environment

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Legal Regulatory Environment

• Freedom of ownership
• Contract laws
• Red tape
• Regulations for running a business
• Elimination of corruption

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Geographic Environment

• geographical size and east-west spread of Canada
• effects communications
• population density low  outside of major urban
  centers

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Geographic Environment

• topographical and climatic challenges
• many areas of Canada not suitable to living all
  year round
• weather effects growing seasons for food
• cost of food effects health and lifestyles
• mountains act as barriers to transportation,
  communication, and limit habitable land space

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Geographic Environment

• the "gifts" of our natural resources
• endowed us with timber for logging, lumber, paper
  
• rich soil for agriculture
• coastline for fishing many species of marine life
  
• minerals to mine, gold, silver, coal, copper,
  nickel, uranium, etc

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Competitive Strategies

• Exceed customer expectations
• Business is becoming customer driven
• Deliver faster (speed)
• Service, new product introduction
• Restructuring and Empowerment
• Responsibility, authority, autonomy, training
  equipment to front line
• Concern for environment

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Evolution of Business

• Agricultural/Manufacturing
• Service Industries
• Future???

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Global Environment

• Quality
• Productivity
• War Terrorism
• Global Changes

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Does Global Experience Help Your Career?
No Response
5
19
56
Unnecessary
Very Helpful
Somewhat
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Source USA Today
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The Future by 2025http//www.7revs.org/

• SEVEN REVOLUTIONS is an effort at the Centre for
  Strategic and International Studies (CSIS) to
  identify and analyze the issues that policy
  makers, business figures, and other leaders will
  face out to the year 2025.

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The Future

• Demography
• Key theme is stratification
• Grow from 6.30B to 8.30 B
• 80 will live in countries least able to support
  them
• Rate of growth will fall to 1
• Developed world is shrinking and older
  undeveloped will have young (aids)
• Hyper-urbanization

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The Future

• Resource Management
• Key theme is not availability but allocation and
  distribution
• Will increases in productivity keep up with
  population growth
• Water will be the most scarce resource
• Current reliance on hydrocarbons but..
• Production in Persian Gulf will decline
• Demand in developing world increases

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The Future

• Technology
• Three major simultaneous drivers
• Computation computers will become iniquitous
  (homes, on and in the body)
• Genomics diagnostics, therapy
• Nanotechnology movement to the molecular and
  even atomic levels
• Did you know?
• IBM made a computer circuit with organic
  molecules so small, 200B fit on a thumbnail

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The Future

• Knowledge
• Information economy knowledge will be dominant
  factor of production
• Knowledge diffusion breaking down national
  barriers evolving culture
• Knowledge gap will create social inequities (the
  digital divide)
• Information Flows and Security dependence
  vulnerability

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The Future

• Economic Integration
• Advances in technology have resulted in a
  staggering increase in the cross-border flow of
  goods and services
• The benefits of integration will continue to flow
  to all
• Income will widen not shrink for individuals

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The Future

• Conflict
• Patterns of conflict are changing in an era when
  nation states no longer have a monopoly over
  super violence
• Asymmetric warfare Sep 11 as herald of new era
  of conflict
• Cyber-warfare capacity to destabilize society
• Intra-state warfare will rise

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The Future

• Governance
• Of the world's 100 largest economic entities, 42
  are now corporations, not countries
• NGOs (Non governmental organizations) - Expect
  more alliances
• Corporations Will juggle triple bottom line
• Governments continue to fall behind
• International Organizations realities will
  outpace the structures

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Skill Level Required
58
Average Skill Level 3.6
40
2
Level 2
Level 4
Level 5
Level 6
Level 1
Level 3
Source Hudson Institute as reported in Arnold
Packer, Retooling the American Worker,
Washington Post
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Current Skill Level
70.5
Average Skill Level 2.6
16.1
6.6
6.8
Level 1
Level 2
Level 3
Level 4
Level 5
Level 6