BUS 1110 KPU Fundamentals of Business & Differences Between Vertical & Horizontal Merger Discussion 1,List the five forces in Porter’s model using examples.2. How is a vertical merger different than a horizontal merger? Please provide an example to explain your answer Business Essentials
Ninth Canadian Edition
Chapter 2
The Environment of Business
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2-1
Learning Objectives (1 of 2)
• Explain the concepts of organizational
boundaries and multiple organizational
environments.
• Explain the importance of the economic
environment to business and identify the
factors used to evaluate the performance
of an economic system.
• Describe the technological environment
and its role in business.
• Describe the political-legal environment
and its role in business.
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Learning Objectives (2 of 2)
• Describe the socio-cultural environment
and its role in business.
• Identify emerging challenges and
opportunities in the business environment.
• Understand the recent trends in the
redrawing of corporate boundaries.
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Organizational Boundaries and Environments
(LO 2-1)
• External Environment
– factors beyond an
organization’s boundaries
that cannot be controlled (i.e.
competition)
• Organizational Boundaries
– that which separates the
organization from its
environment
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Dimensions of the External Environment (LO 2-1)
Multiple Organizational Environments
Economic environment
Technological environment
Political-legal environment
Socio-cultural environment
Business environment
Global environment
Emerging challenges and opportunities
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The Economic Environment (LO 2-2) (1 of 11)
• The conditions of the economic system in which an
organization operates
Economic
Stability
Full
Employment
Economic
Growth
Key
Economic
Goals
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The Economic Environment (LO 2-2) (2 of 11)
Economic Growth Overview
The Business Cycle
Aggregate Output and the Standard of Living
Gross Domestic Product (GDP) and Gross National
Product (GNP)
Productivity
Balance of Trade
National Debt
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The Economic Environment (LO 2-2) (3 of 11)
• Business Cycle
– the typical pattern of short-term ups and downs in an economy
(peak, recession, trough and recovery)
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The Economic Environment (LO 2-2) (4 of 11)
• Aggregate Output
– measure of economic growth
– total quantity of goods and services produced by an economic system
during a given period
• Standard of Living
– total quantity and quality of goods and services that a country’s
citizens can purchase with their currency
• Productivity
– measure of growth that compares the output of an economic system
with the resources that are needed to produce the output
– standard of living improves through increases in productivity
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The Economic Environment (LO 2-2) (5 of 11)
Measuring Economic Growth
• Gross National Product (GNP)
– value of all goods and services produced by a national economy
within a given period regardless of production location
• Gross Domestic Product (GDP)
– value of all goods and services produced by a national economy
within a given period with domestic factors of production
Real Growth Rates
GDP Per Capita
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Real GDP
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The Economic Environment (LO 2-2) (6 of 11)
• Balance of Trade
– value of all exported products
minus imported products
Exports
Imports
• National Debt
– amount of money that a government owes its creditors
– increases/decreases based on the budget deficit/surplus
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The Economic Environment (LO 2-2) (7 of 11)
• Economic Stability
– condition when the amount of money available and the quantity of
goods and services produced are growing at about the same rate
Deflation
Inflation
Unemployment
Threats to
economic
stability
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The Economic Environment (LO 2-2) (8 of 11)
• Inflation
– occurs when there is
widespread price
increases in an economic
system
• Consumer Price Index
(CPI)
– tool used to measure
inflation
• Deflation
– a period of generally falling
prices
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The Economic Environment (LO 2-2) (9 of 11)
• Unemployment
– level of joblessness among people actively seeking work in an
economic system
Seasonal
Cyclical
Structural
Frictional
Types of
Unemployment
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2 – 14
The Economic Environment (LO 2-2) (10 of 11)
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The Economic Environment (LO 2-2) (11 of 11)
• Managing the Canadian Economy
Fiscal Policies
•
Taxes and spending
Monetary Policies
•
Money supply (i.e.
interest rates)
Stabilization Policies
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2 – 16
The Technological Environment (LO 2-3) (1 of 2)
• Technology
– all the ways a company creates value for its customers
▪ knowledge, work methods, physical equipment, etc.
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The Technological Environment (LO 2-3) (2 of 2)
• Research &
Development (R&D)
– provides new ideas for
products services and
processes
▪ basic
▪ applied
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The Political-Legal Environment (LO 2-4)
• Reflects the relationship between business and
government (e.g., regulations)
– pro- or anti-business sentiment
– political stability
– international relations
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The Socio-Cultural Environment (LO 2-5)
• Customs, values, attitudes and demographic
characteristics of the society in which an organization
functions
• Customer preferences and tastes
– vary across and within national boundaries
• Ethical compliance and responsible business behaviour
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2 – 20
The Business Environment (LO 2-6) (1 of 3)
• The Industry Environment
– Porter’s five forces model is used to analyze the competitive
situation in an industry.
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The Business Environment (LO 2-6) (2 of 3)
Emerging Challenges and
Opportunities in the Business
Environment
• The most successful firms are
getting leaner by focusing on their
core competencies
– the skills and resources with which
an organization competes best and
creates the most value for owners
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2 – 22
The Business Environment (LO 2-6) (3 of 3)
• Outsourcing
– paying suppliers and distributors to
perform certain business processes
• The Growing Role of Social
Media
– an integral part of daily
communication
• Business Process Management
– moving away from departmentoriented organizations toward
process-oriented teams
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Redrawing Corporate Boundaries (LO 2-7) (1 of 4)
• Acquisitions and Mergers
– horizontal, vertical or conglomerate mergers
– friendly or hostile takeovers
• Divestitures and Spinoffs
– selling part of existing business or setting it up as a new
corporation
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Redrawing Corporate Boundaries (LO 2-7) (2 of 4)
• Friendly Takeover
– the acquired company welcomes the acquisition, (needs cash or
other benefits)
• Hostile Takeover
– the acquiring company buys enough of the other company’s stock to
take control
▪ a poison pill is a defense tactic that management can adopt to make a
firm less attractive
Poison Pill
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Redrawing Corporate Boundaries (LO 2-7) (3 of 4)
• Employee-Owned
Corporations
– employee stock ownership
programs (ESOP)
• Strategic Alliances
– two or more companies
temporarily join forces
– often called a joint venture
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2 – 26
Redrawing Corporate Boundaries (LO 2-7) (4 of 4)
• Subsidiary and Parent Corporations
– subsidiary corporation owned by another corporation
– parent corporations own subsidiary corporations
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Quick-Check Questions (1 of 5)
1) Environmental protection laws, interest rates, societal values,
and the emergence of new technologies can significantly
impact the profitability of a firm. These types of issues can’t be
controlled by a business as they are considered to exist in the
________.
A)
B)
C)
D)
external environment
internal environment
organization’s boundaries
global context
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2 – 28
Quick-Check Answer (1 of 5)
1) Environmental protection laws, interest rates, societal values,
and the emergence of new technologies can significantly
impact the profitability of a firm. These types of issues can’t be
controlled by a business as they are considered to exist in the
________.
A)
B)
C)
D)
external environment
internal environment
organization’s boundaries
global context
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2 – 29
Quick-Check Questions (2 of 5)
2) The total amount of money that a country owes its creditors.
A)
B)
C)
D)
National Deficit
Purchasing Power Parity Index
National Debt
Gross Domestic Product
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2 – 30
Quick-Check Answer (2 of 5)
2) The total amount of money that a country owes its creditors.
A)
B)
C)
D)
National Deficit
Purchasing Power Parity Index
National Debt
Gross Domestic Product
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2 – 31
Quick-Check Questions (3 of 5)
3) The federal government manages the Canadian economic
system through two sets of policies: fiscal and monetary.
Fiscal Policy refers to:
A)
B)
C)
D)
the control of the money supply
the control of interest rates
the government’s approach to its spending and taxation
the effective management and control of the national debt
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2 – 32
Quick-Check Answer (3 of 5)
3) The federal government manages the Canadian economic
system through two sets of policies: fiscal and monetary.
Fiscal Policy refers to:
A)
B)
C)
D)
the control of the money supply
the control of interest rates
the government’s approach to its spending and taxation
the effective management and control of the national debt
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2 – 33
Quick-Check Questions (4 of 5)
4) Simon would like to buy a Valentines gift for his girlfriend as a
sign of his affection. To his disappointment he discovers that
roses cost $75 a dozen. Luckily, he can buy chocolates for
$20. According to Porte’s Five Forces Model, chocolates are a
less costly _________.
A)
B)
C)
D)
option
substitute
replacement
complement
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2 – 34
Quick-Check Answer (4 of 5)
4) Simon would like to buy a Valentines gift for his girlfriend as a
sign of his affection. To his disappointment he discovers that
roses cost $75 a dozen. Luckily, he can buy chocolates for
$20. According to Porte’s Five Forces Model, chocolates are a
less costly _________.
A)
B)
C)
D)
option
substitute
replacement
complement
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2 – 35
Quick-Check Questions (5 of 5)
5) An organization’s core competencies refers to:
A) The company’s strategies to increase market share
B) The company’s product offerings which achieve the
highest profit levels
C) The training programs used to increase employee
productivity
D) The skills and resources with which they compete best and
create the most value for owners.
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2 – 36
Quick-Check Answer (5 of 5)
5) An organization’s core competencies refers to:
A) The company’s strategies to increase market share
B) The company’s product offerings which achieve the
highest profit levels
C) The training programs used to increase employee
productivity
D) The skills and resources with which they compete best
and create the most value for owners.
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2 – 37
BUSINESS 1110 Individual Weekly Assignment
_______________________________________________________________________
The purpose of this assignment is to integrate the course material into basic understanding for students by
applying and analyzing business theories and topics, practicing business writing skills, develop or strengthen
student’s aptitude for personal reflection, increase student’s awareness of businesses in the media and to
provide an alternate evaluation method for those students who find “test-taking” difficult. This weekly
assignment is worth 40% of your course grade.
OVERVIEW
On Moodle, you will find a tab for each week of the semester. On the tab for each week, you will find an
assignment link. In the assignment link, you will find topics that relate to the material that will be covered in
the chapter.
The assignment requires you to prepare a summary that includes three elements:
1. Personal interpretation/view of the topic;
2. Academic research or industry news articles to support and justify your views with intext citations;
3. Textbook connection to support and justify the theory behind the topic within text citations.
The assignments must be submitted on Moodle prior to the deadline.
Format Options
You can choose from the following formats to prepare your assignment in, however, throughout the semester
you will have to use a minimum of 4 different formats:
• Written report
• Presentation
• Video
• Letter
• Memo
• Annotated Bibliography
• Executive Summary
• Graphic Report
• Excel Report
• Blog
• Vlog
ASSIGNMENT INSTRUCTIONS
The following instructions must be fully met for the “followed instructions” marks.
• All submissions are to be uploaded on Moodle.
• All work must be cited using APA format for in text citation and include a bibliography/works cited
section.
• Assignment must include the three elements: personal thoughts/opinions, research justification and
textbook theoretical concept.
• Late assignments will receive a 0. (Moodle has a time stamp and will notify you if late) There are no
exceptions.
• Please save your document with the following naming convention “FIRST NAME_LAST
NAME_Week#_ASSIGNMENT”.
• Use spell and grammar check and ensure your writing level is at a university level for English grammar.
• Assignment needs to be professionally formatted.
MARKING CRITERIA
You will find the marking rubric on Moodle. Please review the marking outline to help you make sure you get
the mark you are hoping for.
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