ADMS 1000 Final Flashcards
Types of Economic Environment
Individual
Business
Government
Individual Economic Environment
Work
Spending Money
Pay Taxes
Business Five Factors of Production
Natural Resources
Labour
Capital
Knowledge
Entrepreneurs
Government Economic Environment
Creates Laws
Promotes Tax Credits
Ensure Qualified Labour
How to Analyze Economy
Micro
Macro
Microeconomics
Individual Decisions
Macroeconomic
Global stuff
Types of Economic System
Market Economy
Communism
Socialism
Mixed Economy
Market Economy
Capitalist Economy/Private enterprise
Free market system
Individuals can decide to be employees or owners
Communism
Government Owned
Decisions made centrally
Socialism
Government large ownership or control over major essential industries
Mixed Economy
Canada
Government=partly socialist
In control of certain industries and lands
Types of Competitions
Perfect
Monopoly
Oligopoly
Monopolistic
Perfect Competition
Barriers to Entry - None
#of Sellers - Many
Firm Price Setter- No
Product Differentiation - None
Size of Firms - Small to Medium
Monopolistic
Barriers to Entry - Low
#of Sellers - Many
Firm Price Setter - No
Product Differentiation - Small
Size of Firms - Small to Large
Oligopoly
Barriers to Entry - High
#of Sellers - Few
Firm Price Setter - Yes
Product Differentiation - Some
Size of Firms - Large
Monopoly
Barriers to Entry - No Entry
#of Sellers - One
Firm Price Setter - Yes
Product Differntiation - None
Size of Firms - Large
Goal of Canada’s Economic System
Economic Growth
Economic Stability
Employment
The Business Cycle
Expansion
Peak
Contraction
Recovery
Measuring Economic Growth
GDP
GNP
Real GDP
Nominal GDP
GDP
Value of all final goods and services produced within a country’s borders
Real GDP
GDP adjusted to reflect the effects of inflation
Nominal GDP
Is not adjusted for inflation
Productivity
Output vs input
The Balance of Trade
Trade Surplus
Trade Deficit
Balance of Trade
Value of all goods and services a country exports minus value of imports
Trade Surplus
Exports more than imports
Trade Deficit
Imports more than exports
Types of Government Debt
National debt
Provincial debt
Municipal debt
Budget deficit
Debt
Existing/outstanding debt owing
Deficit
Negative difference between tax revenue (cash in) and government spending (cash out)
National Debt Importance
Impacts amount of tax dollars available to spend
Affects interest expense
How money the government has left
Why Debt Bad
Lower country credit rating
Austerity program cuts
Less efficient use of time
The doctrine of Richardian equivalence
The doctrine of Ricardian
equivalence
Make people to believe taxes will be raised in the future
People save money causing a worse economic problem
Types of Unemployment
Frictional
Cyclical
Structural
Seasonal
Frictional Unemployment
Normal labour market turnover, not a downturn in the economy
Cyclical Unemployment
Pace of the economy or business cycle
Structural Unemployment
Available jobs do not corresponds to the skill of labour force
Unemployed individuals do not live in a region where jobs are available
Seasonal Unemployment
Caused by seasonal nature of job
Industry Lifecycle Model
Introduction
Growth
Maturity
Decline
Introduction Phase Characteristics
High Fragmentation (H)
Uncertain market (U)
Small competitors (S)
High innovation (H)
Wiling to pay premium (W)
Entrepreneurial (E)
Lack of legitimacy (L)
Lost of R&D (L)
Introduction Phase Examples
New Tech
New Invention
New Drug
Change in a government regulation
Introduction Phase Summary
New Product, Low Sales, High Cost, Uncertain Markets, which companies focus on innovation and brand building
Growth Phase Characteristics
Dominant Design (D)
Existing Firms (E)
Product in Wider market (P)
Lower Prices (L)
Economies of scale (E)
New entrants (N)
Growing sales (G)
Growth Phase Standards
De jure standard
De Facto standard
Shakeout
De Jure Standard
Legal Mandate enforced by government or standards
De Facto Standard
Not enforced by law but widely accepted through common use
Shakeout
After a Standard is established weaker competitors are removed
Growth Phase Summary
Gains traction causing rapid growth of sales causing new competitors, which companies focus on expanding their market share and profits
Maturity Phase Characteristics
Slow Growth (S)
Lots of Advertising (L)
Intense Competition (I)
Profits (P)
Saturated Markets (S)
Price-Conscious Consumers (P)
Incremental Improvements (“New and Improved”) (I)
Price Wars (P)
Maturity Phase Examples
Mainstream businesses
How to Compete in Maturity Phase
Offer something “truly” different
Something Unexpected
Something Catches Eyes
Maturity Phase Summary
Markets are saturated causing sales to plateau, which makes pricing competitive, which causes incremental improvements
Decline Phase Characteristics
Declining Industry Sales by:
Changes in Demographics
Shifting Consumer Tastes
Technological Substitutions
Decline Phase Examples
Tabaco Industry
Cola (sugary pop) Industry
Retail Malls
Managing Decline Phase
Harvest Profits (H)
Exit Early (E)
Maintain Leadership Stance (M)
Pursue Niche Strategy (P)
Consolidate (C)
Decline Phase Summary
Consumers change preferences or Tech Subs
Innovation and Technology
Radial Innovations
Incremental Innovations
Radial Innovations
Introduces new changes to current products
Incremental Innovations
Focuses making improvements or refinements to current products
Cyclical Model of Technological Change
End of Incremental Change
Technological Discontinuity
End of Ferment
Dominant Design
Globalization Process Involves
Foreign Investment Growth (F)
One Global Economy (O)
Global Economic Integration (G)
Cross-Border Deals (C)
Economic Dependence (E)
Encouragement of Global Business Activity
Pull Factors
Push Factors
Pull Factors
Potential Sales Growth
Obtaining Needed Resources
Push Factors
Competition
Shift to Democracy
Reduction in Trade Barriers
Improvements in Technology
Channels of Global Business Activity
Collaborations (C)
Outsourcing/Offshoring (O)
Licensing /Franchising (L)
Direct Investment in Foreign Operations (D)
Exporting/Importing (E)
Mergers/Acquisitions (M)
Exporting and Importing
Highest Activity
Canada exports over 40% of its production
Licensing and Franchising
Owner paid a fee or royalty to distribute product
Foreign Direct Investment
Purchasing assets or share of ownership of company out of country to gain management.
FDI in Canada is second highest
Joint Ventures and Strategic Alliances
Agreement to Collaborate
Benefits of Mergers and Acquisitions
Obtain New Markets
Obtain New Knowledge
Economics of Scale in Production
Establishing Subsidiaries
Enterprises Produce Goods and Services
Multinational Corporation
Businesses that engage in a form of international business
Benefits of Multinational Corporation
Financial Support (F)
International Trade (I)
Relations Improved (R)
Management Expertise (M)
Technology Improvement (T)
Employment Creation (E)
Economic Development (E)
Risks of Multinational Corporation
Limited Control
Profits to Home Country
Highly Centralized
International Trade Involves
Logic of Trade
Mercantilism
Trade Protectionism
Promoting International Trade
Logic of Trade
Free Trade = Global Efficiency and Wealth
Free trade
Open markets allow equal opportunity to compete as a business
Mercantilism
Trade Theory in 1500 to 1800
Economic policy of accumulating financial wealth through trade surplus
Trade surpluses
Country exports exceeds imports
Trade Protectionism
Protects domestic economy and businesses through restrictions on imports
Problems with Mercantilism and Protectionism
Creates “one-way street” of trade
Types of Regional Economic Integration
Free Trade Area
Custom Unions
Common Market
Economic Union
Free trade area
Region where reduces or eliminates barriers to trade
Maintain trade policies on non-member countries
Lowest Integration
Customs union
Second Most economic integration
Agreement to reduce or remove trade barriers and tariffs
Common market
Coordination of Economic and Labor Polices
Third Most Integration
Economic Union
Builds on previous forms
Highest Level of Integration
Harmonization of fiscal, monetary and tax policies
Other trading
European Union
Asian Trading Bloc
-Asean
-Apec
NAFTA
North American Free Trade Agreement Advantages
Increase in Trade and Exports
Increase in GDP
Builds Relationship
Forces other to be more competitive
More Variety
Reduced Prices
Free Market
North American Free Trade Agreement Disadvantages
Competition with Locals
Increases in trade only due to Canadian low dollar
Not Tech Based Exports
Too Dependent on Trade with US
Canada cant compete
Lost jobs
Loss of Culture
Become Economic Subsidiary
No Increase of Productivity
Business Enterprise System Determines
What is Produced and Distributed to society
How goods and services are produced and distributed
Capitalism
Based on:
Rights of the Individual
Rights of Private Property
Competition
The role of government
Canadian Government Structure
Federal
Provincial
Municipal
Government Role
Tax Collector
Business Owners
Regulator
Tax Collector
Revenue Taxes
Restrictive Taxes
Types of Revenue Taxes
Individual Income Tax
Corporate Income Tax
Sales Tax
Property Tax
Restrictive Taxes
Government is trying to control or curb an activity
e.g, alcohol, cigs
Business Owner Crown Corporation
safeguarding national interests
vital to the economy
Services that could not be made by private businesses
natural monopolies
The Regulator
Constraints to modify economic behavior
To protect the consumer, environment, fair competition
Government as Guardian
Balance of Trade maintainment (B)
Foreign Direct Investment Encourangment (F)
Unfair Global Competition Protection (U)
Nurture Young Industries (N)
Domestic employment ay adequate levels (D)
Subsidies to compete globally Offerings (S)
Nurture Young Industries
Support and protects young industries
To become strong enough to compete with foreign companies
Encourage Foreign Direct Investment
Less Foreign imports = more investments in country
Increases job opportunities, growth of industry, adds capital
Maintain a Favorable Balance of Trade
Trade Deficit or Surplus
Protecting Against Unfair Global Competition
Undercuts = potential of domestic discouraged
Maintaining adequate levels of domestic employment
Shielded locals from foreigns by imposing tariffs
Protectionist measures clash with the principles of free trade, putting governments in a difficult position of balancing domestic economic interests with global business regulations.
No job = poor
Offering subsidies to compete globally
Cash,
low-interest loans,
tax breaks
WTO intervened with disputes if subsidies give domestic industries provide an unfair advantage
Government NOT as Guardian
Public Confidence in Politicians Undermined (P)
Uneven Playing Field (U)
Political Agenda Promotion (P)
Benefits Few (B)
Open and Markets Contrary (O)
Dependency Creation (D)
Deregulation
Reduction of # of laws and regulations
Reduction of government power
Deregulation Benefits
Increased competition
Lower Prices
Improved products and services
Deregulation Risks
Consumer Exploitation
Reduced Quality
Increased Consumer Prices
Privatization
Removal of government involvement
Why Governments Privatize
Belief in Power of Competition
Belief Private=More Efficient
No Need Public Involvement
Financial benefit from selling assets
Challenges of Privatization
Stakeholder Objectives
Employees’ Objectives
Public Objectives
Stakeholder Objective
Different Stakeholders have different interest and objectives
Employee Objectives
Layoffs in developing and transitioning countries
Rail company in 1991 laid off around 80%
Public Objectives
Public’s worry about safety
Worries about prioritization of profits over safety
Societal Forces
Society
Customer Preference
Influences/Opinions
Moral/Ethical Behavior
Business Ethics
Rules, Standards, Principles, or Codes giving guidelines for morally right behaviors
Model for Making Ethical Decisions
Utilitarian/End-point Ethics (John Stuart Mills)
Rule Ethics
Utilitarian or end-point ethics
Examine End Result
Tangible Economic Outcomes (Shareholder Profit)
Intangible Outcomes (Happiness or Friendship)
Utilitarian or end-point ethics Limitations
Estimating benefits and costs to stakeholders
The “process” is ignored
Rule Ethics
Based on
Rules/Principles
Religious, Family, Cultural values
What is morally acceptable
Rule Ethics Limitations
Cant be applied universally
Different Perspective
Obligations overriding ethics
Rules not consistent
Bribe
Something influence you to take an action, when you wouldn’t
What is Illegal
Amount of the bribe
Forging documents
Factors affecting Decisions to Engage in Ethical or Unethical Behavior
Culture (C)
Roles (R)
Routinization (R)
Identity (I)
Decoupling (D)
Corporate Culture
Expected behaviors and goals
Code of conduct
Policies promote ethics
Decoupling
Orgs hide inefficiencies by separating actions from assessments
Allows orgs to hide activities that would be wrong under examination
Employees feel okay to engage in unethical behavior
Job Routinization
Creates standards
Work patterns can make people overlook ethical implications
Less scrutiny of moral aspects of decisions
Organizational Identity
Strong connections lead to overlooking
Learn ethical behaviours by being with people close
Work Roles
Specific jobs have specific duties
For salesperson conflict between prioritizing sales at any cost or being truthful
Corporate Social Responsibility
Legal (L)
Economic (E)
Ethical (E)
Philanthropic (P)
Economic Responsibility
Making Money
Legal Responsibility
To Obey With Laws
Ethical Responsibility
Not required by expected by society to be inline of what they consider ethical
Philanthropic Responsibility
Engage in activities that improve society
Sustainable Development
Split:
Development
Sustainability
People
Triple Bottom Line Framework
Sustainable Reporting Tool for success beyond financial gain:
Economic
Social
Environmental
Economic TBLF
Financial Statement Results:
Revenue by Sector
Research and Development Costs
Taxes Paid
Size of Org
# of Jobs/Employees
Social TBLF
Compliant to Employment Laws
Business Ethics
Fair and Equitable Practices
Environment TBLF
Sustainable Practices that do minimal harm to:
Water
Land
Air
Greatest Environmental
Challenges Today
Over consumption of Natural Resources
Greenhouse Gas Emissions
Fracking
Gas extraction involves injecting high pressure mix of water and chemical to free up oil and gas deposits
TBL Benefits
Transparency
Flexibility
Satisfies more stakeholder
Limits of TBL
No measurement standard
Too Subjective
Lack of Comparability
Measuring Sustainability
Living Plant Index
Ecological Footprint
Index of Sustainability Economic Welfare
Genuine Progress Indicator
Living Planet Index
Measures Changes to World’s Biological Diversity
Ecological Footprint
Land and Sea required to meet demands of human consumption
Index of Sustainable
Economic Welfare
Index that to measure both positive and negative activities that affect a society’s well-being
Genuine Progress Indicator
Measure Economic Growth and Social Well-Being
Subtracts negatives
Business Case for
Sustainability
Reducing costs
Reducing risks
Improving public relations
Reducing costs
Reducing Packaging
Lowering Energy Use
Reducing Waste
Obstacles for change
Time
Money
Lack of knowledge
