Lecture 2 Flashcards
What is the organizational external environment
Factors beyond an organization’s boundaries that cannot be controlled (ie. competition)
What is organizational boundaries
That which separates the organization from its environment
What are 3 conditions of the economic system in which an organization operates
Economic growth, Economic stability, and Full-employment
What are 6 factors that contribute to economic growth
- the business cycle
- aggregate output and standard of living
- GDP and DNP
- Productivity
- Balance of Trade
- National Dept
What is the business cycle
The typical pattern of short-term ups and downs in an economy (etc. peak, recession, trough, and recovery)
What is aggregate output
Measure of economic growth: total quantity of goods and services produced by an economic system during a given period
What is standard of living
total quantity and quality of goods and services that a country’s citizens can purchase with their currency
What is 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 _______ in ________
increases in productivity
What is GNP
Gross National Product
Value of all goods and services produced by a national economy within a given period regardless of production location
What is GDP
Gross Domestic Product
Value of all goods and services produced by a national economy within a given period with domestic factors of production
What is Balance of Trade
Value of all exported products - value of all imported products
What is national dept
amount of money that a government owes its creditors. Increases/decreases based on the budget deficit/surplus
What is economic stability
the condition when the amount of money available and the quantity of goods and services produced are growing at about the same rate
What are the 3 threats to economic stability
- Inflation
- Deflation
- Unemployment
What is inflation
occurs when there are widespread price increases in an economic system
What is Consumer Price Index (CPI)
a tool used to measure inflation
What is deflation
a period of generally falling prices
Define the economic inflation of Canada
In the past 20 years, the rate of price increases has been low and quite stable
In 2021, the inflation rate rose to 4.7%
What is unemployment
level of joblessness amond people actively seeking work in an economic system
What are the 4 types of unemployment?
- Frictional
- Seasonal
- Cyclical
- Structural
What are the two stabilization policies
Fiscal Policies: taxes and spending
Monetary Policies: money supply
What is the political-legal environment
reflects the relationship between business and government (ei. regulations)
What is Michael Porter’s five forces model for
used to analyze the competitive situation in an industry
What are the five competitive forces that shape strategy according to Michael Porter
- Threats of new entrance
2.Bargaining power of consumers - Threat of Substitutes
- Bargaining Power of Suppliers
- Industry Rivalry
What is a competency
the skills and resources with which an organization competes best and creates most value for owners
What is outsourcing
Paying suppliers and distributors to preform certain business processes
What is an Acquisition or Merger
Horizontal, vertical, or conglomerate mergers. Can be a friendly or a hostile takeover
What is divestitures or Spin-off
Selling part of existing business or setting it up as a new corporation
What is a hostile takeover
the aquiring company buys enough of the other companys stock to take control
what is poison pill
a defence tactic that manangement can adopt to make a firm less attractive
What is employee-owned corporations
Employee stock ownership programs (ESOP)
What is strategic alliances
Two or more companies temporarily join forces. Often called a joint venture
What is a subsidiary and parent corporations
Subsidiary corporation owned by another (parent) corporation
What are the two types of inflation
- Demand-pull inflation
- Cost-push inflation
What is cost-push inflation
when business expenses increase and these extra costs are passed on to their customers. ex// price of raw materials go up over time
What is demand-pull inflation?
when the demand of goods and services outpaces the supply. Happens when the economy is strong and close to full capacity
What is Milton Friedmans theory of monetary inflation
this theory, often summarized by the phrase “inflation is always and everywhere a monetary phenomenon,” posits that inflation occurs when there is a sustained increase in the money supply that outpaces economic growth.
Ex// when things get more expensive because there’s too much money and not enough stuff to buy.
What is Porters Diamond Theory
4 things that will determine if a country has a favourable advantage or not. Ex// how to determine whether sweden has an advantage for their furniture or not
What are the 4 things that make up Porters diamond theory
- Favorable Factor Conditions: was their advantage by luck (ex/tourism in greece) or made (ex//good engineers in germany)
- Demand Conditions: there must be damand in that area
- Related and Supporting Industries: you cant just go to greece for tourism and not have somewhere to eat. You must have strong supporting industries
- Firm Strategy, Structure and Rivalry: there must be rivalry. competition makes you better
