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LECTURE 1
THE CHALLENGES OF BUSINESS: A FRAMEWORK
What are the fundamental internal and
external forces which all organizations must
confront in their struggle to survive and
prosper?
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CANADA: A GREAT PLACE TO DO
BUSINESS?
•Competitiveness
•Taxes & Spending
•Employment & Labour
•The Business Environment
•Global status/position
•Technological opportunities
& facilities
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INTERNAL & EXTERNAL ENVIRONMENTS
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INTERNAL ENVIRONMENT – PEOPLE
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People are a key component
of all organizations
People as a competitive
advantage
Recruiting the right people
Managing people and teams
Leadership as a key influence
on employee satisfaction &
performance
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INTERNAL ENVIRONMENT - STRUCTURE
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A planned network of relationships
between individuals in various
positions in the organization
Includes the formal hierarchy of
authority, e.g. distribution of work
rules or procedures controlling
and coordinating behaviour
Many organizations are changing
their structure (restructuring).
This may include becoming ‘flatter’
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INTERNAL ENVIRONMENT - STRUCTURE
MANAGING DIRECTOR
MIDDLE MANAGERS
LINE MANAGERS
OFFICE & ADMIN STAFF
REGULAR WORKERS
A HIERARCHICAL ORGANIZATIONAL STRUCTURE
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INTERNAL ENVIRONMENT - STRUCTURE
MANAGING DIRECTOR
HEADS OF DEPTS
LINE MANAGERS
CLERICAL &
ADMIN STAFF
REGULAR WORKERS
A FLATTER ORGANIZATIONAL STRUCTURE
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INTERNAL ENVIRONMENT - STRUCTURE
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Also includes the informal
hierarchy of authority, who
influences whom and who
is involved in activities like
decision making
What might influence
someone’s position in the
informal structure of an
organization?
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INTERNAL ENVIRONMENT - STRATEGY
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A key part of all management decision-making
activity
Goals must be identified
Strategy is how goals are achieved, e.g. will
the business be a ‘low cost provider’ or a
‘niche provider’?
Why must managers and employees
understand organizational strategy
and goals and the relationship between
the two?
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EXTERNAL ENVIRONMENT – THE
SPECIFIC/TASK ENVIRONMENT
Parties/ Groups that have a direct influence
on the organization
Distributors
People
Structure
Strategy
Labour Pool
Suppliers
Unions
Local Community
Customers
Competitors
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EXTERNAL ENVIRONMENT – THE GENERAL
ENVIRONMENT
Political Forces
Economic Forces
Social Forces
Competitive Forces
Technological Forces Global Forces
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GENERAL ENVIRONMENT - ECONOMIC
FORCES
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An economic slump can mean downsizing, cuts in
training and staff development, end of traditional
work practices etc
An economic boom can mean expansion, extra
training, R & D etc
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GENERAL ENVIRONMENT - POLITICAL
FORCES
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Political change can be very influential e.g.
deregulation of Canadian Telecoms, banking
industry, reduction of trade barriers, changing
political leaders
In Canada there is a move towards less
government intervention
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GENERAL ENVIRONMENT – SOCIETAL
FORCES
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Changes in attitudes to work &
equality are important societal
forces, ‘organizational justice’ &
compensation & benefits
Health & Safety issues
Views on fashion and health
Business ethics
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GENERAL ENVIRONMENT - COMPETITIVE
FORCES
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Business must think about who
their competitors will be
Competition may be at a local,
national or global level. It may be
open or restricted
What are the advantages and
disadvantages of competition?
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GENERAL ENVIRONMENT - TECHNOLOGICAL
FORCES
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Technology has an important influence on
organizations - accessibility influences market
entry and operating costs
Consider how technology has influenced the
role of work and how work is done, e.g.
teleworkers, flexible work practices
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GENERAL ENVIRONMENT – GLOBAL
FORCES
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Global forces have an international
dimension e.g. the events of
September 11th, BSE crisis.
Organizations must now think
globally
Global forces have resulted in
business outsourcing in order to
gain a competitive advantage
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EXTERNAL FORCES IN CANADA
ECONOMIC FORCES
Gross Domestic Product (total value of a country’s
annual output of goods and services)
Canada’s economy grew at 0.5% in 2008.
In last quarter of 2008 GDP declined by 3.4%.
Unemployment is another important economic
force in Canada, currently at 7%.
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EXTERNAL FORCES IN CANADA
 POLITICAL FORCES
Capitalist economy but the government also
has an important role in the business
environment, e.g. R & D incentives, global
trade agreements etc.
 COMPETITIVE FORCES
Open economy. Government attempts to
reduce monopolies by encouraging
competition so goods and services are
available to fit the needs of the market
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EXTERNAL FORCES IN CANADA
 TECHNOLOGICAL FORCES
Resource based economy (farming, mining,
forestry etc) now moving to
manufacturing, technology and service
sector – e.g. telecommunications, energy
etc
 SOCIETAL FORCES
Increasing need for higher education,
immigration, aging population, changes in
employment law, declining birthrates,
women in the workforce
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EXTERNAL FORCES IN CANADA
GLOBAL FORCES
Proximity to USA ($1.3bn a day in trade) or 85%
of all Canadian exports
Canada exports over 40% of its GDP – a major
trading nation through agreements such as
NAFTA
Foreign ownership of Canadian companies is
becoming increasingly common, e.g. the sale of
Canadian companies like HBC
There is a good deal of FDI with many
subsidiaries of US based parent companies
e.g. Walmart
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KEY LEARNING POINTS
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Nature of internal & external forces
Role of internal & external environments
on organizational performance
Connectivity of internal & external
contexts
Characteristics of Canadian business
context
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