(Chapter1)

Business: An organization that seeks to earn profits by providing goods and services
-

Profit: what remains after a business’s expenses have been subtracted from its revenues.
-

Produce most of the goods and services we consume and they employ the majority of
working people
Reward the owners of businesses for taking the risks involved in investing their time and
money
Economic system : the way in which a nation allocates its resources among its citizens
#1) Command economy: an economic system in which government controls all or most
factors of production and makes all or most production decisions
-
Communism and Socialism
-
Communism : proposed by the 19c Karl Marx, a system in which the government owns
and operates all sources of production
-
Socialism: A kind of command economy in which the government owns and operates the
main industries, while individuals own and operate less crucial industries.
#2) Market Economy: an economic system in which individuals control all or most factors of
production and make all or most production decisions
-
Market : A mechanism for exchange between the buyers and sellers of a particular good
or service
-
Input market: Firms buy resources that they need in the production of goods and
services. / Output market: Firms supply goods and services in response to demand on
the part of consumers
-
Capitalism: an economic system in which markets decide what, when, and for whom to
produce. (이윤의 획득을 최대목적으로 하여 이루어지는 경제활동이다. 생산수단을 사
유하는 자본가는 이윤의 획득을 목표로 생산활동을 하지만 자본을 투자하여 생산활
동에 필요한 기회, 재료, 서비스를 구입함과 동시에 생산수단을 소유하지 않는 노동
자에게 임금을 지불하여 노동력을 구매하고 재화, 서비스를 생산한다.)
#3) Mixed market economy: An economic system with elements of both a command
economy and a market economy; in practice, typical of most nations’ economies
- Privatization: the transfer of activities from the government to the private sector
- Nationalization: the conversion of private firms into government-owned firms
(telecommunications industry)
-Deregulation: a reduction in the number of laws affecting business activity and in the
powers of government enforcement agencies

Factors of production : the resources sued to produce goods and services
-
Labour , capital, entrepreneurs, and natural resources – information too
#1) Labour: the mental and physical training and talents of people = human resources
#2) Capital: the funds needed to operate an enterprise.
-
A major source of capital for small businesses: personal investment by owners.
Investments can come from individual entrepreneurs, from partners who start
businesses together, or from investors who buy stock.
#3) Entrepreneurs: an individual who organizes and manages labour, capital, and natural
resources to produce goods and services to earn a profit but who also runs the risk of failure
#4) Natural resources: Items used in the production of goods and services in their natural
state, including land, water, mineral deposits, and trees
#5) Information resources: Information such as market forecasts, economic data, and
specialized knowledge of employees that is useful to a business and that helps it achieve its
goals.

How Government influences business
#1) as Customer
-
Government buys thousands of different products and services from business firms,
including office supplies, office buildings, computers, etc.,
#2) as Competitor
-
Competes with business through Crown corporations, which are accountable to a
minister of parliament for their conduct
#3) as Regulator
-
Regulate many aspects of business activity through administrative boards, tribunals, and
commissions.
-
Canadian Radio-Television and Telecommunications(CRTC), Canadian Transport
Commission(CTC), Canadian Wheat Board >> regulating business activity = include
promoting competition, protecting consumers, achieving social goals, and protecting the
environment
a) Promoting Competition: Competition policy tries to eliminate restrictive trade
practices and thereby stimulate maximum production, distribution, and
employment.
b) Protecting Consumers
-Hazardous products act, Tobacco act, Weights and Measure act, Textile Labeling
act, Food and Drug act
c) Achieving Social Goals: Social goals promote the well-being of our society.
d) Protecting the Environment: Canada Water Act, Fisheries Act, Environmental
Contaminants Act
#4) as Taxation Agent
-
Revenue taxes: Taxes whose main purpose is to fund government services& programs
-
Progressive revenue taxes: Taxes levied at a higher rate on higher income taxpayers
and at a lower rate on lower-income taxpayers
-
Regressive revenue taxes: Taxes that cause poorer people to pay a higher percentage
of income than richer people pay( the same rate regardless of a person’s income)
-
Restrictive taxes: Taxes levied to control certain activities that legislators believe should
be controlled
#5) as Provider of Incentives
-
Federal, provincial, and municipal governments offer incentive programs that help
stimulate economic development.
-
Governments offer incentives through the many services they provide to business firms
through government organizations. Industry Canada offers many different programs
designed to help small businesses.
#6) as a Provider of Essential services
-
Facilitate business activity through the wide variety of services they supply.

Lobbyist: a person hired by a company or an industry to represent its interests to
government officials.

Trade association: an organization dedicated to promoting the interests and assisting the
members of a particular industry

Demand: the willingness and ability of buyers to purchase a product or service

Supply: the willingness and ability of producers to offer a good or service for sale

Law of demand : the principle that buyers will purchase more of a product as its price drops /
Law of supply: the principle that producers will offer more of a product as its price rises

Surplus: a situation in which quantity supplied exceeds quantity demanded / Shortage: a
situation in which quantity demanded exceeds quantity supplied

Private enterprise: an economic system characterized by private property rights(Ownership
of the resources used to create wealth is in the hands of individuals), freedom of choice,
profits, and competition(the vying among businesses in a particular market or industry to
best satisfy consumer demands and earn profits)
-
Perfect competition: a market or industry characterized by a very large number(2) of
small firms(1) producing an identical product so that none of the firms has any ability to
influence price (Canadian agriculture)
1) The products of each firm are so similar that buyers view them as identical to those
of other firms
2) Both buyers and sellers know the prices that others are paying and receiving in the
marketplace
3) Because each firm is small, it is easy for firms to enter or leave the market
4) Going prices are set exclusively by supply and demand and accepted by both sellers
and buyers
-
Monopolistic Competition: a market or industry characterized by a large number of firms
supplying products that are similar but distinctive enough from one another to give firms
some ability to influence price. They can still enter or leave the market easily. (Coca-Cola
and Pepsi, polo and tommy) Product differentiation gives sellers some control over
prices.
-
Oligopoly: a market or industry characterized by a small number of very large firms that
have the power to influence the price of their product and/or resources. It is difficult for
new competitors to enter the industry because large capital investment is
needed.(automobile, airline)
-
Monopoly: a market or industry with only one producer, who can set the price of its
product and/or resources.
-
Natural monopoly: a market or industry in which having only one producer is most
efficient because it can meet all consumer demand for the product.

A brief history of business in Canada
1) The early years
-
Business activity and profit from commercial fishing were the motivation for the first
European involvement in Canada. Beginning in the 1500s, French and British
adventurers began trading with the Aboriginal peoples. Items such as cooking utensils
and knives were exchanged for beaver and other furs. The governments of the countries
from which the settlers came (England and France) were strong supporters of the
mercantilist philosophy. Under mercantilism, colonists were expected to export raw
materials like beaver pelts and lumber at low prices to the mother country. Canadian
manufacturing was slow to develop.
2) The factory system and the industrial revolution
-
Industrial revolution: a major change in goods production that began in England in the
mid-eighteenth century and was characterized by a shift to the factory system, mass
production, and specialization of labour
-
Factory system: a process in which all the machinery, materials, and workers required to
produce a good in large quantities are brought together in one place
-
Mass production: the manufacture of products of uniform quality in large quantities
-
Specialization: the breaking down of complex operations into simple tasks that are easily
learned and performed.
3) The entrepreneurial Era
-
The emergence of entrepreneurs willing to take risks in the hope of earning huge profits.
-
Adam Smith “The Wealth of Nations”(1776)

Let businesses function without regulation or restriction.

Foundation document for capitalism, free enterprise, free trade, wealth creation

Capitalism: a legal system that safe guards private property and permits free trade in
competitive markets; production and consumption are not controlled
4) The Production Era
-
The period during the early twentieth century when business focused almost exclusively
on improving productivity and manufacturing methods
5) The sales and Marketing Eras
-
Sales era: the period during the 1930s and 1940s when businesses focused on sales
forces, advertising and keeping products readily available
-
Marketing era: the period during the 1950s and 1960s when businesses began to
identify and meet consumer wants in order to make a profit.
6) The Finance Era
-
The period during the 1980s when there were many mergers and much buying and
selling of business enterprises
7) The Global Era
-
The emergence of a truly global economy, facilitated by advances in production,
computer technology, and communication systems
8) The Internet Era
-
The rapid growth of the internet has opened up new growth possibilities for both small
and large businesses
(Chapter 18)

Money: any portable, divisible, durable, and stable object generally accepted by people as
payment for goods and services.
-
Portability: lightweight and easy to handle
-
Divisibility: easily divisible into smaller parts with fixed values for each unit
-
Durability: no spoil, die, and if it wears out, it can be replaced with new coins or paper
money. / Stability

Modern banks still keep ‘reserves’ in case money needs to be transferred to cover short term
deficits. But, now they are not ‘gold in the vault’ but rather ‘ deposits’ at the ‘central bank’


M1 : The spendable money supply
-
M-1: Only the most liquid forms of money (currency and demand deposits)
-
Currency : paper money and coins issued by the government / Cheque: an order
instructing the bank to pay a given sum to a specified person or firm / Demand deposits:
money in chequing accounts; counted as M-1 because such funds may be withdrawn at
any time without notice
M2: The Convertible money supply
-
M-2: everything in the M-1 money supply plus savings deposits, time deposits, and
money market mutual funds

-
Measuring the store of monetary value that is available for financial transactions.
-
Time deposits: a deposit that requires prior notices to make a withdrawal; cannot be
transferred to others by cheque/ money market mutual funds: funds operated by
investment companies that bring together pools of assets from many investors.
Credit Cards: a money substitute; they serve as a temporary medium of exchange but are
not a store of value.
-


Big business: quite convenient for consumers & extremely profitable for issuing
companies because of fees they collect
Financial institutions
-
Their main function is to facilitate the flow of money from sectors with surpluses to
those with deficits by attracting funds into chequing and savings accounts
-
Four financial pillars : (1) chartered banks (2) alternate banks, such as trust companies &
credit unions (3) life insurance companies & other specialized lending &saving
intermediaries (4) investment dealers
Changes affecting financial institutions
-
Deregulation: banks to shift away from their historical role as intermediaries between
depositors and borrowers. Canada’s banks are diversifying to provide a wider array of
financial products to their clients.
-
Changing consumer demands: In the past, they made most of their money from the
spread between interest rates paid to depositors and the rates charged on loans.
Investment banking, on the other hand, is fee-based. Banks are making a larger
proportion of their profits from fees, and this is blurring the traditional boundary between
banks and securities firms. ( 캐네디언 타이어가 은행라이센스 획득함, PC같은 전자은
행을 이용가능, 캐나다는 은행이 보험을 파는 것을 금지함)

Changes in international banking
-

Because U.S. and other foreign banks are allowed to do business in Canada, Canada’s
banks are responding to this threat with a variety of tactics, including attempts to merge
with one another so they can afford the millions of dollars in technology investment that
will be needed to remain competitive. Banks are trying other things to be more
competitive, like co-operating to spread their fixed costs.
The Bank of Canada: Canada’s central bank; formed in 1935.
-
A crucial role to play in managing the Canadian economy and in regulating certain
aspects of chartered bank operations.
-
Bank rate (rediscount rate): the rate at which chartered banks can borrow from the Bank
of Canada / an important instrument of monetary policy as a determinant of interest rates.
#1) Chartered Bank
-
A privately owned, profit-seeking firm that serves individuals, non-business organizations,
and businesses as a financial intermediary
-
Trust services: the management of funds left “in the bank’s trust” / Pension services,
financial advice
-
International services : exchange dollars / letter of credit(a promise by a bank to pay
money to a business firm if certain conditions are met) / banker’s acceptance (a promise
that the bank will pay a specified amount of money at a future date)
-
Electronic Funds transfer (EFT) combines computer & communication technology to
transfer funds or information into, from, within, and among financial institutions.
-Automated Banking Machines (ABMs): automated machines that allow bank
customers to conduct account- related activities 24 hours a day, 7 days a week
-Pay-by-phone, Direct Deposits and Withdrawals, Point-of-Sale Transfers (debit
card), Smart Cards, ecash,

Bank Deposit
-
Chequable deposit: a chequing account
-
Customers who deposit coins, paper currency, or other cheques in their chequing
accounts can write cheques against the balance in their accounts.
-
Term deposit: Money that remains with the bank for a period of time with interest paid to
the depositor.

Bank Loans - Prime rate of interest: the lowest rate charged to borrowers

Bank as Creators of Money
-
By taking in deposits and making loans, they expand the money supply.
-
How this expansion process used to work when banks had a reserve requirement, that is,
that they had to keep a portion of their chequable deposits in vault cash or as deposits
with the Bank of Canada.

Trust company: safeguards funds and estates entrusted to it; may also serve as trustee,
transfer agent, and registrar for corporations / Credit union: Co-operative savings and
lending association formed by a group with common interests

Life insurance Company: a mutual or stock company that shares risk with its policy holders
for payment of premiums / factoring company: buys accounts receivable from a firm for less
than their face value, and then collects the face value of the receivables. / sales finance
company: Specializes in financing instalment(할부) purchases made by individuals or firms /
consumer finance company: Makes personal loans to consumers / Venture capital firm:
provides funds for new or expanding firms thought to have significant potential / pension fund:
accumulates money that will be paid out to plan subscribers in the future.

Law of one price: the principle that identical products should sell for the same price in all
countries
-The purpose of devaluing: to cause a decrease in the home country’s exchange value
-The purpose of revaluation: to increase the exchange value and reduce the home country’s
payment surplus

Money inflows and outflows are equal for both countries = in balance >> money does not
actually have to flow between the two countries.

World Bank: a United Nations agency that provides a limited scope of financial services,
such as funding national improvements in underdeveloped countries. / International
Monetary Fund (IMF): A United Nations agency consisting of about 186 nations that have
combined resources to promote stable exchange rates, provide temporary short-term loans,
and serve other purposes.
(Slide 5)

Four paradigms of communication
#1) Encoding- decoding: avoid low signal-to-noise ratio; re-state
-
Encoding involves an attempt to transform meaning into words(and non-verbals)
-
The signal is the true representation of meaning, while the noise is everything else.
Attempt to minimize the signal/noise ratio
-
Decoding involves an attempt to transform words (and non-verbals) into meaning
#2) Intentionalist: Attempt to understand, communicate meaning
-
Deciphering(판독하다, 해독하다) intention, even when simple decoding might yield a
different meaning
-
Text and sub-text
#3) Perspective Taking: take your listener’s perspective into account
-
An exploratory(탐구의) approach requires perspective taking; realistically imagining the
point-of-view of the other
-
Attempting to understand the other and to communicate from their perspective and/or
take their perspective
-
Ex) “It’s the first door on your left”
#4) Dialogic : Establish conditions that foster(발전시키다) effective communication (a
safe space); listen actively; pay attention to message form
-
Involves an invitation / interests, not positions
-
Meaning is socially constructed during the conversation
-
The communication is considered to be a joint accomplishment, a product of the
collaboration of the participants.
-
When both sides participate, both sides become more committed to the process and the
outcome
-
ex: Negotiation = Revealing some information invites the other side to do the same /
Learning what the other side really needs(interests) indicates your good intent /
commitment to solutions is one successful outcome of any negotiation

Your warrants, and your communication partners’ warrants, are the best place to
improve the quality of our communication
-Avoid noise (could be perceived wrongly)
-They will attribute some intent
-Attempt to learn their assumptions

-
Example forms of Business Communication
Memorandum, Annual report executive summary, strategic report, press release,
conference call for investors and analysts, the PowerPoint presentation etc.
#1) The Memo
-
On paper, but now mostly by email, should be concise, on subject
-
From:
-
Strengths : equality, coverage, control of message
-
Weaknesses: if sent to leaders only “Lost in translation”
& To:
>> Subject line
#2) Charlotte Beers at Ogilvy and Mather (Case study)
-
New CEO of large, beleaguered advertising house (270 global offices) , 4 previous
CEO’s failed to turn it around, Sent a “hello video” to all employees worldwide
-
Lots of signal, little noise / Recognition of history (perspectives) / Open-ended content
(an invitation to participate) / The medium was the message
#3) Annual Report
-
A mandated(위임된) summary of activity and results for public companies. A voluntary
disclosure of activity and results for private companies, charities, NFP sector org’s.
-
The target audience is shareholders/ stake holders ; the medium was paper and is now
both paper and online
#4) Executive(경영의) Summary
-
A one page summary of main issue, analysis, and recommendations
-
Many executive summaries start with a recommendation statement, and then circle back
to issues, analysis, etc.
-
Target audience: corporate officers with little time
#5) Strategic Report
-
Most often a report answering a request from your boss, an exec, a stakeholder
-
Ex) allies : statement of issue, some analysis, options, an action plan(specific)
#6) Press Release
-
A controlled message, rarely inviting comment, for the purpose of conveying information
to various media, in the hope of sharing information, clarifying an issue, or garnering(모
으다) attention (Bulletin – internal : 뉴스단신, 공고, 회보
#7)The CFO conference call
-
Usually a prepared speech to provide market guidance or summarize results
-
Often associated with quarterly or annual financial reporting
-
Analysts have limited opportunity to ask questions
-
Shareholders can listen in
#8) The PowerPoint presentation
-
The most common form of internal communication
-
Contain thoughts and ideas about various business functions
-
Tailored toward senior management
-
Strengths : may help organize your thoughts / Weaknesses : may contain all of your
thoughts (ex: Deeley Harley Davidson Canada)

Business communication tends to
1) Be very tightly controlled (signal clarity-명료성)
2) Be very positional (intent is clear)
3) Acknowledge but not include others’ perspectives
4) Rarely invite attempts at increased understanding

As communication methods evolve, you will need to move away from a focus on
encoding (message delivery) toward a focus on dialogue. A dialogic approach will
help you as a leader because you will be able to quickly learn from your employees
and your customers.
(Slide 7: Integrative Thinking)

Integrative Thinking : The ability to face constructively the tension of opposing
models and instead of choosing one at the expense of the other, to generate a
creative resolution of the tension in the form of a new model that contains elements
of the individual models but is superior to each

How to be an “Integrative Thinker”
-
Understand your own models
-
Safeguard against systematic perceptual and decision making biases
-
Collect relevant feedback to model yourself, and to model others
-
Generalize models to include people and environmental factors
-
Resolve model differences by identifying new and better models- identify assumptions
and think about what would happen if the assumption were not valid

Models
-
A model is a cognitive(인식의) or physical representation of the world that provides us
with meaning
-
Models are most often descriptions or explanations of phenomena, causal links between
events, or metaphorical representations of how we perceive reality

Wicked Decision Problems
-
The world has lots of wicked problems / complex and messy, with shifting , incomplete
and contradictory elements
-
Each attempt at devising a solution changes the understanding of the problem
-
It is hard to tell when the problem is ‘solved’
-
Their causes and possible solutions are ambiguous
-
They’re connected to other problems but still unique

Causal model : an abstract model of a system that uses cause-and-effect logic to
describe its behavior

From Data to Decision
-Select data > interpret data> conclude and/or decide about action

We are often overly influenced by the “seemingly correct” automatic rules

Sources of Mental Models
-Mental model: a representation in the mind of a person, thing, phenomena or
situation, each mental model represents a possibility.
-
Experience, Our working theories become rules or laws in our minds, the comfort we get
from using these models to make sense of the world leads us to believe these models
reflect reality and hence to defend these models
-
Three types of mental models : Mindsets , Schema, Scripts
1) Mindset: a collection of assumptions, attitudes, and methods used to approach
decisions / When commonly held, mindsets help to form corporate cultures
-Can be limiting (or enabling) to generation of alternatives in decision making
-Confirmation bias mechanisms reinforce mindsets in individuals and groups
-When an established mindset is disrupted, Paradigm shift
2)
Cognitive Schema(개요, 윤곽)
- how we organize knowledge about particular concepts and categories
- Generalizations, explanations based on specific salient(핵심적인) instances of
experience (Person schemas, event schemas, role schemas, self-schemas)
-We have a person schema for each individual that we know attributes, feelings
-Role schema drive our expectations about what people should do and our
evaluation of how they do it: nurse, artist, CEO
-Schema-driven information processing tends to be very heuristic(스스로발견하게하
는), prone to bias
-Rigid schema are relatively fixed, immune to feedback; enacted by a wide variety of
situations (one size fits all)
-Flexible schema allow for many alternatives, questioning of data, evidence seeking
3) Cognitive Scripts (event schema)
- Representations of knowledge about how to approach tasks, problems, decisions,
situations in which we act
-Roles, scenes, actions are predictable (ex: restaurant, exams, team meetings)
-Script violation leads to uncertainty and anxiety
- Mental representations of reality
-“theories-in-use” that affect our cognition and our behavior
- As simple as an image, as complex as a belief system

The self –serving bias : the tendency to self-serving attributions; namely,
internal attribution for one’s own success and external attributions for one’s own
failure

Common Fallacies
-
I know the truth and I assume there is a truth
-
You disagree with me, so you must be wrong
-
If we cannot agree, the best thing to do is to compromise (either choose or dilute to keep
the peace)

The Heuristics
-
Availability : judgment is a function of how easily instances are brought to mind
-
Representativeness : judgment is a function of the similarity of an instance to a larger set
-
Anchoring and Adjustment: judgment is driven by a salient number in the environment

Framing : the same information presented differently elicits different thought
processes and therefore responses

Myopia( 근시): Present values (both costs and benefits) matter a lot more than
future values

Dynamic inconsistency takes many forms, but results in the commonplace
phenomenon of temptation
-impulsive purchasing and spending/ procrastination/addiction/delaying project
work to the last possible minute

Defending Mental Models
-
Confirmation Bias
-Our tendency to search for and overvalue information that confirms an initial
preference or position. Therefore, we also tend to discount contradictory or
disconfirming information
2) Overconfidence
-Over estimating how much we know and underestimating how much we do not
know
-Reducing Overconfidence is Feedback: auditing/recording decisions and
judgments, monitoring outcomes

Reacting to Model Clash : The integrative Approach

Required thinking
1) I do not know reality = a humble stance
2) I have something valuable to contribute but I am willing to listen/ learn
3) If our models differ, when might mine be true and when might yours?
4) We need to build a new, better model

Be humble, yet optimistic

Audit your own mental models, explore other’s (ask, don’t guess)

Work together to build a new model that is better than either yours or
another’s
(Chapter2)

External environment: Everything outside an organization’s boundaries that might
affect it

Organizational boundary: that which separates the organization from its
environment

Economic environment: conditions of the economic system in which an organization
operates

Key goals in the Canadian economic system: economic growth, stability, and full
employment

Economic Growth
1) Business cycle: pattern of short-term ups and downs in an economy

Recession: period during which aggregate output, as measure by real GDP, declines

Depression: particularly severe and long-lasting recession
2) Aggregate Output and the Standard of Living

Aggregate output: 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 the currency used in their economic system
3) Gross Domestic Product and Gross National Product

GDP : Total value of all goods and services produced within a given period by a national
economy through domestic factors of production
-
The preferred method of calculating national income and output
-
The real growth rate of GDP – the growth rate of GDP adjusted for inflation and changes
in the value of the country’s currency- is what counts
-
If the growth rate of GDP exceeds the rate of population growth, our standard of living
should be improving
-
As a measure of economic well-being of the average person, GDP per Capita is a better
measure than total GDP
-
Real GDP: GDP calculated to account for changes in currency values and prices
-
Nominal GDP: GDP measured in current dollars or with all components valued at current
prices

GNP: Total value of all goods and services produced by a national economy within a
given period regardless of where the factors of production are located.

Purchasing power parity : principle that exchange rates are set so that the prices of
similar products in different countries are about the same
4) Productivity: any activity that adds value to some input, transforming it into an output for a
customer (whether external or internal)
-balance of trade: the total of a country’s exports (sales to other countries) minus its
imports (purchases from other countries)
-national debt: the total amount of money that a country owes its creditors
-budget deficit: the result of the government spending more in one year than it takes in
during that year

Stability : condition in an economic system in which the amount of money available and the
quantity of goods and services produced are growing at about the same rate
1) Inflation : that widespread price increases throughout an economic system
-
People will have more money to spend, but there will still be the same quantity of
products available for them to buy. As they compete with one another to buy available
products, prices go up. Before long, high prices will erase the increase in the amount of
money injected into the economy. Purchasing power declines.
-
Inflation hurts consumers because price is a primary concern when consumers are
deciding whether to purchase a product.
-
Consumer Price index(CPI) for Measuring inflation
2) Deflation: a period of generally falling prices
-
Good : industrial productivity is increasing and cost savings can be passed on to
consumers
-
Bad : consumers have high levels of debt and are unwilling to buy very much
3) Unemployment: level of joblessness among people actively seeking work in an economic
system.
-
Frictional unemployment : people are out of work temporarily while looking for a new job
/ Seasonal unemployment: people are out of work because of the seasonal nature of
their jobs / Cyclical unemployment: people are out of work because of a downturn in the
business cycle / Structural unemployment: people are unemployed because they lack
the skills need to perform available jobs
-
When unemployment is low, raise the wages. Businesses raise the prices of their
products. Thus, although consumers have more money, this increase in soon erased by
higher prices. Purchasing power declines.
-
If wage rates get too high, unemployment will go up. If the government tries to correct
this situation by injecting more money into the economic system- by cutting taxes, but
then inflation sets in and purchasing power declines.

Stabilization policy: government policy, embracing both fiscal (the government collects and
spends revenues) monetary policies (the government controls the size of the nation’s money
supply), the goal of which is to smooth out fluctuations in output and unemployment and to
stabilize prices.

Technology: all the ways firms create value for their constituents
-
Research and Development (those activities that are necessary to provide new products,
services, and processes) >> Basic R&D (Improving knowledge in an area without
primarily focusing on whether any discoveries that might occur are immediately
marketable ) >> Applied R&D(focusing specifically on how a technological innovation can
be put to use in the making of a product or service that can be sold in the marketplace)
-
R&D intensity : R&D spending as a percentage of a company’s sales revenue
-
Technology transfer: process of getting a new technology out of the lab and into the
marketplace. Process technologies are used to improve a firm’s performance of its
internal operations
-
Enterprise Resource Planning: Large-scale information system for organizing and
managing a firm’s processes across product lines, departments, and geographic
locations

Political-legal-environment: Conditions reflecting the relationship between business and
government, usually in the form of government regulation

Socio-Cultural environment : Conditions including the customs, values, attitudes, and
demographic characteristics of the society in which an organization functions

The value of the Canadian dollar & a skilled labour shortage & the environment = important
elements of the business environment >> Rivalry among existing competitors / Threat of
potential entrants / suppliers/buyers/ substitutes

Core competency : skills and resources with which an organization competes best and
creates the most value for owners
-outsourcing: strategy of paying suppliers and distributors to perform certain business
processes or to provide needed materials or services
-viral marketing: strategy of using the internet and word-of-mouth marketing to spread
product information
-business process management: approach by which firms move away from departmentoriented organization and toward process-oriented team structures that cut across old
departmental boundaries

Redrawing corporate boundaries
 Acquisition : one firm buys another firm
Merger: the consolidation of two firms – horizontal merger (a merger of companies in the
same industry), vertical merger (a merger of companies where one is a supplier or
customer of the other), conglomerate merger (a merger of companies in unrelated
businesses)
>>> friendly takeover(a merger where the acquired company welcomes the acquisition) ,
hostile takeover (a merger where one company buys enough of the other company’s
stock to take control even though the other company is opposed to the takeover), poison
pill (a defence adopted by management to make a firm less attractive to a hostile suitor
in a takeover attempt)

Divestiture : occurs when a company decides to sell part of its existing business
operations to another corporation
Spinoff: occurs when a company sets up one or more corporate units as new,
independent businesses
 Employee stock ownership plans : plans that allow employees to buy significant stakes
of larger corporations
 Strategic alliance (joint venture) : involves two or more enterprises co-operating in the
research, development, manufacture, or marketing of a product
-
To help spread the risk of a project / to get something of value from their strategic partner
 Subsidiary corporation: a company that is owned by another corporation
Parent Corporation: a corporation that owns subsidiary corporations
(Slide2)

Canadian Business Environment
- Canada is a social democracy, with a monarch as head of state.
- In Canada, capitalism is not “unbridled(억제되지않은) ; public ownership as well as
private / Adam Smith’s “invisible hand” is at work / Competition is not pure; many
oligopolies (소수독점)

Wealth Creation in Canada
-Wealth: an abundance of material possessions and resources; property that has
economic utility. Today, Canada’s wealth is derived mostly from trade (with U.S)
- In the 1980s and 1990s more and more countries threw off at least some of their trade
barriers and adopted fewer regulations and more open markets. Vietnam and some
other south and south-east Asian economies have also followed. Many Latin American
economies have also liberalized trade and regulations and have seen an increase in
their growth rates. Education turns out also to have an important role to play in many
cases. In the last 10-15 years, a major part of the ‘developing’ world has at last really
started to develop and is growing strongly and fairly steadily.
- The challenges: social and cultural differences, Economic differences, Legal and
political differences / imbalance of payments, large trade surplus or deficit >>These can
result in resource dependence and abuse of power
 Wealth creation Requires : Combination of inputs, Supportive environment, Means of
production, Someone who will pay more than costs
-
Benefits of wealth creation: Personal income for labour, social goods, Asset utilization,
Business income, Environmental good, Transactional and income taxes, beneficial
technologies, etc. / Entrepreneurs, small and medium sized enterprises, and large
private and public corporations will create wealth. / Large corporations may spin off
smaller entrepreneurial groups (intrapreneuring), investors, and local, provincial, national
governments will help.

Sustainable Wealth Creation “Diamond”
-
1.Public policy systems, 2.an effective financial system,3.vibrant entrepreneurship,
4.sophisticated managerial capabilities – all surrounding resource endowments
-
1)Public Policy systems : help to supply human resources, natural resources, fiscal
stimulus, trade policy (a fine balance), Infrastructure
2) Effective financial system: must be trustworthy, fair lending policies, markets for
investing and borrowing, insurance
3) Vibrant entrepreneurship: Support for entrepreneurial process (roles of other three
corners of the diamond), Sole proprietor, partnership, corporation, cooperative, Market
must provide for both success and failure
4) Sophisticated managerial expertise: as business owners and the agents of owners, as
support, as investors
- Open trade leads to wealth creation / We are in economic competition with many other
countries and societies / Our advantages will come from the most productive ways we
can innovate and add value to those countries and societies
-Canada’s Major Commodity Exports 1870-1900 : Lumber(1), Wheat&Flour(2), Nonferrous(철을 함유한) metals
-1900초부터 1920년까지 농업이 좀더 GDP가 높았지만 나중에는 manufacturing

In the 1950s there emerged the idea that there were three ‘worlds’
-First World: Industrialized, ‘capitalist’ economies
>> 1) Stabilization: dealing with inflation as well as depression; and the shift to
monetary policy for stabilization (A monetary and fiscal policy that reduces
fluctuations in output, prices, and unemployment)
- The industrialized economies have avoided another Great Depressionalthough there have been economic downturns = Recessions / They have learned
the policy lessons of Keynes and his followers
-Capitalist economies have gradually become more service based, and
less manufacturing based, which adds stability
-BUT there was an opposite problem to Depression- an economy trying to
produce too much – that the industrialized economies blundered(실수를 저지르다)
into starting in the late 1960s. An economy that is over-heated or over-stimulated by
government policy has its prices rise as demand exceeds supply = Inflation
-High inflation as such Is not as bad as Depression unless it is
hyperinflation. But high and variable inflation is still harmful.
-You are more reluctant to borrow if you are not sure what the ‘real’ cost of
repaying is- This uncertainty shows up as high interest rates, which make
entrepreneurs less willing to build new plants or equipment of to start new
businesses.
-1970년대말 1980년대 초에 미국과 캐나다의 inflation이 10%까지 증가
-In 1989-91 Canada and the US moved to lower inflation again. The was a
mild recession in the US and another big one in Canada. US inflation moved down
to about 3% while Canada had an inflation target of 2%, and sometimes was lower.
-At present, the prime objective of central banks in most industrialized
countries is to keep inflation low and steady. They continually adjust the money
supply, and interest rate targets, to achieve this. Monetary policy has become the
chief method of ‘stabilizing’ the economy
2) Internationalization: lowering trade restrictions and improving international
financial flows
- During the Depression it was learned that trade restriction made all
countries worse off. Industrialized countries tried to set up institutions to reduce
barriers to trade and increase trade and flows of capita.
-The WTO(=GATT) tries to reduce trade barriers through major negotiating
‘rounds’ and to mediate trade disputes. Many earlier trade rounds were successful,
but there has been little progress in last 10 years. Groups of countries have also
reduced trade barriers among themselves by setting up ‘customs unions’ or
‘common markets’. The biggest such movement has been the establishment in the
late 1950s of the European Economic Community (EEC). It has expanded to
include most western and central Europe (=EU)
- The EU not only has free trade among the member countries, but also
permits with some exceptions the free movement of labour as well. In the late
19990s most EU members also adopted a common currency to make trade among
them even easier.
- In 1989 Canada and the US began a ‘free trade’ agreement that was
expanded in 1991 to include Mexico (NAFTA). But NAFTA doesn’t have free
movement of labour or a common currency. There is little doubt that freer trade has
made an important contribution to economic growth among the industrialized
countries since WW2,
-Second World: Industrialized centrally-planned (Communist) economies
-Third World: All ‘less-developed’ or non-industrialized economies no matter what their
political or market system

Competitive Advantage : Factor conditions, Demand conditions, Related and
supporting industries, Strategies, structures, and rivalries
-Developing economies seem to take one of two main strategies:
1) Import Substitution: industrialize by replacing the manufactured goods that came
from the developed world with domestic production; encourage this by high barriers to
trade and by tight regulations on imports
-Most countries chose import substitution and often some form of centralized
planning as well. (China from communist doctrine/ India and many other former
colonies of Europe or the US because they felt they had been exploited as a source
of raw materials and a captive market for the manufactured goods from the ruling
country
- doesn’t work : the economy is over-protected and not forced to change or improve.
The established owners and government collude to keep down competition,
corruption often results.
2) Export-Led Growth: let government or the private sector find areas where the
country had an export advantage and support it. Permit imports as needed for the
exports and for domestic use
- A few countries chose Export-led growth (Taiwan, South Korea, Singapore etc.)
-doesn’t work: the countries listed turned out to be the ‘Asian Tigers’ that began to
grow vigorously long before the others and before China. South Korea, Taiwan and
Singapore at least can now be counted among the developed industrialized countries.
(Chapter 3)

Ethics: individual standards or moral values regarding what is right and wrong or good and
bad
-ethical behavior: behavior that conforms to individual beliefs and social norms about what is
right and good
-business ethics: ethical or unethical behavior by a manager or employee of an organization
-managerial ethics: standards of behavior that guide individual managers in their work
-assessing ethical behavior : (1)gather the relevant factual information,(2) Determine the
most appropriate moral values,(3) make an ethical judgment based on the rightness or
wrongness of the proposed activity or policy
-code of ethics: formal, written acknowledgment of a company’s intent to do business in an
ethical manner

CSR(Corporate social responsibility) :Refers to the way in which a business tries to balance
its commitments to organizational stakeholders(that are directly affected by the practices of
an organization and that therefore have a stake in its performance

Pollution : the injection of harmful substances into the environment
-

Air pollution: when several factors coverage to lower air quality / Global warming : an
increase in the earth’s average temperature / Toxic wastes: dangerous chemical and/or
radioactive by-products of various manufacturing processes / Recycling: the conversion
of certain waste materials into useful products / Biomass: plant and animal waste that
can be recycled to produce energy
Responsibility Toward Customers
-
Rights of Consumers = Consumerism : a social movement that seeks to protect and
expand the rights of consumers in their dealings with businesses
1) The right to safe products 2) the right to be informed about all relevant aspects of a
product 3) the right to be heard 4) the right to choose what they buy 5) the right to be
educated about purchases 6) the right to courteous service
-
Unfair pricing = collusion : an illegal agreement among companies in an industry to “fix”
prices for their products
-
Ethics in advertising : Truth in advertising, advertising of counterfeit(위조의) brands, /
Stealth advertising : involves companies paying individuals to extol the virtues of their
products to other individuals / Morally objectionable advertising

Whistle-blower: an employee who discovers and tires to put an end to a company’s unethical,
illegal, or socially irresponsible actions by publicizing

Cheque kiting : involves writing a cheque from one account, depositing it in a second
account, and then immediately spending money from the second account while the money
from the first account is still in transit

Insider trading : the use of confidential information to gain from the purchase or sale of stock

Approaches to social responsibility
-obstructionist stance: a business does as little as possible to solve social or environmental
problems and denies or covers up their wrongdoings
- Defensive stance: an organization does only what is legally required and nothing more
- Accommodative stance: a company meets all of its legal and ethical requirements, and in
some cases even goes beyond what is required
- Proactive stance: an organization actively seeks opportunities to be socially responsible

Social audit : a systematic analysis of how firm is using funds earmarked for socialresponsibility goals and how effective these expenditures have been

Establishing a social responsibility program involves four basic steps
-
Top management support > strategic planning> appointment of a Director > social audit
> social responsibility

Milton Friedman
-
Nobel Prize winner – Economics / “The social responsibility of business is to increase its
profits” /concentrate on what it does best / The role of government is to be socially
responsible through social policies / Government has the tools
-
According to Friedman, companies should pay out their profits to stockholders.
Stockholders can decide where they want to allocate their resources. This results in
taxation without accountability (no corporate income tax)

Social Responsibility: A business’s collective code of ethics towards its
stakeholders , the Environment ,customers

Responsibility toward employees
-legal and social commitments / human resource management issues / privacy issues
/ drug testing and computer monitoring / encouraging ethical behavior / whistleblowers

Responsibility toward investors
-improper
financial
management,
misrepresentation in reporting of finances
ENRON-type
fraud,
insider
trading,

The SEC becomes suspicious and launches an inquiry of Enron’s finances

Complex illegal transactions : Special Purpose Entity, Hedges, Derivatives, Swaps,
Forward contracts, Pre-paid contracts, Wash Trading, Prepays, Tax avoidance
-
Breached fiduciary duty , Conflicts of interest, compensation, independence, oversight

The business of ethics – your firm can buy advice from ethics specialists /
associations for the promotion of business ethics amy also promote business’ point
of view

Whistleblower risk harassment : they are often afraid / they are ostracized by others
/ they are fired / they feel nothing will happen
-Company’s
view
:
disgruntled(언짢은),
unhappy,
delusional(망상의),
liars,
problematic, psychotic, vindictive(보복을 하려는
-Company’s Response: Attack the message by attacking the messenger, question
their credibility any way they can, diminish and refute their message, engage in
cover-up, destroy documents, “gag orders”
(Chapter4)

Small business: an owner-managed business with fewer than 100 employees

New venture : a recently formed commercial organization that provides goods and/or
services for sale

Entrepreneurship : the process of identifying an opportunity in the marketplace and
accessing the resources needed to capitalize on that opportunity

Entrepreneur : a business person who accepts both the risks and the opportunities involved
in creating and operating a new business venture


Identifying opportunities
-
Idea generation, screening : the idea creates or adds value for the customer , the idea
provides a competitive advantage that can be sustained, the idea is marketable and
financially viable, the idea has low exit costs(the costs in term of time, money, and
reputation that are incurred when a business shuts down)
-
Franchise : an arrangement in which a buyer(franchisee) purchases the right to sell the
product or service of the seller (franchiser)
-
Business plan: a document that describes the entrepreneur’s proposed business venture,
explains why it is an opportunity, and outlines its marketing plan, its operational and
financial details, and its managers’ skills and abilities

Accessing Resources
-
Bootstrapping: financing techniques whereby entrepreneurs make do with as few
resources as possible and use other people’s resources wherever they can. Can also
refer to the acquisition of the other types of resources, such as people, space,
equipment, or materials that are loaned or provided free by customers or suppliers
-
Debt financing : money that is borrowed / equity financing : money that the entrepreneur
invests in a business in return for an ownership interest
-
Collateral(담보물) : items owned by the business or by the individual that the borrower
uses to secure a loan or other credit
-
The entrepreneur-opportunity fit(deciding whether the opportunity is something he or she
can do and wants to do), the opportunity-resources fit(involving determining whether the
resources needed to capitalize on the opportunity can be acquired) , the entrepreneurresources fit (determining the entrepreneur needs to assess whether he or she has the
capacity to meet those requirements)
Intrapreneuring :entrepreneurial characteristics that can create and maintain the innovation
and flexibility of a small-business environment within the confines of a large, bureaucratic (관
료의)structure

/ After the start – up: Taking over a family business, buying a franchise
Partnership : a form of organization established when two or more individuals agree to
combine their financial, managerial, and technical abilities for the purpose of operating a
business for profit
-
General partners : partners who are actively involved in managing the firm and have
unlimited liability
-
Limited partners: partners who generally do not participate actively in the business, and
whose liability is limited to the amount they invested in the partnership
-
Limited partnership: a type of partnership with at least one general partner and one or
more limited partners. The limited partners cannot participate in the day-to-day
management of the business or they risk the loss of their limited liability status


Corporation : a business that is a separate legal entity that is liable for its own debts and
whose owners’ liability is limited to their investment
-
Stockholders : investors who buy shares of ownership in the form of stock
-
Board of directors: the governing body of a corporation whose basic responsibility is to
ensure that the corporation is run in a way that is in the best interests of the
shareholders
-
Public corporation : a business whose shares of stock are widely held and available for
sale to the general public / Private corporation : a business whose shares of stock are
held by only a few shareholders, are not widely available for purchase, and may have
restrictions on their sale
-
allowing a tax deduction on dividend payments
Co-operative : an incorporated from of business that is organized, owned, and
democratically controlled by the people who use its products and services, and whose
earnings are distributed on the basis of their use of the co=operative rather than their level of
investment(협동조합은 소비자,소상인,소생산자 등의 경제적 약자들이 스스로 힘을 모아
(출자자) 조합을 만들어, 민주적으로 함께 운영하고(운영자), 조합원들이 조합의 사업을
이용함으로써(이용자) 생활을 지키고 향상하는 조직이다. 따라서 불특정 다수를 주주로
하며 무한한 이익을 추구하는 주식회사와 달리, 협동조합은 인적인 결합체로 조합원들이
제한된 지역에 한정되어 생활하며, 조합원에 대한 서비스 향상을 추구하고, 잉여금은 조
합원에게 재환원하는 것을 원칙으로 한다.)
-
Allowing to deduct patronage refunds to members out of before-tax income
(Chapter 5)

Globalization : the integration of markets globally
-import: products that are made or grown abroad and sold in Canada / exports: products that
are made or grown in Canada and sold abroad
- Absolute advantage: a nation’s ability to produce something more cheaply or better than
any other country / comparative advantage: a nation’s ability to produce some products more
cheaply or better than it can others
-national competitive advantage: a country will be inclined to engage in international trade
when factor conditions, demand conditions, related and supporting industries, and strategies,
structures, rivalries are favourable / international competitiveness : the ability of a country to
generate more wealth than its competitors in world markets

Trade surplus : occurs when a country exports more than it imports / trade deficit : occurs
when a country imports more than it exports

Balance of payments: the difference between money flowing into and out of a country as a
result of trade and other transactions / exchange rate : the rate at which the currency of one
nation can be exchanged for that of another

As the value of a country’s currency falls, its balance of trade should improve because
domestic companies should experience a boost in exports. There should also be a
corresponding decrease in the incentives for foreign companies to ship products into the
domestic market

Going international : Gauging international demand, adapting to customer needs

Exporter: a firm that makes products in one country and then distributes and sells them in
others / importer : a firm that buys products in foreign markets and then imports them for
resale in its home country

International firm : a company that conducts a significant portion of its business abroad and
maintains manufacturing facilities overseas / multinational firm : controls assets, factories,
mines, sales offices, and affiliates in two or more foreign countries

International organizational structures

-
Independent agent : a foreign individual, or organization, who agrees to represent an
exporter’s interests in foreign markets
-
Licensing arrangement : an arrangement by an owner of a process or product to allow
another business to produce, distribute, or market it for a fee or royalty
-
Branch office : a location that an exporting firm establishes in a foreign country in order
to sell its products more effectively (need world product mandating)
-
A strategic alliance is formed when a company finds a partner in a foreign country where
it would like to conduct business
-
Foreign direct investment : buying or establishing tangible assets in another country
Barriers to international trade
-
Social and cultural differences, economic differences,
-
Legal and political differences :
1) Quota : a restriction by one nation on the total number of products of a certain type
that can be imported from another nation
2) Embargo : a government order forbidding exportation and/or importation of a
particular product – or even all products – of a particular country (한 나라가 특정 국
가에 대해 직간접적 교역, 투자, 금융거래 등 모든 경제교류를 중단하는 금수조치
를 말한다)
3) Tariff: a tax charged on imported products
4) Subsidy : a government payment to help domestic business compete with foreign
firms
5) Protectionism : the practice of protecting domestic business at the expense of free
market competition
-
Local-content laws : laws requiring that products sold in a particular country be at least
partly made in that country
-
business-practice laws : law or regulation passed by host countries to regulate business
practices within their jurisdictions
-cartel: any association of producers whose purpose is to control supply of and prices
for a given product / dumping : selling a product for less abroad than in the producing
nation ; illegal in Canada

Overcoming Barriers to Trade
-
General Agreement on Tariffs and Trade (GATT): international trade agreement to
encourage the multilateral(다국간의) reduction or elimination of trade barriers
-
World Trade Organization(WTO) : organization through which member nations negotiate
trading agreements and resolve disputes about trade policies and practices
1) Promote trade by encouraging members to adopt fair trade practices
2) Reduce trade barriers by promoting multilateral negotiations
3) Establish fair procedures for resolving disputes among members
-
European Union(EU) : agreement among major Western European nations to eliminate
or make uniform most trade barriers affecting group members
-
North American Free Trade Agreement(NAFTA) : agreement to gradually eliminate tariffs
and other trade barriers among the United States, Canada, and Mexico
(Slide 8&9)


Great companies all had leaders who exemplified selfless, employee focused leadership
Emotional intelligence : identifying emotions , using emotions, managing emotions / managing
the emotions of subordinates : the contagious leader

Emotionally intelligent leaders
-Manage stress by evaluating events differently from others / manage the
emotions of their teams successfully

Manage the Process (not the outcome)
-The organizational justice literature suggests that our employees want to
participate in decisions about their work
-Participation leads to ratings of fair process and outcome satisfaction

Leadership
-Contrary to the conventional business mythology, good leadership is rarely
accomplished alone.
-Know your strengths and weaknesses, and enlist employees as allies to cover
your blind spots
-Leaders pay attention to their followers, and the social psychology of their
followers
-Leaders recognize that the lone genius can never keep a lrage organization
engaged and productive

The discipline of Teams
-Teams decide how to work and evaluate themselves and each other
-A variety of skills, knowledge, abilities is required; don’t overlook skills in team
function
-Leadership should be emergent

Teams in conflict
-Typically, conflicts come from differing perceptions of
1) Overly dominant members 2) Workload equity 3) How projects should be
done 4) Skill deficits of any members 5) Degrees of participation/commitment
6)Encroachment of other commitments 7)Offline discussions that should be
held in open forum 8) Goals and expectations 9) Scheduling

Thinking in Teams
-Common information Effect: teams spend the vast majority of their time discussing
information that they all have in common. Unique information is rarely shared and not widely
discussed
-The Abilene Paradox: A team will often agree to a course of action that none of the
individual members wants because each of the members assumes that others want it.
-Polarization(“Risky Shift” ) : Team judgments are often more extreme than the average
judgment of the individual members(Teams will sometimes select riskier courses of action or more risk
averse(꺼려하는) courses of action than would any given individual)
-Groupthink: Teams often experience a deterioration (저하)of mental efficiency and reality
testing when group cohesion is valued over the quality of the decision outcome