MNGT 1711:
Introduction to
Business
Unit 1:
The Business Environment
1
Revenue, Expenses, Profit, Loss
2
• Total sales proceeds or money
received for selling goods and servicesRevenue:
• Costs incurred (fixed and variable) to
produce goods and servicesExpenses:
• When revenue exceeds expensesProfit:
• When expenses exceed revenueLoss:
What is a Business?
◼ An activity that provides goods and services with the intent
to earn a profit.
❑ Are there businesses that do not have a profit goal?
◼ Canada: 170,000 non-profit and charity organizations
employing more than 2 million Canadians.
◼ Review the Imagine Canada Sector Source website.
3
Business: Good or Bad for Society?
◼ You have read the positive impacts of businesses on the
society and quality of life in your text,
Can you name at least three negative impacts of businesses
on the society and quality of life?
4
What do these products have in common?
◼ Poutine, zippers, insulin, BlackBerry, Wonderbra, the
pacemaker, the Robertson screw, Java programming
language, basketball, the goalie mask, peanut butter, the
odometer, the rotary snowplow, the egg carton, IMAX,
McIntosh apples, the walkie-talkie, green currency ink,
the baggage tag, the paint roller, wheelchair-accessible
bus, the electric wheelchair, garbage bags, Canadarm,
Avro Arrow.
5
Know the Largest Canadian Companies
◼ View Canadian Business’ 2015 Investor 500 Stock
Ranking and explore the 15 largest Canadian
companies by market capitalization.
6
The Business Environment
◼ Internal Environment:
Controllable by
management
◼ External Environment:
Uncontrollable by
management
7
Can you identify challenges and opportunities each external
business environment presents?
Exhibit 1.4 The Dynamic Business Environment (Attribution:
Copyright Rice University, OpenStax, under CC-BY 4.0 license)
Social Environment
What might be good locations for
the following businesses?
❑ Immigration law firms
❑ Ethnic food restaurants
❑ Translation services
❑ Education equivalency
appraisals
The population of Canada is
rapidly aging,
❑ Can you name some
healthcare, insurance, and
travel products you can sell to
an aging population?
❑ What impact does it have on
the Canadian labour pool?
Review these Immigration and Ethnocultural Diversity in Canada Statistics:
1 out of 5 Canadians is “foreign born”; a vast majority of foreign-born
Canadians live in Ontario, BC, Quebec, and Alberta; most immigrants settle in
Toronto, Vancouver, and Montreal; most of the migration happens from Asia.
Economic Systems
A financial and social system to determine goods and services
to be produced, for whom to produce, and how resources are
allocated.
◼ Unplanned: Decided by market forces, i.e. capitalism
◼ Planned: Socialism and Communism
◼ Mixed Economy: Exhibits features of all
❑ Can you identify which economic system is followed in Canada?
9
Shift in Canadian Economy
Year Public Sector
1992 26.10%
2003 22.30%
2010 24.40%
2013 24.10%
10
The structure of the Canadian economy has shifted significantly
over time. Generally speaking jobs have moved from an
agriculturally based workforce, to a manufacturing, to a services
based economy. Review this Working Paper from Industry
Canada for detailed information about this transition.
The chart below show job changes in the public sector.
Public Sector Employment
Source:
11
Contribution to GDP by Business Size
12
Economic Issues in Canada
Consumer debt, as well as Government debt, is rising in
Canada.
See: Canadian Taxpayers Federation’s Debt Clock
❑ Can you name two more challenges that the Canadian
economy may face in the future?
13
14
(Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)
Economic Systems Circular Flow
How Business Operate under Economic Systems
15
(Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)
Macroeconomics versus
Microeconomics
◼ Macroeconomics:
Concerned with overall
economy of the nation;
deals with macro
variables such as
inflation, GDP,
employment rate, etc.
◼ Microeconomics:
Concerned with
consumers, family units,
and individuals; deals
with micro variables such
as family income,
demand, and supply.
16
Macroeconomics Tools
◼ Fiscal policy:
decisions regarding
taxation and
government spending
to spur growth.
◼ Monetary policy:
decisions regarding
interest rates and
money supply to spur
growth.
17
Fiscal Policy
◼ Some economists believe that lowering taxes and leaving
consumers and businesses with more money to spend
boosts economy.
◼ Other economists believe that higher taxes resulting in
more government spending on infrastructure will boost
the economy more effectively.
❑ What approach do you think will work better in a country like
Canada?
18
Monetary Policy
◼ Money Supply is currency (bills and coins), chequing & saving
accounts, traveller’s cheques, and money market instruments.
◼ During high inflation, the Bank of Canada reduces the money
supply. Reduction of money available increases interest rates,
which leads to reduced borrowing, reduced spending and
helps to bring prices down.
◼ During low inflation, the Bank of Canada increases money
supply. This lowers interest rates, encouraging more
borrowing and consumer spending to raise the prices.
◼ The money supply is controlled by the Bank of Canada
through:
➢ Buying or selling government securities and bonds;
➢ Setting the Bank of Canada interest rate.
19
Role of the Bank of Canada
◼ Responsible for developing the Canadian
monetary policy;
◼ A banker to Canadian banks and to Canadian
government;
◼ Manages the cheque-clearing process;
◼ Keeps a healthy supply of money.
20
Basic Rights of Capitalism
21
• Are profits guaranteed in capitalism?
Right to own businesses and keep net profits.
Right to have private property, but within the limits of
law.
Right to a free choice to buy, sell, and work.
Right to fair competition.
Government has responsibility to provide a level
playing field for all.
Government has responsibility to provide a level
playing field for all.
Demand Supply & Prices in a Free Market
Consider this example from the text:
Can you explain the equilibrium, surplus, and shortage?
(Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)
What Causes Demand & Supply to Shift?
23
(Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)
What Causes Demand & Supply to Shift?
24(Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)
Competition in a Free Market
◼ Perfect competition
◼ Pure monopoly
◼ Monopolistic market
◼ Oligopoly
25
Competition in a Free Market
1. Go to the Industry Canada website.
2. Choose an industry.
3. Click on businesses and choose your province.
4. Find the number of employers in that industry and
province.
❑ Do you classify it as:
(1) Perfect competition,
(2) Pure monopoly,
(3) Monopolistic market, or
(4) Oligopoly?
26
Comparison of Market Structures
27
(Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.)
Self-Review Questions
1. Explain the concepts of revenue, costs, profit, and loss.
2. What internal and external economic environment factors
affect businesses?
3. Explain capitalism, communism, and socialism.
4. What is the difference between macroeconomics and
microeconomics?
5. What is monetary policy?
6. What is fiscal policy?
7. What is the relationship between prices and demand?
8. How is the market equilibrium reached?
9. Compare perfect competition, pure monopoly, oligopoly,
and monopolistic competition.
28
- Slide 1: MNGT 1711: Introduction to Business
- Slide 2: Revenue, Expenses, Profit, Loss
- Slide 3: What is a Business?
- Slide 4: Business: Good or Bad for Society?
- Slide 5: What do these products have in common?
- Slide 6: Know the Largest Canadian Companies
- Slide 7: The Business Environment
- Slide 8: Social Environment
- Slide 9: Economic Systems
- Slide 10: Shift in Canadian Economy
- Slide 11: Public Sector Employment
- Slide 12: Contribution to GDP by Business Size
- Slide 13: Economic Issues in Canada
- Slide 14: Economic Systems Circular Flow
- Slide 15: How Business Operate under Economic Systems
- Slide 16: Macroeconomics versus Microeconomics
- Slide 17
- Slide 18: Fiscal Policy
- Slide 19: Monetary Policy
- Slide 20: Role of the Bank of Canada
- Slide 21: Basic Rights of Capitalism
- Slide 22: Demand Supply & Prices in a Free Market
- Slide 23: What Causes Demand & Supply to Shift?
- Slide 24: What Causes Demand & Supply to Shift?
- Slide 25: Competition in a Free Market
- Slide 26: Competition in a Free Market
- Slide 27: Comparison of Market Structures
- Slide 28: Self-Review Questions