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.

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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

https://www.fraserinstitute.org/article/times-have-changed-public-sector-employment-on-the-rise-in-canada-especially-in-ontario

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: https://www150.statcan.gc.ca/n1/pub/11-402-x/2011000/chap/gov-gouv/gov-gouv-eng.htm

11

Contribution to GDP by Business Size

12

https://www.ic.gc.ca/eic/site/061.nsf/eng/h_03090.html#figure13

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.

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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.

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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.

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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

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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.

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