1 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?

2 CANADA: A GREAT PLACE TO DO BUSINESS? Competitiveness Taxes & Spending Employment & Labour The Business Environment Global status/position Technological opportunities & facilities

3 INTERNAL & EXTERNAL ENVIRONMENTS

4 INTERNAL ENVIRONMENT – PEOPLE 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

5 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’ INTERNAL ENVIRONMENT - STRUCTURE

6 REGULAR WORKERS MANAGING DIRECTOR MIDDLE MANAGERS LINE MANAGERS OFFICE & ADMIN STAFF A HIERARCHICAL ORGANIZATIONAL STRUCTURE INTERNAL ENVIRONMENT - STRUCTURE

7 A FLATTER ORGANIZATIONAL STRUCTURE MANAGING DIRECTOR HEADS OF DEPTS REGULAR WORKERS LINE MANAGERS CLERICAL & ADMIN STAFF INTERNAL ENVIRONMENT - STRUCTURE

8 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? INTERNAL ENVIRONMENT - STRUCTURE

9 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? INTERNAL ENVIRONMENT - STRATEGY

10 EXTERNAL ENVIRONMENT – THE SPECIFIC/TASK ENVIRONMENT People Structure Strategy Parties/ Groups that have a direct influence on the organization Competitors Unions Labour Pool Customers SuppliersDistributors Local Community

11 Political ForcesSocial Forces Global Forces Technological Forces Competitive ForcesEconomic Forces EXTERNAL ENVIRONMENT – THE GENERAL ENVIRONMENT

12 GENERAL ENVIRONMENT - ECONOMIC FORCES 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

13 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 GENERAL ENVIRONMENT - POLITICAL FORCES

14 GENERAL ENVIRONMENT – SOCIETAL FORCES Changes in attitudes to work & equality are important societal forces, ‘organizational justice’ & compensation & benefits Health & Safety issues Views on fashion and health Business ethics

15 GENERAL ENVIRONMENT - COMPETITIVE FORCES 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?

16 GENERAL ENVIRONMENT - TECHNOLOGICAL FORCES 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

17 GENERAL ENVIRONMENT – GLOBAL FORCES 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

18 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  In last quarter of 2008 GDP declined by 3.4%.  Unemployment is another important economic force in Canada, currently at 7%.

19  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 EXTERNAL FORCES IN CANADA

20  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 EXTERNAL FORCES IN CANADA

21 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 EXTERNAL FORCES IN CANADA

22 KEY LEARNING POINTS Nature of internal & external forces Role of internal & external environments on organizational performance Connectivity of internal & external contexts Characteristics of Canadian business context