CHAPTER 1

The Dynamic
Business
Environment

Prepared by Dr. C. McLarney, Dalhousie University

© 2022 McGraw Hill Limited

 Learning Objectives
1. Illustrate the importance of key business fundamentals to wealth
generation.
2. Identify business stakeholders and their importance to non-profit
organizations and business activities.
3. Explain how entrepreneurship is critical to the wealth of an
economy, also list the five factors of production that contribute to
wealth.
4. State the six elements that make up the business environment
and explain why the business environment is important to
organizations.
5. Give examples of how the service sector has replaced
manufacturing as the principal provider of jobs, but why
manufacturing remains vital for Canada.

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 Business Fundamentals
• Success in business is finding a need for some
goods, or services, and filling that need
• Goods are tangible products – things you can touch
and see
• Services are intangible products – like car insurance,
the feeling of a good vacation

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 Business Fundamentals, pt. 2
• A business is any activity that seeks to provide goods
and services to others while operating at a profit.
• An entrepreneur is a person who risks time and
money to start and manage a business.
• Profit is the amount of money a business earns
above and beyond what It spends for salaries and
other expenses.
• Since not all businesses make a profit, starting a
business can be risky.

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 Entrepreneurship and Wealth
Building
• A business is any activity that seeks to provide
goods and services to others while operating at a
profit.
• An entrepreneur is a person who risks time and
money to start and manage a business .

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 Risk Reward Trade-Offs
• Starting a business involves risk.
• Risk is the chance an entrepreneur takes of losing time and
money on a business that may not prove profitable.

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 Matching Risk With Profit
• Risk is the chance an entrepreneur takes of losing
time and money on a business that may not prove
profitable.
• Profit, is the amount of money a business earns above
and beyond what it pays out for salaries and other
expenses.

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Standard of Living and Quality of
Life
• The term standard of living refers to the amount of
goods and services people can buy with the money they
have
• Canada enjoys a high standard of living partly because
of the wealth created by its businesses
• The term quality of life refers to the general well-being
of a society
• in terms of its political freedom, natural environment,
education, health care, safety, amount of leisure, and
rewards that add to the satisfaction and joy that other
goods and services provide

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Stakeholders: Those Who Stand to Lose or Gain

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 Stakeholders:
Those Who Stand to Lose or Gain, pt. 2
• Customers want value
• Employees want security
• Stockholders want returns
• Suppliers want to be paid
• Dealers want support
• Bankers want returns
• Community groups want “equity”
• Governments want compliance

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 Offshoring and Outsourcing
• Offshoring entails sourcing part of the purchased inputs
outside of the country.
• In Canada, most of the offshoring that occurs is with the United
States.
• Outsourcing means contracting with other companies to do
some or all of the functions of a firm, such as production or
accounting.
• Insourcing is a relatively new term used to describe the
situation where a company has functions that could be
outsourced.

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Offshoring and Outsourcing, pt. 2
• Hare the terms outsourcing and offshoring that different?
• A Statistics Canada report highlights the distinction.

“Outsourcing decisions affect the boundaries of the

firm what production takes place within the firm and
what is purchased from outside the firm.
(Baldwin & Gu. “Outsourcing and Offshoring in Canada”)

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 Non-Profit Organizations
• A non-profit organization is an organization whose goals do
not include making a personal profit for its owners or
organizers.
• Non-profit organizations—such as schools, hospitals, and
charities—also make a major contribution to the welfare of
society.
• Examples include
– Heart and Stroke Foundation
– Cancer Society
– Canada Blood Services
• (for organizing blood donors)

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 Non-Profit Organizations, pt. 2
• Social entrepreneurs are people who use business
principles to start and manage non-profit
organizations and help countries with their social
issues.
• Microlending is an example

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 Entrepreneurship versus Working
for Others
THERE ARE TWO WAYS TO SUCCEED IN BUSINESS:

1. Work within a company and rise to the top.

2. Start your own business.

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Entrepreneurship versus Working
For Others, pt. 2
• The advantage of working for others is that somebody else
assumes the entrepreneurial risk and provides you with
benefits.
• When you consider Canada’s wealthiest citizens, you will
find that they arrived at their wealth as a result of this
entrepreneurial spirit.

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 Creating Economic Wealth
Five Factors of Production:
1. Land (natural resources)
2. Labour (workers)
3. Capital (physical assets not money)
4. Entrepreneurship
5. Knowledge

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The Five Factors of Production

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 Business Environment
• The business environment consists of the surrounding factors
that either help or hinder the development of businesses.

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 Legal and Regulatory
Environment
• Regulations are laws and rules (made by politicians) which
effect how business can operate.
• People are willing to start new businesses if they believe
that the risk of losing their money is not too great.
• Part of that decision is affected by how governments work
with businesses.
• Freedom of ownership
• Contract laws
• Elimination of corruption

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 Legal and Regulatory
Environment, pt. 2
• Governments can do a lot to lessen the risk of
starting and running a business through laws
• Examples of laws include the Canada Small Business
Financing Act, the Consumer Packaging and
Labelling Act, and the Trade Unions Act.

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 Legal and Regulatory
Environment, pt. 3
Starting a business, in some countries, like India, can be very
bureaucratic because of all the government people you have to
deal with to get the proper permits to operate

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 Economic Environment
• The Economic Environment looks at income, expenditures,
and resources that affect the cost of running a business.
• Businesses review the results of major economic indicators
such as consumer spending, employment levels, and
productivity.
• Tradable currency
• Minimum taxes and regulation
• Imports and exports
• Employment levels and productivity

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 Economic Environment, pt.2
• Foreign Exchange - the movement of a country’s
currency relative to other currencies also pertains
to the Economic Environment.
• Entrepreneurship - Another aspect of the economic
environment is the degree of entrepreneurship that
is present
• In some countries, the government owns most businesses
and there is little incentive for people to work hard or
create a profit.

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 Technological Environment
Technology refers to inventions or innovations from
applied science or engineering research.
• Information and technology
• Databases
• Bar codes
• The Internet
• Wireless communications
• Social media

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Technological Environment, pt. 2
• The use and application of technology affects
productivity.
• Productivity is the amount of output you generate
given the amount of input.
• The more you can produce in any given period of
time, the more money you are worth to
companies.

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 Technological Environment, pt. 3
Productivity
• Effectiveness means
producing the desired result.
• Efficiency means
producing goods and
services using the
least amount of
resources.

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Technological Environment, pt. 4
E-commerce
• There are several major types of e-commerce
transactions:
• Business-to-Consumer (B2C)
• Business-to-Business (B2B)
• Business-to-Government (B2G)
• Government-to-Consumers (G2C)

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Technological Environment, pt. 5
• B2C is the regular business that companies do online with
individual customers
• B2B is business doing business with other businesses,
• like suppliers of materials to a manufacturer
• B2G means the business that companies do with
government agencies and departments to supply goods and
services.
• Like a web hosting service supporting the ministry of health
• G2C refers to the business that government does online with
people, such as renewing licenses or applying for permits.

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Technological Environment, pt. 6
• E-Business
• Refers to a wide range of business activities on the
web from simple posting of product photos to B2B
marketplaces.
• E-commerce
• Refers to the websites that allow transactions so that
customers can buy products online.
• Generally, e-commerce is considered a subset of e-
business.

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Technological Environment, pt. 7
E-commerce
A consequence of millions of people using web-
based content is the rise in risks associated with
personal security
Identity theft is the act of obtaining personal
information about a person, such as social insurance
number and/or credit card number, and using that
information for illegal purposes, such as making
purchases

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Technological Environment, pt. 8
Social Media Marketing
• YouTube
• Facebook
• Twitter
• Instagram
• Blogging and microblogs and forums
• Pinterest

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 Competitive Environment
• All the environments are important, but the degree
to which you need to deal with them depends on
whether you do or do not have competition.
• Customer service
• Stakeholder recognition
• Employee service
• Concern for the environment

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 Competitive Environment, pt. 1
• Competing by giving employees decision-making
authority: empowerment.
• To meet the needs of customers, firms must give their
front-line workers (office clerks, front-desk clerks at
hotels, salespeople, etc.) the responsibility, authority,
freedom, training, and equipment they need to respond
quickly to customer requests and to make other
decisions essential to producing quality goods and
providing good service.

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 Competitive Strategies
• Exceed customer expectations
• Business is becoming customer-driven
• Deliver faster (speed)
• Service, new product introduction
• Restructuring and empowerment
• Responsibility, authority, autonomy, training, and
equipment to front line
• Concern for environment

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 Social Environment
(also referred to as the Social-Cultural Environment)

We are particularly interested in the demographic trends that

most affect businesses and career choices.
• Demography: the statistical study of the human population
with regard to its size, density, and other characteristics such
as age, race, gender, and income.
• Diversity
• Demographic changes
• Family

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 Social Environment, pt. 2
The Aging Population
More people are living longer due to:
• better medical knowledge and technology
• better health habits, including:
• proper nutrition
• more exercise
• a reduction in the number of smokers

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 Social Environment, pt. 3
Managing Diversity
• Canada has a strong multicultural population.
• In the last ten years, it has welcomed close to 2.7
million permanent residents.

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 Global Environment
How do global changes affect you?
• As businesses expand to serve global markets,
new jobs will be created in both manufacturing
and service industries.
• Global trade also means global competition.
• Rapid changes create a need for continuous
learning.

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 Ecological Environment
• Few issues have captured the attention of the
international business community more than c
• Climate change is the movement of the
temperature of the planet up or down over time.
The issue now is global warming. 
• A positive outcome of the COVID-19 pandemic was
the fact that carbon emissions were reduced by 7
percent as major industrial and transportation
activities were forced to slow down.

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 Evolution of Business
Agricultural
• The modern farming industry has
become so efficient through the use
of technology that the number of
farms has dropped.

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 Evolution of Business, pt. 2
• Goods
• includes the manufacturing, construction, utilities,
agriculture, forestry, fishing, mining, quarrying, and the
oil and gas industries
• Manufacturing
• includes food, beverage, clothing, chemical, machinery,
wood, and petroleum and coal products manufacturing.

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 Evolution of Business, pt. 3
Service Industries
• Services are intangible products (i.e., products that cannot
be held in your hand), such as education, health care,
insurance, recreation, and travel and tourism.
• In the past, the dominant industries in Canada produced
goods such as steel, railroads, and machine tools. Today, the
fastest-growing firms provide services in areas like health,
telecommunications, entertainment, and finance

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 Chapter Summary
1. Business profit/risk assumption
• Since not all businesses make a profit, starting a business
can be risky.
2. Stakeholder roles
• Your stakeholders want you to succeed.
3. Role of entrepreneurship in wealth creation
• Many of Canada’s wealthiest citizens got their wealth as a
result of having entrepreneurial spirit.

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 Chapter Summary, pt. 2
4. Elements of business environment
• Legal and Regulatory Environment
• Economic Environment
• Technological Environment
• Competitive Environment
• Social Environment
• Ecological Environment
5. Rise of the service sector
• Intangible products

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