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LECTURE 1THE 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?

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CANADA: A GREAT PLACE TO DO BUSINESS?

•Competitiveness•Taxes & Spending•Employment & Labour•The Business Environment•Global status/position•Technological opportunities & facilities

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INTERNAL & EXTERNAL ENVIRONMENTS

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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

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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

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REGULAR WORKERS

MANAGING DIRECTOR

MIDDLE MANAGERS

LINE MANAGERS

OFFICE & ADMIN STAFF

A HIERARCHICAL ORGANIZATIONAL STRUCTURE

INTERNAL ENVIRONMENT - STRUCTURE

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A FLATTER ORGANIZATIONAL STRUCTURE

MANAGING DIRECTOR

HEADS OF DEPTS

REGULAR WORKERS

LINE MANAGERS

CLERICAL & ADMIN STAFF

INTERNAL ENVIRONMENT - STRUCTURE

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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

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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

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EXTERNAL ENVIRONMENT – THE SPECIFIC/TASK ENVIRONMENT

PeopleStructureStrategy

Parties/ Groups that have a direct influence on the organization

Competitors

UnionsLabour Pool

Customers

SuppliersDistributors

Local Community

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Political Forces Social Forces

Global ForcesTechnological Forces

Competitive ForcesEconomic Forces

EXTERNAL ENVIRONMENT – THE GENERAL ENVIRONMENT

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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

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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

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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

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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?

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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

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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

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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 2008. In last quarter of 2008 GDP declined by

3.4%. Unemployment is another important

economic force in Canada, currently at 7%.

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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

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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

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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

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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