Introduction to Administrative Studies

ADMS1000

Petrenko Anton, PhD

Office Hours: By appointment E-Mail: petrenko@yorku.ca

Language and Meaning

What is an organization?

Defining Organization

So, what are some of the things organizations have in common?

Organizations are social entitiesthey are made up of people, and they involve human interaction. Organizations are created to achieve goals (whether profit or non-profit); they are goal-directed. Organizations interact with the environmentorganization obtains inputs (e.g. sources, labour, materials) from the environment and transforms then into outputs (e.g. goods, services).

Language and Meaning

What difference does a perspective do? How do we conceptualize the object when we interpret its boundaries?

Viewing Organization as an Open System

Applying metaphors is a useful way of gaining insight into a concept. Viewing the concept of organization through a metaphor can guide our thinking conceptualizing of the nature of organization and its function.

Viewing organization as an open system focuses our attention on its relation to and interaction with its environment.

Organization used to be viewed as closed systems. This approach focuses on the internal aspect of the organization and sees it as independent and selfsufficient entity.

Organizations environment contains both challenges and opportunities for the organization.

Language and Meaning

What are the critical environmental factors affecting the success of the business?

External Context of Business:

Specific and General Environment
Organization is surrounded by specific or task environment that contains stakeholders (groups or parties) who have direct influence on the ability of the organization to obtain resources and produce outputs. Surrounding the specific environment is the sphere of general environment, which is made up of forces that shape the specific environment. Thus, it also affects the ability of organizations to obtain recourses and produce outputs.

Political Forces
Customers Suppliers Government Local Public

Economic Forces

Labour Forces

ORGANIZATION
Employees Creditors

Global Forces

Competitors
Unions

Distributors

Societal Forces
Competitive Forces

Technological Forces

1. Economic Forces
Whether the economy is strong or weak can dramatically affect the operations and the strategy of business, forcing it to adopt to changing conditions. The changing economic environment can affect competition, consumer behavior, availability of financial and labour resources, employee-employer relationship, etc

How do economic forces affect business? So, what are some of the indicators of economic health?

GDPor Gross Domestic Productis one of the main indicators of the health of the economy. It is the total value of countrys output in goods and services in a given year. The money earned from producing goods and services goes to business, employees, and the government (in taxes).

1979-1989: Canadas GDP grew 3.2% annually 2001-2009: Compound annual growth was 1.6% Severe recession in 2008-2009 Expected compound annual growth is 2.5% until 2025.

2. Competitive Forces
Level of competition can have a dramatic effect on the cost of doing business, revenues, business strategy, and the overall economy. Without competition, the provider of goods has very little incentive to innovate or improve the product or sell it at a fair price. Competition provides such incentives. Pure competition: a (perfect) competition where many small firms produce an identical product (no one has control over price)

How do competitive forces affect business?

Monopolistic competition: a large number of small firms producing slightly different products (some influence on price). Oligopoly: a small number of producers with different products (significant control over price) . Monopoly: one producer of product (controls price).

When industry is relatively concentrated, the producers can dictate market price. Some criticize Canada for not having as strict legislation against industry concentration as present in US. In Canada, 25 large firms are responsible for 25% of total profits and 41% of all assets.

3. Technological Forces
Technological development not only can affect the business's productivity, efficiency, and ultimately its bottom-line, it can dramatically reshape the whole industry and ultimately the economy in general.

How do technological forces affect business?

Canada traditionally has been a resource oriented economy (forestry, mining, fisheries, energy, minerals, and agriculture). However, it had been changing.

If at the start of the 20th century there was a balance between employment in primary sectors (resource) and provision of goods and services, over the course of the century employment shifted towards manufacturing (19451960) and then to services (42% in 1950; 72% in 1993) . Technology is largely responsible for the shift (improved productivity). Mechanization in agriculture (reaper), and then in manufacturing allowed to produce the same output with less people. So, more people are available for service sectors where they are hard to replace.

4. Labour Forces
Demographics comprise characteristics of a population, such as age, sex, income, employment, health, etc Since labour forces are essential to business activities and planning, demographic trends have a significant effect on business operations.
Examples: Veterans returning from WWII, assisted with government grants, married and bought houses, which led to a 20 year industry boom in housing, baby clothing, etc

What is the effect of labour forces on business?

Recent trend is the aging of the population (in 1921: median age 24; in 1993: over 33; in 2036 could be 50). Youth population is decreasing due to low birth rate (in 2011, 20% is 6-19). Business will likely cater to older population: health care, recreation, travel projected to benefit. Another trend is the increasing proportion of women in the labour forces and the increasing racial, and cultural diversity of the workforce. Business practices, from employment to training will have to adjust to the trends.

5. Global Forces
Global factors (trade agreements, competition, geographic proximity, etc) have tremendous effect on Canadas business activity. One of the major such influencing factors is Canadas proximity to US.
International Trade. Canada exports 40% of is GDP (compared to 25% 10 years ago). The questions is whether Canada exports more than it imports (trade deficit). US gets 85% of Canadas export, but Canada runs trade deficit with most other trading partners (except UK). In 2010 the trade balance: US (36, 719.3 mil); Japan (350.6 mil); UK (7,425.2 mil); EU (-11,312.5); OECD (11,104.6 mil); rest (-30,375.4) The level of foreign ownership is relatively high in Canada. We want to attract business investment, but a lot of investment ends up being branch plants rather than full manufacturing (sales offices). Over 20 years, 11,380 companies were taken over worth 548.494 billion but resulting in only 18.040 billion new investment. Now 30% of economy is foreign owned.

How do global forces affect business?

6. Political Forces
Canadian economy is a mixed systema capitalist system with government playing some important role. Historically, the government used tariffs on imports to protect domestic producers. Some argue that a large portion of Canadas industrial development is due to tariffs imposed in 1879 by Sir john Macdonalds National Policy.
The government can exercise some control over the business decisions by offering incentive programs or financial support, favouring its desired choice. There is a controversy over Canadian subsidies to the aerospace giant Bombardier, which is competing with the Brazilian Embraer SA on the global stage.

What is the effect of political forces on business?

But to what extent should the government interfere with the Canadian business in this way?

7. Societal Forces
Canada has a high reputation as one of the best (or best) countries in the world where to conduct business, but it also faces challenges that can undermine this reputation and affect business operations. Society has certain expectations of responsible behaviour; falling short of these expectations can have serious impact on business. Examples: Bear Creek Mining Corp. wanted to open a silver mine in Peru, which led to violent protests from local residents concerned with pollution of waterfive people died and dozens were injured.

How can societal forces affect business?

In 2011, Calgary-based Niko Resource Ltd. was found guilty of bribing officials in Bangladesh (22 other companies are investigated).
Montreal engineering company SNC Lavalin Group Inc. was recently exposed in the media as participating in building prisons in Libya for the regime of Moammar Gadhafi.

Course Objectives
This course offers an examination of the external context of business and the challenges of managing in the Canadian business environment. Our exploration of the external context of business includes consideration of such key areas as economic, competitive, labour, technological, societal, global, and political issues. The broad aim is to provide insight into current challenges and opportunities that play a dramatic role in the business landscape and affect business strategy.

1. To identify the key factors which comprise the external environment of business.
2. To understand the potential impact of these external factors on business. 3. To obtain an understanding of the challenges & opportunities present in the Canadian business context. 4. To encourage critical thinking regarding the external challenges that must be addressed as part of successful business strategy.

Course Requirements

Mid-Term Final Exam Total: 100%

(40%) closed book (60%) closed book