Lecture 2

Question 1

What is the organizational external environment

Answer 1

Factors beyond an organization’s boundaries that cannot be controlled (ie. competition)

Question 2

What is organizational boundaries

Answer 2

That which separates the organization from its environment

Question 3

What are 3 conditions of the economic system in which an organization operates

Answer 3

Economic growth, Economic stability, and Full-employment

Question 4

What are 6 factors that contribute to economic growth

Answer 4

1. the business cycle
2. aggregate output and standard of living
3. GDP and DNP
4. Productivity
5. Balance of Trade
6. National Dept

Question 5

What is the business cycle

Answer 5

The typical pattern of short-term ups and downs in an economy (etc. peak, recession, trough, and recovery)

Question 6

What is aggregate output

Answer 6

Measure of economic growth: total quantity of goods and services produced by an economic system during a given period

Question 7

What is standard of living

Answer 7

total quantity and quality of goods and services that a country’s citizens can purchase with their currency

Question 8

What is Productivity

Answer 8

measure of growth that compares the output of an economic system with the resources that are needed to produce the output

Question 9

Standard of living improves through _______ in ________

Answer 9

increases in productivity

Question 10

What is GNP

Answer 10

Gross National Product
Value of all goods and services produced by a national economy within a given period regardless of production location

Question 11

What is GDP

Answer 11

Gross Domestic Product
Value of all goods and services produced by a national economy within a given period with domestic factors of production

Question 12

What is Balance of Trade

Answer 12

Value of all exported products - value of all imported products

Question 13

What is national dept

Answer 13

amount of money that a government owes its creditors. Increases/decreases based on the budget deficit/surplus

Question 14

What is economic stability

Answer 14

the condition when the amount of money available and the quantity of goods and services produced are growing at about the same rate

Question 15

What are the 3 threats to economic stability

Answer 15

1. Inflation
2. Deflation
3. Unemployment

Question 16

What is inflation

Answer 16

occurs when there are widespread price increases in an economic system

Question 17

What is Consumer Price Index (CPI)

Answer 17

a tool used to measure inflation

Question 18

What is deflation

Answer 18

a period of generally falling prices

Question 19

Define the economic inflation of Canada

Answer 19

In the past 20 years, the rate of price increases has been low and quite stable

In 2021, the inflation rate rose to 4.7%

Question 20

What is unemployment

Answer 20

level of joblessness amond people actively seeking work in an economic system

Question 21

What are the 4 types of unemployment?

Answer 21

1. Frictional
2. Seasonal
3. Cyclical
4. Structural

Question 22

What are the two stabilization policies

Answer 22

Fiscal Policies: taxes and spending
Monetary Policies: money supply

Question 23

What is the political-legal environment

Answer 23

reflects the relationship between business and government (ei. regulations)

Question 24

What is Michael Porter’s five forces model for

Answer 24

used to analyze the competitive situation in an industry

Question 25

What are the five competitive forces that shape strategy according to Michael Porter

Answer 25

1. Threats of new entrance 2.Bargaining power of consumers 3. Threat of Substitutes 4. Bargaining Power of Suppliers 5. Industry Rivalry

Question 26

What is a competency

Answer 26

the skills and resources with which an organization competes best and creates most value for owners

Question 27

What is outsourcing

Answer 27

Paying suppliers and distributors to preform certain business processes

Question 28

What is an Acquisition or Merger

Answer 28

Horizontal, vertical, or conglomerate mergers. Can be a friendly or a hostile takeover

Question 29

What is divestitures or Spin-off

Answer 29

Selling part of existing business or setting it up as a new corporation

Question 30

What is a hostile takeover

Answer 30

the aquiring company buys enough of the other companys stock to take control

Question 31

what is poison pill

Answer 31

a defence tactic that manangement can adopt to make a firm less attractive

Question 32

What is employee-owned corporations

Answer 32

Employee stock ownership programs (ESOP)

Question 33

What is strategic alliances

Answer 33

Two or more companies temporarily join forces. Often called a joint venture

Question 34

What is a subsidiary and parent corporations

Answer 34

Subsidiary corporation owned by another (parent) corporation

Question 35

What are the two types of inflation

Answer 35

1. Demand-pull inflation 2. Cost-push inflation

Question 36

What is cost-push inflation

Answer 36

when business expenses increase and these extra costs are passed on to their customers. ex// price of raw materials go up over time

Question 37

What is demand-pull inflation?

Answer 37

when the demand of goods and services outpaces the supply. Happens when the economy is strong and close to full capacity

Question 38

What is Milton Friedmans theory of monetary inflation

Answer 38

this theory, often summarized by the phrase "inflation is always and everywhere a monetary phenomenon," posits that inflation occurs when there is a sustained increase in the money supply that outpaces economic growth. Ex// when things get more expensive because there's too much money and not enough stuff to buy.

Question 39

What is Porters Diamond Theory

Answer 39

4 things that will determine if a country has a favourable advantage or not. Ex// how to determine whether sweden has an advantage for their furniture or not

Question 40

What are the 4 things that make up Porters diamond theory

Answer 40

1. Favorable Factor Conditions: was their advantage by luck (ex/tourism in greece) or made (ex//good engineers in germany) 2. Demand Conditions: there must be damand in that area 3. Related and Supporting Industries: you cant just go to greece for tourism and not have somewhere to eat. You must have strong supporting industries 4. Firm Strategy, Structure and Rivalry: there must be rivalry. competition makes you better