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1010 final exam notes
Exploring the Functions of Business (York University)
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Week 7: Causal claims
Causal claims:
- Cause and effect relationship
- Determines causes
- Rival causes
Interpretation of causes and effect relationship
CAUSE  EFFECTS
- Help make sense of the world
- Answers to “why” questions
- Natural – basic to human nature
- The basis for decision making and reasoned actions
Determining causes
- Can be very difficult in complex and uncertain situations characteristics of business
o Multiple causes
o Rival causes
- Three situations where we’ll want to consider rival causes
o When there are differences between groups
o When two variables are correlated
o When one event follows another event
Rival causes:
1. Differences between groups
o Need to ask: “are there any other differences that may be relevant
2. Correlations
o Co = together or jointly
o Relation = related to
o Two things are related to each other
o Correlation can be explained through one of three causal links
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o Reverse:

A and B are correlated; A could have caused B but B could also have
caused A
o Third factor:
 A and B could be correlated but does not have a causal relationship
 There’s another factor that could have caused both correlated things
3. Post hoc ergo propter hoc fallacy
- Post hoc (after this
- Ergo (therefore)
- Propter hoc (because of this)
o One event following another
 Does not mean the first caused the second
 Basis of many superstitious beliefs
Accounting (a primer)
Financial reporting
- Generally accepted accounting principle (GAAP)
o National and international standards
- Financial statements
o Balance sheet:
 Statement of financial position at a given point in time
 Reports:
 Assets: economic resources (things of value)
 Liabilities: economic obligations (things owed)
 Ownership equity: residual value after liabilities are paid
o Income statement:
 Statement of income, expenses and profits over a given period
o Cash flow statement:
 Reports on cashflow activities, particularly operating, investing, financing
activities
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Accounting fields
- Financial accounting
o Summary, analysis and reporting of financial transactions
o Stockholders, government agencies and other external stakeholders most
commonly interested in
- Management accounting
o Use of accounting information to make better management decisions
- Auditing
o Independent examination of an organization’s accounts
- Tax
o Accounting for tax purposes
Accounting in Canada: Professional body
- As of Oct 1, 2014
o A new single professional body for all accountants in Canada (Chartered
professional accountants of Canada) with a single designation:
 Chartered professional accountant (CPA)
Causal claim: the balanced scorecard
- “What you measure is what you get. Senior executives understand that their organizations
measurement system strongly affects the behavior of managers and employees”
- “…traditional financial accounting measures … can give misleading signals for continuous
improvement and innovation – activities that today’s competitive environment
demands. [They] worked well for the industrial era, but are out of step with the skills
and competencies companies are trying to master today.”
- “…senior executives do not rely on one set of measures to the exclusion of the other….
Mangers want a balanced presentation of both financial and operational measures.”
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The future of ESG: Accounting
- ESG measures (accounts for)
o Environment
o Social
o Governance
o Investors forced to think about sustainability as a major issues
- Extends logic of balanced scorecard
o Broadly assess sustainability performance
Week 8: Value measurement and intermediary
Finance (a primer)
- Intermediary
o A person who acts as a link between people in order to try to bring about an
agreement or reconciliation; a mediator
o Intermediaries between lenders and borrowers
Finance fields
- Public finance
o Addresses the role of government in the economy
- Corporate finance
o Funding and capital structure of corporations
o Investment banking
- Personal finance
o Financial management for individual and families
o A specialty within SAS
Global financial system
- International financial institutions
o International monetary funds
 Came out of the Bretton Woods Conference following WWII
 Promotes global monetary cooperation and financial stability
o World bank
 An international financial institution of the United Nations
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 Provides loans to developing countries
 Global prospects for world economic outlook
 Global monetary cooperation and financial stability
Governments
o Regulatory agencies
 Sets the rules for the ‘players’ in the financial system
 USA: (US securities and Exchange Commission (SEC) ; Federal Reserve
System (Fed)
 Canada: office of the Superintendent of Financial Institutions (OSFI)
o Central banks
 Manages a state’s currency, money supply, interest rates
 Operates at arms length from government
Banks
o Retail banks: general full-service baking services for individuals and businesses
o Investment banks: help clients raise financial capital by underwriting or acting as
the client’s agent in the issuance of securities (Or both)
 Securities – tradable financial assets (stocks, bonds, derivatives, ect)
Stock market
o Exchanges where stocks are bought/sold
o NYSE: NASDAQ; TSX; tec
What is money?
- Money is an idea
o A belief system (faith?)
o A collective, shared perception of value
- Implications
o If we lose faith (i.e. stop believing) in currency it losses its value
o The financial system is inherently UNSTABLE
Money: a brief history
- Direct exchange
- Valuable objects (shells, salt, stones, feathers etc)
- Metal coin (gold silver)
- Paper money
o The US gold standards (paper money backed by US gold at Fort Knox)
o In 1971, Richard Nixon declared that paper money could no longer be redeemed
for gold
- Digital money
o Online accounts, credit cards eliminate need for paper
- Cryptocurrency
o Bitcoin created in 2009: the world’s first cryptocurrency
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Causal claim: the money game
The value of everything
Value creation stories
- Before 1960
o Finance not, considered a ‘productive’ part of the economy
- Around 1970
o Financial sector included in GDP
o ‘financialization’ of the ‘real economy’
- Value creation
o Private/individual wealth creation myth vs. public institution and investment
Value creation (maker) VS. value extraction (taker)
Techniques of persuasion
- Anticipated objections
o Negative evidence
o Alternative causes
o Conflicting assumptions
- Counter-argue objection
- Limit claim you cannot refute
o Acknowledging limitation makes your writing more persuasive
- Rhetoric
o Use of language of persuade
o Detail (evidence and assumptions)
o Tone (scholarly versus narrative)
o Vividness (being concrete draws attention)
Week 9: Value chains
Open systems
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- Organizations are open systems
o Closed systems are fully self-contained and self-sufficient (e.g. the earth)
o Open systems interact with and rely on the environment and around them (e.g.
-
almost everything)
Business as an open system
o Can be represented as a ‘value chain’ (aka the supply chain)
o Value chain: the process by which a valuable product or service is created
The value chain
Pioneers of productivity
Scientific management (AKA Taylorism)
- Developed by Fredrick Winslow Taylor c. 1900
- Applied ‘scientific’ methods to improve management
- Time-motion studies
- The major gaol  efficiency
o Efficiency is based on the ratio of inputs to outputs (maximum output with
minimum input)
Fordism
- The industrial process developed by Henry Ford to produce the Model T automobile
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- Three major principle
o Standardization: machine made vs. handmade; automation
o Assembly lines: each worker performs a single task
o Higher wages: employees ca afford the product
- The start of mass production
- Greatly facilitated by the technological revolution at the turn of century
Operations and supply chain management
Productivity today:
- Management science
o The use of analytical methods (mathematical models) to make better management
decisions
o AKA operations research
- Operation management
o Design and management of the firm’s system to produce goods and services
o AKA production, manufacturing
- Supply chain management
o Managing the flow of goods both within and outside the firm from point of origin
to point of consumption (raw materials to finished goods)
o Integrated procurement (purchasing); logistics (shipping); operations, information
technology
- International business (IB)
o Management of business activities that cross national boundaries
Economic globalization
- Globalization
o “…the increasing economic integration and interdependence of national, regional
and local economies across the world through an intensification of cross-border
movement of goods, services, technologies and capital.”
- Free trade
o Countries do no restricts imports or exports
o Opposite of ‘protectionism’: government regulations that favour (or protects)
local businesses
o Cf. standard economic theory
- Multinational corporations (MNCs)
o Corporations with operations that cross national boundaries
High price of efficiency
- Efficiency gains
o Unequally distributed (Pareto distribution) richest 1% own 40%; riches American
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is 100B times richer than poorest
Monocultures
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o Highly efficient, highly precarious
- Power and self-interest
o Efficiency  market power  value extraction (cf. Mazzucato)
- Resilience… the ability to recover
o Limit scale
o Friction (e.g. trade barriers)
o Patient capital (long-term)
o Good jobs
o Teach resilience
Week 10: The human factor
The human factor OB&HRM
- Organizational behaviour (OB)
o Two meanings
 Behaviour of people within organizations
 Most common meaning
 Our focus today
 Behaviour of organizations within their environment
 Also called ‘organization theory’
o Rooted in the core academic domain of psychology
 “…an academic and applied discipline that involves the scientific study of
mental functions and behaviors.”
 Industrial – Organizational Psychology
o Aims to understand mental and behavioural process within the context of
organization
- Human resources (HRM )
o Organizational function concerned with
 How people are managed
 Policies and systems for people management
 Maximizing employee performance to achieve organizational goals
(‘strategic HRM)
o Translate OB theory into specific firm policies and practices related to
 Recruitment and selection
 Training and development
 Performance appraisal
 Pay and benefits
 Also M&A: ‘talent’ management ; succession planning, labour relations;
diversity etc.
- Industrial vs. organizational psychology
o I/O psychology is comprised of 2 branches: Industrial Psychology and
Organizations Psychology
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o Though there is considerable overlap, industrial psychology is primarily
concerned with issues that are more molecular while organizational psychology
takes a molar approach
Human motivation
The economic view
- Labour
o A factor of production
- People
o Self-interested
o Rational
- Money
o The best mechanism for ranking preferences
- Employment
o An economic transaction; “wage labour”
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- Money is the main motivator of employee behaviour
Incentives: what money can’t buy
- Question: how far should we take the economic norm of monetary incentives
o Broad influence of economic thought
 Market (economic) reasoning reaching into all spheres of life
 Economists are recasting the discipline to be more far reaching
o Monetary incentives now being widely used to influence human behaviour
 Paying drug addicted women to get sterilized
 Schools pay kids for reading/ good grades
 For health outcomes: losing weight. Taking med’s
o Why should we care?
 Marketizing a good change its meaning: markets value only in dollars
 Market norms/values crowd out or corrupt other norms/values (the
essential value of children, people, animals, nature, etc. is lost)
 Bribes are manipulative: substitute an external reason for an intrinsic one
(do the right thing for the wrong reason)
- Question: do financial incentives crowd out attitudes and norms worth protecting
- Question: how do you get someone to do something
o KITA
 Negative physical
 Negative psychological
 Positive
- Why KITS is not motivation
o Remove carrot/stick and behaviour stops
- Question: how do you install a generator in an employee
o Hygiene vs. motivators
 Hygiene factors produce job dissatisfaction if not sufficient:
 Organization policies, supervision, relationships, working,
conditions, salary
 Motivators produce satisfaction
o Motivation through job enrichment
 Removing controls; increase accountability for own work; complete unit
of work; job freedom; performance feedback; challenging and novel tasks
 Forming work teams
 Establishing client relationship
 Combining tasks
 Making feedback more desired
Motivation types: extrinsic vs. intrinsic
- Extrinsic is external: comes from outside
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o KITS: negative or positive
o Carrots and sticks
- Intrinsic is internal: comes from within
o A generator
o Does not depend on external factors
- Promoting intrinsic motivation
o Herzberg (1968): job enrichment
o Pink (2010): autonomy, mastery, purpose
Techniques of persuasion
- Anticipate objections
o What objections could possibly be made to your arguments
o Negative evidence

-
proving that the counter arguments to your claim doesn’t work makes your
arguments more persuasive instead of not mentioning them
o Alternative causes
 rebutting alternative causes to avoid holes in your arguments
o Conflicting assumptions
 if you are aware that your claims are debatable, and readers might have the
different values as you are, provide explicit data to back your assumptions
up
Counter-argue objections
Limit claims you cannot refute
o Acknowledging limitations make your writing more persuasive
Rhetoric
o Use of language to persuade
o Detail (evidence and assumptions)
o Tone (scholarly versus narrative)
o Vividness (being concrete draws attention)
Week 11: Getting the word out
Marketing
- Activities, institutions, processes
- Communicating, delivering, exchanging offerings
- Value for customers, clients, society at large
Advertising
- Marketing
o Broader than just advertising
- Advertising
o The most visible face of marketing
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- Advertising exposure
o Up to 5000 ads per day
o Vast changes in advertising methods over the years
- “you can manipulate consumers … it’s a game”
- “you’re essentially manipulating these children … is it ethical, I don’t know”
Real needs vs. manipulating consumers
Branding
Marketing meets mission
- Brands for social purpose
o Address global health issues
o Energize employees
- Purpose tree
o Inspiring behavioural change
o Winning internal support
o Measuring performance
o Securing partnerships
o Driving systematic change
New branded world
- Corporations
o Focus primarily on the marketing function rather than the production function
- Production
o Outsourced to low-wage countries
- “Race to the bottom”
o Competitive race to cheapest production areas of the world
o Costs are low because
 Employees are paid very little
 Minimal labour standards (long working hours; unsafe conditions; no
benefits, no security etc.)
 Minimal environmental standards (resource depletion; habitat destruction;
pollution etc.)
o Costs are EXTRENALIZED: i.e. not captured in the final price of the product
Week 12: Business in the future
New economy
- Traditional organizational types
o Business/for profit/private sector
o Government/public sector
o Non-profit/NGO/civil society/plural sector
- Alternative & emerging organizational forms
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o Social enterprise
o Cooperative
o B Corps (Benefit corporations)
Social entrepreneurship
- Social
o Of or relating to human society, the interaction of the individual and the group or
the welfare of human beings
- Entrepreneur
o One who organizes, manages, and assumes the risk of a business or enterprise
- Social entrepreneurship
o Application of entrepreneurial business skills to the creation of an enterprise
whose primary purpose is to solve social and environmental problems
Aravind Eye Care: social enterprise case
- Problem
o Many poor people in India have vison problems that are curable but go untreated
due to lack of money
- Solution
o Highly specialized labour and highly systematized process  low cost
o Charge market rates to those who can afford pay
o Use surplus to cover two who cannot afford
Co-operatives
- Key features
o A legal business form
o Since mid-1800
o Internationally recognized
o Owned/operated by and for members
- Distinguishing features
o Democratic governance
 One member = one vote
 Compare to typical corporation: one share = one vote
- Co-op principles
o 1st: voluntary and open membership
o 2nd: democratic member control
o 3rd: member economic participation
o 4th: autonomy and independence
o 5th: education, training and information
o 6th: co-operation among co-operatives
o 7th: concern for community
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B Corps (Benefit corporation)
- Features
o For profit entities
 Profits and growth as means to a greater end: positive impact for their
employees, communities and the environment
o Extends corporate responsibilities
 Beyond narrow shareholder focus to bread public benefit
- Two forms
o Created B Corp
o Legal business form
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