Thursday, September-08-11
ADMINISTRATIVE STUDIES
Kaitlyn Di Ilio
CHAPTER ONE: THE CONTEXT OF BUSINESS - A FRAMEWORK FOR STUDY
Making Sense of Organizations and Management
To understand the forces that act on business, we must examine issues that are part of an organizations external
environment.
The Organization as an Open System
We are a society of organizations. (Ex. hospitals, schools) All of these organizations are constantly undergoing
change.
WHAT IS AN ORGANIZATION?
1.
2.
3.
PUBLIC/ GOVERNMENTAL ORGANIZATIONS: that provide goods and services without necessarily
generating a profit.
PRIVATE/NON-GOVERNMENTAL ORGANIZATIONS: including voluntary organizations, that offer goods or
services without necessarily generating a profit; and
PRIVATE ORGANIZATIONS: that produce goods or services with the intent of making a profit for the
benefit of their owners or shareholders
Although these organizations are all from different sectors, they all have an underlying characteristic that are
common.
HOW DO WE DEFINE IT?
1.
2.
3.
Organizations are social entities. They are all made up of people as they are generated and maintained
by them and involve some sort of human interaction.
Organizations are created to achieve goals.
Organizations interact with the environment. They obtain input from its environment and then they are
transformed into outputs.
Organizations As a Metaphor
An organism as a….

machine
 political system
 living organism
 theatre
 sports team
 family
Putting an organization into a metaphor allows us to imagine it.
Organizations as Open Systems

We can now view organizations as systems.
Thursday, September-08-11
ADMINISTRATIVE STUDIES
Kaitlyn Di Ilio
System: interdependent elements working together to achieve a goal or goals
Open System: entities that are embedded in, and dependent on exchanges with the environment they operate in.
Social System: People constitute the basic elements.
ORGANIZATIONS AS OPEN SYSTEMS
•Physical resources
•plant
•capital
•materials
•Human Resources
•people
•Knowledge
•Technology
Process
•Goods or Services
•Transformation to goods or
services generated by the
organization (eg. the
manufacturing process)
Outputs
Inputs
Feedback

An organization's environment represents all elements that exist outside the organization and that
potentially, influence or affect the organization in some way. if they do not do things to please their
environment, they will cease to exist.
THE EXTERNAL CONTEXT OF BUSINESS
Organization
Environment = External Context of organizations
Specific
Environment
Specific or Task Environment
Stakeholder - parties or groups that have direct influence on the
organizations ability to obtain resources and generate outputs, they
have some kind of stake or interest in the organization (customers,
General
Environment
suppliers)
GENERAL ENVIRONMENT :


effect the organizations ability to obtain resources, (outer ring affecting the specific environment)
economic, competitive, technological, societal, global and political forces
Thursday, September-08-11
ADMINISTRATIVE STUDIES
Kaitlyn Di Ilio
Economic Forces: recession or strong economic health, organizations are forced to adapt to changing economic
conditions, downsizing are more likely in poor times, facilitated changes to the nature of employer-employee
relationship
Competitive Forces: globalization, dictate changes in organization strategy, demanded an acceleration in
innovation among firms in many industries.
Technological Forces: constantly changing, constant updating
Labour Forces: diversity demands organizations to understand the demographic context within which they
operate. must understand the nature of the industrial relations context within which many operate. unions
represent interests of working population, their role and how they impact the environment of business
Global Forces: globalization, international trade agreements, broader sense of consumers, demands a knowledge
of people overseas and global competitors and other forces that exist on an international level
Political Forces: both specific and general, reduction in trade barriers, increase presence of foreign competition in
many industries. deregulation and privatization. ** how a business competes, or what services it offers and how
they can be offered. always an ongoing change between government and business relationship
Societal Forces: focus on the individual welfare in the workplace, organizational justice, employee treatment, pay
equity, effort to performance instead of seniority. types of organizations that serve societal demands can change
GENERATING A WINNING BUSINESS STRATEGY
Describe the nature and purpose of strategic management and its connection to the environment
There is an overlap of factors between the general environment and specific environment
Demographic changes lead to changes in consumer tastes, hence at the specific environment level.
The Canadian Context
Economic Forces in Canada
GDP: gross domestic product - the total value of a country's output of goods and services in a given year
MONEY employeesBUSINESS OWNERSgovernment
general trend - is to reduce levels of GDP
Competitive forces
 focused on extraction and processing of our natural resources
 we have not developed the entreprenurial and technological expertise of other nations, and had the
added value.
 competition is an important element, to provide better products at lower prices in order to increase sales
and profits
PERFECT COMPETITION (pure) : exists when there are many small firms producing an idential product, and
consequently no single producer has the power to affect the price of the product
MONOPOLISTIC COMPETITION : involves a large number of small firms whose product or service is percieved as
slightly different. As a result, each firm has some influence on the prices, such as may be the case with retail
operations
OLIGOPOLY: exists where there are a small number of producers with a different product (car manufactureers
MONOPOLY- one buyer, one seller

Canada has not taken a strict stance on industry concentration
Thursday, September-08-11

ADMINISTRATIVE STUDIES
Kaitlyn Di Ilio
government legislated competition policy does not attempt to discourage industry concentration, also
seeks to control the potential inequities created when a small number of firms dominate a particular
market
TECHNOLOGY

Canadian trading is based on natural resources, and any fluctuations in the global supply and demand for
these commodities influences the prices. therefore it is highly sensitive to any changes
 needs to catch up in areas of technology
Primary Sector- agriculture, mining, logging, fishing, hunting
Industrial sector- manufacturing of goods-producing sectors
Service sector- hotel and restaurant
 recent decrease in primary sector due to two things
1. technical advances have made human labour obsolete
2. urbanization of the canadian population
 the shift has been from agriculturalmanufacturingservice
 productivity improvement (making higher output with less labor than before)
 service oriented jobs are not replaced easily by machinery, productivity growth is slow
 Canadians need to be employed in services in order to maintain the relative levels of service and
manufacturing output
KNOWLEDGE WORKER- educated and capable of attaining higher skill levels, in highly paying service sector jobs /
education value of transferrable skills
" NEW KNOWLEDGE ECONOMY"
LABOUR



demographics
small market = difficult to develop more than a handful of domestic manufacturers of a stature capable of
competing on the world markets
small operations protected by government now want to expand over border.
GLOBAL FORCES IN CANADA




United States: trade agreements, business sector
importance of international trade
o are we selling more to other countries? (export) than we are importing?
o traditionally run a trade deficit with other countries
o NAFTA - and FTA are reasons for this increase in degree of openness to international trade
foreign ownership: high level of foreign ownership BRANCH PLANTS- many foreign owned firms operate
Canadian subsidiaries largely to produce or simply market the product. these products are typically
designed outside Canada, usually using imported components. they do not perform the complete range of
functions in order to offer a product in the market place.
Canadian managers are not being challenged to add value
Thursday, September-08-11
ADMINISTRATIVE STUDIES
Kaitlyn Di Ilio
Political
 the degree in which the government should help business compete - direct subsidies, tax incentives,
protectionism
Societal
 high level of investment in education
 job to seek corporate ethics and social responsibility
FACEBOOK AND THE BUSINESS CONTEXT
1.) What elements of the external environment do you think contributed to Facebook's success?
A consumer's constant need to be social, and know what is going on in the world. People have a natural
curiosity about them, and to have another person's life at your finger tips is thrilling to many. A
technology based world also drives many people to use the internet in different ways of communicating.
Younger people decide what they like, and that is where things grow in a business. Parents follow their
children to try and be like them.
2.) Which elements are beginning to create challenges for facebook?
Safety is a major issue, because people are vulnerable when they are online to being victims of cyber
bullying or being stalked. It is also a threat to peoples privacy.
3.) Which context must facebook work hardest to address in order to continue to prosper?
Their safety, privacy and access codes. People will have less desire to use the system if they feel at risk.