MGMT 2150 Textbook

Business
First Canadian Edition
Pride • Hughes • Kapoor • Althouse • Allan
Copyright © 2020 by Nelson Education Ltd. 1

LESSON 1
Exploring the World of Business and Economics

Learning Objectives
LO 1-1 Summarize the four benefits of studying business.

LO 1-2 Explain how business benefits society.
LO 1-3 Identify potential societal concerns about business.
LO 1-4 Discuss how different factors might affect businesses and
consumers.
LO 1-5 Classify various economies as one of the four types of
economic systems.
1-3 Copyright © 2020 by Nelson Education Ltd.

Learning Objectives
L0 1-6 Identify the key strategic considerations related to

competition for companies in various industries.
LO 1-7 Identify the effects of various price changes on supply
and demand.
LO 1-8 Explain how different economic indicators are positive or
negative indications of economic conditions.

Why Study Business?
• To choose a career
• To improve one’s career
• To become a better informed consumer and investor
• To become a more influential community member

The benefits of studying business can lead to:
More fulfilling careers
Improved management
skills
Greater consumer insights
Stronger communities

Understanding Business Basics
• Business: An organization that seeks profit by offering
products (goods and services) to satisfy society’s needs.
• Good: A physical, tangible product that we can see and touch.
• Service: An intangible product that we can experience or use.

The Benefits of Business to Society
• Offering valuable goods and services
• Objective: to satisfy customer needs
• Providing employment
• create employment for workers who fulfil and satisfy customer needs
• examples: production line workers, drivers, accountants
• Improving the quality of life

• producing products that they need and want

Concerns about the Impact of Business on
Society
• Managers attempt to balance the
need to create profit against social
concerns:
• Health and Safety Risks
• (e.g., unsafe materials and product design)
• Environmental Damage
• (e.g., unsustainable use of natural
resources)
• Social Disruption
• (e.g., business profits at expense of
precarious work)

Key Takeaway 2
Businesses make a variety of positive

contributions to the society
Managers must balance their pursuit of

profits with vital social concerns

Responding to the Business Environment
• Five factors affect the business environment
1. Economic
• Size and health of economy must be considered when making business
decisions (e.g., when a nation’s economy or a business’s profits trend
negatively)
2. Competitive
• High levels of competition force businesses to cut costs, develop new
products, increase marketing efforts (e.g., Newspapers reduce print frequency
and increase digital paywalls to survive)

Responding to the Business Environment
3. Global
• Access to global markets increases competition and need to enhance skills (e.g.,
China leads in electronics manufacturing)
4. Technology
• Technology innovation has changed how businesses produce and distribute
goods and how we communicate. (e.g., Facebook has more than 2 billion users
globally)
5. Social
• Changes in demographics influences what products companies offer (e.g., diapers
for adults who are incontinent)

Key Takeaway 3
Businesses that effectively respond to factors

affecting the business environment can
develop strategies to optimize their
opportunities for success

Economic Systems
• Determine how wealth is made and distributed in a country

• Affects business opportunities to make income and create wealth
• Affects the choices of consumers and the prices they pay
• Economy: The way in which people deal with the creation and
distribution of wealth
1-14
Why Do Economic Systems Matter?

• Capitalism: an economic system in which individuals own and
operate the majority of businesses that provide goods and
services
• Invisible Hand: a term created by Adam Smith to describe how an
individual’s personal gain benefits others and a country’s economy
• Free-Market Economy: an economic system in which

businesses and individuals decide what to produce and buy
and the market determines prices and quantities sold

• Mixed Economy: an economic system where most land and
business are privately owned but with various levels of
government involvement
• Command Economy: an economic system in which the

government decides what goods and services will be
produced, how they will be produced, for whom available
goods and services will be produced and who owns and
controls the factors of production

• Socialism: An economic system in which the key industries
are owned and controlled by the government.
• Communism: An economic system where all property and

profits are owned by the government, which then decides
what goods and services will be produced.

Key Takeaway 4
The level of economic freedom in a country

will affect:
Opportunities to earn income and

create wealth
Choices of a consumer and the prices
they pay

Degrees Of Competition and Supply and
Demand
• Competition
• Rivalry among businesses for sales to potential customers.
• Affect the number of choices an individual has and the prices

he or she pays for products of an industry
• Helps business owners and employees to choose effective business
strategies

Why Do Degrees of Competition Matter?

Perfect Competition and the Concept of
Supply and Demand
• Market situation in which there are many buyers and
sellers of a product
• No single buyer or seller is powerful enough to affect the price
of that product.
• Prices are decided by the economic concept of supply and
demand
• Equilibrium Price
• price at which the quantity demanded is exactly equal to the quantity supplied

Supply and Demand
Supply: The quantity of a product

that producers are willing to sell
at each of various prices
Demand: The quantity of a

product that buyers are willing to
purchase at each of various prices

Monopolistic Competition
• Market situation in which there are many buyers along with a
relatively large number of sellers.
– Key strategy: Sellers have to differentiate their product from
competitors
• Product Differentiation: The process of developing and

promoting differences between one’s products and all
competitive products.

Oligopoly
• Market (or industry) in which there are few large sellers
• Requires sizable investments to enter the market
• Sellers match each other’s pricing
• Try to win customers through product differentiation
• Examples: airlines, car rental businesses and manufacturers of automobiles, cereal
and mobile phones.
• Game Theory: used to model the interaction between two or more

businesses to determine what will happen if one or more companies take
specific actions with regard to changing prices or introducing new products or
services

Monopoly
A market (or industry) with only one seller and barriers to
keep other companies from entering industry
• No close substitute for the product or service
• Pricing in some industries are regulated by government
• Requires massive investment
• Success depends on quickly achieving a meaningful share of the
market

Key Takeaway 5
The degree of competition in an industry
Affects the choices available to

consumers and the prices they pay
Helps a business or an employee choose
effective business strategies

Measuring Economic Performance
• Economies fluctuate between high and low points resulting in
business cycles consisting of four phases:
1. Peak
2. Recession (or Contraction)
• Two or more consecutive three-month periods of a decline in a country’s GDP
3. Trough
4. Expansion

Gross Domestic Product (GDP)
• Total dollar value of all goods and services produced by all

people within the boundaries of a country during a one-year
period
• Growth in GDP increases employment and incomes

Unemployment and Inflation
• Unemployment Rate: percentage of a country’s labour force
unemployed at any time.
• Unemployed workers who lose wages results in a loss in purchasing
power, which can lead to further loss of jobs for other workers.
• Calculated as the number of unemployed divided by the number of people
currently in the labour force
• The country as a whole loses the goods and services that

could have been produced.

Unemployment and Inflation
• Inflation: tracks the increase in general level of prices of
goods and services over a period of time
• low Inflation rate of 2% is a sign of a stable economy.
• inflation rate of 10% can be a troubling sign for the economy
because rising prices cause a loss of purchasing power.
• Consumer Price Index (CPI): A monthly index that measures

the changes in the prices of a fixed basket of goods typically
purchased by typical consumer in an urban area.

Deflation
• Deflation: decrease in the price of goods and services; the
opposite of inflation.
• usually a sign of economic trouble
• declining prices lead to declining profits for companies
• can lead to an increase in unemployment rates and a shrinking economy for
the country.

Key Takeaway 6

Exploring Careers in Business
• What you learn in this course can be used to:
– Choose a career
– Improve your career
– Become a more informed consumer and investor
– Become a more influential member your community

Key Takeaway 7
What you will learn in this course can help

you evaluate and enhance your career

Business
Copyright © 2020 by Nelson Education Ltd.

LESSON 2
Being Ethical and Socially Responsible

Learning Objectives
(Slide 1 of 2)
2-1 Summarize the three primary components of business ethics.

2-2 Understand if an action is legal, ethical, or both.
2-3 Discuss how organizations can promote ethical behaviour.
2-4 List the four guidelines for making ethical decisions.
2-5 Describe different models of social responsibility.

Learning Objectives
(Slide 2 of 2)
2-6 Identify the various stakeholders and how organizational decisions

impact them.
2-7 Explain the four basic consumer rights.
2-8 Identify two ways that companies demonstrate responsibility to
employees.
2-9 Understand how business practices can help protect the natural
environment.

Ethics
• Ethics: Study of right and wrong and of the morality of the choices
individuals make
• Ethical decision or action – What is right according to some standard of
behaviour
• Business ethics: Application of moral standards to business situations
• Ethical issues can arise from a business’s relationship with investors,
customers, employees, creditors, or competitors

The Three Components of Business Ethics
(Slide 1 of 2)
1. Competing fairly and honestly

• Priority - Obey all laws and regulations
• Ethical businesspeople are expected to refrain from knowingly deceiving,
misrepresenting, or intimidating others.
2. Avoiding conflict of interest
• Occurs when an employee takes advantage of a situation for their own
personal interest rather than for the employer’s interest
• Bribe – Anything given to a person that might unfairly influence their business decision
• While bribes are sometimes part of business negotiations overseas, it is illegal for
Canadian businesspeople to use bribes.

The Three Components of Business Ethics
(Slide 2 of 2)
3. Being transparent
• Transparency: Free flow of information inside and outside the company
• Helps discourage the temptation to compete unfairly or cover-up conflicts of interests
• Includes the flow of information to employees, investors, customers and other
stakeholders.
• Sometimes, transparency alone can discourage the temptation to compete unfairly or to
cover up conflicts of interests.

Key Takeaway
Understanding the components of business

ethics can help in:
Identifying potential ethical concerns
Addressing those concerns

Ethics Start With Us

Key Takeaway 2
To better evaluate if one’s decision is ethical, a combined

understanding of the factors influencing standards of
behaviour and components of business ethics is required

Encouraging Ethical Behaviour in Organizations
(Slide 1 of 2)
• Government’s role
• Legislate more stringent regulations (e.g., Bill 198, “Canadian Sarbanes-
Oxley” Act or C-SOX, which requires publicly listed businesses in
Canada to bolster transparency in financial reporting and disclosures)
• Trade associations’ role
• Exert pressure on members who stoop to questionable business
practices
• Must ensure that codes do not violate competition laws

Encouraging Ethical Behaviour in Organizations
(Slide 2 of 2)
• Company’s role
• Demonstrated commitment from leadership
• Adopt a code of ethics
• Designate an ethics officer
• Protect whistle-blowers

Navigating Ethical Dilemmas
as a Manager
• Ethical dilemma: A decision where every alternative impacts various
stakeholders in unpleasant ways
• Ethical decisions withstand scrutiny when they are made
transparently and methodically
• Requires openness and communication

Key Takeaway 3
Improving ethical business behaviour is a role for:

• Government
• Trade associations
• Organizations
Managers who face ethical dilemmas are advised to:

• Methodically navigate their decisions through
communication and openness

Increasing Social Responsibility
(Slide 1 of 2)
• The recognition that business activities have an impact on society and

the consideration of that impact in business decision making
• Two models define the range of management attitudes towards social
responsibility:
• Economic model
• Socioeconomic model

Increasing Social Responsibility
(Slide 2 of 2)
• Economic model
• Businesses exists to produce quality goods and services, earn a reasonable profit,
and provide jobs
• Belief that society benefits most when businesses are allowed to produce and market
profitable products that society needs.
• Additional concerns should be addressed by government and social institutions.
• Socio-economic model
• Focuses not only profits but also on how business decisions impact society
• Belief that because business is a part of society, it cannot ignore social issues.
• Businesses have the technical, financial, and managerial resources needed to tackle complex
social issues.

Responsibility to Stakeholders
(Slide 1 of 2)
• Anyone who is impacted by the activities of the business

• Includes investors, employees, customers, local communities, and
government
• A decision beneficial to one group may negatively impact another
• Evaluate the impact of the company’s decisions or activities on each
of the stakeholder groups
• Requires considering short- and long-term impacts
• Balance the needs of stakeholders in a way that provides the best
long-term benefit

Responsibility to Stakeholders
(Slide 2 of 2)

Key Takeaway 4
Companies can attempt to balance the needs of

stakeholders and make a positive overall contribution to
the society by analyzing the impact of their activities

Basic Consumer Rights
(Slide 1 of 2)
• Legislation protects consumers with four consumer rights:
1. Right to safety
• Products must be safe and have instructions for intended use
2. Right to be informed
• Consumers must have information about a product before buying and
instructions to use it
• Manufacturers must inform consumer abut potential dangers of using
products

Basic Consumer Rights
(Slide 2 of 2)
3. Right to choose
• Consumers must have a choice of products, offered by different
manufacturers and sellers, to satisfy a need
4. Right to be heard
• Companies should listen and respond to consumer complaints

Key Takeaway 5
The consumer movement has prompted

improvements in:
The quality of products and services
Helping individuals become more

educated and informed consumers

Concern for Employees
• Companies demonstrate responsibility to employees through:
• Equality
• Occupational safety
• The federal government passed laws to forbid discrimination and
establish standards of workplace safety
• Serve as the basis for company policy

Key Takeaway 6
Promotion of equality and occupational safety in the

workplace is good for society, and makes good
business sense

Concern for the Natural Environment
(Slide 1 of 2)
• Environmental concerns revolve around contamination and

responsible use of water, land, and air
• Legislation and regulation have critical roles in pollution control
• To decrease impact on environment by businesses…
• Identify and eliminate inefficiencies in production and operations
• Reduce waste from operations and other activities
• Find alternative use for waste

Concern for the Natural Environment
(Slide 2 of 2)
• Companies use natural resources to create

goods and services that society needs and
wants.
• As companies grow, their impact on natural
environment becomes more prominent, which
can lead to public scrutiny.
• Companies have increased efforts to
implement sustainable business practices to
protect the environment and conserve natural
resources.

Key Takeaway 7
Increased concern about the environment has led to laws

and sustainability strategies:
• Designed to reduce the impact of business activities
When properly implemented, sustainability practices

can help:
• Companies control costs

• Conserve natural resources for future generations

Business

LESSON 3
Exploring Global Business

Learning Objectives
(Slide 1 of 2)
3-1 Identify key benefits of international trade.

3-2 Discuss the impact of currency rate changes on trade.
3-3 Understand how changing trade policy impacts trade
between the countries.

Learning Objectives
(Slide 2 of 2)
3-4 Describe how imposing trade restrictions impact a

country.
3-5 Distinguish between the primary goals of the WTO,
IMF, and the World Bank.
3-6 List the benefits of regional economic integration.
3-7 Discuss the various ways of entering international
business.
The Basis and Benefits of International Trade
(Slide 1 of 3)
A country’s natural resources, labour supply, and customs can

impact the products and services it can produce most efficiently.
• Absolute Advantage: the ability to produce a specific product
more efficiently than any other nation
• Comparative Advantage: the ability to produce a specific
product more efficiently than any other product

The Basis and Benefits of International Trade
(Slide 2 of 3)

The Basis and Benefits
of International Trade
(Slide 3 of 3)

Exporting for Growth
Exporting: Selling and
shipping raw materials of
products to other nations
• Increased jobs and income

Importing for Value
• Importing may be a better choice – even for a large, resource-
rich nation, such as Canada
• Access to resources
• Lower prices
• More product choices for customers
• Most valuable use of country resources

Importing for Value
BENEFIT WITHOUT WITH IMPORTING
IMPORTING
• Access to • Canada would face • Can access all needed resources (e.g.,
Resources shortages of key energy)
natural resources • Includes physical goods and services
(e.g., movies)
• Lower • Local costs of • Provides access to lower-priced goods
Prices production drive due to lower labour costs or access to
prices abundant natural resources

Importing for Value
BENEFIT WITHOUT WITH IMPORTING
IMPORTING
• More choice • Limited product • Product selection is almost limitless
for consumers selection
• Most valuable • Resources spent • Resources may be allocated to
use of country making lower- highest value products (e.g., Canada
resources valued goods can import tomatoes from Mexico
and use land that grew tomatoes to
grow marijuana)

Key Takeaway
International trade benefits consumers,
businesses and countries
Increased jobs and incomes
Access to resources
Lower prices
More product choice
Most valuable use of resources

The Impact of Currency Valuations
(Slide 1 of 4)
• Barter – System of exchange

in which goods or services
were traded directly for other
goods or services
• Limitations:
• Parties in the exchange need
each other’s products at same
time
• Products must be of equal
value in general

(Slide 2 of 4)
Development of currency eliminated inconvenience of barter

• Foreign-exchange control: Restriction on the amount of a
particular foreign currency that can be purchased or sold
• Limits on the amount of foreign currency that can be obtained limits
the amount of goods that can be imported

(Slide 3 of 4)
Currency exchange rate: Value of one currency in relation to

another
• Economic factors impact exchange-rate fluctuations
• Interest rates
• Inflation and economic strength
• Balance of trade and trade flow

(Slide 4 of 4)
Currency devaluation: a drop in the value of one country’s

currency relative to other currencies
• Hope to increase exports which will lead to increased jobs and income

Key Takeaway 2
Changing currency value affect the prices
that consumers pay for products from other
countries
Impacts the volume of imports and exports for a

country, affects employment, economic growth, inflation,
and consumer choice of products

Restrictions to International Business
• International business and “free trade” are steadily increasing.
• Not everyone agrees that free trade is good for a nation for a
range of reasons (e.g., internal political and economic pressures,
mistrust of other nations, etc.)
• Barriers to free trade are built, which results in trade restrictions.

Types of Trade Restrictions
(Slide 1 of 3)
Generally, nations are eager to export products

• Provide markets for products and develops favourable balance
of trade, which is the value of a nation’s exports minus its
imports
• Trade barriers prevent companies from selling to one another in
foreign markets.
• Two common types of trade restrictions are tariffs and quotas.

(Slide 2 of 3)
Tariffs and Quotas

• Tariff: Tax on a particular foreign product being imported into a
country
• Revenue tariffs
• Protective tariffs
• Quota: Limit on the amount of a good that may be imported into a
country during a period of time
• Used to manage imports of certain products or to restrict trade with certain
nations
• Size of the tariffs and quotas impact the level of trade

(Slide 3 of 3)
• Embargo: A complete halt to trading with a particular

country or in a particular product
• Difficult to enforce
• Creates black markets for certain goods
• Cultural barriers to trade
• Often-overlooked type of trade restriction are cultural barriers
• Consumers sometimes use country of origin as simple cues for
purchase decisions (e.g., French wine and cheese, German beer and
cars, Swiss chocolates and watches, may be preferred because of their
countries of origin).

The Impact of Trade Restrictions
3-22
Key Takeaway 3
Trade Restrictions
Include tariffs, quotas, embargoes, and

changes to currency valuation
Help protect industries, consumers,

and national security
Can increase prices, limit choices, and

lead to inefficiencies in global markets

Promoting International Trade and Prosperity
(Slide 1 of 2)
Why some countries don’t benefit from global trade

• National rivalries
• Economic instability
• Lack of economic development

Promoting International Trade and Prosperity
(Slide 2 of 2)
World Trade Organization (WTO)
• Permanent forum for trade negotiations and dispute

settlement
International Monetary Fund (IMF)
• Provides loans and grants to countries experiencing

economic instability
The World Bank
• Funds development projects in developing countries

Key Takeaway 4
The collective aim of IMF, WTO and the World Bank is to

promote global economic development through increased
trade, stable economies, and reduced poverty

Fostering Trade Through Economic
Communities
Economic Community
• Organization of countries formed to promote free movement of
resources and products among member nations (also referred
to as regional economic integration)
• Also known as economic integration
• European Union (EU)
• United States-Mexico-Canada Agreement (USMCA)
• Asia-Pacific Economic Cooperation (APEC)

Goals of Economic Communities
Reduce trade barriers
Increase flow of international trade
Promote peaceful relationships between countries
Provide increased prosperity for the citizens of each member

country

Key Takeaway 5
Economic communities are organizations of

nations formed to reduce trade barriers
Promote international trade and peaceful relationships

between countries

Methods of Entering International Business
• Most trade doesn’t

happen between the
countries themselves.
Trade occurs when a
company enters
international business
markets, either as a
buyer or a seller.

Exporting and Importing
• Lower Control, Lower Risk
• Companies can manufacture products and export to foreign markets
• Access additional customers
• Company can import products manufactured in other countries
• Offer greater choice and lower prices to existing customers

Contractual Agreements
• More Control, More Risk

• Licensing: One company permits another to produce and market its
product and use its brand name in return for royalty or other
compensation
• Franchising: Agreement includes provisions for how the business is to
be operated
• Subcontracting: Agreement specifies the duties of the partnering
company

International Direct Investment
• Most Control, Most Risk

• International direct investment: method for entering international
business that provides complete control over operations
• Acquisition: Purchase of an existing company
• Joint venture: the creation of a separate company that will be run
jointly by partnering companies
• Strategic alliance: Partnership formed to create competitive global
advantage on a worldwide basis

Key Takeaway 6
A company can enter international markets in several ways
• Methods range from those that carry low risk and low degree of
control, to high risk and high degree of control
The decision on method to use will depend on the company’s:
• Goals
• Risk tolerance
• Level of commitment to pursuing opportunities in global business

Business

LESSON 4
Choosing a Form of Business Ownership

Learning Objectives
(Slide 1 of 2)
4-1 Outline the three main forms of ownership structure

used in Canada.
4-2 Summarize the four key considerations for evaluating
ownership structure.
4-3 Determine the most appropriate ownership structure for
business control and ease of transferring ownership.

Learning Objectives
(Slide 2 of 2)
4-4 Determine how taxation and division of profits affect

the choice of ownership structure.
4-5 Identify the liability exposure of the owners of different
businesses.
4-6 Determine the most appropriate business structure for
ease of start-up and administration.

Introduction
• Each form of business ownership has advantages and
disadvantages.
• A business start-up will choose its ownership structure based on
considerations that are specific to its situation.

Different Types of Ownership Structure
Three common forms of business ownership in Canada:
• Sole proprietorships
• Partnerships
• Corporations

Sole Proprietorships
• Form of business that is owned (and usually operated) by one
person
• Easy start-up and closure
• Retention of all profits
• Unlimited liability

Partnerships
• Association or relationship between two or more individuals who

join together to carry on a trade or business
• General partner: Person who shares responsibility for operating a
business, and unlimited liability for the debts of the business
• Limited partner: Person who invests money in a business but has no
management responsibility or liability for losses beyond the amounts
invested in the partnership

Corporations
(Slide 1 of 2)
• Separate entity created by law, with most of the legal rights of a

real person
• Includes the right to:
• Start and operate a business
• Buy or sell property
• Borrow money
• Sue or be sued
• Enter into binding contracts (e.g., obtain financing)

Corporations
(Slide 2 of 2)
• Corporations may be public or private
• Public corporation: A corporation which shares are widely held

and available to the general public
• Private corporation: A corporation whose number of

shareholders is limited
• Normally restricts share transfer to third parties
• Shares are not traded on a stock exchange

Advantages and Disadvantages of
Different Forms of Business Ownership

Key Takeaway
The common forms of ownership structure are sole

proprietorship, partnership, and corporation
Choosing the appropriate form will depend

on size and goals of each business

Key Considerations when Choosing
Ownership Structure
Business control and transfer of ownership
Taxation and division of profits
Legal and financial liability protection
Ease of start-up and administration

Key Takeaway 2
Examining one’s business goals against all

four of the key considerations will help
select the best form of ownership

Business Control and Transfer of
Ownership
(Slide 1 of 2)
Type of ownership structure impacts:

• Control
• Ease of ownership transfer

Business Control and Transfer of
Ownership
(Slide 2 of 2)
• If a member dies or retires:

• Sole proprietorship ceases to exist
• Partnerships can make provisions in their ownership documents to allow remaining
business owners to continue
• Corporations are separate entities and exist independently of the owners

Key Takeaway 3

Taxation and Division of Profits
• Each business’ goal is to earn a profit. The form of business
affects how profits can be divided and how they will be taxed.
Form of Business Profit Allocation

Sole Proprietorship 100% of profits to owner
Partnerships Profits are shared equally or divided as agreed
Corporations Profits are shared amongst shareholders based
on number of shares held by each

Division of Profits

Paying Taxes on Profit
• Two basic methods for tax treatment of profits:
• Pass-through taxation: occurs when an owner’s share of business profits
is reported on individual tax returns
• Prevalent in sole proprietorships and partnerships
• Corporate (dual) taxation: occurs when profits of a business are taxed at
the entity level before profits are distributed to owners; distributions are
reported on the owners’ individual tax returns as dividends and are taxed a
second time
• Dividend: Distribution of profits to the stockholders of a corporation.
• Double taxation may occur as taxes are levied against business profits AND on
dividend income on shareholders’ individual tax returns

Advantages of Corporations
(Slide 1 of 2)
• Better able to attract investment capital

• Can deduct certain business expenses
• Corporate tax rates are lower than those for personal returns

Advantages of Corporations
(Slide 2 of 2)
• As corporations are not required to pay dividends, after-tax

profits may be reinvested back into the business
• Promotes growth while enhancing long term shareholder value
• Avoids double-taxation

Key Takeaway 4
Forms of Business Taxation
• Pass-through taxation
• Corporate taxation
Sole proprietorships and corporations
• Distribute profits based on percentage of ownership
Partnerships
• Divide profits by methods agreed upon by the owners

Legal and Financial Liability Protection
• Sole proprietorships expose owner to unlimited liability

• Unlimited liability: Legal concept that holds a business owner
personally responsible for all the debts of the business
• Limited liability: a feature that limits each owner’s financial liability to
the amount of money that she or he has invested in the business
• Certain limited partners shield personal assets from business liability

• Corporations shield owners from legal and financial liability

Key Takeaway 5
Sole proprietorships and partnerships

• Expose business owners to unlimited personal liability for
company debts and legal judgments
Limited Liability Partnerships and Corporations

• Provide limited-liability protection
• Limits risk; protects owners’ personal assets

Ease of Start-Up and Administration
(Slide 1 of 2)
• All businesses register business names and obtain licenses

• Sole Proprietorship
• Simplest and least expensive to form
• Partnership
• Optional written agreement specifies:
• Partners’ duties, authorities and change mechanisms
• Allocation of profits

Ease of Start-Up and Administration
(Slide 2 of 2)
• Corporation
• Files articles of incorporation with proper authorities
• Adopts corporate by-laws and elect board of directors (BOD)
• BOD appoint officers to run the company

Putting It All Together

Key Takeaway 6
Basic start-up and administration requirements for

most forms of business are simple and inexpensive
• It is beneficial to consult a lawyer
Corporations
• Possess a distinct governance structure
• Requires an annual shareholders meeting

Business

LESSON 5
Considering Small Business, Entrepreneurship, and Franchises

Learning Objectives
(Slide 1 of 2)
5-1 Describe the five common characteristics of successful
entrepreneurs.
5-2 Characterize the small-business sector of the Canadian
economy in terms of size, employment, and economic
impacts.
5-3 Explain three factors contributing to the high number of
small businesses in Canada.
5-4 Summarize the four contributions that small businesses
make to the Canadian economy

Learning Objectives
(Slide 2 of 2)
5-5 List the five major components of a business plan, and the
nine blocks of a business model canvas.
5-6 Determine the most likely source of financing for different
businesses.
5-7 Contrast the advantages and disadvantages of a franchise
with that of a new business start-up in the same type of
business.

Introduction
• Successful entrepreneurs, like John Molson, Harrison and
Wallace McCain and Heather Reisman, embody the
meaning of entrepreneurial spirit.
• Entrepreneurial spirit: Being aware of entrepreneurial activity,

perceiving there are good opportunities, and believing in your
ability to start a business

Characteristics of Entrepreneurs
• Confidence
• Ability to act decisively and lead the business
• Energy
• Willing to put in long hours
• Internal Drive
• Desire to control one’s own destiny
• Vision
• Ability to think strategically and creatively
• Effectively manage details to make vision a reality
• Willingness to Endure Risk
• Ability to persevere and learn from mistakes

Intrapreneurs
• Employees who bring an entrepreneurial spirit to their
organization
• Large businesses look for employees who can apply entrepreneurial
principles and spirit to their organizations.
• Characteristics of effective entrepreneurs are valuable regardless of
career goals.

Key Takeaway
Factors leading to entrepreneurial success include

confidence, energy, internal drive, vision, and tolerance for
uncertainty
Most managers look for the same

characteristics when hiring talent

Motivations for Starting a Business
Decision to quit working for someone else
Loss of a job
An idea for a new product or a new way to sell an existing product
An opportunity to go into business as the result of a hobby

Small Business: A Profile
• Small business: A business that is independently owned and
operated for profit and is not dominant in its field.
• Size:
• Of 1.17 million businesses in Canada as of December, 2015, 97.9% are small
businesses and 1.8% are SMEs (small or medium sized enterprises)
• Employment:
• Small businesses employ 8.2 million individuals in Canada
• Economy:
• Small businesses contribute 30% of Canada’s GDP and one-quarter of research
and development expenditures, while SMEs contribute one-quarter of exports
from Canada

Key Takeaway 2
Entrepreneurs start small businesses

for a variety of reasons
Small businesses contribute towards

employment and Canada’s economic
growth.

Factors Contributing to Entrepreneurship
(Slide 1 of 2)
• Culture of Entrepreneurship
• Idea of entrepreneurship is respected and supported
• Organizations promote small businesses in their communities
• Government organizations (e.g., StartUP Canada, Canada Business
Network, and Canada.ca) provide information, advice, and funding to
start-ups

Factors Contributing to Entrepreneurship
(Slide 2 of 2)
• Advances in Technology
• Innovation advances have made technology more accessible and
affordable to small businesses
• Downsizing and Outsourcing

• Laid-off employees realize they have skills and an entrepreneurial spirit
not previously recognized
• Large companies that outsource fuel the growth of small businesses
that serve them

Key Takeaway 3
Culture of entrepreneurship, advances in technology, and

downsizing and outsourcing are factors that support small
business’ significant role in shaping Canada’s economy

The Importance of Small Business
in Our Economy
• Provide:
• Technical innovation
• Employment
• Competition
• Meet the needs of society and other businesses
• Small businesses exist in local service industries
• Large businesses rely on smaller businesses for various parts and
supplies

Providing Technological Innovation
• Enhanced productivity have been based on leveraging
innovation to find new ways of doing more with less resources
• Compared to large businesses, small businesses are more inventive
• Forefront of today’s emerging “green economy”
• App revolution
Sampling of Canadian Inventions

Basketball Blackberry smart phones Egg cartons
Garbage bags IMAX Insulin
Ski-Doos Time Zones Zippers

Providing Employment
• Canadian small businesses employ 70.5% or 8.2 million
private sector workers
• Canadian women are more likely to become entrepreneurs
than those in other countries
• By 2011, female SMEs contribute $148 million to Canada’s GDP

Providing Competition
• Small businesses challenge larger,

established companies in many ways
• A number of small companies, each
competing in its own particular area
and its own particular way, can
collectively achieve the desired
competitive effect

Meeting the Needs of Society and Other
Businesses
• In many industries, there is little advantage to being big
• Examples: dry cleaning, food services, personal and home services
• More cost-effective for big businesses to buy parts from
smaller ones

Key Takeaway 4
Contributions of small businesses to the
Canadian economy
Provide technical innovation

and competition
Provide employment
Meet the needs of society and

larger organizations

The Importance of a Business Plan
(Slide 1 of 2)
• Business Plan: Written document that describes the

opportunity, goals, and plans for a business
• Purposes
• Communication tool – Informs of potential to make a profit
• Management tool – Helps to track, monitor, and evaluate progress
• Planning tool – Guides a businessperson through the various phases of business

The Importance of a Business Plan
(Slide 2 of 2)
• Questions a business plan should answer

• What exactly is the nature and mission of the new venture?
• Why is this new business a good idea?
• What are the goals and milestones for the business?
• How much will the new business cost?
• Business model: explains how the business will make money

Components of a Business Plan
Executive Summary
Product description and market analysis
Marketing Plan
Operations Plan
Financial Projections

Key Takeaway 5
Components of a business plan
Executive summary, product and

market description
Marketing plan, operations plan
Financial projections

Sources of Funding for Small Business
• Personal resources:
• 80% of new business startups rely on savings, credit cards, home
equity, retirement savings and loans or investments from friends
and family.
• Angel investors: Private individuals who invest money in
exchange for ownership in a company
• Bank loans
• Venture capital: Money invested in high-growth companies
that have the potential to become large and successful

The Growth of Crowdfunding
• Crowdfunding: Inviting people to contribute to a business or
project, via online platform (e.g., Kickstarter, Indiegogo)
• Instead of ownership of the company, contributors receive a reward
depending on level of contributions
• Global crowdfunding sector grew to $34.4 billion in 2015

Key Takeaway 6
Small business start-ups have

limited access to capital
More financing options become available as

businesses establish a track record of increasing
sales and proving growth potential

Franchising
(Slide 1 of 3)
• Entrepreneurs who want to run their own businesses need not

start from scratch. They may purchase a franchise, which is a
validated and proven “business in a box”
• Franchise: A license to operate an individually owned business as if it
were part of a chain of outlets or stores
• Franchisor: An individual or organization granting a franchise
• Franchisee: A person or organization purchasing a franchise

Franchising
(Slide 2 of 3)
Franchisor Franchisee
For a fee, franchisors provide: For a fee, franchisees:
• Use of known business name • Access a proven business model
• Management expertise • Provide labour and capital
• Training and material • Operate franchised business
• Products and production methods for • Agree to abide by terms of franchise
serving customers agreement

Franchising
(Slide 3 of 3)
Advantages Disadvantages
• Gain fees, royalties, new location, • Continual franchisee support
product distribution • Monitor franchisees’ performance
Franchisor
• Motivated franchisees and adherence to terms of
franchise agreement
• Brand name recognition • High upfront franchise fees
• Training and turnkey startup • Royalties on gross sales
• Gain economies of scale on • Pays for building and renos
Franchisee
purchases of supplies/services • Must adhere to terms of franchise
• Access franchisors’ experience and agreement
expertise

Key Takeaway 7
Franchising offers franchisees an alternative to

starting a business from scratch, but they give up
control and share of profit
Franchisors can grow company while increasing

income but must monitor and support franchisees’
progress

Business

LESSON 6
Understanding the Management Process

Learning Objectives
(Slide 1 of 2)
6-1 Summarize the four basic management

functions
6-2 Discuss the strategic factors of an
organization and classify the factors
6-3 Identify the various levels of management

Learning Objectives
(Slide 2 of 2)
6-4 Characterize how the required mix of skills

changes for managers at different levels
6-5 Explain the different leadership styles
6-6 List the four steps of the managerial
decision-making process

Introduction
• When a person buys something online or at the store, it is easy
to forget how much effort went into getting that product to
market.
• Management: Coordinating people and other resources to

achieve the goals of an organization

The Four Functions of Management
(Slide 1 of 2)
• Planning: Establishing organizational goals and deciding how to

accomplish them
• Goals should be specific and measurable
• Strategic planning process is developed by top management
• Organizing: Grouping resources and activities to accomplish

some end result in an efficient and effective manner

The Four Functions of Management
(Slide 2 of 2)
• Leading and motivating
• Leading: the process of guiding others toward the achievement of
organizational goals
• Motivating: The process of providing reasons for people to work in the
best interests of an organization
• Directing: The combined processes of leading and motivating, both of which are
critical activities
• Controlling: Measuring results against goals and making

corrections when needed
• After goal setting and planning, the manager’s second major function is
organizing.

Planning: Setting Goals

Planning: Setting Goals
• Mission Statement: A clear, concise articulation of how the

company intends to achieve its vision—how it is different from
its competition and the keys to its success
• Strategic planning process: Establishing an organization’s
major goals and objectives and allocating resources to achieve
them
• Vision statement: A clear and concise outline of an
organization’s values and goals that it would like to achieve

Controlling
• Consists of three steps:
1. Setting
Standards
2. Measuring
Taking Corrective
actual
Action
performance

Key Takeaway
Functions of management are planning,

organizing, leading and motivating, and
controlling
Managers help meet organizational

objectives effectively and efficiently by
performing these functions

SWOT Analysis
(Slide 1 of 3)
• A tool for identifying and evaluating a business’s strengths,

weaknesses, opportunities, and threats
• Used during the strategic planning process to set goals and objectives
• Helps top management brainstorm and categorize various factors that
either help or hinder the organization
• Each element of the analysis can better help an organization assess the
other elements (e.g., identifying weaknesses that can be easily fixed
may reveal opportunities)

SWOT Analysis
(Slide 2 of 3)
• Strengths
• Internal capabilities and core competencies that give the company an
advantage over its competitors
• Core competencies: Approaches and processes that a company performs well that
may give it an advantage over its competitors
• Weaknesses
• Internal limitations a company faces in developing or implementing
plans

SWOT Analysis
(Slide 3 of 3)
• Opportunities
• External conditions in the business environment that could produce
rewards for the company if properly pursued
• Threats
• External conditions or barriers in the business environment that could
prevent the company from reaching its objectives

Assessing Strategic Factors Using SWOT
• SWOT forces managers to look inside and outside the company,

and to consider both the positive and the negative.
Two methods are used to complete a SWOT analysis:

1. Select a single element (e.g., Strengths) and brainstorm it until
all relevant strategic factors have been identified.
2. Brainstorm all strategic factors that can affect the business,
and then categorize them as strengths, weaknesses,
opportunities, or threats.
Key Takeaway 2
SWOT analysis is used during strategic planning

process to set goals and objectives
Involves assessing strengths,

weaknesses, opportunities, and
threats for the company

Types of Managers
• Managers may be categorized
according to their...
• Level within an organization
• Area of management

Levels of Management
• Top Manager: An upper-level executive responsible for the
organization’s overall fortunes
• Middle Manager: A manager who implements the strategy
and major policies developed by top management
• Front-Line Manager: A manager who coordinates and
supervises the activities of operating employees, oftentimes
a former operating employee promoted to management

Areas of Management Specialization
• Common areas of management specialization – also known as,
functional areas, because they are comprised of groups of
employees who perform a particular business function – include:

Areas of Management Specialization
• Finance Manager: Primarily responsible for an organization’s financial
resources
• Operations Manager: Manages the systems that convert resources into
goods and services
• Marketing Manager: Responsible for facilitating the exchange of
products between an organization and its customers or clients
• Human Resources Manager: Charged with managing an organization’s
human resources programs
• Administrative Manager: A manager who is not associated with any
specific functional area, but who provides overall administrative
guidance and leadership

Non-traditional Management Roles
• Middle and first-line managers are reorganized into multiple

roles every few years
• Employees are organized into project and product teams
working on specific initiatives
• Makes it difficult to identify the level and area of a manager
• Act as a key to empower employees and stay responsive to
market needs

Key Takeaway 3
Managers are classified by their level and

area of specialization in the organization
Classification of managers in this way is an

example of the organizing function of
management

Key Skills of Successful Managers
Conceptual
• Ability to see the “big picture” and understand how the various parts
of an organization fit together
Technical
• Specific skills needed to accomplish a specialized activity
Interpersonal
• Dealing effectively with other people both inside and outside an

organization; examples include the ability to relate to people,
understand their needs and motives, and show genuine compassion

The Mix of Skills Required
for Effective Management
• Different levels of management need a varying mix of skills
to perform effectively. Top management use different skills
than those of front-line managers.
• In addition to interpersonal skills,
• Top management requires strong conceptual skills
• Middle managers need a balanced mix of conceptual and
technical skills
• First-line managers need high technical skills

Key Takeaway 4
Skills required for effective management are

conceptual, interpersonal, and technical
Optimal mix of skills required depends

on the level of the manager

Leadership
• The relationship between a leader and the followers who want
real changes, resulting in outcomes that reflect their shared
purposes.
• Managers must not focus solely on getting the job done, they
must also focus on gaining commitment toward shared goals.
• Managers use formal authority to coerce task completion
• Leaders use influence and persuasion to motivate task completion

Styles of Leadership
(Slide 1 of 3)
• Autocratic: Leader makes decisions and the employees are

expected to execute the decisions exactly as directed
• Fast decisions • Risk of low morale
• Unified and consistent • Can stifle creativity
vision

(Slide 2 of 3)
• Participative: Leader consults employees before making decisions
• Helps team understand goal • Decisions take longer
• Increased commitment from • Team may react poorly when
team input is not accepted

(Slide 3 of 3)
• Laissez-faire: Leader provides a basic vision, the necessary

resources for the team and acts as an advisor.
• Uses the full talents of skilled • Leaders can lose control of
technicians the process
• Reduces number of • Morale can drop
managers

Key Takeaway 5
Primary styles of leadership are autocratic,

participative, and laissez-faire
Each style has advantages and

disadvantages and should be chosen based
on the organization and situation

Managerial Decision-Making
• Decision making:
• The act of choosing one alternative from a set of alternatives.
• Ability to evaluate and make decisions is often related to a
manager’s conceptual skills.

Steps in the Decision-Making Process
Identify the problem
Generate alternatives
Evaluate alternatives
Implement solution

Making Quality Decisions
Correctly identify the problem
• A symptom may be misdiagnosed as a problem
Use creativity
• Avoid “satisficing,” going with the first alternative that meets the minimum
threshold for solving the problem
Use structured analysis to evaluate alternatives
• Decisions are influenced by a number of considerations such as financial

constraints, time limits, and resource availability

Key Takeaway 6
Managers often face complex problems that require

a systematic method for finding solutions
Decision-making process involves identifying the

problem, generating alternatives, selecting an
alternative, and implementing the solution

Business

LESSON 7
Creating a Flexible Organization

Learning Objectives
(Slide 1 of 2)
7-1 Summarize four objectives to consider when organizing a

business.
7-2 Differentiate between efficiency and empowerment in job
design.
7-3 Identify the common types of departmentalization in an
organization.
7-4 Understand how centralization and decentralization affect
efficiency, control, responsiveness, and empowerment.

Learning Objectives
(Slide 2 of 2)
7-5 Identify the advantages and disadvantages of wide and

narrow spans of management.
7-6 Distinguish among different types of organization
structures.
7-7 Explain the relationship between organization design and
an organization’s culture.

Objectives to Consider when Organizing a
Business
(Slide 1 of 3)
• Organization design: An organizational structure that results

from decisions regarding job design, departmentalization,
centralization of authority, and span of management
• Based on an organizations’ industry or customer base, their
objectives may vary
• Four common objectives include efficiency, control, responsiveness and
empowerment

Business
(Slide 2 of 3)
• Efficiency: the ability to complete a task using the minimum

amount of resources
• Control: the ability to make decisions and specify how those
decisions will be carried out

Business
(Slide 3 of 3)
• Responsiveness: Speed at which an organization can improve

its products in response to customer feedback, employee
suggestions, or competitive pressures
• Empowerment: Degree to which employees can make
decisions on their own

Key Takeaway
Objectives to consider for organization design are
efficiency, control, responsiveness, and
empowerment
Each company prioritizes these

objectives differently based on their
industry and customer base
Evaluating objectives can lead to

better organization design
Job Design
(Slide 1 of 3)
• Job Design: Structuring the tasks and activities required to

accomplish a business’s objectives into specific jobs so as to
foster productivity and employee satisfaction.
• Influences organization’s performance and design decisions

Job Design
(Slide 2 of 3)
• Job specialization: Separation of all organizational activities

into distinct tasks and assignment of tasks to different people.
• Increases overall productivity • Can lead to repetitive-use injuries
• Facilitates production modifications • Low level of employee empowerment
• Eliminates task changeover time can lead to boredom and job
• Eases initial job training dissatisfaction

Job Design
(Slide 3 of 3)
• Job rotation: Systematic shifting of employees from one job to

another
• Prevents workers from being bored and dissatisfied
• Helps avoid repetitive-use injuries
• Helps employees develop new skills, and identify new roles
• Jobs with a high degree of variety keep employees engaged and

empowered
• High employee morale

Key Takeaway 2
Job design decides
• Who will do each task required to run the business

• How specialized each job should be
Highly specialized jobs can be efficient
• Low level of empowerment associated with the job could lead to

boredom and dissatisfaction
Job rotation
• Helps keep employees engaged in their work

Types of Departmentalization
• Departmentalization: the process of grouping jobs into
manageable units
Function Product Location Customer

• Groups • Groups • Groups • Groups
employees who employees who employees employees
perform the same work with a according to the according to the
organizational particular good or geographic area needs of various
activity service they serve customer
populations

Key Takeaway 3
Departmentalization is the grouping of people

into manageable units, based on the needs
and priorities of the organization
Common types of departmentalization are by

function, by product, by location, and by
customer

Centralizing and Decentralizing Authority
(Slide 1 of 3)
Delegation: Assigning part of a

manager’s work and power to other
workers
• The pattern of delegation throughout
an organization determines if the
organization is decentralized or
centralized

(Slide 2 of 3)
• Centralized organization: An organization that systematically

works to concentrate authority at the upper levels of the
organization
• Promotes increased management control and efficiency
• Inhibits responsiveness to customers’ needs
• Decreases employee empowerment

(Slide 3 of 3)
• Decentralized organization: An organization where

management consciously attempts to spread authority widely in
the lower levels of the organization
• More innovative and responsive to customer needs
• Employees feel more empowered and engaged
• Less efficient due to “silo” mentality and decreased coordination of
resource utilization

Key Takeaway 4
Centralized authority is where decisions are
concentrated at the upper levels of management
Decentralized authority is where

management spreads authority widely
across the organization
Decisions about the level of centralization

depend on the nature of the industry and
the objectives of the company
The Span of Management
• Span of Management: Number of employees reporting directly to one
manager.
• Based on goals of the company, composition of the company’s workforce, and nature
of the industry
• Organizational height: Number of layers, or levels, of management in a
business

Key Takeaway 5
Span of management is the number of workers

who report directly to one manager
Affects the level of management

control and employee empowerment
in an organization

Forms of Organizational Structure
• Organization chart: A visual representation of the structured
relationships among tasks, responsibilities, and the people given
the authority to do those tasks
• Helps interpret organizational height, type of departmentalization,
chain of command and span of management
• Provides strong hints about the company’s objectives and its degree of
centralization


(Slide 1 of 4)
• Line structure: An organizational structure in which the

chain of command goes directly form person to person
throughout the organization.
• Clear lines of communication • Managers feel isolated
• Fast decision making • Lack resources needed to achieve
company goals

(Slide 2 of 4)
• Line-and-staff structure: An organizational structure that

includes both line and staff positions.
Advantage Disadvantage
• Line managers have specialized support • Reporting structure can create conflicts
from staff managers between managers

(Slide 3 of 4)

(Slide 4 of 4)
• Matrix structure: An organizational structure where individuals work

on teams and all areas are represented so that conflicting objectives can
be balanced and overall goals, rather than individual ones, become the
priority.
• Increased flexibility, collaboration, and • Employees have two supervisors, which
innovation can blur lines of communications and
make conflicts harder to solve

Organization Design in Today’s Economy
• Cross-Functional Team: A team of individuals with varying

specialties, expertise, and skills that are brought together to
achieve a common task.
• Promotes organizational agility by • Employees have two supervisors, which

optimizing collaboration between can blur lines of communications and
departments and product groups make conflicts harder to solve

Key Takeaway 6
Organizational structure
• End result of the organization design process

• Represents the people in the company, how they are grouped,
and whom they report to
Types of organizational structure
• Line structure
• Line-and-staff structure
• Matrix structure

Organization Design and Corporate Culture
(Slide 1 of 2)
• Corporate culture: The inner customs, traditions, and values

of an organization
• Factors that contribute to corporate culture

• Company’s leadership and history
• Organization design and physical workplace environment
• Industry

Organization Design and Corporate Culture
(Slide 2 of 2)
• Organization design impacts corporate culture

• Managers design an organization to either support or change a
corporate culture and must consider competing factors
• Informal organization: The pattern of behaviour and interaction

that stems from personal rather than professional relationships
• Grapevine: The informal communications network within an
organization

Key Takeaway 7
Decisions about organization design
affect corporate culture
Impacts the level of empowerment

and engagement employees feel
Determines the types of employees

the organization will attract

Business

LESSON 8
Producing Quality Goods and Services

Learning Objectives
(Slide 1 of 2)
8-1 Outline how the production process transforms raw

materials, labour, and other resources into finished goods
and services.
8-2 Discuss Canadian manufacturing in terms of costs,
employment levels, and response to global competition.
8-3 Contrast operations management for goods versus services.
8-4 Summarize three key considerations for design planning.

Learning Objectives
(Slide 2 of 2)
8-5 List the four variables to consider when choosing facility

location.
8-6 Describe the different types of facility layouts.
8-7 Understand how supply chain management affects
production time, inventory levels, and customer satisfaction.
8-8 Identify tasks on the critical path in a production schedule.
8-9 Discuss potential benefits of quality improvements.

What is Production?
• Production: The conversion of ideas and resources into useful
goods and services
• Turns inputs into outputs
• Primary goal: Create customer satisfaction, closely linked to product
quality
Production Process Description
Design planning Considers strategic goals and resources of a business
Facilities planning Identifies site where good or service can be produced
Operational planning Decides amount of good or service to be produced

How Canadian Manufacturers
Compete in the Global Marketplace
(Slide 1 of 2)
• Canadian manufacturers contribute:

• $174 billion towards Canada’s GDP
• 68% of Canadian exports
• Spin-off spending from suppliers and
businesses that support the
manufacturing sector

How Canadian Manufacturers
Compete in the Global Marketplace
(Slide 2 of 2)
Good News Bad News

• Advances in technology & • Decreased number of Canadians
manufacturing processes have employed in the manufacturing sector
resulted in increased productivity due to global outsourcing and reduced
demand for manufactured goods
• Evidence of “reshoring” – repatriation
of manufacturing jobs back to Canada

Key Takeaway
Production comprises all the steps required to

take a product from idea to reality
Involves close coordination between operations

and functional areas of the company (e.g.,
marketing, sales, finance, etc.)

The Increasing Importance of Services
(Slide 1 of 2)
Product includes anything that a

company offers to satisfy
customer needs and wants and
may be a:
• Good: A physical, tangible
product that we can see and
touch
• Service: An intangible product
that we experience or use

The Increasing Importance of Services
(Slide 2 of 2)
• Some products contain elements of both goods and services

• Example – Auto repair shop installs new brakes on a car
• The Canadian economy is now characterized as a service
economy
• More effort is devoted to the production of services than to the
production of goods

Planning Quality Services
• Both goods and services producers:
• Utilize production inputs (e.g., human, material, financial, information)
• Convert inputs into a finished product or service through a careful
planning and production process
• Production of services differs from manufacturing goods by:

• Types of resources used
• Timing of product consumption
• Measuring quality

Key Takeaway 3
• Manufacturing of goods and delivery of services:
• Require similar types of operational planning
• Differ in terms of types of resources used, timing of product
consumption, and means for measuring quality

Where Do New Products Come From?
• Research and development (R&D)
• Involves a set of activities intended to identify new ideas that have the
potential to result in new goods and services
• Extension or refinement of existing products is another way new

products are created. These alterations:
• Extend the life of existing products (e.g., Diet Coke extends Coke)
• Can be used to respond to increased competition

What is Design Planning?
• Design Planning: The development of a plan for converting

an idea into an actual good or service; includes decisions
related to product line design, production capacity, and
selection of manufacturing technology
• Major decisions involve

• Design product line
• Estimate production capacity
• Evaluate production technology options

Design Product Line
• Product Line:
• Group of similar products that differ only in relatively minor
characteristics
• Requires balancing customer preferences with production requirements
Factor Long Product Line Short Product Line

Benefit • Offers customers more • From production perspective,
choice easier to manage (fewer
• Easier to sell products that production changeovers, less
meet customers’ needs inventory and uncertainty)

Estimate Production Capacity
• Capacity: The amount of product that an organization can

produce in a given period of time
• Requires operations manager and marketing managers to analyze sales
projections for the product
• Accuracy of sales projections is critical because capacity decision
require large investment of resources

Evaluate Production Technology Options
• Evaluate the degree to which automation and technology will be
used in production
• Requires consideration of trade-offs:
• Automation requires high initial costs and low operating costs
• Human labour results in low initial costs and high operating costs

Key Takeaway 5
Design planning considerations include:
• Designing product lines

• Estimating production capacity
• Evaluating production technology options
Design planning decisions have a big impact on:
• Facilities planning
• Operational planning decisions

Selecting Facility Location and Layout
• Considerations when producing new products in existing
facilities:
• Capacity to meet demand for both new and current products
• Cost of refurbishing an existing factory is less than the cost of
building a new one
• Key variables in considering sites for a new facility

• Proximity to major customers
• Availability and cost of labour
• Cost of construction and operation
• Access to key resources

Determining Facility Layout
• Facility layout: The arrangement of machinery, equipment, and
personnel within a production facility
• Three general types of facility layouts include:

• Process layout
• Product layout
• Fixed-position layout

Key Takeaway 6
Site selection affects cost, quality, and a

variety of operational planning decisions
Planners must choose the type of facility

layout best suited for effective and efficient
production of a particular product

Supply Chain Management
(Slide 1 of 2)
• Supply Chain Management:

• The coordination of members of the supply channel, with the goal of
reducing inefficiencies, costs, and redundancies
• Raw materials suppliers, manufacturers, distributors, and retailers
• Creates a competitive advantage and satisfied customers
• Materials Requirement planning (MRP):

• A computerized system that integrates production planning and
inventory control

Supply Chain Management
(Slide 2 of 2)
• Enterprise Resource Planning

(ERP)
• A computerized system that integrates
production planning, inventory control,
quality statistics, sales data, and more
• Optimizes the ordering process for
materials and supplies
• Facilitates monitoring of each supply chain
member’s needs

Key Takeaway 7
Supply chain management accomplishes

the following key goals:
More reliable production lead

times
Lower inventory levels
Higher customer satisfaction

Scheduling
(Slide 1 of 2)
• Scheduling:
• The process of specifying and controlling time required for each step in
the process to ensure that materials and other resources are in the right
place at the right time
• PERT (Program Evaluation and Review Technique) chart

• Graphic representation of the PERT technique for scheduling a complex
project and maintaining control of the schedule

Scheduling
(Slide 2 of 2)
• Gantt chart
• A graphic scheduling device that displays the tasks to be performed on
the vertical axis and the time required for each task on the horizontal
axis
• Critical Path
• The sequence of activities that take the longest time from start to finish.
• A delay in critical path activities will delay the completion of a project or
production process

Identify the Critical Path
• Key component to scheduling is to
determine the critical path, the sequence of
activities that take the longest time from
start to finish
• Sequence of activities should be scheduled and
controlled carefully
• Critical path activities also includes activities
that have no slack time
• Upon detection of delay in critical path activity,
managers must reallocate workers or machines
from non-critical path activities

Key Takeaway 8
Managers must be aware of tasks that are on

the critical path, so that they can allocate
resources needed to keep production on
schedule

Quality Control
(Slide 1 of 2)
• The process of ensuring that goods and services are produced

in accordance with design specifications
• Objective: Ensure that organization lives up to the quality standards it
has set for itself
Quality Control In the Past Quality Control Today

Quality control inspectors culled Quality control is now used to reduce
defective goods at end of assembly line waste and better utilize resources
to prevent them from reaching (material, labour, time, costs, etc. )
customer

Quality Control
(Slide 2 of 2)
• Total quality management (TQM):

• Coordinated efforts directed at improving customer satisfaction,
increasing employee participation, strengthening supplier relationships,
and facilitating an organizational atmosphere of continuous quality
improvement
• Six Sigma:
• A disciplined approach that relies on statistical data and improved
methods to eliminate defects
• ISO certification:
• Quality management standard (ISO 9001) and environmental management
standard (ISO 14001)
Key Takeaway 9
Quality control is more than inspecting
finished product for defects
• Benefits of investments in quality improvement outweigh the

costs
A well-rounded quality program can
• Reduce the cause of defects

• Better utilize the company’s resources

Business

LESSON 9
Attracting and Retaining the Best Employees

Learning Objectives
(Slide 1 of 2)
9-1 Identify the phases of human resources management.

9-2 Distinguish among job analysis, job description, and
job specification.
9-3 Summarize the three advantages of workplace diversity.
9-4 Discuss the six steps of the recruiting process.
9-5 Compare different compensation schemes.

Learning Objectives
(Slide 2 of 2)
9-6 Distinguish between orientation and training.

9-7 List the four types of methods for training.
9-8 Understand performance appraisals.
9-9 List some of the laws that protects Canadian workers.

An Overview of Human Resources
Management
• Human Resource Management (HRM): All the activities
involved in acquiring, maintaining, and developing an
organization’s human resources
• Phases of HRM:
• Acquisition: Recruiting and hiring new personnel
• Maintenance: Encouraging employees to remain with the business and
work effectively
• Development: Improving employee skills and expanding their capabilities

An Overview of Human Resources
Management
• Acquisition involves planning, job analysis, recruiting, selection,
orientation
• Maintenance involves employee relations, compensation,
benefits
• Development involves training and development, performance
appraisal

The Shared Responsibility of HRM
Most managers spend significant time acquiring, maintaining,
and developing employees.
Organization Size Allocation of HRM Duties

Small Performed by line manager or owner
Medium Hired HR Managers and share with business’s
managers
Large Highly specialized with separate groups dealing with
compensation, benefits, training & development
Key Takeaway
Human resources management (HRM) consists of

all the activities involved in acquiring, maintaining,
and developing an organization’s human resources

Planning Human Resource Needs
(Slide 1 of 2)
• First step in the acquisition phase of HRM is planning

• Managers determine future human resource needs and plan to
meet those needs
• Forecast human resources supply
• Replacement chart: a list of key employees and their possible
replacements within a company
• Skills inventory: a computerized database containing information
on the skills and experience of all current employees

Planning Human Resource Needs
(Slide 2 of 2)
• Job analysis: a systematic approach that identifies and determines the

job duties and requirements and their importance to the organization
• Goal is to create job description and job specification, which form the basis
of a job posting
• Job description: A list of the objectives and responsibilities for a particular job
• Job specification: List of the qualifications required to perform a particular job

Key Takeaway 2
First step in the acquisition phase

of HRM is planning
Managers project how many

employees are required to meet
future needs

Cultural Diversity in Human Resources
• Cultural (or workplace) diversity: the differences among

people in the workforce in terms of ethnicity, gender, religion,
age, and physical or learning abilities.
• Benefits
• Provides businesses a marketing edge
• Drives creativity and innovation
• Attracts top talent

Key Takeaway 3
Cultural diversity refers to the differences

among people in the workforce
Important consideration in terms

of recruiting and management

Recruiting and Hiring Employees
(Slide 1 of 2)
Recruiting: The process of attracting qualified job applicants
Steps of recruitment process:

1. Attract candidate pool
• Recruit internally through company memos or job postings
• Recruit externally through advertised job postings, job fairs, etc

Recruiting and Hiring Employees
(Slide 2 of 2)
2. Screen candidates
• Review resumes and cover letters to eliminate candidates that don’t
meet minimum qualifications
3. Interview candidates
• Top candidates selected during screening process
4. Compare candidates
• Select the top two or three candidates
5. Check references
6. Make a job offer

Key Takeaway 4
Recruiting is the process of attracting

qualified job applicants
Due to the high cost of hiring and training

a new employee, recruiting is conducted
as a systematic process

Employee Compensation Strategies
• Compensation: The payment employees receive in return for
their labour
• Compensation plans must be:
• Competitive enough to attract new talent
• Fair enough to keep existing talent from leaving the company
• Reasonable enough so that the company can still make a profit
• Fringe benefits: Forms of indirect compensation including

pensions, health insurance, and vacation

Employee Compensation Strategies
Industry
• Compensation plans should be designed such that that they are comparable or
better than the competitors in the industry
Level of the job

• Decisions about the compensation levels are based on a job evaluation that
determines the relative worth of jobs within the company
Supply of candidates
• Companies will increase the compensation package for the position to attract and
retain talent when there is a shortage of candidates in an industry

Types of Compensation

Key Takeaway 5
HRM professionals must take into account a variety of

factors when assembling and managing compensation
plans they hope will be attractive to new and current
employees

Orientation and Training
• Orientation: The process of acquainting new employees with the
organization
Key Objectives Benefits

• Complete hiring • Helps settle employees into new
paperwork environment
• Learn administrative • Cuts initiation time, engages new
details employees
• Introduce employee • Acquaints new employees with the
organization

Training and Development
Training Development
• Process of teaching new employees • Process of preparing managers and
how to do their jobs, or teaching other professionals to assume
existing employees how to do their increased responsibility in present and
jobs more effectively and efficiently. future positions.
• Objective: Improve an employee’s • Objective: Prepare employees for

skills and abilities advancement in the organization

Methods of Training and Development
On-the-job training
• Trainee learns by doing the work under the supervision of an experienced
employee or peer mentor
Simulation
• Use of role-playing scenarios
Classroom teaching
• Accommodates many trainees at once and provides personal interaction for
trainees
Online Training
• Incorporate several modes of teaching like videos of classroom teaching,
online quizzes and simulations

Key Takeaway 6
Training is improving an employee’s
skills and abilities
Orientation is acquainting new

employees with the organization

Employee Performance Appraisal
Key Objectives Description
Evaluate performance • Managers establishes and communicates standards
against standards to employees prior to evaluation
• Managers and HR staff rely on performance
Make employee
appraisal results to implement rewards or corrective
decisions
action
• Managers and HR staff review overall performance
Assess HRM practices appraisal results to identify recruitment and training
opportunities

Employee Performance Appraisal

Key Takeaway 8
Objectives of performance appraisal
Evaluate performance against

standards
Make employee decisions
Assess HRM practices

The Legal Environment of HRM
• Employers are responsible for knowing and following HRM laws.

• Aims of legislation regarding HRM practices:
• Protect employees’ rights
• Promote job safety
• Eliminate discrimination
• HR staff are responsible for complying with legal requirements

• HR personnel play a critical role in advising and training line
managers on complying with legal requirements

The Legal Environment of HRM

Key Takeaway 9
Employers are responsible for knowing

and following all laws related to HRM
Laws are aimed at protecting the rights of

employees, promoting job safety, and
eliminating discrimination

Business

LESSON 10
Motivating Employees and Teams

Learning Objectives
(Slide 1 of 2)
10-1 Differentiate Taylor’s principles of scientific management
and Mayo’s Hawthorne studies.
10-2 Distinguish between maintenance factors and motivation
factors.
10-3 Differentiate among the four forms of reinforcement.
10-4 Understand how equity theory affects motivation.

Learning Objectives
(Slide 1 of 2)
10-5 Explain expectancy theory in terms of employee
expectations.
10-6 Describe how goal-setting strategies can help motivate
employees.
10-7 Explore how flexible scheduling strategies can be used to
increase employee motivation.
10-8 Identify the advantages and common pitfalls of
teamwork.

Early Perspectives on Motivation
(Slide 1 of 2)
• Scientific management: the application of scientific principles

to management of work and workers
• Frederick W. Taylor, believed that there was one best way to perform
each task of a job
• Advanced the idea of job specialization
• Believed people only worked to earn money
• Piece-rate system: a compensation system under which employees are paid a
certain amount for each unit of output they produce

Early Perspectives on Motivation
(Slide 2 of 2)
• The Hawthorne Studies

• Insights propelled management thought beyond the scope of Taylor’s
scientific management
• Hawthorne Effect – Employees work harder when they receive
more attention
• Pay is only one motivator, but there are many others
• Happy and satisfied employees are motivated to perform
better which increases productivity

Key Takeaway
Taylor’s system of scientific management applied

scientific principles to work and workers
Hawthorne studies revealed the human

side of productivity improvement

The Emergence of Motivation Theories
(Slide 1 of 2)
• Maslow’s Hierarchy of
Needs: A motivation theory
that sequences human needs
in the order of their
importance, from
physiological needs to self-
actualization needs

The Emergence of Motivation Theories
(Slide 2 of 2)
Theory X and Theory Y: Describe two opposing sets of

assumptions about management’s attitudes and beliefs regarding
workers’ behaviour
• Theory X: A concept of employee motivation generally consistent with
Taylor’s scientific management; assumes that employees dislike work
and will function only in a highly controlled work environment
• Theory Y: A concept of employee motivation generally consistent with
the ideas of the human relations movement; assumes responsibility
and work toward organizational goals, and by doing so, personal
rewards are also achieved

ERG Theory
• ERG Theory: A theory of motivation developed by Clayton Alderfer

that better supports empirical research than Maslow’s Hierarchy Of
Needs Theory; three components of the model are:
• Existence: The concern for basic

material existent motivators
• Relatedness: The concern for
interpersonal relations
• Growth: The concern for personal
growth

Herzberg’s Two-Factor Theory
(Slide 1 of 3)
• Herzberg’s Two-Factor Theory: A

motivation theory that suggests that
satisfaction and dissatisfaction are
separate and distinct dimensions
• Also known as Motivation-Hygiene
Theory

(Slide 2 of 3)
Factors & Examples Presence Absence

Maintenance Factors • Prevents dissatisfaction • Creates dissatisfaction
• Job security • Reduces satisfaction, when
• Pay present to certain degree
• Working conditions • Do not result in higher levels
• Interpersonal relationships of motivation
• Supervision
• Policies and administration
Motivator Factors • Increases motivation • Does not create
• Achievement/Recognition • Increases satisfaction dissatisfaction
• Responsibility • Results in lack of satisfaction
• Advancement/Growth
• Work itself
(Slide 3 of 3)
• Managers should first ensure that pay and other maintenance factors
are adequate
Advantage Importance
• Specifies which job factors can • Raises awareness that non-monetary
eliminate dissatisfaction, and which forms of motivation are oftentimes
are useful in actively motivating more important factors to enhancing
employees. performance than pay alone.

Key Takeaway 2
Maslow’s theory suggested that people work to satisfy

different types of needs in a particular order
Herzberg’s Two-Factor theory suggests that maintenance

factors eliminate dissatisfaction and motivation
factors actively motivate employees

Reinforcement Theory
• A means of modifying behaviour based on the premise that

rewarded behaviour is likely to be repeated, while punished
behaviour is less likely to recur
• Behaviour modification: a systematic program of
reinforcement to encourage desirable behaviour
• Positive reinforcement
• Negative reinforcement
• Punishment
• Extinction

Key Takeaway 3
Reinforcement theory gives managers a framework for

how to modify the behaviour of their employees through
the systematic use of punishment and rewards

Equity Theory
• Equity Theory: A motivation theory based on the premise
that people are motivated to obtain and preserve equitable
treatment for themselves
• Distribute rewards in direct proportion to each employee’s
contribution to the organization
• Rewards can be monetary or non-monetary

Expectancy Theory
• Expectancy Theory: A motivation theory based on the

assumption that motivation depends on how much we want
something and how likely we think we are to get it
• Useful guidelines for managers
• Get to know your employees
• Create achievable outcomes
• Actively assist employees in achieving outcomes

Expectancy Theory

Key Takeaway 4
Contemporary motivation theories such as equity theory and

expectancy theory provide managers additional insights for
understanding employee motivation.

Goal-Setting Motivation Techniques
• Goal-Setting theory: Suggests that employees are motivated

to achieve goals that they and their managers establish together
• Components of effective goal-setting include:

• Employee participation
• Rewards customized to employee needs
• Support from the manager

Management by Objectives (MBO)
• Management by objectives (MBO): A motivation technique in
which managers and employees collaborate in setting goals
• Consists of four steps:
• Set goals
• Develop action plan
• Implement plan
• Review performance

Using Flexibility to Motivate
• Employers use alternative scheduling strategies to attract,
motivate, and satisfy employees who may have different
needs and lifestyles
• Flextime: A system in which employees set their own work hours
within employer-determined limits
• Job sharing: An arrangement whereby two people share one full-
time position
• Telecommuting: Working at home all of the time or for a portion of
the work week

Job Enrichment
• Job enrichment: A method for motivating employees by

providing them with increased variety, responsibility, and control
over their jobs
• Job Enlargement: A form of job enrichment where an employee is
given additional but similar tasks to complete
• Job Redesign: A form of job enrichment where employees are assigned
entirely new tasks that fit their skill sets and the organization’s needs
• Job Rotation: A form of job enrichment where an employee is moved
between various jobs for specific periods of time

Job Enrichment
• Empowerment: making employees more involved in their jobs

by increasing their participation in decision making
• Employee ownership: a situation in which employees own the
company they work for by virtue of being shareholders

Practical Application: Remembering Motivation
Theories When Using Job Enrichment
Motivation Theory Application
Herzberg’s Work can actively motivate employees if they feel jobs

Two-Factor Theory match their skills and provide reasonable variety.
Increases in responsibility must be supported by a

Equity Theory commensurate increase in rewards (monetary and/or
non-monetary).
Properly train employees in new jobs to which they are

Expectancy Theory
assigned so that they feel adequately prepared.

Key Takeaway 5
• Goal setting motivates employees by providing specific and
challenging goals
• Flexible scheduling strategies can help organizations acquire,
motivate, and satisfy employees of diverse backgrounds and needs
• Job enrichment is a management technique for increasing motivation
by providing employees increased variety, responsibility and control
• Job empowerment involves employees more by increasing their
participation in decision making
• Employee ownership makes employees shareholders of the company

Teams and Teamwork
(Slide 1 of 2)

Teams and Teamwork
(Slide 2 of 2)
• Advantages
• Synergy
• Creativity
• Satisfies social and self-esteem needs
• Accuracy
• Pitfalls
• Team conflict
• Social loafing
• Groupthink

Key Takeaway 6
Advantages of a team
Create synergy
Increase creativity
Satisfy social needs
Increase accuracy

Business

LESSON 11
Enhancing Employee-Management Relations

Learning Objectives
(Slide 1 of 2)
11-1 Characterize working conditions historically associated

with efforts to unionize.
11-2 Summarize the five major objectives of unionization.
11-3 Summarize the key goals of labour-management
legislation.
11-4 List the steps for forming a union.

Learning Objectives
(Slide 2 of 2)
11-5 List the activities involved in the collective bargaining

process.
11-6 Explain the bargaining tools available to labour or
management during a negotiation process.
11-7 Discuss how union membership levels affect labour-
management relations in the business environment.

The Industrial Revolution and Poor
Working Conditions
• Inventions and innovations of the 19th century fuelled rapid
industry growth
• Demand for factory workers who worked in poor, unsafe working
conditions
• Persistence of harsh working conditions forced workers to band together
and demand improvements
• Resulted in formation of labour unions

The Beginning of the Labour Movement
(Slide 1 of 3)
• Labour union: An organization that represents workers in

dealing with management over issues involving wages, hours
and working conditions
• Strikes: Temporary work stoppages by employees, calculated to
add force to their demands

(Slide 2 of 3)
• Some of the first major unions in Canada were:

• Knights of Labour (KOL)
• Canadian Labour Union (CLU)
• Trades and Labour Congress of Canada (TLC)

(Slide 3 of 3)
• Today, fewer than 30% of Canada’s workforce are unionized

• Membership is concentrated in a few industries and job sectors
• Three of Canada’s largest unions:
• Canadian Union of Public Employees (CUPE)
• Unifor
• National Union of Public and General Employees (NUPGE)

The Objectives of Unionization
• Improved work rules and working conditions

• Increased job security
• Defined grievance procedures
• Power through solidarity
• Labour contract: a written agreement between labour and

management that is in force for a set period of time
• Grievance procedures: A formally established course of action
for resolving employee complaints against management.

Key Takeaway
Industrial revolution was associated with working
conditions that were unpleasant, unsafe, and lethal
Led to the rise of unions–organizations of workers acting

together to negotiate their wages and working conditions
Objectives of unionization: improved work rules and working

conditions, increased job security, defined grievance
procedures, and power through solidarity

Labour-Management Legislation
• Businesses opposed to unionization used courts to ban

strikes, picketing and union membership drives
• Pro-union legislation resulted in rapid rise of unions
• Led to creation of Canada Industrial Relations Board (CIRB), a
federal agency that interprets and administers provisions of
labour law to support constructive labour-management relations
• Subsequent legislation curtailed some of unions’ power and
correct union abuses

Key Takeaway 2
Federal and provincial legislation provided more power

to unions and led to growth in union membership
The CIRB is an active force in labour relations

The Unionization Process
• Formation of a union requires some employees to express interest
in being represented by a union
• Employees of a non-unionized company formally move forward:
• File certification application with the province’s Labour Relations Board
• Hold representation vote, which must result in majority rule
• Labour Relations Board issues formal “certificate” establishing union as
exclusive agent for employees within the bargaining unit

Negotiating the Labour Contract
(Slide 1 of 2)
• Newly certified union establishes its identity and structure

• Employees nominate and elect union’s officers, representatives
• Negotiating committee is struck to begin collective bargaining
• Collective bargaining: the process of negotiating a labour agreements
that provide for compensation and working arrangements mutually
acceptable to the union and to management

Negotiating the Labour Contract
(Slide 2 of 2)
• Steps to collective-bargaining
• Prepare for negotiations
• Meet with management
• Reach an agreement
• Vote and ratification of the agreement
• Ratification: Approval of a labour contract by a vote of the union
• Labour contracts have an expiration date
• Collective-bargaining process starts all over at that time

Key Takeaway 3
Steps to the collective-bargaining process include

preparing for negotiations, meeting with management,
reaching an agreement, and ratifying the contract

Union and Management Negotiation
Tactics
(Slide 1of 2)
• Labour and management have

different goals
• Labour’s Goals: High pay, secure jobs
• Management’s Goals: Quality
workforce, controlled cost and
flexibility
• Negotiating tactics are used
before and during the bargaining
process

Union and Management Negotiation
Tactics
(Slide 2of 2)
Labour’s Tactics Management’s Tactics
• Picketing: marching back and • Lockout: a business’s refusal to

forth in front of a place of allow union employees to enter
employment with signs the workplace
• Slowdowns: a technique • Replacement workers: non-
whereby workers report to their union workers hired by managers
jobs but work at a slower pace to replace striking union workers
than normal • Injunction: a court order
• Boycotts: refusals to do business requiring a person or group
with a particular company either to perform some act or
to refrain from performing
some act
Labour’s Negotiating Tactics

Management’s Negotiating Tactics
(Slide 1 of 2)

Management’s Negotiating Tactics
(Slide 2 of 2)
• Intervention - Required when negotiation process is stalled

• Mediation: The process of settling issues in which the parties present
their case to a neutral mediator.
• Objective: promote compromise between both parties
• Mediators cannot issue binding decisions or impose settlement
• Arbitration:The use of a neutral third party who conducts a formal
hearing on an unresolved dispute, and then decides on a solution.
• Arbitration may be binding or non-binding
• If binding, the union and management must adhere to the final decision

Key Takeaway 6
Labour can use publicity, work slowdowns, boycotts,

strikes, and court injunctions
Management can use publicity, threats to replace

union workers, lockouts, and court injunctions

Trends in Union Membership
• Organized labour has been integral in improving compensation
and working conditions for average Canadian workers during
the past century
• Union membership has dropped to its lowest level since 1916

The Future of Labour-Management
Relations
• Declining trend of union membership
• Pressure on public-sector unions
• Increased partnership between employers and private sector
unions
• Increased responsiveness of management

Key Takeaway 7
During the 20th century, unions grew

in membership and power
In the recent years, union membership has declined to

its lowest levels, and public approval of unions has
declined with it

Business

LESSON 12
Building Customer Relationships Through Effective Marketing

Learning Objectives
(Slide 1 of 2)
12-1 Explain the key differences between production

orientation and customer orientation.
12-2 Summarize the ways that marketing activities provide
value to customers.
12-3 Identify the four components of a marketing mix.
12-4 Discuss the five major steps involved in a consumer
purchase decision.

Learning Objectives
(Slide 2 of 2)
12-5 List the three influences on the consumer decision

process.
12-6 Identify common dimensions used for market
segmentation.
12-7 Differentiate between product preferences of different
target markets.
12-8 List the four steps of the market research process.

What is Marketing?
• Marketing: The entire process of creating relationships with
customers by offering goods, services, and experiences that they
value
• Building customer relationships through effective marketing is what sets
companies apart from their competition
• Production orientation: A past era in marketing that placed

emphasis on increased output and production efficiency
• Customer orientation: The current era in marketing where an
organization first determines what customers need and then develop
products to fill those needs

The Evolution of the Marketing Concept
(Slide 1 of 2)

The Evolution of the Marketing Concept
(Slide 2 of 2)
• Marketing concept: A philosophy that a business should

provide goods and services that satisfy customers’ needs
through a coordinated set of activities that allow the business to
achieve its objectives
• Consumers’ access to technology magnified need to determine

and satisfy customer needs
• Transition to customer orientation was driven by falling production
costs and increased globalization, which created more competition

Customer Relationship Marketing
• Customer Relationship Management (CRM): Track and
organize information about current and prospective customers
to create marketing strategies that develop and sustain
desirable customer relationships
• Branding: The relationship between a company and its

customers that is built on trust
• Is a name, term, symbol, or design that identifies a seller’s products
• Brand loyalty - Based on consumer’s trust on a company that
represents brand value for the business

Key Takeaway
Increased competition has made companies actively

seek to determine and satisfy customer needs, with
the goal of building long-term customer relationships

The Value Added by Marketing
• Satisfying a customer means providing:
• The right product
• In the right place
• At the right price
• At the right time
• Utility: the ability of a product to satisfy a human need

• Form, place, time, or possession utility

The Marketing Mix
(Slide 1 of 2)
• Marketing Mix: The combination of

marketing activities that deliver
value to customers; typically divided
into four elements: product, price,
distribution, and promotion

The Marketing Mix
(Slide 2 of 2)
• Product: an element of the marketing mix

that includes decisions about a product’s
design, brand name, packaging, and
warranties, and so on
• Pricing: setting a price based on the demand
and cost for a good or service
• Placement (or Distribution): creating the
means by which products flow from the
producer to the consumer
• Promotion: an element of the marketing mix
that focuses on providing information to
target markets
Marketing Strategy
• Marketing Strategy: A plan that will enable an organization to

make the best use of its resources and advantages to meet its
objectives
• Target market
• A group of individuals for which a business develops a specific
marketing mix

Evaluating Marketing Strategy Using the
4P’s
• Successful marketing strategy requires the four elements of the
marketing mix to be thoroughly considered and well-
coordinated
• Weakness in any element can hamper success

The 4 P’s and the Brand Promise
• 4 P’s: Foundation of Branding

• Marketing mix must be:
• Complete
• Integrated
• Consistent
• Builds relationships when consumers are satisfied with the value that
they expect and receive

Key Takeaway 2
Marketing provides value to consumers by giving

them the right product, at the right price,
at the right place, and the right time
Providing value to customers requires a variety of

marketing activities referred to as the marketing mix
– product, price, distribution and promotion

The Consumer Decision Process
(Slide 1 of 3)

(Slide 2 of 3)
• Explains thought process that accompanies major purchases

• Individuals make more satisfying purchases and accurately
evaluate them when they:
• Have well defined purchase criteria
• Are aware of factors that influence their purchase decisions

(Slide 3 of 3)

How Branding Makes Purchasing Easier
• Personal experiences connect consumers to brands by:
• Establishing meaning with the brand
• Providing a frame of reference with which to assess options
• Simplifying purchase decisions, less risky

Key Takeaway 3
Steps in consumer decision process
Recognize problem
Search for information
Purchase
Evaluate after purchase
Influenced by social, situational, and psychological factors

Target Market Selection
• Consumers making a purchase typically use a decision process
that allows them to gather information, evaluate alternatives,
and choose a product that best fits their needs.

Market Segmentation
• The process of separating, identifying, and evaluating the layers of a
market to identify a target market
• Common dimensions for market segmentation
• Demographic
• Geographic
• Lifestyle and Behaviour
• Marketing Plan: A written document that specifies an organization’s

resources, objectives, marketing strategy, and implementation and
control efforts to be used in marketing a specific product or product
group
Marketing Strategy: Creating the Right
Marketing Mix for Your Target Market
• Essence of Marketing Strategy
• Select target market
• Create marketing mix that meets target market’s needs
• Uncontrollable, external factors in the marketing environment can affect
marketing activities
The Forces of the Marketing Environment

Economic forces Competitive forces
Socio-cultural forces Legal and regulatory forces
Political forces Technological forces

Key Takeaway 4
• Target market is a group of individuals for which a business

develops a specific marketing mix.
• Marketing activities are affected by a number of external forces
that make up the marketing environment. These forces include
economic forces, sociocultural forces, political forces,
competitive forces, legal and regulatory forces, and
technological forces.

The Marketing Research Process
• Marketing research: The process of systematically gathering
and analyzing data concerning a particular marketing program
• Applications for marketing research include:

• Assessing the business environment to identify opportunities
• Understanding your position in relation to competitors
• Learning the preferences and usage patterns of your existing customers
• Evaluating the likely success of a new product

Steps Involved in Market Research
Define the research goal
Gather information
Interpret information
Make marketing decisions

The Marketing Research Process
• Primary research: Market research information that is collected

by the company using methods such as surveys, focus groups,
and customer interviews
• Secondary research: Market research information that has
already been gathered and published by someone outside the
company
• Demographics: A dimension of market segmentation that
includes measurable characteristics such as age, gender, income,
education level, and so on
Key Takeaway 5
Marketing research is the process of systematically

gathering and analyzing data concerning a particular
marketing program
Sound marketing decisions require

good information, making the accuracy of market
research critical

Building Brand Value
• Brand value
• relationship between a company and its customers, which is built on
the foundation of trust that the brand promise will be delivered
• brand relationships simplify purchase decisions for customers and
provide brand value for the company

Business

LESSON 13
Developing and Managing Products

Learning Objectives
(Slide 1 of 2)
13-1 Discuss how different forms of a product can bring value

to a customer.
13-2 Differentiate between different types of product
innovation.
13-3 Summarize the four phases of the product development
process
13-4 Identify three examples of activities that occur during
the product development process.

Learning Objectives
(Slide 2 of 2)
13-5 Explain the four stages of the product life cycle in terms
of revenue and profit.
13-6 Identify different marketing strategies for each stage of
the product life cycle
13-7 Explain reasons for changing the product mix.
13-8 Summarize the three main benefits of organizing
products into product lines.
13-9 Discuss different functions of product packaging.

What is a Product?
(Slide 1 of 2)
• Product: Everything one receives in an exchange, including all

tangible and intangible attributes and expected benefits; it may
be a good, a service, or an idea
• Good: A physical, tangible product that we can see and touch
• Service: An intangible product that we experience or use

What is a Product?
(Slide 2 of 2)
• Consumer product: A product purchased to satisfy personal

and family needs
• Business product: A product bought for resale, for making
other products, or for use in a business’s operations

Products Bring
Value to Customers
in a Variety of Ways
• Once one identifies what
customers value, a variety
of ways can be found to
satisfy their needs, whether
it is through a good, a
service, or a blend of the
two.

Consumer Product Classifications
• Convenience product: A relatively inexpensive, frequently
purchased item for which buyers want to exert only minimal effort
• Bread, newspapers, chewing gum
• Shopping product: An item for which buyers are willing to expend
considerable effort on planning and making the purchase
• Appliances, furniture, cell phones
• Specialty product: An item that possesses one or more unique
characteristics for which a significant group of buyers is willing to
spend considerable purchasing effort
• Unique sports car, special handcrafted stereo speakers

Learning to Classify Products
• Products can be classified as goods, services, or both.

• Classification of goods and services enables determination of
needs to facilitate delivery
• Goods can be mass produced and stored; services are delivered
simultaneously, cannot be stored

Business Product Classifications
(Slide 1 of 3)
• Raw material: A basic material that actually becomes part of a

physical product
• Usually comes from mines, forests, oceans, or recycled solid wastes
• Major equipment: Large tools and machines used for production
purposes
• Lathes, cranes, and stamping machines
• Accessory equipment: Standardized equipment used in a
business’s production or office activities
• Hand tools, fax machines, power motors

(Slide 2 of 3)
• Component part: An item that becomes part of a physical

product and is either a finished item ready for assembly or a
product that needs little processing before assembly
• Clocks, tires, computer chips
• Process material: Used directly in the production of another
product but not readily identifiable in the finished product
• Industrial glue and food preservatives

(Slide 3 of 3)
• Supply: An item that facilitates production and operations but

does not become part of the finished product
• Paper, pencils, cleaning agents
• Business service: An intangible product that an organization
uses in its operations
• Accountancy, janitorial service, information technology service
management

Key Takeaway
Product can be a physical good, a service,

or a combination of the two
Understanding the different forms a product

can take helps companies find creative ways to
offer products that satisfy customer needs

The Benefits of Innovation
(Slide 1 of 2)
• Innovation: Any product improvement that customers value

over existing choices
• includes new products that did not exist previously and adaptations to
existing products
• Is necessary because existing products become obsolete when:

• More competitors offer similar products
• Competitors introduce innovations of their own
• Customers need change
• Technology changes

The Benefits of Innovation
(Slide 2 of 2)
• Benefits
• Improving function or quality
• Lowering cost of production
• Offering customers new experiences not previously available

Key Takeaway 2
Pace of innovation is accelerating,

and companies that innovate, better
serve customers and increase profits
Product innovations improve quality of life

by providing improved function and quality,
lower prices, and new experiences

The Phases of Product Development
Idea generation
• Generate as many ideas as possible
Product analysis
• Screen ideas to select the best one
Product development and testing

• Build prototypes or small production runs of the product to test
on a small scale
Commercialization
• Use the knowledge acquired from previous phases and make
final improvements to the product, and launch it to the market

Activities of Each Product
Development Phase
• Each phase of the product development process requires the
completion of specific activities
• Requires management approval of ideas before implementation
• Ensures that resources are not wasted on marginal concepts

Key Takeaway 3
Systematic and intentional approach to

product development can maximize the chance
of launching a winning product
Each stage in product development requires management to

approve ideas before moving forward so that the company
doesn't waste resources on marginal concepts

Product Life Cycle
(Slide 1 of 2)
• A series of stages in which a product’s sales revenue and profit

increase, reach a peak, and then decline
• Refers to an entire product category, not just an individual product
• Marketers who understand the cycle concept are better able to forecast
future sales and plan new marketing

Product Life Cycle
(Slide 2 of 2)

The Stages of the Product Life Cycle
Introduction
• There are few competitors and sales and profits are low
Growth
• Sales and profits increase, and competitors decide to enter the
product category
Maturity
• Sales peak and profits decline as the market becomes saturated and
price competition increases
Decline
• Sales and profits decline as consumer needs move away from
product category

Marketing Strategies for Stages of the
Product Life Cycle
Stage Strategy
Introduction • Heavy promotion to generate awareness and interest
Growth • Build brand through advertising, distribution, price cuts

• Add new features
Maturity
• Further price cuts
Decline • Reduce marketing

Key Takeaway 4
Every product progresses through a product life cycle;

series of stages in which a product's sales revenue
and profit increase, reach a peak, and then decline
Familiarity with the product life cycle helps marketers

maximize profitability of their products over time

Product Mix
(Slide 1 of 2)
• Product mix: the collection of all the company’s products

• Managed by modifying, adding, or deleting products to
maximize sales revenue and profits

Product Mix
(Slide 2 of 2)
Changes in customer preference
Challenges from competitors
Stage of PLC
Simplify product mix

Grouping Products into Product Lines
• Product line: Group of similar products that are related to each

other in the way they work or the audience they target
• Benefits
• Effective product management
• Provide clarity for consumers
• Simplify branding decisions

Key Takeaway 5
Marketing managers at the company must actively manage

the product mix by modifying, adding, or deleting products
as needed to maximize sales revenue and profits
Grouping by product lines provides more effective product

management, clarity for consumers, and simplified branding

The Functions of Packaging
• Packaging consists of all the activities involved in developing
and providing a container with graphics for a product.
• Package is a vital part of the product.
• Makes the product more versatile, safer, or easier to use
• Shape, appearance, and printed message of a package influence
purchase decisions.

Key Takeaway 6
Functions of packaging
Protecting the product
Attracting buyer attention
Providing product information
Improving the product design
Better serving customer needs

Business
[Approved front cover Pride • Hughes • Kapoor • Althouse • Allan

when ready goes here.]

LESSON 14
Managing Distribution and Pricing

Learning Objectives
(Slide 1 of 2)
14-1 Identify the primary channels for delivering products

from producer to customer.
14-2 Explain the four ways that intermediaries provide value
for channel partners.
14-3 Discuss the four features that differentiate retailers.
14-4 Understand the goals of different distribution functions.

Learning Objectives
(Slide 2 of 2)
14-5 List three key considerations when determining prices.

14-6 Understand how to calculate the break-even point based
on fixed and variable costs.
14-7 List five common pricing objectives.
14-8 Differentiate between different pricing strategies.

Channels of Distribution
• Producers use a variety of distribution channels to sell products
• Companies trade directly to consumers, or partner with
marketing intermediaries
• Marketing intermediaries: Organizations that help move products
from producers to consumers

Primary Channels of Distribution
(Slide 1 of 2)
Direct
• Producer sells directly to the consumer, with

no marketing intermediaries in between
Producer to retailer to customer
• Producer sells to a retail store, which then

sells to consumers

Primary Channels of Distribution
(Slide 2 of 2)
Producer to wholesaler to retailer to customer
• Goods are sold to wholesalers, then to retailers

• Sometimes referred to as two-step
Producer to agent to wholesaler to retailer
• Similar to two-step with the addition of sales

agents who help connect buyers and sellers

Benefits of Intermediaries
• Perform distribution functions cheaper, faster, and better than
producers
• Benefits:
• Efficiency and assortment
• Break bulk
• Valuable marketing information
• Instant sales force

Wholesaling
• Wholesalers: intermediaries that sell products to other businesses rather
than customers
• Merchant wholesalers: purchases goods in large quantities and then sells them to
other wholesalers or retailers and to institutional, farm, government, professional or
industrial users
• Commission merchant: usually carries merchandise and negotiates sales for
manufactures
• Agent: an independent sales professional who brings buyers and sellers together
• Broker: specializes in a particular commodity, represents either a buyer or a seller,
and is likely to be hired on a temporary basis

Key Takeaway
Primary channels of distribution include: direct, producer to

retailer to customer, producer to wholesaler to retailer to
customer, and agent to wholesaler to retailer
Marketing intermediaries can provide efficiency and

assortment, break bulk, provide valuable marketing
information, and offer an instant sales infrastructure.

The Importance of Retailers
(Slide 1 of 2)
• Retailers: businesses that specialize in selling products to the

end user
• Retailers are the final link between producers and customers
• Sell online and through physical store location
• It is essential to find retail partners who offer an appropriate fit
for company’s products
• Distinctions between different types of retailers are important because
not all retailers are a good fit for all products

The Importance of Retailers
(Slide 2 of 2)
• Features that differentiate physical retailers

• Number of product categories
• Pricing
• Distribution intensity: Level of market coverage for a product
• Measured by the number of outlets that sells a product
• Ranges from intensive to exclusive distribution
• Size and selection

Types of Retail Store Formats
Department Discount Warehouse Convenience
Stores Stores showrooms stores
Warehouse Specialty
Supermarkets Superstores
clubs stores
Off-price Category
retailers killers

Number of Product Categories
• Some retailers sell products in only one or two product
categories, while others sell a wide assortment of products.
• Roots, for example, sells clothing and related accessories, while
Hudson’s Bay sells clothing, housewares, and many more
categories of products (Figure 14.1).

Pricing
• Some retailers sell at a discount while others sell at a premium.

Distribution Intensity
• The level of market coverage; usually measured by the number
of outlets where the product is sold

Size and Selection
• Some retailers choose to have a small physical store and to carry
a limited number of items, while others choose to have
warehouse stores with a large selection of items (Figure 14.4)

Non-store Retailing
• Selling that does not take place in conventional store facilities; consumers purchase
products without visiting a store
• Direct selling
• Face-to-face selling at home or in the workplace
• Direct marketing
• Catalogue marketing
• Direct-response marketing
• Telemarketing
• Television home shopping
• Online retailing
• Automatic vending
• Use of machines to dispense products

Key Takeaway 2
Common features that differentiate

various physical retailers
Number of product categories, pricing,

distribution intensity, and size

Managing Physical Distribution
(Slide 1 of 3)
• Primary functions of physical distribution

• Inventory management: Involves managing inventories in a way that
maximizes profit and cash flow
• Warehousing: Involves receiving and storing goods, then preparing
them for shipment
• Transportation: Involves the shipment of products through the
distribution channel to the customer

(Slide 2 of 3)
• Mode of distribution
• Type of transportation for moving physical goods from one point to
another
• Railroads, trucks, airplanes, waterways, and pipelines
• At times, companies prefer higher-cost modes due to their benefits
• There is usually a direct relationship between cost and speed; that
is, faster modes of transportation are more expensive.

(Slide 3 of 3)

Pricing Considerations
(Slide 1 of 2)
• Price determines the cost of the product and profit expected by

the company
• Factors that affect product prices
• Economic conditions
• Industry
• Stage of a product life cycle

Pricing Considerations
(Slide 2 of 2)
• Key considerations for determining prices

• Cost incurred by the company
• Maximum price customers are willing to pay
• Competitors price

Key Takeaway 4
Key considerations for determining prices
Cost incurred by the company, what

customers are willing to pay, and what
competitors charge

Break-Even Point
(Slide 1 of 2)
• Number of units that must be sold for total revenue to equal

total costs
• Total cost - Sum of fixed and variable costs for a particular
quantity of production
• Fixed costs: Operating costs of a company
• Rent, salaries, and marketing expenses
• Variable cost: Cost of producing or purchasing product
• Increases as the volume of production increases

Break-Even Point
• Contribution margin: Profit margin on a unit of sale

• Calculated as sales revenue minus variable costs
• Break-even is calculated by dividing the contribution margin
into total fixed costs

Key Takeaway 5
Breakeven analysis determines the number
of units that must be sold to cover the
fixed costs and realize a net profit
Allows to see how pricing scenarios

affect the overall profitability of the
company

Pricing Objectives
(Slide 1 of 2)
• Should be in line with the company’s marketing goals

• Influenced by:
• Type of product
• Industry
• Company’s position within the industry
• Company’s branding goals

Pricing Objectives
(Slide 2 of 2)
• Common pricing objectives used by marketers

• Build a loyal user base
• Increase market share
• Communicate brand value
• Maintain status quo
• Survival or liquidation

Pricing Strategies
Companies have a variety of
pricing strategies available to
them:
New-product Pricing
Psychological Pricing
Product-Line Pricing
Promotional Pricing

Key Takeaway 6
Five common pricing objectives are to build a loyal user

base, increase market share, communicate brand value,
maintain status quo in the industry, and survive.
Four categories of pricing strategies are

new-product pricing, psychological pricing,
product-line pricing, and promotional pricing.

Business

LESSON 15
Developing Integrated Marketing Communications

Learning Objectives
(Slide 1 of 2)
15-1 Summarize the four components of the promotion mix.

15-2 List the advantages of advertising as a promotional tool.
15-3 Discuss the advantages and disadvantages of different
advertising mediums.
15-4 Identify the six steps of the personal-selling process

Learning Objectives
(Slide 2 of 2)
15-5 Explain how different methods of sales promotion may

achieve different objectives.
15-6 Identify different types of public relations tools.
15-7 Differentiate among promotional mixes used to achieve
specific promotional objectives.

The Promotion Mix
(Slide 1 of 2)
• Particular combination of promotional methods a business uses

to reach a target market
• Components/Promotional tools
• Advertising
• Personal selling
• Sales promotion
• Public relations

Promotion Mix
(Slide 2 of 2)
• Depends on:
• Company’s promotional resources and objectives
• Nature of the target market
• Characteristics of product
• Integrated marketing communications:
• Coordinating all aspects of the promotion mix to send clear and
consistent messages to customers

Key Takeaway
Components of the promotion mix
Advertising
Personal selling
Sales promotion
Public relations

Advertising
• Any paid form of non-personal presentation by an identified

sponsor
• Important component of the promotion mix that represents the
largest share of promotional spending
• Advantages
• Offers scale, targeting, choice, and accessibility

Advertising Media

Evaluating Advertising Media
(Slide 1 of 2)
• Different advertising media have distinct differences in terms of

reach, ability to target specific audiences, and cost
• Knowledge of the differences is essential to make efficient and
effective use of marketing dollars

Evaluating Advertising Media
(Slide 2 of 2)
• Reasons for rise in online advertising

• Highly targeted and measurable
• Small budget requirement
• Increased consumption of media via desktop or mobile devices

Major Advertising Media
(Slide 1 of 3)
Medium Advantages Disadvantages

Television • Largest reach • Very expensive
• Audio visual presentation has a high • Message can be quickly forgotten
impact • Increasingly ignored by users of digital
• Ads can be run frequently video recorders (DVR)
Direct Mail • Highly selective and personal targeting • Very expensive on a per-piece basis
• Easy to measure performance • Often thrown away as junk mail
• Hidden from competitors

(Slide 2 of 3)

Newspapers • Can reach large, local audiences • Short life, especially for daily
• Short lead times for placing ads publications
• Ads can be run frequently • High volume of ads limits exposure
• Hard to target specific market segments
Radio • Can target local audiences • Lacks visual imagery

• Low relative cost • Listener’s attention is limited
• Short lead times for placing ads • Difficult for driving listeners to follow
the ad’s call to action

(Slide 3 of 3)

Magazines • Selective targeting • High cost
• Long life • Long lead times (30-90 days)
• Good reproduction of visuals • Infrequent publication
Online • Highly selective targeting • Cost per click can be high
• Available for almost any ad budget • Concerns about security and privacy
• Real-time, measurable feedback • Uncertainty about how to evaluate return
on investment
Outdoor • Geographic selectivity • Allows only very short messages

• Can be placed close to point of sale • Seldom attracts reader’s attention
• Allows for frequent repetition • Criticized as blight on landscape

Key Takeaway 2
Advertising offers scale, targeting, choices,

and accessibility to marketers

Personal Selling
• Personal communication aimed at informing and persuading

customers to buy a company’s products
• Most adaptable of all promotional methods
• Can modify message to suit individual buyer

The Personal-Selling Process
Prospecting
• Research potential buyers and choose the most likely customers or
prospects
Approach the prospect
• Introductory email or phone call
Make the presentation

• Identify prospect’s key needs and focus on benefits that satisfy those
needs
Answer objections
• Highlight key benefits of the product
Close the sale

• Ask for the sale
Follow-up
• Helps increase the likelihood of future sales

Key Takeaway 3
Steps of personal selling process
Prospecting
Approach the prospect
Make the presentation
Answer objections
Close the sale and follow-up

Sales Promotion
• Use of incentives to encourage purchase of a product

• Coupon: a discount on the purchase price of a product
• Samples: free product, usually in a trial size
• Premiums: free gifts with the purchase of a product
• Frequent-user incentives: reward for customer loyalty
• Point-of-purchase displays
• Sweepstakes and contests
• Used to enhance and supplement other promotional efforts

Selection of Sales Promotion Methods
Recommended
Promotional Objective Sales Promotion Method
To attract new customers All methods
To encourage trial of a product Samples
To boost customer loyalty Frequent-user incentives
To cross-sell other products All methods
To gain attention in a retail environment Point-of-purchase displays
To identify prospects or build customer Sweepstakes and contests

relationships

Key Takeaway 4
Sales promotion consists of direct incentives for

customers to purchase or try a product
Best method of sales promotion depends

on the promotional objective

Public Relations
• A broad set of communication activities used to build favourable
relationships with the public
• Common PR goal
• Media coverage of the company on television, in newspapers and
magazines, and online

Types of Public Relations Tools
• Press release: One-page document of about 300-500 words,
provided to the media to promote a company or its product
• Related to:
• New products
• Interviews with company officials
• Reports of new discoveries
• Expansion into new markets
• Investment results

Types of Public Relations Tools
• Press release: a one-page document of about 300-500 words that the
organization provides to the media to promote its company or a product
• Can lead to increased media coverage and inquiries from media outlets that will turn
into in-depth stories
• Press conference: Media members are invited by a company to hear news
or product announcements
• Attracts media exposure by inviting company officials and celebrity endorsers to the
event
• Event sponsorships
• Intended to promote a positive image for the company

Event Sponsorship

The Advantages and Disadvantages of
Public Relations as a Promotional Tool
• Advantages
• Generates valuable free publicity
• Companies with large social-media followings can bypass traditional
media and send news directly to their fans and followers
• Disadvantages
• Publicity is often out of the company’s control
• Companies can’t control the message that media outlets communicate

Key Takeaway 5
Common goal of PR is to gain media publicity

through press releases, press conferences, and
event sponsorships

Key Takeaway 5
The consumer movement has prompted

improvements in:
The quality of products and

services
Helping individuals become more

educated and informed consumers

Promotional Planning
(Slide 1 of 2)
• Promotional campaign: Plan for combining the four

components of the promotion mix to achieve one or more
marketing goals
• Promotional objective
– Building awareness and demand for the product
– Increasing or retaining market share
– Enhancing or repairing your company brand
– Identifying and retaining existing customers

Promotional Planning
(Slide 2 of 2)
• Nature of target market

• In terms of size, geographic distribution, and lifestyle characteristics
• Characteristics of the product
• Complexity and price
• Organization’s resources

Key Takeaway 6
Factors that influence the makeup of a
promotional campaign
Company’s promotional objective
Nature of the target market
Characteristics of the product
Organization’s resources

Business

LESSON 16
Exploring Business Technology

Learning Objectives
(Slide 1 of 2)
16-1 Explain the various management information system (MIS)

functions.
16-2 Discuss the common online business models used by
companies to generate revenue or decrease expenses.
16-3 Identify online marketing tactics available to businesses.

Learning Objectives
(Slide 2 of 2)
16-4 List the three goals for using online tools to interact with
company stakeholders.
16-5 Summarize the three important considerations for
adapting to the increase of mobile devices.

Using Technology to Make Better Business
Decisions
• The goal of any business decision is to reduce risk and improve
your decision-making process by having as much relevant
information as you can acquire.

Management Information Systems (MIS)
(Slide 1 of 2)
• Provides managers and employees with the information they

need to perform their jobs as effectively as possible
• Benefits
• Improves decision making, as data can be processed quickly
• Automatic distribution of information increases the efficiency for
processing and presenting information

Management Information Systems (MIS)
(Slide 2 of 2)
• Primary functions
• Collect
• Internal and external sources
• Process
• Transform data into useful form
• Present
• Information is put in a usable form

Types of MIS Systems
• Types of MIS systems
• Financial
• Operations
• Marketing
• Human resources
• Cloud computing: type of computer usage in which services stored
on the Internet are provided to users on a temporary basis
• Green IT: all of a business’s activities to support a healthy
environment and sustain the planet

Key Takeaway
MIS provides managers and employees

with the information they need to perform
their jobs effectively
Functions of an MIS are to collect, process, and

present information useful to make decisions

Online Business
(Slide 1 of 2)
Online-only retailing
• Company was conceived from the outset to sell online
Click-and-mortar retailing
• Traditional brick-and-mortar retailers selling products through
online platform
Business-to-business (B2B) procurement

• Companies move their supply-chain ordering processes online

Online Business
(Slide 2 of 2)
Advertising-based model
• Content or functionality is offered to users for free and the
company sells advertising to generate revenue
Fee-based content
• Sites charge a fee for access to news, research, entertainment, or
other types of content
Fee-based platform
• Companies offer users functionality or connectivity in exchange
for a fee

Strategic Considerations for Online
Businesses
• No matter which online business model is used, companies
must keep strategy in mind for success
• Key performance indicators (KPIs): measurements that a
company uses to track its progress toward achieving various
objectives

Strategic Considerations for Online
Businesses

Key Takeaway 2
Common online business models
Online-only retailing
Click-and-mortar retailing
B2B procurement
Advertising-based model
Fee-based content and platform

Online Marketing Tactics
(Slide 1 of 2)
• Used to complement traditional offline marketing activities

• Search engine optimization (SEO): Improves search engine
ranking by:
• Optimizing website structure
• Use of keywords
• Number of links from other sites
• Variety of other techniques
• Pay-per-click (PPC): Advertisers only pay when a consumer
clicks on an ad

Online Marketing Tactics
(Slide 2 of 2)
• Content marketing: Uses blogs, videos, infographics, and other

content to attract and engage customers
• Social-media marketing: Involves interacting with consumers
on social network sites
• Lead generation: often involves creating a webpage whose sole
purpose is to incentivize customers to provide their email
address or other contact information
• Email marketing

Using Data to Improve Online Marketing
• Web analytics: Collection and analysis of data related to a
website or other online marketing activities
• Allows measuring:
• The number of visitors to their site
• The most visited pages on the site
• Time spent on each page
– The path users took through the site
– Number of customers who put an item in their online shopping cart
but abandoned their cart before checkout

Key Takeaway 3
Online marketing tactics are used to increase site

traffic, customer engagement, or generate leads
Web analytics help online marketers measure the

effectiveness of their activities and focus on key
areas for improvement

Interacting with Stakeholders
Using Online Tools
• Goals for using online tools
• Improve customer service
• Companies use Twitter and Facebook accounts to provide around-the-clock
customer service
• For example, TD Canada Trust has a Twitter account dedicated to providing
around-the-clock customer service, and the Rogers Twitter account is staffed by a
team that can offer technical support and troubleshooting.
• Manage company reputation
• Gather product and marketing insight
• Insights from social network sites allow a company to modify existing products
and develop new ones

Key Takeaway 4
Online tools allow companies to
communicate and interact with
stakeholders
Help organizations to improve customer

service, manage company reputation, and
gather product and marketing insight

Using Mobile Technology for Business
• Mobile users represent an increasing share of online activity
• Companies adapting to the increase of mobile users must:
• Optimize website design and functionality for mobile devices
• Ensure compatibility with mobile devices
• Simplify payment options for mobile users

Optimize Design and Functionality
• Navigating desktop version of website through mobile is

tedious due to smaller screen size
• How can companies optimize website design for mobile
devices?
• Maintain consistent branding with the full version of the site.
• Create a streamlined layout with simplified navigation.
• Prioritize content according to the features mobile users are most likely
to use

Ensure Compatibility With Mobile Devices
• Technologies that work for desktop websites may not work for
mobile devices
• Companies should use mobile technologies that are compatible
with the widest range of mobile devices
• Java and Flash technologies used for websites are not compatible with
many mobile devices

Simplify Payment Options for Mobile Users
• Mobile devices equip users with the ability to make online

purchases
• Businesses should make use of this emerging opportunity
• Online merchants should enable a quick, easy checkout to
encourage mobile users

Mobile Apps
• Used by companies to address the
needs of mobile users
• Provide a streamlined and efficient
user experience
• Companies send customers
notifications that encourage frequent
use of the app

Key Takeaway 5
Companies adapting to mobile users must:
Optimize design and

functionality
Ensure compatibility
Simplify payment options

Business


LESSON 17
Using Accounting and Financial Information

Learning Objectives
(Slide 1 of 3)
17-1 Distinguish between financial and managerial accounting

17-2 Identify the types of information contained in three
common financial statements.
17-3 Using the balance sheet equation, when given two values
calculate the third value.
17-4 Classify a given item on the balance sheet as an asset, a
liability, or owners’ equity.

Learning Objectives
(Slide 2 of 3)
17-5 Classify a given transaction on the income statement as

either revenue, COGS, an operating expense, or net
income.
17-6 Classify a given the transaction on the statement of cash
flows as either an operating activity, investing activity,
or financing activity.

Learning Objectives
(Slide 3 of 3)
17-7 Summarize why the balance sheet, income statement,

and statement of cash flows should be analyzed
together to provide a picture of a company’s financial
position.
17-8 Explain how ratio analysis might be used to identify
strengths and weaknesses in a company’s financial
performance.

Accounting Fundamentals
(Slide 1 of 3)
• Accounting: Systematically collecting, analyzing, and reporting

financial information
• Managerial accounting: Provides information for managers within an
organization
• Used to make decisions about a company’s financing, investing, marketing, and
operating activities
• Flexibility to provide reports about the revenue and costs associated with
particular products, stores, or departments exists

(Slide 2 of 3)
• Financial accounting: Provides information for people outside an

organization through the generation of standardized financial
statements
• Until 2011, all Canadian companies prepared their financial statements based
on the Canadian generally accepted accounting principles (GAAP). GAAP
was used to ensure accuracy and consistency in the way financial information
was reported.
• On January 1, 2011, Canada adopted the International Financial Reporting
Standards (IFRS) for publicly traded companies. Adoption of the IFRS was
designed to provide consistency in financial reporting internationally and
replace the GAAP, and today many countries are using IFRS.

(Slide 3 of 3)

Two Types of Accounting
Reports may be in different formats that help company managers make

decisions.
Who uses management accounting information?
Financial statements are prepared according to IFRS.
Who uses financial accounting information?

Key Takeaway
Managerial and financial accounting use the

same underlying data but differ in the audience
and the types of financial reports.

Financial Statements
(Slide 1 of 2)
• Provide a clear picture of a company’s financial health and

capabilities
• Balance sheet (or statement of financial position): Snapshot
of a company’s financial position by stating assets, liabilities, and
owners’ equity
• Income statement (or statement of income): Summary of
how much a company earned over a period of time
• Summarizes revenue, expenses, and net income (or loss)

Financial Statements
(Slide 2 of 2)
• Statement of cash flows (or cash flow statement): Illustrates

how the company’s operating, investing, and financing activities
affect cash over a period of time

The Balance Sheet (or Statement of
Financial Position)
• With the adoption of IFRS, the name of the balance sheet was
changed to the statement of financial position
• Summary of how much a company owns at a particular moment
in time
• Divided into sections that represent a math equation
Assets − Liabilities = Owners’ Equity
• Owners’ equity
– Portion of company assets that belongs to the owners after all debts
are paid

Reading a Balance Sheet
• Liquidity - The ease at which an asset can be converted to cash

• Structure of the balance sheet
• Asset categories are listed in order from most liquid to least liquid
• Assets and liabilities are divided between current and long-term
• Assets minus liabilities always equals owners’ equity

The Balance Sheet
• If you created a personal balance sheet, it might look like this:

The Balance Sheet
• If this were a company, it would look exactly the same:

Key Takeaway 3
Sections of a balance sheet are assets,

liabilities, and owners’ equity
Fundamental accounting equation

Assets – liabilities = owners’ equity

The Income Statement (or the Statement
of Income)
• With the adoption of IFRS, the name of the income statement
was changed to the statement of income.
• Helps to analyze the company’s performance
• Allows to categorize a firm’s expenses
• Cost of goods sold (COGS): Cost of producing or purchasing products
for sale
• Varies directly with sales volume or production volume
• Operating expense: Ongoing business expenses
• Rent, salaries, utilities, and marketing expenses
• Referred as fixed costs as they do not change in direct relation to sales volume

Key Takeaway 4
Company’s gross profit is calculated by

subtracting the cost of goods sold from revenue
Net income is calculated by deducting

operating expenses, taxes, and interest from
gross profit

Statement of Cash Flows
• Categorizes cash from operating, investing, and financing

activities
• Total cash flows from the activities are added to calculate the net
increase or decrease in cash for the year.

Key Takeaway 5
Together, the statement of cash flows, balance sheet,

and income statement illustrate the results of business
decisions and reflect the company’s ability to pay
debts, dividends, and finance new growth

Using Financial Statements
for Company Analysis
• Balance sheet, income statement, and statement of cash flows
together provide accurate picture of a company’s financial
position
• Methods of analysis
• Compare a company’s current performance to past performance
• Compare the company’s current performance to the performance of
competitors

Key Takeaway 6
Together, the statement of cash flows, balance sheet,

and income statement illustrate the results of business
decisions and reflect the company’s ability to pay
debts, dividends, and finance new growth

Using Financial Ratios
(Slide 1 of 3)
• Financial ratio: a number that shows the relationship between

two elements of a company’s financial statements
• Allow for a fair and accurate comparison between current
financial results and results from previous periods
• Calculating requires formulas and knowledge of location to find
the numbers that fit those formulas
• Financial statements contain all the necessary numbers

(Slide 2 of 3)
• Profitability ratios
• Tell you how effectively the company uses its resources to generate
profits
• Return on sales: Measures profitability by dividing net income after
taxes by revenue
• Liquidity ratios
• Tell you the company’s ability to convert assets to cash and pay its
short-term debts
• Current ratio: Measures liquidity by dividing current assets by current
liabilities

(Slide 3 of 3)
• Leverage ratios
• Tell you the level of debt compared to assets
or equity
• Debt-to-equity ratio: Measures leverage by dividing total liabilities by
owners’ equity

Key Takeaway 7
Financial ratios allow for a fair and accurate comparison

between current financial results and results from
previous periods or industry competitors.

Business


LESSON 18
Understanding Money, Banking, and Credit

Learning Objectives
(Slide 1 of 2)
18-1 Summarize the three functions of money.

18-2 Explain how changes in money supply may affect
economic growth and inflation.
18-3 Explain how the activities of the Bank of Canada can either
increase or decrease money supply.

Learning Objectives
(Slide 2 of 2)
18-4 Classify the various types of financial institutions.

18-5 Explain how deposit insurance protects consumers.
18-6 List the three ways that technology has improved efficiency
for banks and customers.

What is Money?
• Anything a society uses to purchase products or resources

• Currency – Common form of money
• Exchanged in coins, paper, debit and credit cards
• Earlier, people used barter system to acquire goods

• Barter: System of exchange in which goods or services are traded
directly for other goods or services
• Not conducive to commerce

Functions of Money
Medium of exchange
• Makes economy run smoothly
Measure of value
• A single standard to compare the values of products or services
• Prices of all products are stated in terms of money
Store of value
• Method for retaining or accumulating wealth
• Money may be held and used later

Key Takeaway
Money is anything a society uses to

purchase products or resources
Functions of money are to serve as a

medium of exchange, a measure of value,
and a store of value

Money Supply and the Economy
(Slide 1 of 3)
• Three main components of Canada’s money supply:

• Currency
• Demand deposits
• Time deposits

(Slide 2 of 3)
• The amount of money in circulation in Canada can be measured:

M1 is the narrowest measure. M1 includes all currency (bank notes and coins) plus
demand deposits (personal chequing accounts) and other current accounts at
banks. Other forms of currency include traveller’s cheques, cashier’s cheques, and
money orders.
M2 is a broader measure that includes not only M1 but also personal savings
accounts, other chequing accounts, term deposits, and non-personal deposits that
require notice before the money can be withdrawn.
M3 is also a broad measure that includes M2 plus Canadian residents’ foreign
currency deposits and non-personal (e.g., corporate and not-for-profit) deposits.

(Slide 3 of 3)
• Deflation: Decrease of prices in an economy over time

• Caused by shrinking money supply and can lead to economic recession
• Inflation: Increase of prices in an economy over time
• Caused by the rise in money supply
• Rapid increase can lead to hyperinflation and lower
quality of life for consumers

Key Takeaway 2
Steadily growing money supply is

healthy for an economy
Shrinking money supply can lead to deflation and

increasing money supply can result in inflation

The Bank of Canada
• Sole issuer of bank notes in Canada

• Responsible for facilitating the management of Canada’s financial
system
• Promotes the economic and financial welfare of Canada by
carrying out monetary policy that
• Fosters confidence in the value of money
• Changes the money supply to control inflation and interest rates,
increase employment, and influence economic activity

Managing the Money Supply
(Slide 1 of 2)
• Open Market Operations: the purchase or sale of Canadian

government securities by the Bank of Canada to stimulate or
slow down the economy
• Overnight rate: the interest rate that our major financial
institutions borrow from each other “overnight”

Managing the Money Supply
(Slide 2 of 2)

Key Takeaway 3
Important function of the Bank of Canada
is to use monetary policy to regulate the
nation’s supply of money
Monetary-policy tools include open-market

operations and adjusting the target for the
overnight rate

The Financial Services Industry
• Banks and financial institutions provide:
• Secure place to store money and valuables
• Convenient access to money
• Access to loans
• Business and international services

Types of Financial Institutions
Commercial banks
Credit unions
Savings and loan associations
Nonbank financial institutions

The Office of the Superintendent of
Financial Institutions (OSFI)
• The most important regulatory body of Canada’s banking
system.
• OFSI is an independent agency of the Government of Canada
that regulates federally registered banks, insurers, and trust and
loan companies as well as credit unions, fraternal benefit
societies, and private pension plans.

Key Takeaway 4
The four primary types of financial institutions
that offer a variety of traditional banking
services are:
Commercial banks
Credit unions and caisses

populaires
Trust companies
Non-bank financial institutions

Protecting Your Money
• Canada Deposit Insurance Corporation (CDIC)

• Provides deposit insurance and contributes to the stability of canada’s
financial system
• Promotes public confidence and provides a mechanism for the member
institutions to fund the cost of failures to insured depositors
• Insures eligible deposits at member institutions and reimburses
depositors for the amount of their insured deposits when a member
institution fails

Key Takeaway 5
CDIC was created to maintain stability and public

confidence in Canada's financial system by insuring
deposits and overseeing the soundness of banking
institutions

Innovations in Banking
• Innovations by technology have made banking more efficient
for customers and banks
• Increased competition have encouraged banks to add new
features and services

Key Takeaway 6
Increased competition and technology innovation

have improved banking by providing increased
access to funds, convenient deposit options,
and real-time monitoring of funds

Business

LESSON 19
The Basics of Financial Management

Learning Objectives
(Slide 1 of 2)
19-1 Explain how long-term financial needs, the cash flow

cycle, and seasonality can cause a profitable company
to have significant cash shortages.
19-2 Distinguish among the three primary types of budgets
used for a financial plan.
19-3 List the five key considerations for choosing a form of
financing.

Learning Objectives
(Slide 2 of 2)
19-4 Contrast the advantages and disadvantages of debt versus

equity financing.
19-5 Estimate company value based on the terms of an equity
deal.
19-6 Identify which type of short term financing is appropriate
for a given situation.
19-7 Identify the source of a long-term financing need and
classify it as either debt or equity, and secured or
unsecured.

The Need for Financial Management
• All activities related to generating and raising money and using

it effectively
• Overseen by a chief financial officer (CFO) in larger companies
• Financial managers and their staff ensure that the company has
the financial resources it needs, when required

Common Reasons Companies Need
Financing
• Long-term financing – money that will be used for longer than one year
• Short-term financing – money that will be used for one year or less
• Negative cash flow cycle
• Cash flow: the movement of money into and out of an organization
• Trade credit: Company takes delivery of goods but pays for them
at a later time
• Seasonality
• Certain businesses do not have consistent sales throughout the year
• Profitable companies may face yearly cash shortages during
a specific season

Key Takeaway
Financial management consists of activities related
to obtaining money and using it effectively
Financial managers ensure that funds are available

when needed, obtained at the lowest possible cost,
and are used efficiently
Companies may need additional money to fund short-

and long-term needs, can experience cash shortages due
to negative cash flow cycle and seasonality of revenues
Planning: Basis of Sound Financial
Management
• Financial plan: contains goals that are specific, measurable, and
can be translated into dollar costs.
• Designed for obtaining and using the money needed to implement an
organization’s strategic and operational plans
• Translated into operating and capital budgets

Types of Budgets
Operating budget
• Sales and profits increase, and competitors decide to enter the

product category
Capital budget
• Sales peak and profits decline as the market becomes saturated and
price competition increases
Cash Budget
• Sales and profits decline as consumer needs move away from

product category

Key Takeaway 2
Financial plan is necessary to obtain and use the

funds required to implement an organization’s
strategic and operational plans
Operating and capital budgets help the company

identify the required amount of external funds
Company selects the external sources of funds and finalizes

a cash budget that projects cash inflows
and outflows for a specified period of time

Financing Considerations
• Job of a financial manager is to select financing options that:

• Provide necessary funds at the lowest cost
• Meet the strategic needs of the business

Key Takeaway 3
Considerations for choosing financing options
Amount of financing
Term of financing
External factors
Influence on company operations
Cost of financing
Advantages and Disadvantages of Debt and
Equity Financing
(Slide 1 of 2)
• Debt financing: Borrowing money that must be paid back,
usually with interest
• Used by companies to satisfy both short- and long-term funding needs
• Higher interest rates increase the cost
• Interest expenses can be deducted from company profits
• Debts must be repaid, regardless of company profitability
• Economic conditions effect the level of interest rates and availability of
debt financing

Advantages and Disadvantages of Debt and
Equity Financing
(Slide 2 of 2)
• Equity financing: Money received from the owners or from the
sale of shares of ownership in a business
• Usually for raising larger amounts or for addressing major long-term
needs
• Long term, since selling ownership is a major transaction that can’t be
easily reversed
• No interest cost for most forms of stock
• Does not need to be repaid, provides flexibility for company
• Economic conditions can affect the availability of
equity financing

Equity Financing and Company Valuation
• Value of a company can be determined by its net worth and
earnings
• Company’s history and its future prospects highly influence
investors’ decisions
• Sales revenue and revenue growth
• Profits and profit growth
• Proprietary products or systems that aren’t
easily copied

Key Takeaway 4
Funding options are categorized
into debt and equity financing
Managers evaluate five key considerations to

choose the appropriate funding source
The value of a company can be calculated by

dividing the investment amount by the equity
percentage of ownership the investment will buy
Short-term Financing Options
(Slide 1 of 2)
• Easier to obtain than long-term debt financing because:

• For the lender, the shorter repayment period means less risk of default.
• Dollar amounts of short-term loans are usually lower than those of
long-term loans.
• Close working relationship normally exists between the short-term
borrower and the lender.

Short-term Financing Options
(Slide 2 of 2)
• Trade credit: when a company takes delivery of goods by pays

for them later
• Unsecured loan: short-term loans from a bank or financing
company that are not secured by collateral
• Secured loan: short-term loans from a bank or financing
company that are secured by collateral

Key Takeaway 5
Short-term debt financing is money that

will be repaid in one year or less
Sources include trade credit, unsecured loans, and

secured loans

Long-Term Financing Options
(Slide 1 of 3)
• Sources of long-term financing vary with the size and type of

business
• Long-term loans: Loans from commercial banks and other
financial institutions
• Must be repaid with interest
• Corporate bonds: Loans from investors
• Corporation’s written pledge to repay the loan with interest

(Slide 2 of 3)
• Shares or Equity: Shares of ownership in a company that are

sold to investors
• Small companies offer company shares to family and friends in
exchange for an investment

(Slide 3 of 3)
• Options available for larger companies:

• Angel investors – Private individuals who invest money in exchange for
ownership in the company
• Private placement – Shares are sold to large institutional investors
• Venture capital (VC) – Businesses that invest in companies that have the
potential to become large and successful
• Initial public offering (IPO) – Companies that have high growth
potential can explore going public by selling their shares on the open
market

Key Takeaway 6
Primary sources of long-term financing
Long-term loans
Corporate bonds
Company shares

Business

LESSON 20
Understanding Personal Finance and Investments

Learning Objectives
20-1 Summarize the four steps for creating a financial plan.

20-2 Explain the four factors that impact your selection of
investments.
20-3 Characterize various investments in terms of potential
risk and potential return.
20-4 Calculate return on investment.
20-5 Determine the suitability of the investment given an
investment choice and an asset allocation goal.

Managing Your Personal Finances
(Slide 1 of 2)
• Set goals, taking into account your career, major expenses, and vision for
retirement
• Short-term goals
• Medium-term goals
• Long-term goals
• Control finances and prepare for emergencies
• Individuals should look for expenses that can be removed and opportunities to
increase income
• Emergency fund: Savings account containing enough money to help one pay for
unexpected expenses without going into debt
• Requires certain changes to control the finances

Managing Your Personal Finances
(Slide 2 of 2)
• Evaluate alternatives
• Different investments have different risks and potential returns
• Investments that best fit the goals must be chosen
• Implement, monitor, and revise
• Major life events have the ability to change the trajectory of plans
• Individuals should be ready to adjust their plans accordingly

Key Takeaway
Primary steps for creating a financial plan
Set goals
Control your finances and

prepare for emergencies
Implement, monitor, and revise

Important Factors for Selecting Investments
(Slide 1 of 2)
• Investment horizon: How soon do you need the money?

o Young people have a longer investment horizon
• Risk tolerance: How much risk can you handle?
o Higher risk investments tend to be volatile
o Investors with limited knowledge of the market should avoid riskier
investments
o Influenced by economic conditions

Important Factors for Selecting Investments
(Slide 2 of 2)
• Liquidity needs: Can I sell this investment quickly?

o Liquidity: Ease of converting an investment to cash
o Easier to convert, the more liquid the investment
o Decisions about liquidity are connected with risk tolerance
• Asset allocation: Process of spreading money across several
different types of investments to reduce risk (diversification)
o Expressed in percentages
o Classes of investments
o Stocks
o Bonds
o Cash

Key Takeaway 2
Factors that influence the choice of
investments
Investment horizon
Risk tolerance
Liquidity needs
Asset allocation goals

Investment Alternatives
(Slide 1 of 2)
• Capital preservation: Investment goal aimed at avoiding loss of

funds
• Bank accounts
• Money market accounts
• Term deposits or Guaranteed Investment Certificates (GICs)
• Income investments: Provide steady interest or dividend
payments and are less volatile
• Government bonds
• Corporate bonds or bonds
• Shares or stocks (an equity investment)

Investment Alternatives
(Slide 2 of 2)
• Growth investments: Investments that will increase in value

• Shareholders - Investors who buy company shares
• Growth investing - Selling company stocks after it becomes more
valuable at a higher price than the purchase cost
• Well-diversified stock portfolio
• Contains stocks representing a mix of company sizes, countries, and sectors

Mutual Funds and ETFs to Provide
Diversification
(Slide 1 of 2)
• Options to achieve instant diversification
• Mutual fund: Pools money from many investors to purchase a variety
of different securities
• Managed by a portfolio manager
• Exchange-traded fund (ETF): Invests in shares or other securities to
track the movement of an index

Mutual Funds and ETFs to Provide
Diversification
(Slide 2 of 2)
• Index: Select list of securities that reflects the performance of a
specific type of investment
• Most famous index - Dow Jones Industrial Average
• Blue-chip stocks: Select number of large-cap shares of industry leaders
• Provides shareholders with stable earnings over a number of years
• Large-cap stocks: Company shares with a market capitalization of over $10
billion

Speculative Investments
• Investor hopes to earn a large profit in a relatively short period
of time with high risk
• Short selling
• Buying shares on margin
• Stock options and derivatives
• Commodities and collectibles

Key Takeaway 4
Common investment goals are capital

preservation, income, growth, and speculation
Speculative investments should not be used by

anyone who does not understand the risks
involved

Investment Returns
• Investor goals are based on the projections of rate of return

• Rate of return: Performance of an investment
• Measured by taking the dollar amount of investment gains and dividing it by the
original amount invested
• Expressed as a percentage
• Higher investment returns result in higher financial gains, due to the
power of compounding

Investing Wisely
• Individuals must have a mix of investments that matches their
risk profile and goals
• Investment profile needs to be updated on a regular basis

Key Takeaway 4
Rate of return is calculated by taking the dollar

amount of investment gains and dividing it by
the original amount invested
Assets must be allocated wisely to reduce risk

and match the investment goals

Sources of Information
(Slide 1 of 2)
• Professional advisory services

• Available for a fee
• Canadian financial institutions such as TD Waterhouse, CIBC Wood Gundy
• Newspapers and business magazines

• The Globe and Mail; Report on Business, Canadian Business; The Wall Street Journal,
Barron’s, Bloomberg Business News
• Brokerage firms
• Financial analysts
• Company annual reports

Sources of Information
(Slide 2 of 2)
• Websites
• Interest rates for CDs, current price
information for shares and bonds,
experts’ recommendations

Key Takeaway 5
To begin preparing your financial plan, set goals, take

control of your finances, evaluate alternatives,
implement, monitor, and revise
Use reliable sources before investing any of your

money. These include websites, magazines and
newspapers, and company annual reports

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Business

First Canadian Edition

Pride • Hughes • Kapoor • Althouse • Allan

Copyright © 2020 by Nelson Education Ltd. 1

Copyright © 2020 by Nelson Education Ltd. 2

LO 1-1 Summarize the four benefits of studying business.

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L0 1-6 Identify the key strategic considerations related to

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More fulfilling careers

Greater consumer insights

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• Good: A physical, tangible product that we can see and touch.

• Service: An intangible product that we can experience or use.

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• Improving the quality of life

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Businesses make a variety of positive

Managers must balance their pursuit of

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Businesses that effectively respond to factors

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• Determine how wealth is made and distributed in a country

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• Free-Market Economy: an economic system in which

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• Command Economy: an economic system in which the

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• Communism: An economic system where all property and

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The level of economic freedom in a country

Opportunities to earn income and

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• Affect the number of choices an individual has and the prices

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Supply: The quantity of a product

Demand: The quantity of a

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• Product Differentiation: The process of developing and

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• Game Theory: used to model the interaction between two or more

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The degree of competition in an industry

Affects the choices available to

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• Total dollar value of all goods and services produced by all

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• The country as a whole loses the goods and services that

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• Consumer Price Index (CPI): A monthly index that measures

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What you will learn in this course can help