The Context Of Business: Understanding The Canadian .

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A01 KARA3003 01 SE FM.indd Page i 03/12/13 2:42 PM user/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGESThe Context of Business:Understanding the CanadianBusiness EnvironmentLen KarakowskyYork UniversityNatalie GurielYork UniversityToronto

A01 KARA3003 01 SE FM.indd Page ii 03/12/13 2:42 PM user/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGESVice-President, Editorial Director: Gary BennettAcquisitions Editor: Deana SigutSenior Marketing Manager: Leigh-Anne GrahamProgram Manager: Karen TownsendProject Manager: Rachel ThompsonDevelopmental Editor: Suzanne Simpson MillarProduction Services: Aptara , Inc.Permissions Project Manager: Joanne TangPhoto Permissions Research: Christina SimpsonText Permissions Research: Khalid ShakhshirArt Director: Zeneth DenchikCover Designer: TBDInterior Designer: Anthony LeungCover Image: TBDCredits and acknowledgments for material borrowed from other sources and reproduced, withpermission, in this textbook appear on the appropriate page within the text [or on page xx].If you purchased this book outside the United States or Canada, you should be aware that it hasbeen imported without the approval of the publisher or the author.Copyright 2015 Pearson Canada Inc. All rights reserved. Manufactured in the United States ofAmerica. This publication is protected by copyright and permission should be obtained from thepublisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in anyform or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtainpermission(s) to use material from this work, please submit a written request to Pearson CanadaInc., Permissions Department, 26 Prince Andrew Place, Don Mills, Ontario, M3C 2T8, or fax yourrequest to 416-447-3126, or submit a request to Permissions Requests at and Archives Canada Cataloguing in PublicationISBN 978-013-291300-3

A01 KARA3003 01 SE FM.indd Page iii 03/12/13 2:42 PM user/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGESBrief ContentsPart 1 A Framework for StudyChapter 11EXPLORING CANADIAN BUSINESS:A CRITICAL APPROACH: What arethe Major Challenges FacingBusiness? 1Part 2 The Internal Challenges 40Chapter 2Chapter 3Chapter 4Chapter 5THE EMPLOYEE–EMPLOYERRELATIONSHIP: What ResponsibilitiesDo Bosses Have to TheirEmployees? 40MANAGING THE WORKFORCE:How Can Business Leaders BestManage Their Employees? 77ESTABLISHING THE STRUCTUREOF A BUSINESS: What DoesOrganizational Design Have toDo with Business Success? 129BUSINESS STRATEGY: How DoBusinesses Generate a SuccessfulStrategy? 175Chapter 7COMPETITIVE AND TECHNOLOGICALFORCES: How Do Industries Evolveover Time? 256Chapter 8GLOBAL FORCES: How Is CanadaFaring in the Global Village? 294Chapter 9POLITICAL FORCES: Where WouldCanadian Business Be without OurGovernment? 339Chapter 10SOCIETAL FORCES: Can CorporationsBe Socially Responsible to AllStakeholders? 391Part 4 Adaptation and Change 447Chapter 11THE CHALLENGE OF SUSTAINABILITY:Why Does Business Need to Focuson Sustainability? 447Chapter 12CONFRONTING CHANGE: How DoBusinesses Address the Challenge ofChange? 498Part 3 The External Challenges 211Chapter 6ECONOMIC FORCES: Oh Canada,What Is Your Economy Like? 211iii

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A01 KARA3003 01 SE FM.indd Page v 03/12/13 2:42 PM user/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGESContentsPrefacexiiiAcknowledgmentAbout the AuthorsPart 11xviiixivA Framework for Study 1Exploring Canadian Business: A CriticalApproachWhat Are the Major Challenges FacingBusiness? 1Learning Objectives 1THE BUSINESS WORLD: CAN CANADIAN TIREFLOURISH IN A RAPIDLY CHANGING BUSINESSCONTEXT? 2TALKING BUSINESS 1.3 Jobs, Productivity,and Innovation: How Health Care Drivesthe Economy 25Societal Forces in CanadaCHAPTER SUMMARY2829CHAPTER LEARNING TOOLS 35Key Terms 35Multiple-Choice Questions 35Discussion Questions 36CONCEPT APPLICATION: FACEBOOK:WHEN YOUR FRIENDS ARE WORTH ABILLION! 36Part 2The Internal Challenges 40The Internal Context of Business 4The Employment Relationship: ResponsibilitiesToward Labour 5Leadership and Effectively Managing People 5Developing a Suitable OrganizationalStructure 6TALKING BUSINESS 1.1 Changing GM’sOrganizational Structure 6Generating a Winning BusinessStrategy 7The External Context of Business 7Specific or Task Environment 7General Environment 8The Challenge of Change 11Sustainability 12The Canadian Context: How’s Business inCanada, Eh? 12Economic Forces in Canada 13Competitive Forces in Canada 16Technological Forces in Canada 18TALKING BUSINESS 1.2 Growth in ProvincialLabour Productivity: A Problem from Coastto Coast 20Global Forces in Canada 22Political Forces in Canada 252The Employee–Employer RelationshipWhat Responsibilities Do Bosses Have to TheirEmployees? 40Learning Objectives 40THE BUSINESS WORLD: IS WORKING FOR FREEILLEGAL? 41The Labour Environment and Canadian Society 43Distinguishing Work and EmploymentTALKING BUSINESS 2.1“Employees”? 4543Are Unpaid InternsWhat Is an Employee? 46From Standard to Nonstandard EmploymentRelationships 47Perspectives on Work and GovernmentPolicy 47TALKING BUSINESS 2.2 The State of CanadianUnions—Down but Not Out 52The Labour Context in Canada: Where AreWe Now? 53TALKING BUSINESS 2.3in Canada Today? 55Are Unions RelevantDismissing Employees 55Common Law Rules Requiring Notice ofv

A01 KARA3003 01 SE FM.indd Page vi 03/12/13 2:42 PM userTermination 56Statutory Minimum Notice of TerminationUnemployment Insurance Programs 58/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGES57Current Issues in the Workplace: ManagingWorkforce Diversity 58Protecting Diversity and Guarding AgainstDiscrimination in Canadian Law 58TALKING BUSINESS 2.4 Organizations Seeingthe Light about Faith at Work 61TALKING BUSINESS 2.5 He Says, She Says:Gender Gap Persists in Attitudes TowardWomen’s Advancement in the Workplace 63TALKING BUSINESS 2.6 Aboriginal Workers:Integral to Canada’s Ongoing Competivenessand Performance 65TALKING BUSINESS 2.7 Ontario Employers Havea New Tool to Improve Accessibility for Peoplewith Disabilities 67The Model of the Employment Equity Act 68TALKING BUSINESS 2.8Resources 70Employment EquityTALKING BUSINESS 2.9 Immigrants MakeSignificant Contributions to Innovation 70CHAPTER SUMMARY72TALKING BUSINESS 3.1Steve Jobs 84The Visionary Leader:TALKING BUSINESS 3.2 Conflict Management:The Toxic Employee 85Management Philosophies 88Classical Approaches to Management 88The Social Context 88Scientific Management 89Administrative Management 92Bureaucratic Management 92TALKING BUSINESS 3.3New Direction 93Leading Teams in aThe Classical Approaches in PerspectiveTALKING BUSINESS 3.4Well? 9696Is Weber Alive andBehavioural Approaches toManagement 98TALKING BUSINESS 3.5 The High Costs ofWorkplace Harassment 99The Human Relations Movement 100Mary Parker Follett (1868–1933) 100Chester Barnard (1886–1961) 101Modern Behavioural Science and Motivation-BasedPerspectives 102CHAPTER LEARNING TOOLS 72Key Terms 72Multiple-Choice Questions 72Discussion Questions 73The Best Management Philosophy? ContingencyApproach 102CONCEPT APPLICATION: IMMIGRANTS ARESOMETIMES UNSURE ABOUT THEIR LABOURRIGHTS 74The Critical Importance of Trust in theWorkplace 1063Managing the WorkforceLearning Objectives 77THE BUSINESS WORLD: LEARNING HOW TO BE ANEFFECTIVE LEADER: LESSONS FROM THE EXECUTIVEROUNDTABLE 78The Roles Managers Play inOrganizations 81viContentsTALKING BUSINESS 3.7 How One CanadianCompany Earns Trust 107Trust, Teamwork, and CitizenshipHow Can Business Leaders Best Manage theirEmployees? 77Why Study Management Thought?What Do Managers Do? 81TALKING BUSINESS 3.6 The Myths andRealities of Motivation 10380108TALKING BUSINESS 3.8Teleflex Canada 109How Teams Learn atCHAPTER SUMMARY111CHAPTER LEARNING TOOLS 111Key Terms 111Multiple-Choice Questions 111Discussion Questions 112CONCEPT APPLICATION: KICKING HORSECOFFEE 112

A01 KARA3003 01 SE FM.indd Page vii 03/12/13 2:42 PM user4/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGESMethods of Downsizing 161Consequences of Downsizing 162Establishing the Structure of a BusinessWhat Does Organizational Design Have toDo with Business Success? 129Learning Objectives 129TALKING BUSINESS 4.7 What Every LeaderShould Know About Survivor Syndrome 163Why Has Downsizing Failed to Achieve AnticipatedResults? 164Downsizing as a Nonrational Approach toOrganizational Structure 166THE BUSINESS WORLD: HOW INTERNET COMPANIESARE CHANGING ORGANIZATIONAL STRUCTURE IN THEWORKPLACE 130The Changing Nature of Organizations131TALKING BUSINESS 4.8 Temporary Workers Area Concern for All Canadians 168Flat Organizations 132Fluid Organizations 133Integrated Organizations 133Global Organizations 134CHAPTER SUMMARYCHAPTER LEARNING TOOLS 170Key Terms 170Multiple-Choice Questions 171Discussion Questions 172TALKING BUSINESS 4.1 Atlantic Canada’sOverseas Playground? 135Thinking About Organizations136What Is an Organization? 136Using Metaphors to Describe Organizations136The Anatomy of an Organizations 140What Constitutes an Organization’sStructure? 140What Determines Organizational Structure?A Rational Perspective 143Strategy 144Organizational Size 144Technology 145Environment 145TALKING BUSINESS 4.2Digital World 147ReengineeringCanada’s Trade in aThe Credit154TALKING BUSINESS 4.5 Out-of-ControlOutsourcing Ruined Boeing’s BeautifulDreamliner 155Networking 156Shedding Noncore FunctionsHow Do Businesses Generate a SuccessfulStrategy? 175What Is Strategic Management? 178Analyzing the External Environment 179TALKING BUSINESS 5.2 Foresight andInnovation: Today’s Science Fiction, Tomorrow’sReality? 185Analyzing the Internal Environment 186The VRIO Model186TALKING BUSINESS 5.3Groupon187188Different Levels of Strategies 190Business-Level StrategyLoblaw Cuts 700 Head179TALKING BUSINESS 5.1 Changes in GlobalFood Sector Call for Canadian FoodStrategy 181SWOT Analysis156159TALKING BUSINESS 4.6Office Jobs 159Business StrategyThe Five-Forces ModelToward a Virtual Organization 153Downsizing5THE BUSINESS WORLD: TIM HORTONS: IS ITSSTRATEGY “ALWAYS FRESH”? 176TALKING BUSINESS 4.4 Former OutsourcerDescribes How Job Destruction Works 152OutsourcingCONCEPT APPLICATION: PIXAR: NO MICKEYMOUSE ORGANIZATION! 173Learning Objectives 175149TALKING BUSINESS 4.3Agency 151170190TALKING BUSINESS 5.4 Dollarama Cashing in onPenny-Pinching Canadians 191Contentsvii

A01 KARA3003 01 SE FM.indd Page viii 03/12/13 2:42 PM userTALKING BUSINESS 5.5to Greatness 194/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGESFROGBOX: On the PathCorporate-Level Strategy196TALKING BUSINESS 6.4 Don’t Blame ProfessionalAthletes for High Ticket Prices 226TALKING BUSINESS 5.6 American AirlinesMerges with US Airways 197TALKING BUSINESS 5.7Phone Market 200Goals of Canada’s Economic System 229TALKING BUSINESS 5.9 Understanding the Deal:Shoppers Drug Mart and Loblaw 2032056Oh Canada, What Is Your Economy Like?Learning Objectives 211THE BUSINESS WORLD: CANADIANS ON THEMOVE 212215Individuals 215Businesses 215Canada’s World-ClassTALKING BUSINESS 6.7Challenge 236Canada’s Productivity243TALKING BUSINESS 6.9 Today’s High YouthUnemployment: A Solution for SkillShortages? 248211249CHAPTER LEARNING TOOLS 249Key Terms 249Multiple-Choice Questions 250Discussion Questions 252CONCEPT APPLICATION: SASKATOON:CANADA’S FASTEST-GROWINGECONOMY 2527Competitive and Technological ForcesHow Do Industries Evolve Over Time?TALKING BUSINESS 6.1Advantage 218GovernmentTALKING BUSINESS 6.6Economy 233CHAPTER SUMMARY211Economic ForcesThe Economic EnvironmentTALKING BUSINESS 6.5 The US SubprimeMortgage Crisis and Recession 231Economic StabilityEmployment 246CONCEPT APPLICATION: LULULEMON: FORTHE LOVE OF YOGA 208The External Challenges229TALKING BUSINESS 6.8 Canada’s Growing but“Invisible” Trade: Services 237CHAPTER LEARNING TOOLS 205Key Terms 205Multiple-Choice Questions 206Discussion Questions 207Part 3Economic GrowthLoblaw Gets into MobileTALKING BUSINESS 5.8 Starbucks Buys Its FirstCoffee Farm in Costa Rica 202CHAPTER SUMMARYTALKING BUSINESS 6.3 Better Farm ManagementSeparates the Wheat from the Chaff 224Canada’s People218TALKING BUSINESS 6.2 Growing Gap ofTruck Drivers Will Be Costly to CanadianEconomy 219Analyzing the Economy: Two ApproachesTypes of Economic Systems 220219THE BUSINESS WORLD: FROM PERSONAL COMPUTERSTO NEWSPAPERS: TECHNOLOGY AND CREATIVEDESTRUCTION 257The Industry Life-Cycle Model 258The Introduction Phase: Industry Emergence andCreation 260The Birth ofTALKING BUSINESS 7.2 The Early Years of theAutomobile Industry 262Competition and the Economy222Types of Competition in Free MarketsviiiLearning Objectives 256TALKING BUSINESS 7.1Biotech 261Market Economy 220Communism 221Socialism 221Mixed Economy 222256Contents222TALKING BUSINESS 7.3Botox 265The Business of

A01 KARA3003 01 SE FM.indd Page ix 03/12/13 2:42 PM user/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGESTALKING BUSINESS 7.4 Gray Goo and thePromising Future of the NanotechnologyIndustry 266The Growth Phase: Dominant Designs andShakeouts 267TALKING BUSINESS 7.5 Growth Phase: Demandfor Low-End Smartphones KeepsIncreasing 269The Maturity Phase: A Critical Transition272THE BUSINESS WORLD: FOREIGN OUTSOURCINGAND RBC 295What Is Globalization? 297Sources Encouraging Global BusinessActivity 298Pull Factors 298Push Factors 299TALKING BUSINESS 8.1Under Pressure 300Canada’s Dairy IndustryTALKING BUSINESS 7.6 The Aging PersonalComputer Industry 272Channels of Global Business Activity 301TALKING BUSINESS 7.7Industry Hit Maturity?TALKING BUSINESS 8.2 Canada’s Exports toChina: Still Hewers of Wood and Drawers ofWater 304Has the Retail Grocery274The Decline Phase: Difficult ChoicesTALKING BUSINESS 7.8Industry 275The Fall of the TobaccoInnovation and TechnologyTypes of Innovation274277277TALKING BUSINESS 7.9Edge? 278Is Canada on the LeadingTALKING BUSINESS 7.10 The Linked World: HowICT Is Transforming Societies, Cultures, andEconomies 279The Evolution of Technology281TALKING BUSINESS 7.11 Embracing Disruption:Lessons from Building the First QuantumComputer 281Technological Forecasting283Technology and the Changing Workplace 285TALKING BUSINESS 7.12 Will Technology ReplaceMiddle-Class Jobs? 286CHAPTER SUMMARY287CHAPTER LEARNING TOOLS 288Key Terms 288Multiple-Choice Questions 288Discussion Questions 290CONCEPT APPLICATION: HAS SODA LOSTITS FIZZ? 2908Global ForcesHow Is Canada Faring in the GlobalVillage? 294Learning Objectives 294Exporting and Importing302TALKING BUSINESS 8.3 What are Canada’sNew Export Strengths? 306Outsourcing/Offshoring 307Licensing and Franchising Arrangements 308Direct Investment in Foreign Operations 309TALKING BUSINESS 8.4 What Helps a CountryObtain Foreign Direct Investment? 310Joint Ventures and Strategic AlliancesMergers and Acquisitions 312Establishment of Subsidiaries 313312TALKING BUSINESS 8.5 Is Canada Being“Hollowed Out” by Foreign Takeovers?Putting Mergers and Acquisitions in HistoricalPerspective 313The Multinational Corporation 314The Borderless Corporation315TALKING BUSINESS 8.6World? 315What’s the ThirdTALKING BUSINESS 8.7Local 316Think Global, ActInternational Trade 318The Logic of Trade 318Mercantilism 319Trade Protectionism 320TALKING BUSINESS 8.8 Made in Canada: HowGlobalization Has Hit the Canadian ApparelIndustry 320Promoting International TradeTALKING BUSINESS 8.9Protectionism 322Contents322The Futility ofix

A01 KARA3003 01 SE FM.indd Page x 03/12/13 2:42 PM user/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGESFacilitating Global Business: Regional EconomicIntegration 323European Union (EU) 324Asian Trading Bloc 325North American Trading Bloc and NAFTAWhere Is Canada Headed? 332CHAPTER SUMMARYTALKING BUSINESS 9.6Bad Idea? 366Government as Guardian of Business in the GlobalContext 368327Deregulation376TALKING BUSINESS 9.8Deregulation 380PrivatizationWhere Would Canadian Business Be WithoutOur Government? 339Learning Objectives 339THE BUSINESS WORLD: JAPAN’S TOYOTA ANDCANADA’S SUBSIDIES 340Can Corporations Be Socially Responsible toAll Stakeholders? 391346Learning Objectives 391THE BUSINESS WORLD: THE NEW BLOOD DIAMOND:CELLPHONES 392Defining Business Ethics 395Should Pop Drinkers PayTALKING BUSINESS 10.2in Quebec 397Should the LCBO BeTALKING BUSINESS 9.4 The Canadian Experiencewith Privatization 356358TALKING BUSINESS 9.5 The Role of theCompetition Bureau 362ContentsLac-Mégantic: DisasterModels for Judging the Ethics of Decisions 398End-Point Ethics 400Rule Ethics 401Applying the Models: A Scenario402TALKING BUSINESS 10.3 The Business of Bribery 404Do Organizations Make Us Unethical? 405Government as Guardian of the Private BusinessSector 364xTALKING BUSINESS 10.1 High-Level Barriersto Public Trust in Organizations 395Ethical Behaviour as a Social Phenomenon 396Business Ethics as Managing Stakeholder Interests 397TALKING BUSINESS 9.2 Canada Post FacesBillion Dollar Operating Loss by 2020 352Government Assistance to Private BusinessesCHAPTER LEARNING TOOLS 385Key Terms 385Multiple-Choice Questions 386Discussion Questions 38710 Societal Forces344The Tax Collector Role 348The Business Owner Role: CrownCorporations 349TALKING BUSINESS 9.3Privatized? 355385CONCEPT APPLICATION: THE WIRELESSSERVICE INDUSTRY IN CANADA 388Government as Guardian of Society 348TALKING BUSINESS 9.1More? 350The Dangers of380CHAPTER SUMMARYLevels of Government 345Federal Government Structure371Should Government “Mind Its Own Business”? 375Political ForcesThe Canadian Business Enterprise System:Fundamental Features 342Canadian Government Structure and RolesMore Cheese, PleaseWhy Government Should Not Play the Role ofGuardian of Business 373CONCEPT APPLICATION: BEIJING AND THECALGARY OIL SANDS 336The Regulator RoleWhy Should Government Play the Role of Guardianof Business in the Global Context? 369TALKING BUSINESS 9.7332CHAPTER LEARNING TOOLS 333Key Terms 333Multiple-Choice Questions 333Discussion Questions 3359Auto Bailouts: Good or364Unethical Behaviour as a Consequence ofCorporate Culture 407

A01 KARA3003 01 SE FM.indd Page xi 03/12/13 2:42 PM user/205/PHC00096/9780132913003 KARAKOWSKY/KARAKOWSKY UNDERSTANDING THE CHALLENGESUnethical Behaviour as a Consequence ofDecoupling 410Unethical Behaviour as a Consequence of WorkRoutinization 411What Is Sustainability? 452Economic FactorsSocial Factors 455Environmental FactorsTALKING BUSINESS 10.4 The GlobalPharmaceutical Industry and HumanGuinea Pigs 413TALKING BUSINESS 11.2Canada’s Water? 458Unethical Behaviour as a Consequence ofOrganizational Identity 414Unethical Behaviour as a Consequence ofOrganizational Roles 416Judging the Ethics of Organizations 417Business and Society419Corporate Social Responsibility 422424TALKING BUSINESS 10.5Dragons’ DenTALKING BUSINESS 10.6Germany 428IBM and Nazi425TALKING BUSINESS 10.7 Does Corporate SocialResponsibility Increase Profits? 432TALKING BUSINESS 10.8 Should These CorporateBehaviours Be Mandated? 434Is Corporate Social Responsibility on the Rise?434TALKING BUSINESS 10.9 Social Media GivesPower to Customers 435CHAPTER SUMMARYBenefits and Limitations of the Triple BottomLine Framework 463Benefits of the TBL Approach 463Limitations of the TBL Approach 464Measuring Sustainability 466Living Planet Index 466Ecological Footprint 468Index of Sustainable EconomicWelfare 470Genuine Progress Indicator 471Environmental Performance Index472The Business Case for Implementing SustainablePractices 474Reducing Costs 474Reducing Risk 477Improving Public RelationsObstacles to Change 478477Implementing Sustainable Practices 481Raw Materials482TALKING BUSINESS 11.5Food Sector 483CONCEPT APPLICATION: JOE FRESH AND THEBANGLADESH TRAGEDY 443Adaptat

TALKING BUSINESS 3.2 Conflict Management: The Toxic Employee 85 Management Philosophies 88 Classical Approaches to Management 88 The Social Context 88 Scientific Management 89 Administrative Management 92 Bureaucratic Management 92 TALKING BUSINESS 3.3 Leading Teams in a New Direction 93