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    MGMT8340-Week2 Economic Environment

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    Alin Raj
    This document discusses Canada's economic environment and how managers can use economic information. It covers: 1) Canada's mixed economic system, influenced by supply/demand and allowing private enterprise. Key factors driving economic development include FDI, inflation rates, and infrastructure. 2) The economic growth cycle, with GDP measuring expansion/contraction. Canada's GDP is driven largely by consumer spending. 3) Tools managers can use like PESTEL and Porter's Five Forces analyses to understand macro trends and competitive forces impacting their sectors to help manage challenges.

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    MGMT8340-Week2 Economic Environment

    Uploaded by

    Alin Raj
    33 views34 pages
    This document discusses Canada's economic environment and how managers can use economic information. It covers: 1) Canada's mixed economic system, influenced by supply/demand and allowing private enterprise. Key factors driving economic development include FDI, inflation rates, and infrastructure. 2) The economic growth cycle, with GDP measuring expansion/contraction. Canada's GDP is driven largely by consumer spending. 3) Tools managers can use like PESTEL and Porter's Five Forces analyses to understand macro trends and competitive forces impacting their sectors to help manage challenges.

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    This document discusses Canada's economic environment and how managers can use economic information. It covers: 1) Canada's mixed economic system, influenced by supply/demand and allowing private enterprise. Key factors driving economic development include FDI, inflation rates, and infrastructure. 2) The economic growth cycle, with GDP measuring expansion/contraction. Canada's GDP is driven largely by consumer spending. 3) Tools managers can use like PESTEL and Porter's Five Forces analyses to understand macro trends and competitive forces impacting their sectors to help manage challenges.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    33 views34 pages

    MGMT8340-Week2 Economic Environment

    Uploaded by

    Alin Raj
    This document discusses Canada's economic environment and how managers can use economic information. It covers: 1) Canada's mixed economic system, influenced by supply/demand and allowing private enterprise. Key factors driving economic development include FDI, inflation rates, and infrastructure. 2) The economic growth cycle, with GDP measuring expansion/contraction. Canada's GDP is driven largely by consumer spending. 3) Tools managers can use like PESTEL and Porter's Five Forces analyses to understand macro trends and competitive forces impacting their sectors to help manage challenges.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 34

    BUSINESS OPERATIONS

    MGMT8340
    ECONOMIC ENVIRONMENT
    ABBAS ALIMORAD, MA, PMP, MPED (CANDIDATE)
    AGENDA
    The Economic Environment
    ▪ Canada and its Economic System
    ▪ Key Economic Influencers
    ▪ The Economy in Simple Terms
    ▪ The Economic Growth Cycle/Managing Economy
    Movement
    ▪ Managing in Challenging Times

    Textbook reading
    ▪ Chapter 2 : The Canadian economic environment
    LEARNING OBJECTIVES
    2.1 Identify the major contributing factors that impact
    overall economic development.
    2.2 Describe the underlying economic model that
    shapes an economy.
    2.3 Discuss the concept of economic activity and how
    economies grow and contract.
    2.4 Discuss how managers can use economic
    information to better manage their organizations
    REVIEW OF LAST WEEK’S MATERIAL
    ▪ Business and its Fundamental characteristics
    ▪ What is a Business Model and Business Planning
    Cycle
    ▪ 3 Cs and competitive advantage
    ▪ Value Proposition
    ▪ Profit and Profitability
    ▪ Strategy and tactics
    2.1 IDENTIFY THE MAJOR CONTRIBUTING FACTORS THAT
    IMPACT OVERALL ECONOMIC DEVELOPMENT.
    CANADA & IT’S ECONOMIC SYSTEM

    § Fully developed and diversified economic system


    § The importance of our natural resources, skilled labor
    force and sophisticated technology-based businesses
    § From an agricultural to a diversified system
    § Member of the G7/8
    § Trading relationship with the United States.
    § Productivity gains, strong business investment,
    technological innovation, moderate wage increases,
    and a favorable currency exchange rate create a
    resilient and competitive Canadian economy
    CANADA & IT’S ECONOMIC SYSTEM
    § Contributing factors to Canadian economic
    development:
    § Stable political system
    § Necessary Infrastructure
    § Debt levels within acceptable limits
    § Efficient banking system
    § Well-managed inflation levels
    § Strong monetary policies and a Central Bank (Bank of
    Canada)
    § Strong natural resource base
    § COMPARATIVE ADVANTAGE
    § Ability of a country to produce or supply goods and services at
    a lower cost than other countries or to possess resources or
    unique services which are unavailable in other countries

    Think about the comparative advantages for Canada and any


    other country?
    KEY ECONOMIC INFLUENCERS
    § Some countries and economies prosper while others
    struggle.
    § United States tops the chart with a Gross Domestic
    Product (GDP) of 20.29 trillion USD while Sudan and
    Syria are struggling with USD 82.89 Billion and 22.16
    Billion, respectively

    § The question is WHY?


    KEY ECONOMIC INFLUENCERS
    In order to answer why some struggle and others are
    prosperous, we need to review the following
    1. Status of the contributing factors for economic
    development within a specific economy
    2. Nature and agility of the economic model that
    governs overall economic activity.
    CONTRIBUTING FACTORS TO
    ECONOMIC DEVELOPMENT
    FOREIGN DIRECT INVESTMENT (FDI)
    § A major part of investments to an economy comes from FDI
    § FDI occurs when a company or individual from one country makes
    an investment into a business within another country.
    § According to UNCTAD’s World Investment Report 2022
    § Canada was the 13th largest FDI destination in the world in
    2020, losing three positions compared to 2019. The U.S. and
    the EU are the main investing partners in Canada: half of the
    stock is held by the United States, followed by the UK, Japan
    and Germany.
    § China surpasses U.S. as largest recipient of foreign direct
    investment during Covid pandemic.(Reading)

    § Why do you think Canada lost two spots, or China surpassed US


    in getting FDIs during COVID?
    INFLATION
    § A rise in the level of prices of goods and services within an
    economy over a period of time.
    § Understanding Inflation( Video)
    § There has to be an equilibrium between growth and
    inflation.

    As of March, 2022, Inflation in Canada is at a 31 year high- WHY???


    2.2 DESCRIBE THE UNDERLYING ECONOMIC
    MODEL THAT SHAPES AN ECONOMY.
    UNDERLYING ECONOMIC MODEL

    Three Fundamental Market Composition


    Principles:

    1. The Law of Supply and Demand


    2. Allowance for private ownership,
    entrepreneurship, and wealth creation
    3. Extent of government in influencing economic
    activity and direction
    LAW OF SUPPLY & DEMAND
    § The law of supply and demand refers to the ability of
    the market, independent of external influences, to
    determine the price for which a product or service
    will be bought and sold
    § DEMAND
    § Inelastic Demand
    § Elastic Demand
    § SUPPLY
    § PRICE EQUILIBRIUM = The point at which the supply
    curve intersects the demand curve; no surplus or
    shortage of goods
    Law of Supply and Demand (Reading)
    PRIVATE ENTERPRISE RIGHTS
    § Includes:
    § Personal Ownership
    § Entrepreneurship
    § Wealth Creation
    § Open markets
    § Economies around the world operate differently as per
    their political and economic considerations.
    § Canada and the US fully support these concepts in a
    climate of risk versus return
    § Developing economies such as China and India are
    allowing greater access to these capitalistic principles,
    while others like North Korea are not
    GOVERNMENT INVOLVEMENT
    Many roles:
    § customer, regulator, manager, taxation agent,
    economic stimulation agent, and competitor
    CANADA: A MIXED ECONOMIC SYSTEM

    § MIXED ECONOMIC SYSTEM


    § Components of both open and controlled systems
    § Canada is a mixed economic system
    § Law of supply and demand significantly influence the
    market
    § Supported principles:
    § private ownership, entrepreneurship, wealth
    creation and their corresponding risk and return
    opportunities
    § Canadian government is an active participant in the
    economy
    TRENDS IMPACTING THE CANADIAN
    MARKET
    Prominent trends include:
    § Inflation

    § Geographic Clustering

    § Currency Exchange rate impact

    § Branch market impact

    § Sustainability and green initiatives

    § Aging workforce, immigration and multiculturalism

    § Long-Term competitiveness

    § Small business emphasis

    § Globalization
    2.3 DISCUSS THE CONCEPT OF ECONOMIC ACTIVITY
    AND HOW ECONOMIES GROW AND CONTRACT.
    THE 4 PILLARS OF ECONOMIC
    ACTIVITY AND GROWTH

    Economic Activity = Expenditures + Savings + Investment + Credit


    THE ECONOMIC GROWTH CYCLE
    § GROSS DOMESTIC PRODUCT (GDP)
    § GDP includes:
    § Domestic goods and services
    § Business investments within the economy
    § Goods produced for export
    § Government spending
    § GDP can be measured:
    § Expansion or contraction
    § RECESSION:
    § Two or more quarters of negative GDP movement
    CANADA’S GDP GROWTH (2016-2026)
    KEY ECONOMIC DRIVERS
    § Varies from country to country:
    § China - Gov. spending, production of goods and
    services and associated capital asset investment
    § USA and Canada - Consumer spending
    § US and Canadian economic activity is driven by consumer spending
    up to 70% and 60% respectively.
    § International trade, including both exports and imports, is a large
    component of Canada's economy, each making up about one-third
    of GDP.
    § Canada's largest trading partners are the U.S., China, and the U.K.
    § The three largest industries in Canada are real estate, mining, and
    manufacturing.
    § Broad base of economic activity enables the Canadian economy to
    withstand an economic downturn in one sector.
    What could be the key economic drivers for other countries.
    For example, India?
    ECONOMIC EXPANSION
    ECONOMIC CONTRACTION
    2.4 DISCUSS HOW MANAGERS CAN USE ECONOMIC
    INFORMATION TO BETTER MANAGE THEIR
    ORGANIZATIONS
    MANAGING CHALLENGES
    ▪ Managers need to understand what is happening in
    both domestic and global economy.
    ▪ Three basic questions
    1. What does the general economic indicators suggest
    about our underlying economic model principles?
    ▪ Discussed in previous sections.
    2. What are the Macro-level changes that impacts our
    businesses future growth and market position?
    ▪ PESTEL Analysis
    3. Which specific market forces or competitive actions
    may cause disruptions to our business and market
    sector?
    ▪ Competitive models
    ▪ Porter’s five forces model
    PESTEL ANALYSIS
    § A macro-level assessment of the political, economic, social,
    technology, environmental, and legal trends that can or will
    impact the markets within which an organization competes

    What is PESTEL analysis? Amazon example


    UNDERSTANDING COMPETITIVE MODELS

    Types of Think about the industries and companies


    Competition(Video) which would fit well within each model?
    PORTER’S FIVE FORCES MODEL
    ▪ This model helps a business assess and sense the changes
    happening within the market where their business operates.
    ▪ This assessment is done by evaluating movements and trends
    in the following five key areas
    1. Rivalry Among Existing Competitors
    2. Threat of New Entrants
    3. Threat of Substitute Products/Services
    4. Bargaining Power of Suppliers
    5. Bargaining Power of Buyers

    The 5 Forces that make companies successful (Video)


    PORTER’S FIVE FORCES MODEL

    Tim Hortons accelerating global growth with plans to launch in India in


    2022 (Reading)

    Why do you think Tim Hortons decided to expand its operations to


    India? Would they have benefitted from using any of the
    Management tools discussed?
    WHAT HAVE WE LEARNED TODAY?
    § Canada and its Economic System
    § Key Economic Influencers
    § The Economy in Simple Terms
    § The Economic Growth Cycle/Managing Economy
    Movement
    § Managing Challenges
    NEXT CLASS
    ▪ Business Structures and Culture

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