Table Of ContentThe Context of Business
Understanding the Canadian
Business Environment
Len Karakowsky
York University
Natalie Guriel
York University
Toronto
Vice-President, Editorial Director: Gary Bennett
Managing Editor: Claudine O’Donnell
Acquisitions Editor: Deana Sigut
Senior Marketing Manager: Leigh-Anne Graham
Program Manager: Karen Townsend
Project Manager: Rachel Thompson
Developmental Editor: Suzanne Simpson Millar
Production Services: Aptara®, Inc.
Permissions Project Manager: Joanne Tang
Photo Permissions Research: Christina Simpson
Text Permissions Research: Khalid Shakhshir
Art Director: Zeneth Denchik
Cover Designer: Bruce Kenselaar
Interior Designer: Anthony Leung
Cover Image: © Aslan Alphan/Gettyimages
Credits and acknowledgments for material borrowed from other sources and reproduced, with
permission, in this textbook appear on the appropriate page within the text.
If you purchased this book outside the United States or Canada, you should be aware that it has
been imported without the approval of the publisher or the author.
Copyright © 2015 Pearson Canada Inc. All rights reserved. Manufactured in the United States
of America. This publication is protected by copyright and permission should be obtained from the
publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any
form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain
permission(s) to use material from this work, please submit a written request to Pearson Canada
Inc., Permissions Department, 26 Prince Andrew Place, Don Mills, Ontario, M3C 2T8, or fax your
request to 416-447-3126, or submit a request to Permissions Requests at www.pearsoncanada.ca.
10 9 8 [CKV]
Library and Archives Canada Cataloguing in Publication
Karakowsky, Len, author
The context of business: understanding the Canadian business environment/Len Karakowsky,
York University, Natalie Guriel, York University.
Includes bibliographical references and index.
ISBN 978-0-13-291300-3 (pbk.)
1. Canada–Economic conditions–21st century–Textbooks.
2. Canada–Economic policy–Textbooks. 3. Business enterprises–
Canada–Textbooks. 4. International business enterprises–
Textbooks. I. Guriel, Natalie, author II. Title.
HC115.K342 2013 338.971 C2013-907169-5
ISBN 978-0-13-291300-3
Brief Contents
Part 1 A Framework for Study 1 Chapter 7 COMPETITIVE AND TECHNOLOGICAL
FORCES: How Do Industries Evolve
Chapter 1 EXPLORING CANADIAN BUSINESS
over Time? 234
A CRITICAL APPROACH: What are
the Major Challenges Facing Chapter 8 GLOBAL FORCES: How Is Canada
Business? 1 Faring in the Global Village? 2 68
Chapter 9 POLITICAL FORCES: Where Would
Part 2 The Internal Challenges 40
Canadian Business Be without Our
Chapter 2 THE EMPLOYEE–EMPLOYER Government? 309
RELATIONSHIP: What Responsibilities
Chapter 10 SOCIETAL FORCES: Can Corporations
Do Bosses Have to Their
Be Socially Responsible to All
Employees? 40
Stakeholders? 353
Chapter 3 MANAGING THE WORKFORCE:
Part 4 Adaptation and Change 404
How Can Business Leaders Best
Manage Their Employees? 77 Chapter 11 THE CHALLENGE OF SUSTAINABILITY:
Chapter 4 ESTABLISHING THE STRUCTURE Why Does Business Need to Focus
OF A BUSINESS: What Does on Sustainability? 404
Organizational Design Have to Chapter 12 CONFRONTING CHANGE: How Do
Do with Business Success? 116 Businesses Address the Challenge of
Chapter 5 BUSINESS STRATEGY: How Do Change? 448
Businesses Generate a Successful
Strategy? 159
Part 3 The External Challenges 193
Chapter 6 ECONOMIC FORCES: Oh Canada,
What Is Your Economy Like? 193
iii
Contents
Preface xii TALKING BUSINESS 1.3 Jobs, Productivity,
and Innovation: How Health Care Drives
Acknowledgements xvii
the Economy 25
About the Authors xviii
Societal Forces in Canada 28
CHAPTER SUMMARY 29
Part 1 A Framework for Study 1
CHAPTER LEARNING TOOLS 35
1 E xploring Canadian Business: A Critical
Key Terms 35
Approach
Multiple-Choice Questions 35
What Are the Major Challenges Facing Discussion Questions 36
Business? 1
CONCEPT APPLICATION: FACEBOOK:
Learning Objectives 1
WHEN YOUR FRIENDS ARE WORTH A
THE BUSINESS WORLD: CAN CANADIAN TIRE BILLION! 36
FLOURISH IN A RAPIDLY CHANGING BUSINESS
CONTEXT? 2
Part 2 The Internal Challenges 40
The Internal Context of Business 4
The Employment Relationship: Responsibilities 2 T he Employee–Employer Relationship
Toward Labour 5
What Responsibilities Do Bosses Have to Their
Leadership and Effectively Managing People 5 Employees? 40
Developing a Suitable Organizational
Learning Objectives 40
Structure 6
THE BUSINESS WORLD: IS WORKING FOR FREE
TALKING BUSINESS 1.1 Changing GM’s
ILLEGAL? 41
Organizational Structure 6
The Labour Environment and Canadian Society 43
Generating a Winning Business
Distinguishing Work and Employment 44
Strategy 7
TALKING BUSINESS 2.1 Are Unpaid Interns
The External Context of Business 7
“Employees”? 45
Specific or Task Environment 7
General Environment 8 What Is an Employee? 46
Sustainability 11 From Standard to Nonstandard Employment
The Challenge of Change 12 Relationships 47
Perspectives on Work and Government Policy 48
The Canadian Context: How’s Business in
Canada, Eh? 12 The Labour Context in Canada: Where Are
Economic Forces in Canada 13 We Now? 52
Competitive Forces in Canada 16 TALKING BUSINESS 2.2 The State of Canadian
Technological Forces in Canada 18 Unions—Down but Not Out 5 3
TALKING BUSINESS 1.2 Growth in Provincial TALKING BUSINESS 2.3 Are Unions Relevant
Labour Productivity: A Problem from Coast in Canada Today? 55
to Coast 20
Dismissing Employees 55
Global Forces in Canada 22 Common Law Rules Requiring Notice of
Political Forces in Canada 25 Termination 56
iv
Statutory Minimum Notice of Termination 5 7 TALKING BUSINESS 3.1 The Visionary Leader:
Unemployment Insurance Programs 58 Steve Jobs 84
Current Issues in the Workplace: Managing TALKING BUSINESS 3.2 Conflict Management:
Workforce Diversity 58 The Toxic Employee 8 5
Protecting Diversity and Guarding Against Management Philosophies 88
Discrimination in Canadian Law 58 Classical Approaches to Management 88
TALKING BUSINESS 2.4 Organizations Seeing The Social Context 88
the Light about Faith at Work 61 Scientific Management 89
TALKING BUSINESS 2.5 He Says, She Says: Administrative Management 92
Gender Gap Persists in Attitudes Toward Bureaucratic Management 92
Women’s Advancement in the Workplace 63
TALKING BUSINESS 3.3 Leading Teams in a
TALKING BUSINESS 2.6 Aboriginal Workers: New Direction 93
Integral to Canada’s Ongoing Competitiveness
The Classical Approaches in Perspective 96
and Performance 6 5
TALKING BUSINESS 3.4 Is Weber Alive and
TALKING BUSINESS 2.7 Ontario Employers Have
Well? 96
a New Tool to Improve Accessibility for People
with Disabilities 67 Behavioural Approaches to
The Model of the Employment Equity Act 68 Management 98
TALKING BUSINESS 2.8 Employment Equity TALKING BUSINESS 3.5 The High Costs of
Resources 70 Workplace Harassment 9 9
The Human Relations Movement 100
TALKING BUSINESS 2.9 Immigrants
Make Significant Contributions to Mary Parker Follett (1868–1933) 100
Innovation 70 Chester Barnard (1886–1961) 101
Modern Behavioural Science and Motivation-Based
CHAPTER SUMMARY 72
Perspectives 102
CHAPTER LEARNING TOOLS 72 The Best Management Philosophy? Contingency
Key Terms 72 Approach 102
Multiple-Choice Questions 72 TALKING BUSINESS 3.6 The Myths and
Discussion Questions 73 Realities of Motivation 1 03
CONCEPT APPLICATION: IMMIGRANTS ARE The Critical Importance of Trust in the
SOMETIMES UNSURE ABOUT THEIR LABOUR Workplace 106
RIGHTS 74 TALKING BUSINESS 3.7 How One Canadian
Company Earns Trust 107
3 M anaging the Workforce
Trust, Teamwork, and Citizenship 108
How Can Business Leaders Best Manage their TALKING BUSINESS 3.8 How Teams Learn at
Employees? 77
Teleflex Canada 109
Learning Objectives 77
CHAPTER SUMMARY 111
THE BUSINESS WORLD: LEARNING HOW TO BE AN
EFFECTIVE LEADER: LESSONS FROM THE EXECUTIVE CHAPTER LEARNING TOOLS 111
ROUNDTABLE 78 Key Terms 111
Multiple-Choice Questions 111
Why Study Management Thought? 80
Discussion Questions 112
What Do Managers Do ? 81
The Roles Managers Play in CONCEPT APPLICATION: KICKING HORSE
Organizations 81 COFFEE 112
Contents v
4 E stablishing the Structure of a Business TALKING BUSINESS 4.7 What Every Leader
Should Know About Survivor Syndrome 150
What Does Organizational Design Have to
Do with Business Success? 116 Why Has Downsizing Failed to Achieve Anticipated
Results? 150
Learning Objectives 116
Downsizing as a Nonrational Approach to
THE BUSINESS WORLD: HOW GOOGLE DESIGNED
Organizational Structure 152
ITSELF FOR SUCCESS 117
CHAPTER SUMMARY 155
The Changing Nature of Organizations 119
Flat Organizations 120 CHAPTER LEARNING TOOLS 155
Fluid Organizations 120 Key Terms 155
Integrated Organizations 121 Multiple-Choice Questions 155
TALKING BUSINESS 4.1 Atlantic Canada’s Discussion Questions 156
Overseas Playground? 1 22
CONCEPT APPLICATION: PIXAR: NO MICKEY
Global Organizations 123 MOUSE ORGANIZATION! 157
Thinking About Organizations 123
What Is an Organization? 123
Using Metaphors to Describe Organizations 124
5 B usiness Strategy
The Anatomy of an Organization 127
How Do Businesses Generate a Successful
What Constitutes an Organization’s
Strategy? 159
Structure? 127
Learning Objectives 159
What Determines Organizational Structure?
A Rational Perspective 131 THE BUSINESS WORLD: TIM HORTONS: IS ITS
Strategy 131 STRATEGY “ALWAYS FRESH”? 160
Organizational Size 132 What Is Strategic Management? 162
Technology 132 Analyzing the External Environment 163
Environment 132 The Five-Forces Model 163
TALKING BUSINESS 4.2 Canada’s Trade in a TALKING BUSINESS 5.1 Changes in Global
Digital World 1 34 Food Sector Call for Canadian Food
Reengineering 136 Strategy 165
TALKING BUSINESS 4.3 The Credit TALKING BUSINESS 5.2 Foresight and
Agency 1 37 Innovation: Today’s Science Fiction, Tomorrow’s
Reality? 1 69
TALKING BUSINESS 4.4 Former Outsourcer
Describes How Job Destruction Works 1 39 Analyzing the Internal Environment 169
The VRIO Model 170
Toward a Virtual Organization 140
Outsourcing 140 TALKING BUSINESS 5.3 Groupon 1 71
TALKING BUSINESS 4.5 Out-of-Control SWOT Analysis 172
Outsourcing Ruined Boeing’s Beautiful Different Levels of Strategies 173
Dreamliner 142 Business-Level Strategy 173
Networking 143 TALKING BUSINESS 5.4 Dollarama Cashing in on
Shedding Noncore Functions 143 Penny-Pinching Canadians 1 75
Downsizing 145 TALKING BUSINESS 5.5 FROGBOX: a sustainable
TALKING BUSINESS 4.6 Loblaw Cuts 700 Head franchising success 177
Office Jobs 1 46 Corporate-Level Strategy 179
Methods of Downsizing 147 TALKING BUSINESS 5.6 American Airlines
Consequences of Downsizing 148 Merges with US Airways 180
vi Contents
TALKING BUSINESS 5.7 Loblaw Gets into the Economic Growth 210
Mobile Phone Market 183
TALKING BUSINESS 6.5 The US Subprime
TALKING BUSINESS 5.8 Starbucks Buys Its First Mortgage Crisis and Recession 2 12
Coffee Farm in Costa Rica 1 84
TALKING BUSINESS 6.6 Canada’s World-Class
TALKING BUSINESS 5.9 Understanding the Deal: Economy 213
Shoppers Drug Mart and Loblaw 1 86
TALKING BUSINESS 6.7 Canada’s Productivity
Challenge 216
CHAPTER SUMMARY 187
TALKING BUSINESS 6.8 Canada’s Growing but
CHAPTER LEARNING TOOLS 188
“Invisible” Trade: Services 217
Key Terms 188
Economic Stability 223
Multiple-Choice Questions 188
Employment 226
Discussion Questions 189
TALKING BUSINESS 6.9 Today’s High Youth
CONCEPT APPLICATION: LULULEMON: FOR Unemployment: A Solution for Skill
THE LOVE OF YOGA 189 Shortages? 227
CHAPTER SUMMARY 229
Part 3 The External Challenges 193
CHAPTER LEARNING TOOLS 229
6 E conomic Forces Key Terms 229
Multiple-Choice Questions 229
Oh Canada, What Is Your Economy Like? 193
Discussion Questions 230
Learning Objectives 193
CONCEPT APPLICATION: SASKATOON:
THE BUSINESS WORLD: CANADIANS ON THE
CANADA’S FASTEST-GROWING
MOVE 194
ECONOMY 231
The Economic Environment 197
Individuals 197
7 C ompetitive and Technological Forces
Businesses 197
How Do Industries Evolve Over Time? 234
TALKING BUSINESS 6.1 Canada’s People
Advantage 199 Learning Objectives 2 34
Government 200 THE BUSINESS WORLD: FROM PERSONAL COMPUTERS
Analyzing the Economy: Two Approaches 200 TO NEWSPAPERS: TECHNOLOGY AND CREATIVE
DESTRUCTION 235
TALKING BUSINESS 6.2 Growing Gap of
Truck Drivers Will Be Costly to Canadian The Industry Life-Cycle Model 236
Economy 201 The Introduction Phase: Industry Emergence and
Types of Economic Systems 201 Creation 238
Market Economy 202 TALKING BUSINESS 7.1 The Birth of
Communism 202 Biotech 239
Socialism 203 TALKING BUSINESS 7.2 The Early Years of the
Mixed Economy 203 Automobile Industry 240
Competition and the Economy 204 TALKING BUSINESS 7.3 The Anti-Aging
Types of Competition in Free Markets 204 Industry 242
TALKING BUSINESS 6.3 Better Farm Management TALKING BUSINESS 7.4 Gray Goo and the
Separates the Wheat from the Chaff 2 05 Promising Future of the Nanotechnology
TALKING BUSINESS 6.4 Don’t Blame Professional Industry 243
Athletes for High Ticket Prices 207 The Growth Phase: Dominant Designs and
Goals of Canada’s Economic System 210 Shakeouts 245
Contents vii
TALKING BUSINESS 7.5 The Smartphone TALKING BUSINESS 8.1 Canada’s Dairy Industry
Industry 246 Under Pressure 273
The Maturity Phase: A Critical Transition 248 Channels of Global Business Activity 274
TALKING BUSINESS 7.6 The Aging Personal Exporting and Importing 274
Computer Industry 2 50 TALKING BUSINESS 8.2 Canada’s Exports to
The Decline Phase: Difficult Choices 251 China: Still Hewers of Wood and Drawers of
Water 277
TALKING BUSINESS 7.7 Are Mobile Devices
Killing The Video Game Console Industry? 252 TALKING BUSINESS 8.3 What are Canada’s
New Export Strengths? 279
Innovation and Technology 254
Types of Innovation 254 Outsourcing/Offshoring 280
Licensing and Franchising Arrangements 280
TALKING BUSINESS 7.8 Is Canada on the Leading
Direct Investment in Foreign Operations 281
Edge? 255
TALKING BUSINESS 8.4 What Helps a Country
TALKING BUSINESS 7.9 The Linked World: How
Obtain Foreign Direct Investment? 2 82
ICT Is Transforming Societies, Cultures, and
Economies 256 Joint Ventures and Strategic Alliances 284
The Evolution of Technology 258 Mergers and Acquisitions 284
TALKING BUSINESS 7.10 Embracing Disruption: TALKING BUSINESS 8.5 Is Canada Being
Lessons from Building the First Quantum “Hollowed Out” by Foreign Takeovers?
Computer 258 Putting Mergers and Acquisitions in Historical
Perspective 2 85
Technological Forecasting 260
Technology and the Changing Workplace 261 Establishment of Subsidiaries 286
The Multinational Corporation 286
TALKING BUSINESS 7.11 Will Technology Replace
The Borderless Corporation 287
Middle-Class Jobs? 262
TALKING BUSINESS 8.6 What’s the Third
CHAPTER SUMMARY 263
World? 2 87
CHAPTER LEARNING TOOLS 263
TALKING BUSINESS 8.7 Think Global, Act
Key Terms 263
Local 288
Multiple-Choice Questions 264
International Trade 290
Discussion Questions 264
The Logic of Trade 290
CONCEPT APPLICATION: HAS SODA LOST Mercantilism 290
ITS FIZZ? 265 Trade Protectionism 291
TALKING BUSINESS 8.8 Made in Canada: How
8 G lobal Forces
Globalization Has Hit the Canadian Apparel
How Is Canada Faring in the Global Industry 292
Village? 268
TALKING BUSINESS 8.9 The Futility of
Learning Objectives 268 Protectionism 2 94
THE BUSINESS WORLD: FOREIGN OUTSOURCING Promoting International Trade 294
AND RBC 269
Facilitating Global Business: Regional Economic
What Is Globalization? 271 Integration 295
Sources Encouraging Global Business European Union (EU) 296
Activity 271 Asian Trading Bloc 297
Pull Factors 272 North American Trading Bloc and NAFTA 298
Push Factors 272 Where Is Canada Headed? 303
viii Contents
CHAPTER SUMMARY 304 Should Government “Mind Its Own Business”? 339
Deregulation 339
CHAPTER LEARNING TOOLS 304
TALKING BUSINESS 9.6 The Dangers of
Key Terms 304
Deregulation 343
Multiple-Choice Questions 305
Discussion Questions 305 Privatization 344
CHAPTER SUMMARY 348
CONCEPT APPLICATION: BEIJING AND THE
CALGARY OIL SANDS 306 CHAPTER LEARNING TOOLS 348
Key Terms 348
9 P olitical Forces
Multiple-Choice Questions 349
Where Would Canadian Business Be Without
Discussion Questions 349
Our Government? 309
CONCEPT APPLICATION: THE WIRELESS
Learning Objectives 309
SERVICE INDUSTRY IN CANADA 350
THE BUSINESS WORLD: JAPAN’S TOYOTA AND
CANADA’S SUBSIDIES 310 10 S ocietal Forces
The Canadian Business Enterprise System: Can Corporations Be Socially Responsible to
Fundamental Features 312 All Stakeholders? 353
Canadian Government Structure and Roles 313 Learning Objectives 353
Levels of Government 314
THE BUSINESS WORLD: THE NEW BLOOD DIAMOND:
Federal Government Structure 316
CELLPHONES 354
Government as Guardian of Society 317
Defining Business Ethics 356
The Tax Collector Role 317
TALKING BUSINESS 10.1 High-Level Barriers
TALKING BUSINESS 9.1 Should Pop Drinkers Pay
to Public Trust in Organizations 357
More? 319
Ethical Behaviour as a Social Phenomenon 358
The Business Owner Role: Crown
Business Ethics as Managing Stakeholder Interests 359
Corporations 320
TALKING BUSINESS 10.2 Lac-Mégantic: Disaster
TALKING BUSINESS 9.2 Canada Post Faces
in Quebec 359
Billion–Dollar Operating Loss by 2020 3 21
Models for Judging the Ethics of Decisions 360
TALKING BUSINESS 9.3 Should the LCBO Be
End-Point Ethics 361
Privatized? 324
Rule Ethics 363
The Regulator Role 325
Applying the Models: A Scenario 364
Government as Guardian of the Private Business
TALKING BUSINESS 10.3 T he Business of Bribery 366
Sector 328
Do Organizations Make Us Unethical? 3 67
Government Assistance to Private Business 328
Unethical Behaviour as a Consequence of
TALKING BUSINESS 9.4 Auto Bailouts: Good or
Corporate Culture 368
Bad Idea? 330
Unethical Behaviour as a Consequence of
Government as Guardian of Business in the Global
Decoupling 371
Context 332
Unethical Behaviour as a Consequence of Work
Why Should Government Play the Role of Guardian Routinization 372
of Business in the Global Context? 333
TALKING BUSINESS 10.4 The Global
TALKING BUSINESS 9.5 More Cheese, Pharmaceutical Industry and Human
Please 335 Guinea Pigs 374
Why Government Should N ot Play the Role of Unethical Behaviour as a Consequence of
Guardian of Business 337 Organizational Identity 375
Contents ix
