Hollowing out the middle chapter summaries

INSTRUCTOR'S MANUAL

FOR

THE CONTEXT OF BUSINESS

Understanding the Canadian

Business Environment

Len Karakowsky York University

Natalie Guriel York University

Toronto

ISBN: 978-0-13-358955-9

Copyright © 2015 Pearson Canada Inc., Toronto, Ontario. All rights reserved. This work is protected by

Canadian copyright laws and is provided solely for the use of instructors in teaching their courses and

assessing student learning. Dissemination or sale of any part of this work (including on the Internet) will

destroy the integrity of the work and is not permitted. The copyright holder grants permission to

instructors who have adopted The Context of Business, by Karakowsky and Guriel, to post this material

online only if the use of the website is restricted by access codes to students in the instructor’s class that is using the textbook and provided the reproduced material bears this copyright notice.

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CHAPTER 1

EXPLORING CANADIAN BUSINESS:

A CRITICAL APPROACH

CHAPTER SYNOPSIS

This chapter introduces students to the broad-based categories of the challenges and

opportunities of businesses and other organizations. Students are introduced to the external

environmental forces of political, economic, technological, societal, competitive and global, as

well as the internal forces that drive the business: labour, leadership, structure and strategy.

LEARNING OBJECTIVES

1. Identify the key internal forces that shape any business.

2. Identify the forces that compose the specific and general environments of organizations.

3. Discuss the nature of the external forces confronting organizations.

4. Explain the importance of each of the external forces within the Canadian business context.

CHAPTER OUTLINE

CHAPTER 1

 Exploring Canadian Business: A Critical Approach: What Are the Major Challenges Facing Business? 1

 Learning Objectives 1  The Business World: Can Canadian Tire Flourish In a Rapidly Changing Business

Context? 2

THE INTERNAL CONTEXT OF BUSINESS 4

 The Employment Relationship: Responsibilities Toward Labour 5  Leadership and Effectively Managing People 5  Developing a Suitable Organizational  Organizational Structure 6  Generating a Winning Business Strategy 7

THE EXTERNAL CONTEXT OF BUSINESS 7

 Specific or Task Environment 7  General Environment 8

a. Economic forces 8

b. Competitive forces 8

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c. Technological forces 9

d. Global forces 9

e. Political forces 10

f. Societal forces 10

 Sustainability 11  The Challenge of Change 12

THE CANADIAN CONTEXT: HOW’S BUSINESS IN CANADA, EH? 12  Economic Forces in Canada 13  Competitive Forces in Canada 16  Technological Forces in Canada 18  Global Forces in Canada 22  Political Forces in Canada 25  Societal Forces in Canada 28

CHAPTER SUMMARY 29

CHAPTER LEARNING TOOLS 35

 Key Terms 35  Multiple-Choice Questions 35  Discussion Questions 36  Concept Application: Facebook: When Your Friends Are Worth a Billion! 36

BUSINESS WORLD EXERCISE

1. Refer to the Business World article “Can Canadian Tire Flourish in A Rapidly Changing Business Context (page 2).” In recent years, how have the six external forces (eg. political, economic, technological, societal, competitive and global) impacted Canadian

Tire’s business and operations? State any assumptions you may have.

Teaching Note:

In the textbook, students can use Exhibit 1.7 The External Forces Framework:

Considerations for Analysis (page 30) Here in the Instructor’s resources, please see Appendix A.

Depending upon how current and in-depth you want students to answer the question, you

can either stick to the case/article facts or get students to use the company’s web site. The suggested answers typically will be limited to the case facts; however, sometimes

reasonable assumptions or inferences can be made when the case does not specifically

mention a particular fact. For instance, this case does not really discuss the political

force. You could make an inference Canadian Tire must comply to laws and regulations

for the industries that it operates in, such as automotive and of course, employment laws

because the company has employees.

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Political – Canadian Tire must comply to laws and regulations for the industries that it operates in, such as automotive, hardware, sports etc and of course, employment laws

because the company hires employees.

Economic – The state of the economy is not mentioned in the case. We can assume that if there was a recession, sales may go down; however, Canadian Tire sells many items that

people need every day, so it may not be impacted in the same way as a company, for

example, selling luxury goods, which people don’t need every day.

Technological – Changing technology that affects the internet or how consumers like to shop is forcing Canadian Tire to respond. In 2013, Canadian Tire announced plans to

significantly improve its digital technology practices, including a partnership with

Communitech, a technology company based in Kitchener, Ontario. The aim is to develop

apps, content, and other digital innovations to improve the shopping experience of

Canadian Tire customers, both online and in the store. Canadian Tire also recently

relaunched its online store after executives aborted a previous attempt in 2009. Among

the items sold online are tires and wheels, which have to be picked up at Canadian Tire

stores where many will also be installed.

Societal – Changing consumer preferences or trends have also impacted Canadian Tire.

Smartphones - Canadian Tire recognizes that consumers are using their smartphones to

compare prices and shop smarter. In 2013, Canadian Tire announced plans to

significantly improve its digital technology practices, including a partnership with

Communitech, a technology company based in Kitchener, Ontario. The aim is to develop

apps, content, and other digital innovations to improve the shopping experience of

Canadian Tire customers, both online and in the store.

Online shopping – Online shopping has become more of an expectation by consumers. Consumers expect to log onto a companies’ website and see all the products and services it offers, the price and other variables. For example, Canadian Tire recently relaunched its

online store after executives aborted a previous attempt in 2009. Among the items sold

online are tires and wheels, which have to be picked up at Canadian Tire stores where

many will also be installed. This effort was in response to a growing trend of Canadians

buying their tires online through US-based websites and having them shipped directly to

local mechanics.

Competitive – Canadian Tire is a diversified Canadian retailer. It competes in many industries because of the products and services that it sells. As the name indicates,

Canadian Tire sells tires and automotive goods and services such as repair and

maintenance services. The company also sells hardware, sports equipment and clothing.

In other services, Canadian Tire owns a banking operation, Canadian Tire Financial

Services for its credit card, and the company recently began offering home installation

services such as garage door openers, central vacuum installations and heating and

cooling systems. Its competitors are therefore many. As a department store retailer, some

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examples are Walmart, Target, and Home Depot. However, Canadian Tire’s competitors can be sub-categorized according to all the sub-industries it operates in.

Global – Global retailers such as Walmart, Target and Home Depot have forced Canadian Tire to compete against larger box stores.

TALKING BUSINESS EXERCISES

1. Refer to the Talking Business 1.1 - “Changing GM’s Organizational Structure.” (page 6) How has GM’s change in structure helping its operations?

Generally, GM’s change in structure is:  allowing a better alignment with the company goals and strategies (eg. branding)  improving communication (eg. messaging, sharing)  providing clearer roles  helping future needs

2. Refer to the Talking Business 1.2, “Growth in Provincial Labour Productivity: A Problem from Coast to Coast.” (page 20) How can Canada improve its labour productivity?

Canada can improve its labour productivity in three ways: labour composition, capital

intensity and multifactor productivity.

Labour composition - generally refers to the skill set of the workforce. Certainly, having

a better educated and skilled workforce can improve productivity by understanding how

to do things better and more efficiently.

Capital intensity - typically refers to the amount of capital invested per worker. Policies

that reduce corporate taxes and regulations; in other words, leave more money in the

hands of business can boost investment and lead to greater productivity.

Multifactor Productivity (MFP) growth – sometimes is viewed as the efficiency created from the right labour and capital mix. Government initiatives such as investments to

public infrastructure and a reduction in interprovincial trade barriers have helped

provinces increase MFP growth. Business spending on research and development has

also helped boost MFP.

3. Refer to Talking Business 1.3, “Job Productivity and Innovation: How Health Care Drives the Economy.” (page 25) How does health care contribute to Canada’s economy?

Jobs - The health care sector employs about 1.4 million doctors, nurses, and medical

administration staff, which makes up 9% of total jobs in Canada. Through its supply

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chain of medical and clinical equipment and other professional services, another 45,000

jobs exist.

Productivity – The health care sector contributes to productivity. That is, how efficient goods and services are produced. Certainly, the health care sector has played a role in

trying to decrease worker absenteeism rates from stress, disability and illness. In other

words, healthier workers are more productive workers.

Innovation – The health care sector contributes much to research and innovation that has led to economic output of trillions of dollars. Clearly, improvements to health care allow

people to live longer lives and thus, people remain in the labour force longer and

contribute to consumer spending and wealth creation.

SAMPLE CLASS DISCUSSION QUESTIONS

1. Choose a company. Research it on the internet, and perform an external forces analysis.

How have the political, economic, technological, societal, competitive and global forces

impacted this company?

Teaching note: Usually pick a time frame of the most recent 1-3 years, otherwise some

facts may be too old to be relevant anymore.

2. What is Canada’s competitive advantage today? What do we excel at? Consider, is this sustainable?

Teaching note: For example, if you picked natural resources, what type of resource is a

competitive advantage exactly? Is it oil and gas, trees, etc? Is this a non-renewable

resource that is depleting and will soon be used up? How then does Canada compete

with the rest of the world?

3. What are the strengths of Canadian banks?

Teaching note: The answer is in the textbook page 14-15.

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CHAPTER LEARNING TOOLS

Multiple Choice Answers (also available in the back of the textbook, page 487)

1. B, 2. D, 3. B, 4. C, 5. D, 6. D, 7. D, 8. D, 9. D, 10. B, 11. A, 12. D, 13. B, 14. C, 15. B

Discussion Questions

1. Identify and explain four internal challenges for business

The four internal challenges for business are labour, leadership, strategy and structure.

Labour - Labour or workers are usually interested in maximizing the income they receive

from the sale of their labour, whereas businesses usually desire to maximize profit. These

two objectives can clash, creating conflicts that can have negative effects on productivity

and profits, as well as the economy and society more generally.

Leadership – How do we manage people in order to meet the objectives of the organization and allow successful results?

Structure – An organizational structure is a deliberately planned network or pattern of relationships that exists among individuals in various roles or positions. This includes the

formal hierarchy of authority, the distribution or grouping of work (for example, into

departments) and the rules or procedures that control and coordinate behaviour in the

organization.

Strategy – Deciding what strategies the organization should pursue is a key task of managers. There are three generic strategies.

2. Describe the difference between the general environment and the specific environment.

The general environment – is the environment shared by all organizations in a society, such as the economic and political environments, and technological, societal, competitive

and global forces.

The specific environment – is the environment within which a particular organization operates, which is ultimately shaped by the general environment and includes

stakeholders, customers, competitors, suppliers, and so on.

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3. Identify and describe the six external challenges for business.

Political – Political forces are the government forces of a country that impose laws and regulations on a business or organization to comply to. The political environment can

dictate changes in how a business competes or what services it offers and how they can

be offered.

Economic – The state of the economy can affect the profitability of a business. A recession can increase unemployment, reduce consumer spending and subsequently,

cause a drop in sales. On the other hand, a strong economy can reduce unemployment,

encourage consumer spending and subsequently cause an increase in sales.

Technological – Technology plays a central role in how an organization functions, how it obtains resources, and, ultimately, how effectively it competes. Improved technology can

reduce a business’s operating costs, allow telework for employees and allow business processes to be redesigned or reengineered.

Societal - Societal forces represent the members of society that can exert influence on a

business. Customers, the general public and the media are three examples. Certainly,

changes to customer preferences, demographics and/or values and ethics can affect how

society responds to a business product, service or initiative.

Competitive – Competitors are organizations operating in the same industry and selling similar products and services. However, competitors may compete in different

ways. For instance, competitive forces operate both domestically and globally. Clearly,

increased competition is an ongoing threat for most businesses.

Global - Global forces, in many ways, are forces that could be considered part of general

economic, political, technological, competitive, or societal forces, but are international in

nature.

4. Provide five examples of an external stakeholder.

Teaching Note:

Students here can choose from a wide variety of stakeholders. You can also frame the

question to ask which 5 external stakeholders are likely most influential or most

important for business to satisfy?

Customers – want quality products at the best price.

The general public – wants to ensure the business is acting appropriately in the community it operates in. For example, providing jobs, complying with laws, and not

harming its workers or surrounding environment.

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The government – wants to collect business taxes, regulates industries through laws and regulations.

Suppliers – want to ensure business will buy goods from them, as well as pay for their products and services in a timely manner.

Creditors – want to ensure the company remains profitable to collect loans or other liabilities owing.

Lawyers – may need to assist business in reviewing contracts, defending lawsuits, etc

Auditors – may need to audit the companies’ financial statements.

Media – may write business news articles, providing either positive and negative reports.

Environmentalist – may boycott unsafe or harmful products to the environment

Industry associations – may want to help business members be successful and deal with challenges etc.

Other interest groups?

5. How can the political force influence business?

The political environment can dictate changes in how a business competes or what

services it offers and how they can be offered. The political force can impact how a

business operates due to country stability, laws and regulations, taxes, trade relationships,

environmental fees, business incentives, crown corporation activities and deregulation

and privatization activities.

Teaching Note: Students can consider the following:

Country stability - Are there wars, natural disasters, national debt, civil unrest, or other

issues that threaten the government and businesses being able to function?

Laws and regulations - How do municipal, provincial, federal, or international laws and

regulations affect business operations, projects, and activities?

Taxes - What taxes does your organization have to pay? For example, corporate tax,

property tax, sales tax, land transfer tax, tariffs on imported goods, etc.

Trade relationships - How is a country’s trade relationship with another country affecting business? - Is there a free trade agreement (e.g., NAFTA) or trade barriers (e.g., quotas

and tariffs)? Does the relationship protect domestic business or open up the market to

foreign competition?

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Environmental fees - Are there environment fees that businesses need to collect and

remit? For example, are there recycling fees on designated electronic products or garbage

collection fees?

Business incentives - What incentives does the government give businesses to encourage

them to operate in a particular region, create jobs, increase profitability, or increase

competitiveness? For example, in Canada, the Scientific Research and Experimental

Development (SR&ED) tax credit for eligible companies encourages research and

innovation; subsidies (e.g., free cash or loans by government) also support certain

industries.

Crown corporations - Are there certain industries the government has control over that

affect how your business operates and competes? (For example, the Liquor Control

Board of Ontario (LCBO), Canada Post, etc.)

Deregulation/privatization - Are there certain industries the government is releasing

control over that may affect how your business operates and competes?

6. How can the societal force influence business?

The societal force can include customers, the general public, bloggers, the media and so

on. Certainly, society can influence business due to consumer preferences, demographics

and values. For example, if consumers prefer to access emails from their mobile devices

rather than their desktop computer, businesses like Yahoo may be forced to change

advertising to make it more suitable for smaller viewing. Another example is

demographics. As society ages, there will be more demand for health services and related

support products. And of course, society has a growing concern over business and its

ethical behaviour. Individuals can easily boycott a product or write about it on a blog.

7. Compare and contrast competitive force and technological force. How do they relate to

one another?

To compete effectively, organizations must continually create new and better methods of

serving customers. Competitors are organizations operating in the same industry and

selling similar products and services. However, competitors may compete in different

ways. Often competition can become more intense or change as new technology is

invented or improved. Technology plays a central role in how an organization functions,

how it obtains resources, and, ultimately, how effectively it competes. Certainly,

technological evolution can cause industry evolution.

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8. Why is organizational learning important to a company’s success?

Organizational learning allows organizations to effectively change or adapt to their

environment by learning how to recognize the need for change, and what actions are

necessary to adapt. Some management scholars have suggested that organizational

learning represents the collective experience of individuals within the organization and

happens when organizational procedures change as a result of what has been learned.

Organizational learning, in this sense, involves a three-stage evolution in which the

highest stage incorporates three aspects of learning: adapting to the environment, learning

from employees, and contributing to the learning of the wider community or context. The

ability of organizations to adapt to and change with a changing environment is dependent

on the ability of their members to change and adapt. The best business leaders are

essentially facilitators of change. Such facilitators are individuals with vision who can

encourage others to leap into a new paradigm.

9. How is the resource industry impacting Canada’s economy?

Canada’s resource industry is made up of Canada’s forests, farms, fisheries, mines, and oil and gas sectors. Traditionally, most provincial economies benefited from the resource

sector.

Canada’s economy was built on extracting and exporting these raw materials. As early as the 1600s, companies began selling Canadian resources abroad. In 1670, for example, the

Hudson’s Bay Company was formed and began trading fur with European countries. By the early 1900s, significant industry had developed in Canada. Numerous mining

companies began extracting minerals and coal from Alberta’s landscape. Similarly, other companies saw great opportunity to extract and manufacture forestry products. In 1909,

for example, a pulp and paper mill was established in Grand Falls, Newfoundland.

Similarly, the Maritime provinces had flourishing fishing industries with easy access to

the Atlantic Ocean and other bodies of water. Across Canada, individuals moved to

places of employment, and towns grew around industry leaders. The resource sector

became the foundation of Canada’s economy and economic growth for the next century, creating jobs and prosperity for many. Today, the resource sector is still an important part

of Canada’s economy, but faces a number of challenges:

Depleting resources: Over the past century, many renewable and non-renewable

resources have been significantly depleted. Mining companies have had to rely on lower-

grade ores; in the forestry industry, depletion of high-quality fibre has led companies to

exploit second- and third-growth timber in less accessible areas; and in the fishing sector,

the Newfoundland cod fishery had been essentially exhausted by the late 1980s.

New technology and equipment: Costs have increased significantly for improved

technology and extraction equipment. New equipment has been required to improve

production efficiency, to extract resources requiring advanced extraction systems, to gain

greater value from production inputs, and to sustain Canada’s competitive position in

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the global commodities marketplace.

Foreign competition: Foreign competition presents another challenge to Canada’s natural resource industries. The US softwood lumber producers, for example, have been a major

competitor to Canada, resulting in several legal battles over unfair competition practices.

Inexpensive labour costs have also been a competitive advantage for foreign producers.

In 2009, AbitibiBowater Inc. (now known as Resolute Forest Products), closed its Grand

Falls pulp and paper mill because of reduced demand for paper and increasing labour

costs.

Pressure from environmental groups: Similarly, environmental concerns have resulted

in new regulations for Canadian companies, to which foreign producers are not subject.

The high rate of extraction of natural resources has led environmental groups to

lobby governments to protect wilderness areas, reduce yields extracted, and require

10. Does Canada have a competitive advantage?

Typically, a competitive advantage is achieved when an organization excels in one or

more attributes that allow it to outperform its competitors. An attribute might be having a

highly skilled staff, a patented technology, a unique marketing strategy, a well-known

brand, or something else that makes the company a leader in its field. In terms of a

country having a competitive advantage in an ‘area’ is certainly open to debate.

In the global economic environment, countries compete through trade and strive for

a competitive advantage based on the goods and services they sell. Some countries are

recognized for their superior products. The United States, for example, is known for

producing world-class Hollywood movies. Belgium is known for crafting decadent

chocolates. And England is recognized for its fine bone china. But what is Canada known

for?

Some observers will argue that its our natural resources that give us a competitive

advantage. Other observers disagree and argue that we aren’t ‘making’ anything. For instance, while we produce lumber, we are not known as the best furniture makers in the

world.

Teaching note: This may be a good classroom discussion question, where students can

research Canadian industries that are in demand globally. Students can start by

researching the question: what are strong Canadian exports?

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Conception Application

Case: Facebook: When your friends are worth a billion

1. What elements of the external and internal environment do you think contributed to

Facebook’s success?

External forces:

Political - Laws about the internet were limited, so there were no regulations limiting its

grow or usage.

Economic - Membership growth was not dependent on the state of the economy, since the

social media service was free. Customers did not have to pay for it.

Technology - The social media site is internet-based, so it is available in most countries.

Various types of technology have been used to create interest and encourage members to

log onto the site regularly. There is the technology that allows photos to be posted;

'pokes' and 'likes' are interactive; online games are another example. The technology

allowed people a free way for family and friends to communicate and stay in touch,

replacing long-distance phone calls, letter writing etc.

Societal - Facebook was originally used only by Harvard students, so there was privacy

and exclusivity. However, as it grew amongst universities and then to the general public,

Facebook allowed family, friends and even coworkers a free and enjoyable way to

communicate with each other and stay and touch, by posting messages, photos, etc.

Competitive - Facebook quickly grew and became the leader in social media. As of 2013,

it has over 1 billion members. Initially, there weren't as many competitors. So, it grew

quickly.

Global - Since Facebook is internet-based, membership grew quickly in the United

States, Canada and globally, allowing a presence in various countries.

Internal forces:

Managing people - Workers are encouraged to work in teams. Workers who haven't

finished their training programs are encouraged to work on the live site.

Structure - It is a company without a large hierarchical structure. There are only 4,600

workers globally, so a lean company. Facebook therefore may be able to adapt quicker to

market changes, with less lines of authority and 'approvals' required.

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2. Which elements of the external and internal environment are beginning to create

challenges for Facebook?

Political - Privacy laws vary in different countries, Therefore, Facebook must be

compliant with privacy laws globally or otherwise its could face penalties, as well as,

countries may block their sites. Disgruntled shareholders have also filed lawsuits against

Facebook questioning the validity of the valuation of its initial public offering.

Economic - The economy may now play more of a role in Facebook's success, since

Facebook's business has diversified into advertising revenue, smartphone sales and online

game revenues. If there is a downturn into the economy, organization may lower their

advertising budget and not advertise on Facebook. On the other hand, if the economy is

in a downturn, there may be more people unemployed and therefore at home and using

Facebook, so companies may see this as a good time to advertise on Facebook. Similarly,

our businesses, such as smartphones sales, could go down during a recession. On the

other hand, a recession and more unemployed people could cause a rise in online game

sales, since people are at home and have more time on their hands.

Technology - Facebook needs to ensure technology is always working 100% so members

do not get frustrated with using the site. Other new technological features need to be

added occasionally to keep users interested and engaged in the site.

Societal - Concerns over privacy, cyberbullying, safety and security etc are discouraging

some people from using the site. Certainly any additional problems with privacy can lead

to bad publicity and discourage future membership; and therefore, will affect advertising

revenues and growth.

Competitive - Facebook has many more competitors now than it did a decade ago. A few

examples include GooglePlus, Twitter and LinkedIn. Clearly, customers have more

choice in social media sites that are also free to use. Facebook’s competitive environment today involves a few industries: advertising, selling information about users, online

games, and selling smartphones. For example, Facebook also competes against

smartphone companies as it entered the smartphone market in 2013 with the HTC First.

Facebook therefore competes against Apple, Blackberry, Samsung, Noika and other

smartphone companies.

Global - Global competitors are increasing too. Certainly some markets are already

dominated by certain sites. In China, 1.3 billion users use Sina Weibo, Renren, and

Tencent. In Russia, another large market, 100 million citizen use VKontakte.

3. Which force must Facebook work the hardest to address to continue to prosper? Why?

Teaching note: Which force Facebook must work the hardest to address is open to

interpretation, and should be supported by strong arguments. Students should state why

certain forces need to be addressed the most. To have a strong answer, students can also

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indicate why other forces are weaker and not as important. The answer of this question

may change due to changes in the business and related news developments. This question

can also be used as a research question and students can research the current status of

the company and what are its most immediate concerns and challenges.

Certainly, competition has increased. However, students can also argue that Facebook

may have more of a niche, whereby it is used for family and friends to stay in touch,

whereas LinkedIn, for example, serves more as a professional resource tool.

Privacy concerns are also growing since people are concerned about identity theft and so

on.

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Appendix A

The External Forces Framework: Considerations for Analysis

Economic

a. State of the economy

 Is the economy growing or slowing down?  What stage of the business cycle is the economy in?

o expansionary (slow, moderate, high growth)

o peak

o contractionary (recession)

o trough

 How is the economy affecting business? Are businesses expanding operations or downsizing?

b. Interest rates

 What are the lending interest rates?  Are they low, moderate, or high?  How are interest rates affecting business?  low interest rates = lower financing costs  high interest rates = higher financing costs

c. Currency rate

 What is the domestic currency rate compared to other countries?  Is the currency rate appreciating or depreciating?  How is the currency rate affecting business?  If the domestic currency is appreciating,

= more expensive for foreign countries to buy Canadian goods (exports)

= less expensive for Canadians to buy foreign goods (imports)

 If the foreign currency is appreciating, = more expensive for Canadians to buy foreign goods (imports)

= less expensive for foreign countries to buy Canadian goods (exports)

d. Unemployment rate

 What is the unemployment rate?  How is the unemployment rate affecting business?  low unemployment = more people working = increased spending power  high unemployment = less people working = decreased spending power

e. Inflation rate

 What is the inflation rate?  How is inflation affecting business?

low inflation = price level increasing at a slow pace

high inflation = price level increasing at a rapid pace

f. National debt

 What is the national debt?  Is a country’s debt so high that it is creating economic instability in the country?

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Competitive

a. Type of competition

 What type of competition exists in your industry? o perfect competition

o monopoly

o oligopoly

o monopolistic competition

b. Phase of the industry in industry life-cycle model

 What phase of the industry life-cycle model is your industry in? o introduction

o growth

o mature

o decline

c. Intra-industry competition

 How competitive is your industry? (Low, moderate, or high?)  How large is your company compared to your competitors?  Does your company dominate the industry?  Did your company create an industry standard?  Who are your competitors?  How many competitors do you have?  Do you have domestic and foreign competition?  What opportunities and threats exist in your industry that can affect your company being

more competitive or less competitive?

Technological

a. Type of technology

 What types of technology are used in your company’s industry?  How is technology impacting or changing business?

o Work approaches

 Videoconferencing versus in-person meetings  Tablets versus desktop computers

o Equipment

 Manufacturing assembly line  Special computer-aided tools

o Electronics

 Smartphones, tablets, robotics, etc. o Telecommunications

 Internet, phone service, etc. o Processing systems

 Computers, data processing systems, etc. Political/Legal

a. Country stability - Are there wars, natural disasters, national debt, civil unrest, or other issues

that threaten the government and businesses being able to function?

b. Laws and regulations - How do municipal, provincial, federal, or international laws and

regulations affect business operations, projects, and activities?

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c. Taxes - What taxes does your organization have to pay? For example, corporate tax, property

tax, sales tax, land transfer tax, tariffs on imported goods, etc.

d. Trade relationships - How is a country’s trade relationship with another country affecting business? - Is there a free trade agreement (e.g., NAFTA) or trade barriers (e.g., quotas and

tariffs)? Does the relationship protect domestic business or open up the market to foreign

competition?

e. Environmental fees • Are there environment fees that businesses need to collect and remit? For example, are there recycling fees on designated electronic products or garbage collection

fees?

f. Business incentives - What incentives does the government give businesses to encourage

them to operate in a particular region, create jobs, increase profitability, or increase

competitiveness? For example, in Canada, the Scientific Research and Experimental

Development (SR&ED) tax credit for eligible companies encourages research and

innovation; subsidies (e.g., free cash or loans by government) also support certain industries.

g. Crown corporations - Are there certain industries the government has control over that affect

how your business operates and competes? (For example, the Liquor Control Board of

Ontario (LCBO), Canada Post, etc.)

h. Deregulation/privatization - Are there certain industries the government is releasing control

over that may affect how your business operates and competes?

Societal

a. Societal customs, attitudes, values, ethics

 What does society think about certain issues (the environment, foreign-made goods, workers’ rights, health and safety issues, etc.)?

 What demands are consumers requiring businesses to adhere to that are driven by values, customs, attitudes, and ethics? (Corporate social responsibility, fair reporting,

sustainability, etc.)

b. Demographics

 Is the majority of the population young or old?  How is the age of the population affecting consumer spending and demand for certain

products and services?

 How are demographics affecting or changing business? c. Consumer preferences

 What products and services are customers preferring and willing to pay for?  Are consumer preferences changing? If so, why?  How are consumers’ changing tastes affecting business?

Global

Global forces include all of the forces described above in an international context.

a. Political - Are political issues and events in foreign countries affecting how domestic

companies do business? (Country stability, laws, taxes, trade relationships, etc.)

b. Economic - How are foreign economic conditions affecting domestic businesses? (e.g., Will

the debt problems of Europe affect the economy in Canada and the global economy?)

c. Technological - How do foreign technological innovations affect competition for Canadian

firms? (e.g., iPhone technology versus BlackBerry technology?)

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d. Societal - How do Canadian societal values, attitudes, and expectations affect business

operations in other countries? How do foreign societal values, attitudes, and expectations affect

businesses in Canada?

e. Competitive - How do foreign companies impact how domestic firms operate and compete?

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CHAPTER 2

THE EMPLOYEE-EMPLOYER

RELATIONSHIP

CHAPTER SYNOPSIS This chapter focuses on the employee-employer relationship and the role of labour in organizations. Legal responsibilities and the definition of an employee is addressed as well as government policy. Four perspectives on the governance of work are also considered such as the neoclassical, managerial, industrial pluralist, and the critical perspective. The chapter also introduces to students the role of unions and diversity opportunities and challenges in the workplace.

LEARNING OBJECTIVES

1. Discuss the meaning and significance of employment and explain how it differs from other forms of work arrangements.

2. Explain the difference between the standard employment and the nonstandard employment relationship.

3. Identify and explain the main perspectives that shape debates about the appropriate role of markets, management, unions, and legislation.

4. Explain how we balance the interests of employers and employees when employment relationships are terminated.

5. Identify and explain the business responsibilities and opportunities within Canada’s diverse labour force environment.

CHAPTER OUTLINE CHAPTER 2  The Employee–Employer Relationship: What Responsibilities Do Bosses Have to Their

Employees? 40  Learning Objectives 40  The Business World: Is Working For Free Illegal? 41 THE LABOUR ENVIRONMENT AND CANADIAN SOCIETY 43  Distinguishing Work and Employment 43  What Is an Employee? 46  From Standard to Nonstandard Employment Relationships 47  Perspectives on Work and Government Policy 47

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THE LABOUR CONTEXT IN CANADA: WHERE ARE WE NOW? 53  Dismissing Employees 55  Common Law Rules Requiring Notice of Termination 56  Statutory Minimum Notice of Termination 57  Unemployment Insurance Programs 58  Current Issues in the Workplace: Managing Workforce Diversity 58  Protecting Diversity and Guarding Against Discrimination in Canadian Law 58  The Model of the Employment Equity Act 68 CHAPTER SUMMARY 72 CHAPTER LEARNING TOOLS 72  Key Terms 72  Multiple-Choice Questions 72  Discussion Questions 73  Concept Application: Immigrants Are Sometimes Unsure About Their Labour Rights 74

BUSINESS WORLD EXERCISE

1. Refer to the Business World article “Is Working for Free Illegal (page 41).” Explain the pros and cons of unpaid internships for companies, students and the overall economy.

Teaching note:

Students can draw direct examples from the case, as well as make reasonable

assumptions or inferences where appropriate.

Companies

Pros Cons

 Companies get free labour which helps save money on salary, benefits, and administration costs.

 Companies develop an available, trained labour pool to potentially hire from.

 Companies may benefit from fresh ideas.

 Students may not be as committed if no pay is involved.

 Companies may incur some administration costs in interviewing and training interns.

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Students

Pros Cons

 Students gain work experience to help find a future job.

 Students learn about the industry.  Students can get a potential job

reference.

 Students complete educational requirements.

 Students may develop some interpersonal skills (eg. working with people).

 Students have no income to pay rent, food, student loans or other obligations.

 Students may have to work a part- time paying job to pay bills on top of internship work.

 Unpaid interns are not employees, so they have no employment rights.

 There are no labour laws to protect interns.

 There is no guarantee of full-time employment.

Economy

Pros Cons

 Companies have lower labour costs, so are more profitable and therefore can use profits for other investment and business growth.

 Unpaid internships help students gain work experience to find employment and contribute to the economy.

 Unpaid internships replace real jobs and drive down wages.

 Unpaid internships lead to higher unemployment among youth.

 Unpaid work can contribute to less consumer spending.

 Unpaid work results in no taxable income to pay for government programs and services.

TALKING BUSINESS EXERCISES

1. Refer to the Talking Business 2.1 - “Are Unpaid Interns Employees.” (page 45) What are some of the factors that must be considered in determining whether or not an intern is an

employee?

Some of the factors that must be considered are:

 Who performs the work?  Who supplies the services?  Who receives training from the employer?

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 Is the internship part of a higher education co-op program?  Are there any employees that are displaced?  Is the training similar to a vocational school?  Who mainly benefits from the training: the individual or employer?  Does the individual have the right to become an employee?  Is the individual advised about receiving no remuneration?

2. Refer to the Talking Business 2.2, “The State of Canadian Unions – Down but Not Out” (page 53) and refer to the Talking Business 2.3, “Are Unions Relevant in Canada Today” (page 55). According to the two articles, what are some of the challenges unions are

currently facing?

Some of the challenges are:

Wages not as high - Union wages (compared to non-union wages) are not as high as they once were. The difference in wages is less than 8%. Less unionized workers – Today, there are less workers covered by a collective agreement. Only about 29-31%. So, there is less union membership and therefore, less union dues. Many industries not unionized - There is difficulty in organizing certain industries such as agriculture, services and financial sectors. Limitations of traditional model - There are some limitations with the traditional union model. Some unions want to include students, retirees and the unemployed but they have not yet determined how to do so. Unions need to adapt - Unions need to adapt to today’s realties: slow economic growth, rapid technological change and increasing global competition. Political change - There are legislative changes restricting union certification processes. Economic change - There are changes in the economy, such as a reduction (“hollowing out”) of the manufacturing sector. Societal changes - Demographic changes have affected the perception of the value that unions can bring to the labour force. For instance, many older workers support unions, while many younger workers do not. During their employment, older workers had experienced wage gains, advances for women, racial equality and better working conditions. On the other hand, the younger generation has been the benefactor of these past gains and has not directly seen the before and after results.

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3. Refer to the Talking Business 2.2, “The State of Canadian Unions – Down but not Out” (page 53) and Refer to the Talking Business 2.3, “Are Unions Relevant in Canada Today” (page 55). According to the two articles, what have been some of the benefits of unions?

Some of the benefits of unions are:

Increased wage competitiveness - Union wages in collective agreements have served as a benchmark and have influenced non-union wages as they increased wage competitiveness. Improved equity and working conditions - Unions have increased wages and helped with pay equity for women, racial equality and improved working environments. Improved public policy - Unions have lobbied the government and achieved public policy improvements in workplace health and safety, pension benefits and literacy.

4. Refer to Talking Business 2.4, “Organizations Seeing the Light about Faith at Work.” (page 61) How can organizations benefit by having policies that support religious

diversity?

Benefits of policies that support religious diversity include:

 Attracting and retaining valued employees  Improving employee morale  Improving employee loyalty  Improving efforts towards corporate social responsibility  Leveraging unique knowledge, talents and backgrounds

5. Refer to Talking Business 2.5, “He Says, She Says: Gender Gap Persists in Attitudes toward Women’s Advancement in the Workplace.” (page 63) What are some factors that affect women’s advancement in the workplace?

Factors that can affect women’s advancement in the workplace include:

 Abilities  Motivation  Leadership opportunities  Attitudes

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6. Refer to Talking Business 2.6, “Aboriginal Workers: Integral to Canada’s ongoing Competitiveness and Performance.” (page 65) According to the Conference Board of Canada article, what factors may help Aboriginal workers contribute to Canada’s ongoing competitiveness and performance?

Factors that may help Aboriginal workers include:

 Continuing education to advanced degrees  Additional work experience and skills  Better transportation and access to jobs  A reduction in negative stereotypes by society

7. Refer to Talking Business 2.7, “Ontario Employers Have a New Tool to Improve Accessibility for People with Disabilities.” (page 67) What is the purpose of the Employers’ Toolkit?

The purpose of the Employer’s Toolkit is:

 To assist employers in understanding and implementing the Employment Standard in regards to the Accessibility for Ontarians with Disabilities Act (AODA).

 To make workplaces more inclusive where everyone has access to work, is treated with respect and is valued.

 To reduce the unemployment rate for people with disabilities.  To help prepare for looming labour shortages.

8. Refer to Talking Business 2.8, “Employment Equity Resources.” (page 70) Identify what are three government departments that help employers and workers with labour and

equity issues?

Three government departments that help employers and workers with labour and equity issues:

 Government of Canada Labour Program  Employment and Social Development Canada  Human Resources and Skills Development Canada

9. Refer to Talking Business 2.9, “Immigrants Make Significant Contributions to Innovation.” (page 70) How is immigration contributing to Canada’s economy?

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Immigration is contributing to Canada’s economy in the following ways: Improving trade - Immigration rates can affect trade levels. For example a one percentage point increase in the number of immigrants can translate into an increase in exports by 0.11 per cent.

Improving innovation - Immigrants bring diverse knowledge and experience that can increase innovation. Immigrants are motivated, risk takers and predisposed to be innovative.

Improving foreign direct investment - Foreign direct investment increases when Canada increases immigration from those countries.

SAMPLE CLASS DISCUSSION QUESTIONS

1. Ask the class a general question: Put up your hand if you have had a part-time,

temporary or contract position? Ask what type of job was it; the number of hours per

week; the pay range; and what if any benefits it provided?

Teaching note: Students can discuss this in groups or as a class to get a sense of the

different types of precarious jobs that currently exist and how they may vary.

2. Do you think Canada’s employment laws do enough to protect workers from

discrimination? Why or why not?

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CHAPTER LEARNING TOOLS

Multiple Choice Answers (also available in the back of the textbook, page 487) 1. D 2. B 3. A 4. B 5. C 6. D 7. D 8. D 9. B 10. D 11. D 12. C 13. A 14. C 15. D

Discussion Questions

1. Why does the distinction between employment and other forms of work arrangements

matter to businesses in Canada?

Whether a work arrangement is characterized as employment or as some other form of business arrangement has significant implications in Canada. That is because many legal rights and entitlements are tied to the existence of an employment relationship. For example, Canadian governments have enacted a considerable amount of legislation to regulate employment based on the theory that employees require government protection because of their vulnerability to the employer. Employment standards legislation is one example. It entitles employees to a minimum wage, overtime pay, mandatory time off and holiday pay, and notice of termination among other benefits. None of these entitlements apply unless the arrangement is characterized as employment. Similarly, human rights laws prohibit discrimination in employment relationships, and access to unemployment insurance, public pension schemes, and workers’ compensation benefits are often contingent upon a worker having been employed for a period of time prior to making their claim for benefits. Tax systems also treat employees and nonemployees differently—nonemployees can deduct business expenses from their taxable income, whereas employees cannot.

2. What are some potential benefits and disadvantages to businesses of hiring employees

rather than retaining independent contractors?

Benefits Disadvantages

 foster worker commitment  retain knowledge and skills learned by

employees

 promote loyalty

 must comply with employment standards laws such as minimum wage, overtime pay, mandatory time off, holiday pay

 must pay insurance premiums  must provide notice to employees upon

termination

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3. Explain the difference between standard and nonstandard employment.

The Standard Employment Relationship (or SER) is characterized by regular, full-time hours at a single employer, often spanning an entire working career. Employees working under an SER receive periodic pay raises and their employers usually provide health benefits and pension plans. The SER functions in the shadow of an extensive array of government regulation that guides the relationship and is underpinned by a strong social security net that provides protection to employees whose employment ends for one reason or another. For example, an employee who is laid off due to lack of work is entitled to unemployment insurance benefits, and an employee injured at work is entitled to workers’ compensation benefits. Unemployment and workers’ compensation benefits are funded by mandatory employer contributions.

Nonstandard employment (or NSE) is less stable and is characterized by part time, temporary, or variable working hours; lower pay; fewer employer-provided benefits; shorter job tenure; and no access to collective bargaining. A 2009 study of Canadian labour standards found that NSE accounts for about 32% of the Canadian workforce. Many of these workers are young, recent entrants into the labour force. This trend toward NSE means that young people graduating from university today are far less likely to experience the sort of stable, predictable employment patterns that were the norm for earlier generations. Many other workers are being characterized as independent contractors, sometimes at their own request, but often at the behest of businesses seeking to benefit from the financial savings and legal flexibility associated with eliminating “employees.” The shift from standard employment to “self-employment” is a major contributor to growing income inequality in Canada, since self-employed workers tend to be lower paid, have fewer employer-paid benefits, have less job security, and are not entitled to the many social protections (unemployment insurance, workers’ compensation) or guarantees (minimum wage, overtime pay, paid holidays) available only to people who are or were “employees.” Workers employed under NSE arrangements and low-income workers who are treated as independent contractors are often described as vulnerable or precarious workers. They live on the cusp of poverty and are unable to save or plan for the future because their source of income is always on the verge of disappearing.

4. Which of the various perspectives on work and government policy do you most agree

with, and why?

Teaching note: This is open to classroom discussion and debate.

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5. Identify and describe three approaches used in Canada to protecting employees when

their employment is terminated.

Common law of the employment contract - All non-union employees in Canada have an employment contract with their employer. Sometimes the contract is written, but if it is not then the parties have a verbal contract. Disputes about what an employment contract says or how it should apply in a given situation are resolved by judges in courts of laws. Over time, a large body of decisions by judges interpreting employment contracts have been released and recorded in law books and, more recently, on electronic websites. This body of case law is known as the common law of the employment contract. Reasonable Notice - One rule that judges created and that forms part of the common law of the employment contract is a requirement for employers to provide employees with reasonable notice of the termination of the employment contract. How much notice is “reasonable” is decided by judges and depends on a number of factors, including the length of the employee’s service, the employee’s age, and the type of work the employee performed. For long service employees, the notice period required can be as much as one to two years. The notice can be working notice, or pay in lieu of notice, meaning that the employer can just pay the employee their wages for the period of notice without requiring the employee to actually work. This requirement for employers to give reasonable notice helps employees transition from one job to the next. Mandatory minimum statutory notice - If an employer fails to provide the employee with reasonable notice, the employee can sue the employer in court to recover it. However, this is costly and takes a lot of time, so most workers do not bother. To provide a less expensive, quicker, and more informal means of ensuring employees receive some notice of their termination, governments have imposed notice requirements. Employment standards statutes in Canada include mandatory minimum statutory notice provisions.

6. Identify and explain three types of laws used in Canada to address worker diversity.

The Charter of Rights and Freedoms - The Charter of Rights and Freedoms forms part of Canada’s Constitution. It governs the relationship between governments and citizens by protecting fundamental rights and freedoms of Canadians against state interference, including the following:

 fundamental freedoms of speech, press, assembly, association, and religion  democratic rights  mobility rights regarding the right to move freely from province to province for

the purposes of residence or employment

 legal rights, which provide standard procedural rights in criminal proceedings  equality rights, which guarantee no discrimination by law on grounds of race,

ethnic

 origin, colour, religion, sex, age, or mental and physical ability

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 language rights

The Charter applies only to government action. Governments can act in two ways: as an employer and as lawmakers. Therefore, in the labour context, the Charter is applicable directly to governments as employers and to all laws passed by governments. Canadian Human Rights Act - The Canadian Human Rights Act, which applies to businesses governed by federal laws (about 10% of Canadian employees are governed by laws made in Ottawa), prohibits discrimination in employment on the following grounds: