1 Describe the language and environment of Canadian business.

Introduction

In this chapter, we will embark on a comprehensive journey through the fundamental aspects of business. We begin by defining basic business concepts, laying the groundwork for understanding the intricate world of commerce. Following this, we will delve into the various activities and environments that businesses operate within, providing a clear picture of the dynamic landscape. We will also explore the economic foundations that underpin business operations, and examine the critical forces of supply, demand, and competition that shape market behavior. Additionally, we will explain the cyclical nature of economies and the importance of productivity in sustaining growth. Finally, we will trace the evolution of the Canadian economy, highlighting key developments and trends that have shaped its current state.

1.1 Define basic business concepts.

Business, in its simplest form, is the practice of meeting people’s needs by offering products and earning a profit in return. A business can be a single person or a large organization, but its goal is always the same: provide something of value and receive financial reward—called profit—for doing so. The “product” a business offers may be a tangible good, such as a car, a smartphone, or a jacket. It can also be a service you cannot physically touch, like dry-cleaning, a medical check-up, or a concert. Sometimes the product is an idea—an accountant’s tax advice or an attorney’s legal strategy—meant to solve a problem rather than take up space on a shelf. Whatever shape it takes, a product must satisfy a customer’s need or desire if the business hopes to succeed.

Business: Individuals or organizations striving to earn profits by providing products that satisfy customers’ needs. Profit: The financial reward from delivering products or services effectively. Product: A good or service, tangible or intangible, that provides satisfaction and benefits. Tangible Goods: Physical items like automobiles, smartphones, or clothing. Services: Non-tangible offerings such as dry cleaning, medical consultations, or entertainment. Ideas: Concepts or intellectual solutions, such as those provided by accountants or attorneys.

 

Beyond Profit: Nonprofits and Charities

Not every organization is built to earn profit. Nonprofits and charities exist to advance a mission or serve a cause, yet they still rely on many of the same business practices—budgeting, marketing, and strategic planning—to maximize their impact.

 

Stakeholders: Who They Are and Why They Matter

Whether an organization aims for profit or for social good, it operates within a web of relationships called stakeholders. Stakeholders are people or groups with an interest in how the organization performs and how its choices affect them.

Internal stakeholders work inside the organization. Owners—ranging from a single proprietor to shareholders of a public corporation—invest capital and expect a return or, in the case of public entities like Crown corporations or colleges, fulfill a public mandate. Employees contribute their time, knowledge, and effort to reach organizational goals and, in turn, rely on fair pay and a stable workplace.

External stakeholders stand outside the organization but are still influenced by its decisions—or can influence those decisions themselves. Customers buy or use the products and shape the business’s reputation through their satisfaction. Competitors vie for the same market, pushing each other to innovate. Policymakers and regulators set the rules of the game, ensuring safety, fairness, and compliance. Suppliers and distributors keep the supply chain moving so products reach customers on time. Bankers and investors provide the funds that help a business grow. Even the general public is a stakeholder, because a company’s social, environmental, and economic actions ripple through communities.

Long-term success depends on balancing the expectations of all these stakeholders. Ignoring any key group—whether it is employees, customers, or the wider community—can put the organization’s future at risk. By understanding who their stakeholders are and what they need, businesses and nonprofits alike can make better decisions, build stronger relationships, and achieve their goals more sustainably.

Key Insight: To succeed in the long run, businesses need to meet the needs and expectations of both internal and external stakeholders. If they neglect these groups, it can put the organization’s future at risk.

 

Internal Stakeholders

External Stakeholders

These individuals are directly involved in the organization’s day-to-day activities. Owners: These can include sole proprietors, business partners, or shareholders in a corporation. In the case of public organizations like Crown corporations or colleges, ownership may rest with the government. Employees: Employees are essential to any business. They contribute their time, skills, and effort to help the organization reach its goals.

These groups are not part of the business itself but are still affected by or can affect its operations. Customers: They purchase or use the business’s goods or services and often influence demand and business reputation. Competitors: Other businesses offering similar products or services compete for the same customers and market share. Policy Makers and Regulators: Government bodies that create and enforce rules and regulations impacting how businesses operate. Suppliers and Distributors: These are companies or individuals that provide the raw materials, products, or services a business needs to function and deliver to customers. Bankers and Investors: They supply financial support, whether through loans, investments, or other funding mechanisms. General Public: Communities and society at large can be affected by a business’s social, environmental, and economic impact.

 

Now, let’s examine a contemporary company that is rapidly transforming the way business is conducted.

What is OpenAI

 

OpenAI serves a diverse and expanding customer base across multiple sectors. Individual users, including students, researchers, and content creators, utilize ChatGPT for academic assistance, writing support, and brainstorming. Businesses and corporations integrate OpenAI’s models into their workflows to enhance automation, improve customer service, and streamline content generation. Software developers and technologists leverage AI tools like Codex to improve productivity and automate coding tasks, while media and marketing firms use AI-generated text and images for content creation and strategic decision-making. 

• How has the ownership of OpenAI changed over the years?
• What are various revenue sources for the business?
• Who are the customers of OpenAI LP?
• What is the difference between For-profit, non-profit, and Limited-profit companies?

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1.2 Review the activities and environment of business.

Why Business Matters

Businesses form the backbone of society, driving economies, creating jobs, and fulfilling societal needs. They contribute significantly to global progress, technological innovation, and economic interconnectivity, thereby improving our standard of living.

One of the key reasons businesses are essential is their role in innovation and technological progress. Entrepreneurs and businesses drive breakthroughs that shape the future, pushing the boundaries of what is possible and bringing new technologies to market. Job creation is another critical function of businesses. They provide employment opportunities that sustain livelihoods, offering people the means to support themselves and their families. Businesses also fuel economic growth. Through interconnected trade and financial systems, they stimulate both local and global economies, ensuring a continuous flow of goods, services, and capital.

Beyond financial contributions, businesses play a vital role in supporting communities. They enhance community stability and security, often engaging in initiatives that improve the quality of life for local residents. Workplaces foster social connection by providing environments where collaboration, networking, and a sense of belonging can thrive. These social interactions are crucial for personal and professional development. As societal needs evolve, businesses adapt to and anticipate changes in consumer demands. This ability to respond to evolving societal needs ensures that they remain relevant and continue to meet the needs of their customers. Through taxes, businesses contribute to funding public services. These funds support vital social programs and infrastructure, such as education, healthcare, and transportation systems.

Businesses also have a significant cultural influence. They create trends that shape societal values and lifestyles, impacting everything from fashion to technology to entertainment. Many businesses take on roles in advocacy and awareness, championing social justice and environmental causes. Their efforts can lead to positive changes in society and raise awareness about important issues. Finally, successful businesses serve as an inspiration for the future. They inspire the next generation of innovators and leaders, showing what is possible with hard work, creativity, and determination.

Businesses achieve their goals by organizing their employees into functional areas, each specializing in key tasks. These areas must work collaboratively, leveraging their unique strengths, to ensure the business thrives. The concept of synergy—where combined efforts yield greater results than individual contributions—illustrates the importance of integration. While each area may have its distinct focus, all must align to achieve the overarching goal: the success of the business.

 

Management: In any organization, managers are responsible for coordinating and guiding the work of employees across all areas of the business. Their main role is to ensure that the company is working efficiently and effectively toward its goals. To do this, managers carry out four key functions: planning what needs to be done, organizing resources and tasks, directing people to take action, and controlling processes to stay on track.

 

Human Resources: HR managers are responsible for ensuring that the organization has all of the skills and capabilities necessary to run the business. HR managers develop staffing plans, recruit and select new employees, monitor the performance management process, and develop succession plans for advancement and replacement. They develop standards for compensation and benefits and assist managers with staff issues.

Operations: All companies must convert resources (labour, materials, money, information, and so forth) into goods or services. Some companies, such as Apple, convert resources into tangible products—Macs, iPhones, etc. Others, such as hospitals, convert resources into intangible products — e.g., health care. The person who designs and oversees the transformation of resources into goods or services is called an operations manager. This individual is also responsible for ensuring that products are of high quality. In many organizations, operations management includes managing the supply chain which controls the delivery of raw materials and the distribution of finished goods.

Marketing: Marketing consists of everything that a company does to identify customers’ needs (i.e. market research) and design products to meet those needs. Marketers develop the benefits and features of products, including price and quality. They also decide on the best method of delivering products and the best means of promoting them to attract and keep customers. Marketing manages the relationship with customers and makes them aware of the organization’s desire and ability to satisfy their needs.

 

Accounting: Managers need accurate, relevant and timely financial information, which is provided by accountants. Accountants measure, summarize, and communicate financial and managerial information and advise other managers on financial matters. There are two fields of accounting. Financial accounting focuses on preparing financial statements to help users (both inside and outside the organization) assess the company’s financial health. Managerial accounting prepares information for internal use (for example, reports on the cost of materials in production) to assist in decision-making within the company.

Finance: Finance involves planning for, obtaining, and managing a company’s funds. Financial managers address such questions as the following: How much money does the company need? How and where will it get the necessary money? How and when will it pay the money back? What investments should be made in plant and equipment? How much should be spent on research and development? Good financial management is particularly important when a company is first formed because new business owners usually need to borrow money to get started.

Information Technology: Information is one of the most critical assets of most businesses today. Some businesses (such as social media companies) are entirely information-based. Information Technology (IT) managers are responsible for building computer and network infrastructures, implementing cybersecurity protocols, and developing user-facing software (like websites or apps for customers). There is often a high level of integration between a business’s IT systems and other departments such as finance, marketing, and operations. Businesses also frequently need to develop interfaces to send and receive information from other companies, including suppliers and logistics providers.

 

Types of Economic Systems

Socialist Economy (State-led but Market-Aware): Under socialism, the government typically owns or strictly regulates “commanding heights” such as energy, transportation, health care, and banking, while permitting private ownership of smaller firms. Prices for essentials may be subsidized, and profits from state-owned enterprises are often redistributed through social programs. Example: China labels its system a “socialist market economy.” The state retains majority stakes in giants like Sinopec (energy) and ICBC (banking), sets ceilings on fuel and electricity prices, and guides investment through five-year plans, yet millions of privately owned restaurants, e-commerce shops, and tech start-ups compete freely for consumers.

Mixed Market Economy: A mixed‑market economy gives entrepreneurs substantial freedom to launch companies, hire employees, and set prices, while government oversight steps in to correct market failures and safeguard the public interest. Typical interventions include antitrust legislation, minimum‑wage laws, environmental regulations, and safety‑net programs such as unemployment insurance and public health care. For example, in Canada, business founders can enter almost any industry, provided they follow federal competition rules, provincial labour standards, and national product‑safety requirements. At the same time, the universally funded Medicare system guarantees access to doctors and hospitals, showing how public services can coexist with private enterprise.

Pure Market Economy (Theoretical Ideal): A pure market economy—sometimes called “laissez-faire capitalism”—would rest entirely on voluntary exchanges, with no taxes, subsidies, price controls, or regulatory agencies. Property rights would be enforced privately or through minimal courts, and all goods and services (including roads, money, and policing) would be bought and sold at market prices. Economists treat this as a useful thought experiment because every real nation, even the most pro-market, maintains some public services or rules to curb monopolies, protect consumers, or address inequality. Example (hypothetical): Imagine a digital island-state where all infrastructure is funded by user fees, contracts are policed by private arbitration firms, and citizens decide individually whether to purchase health insurance or schooling; no government body sets standards or redistributes income—an arrangement never fully achieved in practice.

A nation’s economic system falls somewhere along a spectrum that ranges from planned to market‑driven. At one end of the spectrum lies a planned economy, where the state decides what to produce, in what quantities, and at what prices. Central planners set detailed output targets and price schedules, leaving firms and consumers with very little decision‑making power. At the opposite end is the pure free‑market economy, in which production and pricing are determined entirely by supply and demand.

Planned economies are often associated with communism, a political and economic ideology that seeks to eliminate class divisions by placing ownership of factories, mines, and other productive assets in the hands of the public. In theory, a communist society abolishes private property and money, distributing goods strictly according to need. While communism is not synonymous with central planning, communist states have typically relied on centrally planned mechanisms to implement their goals.

Socialism sits somewhat closer to the middle of the spectrum. Like communism, it favors public or state ownership of key industries; however, it allows for more private activity and often coexists with limited market forces. Because the government still directs large segments of production, most socialist systems are classified as planned (or at least partly planned) rather than market economies.

Moving further toward the market end is capitalism, where privately owned firms and individuals make production and pricing decisions. In its purest form—sometimes called laissez‑faire capitalism—the government plays a minimal role, allowing prices, wages, and output to adjust freely to changes in supply and demand.

The intellectual foundation for market capitalism was laid by Adam Smith, whose 1776 work The Wealth of Nations introduced the idea of the Invisible Hand. Smith argued that individuals who pursue their own self‑interest—hoping to earn profits or secure the best deal—unintentionally promote society’s welfare. Crucially, he noted that competition keeps this self‑interest in check: firms must improve quality and lower prices to attract buyers, while consumers (through their choices) ultimately determine which goods are produced. Taken together, self‑interest and competition generate the continuous adjustments that guide resources to their most valued uses.

Today, few countries operate at the extreme ends of the spectrum. Instead, most—including Canada—adopt a mixed economy that blends market signals with some level of government involvement. In any mixed or market‑oriented system, consumers wield significant influence. Their collective preferences, expressed through demand, signal which products and services hold value. Firms, motivated by potential profit, adjust supply to meet that demand, and competition among producers pushes them to allocate resources efficiently, keep prices in line, and innovate continuously. This ongoing interplay between limited resources and unlimited wants explains the trade‑offs that shape our daily choices—and the broader economy as well.

In Canada, privately owned businesses are free to decide what to produce and at what price, but the government provides essential services such as universal healthcare and regulates utilities like SaskPower and SaskTel. By contrast, the United States—also a mixed economy—leans slightly further toward market solutions, while European nations such as France maintain a stronger social‑welfare component.

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Demand for Goods and Services

Economists use the term demand to refer to the amount of some good or service consumers are willing and able to purchase at each price. Demand is fundamentally based on needs and wants—if you have no need or want for something, you won’t buy it. While a consumer may be able to differentiate between a need and a want, from an economist’s perspective they are the same thing. Demand is also based on ability to pay. If you cannot pay for it, you have no effective demand. By this definition, a person who does not have a drivers license has no effective demand for a car.

What a buyer pays for a unit of the specific good or service is called price. The total number of units that consumers would purchase at that price is called the quantity demanded. A rise in price of a good or service almost always decreases the quantity demanded of that good or service. Conversely, a fall in price will increase the quantity demanded. When the price of a gallon of gasoline increases, for example, people look for ways to reduce their consumption by combining several errands, commuting by carpool or mass transit, or taking weekend or vacation trips closer to home. Economists call this inverse relationship between price and quantity demanded the law of demand. The law of demand assumes that all other variables that affect demand (which we explain in the next module) are held constant.

 

Types of Market Competition

Understanding the Canadian Economy: Every day, we are inundated with economic news—be it on television, online, or through discussions in class. Topics such as the economy’s performance (measured by GDP), unemployment rates, inflation, housing prices, government debt, and consumer confidence trends dominate the headlines. For students studying business and aspiring to become business owners or managers, understanding these key concepts is essential.

The Canadian economy is influenced by numerous factors, and the government plays a pivotal role in shaping its direction. This learning step introduces fundamental economic concepts to help you navigate and make sense of the information surrounding you. While you might delve deeper into these ideas in a macroeconomics course later, this summary will provide you with a foundational understanding.

 

Key Concepts in the Canadian Economy

Gross Domestic Product (GDP) One of the most important measures of an economy’s performance is Gross Domestic Product (GDP), which represents the market value of all goods and services produced domestically in a given year. The GDP is defined as the market value of all goods and services produced by the economy in a given year. The GDP includes only those goods and services produced domestically; goods produced outside the country are excluded. The GDP also includes only those goods and services that are produced for the final user; intermediate products are excluded.

What counts: Only goods and services produced for the final user. Intermediate products, like components used in manufacturing, are excluded. For example, the silicon chip that goes into a computer (an intermediate product) would not count directly because it is included when the finished computer is counted.

Why it matters: By itself, the GDP doesn’t necessarily tell us much about the direction of the economy. But change in the GDP does. If the GDP (after adjusting for inflation, which will be discussed later) goes up, the economy is growing. If it goes down, the economy is contracting. There is some debate amongst economists that GDP provides the most accurate measure of an economy’s performance.

 

 

 

The business cycle refers to recurring fluctuations in real GDP over time, characterized by four phases:

Peak: The highest point before economic contraction.

Recession: A period of economic decline.

Trough: The lowest point before recovery begins.

Expansion: A period of economic growth.

Healthy, long-term growth trends are essential for improving standards of living and fostering societal well-being.

 

Watch this video for an overview of the business cycle.

 

 

 

 

 

 

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1.6 Describe the evolution of the Canadian economy.

Canada’s economy has evolved significantly over time, transitioning through distinct phases that reflect societal, technological, and industrial advancements. These phases demonstrate how economic structures adapt to meet changing needs and opportunities.

 

The Early Economy: In its earliest phase, Canada’s economy was largely agricultural. Colonists established self-sufficient communities, producing almost everything they needed locally. This traditional economy emphasized subsistence and minimal trade, reflecting the “traditional economy” model discussed in our previous lessons.

 

The Industrial Revolution: The Industrial Revolution marked a transformative period for Canada’s economy. The introduction of machinery and job specialization increased production speed and efficiency. This era laid the foundation for large-scale industrialization, reshaping labor and economic structures.

 

The Manufacturing Economy: Industrialization ushered in a manufacturing economy, focusing on the mass production of goods and services. Factories became central to economic activity, providing employment and driving urbanization across Canada.

 

The Marketing Economy: As businesses grew, they began prioritizing consumer needs and desires. This led to the marketing economy, where companies tailored products and services to meet market demands. The focus shifted from mere production to understanding and fulfilling consumer expectations.

 

The Service Economy: Post-World War II economic prosperity introduced the service economy. Rising incomes and improved quality of life enabled people to hire others for various services. This period also saw a significant increase in women joining the workforce, further fueling the demand for professional and personal services.

 

The New Digital Economy: The emergence of advanced technology and digital media catalyzed the new digital economy. E-commerce platforms like Amazon transformed how goods and services are bought and sold. Digital innovations continue to create new products and services, fundamentally changing industries and consumer behaviors.

 

Artificial Intelligence (AI): The newest phase of economic evolution is powered by artificial intelligence (AI), which allows machines to perform tasks that once demanded human intelligence and is already reshaping business operations. AI‑driven analytics handle massive volumes of structured and unstructured data—so‑called “big data”—at unprecedented speeds, uncovering insights that guide strategy and innovation. Blockchain technology, another AI‑enabled advance, provides a tamper‑resistant, decentralized ledger that enhances data security and builds trust across supply chains and financial transactions. Meanwhile, AI‑guided drones are taking on roles such as product delivery, aerial surveying, and environmental monitoring in sectors ranging from construction and agriculture to defense and retail. Although these breakthroughs boost productivity and service quality, they also raise ethical questions about privacy, decision transparency, and job displacement, forcing organizations and workers alike to adapt to a rapidly changing economic landscape.

1.7 LO1 – Business Case

First, you decide whether you will work individually or in a team. Then, you will begin your work by applying course concepts covered in this Learning Outcome to an existing business of your choice.