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The Context of Business:

Understanding the Canadian
Business Environment

Len Karakowsky
York University

Natalie Guriel
York University

Toronto
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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? 256
A CRITICAL APPROACH: What are
the Major Challenges Facing Chapter 8 GLOBAL FORCES: How Is Canada
Business? 1 Faring in the Global Village? 294
Chapter 9 POLITICAL FORCES: Where Would
Part 2 The Internal Challenges 40 Canadian Business Be without Our
Chapter 2 THE EMPLOYEE–EMPLOYER Government? 339
RELATIONSHIP: What Responsibilities Chapter 10 SOCIETAL FORCES: Can Corporations
Do Bosses Have to Their Be Socially Responsible to All
Employees? 40 Stakeholders? 391
Chapter 3 MANAGING THE WORKFORCE:
How Can Business Leaders Best Part 4 Adaptation and Change 447
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? 447
Organizational Design Have to Chapter 12 CONFRONTING CHANGE: How Do
Do with Business Success? 129 Businesses Address the Challenge of
Chapter 5 BUSINESS STRATEGY: How Do Change? 498
Businesses Generate a Successful
Strategy? 175

Part 3 The External Challenges 211

Chapter 6 ECONOMIC FORCES: Oh Canada,
What Is Your Economy Like? 211

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Contents
Preface xiii TALKING BUSINESS 1.3 Jobs, Productivity,
and Innovation: How Health Care Drives
Acknowledgment xviii
the Economy 25
About the Authors xiv
Societal Forces in Canada 28
CHAPTER SUMMARY 29
Part 1 A Framework for Study 1
CHAPTER LEARNING TOOLS 35
1 Exploring 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 The 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 43
Strategy 7
TALKING BUSINESS 2.1 Are Unpaid Interns
The External Context of Business 7 “Employees”? 45
Specific or Task Environment 7
What Is an Employee? 46
General Environment 8
From Standard to Nonstandard Employment
The Challenge of Change 11
Relationships 47
Sustainability 12
Perspectives on Work and Government
The Canadian Context: How’s Business in
Policy 47
Canada, Eh? 12
Economic Forces in Canada 13 TALKING BUSINESS 2.2 The State of Canadian
Unions—Down but Not Out 52
Competitive Forces in Canada 16
Technological Forces in Canada 18 The Labour Context in Canada: Where Are
TALKING BUSINESS 1.2 Growth in Provincial We Now? 53
Labour Productivity: A Problem from Coast TALKING BUSINESS 2.3 Are Unions Relevant
to Coast 20 in Canada Today? 55
Global Forces in Canada 22 Dismissing Employees 55
Political Forces in Canada 25 Common Law Rules Requiring Notice of

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Termination 56 TALKING BUSINESS 3.1 The Visionary Leader:

Statutory Minimum Notice of Termination 57 Steve Jobs 84
Unemployment Insurance Programs 58 TALKING BUSINESS 3.2 Conflict Management:
Current Issues in the Workplace: Managing The Toxic Employee 85
Workforce Diversity 58 Management Philosophies 88
Protecting Diversity and Guarding Against Classical Approaches to Management 88
Discrimination in Canadian Law 58 The Social Context 88
TALKING BUSINESS 2.4 Organizations Seeing Scientific Management 89
the Light about Faith at Work 61 Administrative Management 92
TALKING BUSINESS 2.5 He Says, She Says: Bureaucratic Management 92
Gender Gap Persists in Attitudes Toward TALKING BUSINESS 3.3 Leading Teams in a
Women’s Advancement in the Workplace 63 New Direction 93
TALKING BUSINESS 2.6 Aboriginal Workers: The Classical Approaches in Perspective 96
Integral to Canada’s Ongoing Competiveness
TALKING BUSINESS 3.4 Is Weber Alive and
and Performance 65
Well? 96
TALKING BUSINESS 2.7 Ontario Employers Have
a New Tool to Improve Accessibility for People Behavioural Approaches to
with Disabilities 67 Management 98
The Model of the Employment Equity Act 68 TALKING BUSINESS 3.5 The High Costs of
TALKING BUSINESS 2.8 Employment Equity Workplace Harassment 99
Resources 70 The Human Relations Movement 100
TALKING BUSINESS 2.9 Immigrants Make Mary Parker Follett (1868–1933) 100
Significant Contributions to 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 103

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 Managing 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
Why Study Management Thought? 80
Multiple-Choice Questions 111
What Do Managers Do? 81
Discussion Questions 112
The Roles Managers Play in CONCEPT APPLICATION: KICKING HORSE
Organizations 81 COFFEE 112

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4 Establishing the Structure of a Business Methods of Downsizing 161

What Does Organizational Design Have to Consequences of Downsizing 162
Do with Business Success? 129 TALKING BUSINESS 4.7 What Every Leader
Learning Objectives 129 Should Know About Survivor Syndrome 163
Why Has Downsizing Failed to Achieve Anticipated
THE BUSINESS WORLD: HOW INTERNET COMPANIES
Results? 164
ARE CHANGING ORGANIZATIONAL STRUCTURE IN THE
Downsizing as a Nonrational Approach to
WORKPLACE 130
Organizational Structure 166
The Changing Nature of Organizations 131
TALKING BUSINESS 4.8 Temporary Workers Are
Flat Organizations 132 a Concern for All Canadians 168
Fluid Organizations 133
Integrated Organizations 133 CHAPTER SUMMARY 170
Global Organizations 134
CHAPTER LEARNING TOOLS 170
TALKING BUSINESS 4.1 Atlantic Canada’s
Key Terms 170
Overseas Playground? 135
Multiple-Choice Questions 171
Thinking About Organizations 136 Discussion Questions 172
What Is an Organization? 136
Using Metaphors to Describe Organizations 136 CONCEPT APPLICATION: PIXAR: NO MICKEY
The Anatomy of an Organizations 140 MOUSE ORGANIZATION! 173
What Constitutes an Organization’s
Structure? 140
What Determines Organizational Structure?
5 Business Strategy
A Rational Perspective 143 How Do Businesses Generate a Successful
Strategy 144 Strategy? 175
Organizational Size 144 Learning Objectives 175
Technology 145 THE BUSINESS WORLD: TIM HORTONS: IS ITS
Environment 145 STRATEGY “ALWAYS FRESH”? 176
TALKING BUSINESS 4.2 Canada’s Trade in a What Is Strategic Management? 178
Digital World 147 Analyzing the External Environment 179
Reengineering 149 The Five-Forces Model 179
TALKING BUSINESS 4.3 The Credit TALKING BUSINESS 5.1 Changes in Global
Agency 151 Food Sector Call for Canadian Food
TALKING BUSINESS 4.4 Former Outsourcer Strategy 181
Describes How Job Destruction Works 152 TALKING BUSINESS 5.2 Foresight and
Toward a Virtual Organization 153 Innovation: Today’s Science Fiction, Tomorrow’s
Outsourcing 154 Reality? 185

TALKING BUSINESS 4.5 Out-of-Control Analyzing the Internal Environment 186

Outsourcing Ruined Boeing’s Beautiful The VRIO Model 186
Dreamliner 155 TALKING BUSINESS 5.3 Groupon 187
Networking 156 SWOT Analysis 188
Shedding Noncore Functions 156 Different Levels of Strategies 190
Downsizing 159 Business-Level Strategy 190
TALKING BUSINESS 4.6 Loblaw Cuts 700 Head TALKING BUSINESS 5.4 Dollarama Cashing in on
Office Jobs 159 Penny-Pinching Canadians 191

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TALKING BUSINESS 5.5 FROGBOX: On the Path TALKING BUSINESS 6.3 Better Farm Management
to Greatness 194 Separates the Wheat from the Chaff 224
Corporate-Level Strategy 196 TALKING BUSINESS 6.4 Don’t Blame Professional
TALKING BUSINESS 5.6 American Airlines Athletes for High Ticket Prices 226
Merges with US Airways 197 Goals of Canada’s Economic System 229
TALKING BUSINESS 5.7 Loblaw Gets into Mobile Economic Growth 229
Phone Market 200 TALKING BUSINESS 6.5 The US Subprime
TALKING BUSINESS 5.8 Starbucks Buys Its First Mortgage Crisis and Recession 231
Coffee Farm in Costa Rica 202 TALKING BUSINESS 6.6 Canada’s World-Class
TALKING BUSINESS 5.9 Understanding the Deal: Economy 233
Shoppers Drug Mart and Loblaw 203 TALKING BUSINESS 6.7 Canada’s Productivity
Challenge 236
CHAPTER SUMMARY 205
TALKING BUSINESS 6.8 Canada’s Growing but
CHAPTER LEARNING TOOLS 205 “Invisible” Trade: Services 237
Key Terms 205 Economic Stability 243
Multiple-Choice Questions 206 Employment 246
Discussion Questions 207
TALKING BUSINESS 6.9 Today’s High Youth
CONCEPT APPLICATION: LULULEMON: FOR Unemployment: A Solution for Skill
THE LOVE OF YOGA 208 Shortages? 248

CHAPTER SUMMARY 249

Part 3 The External Challenges 211
CHAPTER LEARNING TOOLS 249
6 Economic Forces Key Terms 249
Oh Canada, What Is Your Economy Like? 211 Multiple-Choice Questions 250
Discussion Questions 252
Learning Objectives 211
THE BUSINESS WORLD: CANADIANS ON THE CONCEPT APPLICATION: SASKATOON:
MOVE 212 CANADA’S FASTEST-GROWING
ECONOMY 252
The Economic Environment 215
Individuals 215 7 Competitive and Technological Forces
Businesses 215
How Do Industries Evolve Over Time? 256
TALKING BUSINESS 6.1 Canada’s People
Learning Objectives 256
Advantage 218
THE BUSINESS WORLD: FROM PERSONAL COMPUTERS
Government 218
TO NEWSPAPERS: TECHNOLOGY AND CREATIVE
TALKING BUSINESS 6.2 Growing Gap of
DESTRUCTION 257
Truck Drivers Will Be Costly to Canadian
Economy 219 The Industry Life-Cycle Model 258
The Introduction Phase: Industry Emergence and
Analyzing the Economy: Two Approaches 219
Creation 260
Types of Economic Systems 220
Market Economy 220 TALKING BUSINESS 7.1 The Birth of
Communism 221 Biotech 261
Socialism 221 TALKING BUSINESS 7.2 The Early Years of the
Mixed Economy 222 Automobile Industry 262
Competition and the Economy 222 TALKING BUSINESS 7.3 The Business of
Types of Competition in Free Markets 222 Botox 265

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TALKING BUSINESS 7.4 Gray Goo and the THE BUSINESS WORLD: FOREIGN OUTSOURCING
Promising Future of the Nanotechnology AND RBC 295
Industry 266
What Is Globalization? 297
The Growth Phase: Dominant Designs and Sources Encouraging Global Business
Shakeouts 267 Activity 298
TALKING BUSINESS 7.5 Growth Phase: Demand Pull Factors 298
for Low-End Smartphones Keeps Push Factors 299
Increasing 269 TALKING BUSINESS 8.1 Canada’s Dairy Industry
The Maturity Phase: A Critical Transition 272 Under Pressure 300
TALKING BUSINESS 7.6 The Aging Personal Channels of Global Business Activity 301
Computer Industry 272 Exporting and Importing 302
TALKING BUSINESS 7.7 Has the Retail Grocery TALKING BUSINESS 8.2 Canada’s Exports to
Industry Hit Maturity? 274 China: Still Hewers of Wood and Drawers of
The Decline Phase: Difficult Choices 274 Water 304
TALKING BUSINESS 7.8 The Fall of the Tobacco TALKING BUSINESS 8.3 What are Canada’s
Industry 275 New Export Strengths? 306

Innovation and Technology 277 Outsourcing/Offshoring 307

Types of Innovation 277 Licensing and Franchising Arrangements 308
TALKING BUSINESS 7.9 Is Canada on the Leading Direct Investment in Foreign Operations 309
Edge? 278 TALKING BUSINESS 8.4 What Helps a Country
TALKING BUSINESS 7.10 The Linked World: How Obtain Foreign Direct Investment? 310
ICT Is Transforming Societies, Cultures, and Joint Ventures and Strategic Alliances 312
Economies 279 Mergers and Acquisitions 312
The Evolution of Technology 281 Establishment of Subsidiaries 313
TALKING BUSINESS 7.11 Embracing Disruption: TALKING BUSINESS 8.5 Is Canada Being
Lessons from Building the First Quantum “Hollowed Out” by Foreign Takeovers?
Computer 281 Putting Mergers and Acquisitions in Historical
Perspective 313
Technological Forecasting 283
Technology and the Changing Workplace 285 The Multinational Corporation 314
TALKING BUSINESS 7.12 Will Technology Replace The Borderless Corporation 315
Middle-Class Jobs? 286 TALKING BUSINESS 8.6 What’s the Third
World? 315
CHAPTER SUMMARY 287
TALKING BUSINESS 8.7 Think Global, Act
CHAPTER LEARNING TOOLS 288 Local 316
Key Terms 288 International Trade 318
Multiple-Choice Questions 288 The Logic of Trade 318
Discussion Questions 290 Mercantilism 319
CONCEPT APPLICATION: HAS SODA LOST Trade Protectionism 320
ITS FIZZ? 290 TALKING BUSINESS 8.8 Made in Canada: How
Globalization Has Hit the Canadian Apparel
8 Global Forces Industry 320
How Is Canada Faring in the Global Promoting International Trade 322
Village? 294 TALKING BUSINESS 8.9 The Futility of
Learning Objectives 294 Protectionism 322

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Facilitating Global Business: Regional Economic TALKING BUSINESS 9.6 Auto Bailouts: Good or
Integration 323 Bad Idea? 366
European Union (EU) 324 Government as Guardian of Business in the Global
Asian Trading Bloc 325 Context 368
North American Trading Bloc and NAFTA 327 Why Should Government Play the Role of Guardian
Where Is Canada Headed? 332 of Business in the Global Context? 369
CHAPTER SUMMARY 332 TALKING BUSINESS 9.7 More Cheese, Please 371
Why Government Should Not Play the Role of
CHAPTER LEARNING TOOLS 333
Guardian of Business 373
Key Terms 333
Should Government “Mind Its Own Business”? 375
Multiple-Choice Questions 333
Deregulation 376
Discussion Questions 335
TALKING BUSINESS 9.8 The Dangers of
CONCEPT APPLICATION: BEIJING AND THE Deregulation 380
CALGARY OIL SANDS 336 Privatization 380
CHAPTER SUMMARY 385
9 Political Forces
Where Would Canadian Business Be Without CHAPTER LEARNING TOOLS 385
Our Government? 339 Key Terms 385
Multiple-Choice Questions 386
Learning Objectives 339
Discussion Questions 387
THE BUSINESS WORLD: JAPAN’S TOYOTA AND
CANADA’S SUBSIDIES 340 CONCEPT APPLICATION: THE WIRELESS
SERVICE INDUSTRY IN CANADA 388
The Canadian Business Enterprise System:
Fundamental Features 342
10 Societal Forces
Canadian Government Structure and Roles 344
Can Corporations Be Socially Responsible to
Levels of Government 345
All Stakeholders? 391
Federal Government Structure 346
Government as Guardian of Society 348 Learning Objectives 391
The Tax Collector Role 348 THE BUSINESS WORLD: THE NEW BLOOD DIAMOND:
The Business Owner Role: Crown CELLPHONES 392
Corporations 349 Defining Business Ethics 395
TALKING BUSINESS 9.1 Should Pop Drinkers Pay TALKING BUSINESS 10.1 High-Level Barriers
More? 350 to Public Trust in Organizations 395
TALKING BUSINESS 9.2 Canada Post Faces Ethical Behaviour as a Social Phenomenon 396
Billion Dollar Operating Loss by 2020 352 Business Ethics as Managing Stakeholder Interests 397
TALKING BUSINESS 9.3 Should the LCBO Be TALKING BUSINESS 10.2 Lac-Mégantic: Disaster
Privatized? 355 in Quebec 397
TALKING BUSINESS 9.4 The Canadian Experience Models for Judging the Ethics of Decisions 398
with Privatization 356 End-Point Ethics 400
The Regulator Role 358 Rule Ethics 401
TALKING BUSINESS 9.5 The Role of the Applying the Models: A Scenario 402
Competition Bureau 362 TALKING BUSINESS 10.3 The Business of Bribery 404
Government as Guardian of the Private Business Do Organizations Make Us Unethical? 405
Sector 364 Unethical Behaviour as a Consequence of
Government Assistance to Private Businesses 364 Corporate Culture 407

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Unethical Behaviour as a Consequence of What Is Sustainability? 452

Decoupling 410 Economic Factors 454
Unethical Behaviour as a Consequence of Work TALKING BUSINESS 11.1 Cree Village Ecolodge,
Routinization 411 a Sustainable Travel Destination 455
TALKING BUSINESS 10.4 The Global Social Factors 455
Pharmaceutical Industry and Human Environmental Factors 456
Guinea Pigs 413
TALKING BUSINESS 11.2 How Sustainable Is
Unethical Behaviour as a Consequence of Canada’s Water? 458
Organizational Identity 414 TALKING BUSINESS 11.3 Fracking Fracas: Pros
Unethical Behaviour as a Consequence of and Cons of Controversial Gas Extraction
Organizational Roles 416 Process 461
Judging the Ethics of Organizations 417 Benefits and Limitations of the Triple Bottom
Business and Society 419 Line Framework 463
Managing the Forces of Business and the Stakeholders Benefits of the TBL Approach 463
of Business 420 Limitations of the TBL Approach 464
Managing the Challenges of the Societal Force 422 Measuring Sustainability 466
Corporate Social Responsibility 422 Living Planet Index 466
The CSR Debate 424 Ecological Footprint 468
TALKING BUSINESS 10.5 Dragons’ Den 425 Index of Sustainable Economic
TALKING BUSINESS 10.6 IBM and Nazi Welfare 470
Germany 428 Genuine Progress Indicator 471
TALKING BUSINESS 10.7 Does Corporate Social Environmental Performance Index 472
Responsibility Increase Profits? 432 The Business Case for Implementing Sustainable
TALKING BUSINESS 10.8 Should These Corporate Practices 474
Behaviours Be Mandated? 434 Reducing Costs 474
Is Corporate Social Responsibility on the Rise? 434 Reducing Risk 477
Improving Public Relations 477
TALKING BUSINESS 10.9 Social Media Gives
Power to Customers 435
Obstacles to Change 478
TALKING BUSINESS 11.4 Canada Isn’t Cleaning
CHAPTER SUMMARY 440 Up on Green Technology Exports 480
CHAPTER LEARNING TOOLS 441 Implementing Sustainable Practices 481
Key Terms 441 Raw Materials 482
Multiple-Choice Questions 441 TALKING BUSINESS 11.5 Leading Change in the
Discussion Questions 443 Food Sector 483
CONCEPT APPLICATION: JOE FRESH AND THE Manufacturing 484
BANGLADESH TRAGEDY 443 Distribution 486
Retailing 486
Part 4 Adaptation and Change 447 TALKING BUSINESS 11.6 Are Plastic Bags Really
Necessary? 487
11 The Challenge of Sustainability Marketing 488
Why Does Business Need to Focus on Consumer Use/Consumption 488
Sustainability? 447 End-of-Life/Disposal 490
Learning Objectives 447
CHAPTER SUMMARY 491
THE BUSINESS WORLD: CAN CANADIAN BUSINESSES
AFFORD TO IGNORE CLIMATE CHANGE? 448 CHAPTER LEARNING TOOLS 491

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Key Terms 491 Methods of Change: Theory E and Theory O

Multiple-Choice Questions 492 Change 515
Discussion Questions 493 The Process of Transformational Change: An
Illustration 518
CONCEPT APPLICATION: IS LOCAL FOOD Understanding the Forces for Change 518
SUSTAINABLE? 494 The Change Vision and Implementation 518
Creating a Learning Organization 522

12 Confronting Change TALKING BUSINESS 12.8 The Learning

Manager 525
How Do Businesses Address the Challenge of
Change? 498 Double-Loop Learning and Shifting Paradigms 526
Do Organizations Encourage or Discourage Learning
Learning Objectives 498
and Change? 527
THE BUSINESS WORLD: INDIGO: WRITING THE NEXT
TALKING BUSINESS 12.9 Facebook’s Culture
CHAPTER IN CANADA’S BOOK INDUSTRY 499
Promotes Learning and Change 528
Change and the Environment of Business 501
Implementing Change Through Tipping Point
Forces for Change 501
Leadership 531
TALKING BUSINESS 12.1 Making Skills Work in What Is the Tipping Point? 531
Ontario 503 Three Rules of the Tipping Point 531
TALKING BUSINESS 12.2 Yes, There Is a Future Applying the Tipping Point to Organizational
for Manufacturing in Canada 505 Change 533
TALKING BUSINESS 12.3 Digital Health: More
Than Just Health and Technology 506
CHAPTER SUMMARY 535
TALKING BUSINESS 12.4 Pro Sports and CHAPTER LEARNING TOOLS 535
Globalization 508 Key Terms 535
TALKING BUSINESS 12.5 How Canada Welcomed Multiple-Choice Questions 535
Bangladeshi Clothing Imports 509 Discussion Questions 537
TALKING BUSINESS 12.6 Slow-Motion CONCEPT APPLICATION: WHEN GOOD
Demographic Tsunami About to Hit Canada’s COMPANIES GO BAD: THE CASE OF KODAK 537
Economy 511
Types of Change 512 Glossary 000
Developmental Change 512 Index 000
Transitional Change 513
Transformational Change 513
TALKING BUSINESS 12.7 Transformational
Change: Starbucks Risks Core Business for New
Unknown Ventures 514

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Preface
There is much to be proud of with regard to the Canadian business sector. According to
many observers, Canada is poised to earn a distinguished reputation on the world scene.
In fact, Canada has been consistently cited in the media as “one of the best countries to
do business in.” Recently Forbes ranked Canada fifth overall in the world for business,
based on such factors as low corporate tax rates and one of the most stable banking
systems.
Beyond its economic stability, Canada is also reputed for its world-class university
system, which is much more affordable than most privately funded colleges in the United
States. In turn, Canada is known for its ability to attract and retain a highly educated
workforce. Our strong business reputation is also based on having among the highest
investment rates in education as a percentage of its GDP. Its enviable status is also based
on comparatively low poverty and crime rates.
The positive climate for business has also made this country a popular location for
entrepreneurs. Based on a study conducted by management consulting firm Ernst & Young,
Canada was ranked among the top five places in the world to start a business, given its
strong entrepreneurial culture. The Ernst & Young report considered such factors as small
business tax burden, access to financing, and intangibles such as the value placed on research
and innovation as well as attitudes toward entrepreneurs in the business community.
There is no doubt that Canada is fast becoming a major player on the global scene.
However, at the same time significant challenges exist. The last two decades have
witnessed tremendous change and turmoil across our organizational landscape—from
numerous bankruptcies of once-great Canadian companies to massive reductions in the
workforce of many others to the growth in foreign ownership across corporate Canada. Is
all this cause for concern or just the natural evolution of business? Are we headed for the
best of times or the worst of times?
Indeed, what lies ahead for Canadian business? To address that question, we need to
systematically examine the context of business and the factors that shape our business
environment. To do so we must look both “inside” and “outside” of the corporate walls.
That is, we need to consider key challenges and opportunities that exist within the bound-
aries of the organization, as well in the organization’s external environment.
The aim of this book is to help facilitate the following learning goals for students:

1. To examine the context within which all businesses operate. Specifically, we

consider the internal context and the external context of business and the range of
unique challenges and opportunities each possesses.
2. To obtain a deeper understanding of the nature of the Canadian business environment.
What differentiates Canada from other business environments? What are the major
strengths and weaknesses of Canada as a place to do business? What does the future
hold for Canadian business?
3. To encourage critical thinking regarding the nature of business and its environment.
This text presents a range of ideas, perspectives, and conceptual frameworks for
identifying and analyzing key issues in the business environment.

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4. To gain exposure to major voices and leading thinkers in the field of business and
organizational studies. This book draws upon many ideas from a wide range of
business scholars, experts, and practitioners.
The study of business is really about the study of society. It is an obvious fact that we
are a society of organizations—from our hospitals to our schools to our multinational
organizations, it is hard to imagine life without organizations. And, for better or worse,
those very institutions and organizations that we have grown up with are continuing to
undergo dramatic change. We need to understand where change is coming from and how
organization’s can best respond to the changing business context.
The Context of Business takes the reader on a journey that explores the environment
within which business operates—both within the Canadian context and within the global
context. The reader will be introduced to a variety of perspectives, theories, and concepts
that shed light on real business issues. While this text does introduce the reader to many
fundamentally important business terms and concepts, our emphasis is on helping students
develop analytical thinking skills. Our aim is to present ideas, frameworks for discussion,
and concepts that students can use as tools to help analyze “what is going on out there” in
the “real” business world.
We hope that The Context of Business takes you on an enriching journey into the
environment of business. There is much to learn about Canadian business and, as you
will see, there is also much to be proud of. As a current or prospective member of the
Canadian workforce, you have every reason to be interested in what the future holds for
Canadian business. We hope this book helps you think more critically and thoughtfully
about what lies ahead.
Enjoy the journey!
Len Karakowsky
Natalie Guriel

STRENGTHS AND FEATURES OF THIS TEXT

This text differs in a number of significant ways from the typical introductory business
textbook. There are at least three key areas of emphasis that distinguish this text, as
outlined below.

1. Emphasis on Critical Thinking Skills

The Context of Business will be the foundation for an introductory course in business that
first introduces students to the business environment—both internal and external. The
aim of this text is to provide a critical examination of the nature of business organizations
and the fundamental challenges that they face within the Canadian context. The central
objective is to provide insight into the business environment in Canada while encouraging
students to think critically about how organizations are managed and how business leaders
confront current challenges. This emphasis on critical thinking skills may be what largely
differentiates this book from many other introductory business textbooks.

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Consequently, while we clearly set out descriptions necessary to understand the

“mechanics” of business issues, ranging from the economic context to the political con-
text, our aim is to engage students in a way that will stimulate them to think critically
about these contexts. Students will be inspired to ask questions about how business
operates and how the environment impacts business. We ask questions central to under-
standing what is “going on out there” in the Canadian business world, including: What
kind of competition exists in Canada in different industries? How has the number of
telecommunications companies impacted the consumer? Do government subsidies to
business impact competitiveness in Canada? What did the tragedy at Lac-Mégantic
teach us about corporate social responsibility? These kinds of questions demand more
than simply memorizing business jargon.
We believe that our approach in this text will help students better understand and
appreciate the purpose behind their further studies in specific functional areas of business
while also nurturing the skills they need to succeed in later courses.

2. Emphasis on Concept Application

Each chapter sets out clearly the learning objectives for that chapter. We believe that we
have set challenging but achievable learning objectives for each chapter, and we have
ensured our chapters provide all the information students require to engage in a thought-
ful and informed analysis of each of the topics. Our fundamental aim is to get students to
take business ideas, concepts, and frameworks and use them to make sense of business
events and challenges.
In writing this book, we endeavoured to make fundamental business concepts “come
alive” through the application of these concepts to important, real-world situations. This
text includes a wealth of current business cases drawn from the popular press to help clarify
ideas presented within each chapter. Specifically, each chapter begins with The Business
World case, which reports on important, current, real-life business issues and themes that
are explored within the chapter. The chapters are also filled with real-life business illustra-
tions summarized within the Talking Business boxes. Interspersed throughout the text,
these features often present current business news or situations that further explore the
concepts discussed in the chapter in a real, applied way. These are ideal for class discussion
and also offer media accounts that may differ from the authors’ perspectives of business
happenings. Instructors may wish to use some of these as mini-cases for class discussion on
a daily basis when a lengthier, end-of-chapter case is not assigned.
Each chapter also contains an end-of-chapter Case Application with questions.
These cases are also drawn from the Canadian popular press and are intended to give stu-
dents an opportunity to apply chapter concepts to real business contexts. We have used
these kinds of cases in our own classes with much success. The cases are of relatively short
length. While the cases are intended to focus on the material in the accompanying chap-
ter, many of the cases in this book carry ramifications that spill over into several areas.
However, we have found that the ability to integrate different concepts from different
chapters takes time. Consequently, our focus was on building this skill by keeping the
cases relatively focused, though certainly many of these cases could be revisited from dif-
ferent chapter perspectives. The Instructor’s Resource Manual provides suggestions and
possible discussions relating to each of these cases.

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3. Emhpasis on “Real” Canadian Business Context

In addition to offering frameworks and principles central to an understanding of the con-
text of business in general, we have endeavoured to provide an interesting and up-to-date
presentation of relevant business events and business cases. We have made every effort to
infuse this text with “real-life” illustrations. References are made to major business stories
from across the globe. However, we are particularly interested in the Canadian context.
Consequently, we focus on Canadian stories and give ample attention to current Canadian
business policies and practices for the topics covered throughout this book. The end-of-
chapter cases are drawn from both Canadian and global contexts. And this text was
authored by Canadian scholars—it is not a Canadian adaptation of a US text.
While this text relates ideas and theories drawn from the work of management
scholars and management research, we are also concerned with relating ideas and
issues voiced by practitioners and communicated through such popular press sources as
Canadian Business, Globe and Mail, Fortune, Report on Business, and the Huffington Post.

End-of-Chapter Pedagogical Features

We have included discussion questions at the end of every chapter, ranging from short
answer to essay-type responses. These questions provide various levels of challenge and
will ensure students have understood the issues presented in the chapter. In addition, we
have included multiple-choice questions. The Instructor’s Resource Manual provides
suggestions and discussions for taking up all of these end-of-chapter questions.
Supplements The following supplements are available for instructors:
Instructor’s Resource Manual. The Instructor’s Resource Manual includes chapter learning
objectives, chapter outlines and summaries, discussion questions and answers for in-text
features, as well as answers for the discussion and review questions.
Pearson MyTest. MyTest helps instructors easily create and print quizzes and exams with
hundreds of questions, including multiple-choice, true/false, short answer, and essay
questions. For each question we have provided the correct answer, a reference to the rel-
evant section of the text, a difficulty rating, and a classification (recall/applied). MyTest
software enables instructors to view and edit the existing questions, add questions, gener-
ate tests, and distribute tests in a variety of formats. Powerful search and sort functions
make it easy to locate questions and arrange them in any order desired. Questions and
tests can be authored online, allowing instructors ultimate flexibility and the ability to
efficiently manage assessments anytime, anywhere, visit www.pearsonmytest.com.
PowerPoint Lecture Slides. Prepared by the authors, the PowerPoint presentations are
colourful and varied, designed to hold students’ interest and reinforce each chapter’s
main points.
peerScholar. Firmly grounded in published research, peerScholar is a powerful online
pedagogical tool that helps develop students’ critical and creative thinking skills.
peerScholar facilitates this through the process of creation, evaluation, and reflection.
Working in stages, students begin by submitting written assignments. peerScholar
then circulates their work for others to review, a process that can be anonymous or
not, depending on your preference. Students receive peer feedback and evaluations

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immediately, reinforcing their learning and driving the development of higher-order

thinking skills. Students can then resubmit revised work, again depending on your pref-
erence. Contact your Pearson Canada representative to learn more about peerScholar
and the research behind it.
Innovative Solutions Team. Pearson’s Innovative Solutions Team works with faculty and
campus course designers to ensure that Pearson products, assessment tools, and online
course materials are tailored to meet your specific needs. This highly qualified team is
dedicated to helping schools take full advantage of a wide range of educational tech-
nology by assisting in the integration of a variety of instructional materials and media
formats.
Pearson Custom Library. For enrollments of 25 students or more, you can create your
own textbook by choosing the chapters that best suit your own course needs. To begin
building your custom text, visit www.pearsoncustomlibrary.com.
CourseSmart for Instructors. CourseSmart goes beyond traditional expectations—
providing instant, online access to textbooks and course materials at a lower cost for
students. And even as students save money, you can save time and hassle with a digital
eTextbook that allows you to search for the most relevant content at the very moment
you need it. Whether it’s evaluating textbooks or creating lecture notes to help stu-
dents with difficult concepts, CourseSmart can make life a little easier. Find out how
when you visit www.coursesmart.com/instructors.
The following supplements are available for students:
CourseSmart for Students. CourseSmart goes beyond traditional expectations—providing
instant, online access to the textbooks and course materials you need at an average sav-
ings of 60%. With instant access from any computer and the ability to search your text,
you’ll find the content you need quickly, no matter where you are. And with online tools
like highlighting and note-taking, you can save time and study efficiently. See all the
benefits at www.coursesmart.com/students.

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Acknowledgments
There are many people to acknowledge for their contributions to and support of this book.
First, we would like to express gratitude to those individuals at Pearson Canada who were
responsible for making this book a reality. Our gratitude goes to the expertise provided by
Deana Sigut, Acquisitions Editor; Suzanne Simpson Millar, Developmental Editor;
Leanne Rancourt, Copyeditor; Rachel Thompson, Project Manager; and Rashmi Tickyani,
Production Editor. Suzanne merits our deep gratitude for her dedicated attention to and
rigorous work on this text.
Thanks also go to those who reviewed our proposals and earlier drafts of this text:
Julius Bankole University of Northern British Columbia
Edith Callaghan Acadia University
Cuiping Chen University of Ontario Institute of Technology
Shawna DePlonty Sault College
Susan Graham University of Prince Edward Island
Brent Groen Trinity Western University
Eytan Lasry York University
Anthony Mallette Southern Alberta Institute of Technology
Angelo Papadatos Dawson College
Raymond Paquin Concordia University
Jennifer Percival University of Ontario Institute of Technology
Robert Soroka Dawson College
Trent Tucker University of Guelph
Michael Wade Seneca College
Kent Walker University of Windsor
Bill Waterman Mount Allison University
We would also like to express gratitude to all of contributors to this text. Professors
You-Ta Chuang, David Doorey, and Eytan Lasry for their author contributions to
Chapters 5, 2, and 7, respectively. We are grateful as well to our students, who have
provided comments on a regular basis.
We wish to thank our colleagues for their insights and suggestions, including
Paulette Burgher, Keith Lehrer, Peter Modir, Peter Tsasis, Indira Somwaru, and Vita
Lobo. Our thanks also go to textbook contributors Joseph Adubofuor, Amy Bitton, Anya
Cyznielewski, Ziv Deutsch, Melanie Gammon, Jason Guriel, Gillian Gurney, Shu-Hui
Huang, Imran Kanga, Ezra Karakowsky, Chris Kirkpatrick, Orlando Lopez, Karen
Rabideau, Akiva Stern, Paul Thomson, and Janu Yasotharan. Your input and assistance
were much appreciated!
Finally, we wish to express appreciation to our family members for their patience,
understanding, and support. We dedicate this book to you.
Len Karakowsky
Natalie Guriel

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About the Authors

Len Karakowsky is a professor of management at York
University. He earned his Ph.D. from the Joseph L.
Rotman School of Management at the University of
Toronto, his MBA from the Schulich School of Business
at York University, and his Bachelor of Commerce from
the University of Toronto. He has served on the faculty
of York University since 1997.
Professor Karakowsky is an award-winning instruc-
tor who has been teaching business management courses
for almost 20 years. In 2004, he helped launch Canada’s
first executive master’s degree program in the School
of  Human Resource Management at York University.
Several years later he assisted in the establishment of the doctoral program in human
resource management at York University.
Professor Karakowsky’s research and consulting interests include the areas of lead-
ership development, organizational change, demographic diversity, and corporate social
responsibility. His research has been published extensively in such journals as Leader-
ship Quarterly, Journal of Applied Psychology, Administration and Society, Journal of
Management Studies, Group and Organization Management, Journal of Management Devel-
opment, Small Group Research, Journal of Management Systems, International Business
Review, and many others. He has authored award-winning papers and co-authored the
text Business and Society: Ethics and Stakeholder Management (Canadian Edition) for
Thomson Nelson publishers.

Natalie Guriel is a faculty member in the School of

Administrative Studies at York University. She holds a
master’s degree in management and professional account-
ing from the Joseph L. Rotman School of Management,
University of Toronto, and an honours bachelor of arts
degree in political science from the University of
Toronto. Her professional designations were earned from
the Canadian Institute of Management and include
Chartered Manager, Certified in Management, and
Professional Manager.
Professor Guriel has enjoyed teaching business man-
agement courses at York University for over 10 years. She
has also taught undergraduate and graduate business
courses at several other universities across Canada. Her teaching interests are varied and
range from business management to financial accounting, management accounting, and

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taxation. She has received recognition for her teaching excellence and for her contribu-
tions to curriculum development.
Professor Guriel began her career as a taxation and accounting specialist for Deloitte.
She later worked in a variety of management-related roles in the software, retail, and
service industries. She is a member of the Canadian Institute of Management as well as
the Academy of Management in the United States.

xx About the Authors