AFM 132

0 | Intro

Preview

• Introductory Survey
• Unit 1: The Future of Work

Outline

1. The future of work
2. Overview of business
3. Scanning the business environment
4. Ethics and social responsibility
5. Management
6. Entrepreneurship
7. Business models
8. Marketing
9. Operations management
10. HR management
11. Financial management
12. Accounting

1 | The future of work

1.1 | Looking forward to 2030

UN SDGs = Sustainable Development Goals

Ex: It’s estimated that 80% of jobs in 2030 haven’t been invented yet

Exponential change

• How long does it take a good/service to reach 50 million users?

1.2 | Impact of the business environment: IB / Ethics / CSR

International Business

• Competition for customers
• Business decision
• Employment

Ethics and SCR (Corporate Social Responsibility) - we expect more of business today

• Ethical Behavior
• Greenwashing
• ex: Starbucks (HR stuff, ethical sourcing, union busting)

1.3 | Toolkit to becoming future-proof

• Digital Literacy
• Entrepreneurial abilities
• Creativity, problem solving, social intelligence

”IQ gets you hired, EQ gets you promoted”

1.4 | Mindset for upcoming units

CPA ad: Should we try and keep CDs alive, or change?

Keep evolving, don’t anchor yourself to past success

1.5 | Key terms

• EQ = Emotional Quotient, EI = Emotional Intelligence
• Intrapreneurship = entrepreneurship in a company
• Sustainability

2 | Overview of Business

2.1 | Understanding business as a financial leader

Chief Financial Officer (CFO)

• Financial report, control, compliance PLUS operation, HR, IT, etc.
• Connected to all areas of business

Skills for a CFO

• Digital literacy
• Entrepreneurial mindset
• Social intelligence

2.2 | Introduction to business

History of business in Canada

• Mixed economy (some allocation by market, some by government)
• Crown Corporations (Canada Post, LCBO, CBC)
• Privatization (sale of crown corps: CN, Air Canada, Petro Canada)

Introduction to business ownership

• Sole proprietorship:
  • Income and expenses are reported on taxes
  • Lower start-up costs
  • High liability
• Partnership: multiple guys
• Corporation: independent entity
  • Limited liability
  • More access to funding (issuing shares)
  • Indefinite life

2.3 | Learning from failure: Why small businesses fail

Ex: Sears was a former retail giant with the infrastructure to support online sales, but got one-upped by Amazon

Ex: Target entered Canada with a very similar model as the US, but didn’t account for the complexity of the Canadian market and geography

2.4 | Impact of globalization on stakeholders

Slow-globalization

• Led to populism and protectionism
• Post-pandemic trends: global disruptions mess up long + complex supply chains
  • Countries building their own skills / tech capacity
  • Manufacturing evolution: automation and high-skill jobs
  • Data and technology help/hinder innovation
• How each country can be more resilient + interdependent

2.5 | Why we trade

• Different resources, environmental conditions, populations, knowledge and expertise
• Imports vs Exports
• Balance of trade - favourable (surplus) vs unfavourable (deficit)
• Free trade = trading w/o political / economic obstruction
  • Comparative advantage
  • Free-market economy

Barriers to trade (protectionism)

• Tariffs
• Import quotas
• Embargo
• Non-tariff barriers

Other

• Requirement to be ISO certified
• Ban on sale of seal products
• Tax on import of dairy products
• Limit on how much softwood can be imported

Trade Wars

• Affect competition, prices, demand, production, innovation
• Impacts local manufacturers, factory workers, farmers, consumers

2.6 | Entering global markets: Canada’s perspective

Canadian companies generally export by selling/buying from

• Directly purchasing from foreign buyers/sellers
• Indirectly through an intermediary, such as a foreign distributor

Canada Goose: Keep Canadian identity, export to the rest of the world

Lululemon: Contract Manufacturer

2.7 | Strategies to enter global markets

Strategies: Commit, control, risk, profit potential

Licensing vs Franchising

• Licensor vs Licensee
• Franchisor vs Franchisee

2.8 | Future opportunities and challenges

International

• Canada can look at tapping into emerging markets which have large populations and a growing middle class
  • BRICS = Brazil, Russia, India, China, South Africa
• How to evaluate global opps?
  • Political
  • Economic
  • Social
  • Technological

For Canada, what are the

• Opportunities?
  • Consider global GDP and being 40% of world’s population
  • Join BRICS+
• Risks?
  • Countries are so different - values, infrastructure, business practices
  • Not on an equal playing field
  • Varying levels of risk

2.9 | Key Terms

• Franchising: Where someone with a business concept (the franchisor) sells the rights to use the business name and to sell a product or service to another party (known as the franchisee).
• Licensing: When a domestic company (known as the licensor) allows a foreign company (known as the licensee) to make its product in exchange for a fee (typically a royalty).

3 | Scanning the Business Environment

3.1 | Background and tools

Tools

• Environmental scan (what affects growth/success)
  • SWOT, PEST, Porter’s 5 forces
• Stakeholders (customers, suppliers, banks, governments, unions)

3.2 | PEST

Politics

• Factors of Production
  • Land, Labour, Capital, Entrepreneurship, Knowledge
• Levels of government
  • Federal → Provincial → Municipal
• Laws and regulations
  • Legislation
  • How to protect consumers / business
    • Consumers: Canada Anti-Span Legislation (CASL)
    • Businesses: Competition Bureau, Competition Act
  • Deregulation
• Fiscal Policy
  • Taxes (corporate income, property, imports, sales)
  • Government spending (job creation, infrastructure)
• National Debt: Accumulation of government deficits over time
• Trade Relationships

Economic

• Microeconomic vs Macroeconomics
• Health of the economy
  • Unemployment, spending power
  • Business cycles (Trough, Peak, Recovery, Expansion, Contraction - Recession vs Depression)
• Currently
  • Bank of Canada focused on lowering interest rates
• Monetary Policy
  • Bank of Canada (BoC) controls monetary policy
    • High interest rates: more saving, less borrowing
    • Low interest rates: more spending, more borrowing
    • Keeps Inflation: Low, Stable, Predictable
  • BoC is a special type of Crown Corporation
    • Announces Interest Rates 8x a year
    • Consider the 2008-09 global recession: interest rates were too low trying to heat up the economy
• Terms
  • Inflation
  • Consumer Price Index (CPI)
  • Benchmark interest rate
  • Gross Domestic Product

Social

• Demographic Trends: Age, Education, Income, Diversity
• Changing Social Attitudes
  • Companies have a social license to operate
  • Triple Bottom Line reporting: Social, Environment, Economic report (People, Planet, Profit)

Technological

3.3 | The competitive landscape: Porter’s five forces

Porter’s 5 Forces

1. Current competitors (existing rivalry)
2. Potential competitors (Threat of new entrants)
   1. Consider barriers to entry
3. Substitutes
   1. Consider customers and their switching costs
4. Bargaining power of suppliers
5. Bargaining power of customers

Some considerations about using Porter’s

• Useful for new or existing companies
• Limitations - may not recognize disruptions

3.4 | Building on your toolkit to assess an organization: SWOT

Internal: Strength | Weakness External: Opportunities | Threats

• Capitalize on strengths
• Improve weaknesses
• Take Advantage of opportunities
• Mitigate threats

4 | Ethics and Social Responsibility

4.1 | Ethics and social responsibility

Stakeholder questions

• Why does a business exist, how does it operate, who do they associate with, what do they believe?
• Example: Single-use plastics

4.2 | Understanding ethics

Legality vs Ethics

• Laws: Established rules/regulations within a jurisdiction
• Ethics: Guiding principles to navigate decision-making

4.3 | Navigating Ethical Dilemmas

Ethics Questions

1. Does it violate any laws or policies?
2. Are the alternatives fair for all parties involved?
3. How will you feel about the decision?

4.4 | Corporate Social Responsibility (CSR)

Business case:

• Better sales if you’re responsible
• Investors have ESG goals

4.5 | Responsibility to stakeholders

Examples

• Employees
• Customers
• Investors
• Lending institutions (banks, credit unions)
• Communities
• Governments

4.6 | Future opportunities and challenges

TBL (Triple Bottom Line) Reporting

• People
• Planet
• Profit

5 | Management

5.1 | Management Today

5.2 | Plan

Questions

1. Where are we now?
2. Where do we want to be?
3. How can we get there?

Vision Statement:

• Long term goal
• Current purpose

Mission Statement

• Why the business exists (goods and services, values, key customers, society)
• What makes the business unique

SMART Goals

• Specific
• Measurable
• Attainable
• Relevant
• Timely

Contingency Plans

• If progress towards a goal isn’t going as expected
• Handling a crisis

5.3 | Organize

Purposes

• Allocate resources and assign tasks
• Design processes and procedures

C Suite

• Chief Executive Officer (CEO)
• Chief Financial Officer (CFO)
• Chief Operating Officer (COO)
• Chief Information Officer (CIO)
• Chief Marketing Officer (CMO)

Important Skills

• Human skills
• Technical skills
• Conceptual skills
• Rewarding top talent

5.4 | Lead

Traits for leaders

• Drive
• Cognitive Ability
• Self-confidence
• Honesty and integrity
• Leadership motivation

Types of motivation (Maslow’s Hierarchy)

• Physiological
• Safety
• Love/belonging
• Esteem
• Self-actualization

Types of Leadership

• Autocratic
• Democratic
• Laissez-faire

5.5 | Control

Control Process

1. Establish clear standards
2. Monitor and record performance
3. Compare results against standards
4. Communicate results
5. If needed, take corrective action

4 Metrics of the balanced scorecard

1. Financial
2. Customers
3. Learning and Growth
4. Business Processes

6 | Entrepreneurship

6.1 | What it takes to be an entrepreneur

Incubators

• Velocity
• The Problem Lab
• Co-op and E Co-op

Traits of an Entrepreneur

• Passion and motivation
• Tolerant of uncertainty
• Learning and Growth Mindset
• Confidence

6.2 | Entrepreneurship vs Intrapreneurship

What drives entrepreneurship?

• They want to be their own boss
• They want flexibility
• They want to define their own success

What makes entrepreneurship mainstream?

• Education
• Technology
• Social acceptance
• Support systems

Intrapreneurship = Being entrepreneurial in a corporate setting

6.3 | New venture creation

Entrepreneurship life cycle

1. Birth / introduction
2. Breakthrough / growth
3. Maturity / exit

Challenges in launching an idea

• Getting customers
• Managing time
• Abiding by local rules

Buying an existing business

• Why is it up for sale?
• Due diligence
• What price to pay?
  • What it owns
  • What it currently earns
  • What makes it unique

Franchising

• Franchisor’s experience and reputation
• Proven product or service

6.4 | Resources to start a business

Incubators = Environments that help entrepreneurship

Industry and Government Supports

• Business Development Bank of Canada (BDC)

Financing

• Angel investors
• Venture capitalists
• Crowdfunding

6.5 | Entrepreneurship

Value Proposition = describes the benefits customers can get from using a product

• Jobs
• Pains
• Gains

Business Model = captures how you deliver value to customers through the value proposition

Business Plans

• Nature of the business
• Target Market
• Understanding the competition and industry
• Qualifications of the people involved

Common mistakes

• Ignoring the competition
• Relying on a few customers
• Procrastinating
• Being too optimistic

Record Keeping

• Accounting Systems
• Inventory
• Customer / Employee records

7 | Business Models

7.1 | An Introduction

1. What are you providing?
2. Who are you providing to?
3. How do you survive and thrive?

7.2 | The Business Model Canvas

7.3 | Intro to Business Stages

• Birth / introduction
• Breakthrough / growth
• Maturity / Exit

Business Functions

• Create Value (Marketing)
• Deliver Value (Operations, HR, Finance)
• Capture Value (Accounting)

8 | Marketing

8.1 | Intro to Marketing

Trends in marketing today

1. The importance of data
2. Emphasis on customer relationship management
3. Rise in cause marketing
4. Social media marketing

8.2 | Understanding the Customer

• Market Research = collect info to understand customers to satisfy their needs
• Secondary Research = examine information and statistics that are already available (surveys, research, data, company records)
• Primary Research = collecting your own info

Customer Markets

• Business to Customer (B2C)
  • Personal consumption
  • Quick decision-making
  • Larger pool of purchases
• Business to Business (B2B)
  • Want a longer-term relationship
  • Slow decision-making
  • Smaller pool of purchases

Market Segmentation

• Mass Marketing
• Market Segmentation = grouping market into similar needs
  • Geographic
  • Demographic
  • Psychological
  • Behavioral

Consumer decision-making process

1. Initial consideration - what do I need?
2. Active evaluation - what info is available on the alternatives?
3. Purchase decision - what best meets my needs
4. Post-purchase experience - was it good?

Influences

• Social
• Psychological
• Situational

8.3 | The Marketing mix (4Ps)

Product

• Testing
  • Concept testing = sharing an idea
  • Test marketing = launching to a small group / crowdsourcing
• Packaging
  • Does it stand out?
  • Is it simple to use?
  • Does it provide the needed information?
• Product line vs Product mix

Price

• Cost-plus = cost > revenue
• Competitive pricing = assessing competition
• Value-based pricing = Assesses value
• Price skimming = highest possible (during introduction)
• Penetration pricing = lowest possible

Place

• Intermediaries
  • Retailers
  • Wholesalers
  • Agents / brokers
• Types of efficiencies
  • Transportation
  • Promotion
  • Customer Support
• Types of distribution (retailers)
  • Intensive
  • Selective
  • Exclusive

Promotion

• Advertising
• PR
• Sales Promotions
• Direct Marketing
• Personal Selling

8.4 | Building long-term customer relationships

Customer Relationship Management (CRM)

• Captures data to support interactions
• Uses software and databases
• Identifies the best customers / customizes communications / assesses the effectiveness of marketing

8.5 | Building a brand

Brand = Name / Symbol / Design

• Clearly delivered message
• Credibility for company
• Emotional connection
• Motivation to buy
• Customer Loyalty

Brand Equity = strength Brand awareness = how many people know

What do valuations take into account?

• Financial analysis
• Role of the brand
• Brand strength

8.6 | Decision Making around the product life cycle

9 | Operations Management

9.1 | What is operations management?

Operations Management = how a company creates goods/services for their customers through efficient management of resources/processes

• Products: Are they manufactured efficiently with specific quality standards?
• Service: Are quality experience provided to customers at a reasonable cost?

History of operations and automation

• Early 1900s: moving assembly line
• Now: Automation

Push for Innovation in Canada

• Strategic partnerships between business, academia, and government
• Government supports innovations in manufacturing and technology through policies or funding

Productivity = Efficiency of operations to transform inputs into outputs

• Use fewer inputs = same outputs
• Use same inputs = more outputs

Productivity Improvements

• Improving efficiency of production processes
• Waste reduction
• Improving quality

9.2 | Operations Planning: Facility location, layout, outsourcing

Facility Location

• Proximity to customers
• Proximity to resources
• Government support

Facility Layout

• Product or line layout (assembly line for car)
• Process or functional layout (many stations)
• Fixed position layout (employees congregate around large project like a house)

Reasons for outsourcing

• Reduce or control costs
• Gain access to expertise or technology
• Free up internal resources

9.3 | Operations Control: The production process

Goals

• Produce at the lowest possible cost
• Produce in a timely manner
• Produce to an acceptable level of quality

Purchasing

• Materials requirement planning - setting budgets, deciding what to purchase
• Establishing relationships with a few suppliers

Inventory management considerations

• Reliability
• Quality
• Logistics

Production processes

• Made-to-order
• Mass production
• Mass customization

Quality

• International Organization for Standardization (ISO) focuses on quality or environment/sustainability
• Total Quality Management (TQM) is a continuous process to improve product quality and customer satisfaction

9.4 | Supply chain management

Main Questions

• Do you have the optimal number of partners?
• Are you able to reduce costs?
• Do you have flexibility and speed?
• Can you ensure that the eventual customer will be satisfied?

9.5 | Your tool kit: PERT and Gantt Charts

Program Evaluation and Review Technique (PERT) = planning tool that considers tasks and their relationship

1. Identifying the tasks required to get the job done
2. Estimating the time required to complete each task
3. Plotting out and sequencing the tasks
4. Identifying the critical path (longest sequences of tasks)

Gantt chart = Planning tool that measures progress, showing what’s being worked on, and what percent they’re done

9.6 | Decision-making and future of operations

Investments in Research and Development (R&D)

Lean Manufacturing (woah): Using the fewest…

• Raw materials
• Human effort
• Space
• Tools
• Equipment

Technology

• Computing
  • Computer-aided design (CAD): like 3D modelling
  • Computer-aided manufacturing (CAM):
  • Computer-integrated manufacturing (CIM)
• Manufacturing
• Operations management

10 | HR Management

10.1 | Introduction to Human Resources Management (HRM)

10.2 | The Employee Lifecycle (ELC)

1. Recruitment: Attracting Talent
2. Onboarding: Learning
3. Development: Providing learning opportunities
4. Retention: Continually motivating and engaging
5. Offboarding: Managing departures

10.3 | HRM Legislation

Canadian Laws

• Employment Standards
• Workplace health and safety regulations
• Employment equity and human rights

10.4 | Trends in HRM

• Changing Demographics
• Managing workplace diversity
• Pay Equity
• Harassment policies
• Mental health wellness
• A global workforce
• Evolving knowledge and skill requirements
• Shift in employee attitudes
• Contingent workers

11 | Financial Management

11.1 | Financial Management

Your finances

• Sources of income
• Your expenses
• Your debts
• Your financial goals
  • TVOM
  • Compound interest

Managing finances for a business

• Character (company size, location, # years in business, etc.)
• Capacity (cashflow, liquidity, debt)
• Conditions (external factors like industry growth rate, politics, currency)

11.2 | Financial Planning

Step 1: Developing forecasts

• Indicators
  • Past performance
  • New sales contracts
  • Product offerings and customer growth
  • Changes to key expenses
• Short-term forecasts: Predicts revenue and expenses for <1 yr
• Long-term forecast: >1 yr

Step 2: Developing budgets

• Operating budget: expenses
• Cash budget: cash inflows and outflows
• Capital budget: considers >1 yr to account for new equipment, etc.

Step 3: Establishing financial controls

• Financial control = Comparing actual results to what was projected to identify differences (variances)
• Examples
  • Increase in raw materials cost
  • Increase in labour costs
  • Increase in quality produced
  • Quality issues

11.3 | Managing Cash Flow

Ways for small businesses to fail

• Undercapitalization = not having enough capital to support your operations
• Cash management = ensuring you have enough liquidity available

How to Succeed

• Connecting from customers
  • Invoice immediately
  • Follow up
  • Reward early payment (eg. 2% discount if paid within 10 days, otherwise full amount is due in 30 days, otherwise known as 2/10 net 30)
• Paying suppliers = do it as late as possible without any penalty

11.4 | Financing a Business

Funding Needs

• Day-to-day operations
• Capital expenditures

Funding Sources

• Operations - when a company generates a profit and keeps it in the business
  • Keep it in the company
  • Return to owners (dividends)
  • Pay down debts
• Debt financing - obtaining funds from creditors like banks, which must be repaid
  • Terms: Principal, Interest, Term, Security of a loan (secured or unsecure), Covenants
  • Financing Options: Credit card, Line of credit, Term loan
  • Issuing Bonds: Promise to pay back, promise of interest, security (eg. AAA)
• Equity financing - obtaining funds from the sale of ownership (shares)
  • IPO = Initial Public Offering
  • Prospectus = A document that summarizes business details
  • Common shares = Voting
  • Preferred shares = No voting, but priority to dividends

Debt or equity?

• Debt: If the company will do bad
• Equity: If the company will do well

12 | Accounting

12.1 | Accounting and Financial Information

Accounting

• Buying supplies
• Paying employees
• Obtaining loans from banks
• Selling a product

Accounting Information System

1. Inputs (paper trail, invoices)
2. Processing (all sales in the past month)
3. Outputs (reports and statements)

Internal Stakeholders

• Marketing personnel
• Operations personnel
• HR personnel

External Stakeholders

• Investors
• Analysts
• Lenders
• Government

Immediate tasks when starting a business

• Set up for operations
• Business planning (cash burn rate)
• Tax compliance

12.2 | Accounting in Canada

Managerial accounting = Information inside a company Financial accounting = Stakeholders outside a company, publishing annual reports

Private accountants = corporate accountants in a single company Public accountants = provide professional services for a fee

12.3 | Accounting Standards

In Canada

• International Financial Reporting Standards (IFRS)
• Accounting Standards for Private Enterprises (ASPE)

An accounting framework

• What information to present
• Qualitative characteristics
  • Relevance and faithful representation
  • Comparability
  • Verifiability
  • Timeliness
  • Understanding
• Quantifying financial statement elements
  • Recognition
  • Measurement

12.4 | Financial Statements

Balance Sheet / Statement of Financial Position

• what a company owns and owes

Income Statement / Profit and Loss Statement

• earnings and expenses over some time

Cash Flow Statement / Statement of Cash Receipts and Disbursements

• cash inflows and outflows

12.5 | Financial Statement Analysis: Using ratios

Key Performance Indicators (KPIs)

• Comparing to prior year figures
• Comparing to competitors
• Comparing to industry averages

Liquidity ratios:

$$\text{Current Ratio}=\frac{\text{Current Assets}}{\text{Current Liabilities}}$$ $$\text{Quick Ratio Asset Test}=\frac{\text{Current Assets - Inventory - Prepaid Expenses}}{\text{Current Liability}}$$

Leverage ratios

$$\text{Debt to Asset Ratio}=\frac{\text{Total Liabilities}}{\text{Total Assets}}$$ $$\text{Debt to Equity Ratio}=\frac{\text{Total Liabiltiies}}{\text{Owners’ Equity}}$$

Profitability ratios

$$\text{Earnings per Share}=\frac{\text{Net Income}}{\text{Average number of common shares}}$$ $$\text{Return on Sales}=\frac{\text{Net Income}}{\text{Net Sales}}$$ $$\text{Return on Equitiy (ROE)}=\frac{\text{Net Income}}{\text{Average Owner’s Equity}}$$

Activity ratios

$$\text{Inventory Turnover Ratio}=\frac{\text{COGS}}{\text{Average Inventory}}$$