AFM 131 Finals Notes:
Unit 1: Future of Work
EQ (Emotional Quotient, also know as emotional intelligence): Focuses on the strength of certain soft
skills, and involves developing greater self-awareness and self-control, and developing the ability to
empathize and see a variety of perspectives.
Intrapreneurship: Entrepreneurial activity within a corporate setting, where one is able to help grow their
company by being creative to evolve processes or launch new products/services using the company’s
existing resources and reputation.
Sustainability: Business practices that leave a positive impact on the environment to protect the world for
future generations.
Unit 2: Business
Business Ownership:
Sole Proprietorship: owned by one person
o Advantages:
Easy to set up
Lower start-up costs
Freedom and control for owners
Less regulatory environment
o Disadvantages:
Unlimited liability: your responsibility
Business continuity is your responsibility
Difficulty raising funds
Partnership: owned by 2+ people
o Advantages:
Easy and inexpensive
Sharing costs with other people
Shared management and decision making
Less regulatory
o Disadvantages:
Unlimited liability: major responsibility
Potential for conflict
Corporation: separate legal entity; ownership through shared capital; shareholders are not
personally liable for debts or acts of the corporation (different rights and responsibilities)
o Advantages:
Limited liability
Business continuity
Greater access to financing
Tax advantages
o Disadvantages:
Higher start up costs
Greater regulatory requirements
Balance of trade: The relationship between importing and exporting.
Favourable balance of trade (trade surplus): When exports are greater than imports.
Unfavourable balance of trade (trade deficit): When imports are greater than exports.
Comparative advantage: Countries should sell (export) what they can produce most efficiently, and buy
(import) when they cannot.
Contract manufacturing: Involves finding a foreign manufacturer to make your product and then have
your own brand name or trademark attached. Also known as outsourcing.
Crown corporation: A company owned by the federal or provincial government (also referred to as
publicly owned).
Embargo: A ban on the import or export of specific products.
Foreign direct investment (FDI): Buying permanent property (or a business) and operating in a foreign
country.
Foreign subsidiary: A company that is owned by a parent company located in another country.
, 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).
Free trade: Where goods and services can be traded between countries without any political or economic
obstruction.
Import quota: A limit on the quantity of products that a country imports.
Joint venture: Two or more companies that form a partnership to take on a major project.
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).
Mixed economy: An economic system where some allocation of resources are made by the market, and
some are made by the various levels of government that play an active role in the economy.
Small business: An organization that
is independently owned and operated,
is not dominant in its field, and
meets certain standards of size (typically 1 to 99 employees).
Strategic alliance: Two or more companies that form a long-term partnership to support each other in
building competitive market advantages.
Tariffs: Taxes on imports, which raise the price of imported products.
Trade protectionism: Limits the import of goods and services through the use of government
regulations.
Unit 3: Business Analysis
PEST:
Political: how the government impacts business environment
Economic: Monetary policies
Social: demographic trends
Technological:
Porter’s Five Forces:
Current competitors (also referred to as existing rivalry)
o How many competitors are there?
o Do you know who they are?
o What do they offer?
o What resources do they have?
o If you’re entering an industry with entrenched competitors and with many resources, it may be more
challenging to get started.
Potential competitors (also known as the threat of new entrants)
o Barriers to entry could include:
o Existing dominance in the marketplace — An entrenched competitor may have already created
fierce brand loyalty, making it more difficult for a new entrant to launch a competing product or
service.
o Capital requirements — The money required to start a new company could be a barrier or deterrent
to get involved in an industry. Consider the high capital costs that would be required to launch a
new airline.
o Laws and regulations — Government policies can encourage or impede whether new companies
can launch in an industry. And consider how legal protection, such as patents and trademarks, can
protect an existing company from the threat of a new entrant wanting to offer a similar product or
service.
o Economies of scale — Existing companies that have grown over time may be able to benefit from
having their cost of production spread over a larger number of units produced, so the cost per unit
declines as the number of units produced increase. Where existing companies have these
economies of scale, it can be difficult for a new entrant to compete if they don’t have this advantage
to produce at such high volumes, and thus have higher costs, which will have to be reflected in the
price to buyers, making it harder for them to compete.
Substitutes
Unit 1: Future of Work
EQ (Emotional Quotient, also know as emotional intelligence): Focuses on the strength of certain soft
skills, and involves developing greater self-awareness and self-control, and developing the ability to
empathize and see a variety of perspectives.
Intrapreneurship: Entrepreneurial activity within a corporate setting, where one is able to help grow their
company by being creative to evolve processes or launch new products/services using the company’s
existing resources and reputation.
Sustainability: Business practices that leave a positive impact on the environment to protect the world for
future generations.
Unit 2: Business
Business Ownership:
Sole Proprietorship: owned by one person
o Advantages:
Easy to set up
Lower start-up costs
Freedom and control for owners
Less regulatory environment
o Disadvantages:
Unlimited liability: your responsibility
Business continuity is your responsibility
Difficulty raising funds
Partnership: owned by 2+ people
o Advantages:
Easy and inexpensive
Sharing costs with other people
Shared management and decision making
Less regulatory
o Disadvantages:
Unlimited liability: major responsibility
Potential for conflict
Corporation: separate legal entity; ownership through shared capital; shareholders are not
personally liable for debts or acts of the corporation (different rights and responsibilities)
o Advantages:
Limited liability
Business continuity
Greater access to financing
Tax advantages
o Disadvantages:
Higher start up costs
Greater regulatory requirements
Balance of trade: The relationship between importing and exporting.
Favourable balance of trade (trade surplus): When exports are greater than imports.
Unfavourable balance of trade (trade deficit): When imports are greater than exports.
Comparative advantage: Countries should sell (export) what they can produce most efficiently, and buy
(import) when they cannot.
Contract manufacturing: Involves finding a foreign manufacturer to make your product and then have
your own brand name or trademark attached. Also known as outsourcing.
Crown corporation: A company owned by the federal or provincial government (also referred to as
publicly owned).
Embargo: A ban on the import or export of specific products.
Foreign direct investment (FDI): Buying permanent property (or a business) and operating in a foreign
country.
Foreign subsidiary: A company that is owned by a parent company located in another country.
, 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).
Free trade: Where goods and services can be traded between countries without any political or economic
obstruction.
Import quota: A limit on the quantity of products that a country imports.
Joint venture: Two or more companies that form a partnership to take on a major project.
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).
Mixed economy: An economic system where some allocation of resources are made by the market, and
some are made by the various levels of government that play an active role in the economy.
Small business: An organization that
is independently owned and operated,
is not dominant in its field, and
meets certain standards of size (typically 1 to 99 employees).
Strategic alliance: Two or more companies that form a long-term partnership to support each other in
building competitive market advantages.
Tariffs: Taxes on imports, which raise the price of imported products.
Trade protectionism: Limits the import of goods and services through the use of government
regulations.
Unit 3: Business Analysis
PEST:
Political: how the government impacts business environment
Economic: Monetary policies
Social: demographic trends
Technological:
Porter’s Five Forces:
Current competitors (also referred to as existing rivalry)
o How many competitors are there?
o Do you know who they are?
o What do they offer?
o What resources do they have?
o If you’re entering an industry with entrenched competitors and with many resources, it may be more
challenging to get started.
Potential competitors (also known as the threat of new entrants)
o Barriers to entry could include:
o Existing dominance in the marketplace — An entrenched competitor may have already created
fierce brand loyalty, making it more difficult for a new entrant to launch a competing product or
service.
o Capital requirements — The money required to start a new company could be a barrier or deterrent
to get involved in an industry. Consider the high capital costs that would be required to launch a
new airline.
o Laws and regulations — Government policies can encourage or impede whether new companies
can launch in an industry. And consider how legal protection, such as patents and trademarks, can
protect an existing company from the threat of a new entrant wanting to offer a similar product or
service.
o Economies of scale — Existing companies that have grown over time may be able to benefit from
having their cost of production spread over a larger number of units produced, so the cost per unit
declines as the number of units produced increase. Where existing companies have these
economies of scale, it can be difficult for a new entrant to compete if they don’t have this advantage
to produce at such high volumes, and thus have higher costs, which will have to be reflected in the
price to buyers, making it harder for them to compete.
Substitutes
