I will be having an exam on these sldies I have provided. I want you to create me detailed study notes escepally for the learning objectives that I can study. I want the notes to be detailed and cover all the topics. Make sure the formating is nice. Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 1
Prepared by Michael Wade, Seneca College
CHAPTER 1
The Dynamic 
Business 
Environment
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 2
Learning Objectives
After you have read and studied this chapter, you should be able to:
LO1 Illustrate the importance of key business 
fundamentals to wealth generation.
LO2 Identify business stakeholders and their importance 
to non-profit organizations and business activities.
LO3 Explain how entrepreneurship is critical to the wealth 
of an economy, and list the five factors of production that 
contribute to wealth.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 3
Learning Objectives, cont’d.
LO4 State the six elements that make up the business 
environment and explain why the business environment is 
important to organizations.
LO5 Give examples of how the service sector has replaced 
manufacturing as the principal provider of jobs, and why 
manufacturing remains vital for Canada.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 4
LO1 Business Fundamentals
• Goods: tangible products such as computers, food, 
clothing, cars and appliances.
• Services: intangible products (i.e. products that can’t be 
held in your hand) such as education, health care, 
insurance, recreation, and travel and tourism.
• Business: any activity that seeks to provide goods and 
services to others while generating a profit.
• Entrepreneur: a person who risks time and money to 
start and manage a business.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 5
Revenues, Profits, and Losses
• Revenue: total amount of money received during a 
given period for goods sold and services rendered, and 
from other financial resources.
• Profit: the amount a business earns above and beyond 
what it spends for salaries and other expenses.
• Loss: when a business’s expenses are more than its 
revenues.
• Risk: the chance of loss, the degree of probability of 
loss, and the amount of possible loss (i.e., time and 
money)
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 6
Standard of Living and 
Quality of Life
• Standard of living: the amount of goods and services 
people can buy with the money they have.
• Quality of life: the general well-being of a society in 
terms of its political freedom, natural environment, 
education, health care, safety, amount of leisure, and 
rewards that add to the satisfaction and joy that other 
goods and services provide.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 7
LO2 Responding to 
Various Stakeholders
Stakeholders: all of the people who stand to gain or lose by the 
policies and activities of a business.
• Customers 
• Employees
• Financial institutions (e.g., banks and credit unions)
• Investors (e.g., shareholders)
• Environmentalists
• Governments
• Suppliers 
• Dealers (e.g., retailers)
• Surrounding community
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 8
Stakeholders
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 9
Stakeholders 
and the 
Business 
Section
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 10
Changes in International 
Trading Patterns
• Offshoring: sourcing part of the purchased inputs outside of 
the country. 
• Outsourcing: assigning various functions, such as 
accounting, production, security, maintenance, and legal work 
to outside organizations.
o This helps the company to be more competitive but may impact 
the local community because jobs may be lost.
• Insourcing: Assigning various functions that could to an 
outside organization to employees in the company.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 11
Using Business Principles in 
Non-Profit Organizations
• Non-profit organization: An organization whose goals do not 
include making a personal profit for its owners or organizers.
• Revenues greater than expenses (surplus) are used to carry 
out the social or educational goals of the organization.
• Social entrepreneurs: use business principles to start and 
manage non-profit organizations and help address social 
issues.
• Non-profit organizations are run as regular businesses without 
the profit motive.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 12
LO3 Entrepreneurship Versus Working 
for Others
• Advantages of working for others include:
o risk is assumed by others.
o workers receive benefits such as paid vacation time 
and health insurance.
• Entrepreneurs assume all the risk of starting and running 
a business.
o there may be great financial rewards, but many new 
businesses fail.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 13
The Importance of Entrepreneurs and 
the Creation of Wealth
• Factors of Production include:
o Land (or natural resources)
o Labour (workers)
o Capital goods such as machinery, tools, buildings. 
Money to purchase these goods is not considered a 
Factor of Production.
o Entrepreneurship
o Knowledge
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 14
The Five Factors of Production
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 15
LO4 The Business Environment
• The business environment includes the surrounding 
factors that either help or hinder the development of 
businesses.
• These factors include: 
o legal 
o economic 
o technological 
o competitive 
o social 
o global
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 16
Business Environment
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 17
The Legal Environment
• Regulations: restrictions that provincial and federal laws 
place on businesses with respect to the conduct of their 
activities. 
o They exist to protect both consumers and businesses
• Governments encourage business through lower 
taxation and regulations affecting contracts, corruption, 
and illegal activities both domestically and 
internationally. 
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 18
The Economic Environment
• The economic environment looks at income, expenditures, and 
resources that affect the cost of running a business.
• Economic indicators include: consumer spending, employment 
levels, and productivity.
• Currency fluctuations affect imports and exports.
o A lower Canadian dollar relative to the US dollar makes our 
exports cheaper, therefore positively impacting companies that 
produce goods and services for export.
o When the Canadian dollar is high relative to the US dollar, our 
exports become more expensive, therefore loosing their 
competitive advantage.
• Entrepreneurship is promoted by governments by allowing private 
ownership of businesses. Not all countries do this.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 19
The Technological Environment
• Technology: Everything from phones and 
copiers to computers, mobile devices, 
medical imaging machines, and the various 
software programs and apps that make 
business processes more effective, 
efficient, and productive.
• Productivity: the amount of output that is 
generated given the amount of input (e.g., 
hours worked. 
o Higher productivity means employers 
need fewer workers leading to higher 
unemployment.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 20
The Growth of Electronic Commerce 
(E-Commerce)
• E-commerce encompasses: the buying and 
selling of goods and services over the Internet.
• B2C: business to consumer
• B2B: business to business 
• E-business refers to: any information system or 
application that empowers business processes.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 21
Using Technology to be Responsive to 
Customers 
• Database: an electronic storage file for information.
• Identity theft: obtaining an individual’s personal information, 
such as their Social Insurance Number and credit card 
numbers, for illegal purposes.
• In Canada federal privacy laws have been created.
• You can protect yourself by restricting whom you give 
personal information to, installing anti-virus and anti-spy 
software, and a firewall on your computer.
• You should monitor your credit report on a frequent basis.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 22
Social Media Marketing
• The most common tools or platforms used by both 
consumers and organizations are social networking 
sites (e.g., Twitter and Facebook) blogs, wikis, podcasts 
and other shared media sites such as YouTube.
• Social networking sites are used to connect and 
communicate with current and potential customers.
• Crowdsourcing: using the expertise of a large group of 
people to solve a business problem.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 23
The Competitive Environment
• Components of competition:
o entry, power of buyers, power of suppliers, existing 
competition and substitutes
• Companies compete by:
o exceeding customer expectations
o restructuring and empowerment
• Empowerment: giving front-line workers the 
responsibility, authority, and freedom to respond quickly 
to customer requests.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 24
How Competition Has Changed Business
Traditional Businesses Modern Businesses
Customer satisfaction Delighting the customer*
Customer orientation Customer and stakeholder orientation**
Profit orientation Profit and social orientation†
Reactive ethics Proactive ethics‡
Product orientation Quality and service orientation
Managerial focus Customer focus
* Delight is a term from total quality management. Bewitch and fascinate are alternative terms.
** Stakeholders include customers, employees, investors, suppliers, dealers (e.g., retailers), and the community; the goal is 
to please all stakeholders.
† A social orientation goes beyond profit to do what is right and good for others.
‡ Proactive means doing the right thing before anyone tells you to do it. Reactive means responding to criticism after it 
happens.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 25
The Social Environment
• Demography: the statistical study of the human population 
with regard to its size, density, and other characteristics such 
as age, race, gender, and income.
• Demographic shifts include: 
o An aging population
o Changes in the workforce
o Diversity due to growing numbers of immigrants
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 26
Population Distribution by Age Group
YEAR 0–4 5–19 20–34 35–64 65 AND ABOVE
2016 5.7% 16.3% 20.5% 41.2% 16.3%
2021 5.6% 16.5% 19.3% 40.1% 18.5%
2026 5.5% 16.9% 18% 38.8% 20.8%
2031 5.2% 16.8% 17.5% 37.7% 22.8%
2036 5% 16.5% 17.7% 37.1% 23.7%
Source: Adapted from “Population Projections for Canada, Provinces and Territories 2009–2036," Cat. No. 91–520–X, June 
2010. Retrieved from http://www.statcan.gc.ca/pub/91–520–x/2010001/t370-eng.htm.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 27
The Global Environment
• Important to all other environmental influences due to:
o increased growth of global competition.
o increased free trade among nations.
o development of efficient distribution systems.
o communication advances such as the Internet.
o improved living standards due to globalization. 
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 28
How Global Changes Affect You
• Businesses expand to serve global markets.
• New jobs are created in both manufacturing and 
service industries.
• Rapid changes create a need for continuous 
learning.
• More job opportunities for graduating students.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 29
The Ecological Environment
• Climate change: the movement of the temperature 
of the planet up or down over time.
• Current issue is global warming.
• Greening: a trend of saving energy and producing 
products that cause less harm to the environment.
• Sustainability: development that meets the needs 
of present and future generations.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 30
LO5 The Evolution of 
Canadian Business
• Due to increased efficiencies, global competition, and 
improved technology, jobs are being lost in the 
manufacturing sector.
• The number of Canadian farms has dropped due to 
technology, and have been replaced by some larger 
farms, and some small but highly specialized farms.
• Many workers who cannot find work may need retraining 
and further education to become qualified for new and 
existing jobs.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 31
Importance of the Services-Producing and 
Goods-Producing Sectors in Canada
Number of Employed 
(thousands)
Total Workforce 
(percent)
TOTAL EMPLOYED IN CANADA 18,464 100.0
Services-Producing Sector 14,541 79
Trade 2,809.6 15.2
Health Care and Social Assistance 2,383.2 12.9
Professional, Scientific & Technical Services 1,448.8 9.9
Goods-Producing Sector 3,876 21
Manufacturing 1,724.8 9.3
Construction 1,409.3 7.6
Forestry, Fishing, Mining, Quarrying, Oil & Gas 329.6 1.7
Source: Statistics Canada. Employment by Industry and Sex, 2017, accessed May 19, 2018, 
http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/labor10a-eng.htm.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 32
Progress in Service Industries
• Unlike the past, the services-producing sector now 
employs almost 79 percent of Canada’s working 
population.
• Technological improvements have helped businesses 
reduce their workforce, while increasing their efficiency.
• Large manufacturing companies are outsourcing 
services, creating more opportunities for service oriented 
people.
• Women entering the workforce have increased demand 
for services such as day care, food preparation and 
household maintenance.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 33
What is the Service Sector?
There’s much talk about the service sector, but few discussions 
actually list what it includes. Here are some examples of businesses 
in the service sector. (See Figure 1.9)
• Amusement and Recreation Services
o Amusement parks, Ice skating rinks, Bowling alleys
• Business Services
o Collection agencies, Window cleaning, Public relations
• Legal Services
o Lawyers, Paralegals, Notary public
• Educational Services
o Schools, Libraries, Online schools
• Health Services
o Chiropractors, Nursery care, Dentists
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 34
Chapter Summary
LO1 Profit is money earned over and above expenses. Risk 
is assumed in the pursuit of profit.
LO2 Stakeholders are affected by what businesses do. Nonprofit organizations raise funds and use them to support 
charitable activities.
LO3 Entrepreneurs risk time and money to start and manage 
a business. The five Factors of Production include: land, 
labour, capital goods, entrepreneurship, and knowledge.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 35
Chapter Summary cont’d.
LO4 The six elements of the business environment include: 
legal, economic, technological, competitive, social, and 
global.
LO5 The service sector has replaced manufacturing as the 
principal provider of jobs, although manufacturing remains 
vitally important for Canada.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 36
Prepared by Michael Wade, Seneca College
CHAPTER 2
How Economic 
Issues Affect 
Business
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 37
Learning Objectives
After you have read and studied this chapter, you should be able to:
LO1 Describe basic economics.
LO2 Explain what capitalism is and how free markets work.
LO3 Compare the benefits and negative consequences of 
socialism and communism.
LO4 Describe the mixed economy of Canada.
LO5 Illustrate the significance of key economic indicators 
and the business cycle.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 38
LO1 Explain What Capitalism is and 
How Free Markets Work
• Economic concepts are the basis for most major 
business decisions.
• Both the global economy and the Canadian economy 
have an effect on Canadian business.
• Economics is: the study of how society chooses to 
employ resources (Factors of Production) to produce 
goods and services and distribute them for consumption 
among various competing groups and individuals.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 39
Branches of Economics
• Macroeconomics: the part of economic study that looks 
at the operation of a nation’s economy as a whole.
• Microeconomics: the part of economic study that looks 
at the behaviour of people and organizations in particular 
markets.
• Resource development: the study of how to increase 
resources and the creation of conditions to make better 
use of those resources (e.g., recycling).
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 40
Growth Economics and Adam Smith
• Scottish economist Adam Smith, author of The Wealth of 
Nations, believed freedom was vital to wealth creation.
• If people could keep the profits they derived from the 
land or business they owned and worked, the incentive 
to work harder was powerful. 
• This incentive would then cause the economy to grow 
and prosper.
• Smith is considered the father of modern economics.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 41
How Businesses Benefit the Community
• Smith believed that people work for their own selfinterest, but in so doing, actually benefit the economy as 
a whole.
• The invisible hand: turns self-directed gain into social 
and economic benefit for all.
• Smith assumed that as people became wealthier, they 
would help others in the community who were less 
fortunate, by providing jobs or goods and services for 
sale.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 42
LO2 Explain What Capitalism is and 
How Free Markets Work
• Capitalism: an economic system in which all or most of 
the factors of production and distribution are privately 
owned and operated for profit.
• Free market: one in which decisions about what to 
produce and in what quantities are made by the market.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 43
How Prices Are Determined
• In a free market, prices are determined by negotiations 
between buyers and sellers.
• Supply: the quantity of products that manufacturers or 
owners are willing to sell at different prices at a specific 
time.
• Demand: the quantity of products that people are willing 
to buy at different prices at a specific time.
• Market Price: the price determined by supply and 
demand
• The Equilibrium Point: the quantity demanded and the 
quantity supplied are equal.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 44
Supply Curve at Various Prices
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 45
Demand Curve at Various Prices
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 46
The Equilibrium Point
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 47
Supply Curve at Various Prices
Don’t look at the prices when 
you are looking at Quantity.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 48
Demand Curve at Various Prices
Don’t look at the quantities 
when you are looking at 
Prices.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 49
The Equilibrium Point
Now you look at 
where the two 
curves cross.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 50
Supply and Demand
This is a supplier 
created increase 
in quantity.
This is called “Supply 
Surplus”.
Any additional quantity that 
is created not by marketdriven demand generally 
decreases the price the 
buyer can achieve.
The seller generally cannot 
increase price by producing 
more and “flooding” the 
market.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 51
Supply and Demand
This is a 
supplier 
created 
decrease in 
quantity.
This is called 
“Supply Scarcity”.
Because the 
supply is less than 
the demand, prices 
will go up.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 52
Supply and Demand
This is a MarketDriven Demand 
increase in 
Prices the seller 
can charge.
This is called “Demanddriven Scarity”. Any 
additional demand that is 
created by the market 
generally increases the 
price the seller can 
achieve at the same 
supply level.
If the supplier(s) make 
more jeans (increases 
supply – the green dashed 
line), the new equilibrium 
price is the red “X” where 
the two new curves 
intersect - which is usually
higher than the previous 
Equilibrium Price.
X
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 53
Supply and Demand
This is a 
Market 
Demand 
created 
decrease in 
quantity.
Any reduction in 
market-driven Demand 
generally decreases 
the price the buyer can 
achieve with the same 
level of supply.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 54
Supply and Demand
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 55
Supply and Demand
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Why is this important?
• When someone makes additional money 
that is above the Cost of Living (CPI) 
percentage increases, they tend to spend 
it buying more goods or services (“Higher 
Real Income”). 
o This creates additional demand on what they are buying more 
of versus the past demand state.
• When the increase in inflation (CPI) is 
more than the increase in the person’s 
wages, they tend to spend less (“Lower 
Real Income”).
o This tends to decrease consumer demand. When prices of 
beef goes up, the substitutions increase (i.e.: people buy 
more pork or chicken or fish).
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 57
How Prices Are Determined
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 58
Why is this important?
https://biv.com/article/2023/09/canadian-beef-prices-soar-cost-pork-ham-and-baconfalls#:~:text=Fresh%20or%20frozen%20beef%20prices,August%2C%20compared%20with%20August%202022
Buying pork or fish products instead of beef and chicken was one way consumers could have 
stabilized their food budgets. Statistics Canada makes clear that its Consumer Price Index is not a 
cost-of-living gauge because consumers could substitute lower cost items for higher priced items 
and find the same enjoyment.
"The idea is that consumers would normally switch between products as the price relationship of 
goods changes," the nation's number cruncher said. "If, for example, consumers get the same 
satisfaction from drinking tea as they do from coffee, then it is possible to substitute tea for coffee 
if the price of tea falls relative to the price of coffee.“
Today's data for grocery price changes shows that prices for various centre-of-the-plate 
proteins fluctuated wildly. Fresh or frozen beef prices, for example, soared 11.9 per cent in 
August, compared with August 2022. Fresh or frozen chicken prices also saw steep inflation, and 
rose 8.9 per cent in August, compared with August 2022. It was pig-related meats that became 
more affordable. Canadian fresh and frozen pork prices fell 0.9 per cent year-over-year in August, 
while ham and bacon prices declined 5.9 per cent in that time period.
While chicken is supply managed in Canada, beef and pork products are not.
Pork producers have faced steep competition from global companies in Europe and the 
U.S. Struggles in the pork sector have been ongoing, with Quebec pork producer Olymel in April 
saying that it would close a major slaughterhouse, laying off 994 workers as it restructures 
amid tough market conditions.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 59
Competition Within Free Markets
• Perfect Competition: the market situation in which 
there are many sellers in a market and no seller is 
large enough to dictate the price of a product.
• Monopolistic Competition: the market situation in 
which a large number of sellers produce very similar 
products that buyers nevertheless perceived as 
different.
• Oligopoly: a form of competition in which just a few 
sellers dominate the market.
• Monopoly: a market in which there is only one seller 
for a product or service.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 60
Free Market Competition 
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 61
Benefits and Limitations of Free 
Markets
• Free markets allow open competition among 
companies.
• In a free market, companies must provide customers 
with quality products at fair prices with good service, 
or risk losing those customers.
• Free markets have provided opportunities for poor 
people to rise above poverty.
• Free markets have also brought inequality between 
rich and poor.
• They have led to greed, which often dictates how 
managers and owners act-not always in the best 
interests of their stakeholders. 
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 62
LO3 Compare the Benefits and Negative 
Consequences of Socialism and 
Communism
• Socialism: an economic system based on the premise 
that some, if not most, basic businesses should be 
owned by the government so that profits can be evenly 
distributed among the people in some way.
o Think Scandinavian countries – which, 
interestingly, are almost always in the Global Top 
Ten most innovative countries.
o Swedish income tax rates: +/-$80K to +/-$100K = 
54%, +/-$100K and above = 57%. 
o Canadian income tax rates: +/-$55K to +/-$90K = 
29.65%, +/-$90K to +/-$102K = 31.48%, +/-$102K to 
+/-$106K = 33.89%, +/-$106 to +/-$111K = 37.91%.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 63
Norway was 
22nd, but 3rd in 
Institutions 
and 2nd in 
Infrastructure.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 64 https://www.wipo.int/publications/en/details.jsp?id=4622
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 65
LO3 Compare the Benefits and Negative 
Consequences of Socialism and 
Communism
• Results are social equality through economic 
redistribution, generally by the government through 
taxation
• However, this may take away incentive to work for more 
profit due to the high taxation rates, which pay for various 
government programs.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 66
Understanding Communism
• Communism: an economic and political system in which 
the state (the government) makes almost all economic 
decisions and owns almost all of the major factors of 
production.
• Shortages may occur as the government has no idea 
what and how much to produce; people loose the 
incentive to work hard as the government takes most of 
their earnings.
• Today there is a trend to move toward free markets.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 67
The Trend Toward Mixed Economies
• Free-Market Economy (Capitalism): an economy in 
which the market largely determines what goods and 
services are produced, who gets them, and how the 
economy grows.
• Command Economy (Communism or Socialism): an 
economy in which the government largely decides which 
goods and services are produced, who gets them, and 
how the economy will grow.
• Mixed Economies: economic systems in which some 
allocation of resources is made by the market and some 
by the government.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 68
Comparisons of Key Economic Systems
Capitalism (Canada) Socialism (Sweden) Communism (North 
Korea)
Mixed Economy 
(Canada)
Social and 
Economic 
Goals
Private ownership of 
land and business. 
Freedom and the 
pursuit of happiness. 
Free trade. Emphasis 
on freedom and the 
profit motive for 
economic growth.
Public ownership of major 
businesses. Some private 
ownership of smaller 
businesses and shops. 
Government control of 
education, health care, 
utilities, mining, 
transportation, and media. 
Very high taxation. Emphasis 
on equality.
Public ownership of all 
businesses. 
Government-run 
education and health 
care. Emphasis on 
equality. Many 
limitations on freedom, 
including freedom to 
own businesses, 
change jobs, buy and 
sell homes, and 
assemble to protest 
government actions.
Private ownership of land 
and business with 
government regulation. 
Government control of 
some institutions (e.g., 
mail). High taxation for 
the common welfare. 
Emphasis on a balance 
between freedom and 
equality.
Motivation 
of Workers
Much incentive to work 
efficiently and hard, 
because profits are 
retained by owners. 
Workers are rewarded 
for high productivity.
Capitalist incentives exist in 
private businesses. 
Government control of wages 
in public institutions limits 
incentives.
Very little incentive to 
work hard or to 
produce quality 
products.
Incentives are similar to 
capitalism except in 
government-owned 
enterprises, which have 
few incentives.
Control 
over 
Markets
Complete freedom of 
trade within and 
among nations. No 
government control of 
markets.
Some markets are controlled 
by the government and some 
are free. Trade restrictions 
among nations vary and 
include some free trade 
agreements.
Total government 
control over markets 
except for illegal 
transactions.
Some government 
control of trade within 
and among nations 
(trade protectionism).
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 69
Comparisons of Key Economic Systems, cont’d
Capitalism (Canada) Socialism (Sweden) Communism (North 
Korea)
Mixed Economy 
(Canada)
Choices in 
the Market
A wide variety of 
products is available. 
Almost no scarcity or 
oversupply exists for 
long because supply 
and demand control 
the market.
Variety in the marketplace 
varies considerably from 
country to country. Choice is 
directly related to government 
involvement in markets.
Very little choice 
among competing 
products.
Similar to capitalism, but 
scarcity and oversupply 
may be caused by 
government involvement 
in the market (e.g., 
subsidies for farms).
Social 
Freedoms
Freedom of speech, 
press, assembly, 
religion, job choice, 
movement, and 
elections
Similar to mixed economy. 
Government may restrict job 
choice, movement among 
countries, and who may attend 
upper-level schools (i.e., postsecondary institution).
Very limited freedom to 
protest the 
government, practice 
religion, or change 
houses or jobs.
Some restriction on 
freedoms of assembly 
and speech. Separation 
of church and state may 
limit religious practice in 
schools.
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LO4 Describe the Mixed Economy of 
Canada
• The Canadian government’s goal is to grow the economy but 
with some social equality for all citizens.
• Government involvement includes: health care, education, 
business regulation, telecommunications etc.
• The US is Canada’s largest trading partner and has a great 
influence on our government and culture.
• The government has passed many laws and regulations that help 
to maintain the integrity of our Canadian culture.
• Due to pressure to became more competitive, many industries 
such as the airlines, banking and transportation are being 
deregulated.
• Private-sector industries are now competing with governmentfunded institutions in areas such as health care, education, and 
security.
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LO5 Illustrate the Significance of 
Key Economic Indicators and the Business Cycle
Key Economic Indicators:
• Gross Domestic Product (GDP): the total value of 
goods and services produced in a country in a given 
year. 
• Productivity: workers can produce more goods and 
services than before in the same time period-leading to 
decreased production costs and therefore lower prices. 
• The Unemployment Rate: the percentage of the labour
force that actively seeks work but is unable to find work 
at a given time.
• The four types of unemployment include: frictional, 
structural, cyclical and seasonal.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 72
Canadian Unemployment Rate
THE UNEMPLOYMENT RATE IN CANADA 1989-2014
Source: Statistics Canada. Table 282-0002 - Labour force survey estimates (LFS), by sex and detailed age group, annual 
(persons unless otherwise noted), CANSIM (database). (accessed: 2015-03-04); Statistics Canada, Labour Force Survey, 
http://www.stats.gov.nl.ca/statistics/Labour/PDF/UnempRate.pdf.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 73
The Price Indexes
• Inflation: A general rise in the prices of goods and 
services.
• Disinflation: A situation in which price increases are 
slowing (the inflation rate is declining).
• Deflation: A situation in which prices are declining.
• Stagflation: A situation in which the economy is slowing 
but prices are going up regardless.
• Consumer Price Index (CPI): A monthly statistic that 
measures the pace of inflation or deflation.
• Human Development Index: A measure of a country’s 
progress that includes wealth, health, and education.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 74
The Business Cycle
• Business cycles (economic cycles): the periodic rises 
and falls that occur in economies over time.
• Boom: periods of economic boom bring jobs, growth, 
and economic prosperity.
• Recession: two or more consecutive quarters in the 
decline of the GDP.
• Depression: A severe recession.
• The government in Canada uses fiscal and monetary 
policy to keep the economy stable.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 75
The Business Cycle
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 76
Chapter Summary
LO1 Economics
– the study of how society chooses to employ 
resources to produce goods and services and 
distribute them for consumption
– two major branches:
– macroeconomics studies the operation of a nation’s 
economy as a whole
– microeconomics studies the behaviour of people 
and organizations in particular markets
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 77
Chapter Summary, cont’d.
L02 Capitalism and free markets 
– Capitalism is an economic system in which all or 
most of the means of production and distribution are 
privately owned and operated for profit.
– The free market is one in which decisions about 
what to produce and in what quantities are made by 
the market
L03 Socialism and communism
– socialism based on the premise that some 
businesses should be owned by the government. 
– communism, the government owns almost all major 
production facilities and dictates what gets produced 
and by whom.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 78
Chapter Summary, cont’d.
LO4 Canada’s “mixed” economic system
– part capitalist and part socialist, some businesses 
are privately owned, but taxes tend to be high to 
distribute income more evenly among the population
LO5 Economic indicators and the business cycle 
– GDP, unemployment, inflation, productivity
– business cycle: boom, recession, depression, 
recovery 
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 79
Prepared by Michael Wade, Seneca College
CHAPTER 3
Competing in 
Global Markets
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Learning Objectives
LO1 Describe the importance of the global market
and the roles of comparative advantage and absolute 
advantage in global trade.
LO2 Explain the importance of importing and exporting, 
and define key terms used in global business.
LO3 Illustrate the strategies used in reaching global 
markets and explain the role of multinational corporations 
in global markets.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 81
Learning Objectives cont’d.
LO4 Evaluate the forces that affect trading in global 
markets.
LO5 Debate the advantages and disadvantages of trade 
protectionism, define tariff and non-tariff barriers, and give 
examples of common markets.
LO6 Discuss the changing landscape of the global 
market.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 82
LO1 The Dynamic Global Market
• Canada is a market of more than 37 million people.
• There are over 7 billion potential customers in 194 
independent countries.
• Global trends have hit the US and Canadian auto 
industries, forcing the closing of plants, the loss of jobs 
and the restructuring of many companies.
• Progressive companies are continuously looking for 
opportunities in the global markets, at the same time as 
they are also looking for threats.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 83
World Population by Continent
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Importing, Exporting, and Free Trade
• Exporting: selling goods and services to another 
country.
• Canada is generally an exporting country.
• Importing: buying goods and services from another 
country.
• Free Trade: the movement of goods and services 
among nations without political or economic barriers.
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Why Trade With Other Nations?
• No one country can produce all the products that its 
people want and need.
• Nations who cannot produce what they want and need 
will want to trade with countries who can and have a 
surplus.
• Some countries have an abundance of natural 
resources but lack the technological know-how to 
retrieve them.
• Other countries have the technology but lack the 
natural resources.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 86
The Pros and Cons of Free Trade
Pros Cons
• The global market contains more than 7 
billion potential customers for goods and 
services.
• Domestic workers (particularly in 
manufacturing-based jobs) can lose their 
jobs due to increased imports or 
production shifts to low-wage global 
markets.
• Productivity improves when countries 
produce goods and services in which they 
have a comparative advantage.
• Workers may be forced to accept pay cuts 
from employers who can threaten to move 
their jobs to lower-cost global markets.
• Global competition and less-costly imports 
keep prices down, so inflation does not 
curtail economic growth.
• Moving operations overseas because of 
intense competitive pressure often means 
the loss of service jobs and white-collar 
jobs.
• Free trade inspires innovation for new 
products and keeps firms competitively 
challenged.
• Domestic companies can lose their 
comparative advantage when competitors 
build advanced production operations in 
low-wage countries.
• The uninterrupted flow of capital gives 
countries access to foreign investments, 
which helps keep interest rates low.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 87
The Theory of Comparative Advantage
• Comparative Advantage Theory: a country should sell 
to other countries those products that it produces most 
effectively and efficiently, and buy from other countries 
those products it cannot produce as effectively or 
efficiently.
o Japan has this ability with cars and electronic items
o Canada has an advantage in some forestry, 
agricultural and mineral products
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The Theory of Absolute Advantage
• Absolute Advantage Theory: exists when a country 
has a monopoly on producing a specific product or is 
able to produce it more efficiently than all other 
countries.
• An absolute advantage in natural resources may not 
last forever, e.g., diamond production in South Africa.
• Global competition has caused some absolute 
advantages to decrease.
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LO2 Getting Involved in Global Trade
• Examples of multinational firms: Bombardier, Sony, and 
Magna International 
• In Canada, small business contributes between 25-41% 
to Canada’s gross domestic product, employs about 7 
million people (about 20% of workers) and comprises 
about 90% of all exporters.
• Government agencies such as Foreign Affairs and 
International Trade Canada and Export Development 
Canada assist companies in getting more involved in 
international trade.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 90
Importing and Exporting 
Goods and Services
• The Canada Border Services Agency ensures that 
goods and services entering Canada are compliant with 
our regulations both federally and provincially.
• Trade with other countries provides jobs for Canadians 
(about 1 in 3 Canadian jobs).
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Categories and Examples of Canada’s Merchandise and Services Trade
Categories Examples
Merchandise Trade
Industrial Goods 
and Materials
Metals and metal ores, chemicals and plastics, and other industrial goods and 
materials
Machinery and 
Equipment
Industrial and agricultural machinery, aircraft and other transportation equipment, 
and other machinery and equipment
Energy Products Crude petroleum and other energy products such as natural gas, petroleum, and 
coal products
Automotive 
Products
Passenger autos and chassis, trucks and other motor vehicles, and motor vehicle 
parts
Agricultural and 
Fishing Products
Wheat, fruits and vegetables, and other agricultural and fishing products such as 
live animals, feed, beverages, and tobacco
Forestry Products Lumber and sawmill products, wood pulp and other wood products, and newsprint 
and other paper products
Other Consumer 
Goods
Apparel and footwear, and miscellaneous consumer goods such as watches, 
sporting goods and toys, and television and radio sets
Sources: “Canada’s International Trade in Services, 2013,” Statistics Canada, October 1, 2014, 
http://www.statcan.gc.ca/daily-quotidien/141001/dq141001b-eng.pdf; Canadian International Merchandise Trade, 
Statistics Canada, January 2015, Catalogue no. 65-001-X.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 92
Resources – Minerals - Ontario “Ring of Fire”
The Ring of Fire is a vast, mineral-rich region located in the remote James Bay 
Lowlands of Northern Ontario, Canada. Spanning approximately 5,000 square kilometres
(1,900 sq mi), the area is rich in chromite, nickel, copper, platinum group elements, gold, zinc, and 
other valuable minerals. Discovered in the early 21st century, the Ring of Fire is considered one of 
the most significant mineral deposits in Canada, with the potential to greatly impact the nation's 
economy and global mining industry.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 93
Categories and Examples of Canada’s Merchandise and Services Trade, 
cont’d.
Categories Examples
Service Trade Categories
Travel Services Business travel and personal travel
Transport Services Air transport, water transport, land, and other transport
Commercial 
Services
Communication, construction, insurance, computer and information, architectural, 
engineering, research and development, and other financial services
Government 
Services Military activities and business support
Sources: “Canada’s International Trade in Services, 2013,” Statistics Canada, October 1, 2014, http://www.statcan.gc.ca/dailyquotidien/141001/dq141001b-eng.pdf; Canadian International Merchandise Trade, Statistics Canada, January 2015, Catalogue no. 
65-001-X.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 94
Measuring Global Trade
• Balance of Trade: a country’s ratio of exports to imports.
• Trade Surplus: a favourable balance of trade; occurs when 
the value of the country’s exports exceeds that of its imports 
• Trade Deficit: an unfavourable balance of trade; occurs 
when the value of the country’s imports exceeds that of its 
exports.
• Balance of Payments: the difference between money 
coming into the country (from exports) and money leaving 
the country (from imports) plus money flows from other 
factors such as tourism, foreign aid, military expenditures 
and foreign investment.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 95
Canada’s Goods and Services Trade 
by Region, 2014
Services Goods
Exports % Imports % Exports % Imports %
United States 55.1 54.4 75.3 65.8
European Union 16.8 16.8 8 9.5
China --* -- 4.3 6.9
Japan 1.6 1.6 2.1 2.1
Mexico -- -- 1.7 3.5
India -- -- 0.8 0.5
South Korea -- -- 0.9 1.6
Rest of World 26.5 26.5 6.9 10.1
* indicates no services export or import values for the region were provided in the federal government report.
Source: “Canada’s State of Trade: Trade and Investment Update—2017,” Table 4.2-"Goods Exports 2016", Table 4.3-"Goods Imports 2016", and Table 
4.6-"Services Exports and Imports by Region 2016", Global Affairs Canada, accessed May 20, 2018, http://www.international.gc.ca/economisteconomiste/performance/state-point/state_2017_point/index.aspx?lang=eng#1_0.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 96
Canada’s Priority Markets
• Emerging economies are experiencing high growth rates, 
improved living standards and more global prominence.
• Technological advances allow most regions in the world to 
be included in global trade.
• The federal government has developed a Global Markets 
Action Plan, which identifies three important opportunities for 
Canadian trade.
• These include emerging markets in 21 countries from the 
Asia-Pacific, Latin America, Caribbean, North America, 
Middle East, Africa and European regions. 
• China and India are of particular interest to Canadian 
exporters.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 97
LO3 Strategies for Reaching 
Global Markets
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The Largest Multinational Corporations in the World
Company Country Revenue
1. Walmart Stores United States $482,130,000
2. State Grid China $329,691,000
3. China National Petroleum China $299,271,000
4. Sinopec Group China $294,344,000
5. Royal Dutch Shell Netherlands $272,156,000
6. Exon Mobile United States $246,204,000
7. Volkswagon Germany $236,600,000
8. Toyota Motor Japan $236,592,000
9. Apple United States $233,715,000
10. BP Great Britain $225,982,000
Source: Fortune, www.fortune.com, accessed June 2017. 
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 99
LO4 Forces Affecting Trading 
in Global Markets
• Sociocultural forces
o culture
o ethnocentricity
• Economic and financial forces
o exchange rate
o devaluation
o countertrading
• Legal forces
• Physical and environmental forces
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 100
Oops, Did We Say That?
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 101
Countries Rated Highest on Corrupt Business
1. Somalia
2. South Sudan
3. North Korea
4. Syria
5. Yemen
6. Sudan
7. Libya
8. Afganistan
9. Venezuela
10. Iraq
165. Canada (9th least corrupt country in the world)
174. Denmark (least corrupt country in the world)
Source: Transparency International, 2017
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LO5 Trade Protectionism
• Trade Protectionism: the use of government regulations to 
limit the import of goods and services. 
o Dumping: selling products in a foreign country at lower 
prices than those charged in the producing country.
o Tariff: a tax imposed on imports.
o Import Quota: a limit on the number of products in 
certain categories that a nation can import.
o Embargo: a complete ban on the import or export of a 
certain product or the stopping of all trade with a 
particular country.
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The GATT and the WTO
• General Agreement on Tariffs and Trade (GATT): a 
1948 agreement that established an international forum 
for negotiating mutual reductions in trade restrictions.
• World Trade Organization (WTO): the international 
organization that replaced the General Agreement on 
Tariffs and Trade, and was assigned the duty to 
mediate trade disputes among nations.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 104
The IMF and The World Bank
• The International Monetary Fund (IMF): An 
international bank that makes short-term loans to 
countries experiencing problems with their balance of 
trade.
• The World Bank: an autonomous United Nations 
agency that borrows money from the more prosperous 
countries and lends it to less-developed countries to 
develop their infrastructure. 
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Producers’ Cartels
• Producer’s cartels: Organizations of commodityproducing countries that are formed to stabilize or 
increase prices to optimize overall profits in the long 
run.
• The Organization of Petroleum Exporting Countries 
(OPEC) is the most widely known cartel, but there are 
others for commodities such as copper, rubber, and 
tungsten.
• Cartels operate to restrict the free flow of goods and 
therefore control the prices. 
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Common Markets
• Common markets (trading bloc): a regional group of 
countries that have a common external tariff, no internal 
tariffs, and a coordination of laws to facilitate exchange 
among member countries.
• North American Free Trade Agreement (NAFTA): 
agreement that created a free-trade area among Canada, 
the United States and Mexico.
• The European Union (EU): consists of a group of 
countries, located primarily in Europe, with a population of 
over 508 million people and a GDP of almost US$18.5 
trillion. 
• Currently Canada is involved in 11 tree-trade agreements
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Trade Agreements/Unions
• Canada-US-Mexico Agreement (CUSMA): A free-trade area 
among Canada, the United States, and Mexico.
• The objectives of NAFTA were to: 
1. eliminate trade barriers and facilitate cross-border movement 
of goods and services among the three countries.
2. promote conditions of fair competition in this free-trade area.
3. increase investment opportunities in the territories of the 
three nations.
4. provide effective protection and enforcement of intellectual 
property rights (patents, copyrights, etc.) in each nation’s 
territory.
5. establish a framework for further regional trade cooperation.
6. improve working conditions in North America.
107
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LO6 Globalization and Your Future
• It is estimated that China will take over the United 
States as the world’s largest economy by 2028.
• India has seen huge growth in information technology, 
pharmaceuticals, and biotechnology.
• China and India are predicted to lead the world market 
as leading global suppliers of manufactured goods and 
services.
• Russia and Brazil are expected to dominate the world 
market as suppliers of raw materials.
• Brazil, Russia, India and China are referred to as the 
BRIC countries.
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The Pros and Cons of 
Offshore Outsourcing
Pros Cons
• Less strategic tasks can be outsourced 
globally so companies can focus on where 
they can excel and grow.
• Jobs are lost permanently and wages fall 
due to low-cost competition offshore.
• Outsource work allows companies to 
create efficiencies that in fact let them hire 
more workers
• Offshoring may reduce product quality, 
which can cause permanent damage to a 
company’s reputation.
• Consumers benefit from lower prices 
generated by effective use of global 
resources and developing nations grow, 
thus fuelling global economic growth.
• Communication within the company, with 
its suppliers, and with its customers 
becomes much more difficult.
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Chapter Summary
LO1 Canada has population of 37 million. Absolute and 
Comparative Advantage refer to the efficiencies countries 
develop in producing goods and services.
LO2 Imports and exports occur when countries trade with 
each other.
LO3 The strategies used to reach global markets include: 
exporting, licensing, franchising, contract manufacturing, 
joint ventures, strategic alliances, and foreign direct 
investment.
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Chapter Summary, cont’d.
LO4 Forces that affect global markets include: socio
cultural, economic, and financial, legal, and physical and 
environmental forces. 
LO5 Countries use protectionist devices, called trade
protectionism, to limit trade with other countries. These 
include tariffs, import quotas and embargoes. 
LO6 Global markets are changing due to the Internet, 
and the emergence of India, China, Brazil and Russia as 
potential trading partners. 
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Prepared by Michael Wade, Seneca College
CHAPTER 4
The Role of 
Government in 
Business
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Learning Objectives
LO1 List the seven categories of government activities 
that can affect business.
LO2 Trace the historical role of government in the 
Canadian economy and understand why Crown 
Corporations were created.
LO3 Demonstrate why understanding laws and 
regulations at all levels of government is critical to 
business success. 
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Learning Objectives cont.’d
LO4 Describe how the Bank of Canada influences 
monetary policy
LO5 Explain how taxation and financial policies affect the 
Canadian economy. 
LO6 Describe how government expenditures benefit 
consumers and businesses alike.
LO7 Illustrate how purchasing policies and services assist 
Canadian businesses.
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LO1 Government Affects Business
Government activities that affect business may be 
divided into six categories:
1. Crown Corporations
2. Laws and Regulations
3. The Bank of Canada
4. Taxation and Financial Policies
5. Government Expenditures
6. Purchasing Policies
7. Services
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LO2 Government Involvement 
in the Economy
• Canada was formed in 1867 and the federal government 
was given power to ‘regulate trade and commerce’.
• Special efforts were needed to unify Canada once the 
western provinces joined Confederation.
• Canada’s small population is spread across the country, 
most of which is near the US border.
• Trading patterns are north/south.
• A National Policy was developed to protect Canadian 
manufacturing by implementing high tariffs.
• The Government built an east/west railway to unite the 
country (Canadian Pacific, not Canadian National).
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Crown Corporations
• Crown Corporations: companies that are owned by the 
federal or provincial government.
• They are set up to: 
o Provide services that were not being provided
by business. 
o Bail out major industries in trouble.
o Provide special services not otherwise available; e.g., 
Bank of Canada
• Most electric power companies are owned by provincial 
Crown Corporations.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 118
Crown Corporations
Rank Federal Crown Corporation 2017 Revenue ($ billions)
1 Canada Pension Plan Investment Board $36.273
2 Canadian Commercial Corporation $2.657
3 Public Sector Pension Investment Board $15.913
4 Canadian Mortgage and Housing Corporation $9.159
5 Canada Post Corporation $7.891
6 Export Development Canada $2.072
Source: “Consolidated Financial Information for Crown Corporations (Annual Report 2016-2017),” Government of Canada, accessed June 28, 2018, 
https://www.canada.ca/en/treasury-board-secretariat/services/reporting-government-spending/inventory-government-organizations/consolidatedfinancial-information-crown-corporations-annual-report-2016-2017.html.
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The Role of Government
• Government continues to reduce its role in the 
economy by selling government-owned assets, such as 
Air Canada and Canadian National Railway.
• Privatization: the process of governments selling 
Crown corporations.
• Deregulation: government withdrawal of certain laws 
and regulations that seem to hinder competition.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 120
LO3 Laws and Regulations
Federal government responsibilities include:
• trade regulations (interprovincial and international)
• incorporation of federal companies
• taxation (both direct and indirect)
• the banking and monetary system
• hospital insurance and medicare
• the public debt and property
• National defence
• unemployment
• immigration
• criminal law
• fisheries
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Some Major Federal Consumer 
Protection Laws
Personal Information Protection and Electronics Document Act: sets rules for how 
private-sector organizations collect, use, and disclose personal information for 
commercial activities.
Canadian Agricultural Products Standards Act: covers a wide range of farm 
products such as organic, meat, poultry, eggs, maple syrup, honey, and dairy products.
Consumer Packaging and Labelling Act: applies to all products not specifically 
included in other Acts.
Food and Drugs Act: covers a whole range of regulations pertaining to quality, testing 
approval, packaging, and labelling.
Hazardous Products Act: covers all hazardous products.
Textile Labelling Act: includes apparel sizing and many other special areas.
Weights and Measures Act: applies to all equipment that measures quantities such 
as scales, gas pumps, and so forth.
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Marketing Boards
• Marketing boards: organizations that control the supply or 
pricing of certain agricultural products.
• Therefore they may control trade.
• Marketing boards promote stability in volatile areas of the 
economy, e.g., farming.
• Weather, disease, uncoordinated decisions (sometimes 
worldwide), and market power of large corporations create 
unstable prices and supply for both farmers and consumers. 
• The Canadian Dairy Commission, The Egg Farmers of 
Canada and the Chicken Farmers of Canada are examples 
of marketing boards that control the production of products 
by assigning quotas, thus controlling the prices.
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Provincial Government Responsibilities
Provincial government responsibilities include:
• regulation of provincial trade and commerce
• natural resources within their boundaries
• direct taxation for provincial purposes
• incorporation of provincial companies
• licensing for revenue purposes
• the administration of justice
• health and social services
• municipal affairs
• property law
• labour law
• education
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 124
Number and Capital Value of P3 
Projects in Canada, 2018
Number
Health 97
Transportation 78
Justice 23
Water and Wastewater 19
Recreation and Culture 15
Education 14
Energy 11
Accommodation 10
Information Technology 5
Government Services 4
Total 276
Source: “Canadian PPP Project database,” Canadian Council for Public-Private Partnerships, accessed May 31, 2018, 
http://projects.pppcouncil.ca/ccppp/src/public/search-project?pageid=3d067bedfe2f4677470dd6ccf64d05ed; and 
http://p3spectrum.ca/project/.
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Municipal Government Responsibilities
• Municipalities are set up by the provincial legislatures.
• Municipalities offer some services in partnership with 
the private sector and other levels of government.
• Regulations and laws concern:
o consumer protection
o zoning requirements
o business regulations, licencing
o taxation
o essential and other services 
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Free Trade Between Provinces
• Trade between provinces in a $300-billion industry in 
Canada
• Some trade barriers exist, created to protect provincial 
economies, protect the environment, and establish 
workplace standards.
• These trade barriers limit the movement of workers in 
areas such as health care, financial and legal services, 
engineering and teaching. 
• The Agreement on Internal Trade (AIT) was an 
interprovincial agreement created to reduce these 
barriers. 
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LO4 Bank of Canada
• The Bank of Canada (BoC), a federal Crown corporation, is Canada’s 
central bank. As a financial institution, it provides banking services on 
behalf of the federal government; however, it does not offer banking 
services to the public.
• Monetary policy is the management of the money supply and interest 
rates.
• The money supply is the amount of money the BoC makes available for 
people to buy goods and services.
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LO5 Taxation
• Taxes (revenue, income, and property) are used by 
government to pay for services, pay down debt, and 
fund government operations and programs
• Sin taxes are used to discourage tax payers from using 
certain products; e.g., cigarettes. 
• Tax credits are given to companies to encourage 
growth.
• All businesses pay various taxes (a cost of doing 
business), which are passed on to the consumer in the 
form of higher prices.
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The Average Canadian Family’s Total Expenditures as a 
Percentage of Cash Income, 2016
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Stabilizing the Economy Through 
Fiscal Policy
• Fiscal Policy: the federal government’s effort to keep the 
economy stable by increasing or decreasing taxes or 
government spending.
• Deficit: occurs when the government spends over and 
above the amount it gathers in taxes over a specific 
period of time (namely a fiscal year).
• National debt: the accumulation of government 
surpluses and deficits over time. Today Canada’s debt 
totals more than $637 billion.
• Surplus: an excess of revenues over expenditures.
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The Federal Budget
• Federal Budget: a comprehensive report that reveals 
government financial policies and priorities for the 
coming year. 
o It shows how much revenue the government expects to collect, 
any changes in income and other taxes and whether a deficit or 
surplus is expected
• Monetary Policy: management of the money supply 
and the interest rates.
o It is controlled by the Bank Of Canada
o Raising and lowering interest rates are meant to help control 
the business cycles.
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LO6 Government Expenditures
Federal, provincial, and municipal governments disburse 
tens of billions of dollars toward such services as:
• Financial aid-assistance to businesses including 
grants, loans, loan guarantees and subsidies. 
• Equalizations Program-Transfer payments are direct 
payments from governments to other governments 
or to individuals. 
• Equalization: a federal government program for 
reducing fiscal disparities among provinces
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LO7 Purchasing Policies
• The government is a very large purchaser and 
consumer of goods and services.
• Governments attempt, where possible, to favour local 
businesses in their purchasing policies, thus creating 
trade barriers between provinces.
• When advanced technology items, whether military or 
civilian, are purchased from foreign companies, the 
government usually insists that a portion of these items 
be manufactured in Canada. 
o This creates jobs and helps companies acquire new 
technologies.
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Services
• Industry Canada offers a variety of programs to help 
businesses get started and to promote businesses 
internationally.
• The National Research Council supports research and 
technology in areas such as aerospace, biotechnology, 
engineering and construction, fundamental sciences, 
information and communications technologies, and 
manufacturing.
• The Departments of Foreign Affairs, Trade and 
Development (now “GAC”) offers support to those 
businesses wishing to trade and invest internationally.
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Some Government Sources Available 
to Assist Canadian Businesses
Government Source Mission
Business 
Development Bank of 
Canada (BDC)
BDC provides small and medium-sized businesses with flexible financing, 
affordable consulting services, and venture capital. BDC has a particular 
focus on the emerging and exporting sectors of the economy.
Canada Business 
Network
Canada Business Network is a government information service for 
businesses and start-up entrepreneurs in Canada. It serves as a single 
point of access for federal and provincial/territorial government services, 
programs, and regulatory requirements for business.
Export Development 
Canada (EDC)
EDC provides Canadian exporters with financing, insurance, and bonding 
services as well as foreign market expertise.
National Research 
Council (NRC)
NRC helps turn ideas and knowledge into new processes and products. 
Businesses work with partners from industry, government, and universities.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 136
Role of the Canadian GovernmentSome Final Thoughts
• An industrial policy is a comprehensive, coordinated 
government plan to guide and revitalize the economy.
• Many policy advisors are opposed to more government 
involvement, preferring more “privatization.”
• The federal government will continue to promote 
international trade.
• Environmental policies may impact future trade.
• Each level of government is focused on creating a 
competitive environment for businesses of all sizes.
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Chapter Summary
LO1 Seven categories of government activities that affect 
business are: Crown Corporations, laws and regulations, the Bank 
of Canada, taxation and financial policies, government 
expenditures, purchasing policies, and services.
LO2 Crown corporations provide services not provided by 
business, bail out industries in trouble, and provide special 
services.
LO3 Business needs to understand the laws and regulations that 
affect them. 
LO4 The Bank of Canada (BoC), a federal crown corporation, is 
Canada's central bank. Its role is to promote the economic and 
financial well-being of Canada.
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Chapter Summary cont’d.
LO5 Taxes are collected by all levels of government to fund 
social programs and services.
LO6 Business benefits because governments provide 
subsidies, support research and development and generally 
help businesses be competitive. Government spending helps 
consumers by dispersing funding for such things as: social 
services, job creation, health and education
LO7 Purchasing policies benefit business because preference 
is given to local firms.
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Prepared by Michael Wade, Seneca College
CHAPTER 5
Ethics and Social 
Responsibility
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Learning Objectives
LO1 Explain why obeying the law is only the first step in 
behaving ethically.
LO2 Ask the three questions to answer when faced with a 
potentially unethical action.
LO3 Describe management’s role in setting ethical 
standards.
LO4 Distinguish between compliance-based and integritybased ethics codes, and list the six steps that can be 
considered when setting up a corporate ethics code.
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Learning Objectives, cont’d.
LO5 Define corporate social responsibility and compare 
corporations’ responsibilities to various stakeholders. 
LO6 Discuss the importance of ethical behaviour and social 
responsibility in global markets.
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LO1 Ethics Is More than Legality
• Ethics reflect people’s proper relations with one another 
and how people should treat others.
• Laws are more narrow and are written to protect us 
from fraud, theft, and violence.
• Unethical behaviour may sometimes be legal, but is still 
unethical.
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Brief Summary of Corporate Scandals
Canadian Ethical Breaches
• Ontario Lottery and Gaming Corporation for not cracking down on 
retailers who collected tens of millions of dollars in jackpots between 
1999 and 2006 
• Volkswagen agreed to a $290.5 million settlement related to its 
emissions cheating scandal - They programmed the TDI engine 
management system to work only when being tested.
• WestJet Airlines Ltd. spying on Air Canada
• the Atlantic Lottery Corporation had concerns of retailers stealing 
winning tickets from customers
• Research In Motion (RIM) Stock Option Scandal
• Federal Government Sponsorship Scandal, $100 million was paid to 
Quebec agencies re: Quebec separation referendum
• In 2014, a political party staffer was found guilty under the Elections Act 
of willfully preventing a voter from casting a ballot 
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Ethical Standards Are Fundamental
• Ethics: standards of moral behaviour; that is, behaviour that 
is accepted by society as right versus wrong.
• Many people practice situational ethics. That is: what is right 
is whatever works best for the individual; each person has to 
work out for him-or herself the difference between right and 
wrong.
• Basic moral values such as integrity, respect for human life, 
self-control, honesty, courage, and self-sacrifice are 
standard in most cultures. 
• Cheating, cowardice, and cruelty are universally wrong.
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LO2 Ethics Begin With Each of Us
• Ask the following three questions when facing an 
ethical dilemma:
o Is my proposed action legal?
o Is it balanced?
o How will it make me feel about myself?
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LO3 Managing Businesses Ethically 
and Responsibly
• Businesses should be managed ethically to:
o maintain a good reputation
o keep existing customers
o attract new customers
o avoid lawsuits
o reduce employee turnover
o avoid government intervention
o please customers, employees, and society
o DO THE RIGHT THING
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LO4 Setting Corporate 
Ethical Standards
• Compliance-based ethics codes: ethical standards that 
emphasize preventing unlawful behaviour by increasing 
control and by penalizing wrong-doers.
• Integrity-based ethics codes: ethical standards that define 
the organization’s guiding values, create an environment that 
supports ethically sound behaviour, and stress shared 
accountability among employees.
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Overview of Hershey Company’s Code 
of Ethics
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Strategies for Ethics Management
Features of Compliance-Based Ethics Codes Features of Integrity-Based Ethics Codes
Ideal Conform to outside standards (laws 
and regulations)
Ideal Conform to outside standards 
(laws and regulations) and 
chosen internal standards
Objective Avoid criminal misconduct Objective Enable responsible employee 
conduct
Leaders Lawyers Leaders Managers with aid of lawyers 
and others
Methods Education, reduced employee 
discretion, controls, and penalties
Methods Education, leadership, 
accountability, decision 
processes, controls, and 
penalties
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Six Steps to Improve Business Ethics
1. Top management must adopt and unconditionally support an 
explicit corporate code of conduct.
2. Employees must understand that expectations for ethical 
behaviour begin at the top.
3. Ethics must be built into training.
4. An ethics office must be set up.
5. Outside stakeholders must be told about the ethics program.
6. Ethics codes must be enforced.
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Protection For Whistleblowers
• Whistleblowers: people who report illegal or unethical 
behavior.
• Sarbanes-Oxley Act of 2002 (SOX)
o US legislation that established stronger standards to prevent 
misconduct, and to ensure the accuracy and reliability of 
published financial information. It applies to all publicly traded 
companies.
o It also protects whistleblowers from any company retaliations. 
o There is no national legislation in Canada that protects all 
workers. 
o However, some federal and provincial legislation does protect 
public service workers. 
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LO5 Corporate Social Responsibility
• Corporate Social Responsibility (CSR): a business’s concern 
for the welfare of society.
• Corporate Philanthropy: dimension of social responsibility that 
includes charitable donations.
• Corporate Social Initiatives: includes enhanced forms of 
corporate philanthropy that are more directly related to the 
company’s competencies.
• Corporate Responsibility: includes everything from hiring 
minority workers to making safe products.
• Corporate Policy: refers to the position a firm takes on social 
and political issues.
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Concepts of Social 
Corporate Responsibility
• There are two different views of corporate responsibility to 
stakeholders:
o strategic approach: requires that management’s primary 
orientation be toward the economic interests of the 
shareholders.
o pluralist approach: recognizes the special responsibility of 
management to optimize profits, but not at the expense of 
employees, suppliers, or members of the community. 
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Levels of Corporate Responsibility 
to Stakeholders
• Companies are responsible to their:
o customers
o investors (insider trading-an unethical activity in which 
insiders use private company information to further their 
own fortunes or those of their family or friends)
o employees
o society
o the environment
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Social Auditing
• Social audit: a systematic evaluation of an 
organization’s progress toward implementing programs 
that are socially responsible and responsive.
• Triple-bottom line (TBL, 3BL, or People, Planet, 
Profit): a framework for measuring and reporting 
corporate performance against economic, social, and 
environmental parameters.
• Types of groups that serve as watchdogs: socially 
conscious investors, research organizations, 
environmentalists, union officials and customers.
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Socially Responsible Business 
Activities
Community-related activities such as participating in local fundraising campaigns, donating 
employee time to various non-profit organizations, and participating in urban planning and 
development
Employee-related activities such as establishing equal opportunity programs, offering flextime and 
other benefits, promoting job enrichment, ensuring job safety, and conducting employee 
development programs; you will learn more about such programs in Chapter 12
Political activities such as taking a position on nuclear safety, gun control, pollution control, 
consumer protection, and other social issues, and working more closely with local, provincial, and 
federal government officials
Support for higher education, the arts, and other non-profit social agencies
Consumer activities such as ensuring product safety, creating truthful advertising, handling 
complaints promptly, setting fair prices, and conducting extensive consumer education programs
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Corporate Social 
Responsibility
• Is this really “CSR”?
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Sustainable Development
• Sustainable development: implementing a process that 
integrates environmental, economic, and social 
considerations into decision making.
• World Commission of Environment and Development 
concludes: that development should be sustainable for 
the benefit of current and future generations.
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LO6 International Ethics and 
Social Responsibility
• Many companies are demanding socially responsible 
behaviour of international partners and suppliers.
• Cultural sensitivities are important as what may be 
considered unethical or illegal behaviour in Canada may 
be quite acceptable in another country.
• Fair Trade: social movement dedicated to making sure 
that producers in developing countries are paid a fair 
price for the goods we consume, resulting in more 
money in their pockets.
• Some companies are being criticized for exploiting 
workers in poorer countries.
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Chapter Summary
LO1 Legality is only the beginning of ethical behaviour. 
LO2 Ask the questions: Is it legal? Is it balanced? How will 
it make me feel about myself?
LO3 Management must lead by example. Two major 
categories of ethical codes are compliance-based and 
integrity-based.
LO4 Two major categories of ethical codes are compliancebased and integrity-based. There are six steps in setting 
corporate ethics codes.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 161
Summary, cont’d.
LO5 Corporate Social Responsibility is important to various 
stakeholders, and businesses have a responsibility to these 
stakeholders.
LO6 Businesses can influence ethical behaviour and social 
responsibility in global markets.
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Prepared by Michael Wade, Seneca College
CHAPTER 6
Forms of 
Business 
Ownership
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Learning Objectives
LO1 List the advantages and disadvantages of sole 
proprietorships.
LO2 Describe the advantages and disadvantages of 
partnerships. Include the differences between general and 
limited partners. 
LO3 Discuss the advantages and disadvantages of 
corporations.
LO4 Outline the advantages and disadvantages of
franchising, Include the challenges of global franchising.
LO5 Describe the role of co-operatives in Canada.
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LO1 Starting a Small Business
• Sole Proprietorship: a business that is owned, and 
usually managed, by one person.
• Partnership: a legal form of business with two or more 
parties.
• Corporation: a legal entity with authority to act and 
have liability separate from its owners.
• Unlimited Liability: the responsibility of business 
owners for all of the debts of the business.
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Sole Proprietorship
Advantages Disadvantages
• Ease of starting and ending
• Be your own boss
• Pride of ownership
• Retain profit
• No special taxes
• Less regulation
• Unlimited liability
• Limited financial resources
• Management difficulties
• Overwhelming time commitment
• Few fringe benefits
• Limited growth
• Limited lifespan
• Possibly pay higher taxes
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LO2 Partnerships
• General partnership: all owners share in operating the business 
and in assuming liability for the business’s debts.
• Limited partnership: consists of one or more general partners and 
one or more limited partners.
• General Partner: an owner (partner) who has unlimited liability and 
is active in managing the firm.
• Limited partner: an owner who invests money in the business but 
does not have any management responsibility or liability for losses 
beyond the investment.
• Limited liability: the responsibility of a business’s owners for losses 
only up to the amount they invest; limited partners and shareholders 
have limited liability.
• Limited liability partnership (LLP): limits partners’ risk of losing 
their personal assets to only their own acts and omissions, including 
those under their supervision.
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Advantages Disadvantages
• More financial resources
• Shared management and 
pooled, complementary skills 
and knowledge
• Longer survival
• Shared risk
• No special taxes
• Unlimited liability
• Division of profits
• Disagreements among partners
• Difficulty of termination
• Possibility of higher taxes
Partnerships
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Partnership Agreement Provisions
1. The name of the business. All provinces require the firm’s name to be registered with the province if the firm’s name is different from the 
name of any of the partners.
2. The names and addresses of all partners.
3. The purpose and nature of the business, the location of the principal office(s), and any other locations where business will be conducted.
4. The date the partnership will start and how long it will last. Will it exist for a specific length of time, or will it stop when one of the partners dies 
or when the partners agree to discontinue?
5. The contributions made by each partner. Will some partners contribute money, while others provide real estate, personal property, expertise, 
or labour? When are the contributions due?
6. The management responsibilities. Will all partners have equal voices in management, or will there be senior and junior partners?
7. The duties of each partner.
8. The salaries and drawing accounts of each partner.
9. Provision for sharing of profits or losses.
10. Provision for accounting procedures. Who’ll keep the accounts? What bookkeeping and accounting methods will be used? Where will the 
books be kept?
11. The requirements for taking in new partners.
12. Any special restrictions, rights, or duties of any partner.
13. Provision for a retiring partner.
14. Provision for the purchase of a deceased or retiring partner’s share of the business.
15. Provision for how grievances will be handled.
16. Provision for how to dissolve the partnership and distribute the assets to the partners.
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LO3 Corporations
• Corporation: a federally or provincially chartered legal 
entity with authority to act and have liability separate 
from its owners (stockholders/shareholders) .
• Public corporation: has the right to issue shares to the 
public, so its shares may be listed on a stock exchange.
• Private corporation: is usually controlled by a small 
number of shareholders and it shares are not listed on a 
stock exchange.
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Some Corporation Types
Corporations can fit in more than one category.
A benefit (B) corporation is certified to meet rigorous standards of social and environmental 
performance, accountability, and transparency. Review the Seeking Sustainability box for an 
example.
A Crown corporation is one that can only be registered by the provincial or federal government.
A domestic corporation conducts business in its home country (e.g., Canada only).
A multinational corporation is a firm that operates in several countries.
A non-profit (or not-for-profit) corporation is one that does not seek personal profit for its owners.
A private (closed) corporation is one whose shares are held by a few people and are not available to 
the general public.
A professional corporation is a private corporation whose owners provide professional services (e.g., 
accountants and architects).
A public (open) corporation sells shares to the general public.
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Advantages Disadvantages
• Limited liability
• More money for investment
• Size: may be larger due to 
increased resources
• Perpetual life
• Ease of ownership change
• Ease of attracting talented 
employees
• Separation of ownership from 
management
• High initial costs
• Extensive paperwork
• Double taxation
• Two tax returns
• Size: may become too inflexible 
to new ideas
• Termination difficult
• Stockholder and board conflict
Corporations
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Canada’s Largest Corporations
B. Private Corporations Based on Revenue
Rank Company Proft ($ 
billions)
Category
1 Wal-Mart Canada US$25.40 Retail
2 Costco Wholesale Canada US$17.94 Retail
3 Direct Energy Marketing Ltd. C$20.69 Utilities
4 Desjardins Group C$16.98 Financial
5 McKesson Canada US$13.70 Wholesale
Sources: “Top 1000: Public (Top 1000)" and "Top 1000: Private (Top 1000),” ROB Magazine, June 27, 
2017, https://beta.theglobeandmail.com/report-on-business/rob-magazine/top-1000/top-1000-stocks-ratedcanada/article35448077/?ref=http://www.theglobeandmail.com&.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 173
How Owners Affect Management
Owners have an influence on how business is managed by electing a board of directors. The board 
hires the top officers (and fires them if necessary). It also sets the pay for those officers. The officers 
then select other managers and employees with the help of the human resource department.
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Comparison of Forms of Business Ownership
PARTNERSHIPS CORPORATION
Sole
Proprietorship
General 
Partnership
Limited*
Partnership
Public 
Corporation Private Corporation
Documents Needed to 
Start Business
None, may 
need permit or 
licence
Partnership 
agreement (oral 
or written)
Written 
agreement; 
must file 
certificate of 
limited 
partnership
Articles of 
incorporation, 
bylaws
Articles of 
incorporation, bylaws; 
must meet criteria
Ease of Termination
Easy to 
terminate: just 
pay debts and 
quit
May be hard to 
terminate, 
depending on 
the partnership 
agreement
Same as 
general 
partnership
Hard and 
expensive to 
terminate
Not difficult; pay off 
debts, sell off assets, 
withdraw cash, and 
pay taxes
Length of Life
Terminates on 
the death of 
owner, sale, or 
retirement
Terminates on 
the death or 
withdrawal of 
partner
Terminates on 
the death or 
withdrawal of 
partner
Same as 
general 
partnership
Perpetual life
Transfer of Ownership
Business can 
be sold to 
qualified buyer
Must have 
agreement of 
other partner(s)
Same as 
general 
partnership
Easy to change 
owners; just 
sell shares
Easy—just sell 
shares†
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 175
Comparison of Forms of Business Ownership, cont’d.
PARTNERSHIPS CORPORATION
Sole
Proprietorship
General 
Partnership
Limited*
Partnership
Public 
Corporation Private Corporation
Financial Resources
Limited to 
owner’s capital 
and loans
Limited to 
partners’ capital 
and loans
Same as 
general 
partnership
More money to 
start and 
operate: sell 
stock and 
bonds; loans
Owners’ capital and 
loans; no public stock 
issue allowed
Risk of Losses Unlimited 
liability
Unlimited 
liability Limited liability Limited liability Limited liability
Taxes
Taxed as 
personal 
income
Taxed as 
personal 
income
Same as 
general 
partnership
Corporate, 
double taxation
Same as public 
corporation
Management 
Responsibilities
Owner 
manages all 
areas of the 
business
Partners share 
management
Cannot 
participate in 
management
Separate 
management 
from ownership
Owners usually 
manage all areas
Employee Benefits
Usually fewer 
benefits and 
lower wages
Often fewer 
benefits and 
lower wages; 
promising 
employee could 
become a 
partner
Same as 
general 
partnership
Usually better 
benefits and 
wages, 
advancement 
opportunities
Same as public 
corporation
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Business Regulations
• Business regulations: businesses must follow 
provincial and federal business laws and regulations.
• Registration is required to ensure names are not 
duplicated, and taxes are paid.
• Federal registration protects company name and 
usage across Canada. 
• Articles of incorporation: a legal authorization from 
the federal or provincial/territorial government for a 
company to use the corporate format.
• Reporting and information: corporations must fill out 
many forms and if public, must file annual reports.
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LO4 Franchising
• Franchise agreement: an arrangement whereby 
someone with a good idea for a business sells the rights 
to use the business name and sell its goods and 
services in a given territory.
• Franchisor: a company that develops a product 
concept and sells others the rights to make and sell the 
products.
• Franchise: the right to use a specific business’s name 
and sell its goods and services in a given territory.
• Franchisee: a person who buys a franchise.
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Franchises
Advantages Disadvantages
• Management and marketing 
assistance
• Personal ownership
• Nationally recognized name
• Financial advice and 
assistance
• Lower failure rate
• Large start-up costs
• Shared profit
• Management regulation
• Coattail effects
• Restrictions on selling
• Fraudulent franchisors
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 179
Buying a Franchise
Checklist for Evaluating a Franchise
The Franchise
Did your lawyer approve the franchise contract you’re considering after he or she studied it paragraph by 
paragraph?
Does the franchise give you an exclusive territory for the length of the franchise?
Under what circumstances can you terminate the franchise contract and at what cost to you?
If you sell your franchise, will you be compensated for your goodwill (the value of your business’s reputation 
and other intangibles)?
If the franchisor sells the company, will your investment be protected?
The Franchisor
How many years has the firm offering you a franchise been in operation?
Does it have a reputation for honesty and fair dealing among the local firms holding its franchise?
Has the franchisor shown you any certified figures indicating exact net profits of one or more going firms that 
you personally checked yourself with the franchisee? Ask for the company’s disclosure statement.
Will the firm assist you with:
A management training program?
An employee training program?
Will the firm assist you with:
A public relations program?
Capital?
Credit?
Merchandising ideas?
Will the firm help you find a good location for your new business?
Has the franchisor investigated you carefully enough to assure itself that you can successfully operate one of 
its franchises at a profit both to itself and to you?
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Buying a Franchise, cont’d
You, the Franchisee
How much capital will you need to purchase the franchise and operate it until your income equals your 
expenses?
Does the franchisor offer financing for a portion of the franchising fees? On what terms?
Are you prepared to give up some independence of action to secure the advantages offered by the 
franchise?
Do you have your family’s support?
Does the industry appeal to you? Are you ready to spend much or all of the remainder of your business 
life with this franchisor, offering its product or service to the public?
Your Market
Have you made any study to determine whether the product or service that you propose to sell under 
the franchise has a market in your territory at the prices you’ll have to charge?
Will the population in the territory given to you increase, remain static, or decrease over the next five 
years?
Will demand for the product or service you’re considering be greater, about the same, or less five years 
from now than it is today?
What competition already exists in your territory for the product or service you contemplate selling?
Sources: U.S. Department of Commerce, Franchise Opportunities Handbook; and Steve Adams, “Buying a Brand,” Patriot Ledger (Quincy, MA), March 1, 2008
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E-Commerce in Franchising
• The Internet allows franchisors to offer their products to 
a wider market. 
• Online franchises do not require physical space and 
there are no up-front fees. They are not given specific 
territories.
• Home-based franchises require the same investment of 
time and energy as any home-based business. However, 
they have support of the franchisor.
• Franchising in international markets can offer many 
possibilities but there can also be problems around 
intellectual property, franchisor support, and local 
regulations.
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LO5 Co-Operatives
• Co-operative: an organization owned by peopleproducers, consumers, or workers-with similar needs 
who pool their resources for mutual gain.
• Co-operatives are locally owned and democratically 
controlled.
• Some co-operatives are owned by members who 
actually make the products (dairies) and others are 
worker-owned. 
• Credit Unions are a form of co-operative.
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Co-Operatives Differ from Other 
Business Principles 
• A different purpose: meets the common needs of their 
members.
• A different control structure: one member/one vote 
system.
• A different allocation of profit: profits are shared among 
their member-owners on the basis of how much they use 
the organization, not on how many shares they hold.
• Profits are not subject to income tax.
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Some Co-Operative Benefits
Philosophical Benefits Community Benefits
People favoured over money in terms of 
priorities Ability to change things that do not work
Greater community autonomy Fair market prices
Product and service development by the 
people for the people Strong customer/client loyalty
Opportunities to strengthen community 
bonds by helping one another Greater employment opportunities
You can define your own needs instead of 
letting a conglomerate do it for you
Better access to quality products and 
services
Modest savings for all instead of the 
excessive accumulation of profits by a few
Economic and social growth in the 
community
Source: “The Co-Operative Advantage,” CoopZone Developers’ Network Co-operative, accessed November 3, 2017, 
http://www.coopzone.coop/about-co-operatives/the-co-operative-advantage/.
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Co-Operatives by Area of Activity
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Summary
LO1 Sole proprietorships are businesses owned and 
usually operated by one person.
LO2 Partnerships occur when two or more people 
agree to be co-owners of a business.
LO3 Corporations are a legal entity with authority to act 
and have liability separate from the owners.
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Summary cont’d.
LO4 Franchising is an agreement where the franchisor 
sells the rights to use the business name and sell the 
products or services in a given territory.
LO5 Co-operatives are organizations owned by 
members and customers with similar needs who pool 
their resources for mutual gain.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 188
Prepared by Michael Wade, Seneca College
CHAPTER 7
Entrepreneurship 
and Starting a 
Small Business
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Learning Objectives
LO1 Explain why people are willing to become 
entrepreneurs, and describe the attributes of successful 
entrepreneurs.
LO2 Discuss the importance of small business to the 
Canadian economy.
LO3 Summarize ways to learn how small businesses 
operate.
LO4 Analyze what it takes to start and run a small 
business.
LO5 Outline the advantages and disadvantages that 
small businesses have in entering global markets.
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The Age of the Entrepreneur
• Entrepreneurship: accepting the challenge of starting 
and running a business.
• Small business and entrepreneurship differ in the 
following ways: 
o Amount of wealth creation
o Speed of wealth creation
o Risk
o Innovation
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LO1 Why People Take the 
Entrepreneurial Challenge
• New idea, process, or product
• Independence
• Challenge
• Family pattern
• Profit
• Immigrants
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What Does It Take to 
Be an Entrepreneur?
• Self-directed
• Self-nurturing
• Action-oriented
• Highly energetic
• Tolerant of uncertainty
• Able to learn quickly
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Turning Your Passions and 
Problems into Opportunities
• A business idea is a good business opportunity if:
o It fills customers’ needs.
o You have the skills and resources to start a business.
o You can sell the product or service at a price customers 
are willing and able to pay-and still make a profit.
o You can get your product or service to customers before 
your window of opportunity closes or before competitors 
with similar solutions beat you to the marketplace.
o You can keep the business going.
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Entrepreneurial Teams
• An entrepreneurial team is: a group of experienced 
people from different areas of business who join together 
to form a managerial team with the skills needed to 
develop, make and market a new product.
• Combines creative skills with production and marketing 
skills right from the start.
• Can ensure more co-operation and coordination among 
functions. 
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Micropreneurs and 
Home-Based Businesses
• Micro-enterprise: a small business defined as having 
one to four employees.
• Micropreneurs: Small-business owners with fewer than 
five employees, who are willing to accept the risk of 
starting and managing the type of business that remains 
small, lets them do the kind of work they want to do, and 
offers them a balanced lifestyle.
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Reasons for Home-Based 
Businesses
• Computer technology
• Corporate downsizing
• Change in social attitudes
• Challenges include:
o getting new customers
o managing time
o keeping work and family tasks separate
o abiding by city ordinances
o managing risk
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Potential Home-Based 
Businesses
1. Home Renovation Services
2. Pet Products and Services
3. Catering Services
4. Cleaning Services
5. Fall Prevention Products - Sales and Service
6. Wedding Planner Services
7. Ecommerce
8. In-Home Beauty Services
9. Sewing and Alteration Services
10. Business/Life Coach Services
Source: Susan Ward, “The Best Home Business Opportunities,” The Balance, July 20, 2017, https://www.thebalance.com/top-home-businessopportunities-2948561.
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Web-Based Businesses
• Web-based businesses offer more than merchandise 
found in stores.
• Online spending is expected to reach 8 percent of 
overall retail sales by 2018.
• Affiliate marketing: an online marketing strategy in 
which a business rewards individuals or other 
businesses (affiliates) for each customer the affiliate 
sends to its Web site.
• This is one of the easiest way to start a web-based 
business.
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Entrepreneurship Within Firms
• Intrapreneurs are: creative people who work as 
entrepreneurs within corporations.
• The idea is to use the company’s existing resourceshuman, financial, and physical–to launch new products 
and generate new profits.
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Encouraging Entrepreneurship: 
What Government Can Do
• Business incubators: centres that provide space, 
services, advice, and support to assist new and growing 
businesses to become established and successful.
• Goals of incubators are;
o Produce successful companies
o Create jobs
o Retain businesses in a community
o Building or accelerating growth in a local industry
o Diversifying local economies
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LO 2 Getting Started in 
Small Business
• A business establishment must meet the following 
criteria: it must have one paid employee, it must have 
annual sales revenue of $30,000, and it must be 
incorporated and have filed a federal corporate income 
tax return at least once in the previous three years.
• A small business is: a business that is independently 
owned and operated, is not dominant in its field, and 
meets certain standards of size in terms of employees or 
annual revenues.
• Small businesses are often able to provide better 
customer service and respond to customer needs faster 
than larger organizations.
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Number of Business Locations 
by Sector and Firm Size 
NO. OF BUSINESS LOCATIONS
Percentage of
Employer 
Businesses Total
GoodsProducing
Sector
Services-Producing
Sector
Small businesses (1–
99 employees) 97.9 1,143,630 245,540 898,090
Medium-sized 
businesses (100–499 
employees)
1.8 21,415 5,342 16,073
Large businesses 
(500 + employees) 0.3 2,933 569 2,364
Total 100.0 1,167,978 251,451 916,527
Source: Statistics Canada, “Number of Employer Businesses by Sector and Firm Size (number of employees), December 2015,” Industry 
Canada, 2, June 2016, https://www.ic.gc.ca/eic/site/061.nsf/vwapj/KSBS-PSRPE_June-Juin_2016_eng-V2.pdf/$file/KSBS-PSRPE_JuneJuin_2016_eng-V2.pdf.
Approximately 98 percent of Canadian employers businesses are considered small businesses by 
Industry Canada.
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Small Business Statistics
• 97.9 percent of businesses in Canada have fewer than 
100 employees.
• Small businesses created little over 1.1 million jobs, on 
average, between 2005 and 2015.
• Small businesses employed approximately 8.2 million 
individuals in Canada, or 70.5 percent of the total private 
labour work force.
• Small business contributed 30 percent to Canada’s 
gross domestic product.
• SME exports $106 billion worth of goods
• About 16 percent of small businesses were owned by 
females, 20 percent were owned by both males and 
females in equal partnerships.
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Causes of Small-Business Failure
Plunging in without first testing the waters on a 
small scale. Buying too much on credit.
Underpricing or overpricing goods or services. Extending credit too freely.
Underestimating how much time it will take to 
build a market. Expanding credit too rapidly.
Starting with too little capital. Failing to keep complete, accurate records so that 
the owners drift into trouble without realizing it.
Starting with too much capital and being careless 
in its use.
Carrying habits of personal extravagance into the 
business.
Going into business with little or no experience 
and without first learning something about the 
industry or market.
Not understanding business cycles.
Borrowing money without planning just how and 
when to pay it back.
Forgetting about taxes, insurance, and other 
costs of doing business.
Attempting to do too much business with too little 
capital.
Mistaking the freedom of being in business for 
oneself for the liberty to work or not, according to 
whim.
Not allowing for setbacks and unexpected 
expenses.
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Causes of Small-Business Success
The customer requires a lot of personal 
attention, as in a beauty parlour.
A large business sells a franchise operation to 
local buyers. (Don’t forget franchising as an 
excellent way to enter the world of small 
business.)
The product is not easily made by massproduction techniques (e.g., custom-tailored 
clothes or custom auto-body work).
The owner pays attention to new competitors.
Sales are not large enough to appeal to a large 
firm (e.g., a novelty shop).
The business is in a growth industry (e.g., 
computer services or web design).
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LO3 Learning About 
Small-Business Operations
There are several ways to get into your first business 
venture:
1. Learn from others.
2. Get some experience.
3. Buy an existing business. 
4. Buy a franchise.
5. Inherit/ take over a family business
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LO4 Managing a Small Business
To be successful as a small business owner, the following 
functions are important to explore:
1. Planning your business (business plan).
2. Financing your business (finance)
3. Knowing your customers (marketing).
4. Managing your employees (human resource 
development).
5. Keeping records (accounting).
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 208
Managing a Small Business cont’d.
• Business Plan: a detailed written statement that describes the nature 
of the business, the target market, the advantages the business will 
have in relation to competition, and the resources and qualifications 
of the owner.
• Angel investors: Private individuals who invest their own money in 
potentially hot new companies before they go public.
• Venture capitalists: Individuals or companies that invest in new 
businesses in exchange for partial ownership of those businesses.
• Crowdfunding: raising funds through the collection of small 
contributions from the general public (known as the crowd)using the 
Internet and social media.
• Market: people with unsatisfied needs and wants who have both the 
resources and the willingness to buy.
Understanding Canadian Business, 10th Edition Copyright © 2019 McGraw-Hill Education Limited 209
Sample of Outline of Business Plan
• Cover Letter
• Executive Summary
• Company Background
• Management Team
• Financial Plan
• Capital Required
• Marketing Plan
• Location Analysis
• Manufacturing Plan
• Appendix
© 2019 McGraw 209 -Hill Education Limited
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Financial Instruments Used for Start-up SME’s
Fifty-one percent of 
Canadian SMEs 
requested external 
financing in 2014. 
Since they often lack 
both a credit history 
and the collateral 
needed to secure a 
loan, it is not 
surprising that 
personal financing 
represents the largest 
source (84 percent) of 
funding.
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LO5 Going Global: 
Small-Business Prospects
• Major challenges:
o difficulty obtaining financing
o may not know how to get started.
o may not understand cultural differences in 
prospective markets.
o may be too much bureaucratic paperwork for a 
small business to manage.
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Small-Business Advantage
• Overseas buyers enjoy dealing with individuals rather 
than large corporations.
• SME’s can usually begin shipping faster.
• They may support a wide variety of suppliers.
• They can often provide more personal service and 
personal attention, because overseas accounts may be 
their major source of business.
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Chapter Summary
LO1 Entrepreneurs are motivated by challenge, family 
pattern, profit, or may be immigrants.
LO2 Small business generates between 25 and 41 
percent Canada’s GDP and employs 69.7 percent of 
Canada’s private labour force.
LO3 You can learn about small business by working for 
someone else, buying an existing business, buying a 
franchise or inheriting/taking over a family business.
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Chapter Summary, cont’d.
LO4 To run a small business you need to plan, finance, 
keep records, get to know your customers, and manage 
employees.
LO5 From a global perspective, small business can usually 
ship faster, provide a wider selection of suppliers, and 
provide more personal service.
– Some of the challenges are: difficult to get 
financing, lack of knowledge on how to get started, 
lack of understanding of cultural differences in 
foreign markets, and copious bureaucratic red tape.