Part A – Introducing Business in Canada

Chapter 1 – Foundations of Business

Learning Objectives

By the end of the chapter, you should be able to:

  1. identify and describe the primary and secondary participants in a business;
  2. describe the concept of stakeholders and identify the stakeholder groups relevant to an organization;
  3. discuss and identify types of influences from the external environment on the business;
  4. describe what takes place within each of the functional areas of business; and
  5. explain key terms highlighted in the chapter.

Show What You Know


Raven Reads: Promoting the Indigenous Economy

Raven Reads is a growing British Columbia subscription box service that now has a global reach, and it all started with Nicole McLaren’s desire to meaningfully engage in business and community.

Raven Reads subscription boxes curate products that promote Indigenous Peoples and the Indigenous economy.

In particular, Nicole was compelled by a desire to educate others on the overwhelming impact of residential schools.1 The residential schools scattered throughout Canada formally started in 1883 and lasted as late as the 1990s in some areas. At least 150,000 First Nations, Métis, and Inuit students were subjected to a school system that targeted removing most, if not all, of the students’ cultural identities. Generations of First Nations, Métis, and Inuit students endured unhealthy and abusive environments.2 The Truth and Reconciliation Reports and Calls to Action3 highlighted these and other atrocities and offered calls to action. After reading these reports, Nicole found herself asking “what does reconciliation mean and what role can I play in this?”4

Nicole focused on her desire to educate others on the overwhelming impact of residential schools5 so she started a book club in 2016. That book club then turned into a small home business in which she curated Indigenous created content, books, and products and then delivered them to customers. The business struck a nerve and grew rapidly. Today, it is a thriving subscription box business and distribution center operating out of Kamloops, BC with customers worldwide.

From its inception and at its core, Raven Reads is an impact-driven company that focuses on curating Indigenous content and products to support and help grow the Indigenous economy. Seventy percent of Raven Reads suppliers are impact ventures that support Indigenous communities, charities, and social impact initiatives.6 Raven Reads is an exemplary business of today. It is rooted in an empowering compassion, supports the Indigenous economy, and gives back so others can do the same.

What do you think?

Discussion Questions

  1. What are the primary reasons for the success of Raven Reads?
  2. What are the greatest challenges facing Raven Reads today?

Introducing the Business Context

Canadian businesses operate within a dynamic environment and multiple disciplines and interrelationships between various components that make up business. If we look at these components together we can gain a basic understanding of how businesses are making decisions within an ever-changing set of needs. To survive, business organizations have to respond to changing macro environmental factors. The macro environment provides opportunities for businesses to adapt and innovate, and also represents threats to and limitations on an organization’s ability to achieve its objectives.

The world is made up of inspiring and diverse businesses and a range of business opportunities. Businesses can be big or small, traditional brick and mortar or online, broad or niche, established or new, successful or unsuccessful, and local, domestic or global. Advances in technology are bringing rapid changes in the ways we produce and deliver goods and services. The Internet and other improvements in communication (such as smartphones, video conferencing, and social networking) now affect the way we do business. Companies are expanding international operations, and the workforce is more diverse than ever. Corporations are being held responsible for the behavior of their executives, and more people share the opinion that companies should be good corporate citizens. Because of the role they played in the worst financial crisis since the Great Depression, businesses today face increasing scrutiny and negative public sentiment.7

As you go through the course with the aid of this textbook, you will explore the exciting world of business. We will introduce you to the various activities in which business people engage — accounting, finance, information technology, management, marketing, and operations. We will help you understand the roles that these activities play in an organization, and show you how they work together. We hope that by exposing you to the things that business people do, we will help you to decide whether business is right for you and, if so, what areas of business you would like to study further.

Decision Making within the External Environment

With respect to decision making within the external environment, there are two main perspectives to adopt.

Figure 1.1 Comparing Two Views of Management

Move the line left or right to compare the two common views of management.

Figure 1.1 On one side of the image is the view, Managers “Know Best”, where decision making is under the control of the managers and should rely on managers’ capabilities. In the view of Managers “Know Best”, managers have ultimate accountability; if the company is successful, the managers get the credit, and if the company is not successful, the managers get the blame. The other side of the image shows the view, The Environment Decides, where decision making is in response to the environment; however, it is limited as the business can only do what the environment sustains. In the view of The Environment Decides, a company’s success comes from reacting well to the environment, and a company’s failure is because of an unfavorable environment.

One perspective takes the boardroom approach, where everything is viewed from management’s perspective; managers “know best,” meaning that managers have the skills and knowledge to make the best decisions for the company. Correspondingly, managers are held accountable for any missteps of the company. The top managers are responsible for either outcome.

The second perspective for making decisions stresses the need for critical analysis and evaluation of the external environment. The company must focus on the external environment, particularly on the perspectives of other stakeholders including customers, employees, competitors, investors, lenders, government and the general public. In doing so, they will be able to respond to the environment’s needs. The challenge with this perspective is that the decision makers can put so much emphasis on the influence of the external environment that they sometimes miss opportunities to take control of a situation. For example, during the early days of the COVID-19 pandemic, the external business environment shifted dramatically. Businesses that emphasized the control of the external environment did not adapt the ways they provided their products to people. Consequently, many of them did not survive. Businesses with this external influence perspective would have said that they closed because of the pandemic, not because they were not adaptable.

As the story of Raven Reads suggests, today is an interesting time to study business. More than ever, businesses have to pay attention to what is happening around them. The political, economic, legal, social/cultural, technological, and natural environmental factors are constantly shifting. Being too dependent on managers’ know-how or attributing too much control to the environment is problematic. Thus, most Canadian businesses have adopted a hybrid approach.

Figure 1.2 Blending the Two Views – A Hybrid Approach

Figure 1.2 When using the Hybrid Approach as managers, take action over the things you can control. Pay attention to the environment rather than over-relying on managers. When things go wrong, look at the managerial decisions and the environment for explanations.

The hybrid approach draws on the strength of both perspectives and limits the negatives of each perspective. Namely, it emphasizes that managers can have control, but that they are also limited by the environment. As a result, managers should pay close attention to what’s happening around the business so that they can adapt to the changing trends.

What Is Business?

Before we move on to a deeper discussion of business, it is important to clearly define business. A business is any activity that provides goods or services to consumers for the purpose of making a profit. Be careful not to confuse the terms revenue and profit. Revenue represents the funds an enterprise receives in exchange for its goods or services. Profit is what’s left (hopefully) after all the bills are paid.

Many businesses provides products or services. Your bank is a service company, as is your internet provider. Hotels, airlines, law firms, movie theaters, and hospitals are also service companies. Many companies provide both goods and services. For example, your local car dealership sells goods (cars) and also provides services (automobile repairs). Second, some organizations are not set up to make profits for individual stakeholders. Many are established to provide social or educational services for the entire public. Such non-profit organizations include the United Way, Habitat for Humanity, the Boys and Girls Clubs, the Canadian Red Cross, and many colleges and universities. Most of these organizations, however, function in much the same way as a business. They establish goals and work to meet them in an effective, efficient manner. Thus, most of the business principles introduced in this text also apply to non-profits.

Business Participants, Stakeholders, and Functional Areas of Business

We will begin our discussion of business by identifying the main participants of business, the stakeholders of business, and the functions that most businesses perform. We will finish this section by discussing the external factors that influence a business’s activities.


Every business must have one or more owners whose primary role is to invest money in the business. When a business is being started, it is generally the owners who polish the business idea and bring together the resources (money and people) needed to turn the idea into a business. The owners also hire employees to work for the company and help it reach its goals. Owners and employees depend on a third group of participants— customers. Ultimately, the goal of any business is to satisfy the needs of its customers in order to generate a profit for the owners. Other participants can include suppliers and even competitors.


Consider your favorite restaurant. It may be an outlet or franchise of a national chain (more on franchises in a later chapter) or a local “mom and pop shop” without affiliation to a larger entity. Whether national or local, every business has stakeholders – those with a legitimate interest in the success or failure of the business and the policies it adopts. Stakeholders include customers, vendors, employees, suppliers, landlords, competitors, bankers, and others (see Figure 1.3). Other stakeholders include the general public, the environment and all the various government departments that impact the business. All have a keen interest in how the business operates, in most cases for obvious reasons. If the business fails, employees will need new jobs, vendors will need new customers, and banks may have to write off loans they made to the business. Stakeholders do not always see things the same way — their interests sometimes conflict with each other. For example, lenders are more likely to appreciate high profit margins that ensure the loans they made will be repaid, while customers would probably appreciate the lowest possible prices. Pleasing stakeholders can be a real balancing act for any company.

Figure 1.3 Common Business StakeholdersVarious sized and coloured circles each labeled with a stakeholder in business. The labels are listed in the image caption.

Figure 1.3 Common Business Stakeholders include: the environment, service users, policy makers, the public, managers, customers, the government, shareholders, funders, employees, suppliers, and owners.

Functional Areas of Business

The activities needed to operate a business can be divided into a number of functional areas. Examples include: human resources, operations, marketing, accounting, finance and information technology. Let us briefly explore each of these areas.

Human Resources

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


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


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


Managers need accurate, relevant and timely financial information, which is provided by accountants. Accountants measure, summarize, and communicate financial and managerial information and advise other managers on financial matters. There are two fields of accounting. Financial accountants prepare financial statements to help users, both inside and outside the organization, assess the financial strength of the company. Managerial accountants prepare information, such as reports on the cost of materials used in the production process, for internal use only.


Finance involves planning for, obtaining, and managing a company’s funds. Financial managers address such questions as:

  • How much money does the company need?
  • How and where will it get the necessary money?
  • How and when will it pay the money back?
  • What investments should be made in the company’s plant and equipment?
  • How much should be spent on research and development?

Good financial management is particularly important when a company is first formed because new business owners usually need to borrow money to get started.

Information Technology

Information is one of the critical assets of most businesses. Businesses such as Facebook are entirely information-based businesses. Information technology (IT) managers are concerned with building computer and network infrastructure, implementing security and privacy protocols, and developing user interfaces and apps for customers. Usually, there is a high level of integration between the business’s website or application and other departments within the business, such as finance, marketing and operations. Often, businesses must develop interfaces to send and receive information from other companies, including suppliers, and logistics and shipping providers. The global pandemic has also made it necessary for businesses to establish and improve their virtual presences. As the use of technology increases so do the number of threats and vulnerabilities. The number of potential risks involved in using information technology is rising, creating a security gap between the expectations of users and the ability of technology suppliers to meet those expectations. Data privacy concerns, protection and security now play an important role. Cybersecurity is changing the way things are done today more than ever before.

External Influences on Business Activities

Raven Reads and other businesses do not operate in a vacuum; they are influenced by a number of external factors. These include the economy, government, consumer trends, information technology, legal factors, public pressure to act as good corporate citizens, and other factors. Collectively, these forces constitute what is known as the “macro environment” – essentially the big picture world outside over which the business exerts very little if any control.

Figure 1.4 Common Influences from the Business’s External Environment

The company surrounded by its environmental forces: demographic, natural, economic, political, cultural, and technological. Source: All icons from the Noun Project

“Business and Its Environment” sums up the relationship between a business and the external forces that influence its activities. One industry that is clearly affected by all these factors is the fast food industry, in which companies such as Taco Bell, McDonald’s, Tim Hortons and others all compete. Here are a few statements to show the way external factors impact business. For instance, in a strong economy people have more money to eat out. Food standards are monitored by the Canadian Food and Drug Inspection Agency at the federal level, with entities at both the provincial and municipal levels monitoring adherence. Preferences for certain types of foods are influenced by consumer trends (fast food companies are being pressured to make their menus healthier). 


In 2017 Ontario became the first province in Canada to require food service providers with 20 or more locations in the province, such as restaurants, coffee shops, convenience stores, grocery stores and movie theatres, to include the number of calories for each food and beverage item on their menus, labels or tags.

Finally, a number of decisions made by the industry result from its desire to be a good corporate citizen. For example, several fast food chains have responded to environmental concerns by eliminating Styrofoam containers.8

Of course, all industries, not just the food industry, are impacted by external factors. As people have become more conscious of the environment, they have begun to choose new technologies, like all-electric cars to replace those that burn fossil fuels. Established companies like Nissan, with its Nissan Leaf, and brand new companies like Tesla have entered the market for all-electric vehicles. The global electric vehicle market was valued at US$ 113.6 Bn in 2020. It is estimated to expand at a Compound Annual Growth Rate (CAGR) of 26.62% from 2021 to 2031.9


As you move through this text, you will learn more about these external influences on a business.

Comprehension Check

Use the image below to test yourself by:

  • defining each key term;
  • identifying each term as a participant, stakeholder, function or external influence (remember some can be more than one); and
  • providing an example of why each term is important to a business.

Key Takeaways

Important Terms and Concepts:

  1. The primary participants in a business are its owners, investors, employees, and often its customers. The secondary participants are customers, competitors, and suppliers.
  2. Every business must consider its stakeholders, and their sometimes conflicting interests, when making decisions.
  3. Businesses are influenced by factors such as the economy, government, and other forces external to the business.
  4. The activities needed to run a business can be divided into functional areas.


  1. Dunne, D. (2022, May 30). Meet Nicole McLaren, Raven Reads. BC Marketplace.
  2. Miller, J. R. (2012). Residential Schools in Canada. The Canadian Encyclopedia.
  3. University of Manitoba. (2022). Reports: National Centre for Truth and Reconciliation.
  4. Raven Reads. (n.d.). About us.
  5. Dunne, D. (2022). Meet Nicole McLaren, Raven Reads. BC Marketplace.
  6. Raven Reads. (n.d.). Press Kit.
  7. Hilsenrath, J., Ng, S., & Paletta, D. (2008, September 18). Worst Crisis Since ’30s, With No End Yet in Sight. WSJ.
  8. Baron, D. P., Eunsin, L., Huggett, J., Rigoglioso, M., Snyder, B. & Zich, J. (2003). Facing Off in Public. Stanford Business. Retrieved from:
  9. Transparency Market Research. (2021). Electric Vehicles Market – Global Industry Analysis, Size, Share, Growth, Trends and Forecast, 2021 – 2031.


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Fundamentals of Business Copyright © 2022 by Florence Daddey and Rachael Newton is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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