Schulich School of Business

York University
Course Outline ECON 5100B 3.0: THE ECONOMIC ENVIRONMENT OF BUSINESS Wednesdays, 8:30-11:30 a.m. Room: SSB E118 Fall 2011 Instructor Fred Lazar Phone: (416) 736-5068 N205J Seymour Schulich Building flazar@yorku.ca Office hours: Wednesdays, 12:30-15:00 p.m. Assistant: Filomena Ticzon Phone: 416-736-5068 Email: fticzon@schulich.yorku.ca Office: SSB N205B Brief Description This course provides managers with an overview of the economic environment within which business must operate, and an understanding of some of the analytical tools which economists use to solve business and economic problems. The focus is to enable students to identify, understand and evaluate the domestic and global forces causing economic change. Key concepts and ideas from microeconomics, macroeconomics and international economics are introduced. Topics relevant to real-world issues and problems provide the focus for in-class discussion. Upon completion, students are expected to be familiar with the fundamental concepts of economics, and to be able to analyze how changes in the economic environment affect business performance and future strategic options. Course objectives Why is this course part of the MBA curricula? Because in addition to providing a useful tool set for tackling problems, economics should provide a platform for bringing the various areas together in tackling problems. While areas such as Accounting, Finance, Marketing, Organizational Behaviour and Strategy can be taught in silos, and at times problems may be specific to a particular area, most often, solving a problem requires combining two or more of these areas. An economics course should play a key role in showing you how to combine areas for decision-making and problem solving, and provide you with more tools to tackle and solve real problems.

This course will be built around Arcelor Mittal, and in the process introduce students to a number of basic, yet very important economic concepts, and show how they can be used to improve the decision-making process. By examining various aspects of this company, the course will provide students with the economic tools useful for solving business problems. Bob Lutz on MBA Programs: They have produced generations of number-crunching, alternate-scenario-loving, spreadsheet-addicted idiot savants. They should be ashamed. The approach to be used in this course is to start with a real company and its problems, and use economics to try to understand how the company got into these problems and what options might be available for the company to survive and succeed. By linking a key economic concept or principle to a particular issue or problem, students should be able to better appreciate the value of economics and understand the key concepts and principles. Some examples: Corporate Social Responsibility (CSR) has become well entrenched in MBA curricula and in the actions of many CEOs. But does it make sense for a company to be concerned with CSR? The steel industry is extremely vulnerable to economic shocks. Whenever the economy slides into a recession, many steel companies become unprofitable. Even during good economic conditions, steel companies are prone to engage in hyper-competition and destroy their profit potential. They are also subject to sharply higher commodity prices. What can steel companies do to better insulate themselves against economic shocks? Is consolidation inevitable in this industry? What caused the financial and economic crisis in 2008? Are we recovering and if so, why? What are the implications of the crisis for corporate strategy, government policy and the future of markets? Are we seeing a repeat of the 2008 crisis today, as Greece, Portugal, Italy, Belgium and Spain come under pressure to solve their respective budgetary problems? The list of real examples and problems where economics can play an illuminating role in clarifying the issues and highlighting the most reasonable solutions can be almost endless. Organization of the Course Assigned Readings Required reading for this course includes only the following: Fred Lazar, Economics for Management 2011 Available online. The lectures also are available online.

Relevant websites: www.bank-banque-canada.ca www.bank-banque-canada.ca/en/rates/converter.html www.xe.com/ucc/ www.forbes.com www.globeandmail.com www.statcan.ca www.oecd.org www.fin.gc.ca www.imf.org www.federalreserve.gov www.nytimes.com www.sedar.com www.sec.org Evaluation of Student Performance The course grading scheme for Masters level courses at Schulich uses a 9-value grade-point system. The possible course letter grades for a course and the corresponding grade points awarded for each grade are: A+ A AB+ B BC+ C CF 9 grade points 8 7 6 5 4 3 2 1 0

(Students are reminded that they must maintain a cumulative GPA of at least 4.2 to remain in good standing and continue in the program, and a minimum of 4.4 to qualify for their degree. Schulich grading guidelines mandate a section grade point average [GPA] of between 4.7 and 6.1 for core courses.) The letter grades for each assignment and test will be converted into grade points as above, and a weighted average will be calculated to determine the final grade for each student.

The final grade for the course will be based on the following items weighted as indicated: Assignment #1: Assignment #2: Mid-term test: Final Examination: 25% 25% 25% 25%

Assignment #1 is a short essay. Select any editorial or column appearing on the Editorial/Comments page of the Financial Post (National Post) 2nd last page, and discuss whether or not you agree with argument. Summarize briefly the key arguments and then discuss the reasons for agreeing or not agreeing with the key arguments made in the editorial or column you selected. The essay should be between 1,000 and 1,500 words in length. No need to list references. The essay will be due on November 2. Do not submit a hard copy. Send me your essay by email. Assignment #2 is a short essay: Choose any company listed on the NYSE or TSX and discuss whether you agree with the companys strategies to deal with its three most significant risks. Compare the risks highlighted by the company you select with those listed by its three major competitors. Based on this comparison, you will decide whether your company has identified the correct major risks. Then, based on a comparison with the strategies highlighted by its competitors, you will determine whether your company is on the right strategic path to deal with the risks. If you decide that you company has not identified the most significant risks, then you will conclude that it is not on the right strategic path. The essay should about 1,000 words in length. No need to list references. The essay will be due on December 7. Do not submit a hard copy. Send me your essay by email. Mid-Term Test will consist of responding to three essay questions, which you will select from a set of six. The test will last two hours. The test will take place in class on November 2. The test is open book and can be written on your laptop and submitted by email after the test. The Final Examination will consist of responding to three essay questions, which you will select from a set of six. The examination will last two hours. The exam will take place during the regularly scheduled examination period following the end of the term. The exam is open book and can be written on your laptop and submitted by email after the exam. Students should not make plans to be away from Toronto during any portion of the announced examination period until the dates for their specific examinations have been announced.

Academic Honesty Academic honesty is fundamental to the integrity of university education and degree programs. The Schulich School will investigate and will act to enforce academic honesty policies where apparent violations occur. Students should familiarize themselves with York Universitys policy on academic honesty. It is printed in full in your student handbook and can also viewed on-line on the Schulich website, clicking through as indicated: MBA/IMBA. Schulich website Programs Masters Degree Learn More Academic Policy While academic dishonesty can take many forms, there are several forms of which students should be highly aware because they are the ones that are most likely to occur in the context of a specific course. [1] Plagiarism. Plagiarism is the presentation of information, ideas, or analysis generated by other people as being your own. It includes direct quotations as well a substantive paraphrases where the course of that information or idea is not clearly identified to the reader. Students should be careful to present their written work in a way that makes it completely clear in each and every case where a quotation, a paraphrase, or an analysis is based on the work of other people. (This includes information from all sources, including websites.) [2] Cheating. Cheating is an attempt to gain an unfair advantage in an evaluation. Examples of such violations include (but are not limited to) consulting prohibited materials during an examination or copying from another student. [3] Failure to follow limitations on collaborative work with other students in preparing academic assignments. Each class differs in the mix of assignments and group-versusindividual preparation that is allowed. The instructor will make clear the extent of collaboration among students that is acceptable among students on various pieces of assigned work. Students should abide by those limitations and, if they are unsure about whether a certain level or form of collaboration would be acceptable, to clarify that question with the instructor in advance. [4] Aiding and abetting. A student is guilty of violating academic honesty expectations if he/she acts in a way that enables another student to engage in academic dishonesty. If a student knows (or should reasonably expect) that an action would enable another student to cheat or plagiarize, that students action constitutes an academic honesty violation. Illustrative examples include making your exam paper easily visible to others in the same exam or providing your own working or finished documents for an individual assignment to another student (even if that other student said that he/she just wanted to get an idea of how to approach the assignment or to check whether they had done theirs correctly).

[5] Use of academic work in more than one course. Generally, academic work done for every course is new work, done for that course only. If a student wishes to use some or all of the academic work done for an assigned task in one course in another course, the student must get explicit, prior permission from both instructors so that they agree that the scope and nature of the overlapping use of that work is such that it can fairly be counted toward both courses. Schedule of Topics and Readings Date Sept. 14 Sept. 21 Sept. 28 Oct. 5 Oct. 12 Oct. 19 Oct. 26 Nov. 2 Nov. 9 Nov. 16 Topic Assigned work due Introduction: What is economics? Decision-making; time horizons Firms: What are they? Why do they exist? How are they structured? Markets: Definitions; Boundaries; Role of governments Employees: HR policies Profits: Definitions; Differences between accountants and economists Revenues: Market segmentation; brands and reputation; strategies to increase revenues Reading week Term test Assignment #1 Costs: Definitions; Supply and capacity; strategies to reduce costs; interaction between demand and supply Competitiveness and Pricing: Competition paradigms; competitive strategies and competitiveness; pricing strategies Macroeconomics: Aggregate demand; stabilization policies; business cycles Financial Markets: Risks and returns; Financial intermediation; Central banks; Trade-offs Economic Crisis: What happened; Assignment #2 derivatives and hedging Final Exam (subject to change)

Nov. 23 Nov. 30 Dec. 7 Dec. 14