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Canada (511,155)
MGTA01H3 (348)
Lecture

Management Chapter 3 Notes

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Department
Management (MGT)
Course
MGTA01H3
Professor
Chris Bovaird
Semester
Summer

Description
Chapter Three: Understanding Entrepreneurship, Small Business + New Venture Small Business - Defining a ‘small’ business can be tricky - Various measures might be used o Number of people the business employs o Company’s sales revenue o Size of investment o Type of ownership - Industry Canada main federal government agency responsible for small business - Government relies on two distinct sources of information: o Business Register – tracks businesses o Labour Force Survey – tracks individuals - To be included in register o Have at least one paid employee o Annual sales revenue of $30 000 or more o Or be incorporated - Considered small o For goods producing business – fewer than 100 employees o Service-producing business – fewer than 50 employees - Labour Force Survey uses information from individuals o Make estimates of employment and unemployment levels o Self-employed – working owners of a business, working for themselves www.notesolution.com - Majority of the businesses in Canada have no employees nor are they incorporated - Small business: an owner-managed business with less than 100 employees The New Venture/Firm - Three most common criteria to determine when a new form comes into existence: o When it was formed o Whether it was incorporated o If it sold goods or services - Business considered to be new – if has become operational within previous 12 months - New Venture(Firm): a recently formed commercial organization that provides goods or services Entrepreneurship - Entrepreneurship: the process of identifying an opportunity in the marketplace and accessing the resources needed to capitalize on it - Entrepreneurs: people who recognize and seize opportunities - Small businesses are usually independent owned and influenced by unpredictable market forces o They provide an environment where attributes like creativity can be used - Entrepreneurs can occur in different types of firms The Role of Small and New Businesses in the Canadian Economy Small Businesses www.notesolution.com - Close to 98% of all businesses in Canada are small - 58% of all businesses are located in Ontario and Quebec - Canadian allocation of small businesses are similar to US - Majority of the small businesses have fewer than five employees - Private Sector: the part of the economy that is made up of companies and organizations that are not owned or controlled by the government - According to Industry Canada small businesses account for over 2/3 of employ in four industries: o Non-institutional health care o Construction industry o Other services o Accommodation and food - Contribution of small businesses to economy in terms of GDP? o Annual contribution has been valued at 25% New Ventures - New firms are responsible for the vast majority of new products and services - Most of the growth in firms occurred in services produces sector - The number in high-knowledge industries doubled - Women are playing a far more prominent role than before o In terms of who has been responsible for the growth o more than 800,000 women entrepreneurs in Canada - government statistics exclude new ventures if they are without employees www.notesolution.com The Entrepreneurial Process - entrepreneur must first identity a business opportunity and access resources needed to capitalize on it - if elements are mismatched the journey may be abandoned The Entrepreneur - the entrepreneur is at the heart of the entrepreneurial process - personal characteristics include o behavioural high energy level o personality independence - people are not ‘born’ entrepreneurs - personal characteristics have less impact on a person’s actions than the situation - what is important is what the person DOES - two main things they need to do : o identify an opportunity o access resources Identifying Opportunities - involves generating ideas for new or improved products + screening those products - Involves developing the opportunity www.notesolution.com Idea Generation: - Generating involves abandoning traditional assumption about how things work - Most new ventures do not come from a deliberate search for business o Comes from events relating to work or everyday life - Sources for ideas: o Work experience is common source of ideas Entrepreneur is aware as an employee with the marketpace o Next most frequent sources is personal interest/hobby o Chance happening A situation were idea comes about unexpectedly Characteristics that an idea has that will make it a greater opportunity - The Idea Creates or Adds Value for the Customer o Product solves a significant problem or meets a significant need - The Idea provides a Competitive Advantage that Can Be Sustained o Competitive advantage exists when customers see the product as being better than competition o Involves maintaining it in the face of your competitions actions or changes o The longer the markets are in a state of flux – greater likelihood of being able to sustain a competitive advantage - Idea that is Marketable and Financially Viable o It is important to determine whether sales will lead to profits o You have to understand who the customers are, how the product will satisfy their needs o Requires a thorough understanding of key competitors www.notesolution.com o Entrepreneurs must prepare a Sales Forecast: An estimate of how much a product or service will be purchased by prospective customers over a specific period – typically one year Total sales venue is estimated by multiplying unit expected to sell by their price o Financial forecasts consist of start up costs, cash budget, income statement, balance sheet - The Idea has Low Exist Costs o Exit costs are low if a venture can be shut down without a significant loss of time, money or reputation Developing the Opportunity - Clear notion of business concept and entry strategy needs to be developed o During the process, business concepts often change - Important to be responsive to new information - Important to be on the lookout for opportunities that were not anticipated - Three Main Entry Strategies o They introduce a totally new product or service o They introduce a product that will compete directly with existing but add a new twist o They franchise - Franchise: an arrangement in which a buy (franchisee) purchases the right to sell the product or service of the seller (franchiser) - Business Plan: a document that describes the entrepreneur’s proposed business venture o Explains why it is an opportunity www.notesolution.com o Outlines its marketing plan, operational and financial details o Outlines manager’s skills and abilities - Planning does not have to be completed before action is taken Accessing Resources
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