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Lecture Note for MGTA03, Lecture 3

by OC2

Management (MGT)
Course Code
Ingrid L.Stefanovic

of 3
Lecture Notes: Chapter 3
x All the economic systems on earth are divided into two categories
o Government makes many or most of the factors of productionÆcommand
o Private individuals own and control and make most of the decisions about what
they are going to buy/sellÆmarket economy(Canada)
permission to start a business(no forms/no fees/no licenses)
Only business where you might need a license is to start a banking
In order to start a business, is wake up one morning and decide you want
to beginÆdecide you want to give piano lessons
Textbook suggests that every day in Canada that 380 new businesses get
x Small BusinessÆit is hard to define, there is no proper definition that tells you exactly
ÁZuooµ]v]XXX^KÁv-managed business/ less than 100 employees/or low
o Some problems with the definition
GM is privately owned however it is a large business
x Small Business in Canada
o It is basically impossible to know how many small business are in Canada Æ
Industry Canada had a guess that it can be around 2.1 million(estimate)
o The fact is that well north of 98% of all business of Canada are small business
x Small Business t What about jobs?
o Total Canadian workforce Æ 14 mill
o Government employees(city, prov., fed)Æ 2 mill
o Private sector employees Æ 12 mill
o Conclusion
10% of Canadians are self-employed
25% of Canadians work in business with less than 5 employees
50% of Canadians work in business with less than 50 employees
x Small Business t Survival Rates
o Chart shows that if 10 years ago (1998), 100 new business were to be formed,
shows the odds of any of those 100 business getting to the end of the year and
surviving, according to data collected by Canadian government 24% of
businesses that were formed 10 years ago failed. As the years go on more
business begin to fail. On the 100 firms that got created on 1998, in 2001 only
half of them are still going, they keep diminishing. The failure rate decreases as
the years go by because all the badly runned businesses are gone in the first few
years and the better runned business stay longer. 80% of all business disappear
at the end of the decade.
x Interesting fact about entrepreneurs
o People think the odds are 95% of failing at the end of 10 years, it is basically
impossible to keep a business for 10 years.... according to entrepreneurs
x Who starts a business? t Entrepreneur
o Individuals who organizes and co-ordinates the activities required to start a new
Entrepreneur Æ from French
x Entrer t to enter
x Prendre t to take
o Somebody has to have to vision to create a business, all the factors of production
o Entrepreneurs are people who enter into a market environment, and take
advantage of it, take a chance.
o Without a small people who want to become wealthy, our economic system
won[t be good
x Entrepreneurs: Demographic Attributes
o Who typically are entrepreneurs?
x Children of entrepreneurs ( pull factor)
x Immigrants/children of immigrants( push factor)
x People between the ages of 30 t 40(managed risk)
x People who are not academically inclined(doers , not thinkers)
x Women are less likely to fail has entrepreneurs( better risk managers)
^µoo_(}t are people who are pulled into it by people who are their parents
or role models
^µZ_(}- dna, sociology, nature ; people who are willing to task risks,
because Z[ what brought your parents there
Most people will not become entrepreneurs right after graduating university
because they do not have all of the factors of production, mostly capital. Not
everyone will have loads of money that can be used to start a business.
Therefore, you will need a paid job for 10-15 years before you can start a
If you want to be an entrepreneur , be a C student
Women start businesses with less money, they owned businesses that grow
faster even though their plan tend to be more conservative, women owned
businesses end up employing more people, less likely to fail
Women are better entrepreneurs then men because they lack something
x they lack testosterone( a male hormone) , which men have and it makes
then quick tempered, and etc
x Entrepreneurs: Personal Traits
High NAch ( Need for achievement)
Internal locus of control
Comfortable with uncertainty
Willingness to take calculated risks
Self confident
x 3 human motivators
x Need for power
x Need for affinity( to be liked)
x Need for achievement