Mgm102 Exam Imp Notes
Schermerhorn Chap 5
Entrepreneurship: Risk taking behavior that results in new opportunities; accepting the challenge of
starting and running a business.
Entrepreneur: A person willing to take riskfull opportunities that others viewed as threats; short ventures
that results in new products and services. **those willing to buy franchises, open small retail shop, or own
business are also entrepreneurs**
Necessity based Entrepreneurship: takes place because other employments options not available.. ex.
Women in the workforce, Glass Ceiling, if there is inequality in the workforce people may just open own
business in order to prosper.
Small Business: A business that has less than 100 employees, is independently owned and operated and
doesn’t dominate industry; also meets business establishment criteria (at least one employee, 30000 yearly
revenue, and filed income tax return)
Motivations: HOW TO GET STARTED; wanting to be own boss, continue with family business, fulfilling
a dream etc.
Franchise: when a person buys the right to sell another company’s product or service in another location.
Franchisee buys from Franchisor and becomes a Franchise.
Internet Entrepreneurship: Creating a venture online; Internet saves costs by diminishing renting costs and
fewer employees therefore higher profits
Family Business: business owned and controlled by members of family
▯ Family Business Feud: When family members have major disagreements on how a business
should be run.
▯ Succession Problem: the issue of who will run the business after the head leaves
▯ Succession Plan: plan that describes how leadership transition, financial matters. Legal aspects of
the transfer will be handled.
New Venture Creation: finding a new market that has not been discovered yet by new firms.
▯ First Mover Advantage: an advantage that comes from being first to exploit a niche or enter a
Debt Financing: borrowing money that needs to be repaid with interest
Equity Financing: Exchanging ownership shares in return for outside financing; owner of shares takes risk,
the money doesn’t need to be repaid back.
Initial Public Offering (IPO): when a company first makes it shares available to the public
Venture Capitalists: investors that invest in new business in exchange for partial ownership
Angel Investor: wealthy individual willing to invest in new venture in return for equity; private individuals
who invest their own money in businesses they think may prosper before the business goes public.
Possible Short Answers:
Characteristics of an Entrepreneur: (PISSHTH) ▯Passion and action oriented, internal locus of control
(self directing), self confidence, self reliance, high need for achievement, tolerance for ambiguity (risk
takers), high energy level.
Why Do Small Businesses Fail: (PIGELLL) ▯Poor Financial Control, Insufficient Commitment, Growing
too fast, Ethical Failure (fraud etc.), Lack of Experience, Lack of Expertise, Lack of Strategic leadership
(not strategizing properly).
Life Cycle of Entrepreneurship: (BBM)
1. Birth Stage: Establishing firm, getting money, getting customers
2. Breakthrough Stage: Working on finances, becoming profitable, Growing
3. Maturity Stage: Refining strategy, continuing growth What’s a Business Plan and What’s Included in It:
Business Plan: describes the direction for a new business and the financing needed to operate it. (What
banks and financers want to see before loaning money) (nature of business, target market, advantages,
What’s Included in it: (CCIMMPE) ▯ Capital Needs, Company Description, Industry Analysis, Milestones,
Marketing strategy, Products and Services, Executive Summary.
What are the different forms of Ownership:
Sole Proprietorship: form of business where individual pursues a profit; Simple to start and terminate,
person is liable for business debts.
Partnership: Business owned by two or more people
Corporation: A business that has a legal entity apart from the owners; corporation responsible for own
liabilities; costs and a lot of documentation (disadv.)
Limited Liability Corporation: hybrid business that combines advantage of sole, partnership and
corporation; single owner, multiple owners for tax purposes, functions like a corp. (protecting assets)
Nickels Chp 7
SME: business with less than 500 employees
Entrepreneurial team: group of experienced people from different areas of business who join together to
form a managerial team with the skills needed to develop and market a new product.
Microenterprises: small business defined as having fewer than 5 employees
Micropreneurs: (owners of Microenterprises) Many have home based businesses; trying to balance career
Intrapeneurs: creative people who work as entrepreneurs within corporations.
Business Establishment: has at least one paid employee, yearly revenue of 30,000 and has filed an income
tax return at least once in 3 years.
Employer Business: meets one of the business establishment criteria and maintains payroll of atleast one
person (usually owner)
Market: people with unsatisfied wants and needs who have both the resources and willingness to buy
Possible Short Answers:
Difference between Entrepreneurship and Small Businesses: (RISA) ▯ Risk, Innovation, Speed of Wealth
Creation, Amount of Wealth Creation
Why become an Entrepreneur: (PICNIF) ▯Profit, Independence, Challenge (excitement), New
ideas/product, Immigrants (lack Canadian job experience so start own business), Family Pattern.
What does it take to be an Entrepreneur: (HADATS) ▯Highly energetic, Action oriented, Determined
(believe in your idea), Able to learn quickly, Tolerant of Uncertainty, Self Directed.
Reasons for the emergence of Female Entrepreneurs: Financial need, Lack of Opportunities, Family and
personal responsibility, public awareness of other women in business, higher rate of success for women,
Women returning to workforce.
Why open home based business: Corporate downsizing (no job security so people start own venture),
computer technology (affordable and easier), change in social attitudes (considered a real job now)
Challenges of Working at home: Getting new customers (don’t have signs and storefronts), managing time
(self discipline), Keep work and family separate, Abiding by city rules (laws), Managing risks (businesses
not always covered by insurance) What can Gov. do to encourage entrepreneurship: Specialized programs for them. Small business Quarterly
(SBQ) gives quick snapshot of recent performance of Canada’s small business sector, Incubators (centers
that provide hands on management assistance, support services etc.), give tax breaks, encourage R + D.
Example of Small businesses in Many Sectors: Service, Retail, Wholesalers, Manufacturing, Construction
How to start Venture: Start own company, Get some experience, Buy an existing business, Franchise,
Inherit family business.
How to start Small Business: Plan (business plan), Get funds (Venture Capitalist, Angel investors), Know
customers (market), Manage employees, Get help, Go international (many businesses don’t because they
don’t know how to start, how to export, understand cultural differences etc.)
Why do International buyers prefer dealing with Individuals not Companies: More personal service,
shipping faster, provide wide variety of suppliers, provide undivided attention to each customer.
Nickels Chp 4
National Policy: Gov. policy that placed high tariffs on imports from US to protect Canadian
Privatization: process of Gov. selling crown corporations.
Sin tax: taxes (help to pay for public services) placed on products to discourage use (ex. Cigarettes)
Fiscal Policy: the federal governments attempt to keep economy stable by increasing/decreasing taxes
(Gov. offers tax credits to companies who open plants in areas of high unemployment)
Deficit: occurs when Gov. spends over and above the money received from taxes
National Debt (Federal Debt): the accumulation of Gov. surpluses and deficits over time. (to reduce:
reduce pension payments to wealthier citizens, layoff workers)
Surplus: Revenues more than Expenditures.
Federal Budget: a report that shows Gov. policies for the upcoming year (shows how much revenues Gov.
expects to collect, whether a deficit or surplus is expected)
Monetary Policy: Management of money supply and interest rates controlled by Bank of Canada (A crown
i▯ f economy booming, increase interest rates (an attempt to control inflation), money becomes
more expensive to borrow, therefore businesses borrow less and economy slows.
i▯ f economy falling, decrease interest rates, money becomes cheaper to borrow, more businesses
borrow ore, and economy increases.
▯Money supply: the more money the BOC makes available to economy the more the economy
Transfer payments: direct payments from Gov. to other Gov. or individuals.
Equalization: Federal government program for reducing fiscal disparities among provinces.
Purchasing Policy: A policy that states when advanced technological items must be purchased from foreign
companies, Our Gov. insists that a portion be manufactured in Canada. Whatever can be produced in
Canada is acquired in Canada.
Industrial Policy: A comprehensive coordinated Gov. plan to guide and revitalize the economy.
3 factors that contribute to projected deficit: World GDP falling, Continuous US recession, drop in
Possible Short Answers: What Are Crown Corporations, their jobs and some examples:
Crown Corporations: a company that is owned by the government (federal/provincial)
Their jobs: To bail out a major industry (Canadian Railway) –Provide a service that couldn’t be available
otherwise (Bank of Canada) –typically in each province (Electrical power company)
Define Marketing Boards and give advantage and disadvantage:
Marketing Boards: organizations that control the supply or pricing of certain agricultural products in
Canada (allocates quotas to each province and sets price)
Advantage: reduces tariffs and other restrictions
Disadvantage: doesn’t allow for normal competitive competition
Services in Canada:
Industry Canada: many programs implemented by Federal Gov. to help small businesses get started;
publishes brochures, pamphlets etc.
National Research Council: agency that reports to Parliament through Industry Canada; helps industry
remain up to date and competitive and top R+D.
Foreign Affairs: Agency designed to assist companies in foreign and exporting investment activities.
Nickels Appendix B
Precedent: decisions judges have made in earlier case that guide the handling of new cases.
Administrative Agency: Gov. institutions created by parliament with the power to pass rules and regulations
that takes the form of the provincial civil code.
Tort Law: an example of a Common Law; a wrongful act that causes an injury to another persons body,
Negligence: in tort law behavior; doesn’t meet the standard of care required and causes unintentional harm
Product liability: part of tort law that holds business liable for harm caused by their products or service.
Strict Product Liability: legal responsibility for injury caused by product regardless of fault.
Patent: a form of intellectual property that gives the creator rights to their ideas for 20 years. (they have the
right to sell their patent to others)
Copyright: a form of intellectual property that protects the owner rights to their materials such as
photographs, comics etc.
Trademark: a brand that’s been given exclusive legal protection to both brand name and pictorial design.
Industrial Design: a form of intellectual property that protects the owners right to use the visible features of
a product that identify it.
Express Warranty: Warranty in a box.
Implied Warranty: Guarantees legally imposed on the seller.
Full Warranty: requires seller to replace product at no charge if it’s defective.
Limited Warranty: limited defects are covered by warranty, not all.
Negotiable Instruments: forms of commercial paper (cheques) that are transferable among businesses ad
individuals and represent a promise to pay a specific amount. (must be written and signed by maker and
payable on demand or a certain time)
Contract: a legally enforceable agreement between 2 or more parties.
Contract Law: set of laws that specify what constitutes a legally enforceable agreement.
Consideration: Something of value; requirement of legal contract.
Breach of Contract: when one party fails to follow terms of the contract.
Damages: the monetary settlement awarded to a person who is injured by a breach of contract.
Consumerism: a social movement that seeks to increase and strengthen the rights and power of buyers in
relation to sellers.
Bankruptcy: legal process by which a person or business is unable to meet financial obligations and is
relieved of those obligations by a courts that divides debtors assets among creditors allowing creditors to
get at least part of their money and freeing the debtor to begin anew. Voluntary Bankruptcy: legal procedures initiated by a debtor
Involuntary Bankruptcy: bankruptcy procedures filled by a debtor’s creditor.
Secured creditors: have direct claim against a specified asset of the debtor.
Preferred creditors: have priority over general and unsecured creditors.
Unsecured creditors: don’t have a direct claim against any asset and aren’t given preferred treatment by the
Deregulation: Gov. withdrawal of certain laws and regulations that seem to hinder competition.
Possible Short Answers:
Three Legal Branches: (LEJ)
Legislative: makes laws (provinces)
Executive: administers laws; puts them into practice
Judicial: (court; judge) applies laws, when there are disputes.
Three Laws: (CBC)
Criminal Law: defines crimes and establishes punishments.
Civil Law: legal proceedings that don’t involve criminal acts
Business Law: rules, codes and regulations that businesses must follow and conduct their own business
within the legal framework
Differen’ce between Statutory and Common Law:
Statutory Law: written law. (ex. Treaties, bylaws etc.)
Common Law: unwritten law. (body of law that comes from decisions handed down from judges)
Common law system realizes that the courts made laws through their decisions while Civil law restricts
them from interpreting the laws provided by legislation.
What makes a contract Legally binding:
1.An offer is made, 2. There’s an acceptance of offer, 3. Both parties give consideration, 4. Both parties are
competent, 5. Contract must be legal, 6. Contract is in proper form.
Nickels Chp 3
Exporting: Selling goods to another country
Importing: Buying goods from another country
Free Trade: movement of goods and services without political or economical obstruction.
Balance of Trade: a nations ratio of exports to imports.
▯ Trade Surplus: when exports>imports
▯ Trade Deficit: when exports