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Chapter 7-9

Commerce - Chapter 7-9 Notes.docx

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Rita Cossa

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CHAPTER SEVEN – ENTREPRENEURSHIP AND STARTING A SMALL BUSINESS Entrepreneurship and Small Business  Entrepreneurship: accepting the challenge of starting/running a business  Differences between entrepreneurship and small businesses: 1. Amount of Wealth Creation: successful entrepreneur creates excess wealth 2. Speed of Wealth Creation: entrepreneurial wealth is more rapid than small business wealth 3. Risk: risk is higher for entrepreneurship 4. Innovation: entrepreneurship involves more innovation than small businesses Well-Known Canadian Entrepreneurs  Canadian Tire: started by John W. and Alfred J. Billes  Sobeys: J.W. Sobey Why People Take the Entrepreneurial Challenge  New Idea, Process or Product: think they can produce a better product/current product at lower cost  Independence: do not enjoy working for someone else  Challenge: excitement and challenge of doing something new/difficult  Family Pattern: family business/long line of entrepreneurs in family  Profit: large risk but large profits  Immigrants: hard for them to find employment so start own business What Does It Take to Be an Entrepreneur?  Self-directed: o Confident in yourself and decisions o Self-disciplined  Determined: o Believe in idea when no one else does o See through obstacles/difficulties  Action-Oriented: o Must want to realize, actualize and build dream  Highly Energetic: o Must be emotionally, mentally and physically able to work long/hard  Tolerant of Uncertainty: o Make decisions with varying degrees of risk  Able to Learn Quickly: o Learn from mistakes o Adapt and change when required o Admit to mistakes Women Entrepreneurs  Number of self-employed women is growing more than number of self- employed men  47% of SMEs have some degree of female ownership  Small and medium-sized enterprises (SMEs): all businesses with fewer than 500 employees  Reasons for significant emergence of female entrepreneurs: o Financial Need: average real income of Canadians has dropped; many women forced to support family budged o Lack of Promotion Opportunities: most positions in higher management still dominated by men o Women Returning to the Workforce: return to workforce after raising family with outdated skills o Family and Personal Responsibility: need to support family if are divorced/single mother o Public Awareness of Women in Business: successful women gives others confidence to try o Part-Time Occupations: women with talents are encouraged to develop hobby/skill on part-time basis o Higher Rate of Success for Women: women entrepreneurs more successful than men (cautious, calmer, accept advice) Entrepreneurial Teams  Entrepreneurial team: group of experienced people from different areas of business who join together to form a managerial team with skills needed to develop, make and market new product  Teams can combine creative, marketing and production skills Micropreneurs and Home-Based Businesses  Micro-enterprises: small business defined as having fewer than five employees  Micropreneurs: o Small-business owners o Willing to accept risk of starting/managing type of business that remains small o Offers balanced lifestyle o Can do work they want to do o Ex. writers, consultants, architects, bookkeepers  Reasons for growth of home-based businesses: o Computer Technology: home-based business can look/act as big as corporate competitors o Corporate Downsizing: downsizing has made workers aware that jobs are not secure so want to venture out on own o Change in Social Attitudes: people no longer view it as not having a “real job”  Challenges with home-based businesses o Getting New Customers: hard to get word out because do not have signs/storefront o Managing Time o Keeping Work and Family Tasks Separate o Abiding by City Ordinances: restrictions on types of businesses that are allowed in certain parts of community/how much traffic attracted to neighbourhood o Managing Risk: make sure insurance policy covers business-related claims Web-Based Business  Web-based businesses sell variety of things  Ex. eBay  Web is better than a catalogue  Do not have to create and mail catalogues Entrepreneurship Within Firms  Intrapraneurs: o Creative people who work as entrepreneurs within corporations o Use company’s resources to launch new products  Some companies require employees to devote some of their time to thinking of new products  How Post-It Notes were made Encouraging Entrepreneurship: What Government Can Do  Canadian Business: o Federal government information services for entrepreneurs o Primary source for up-to-date/accurate business-related info o Improve start-up, survival, growth rates of small businesses  Provide other services/programs to help entrepreneurs  Small Business Quarterly (SBQ): provides quick snapshot of recent performance of Canada’s small businesses  Incubators: o Centres that provide hands-on management assistance o Education, information, technical and vital business support services o Networking resources, financial advice o Ex. Quebec Biotechnology Innovation Centre (QBIC) in Laval   Government can also offer investment tax credits to businesses that create jobs Starting A Small Business Small Versus Big Business  Business establishment: must meet one of following criteria o Must have at least one paid employee o Must have annual sales revenue of $30,000 o Must be incorporated and have filed federal corporate income tax return in past three years  Employer business: meets one of establishment criteria and maintains payroll of at least one person  Small business: o Independently owned business o Not dominant in its field Importance of Small Businesses  Almost all small businesses are Canadian-owned/managed  Help maintain Canadian identity and economic independence  Small businesses can be bought out by large companies  Help them become more competitive  Most of Canada’s jobs are in small businesses Wide Diversification 1. Service Businesses: computer consulting, dry cleaners, travel agencies, salons 2. Retail Businesses: shoe, clothes, hats, skis, housewares, ice cream, groceries 3. Construction Firms 4. Wholesalers: wholesale food warehouse, jewelry center, 5. Manufacturing: manufacturers make the most money of small-business owners Small-Business Success and Failure  Should not count as failures but do: o Small-business owners go out of business to start new/different business o Business changes ownership from partnership to corporation o Retirements of sole owners  96% of small businesses last one year  85% last three years  70% last five years  Cause of failures: managerial incompetence/inadequate financial planning  Easiest businesses to start: ones with least growth and greatest failure rates  Easiest business to keep alive: ones difficult to get started Learning About Small-Business Operations Start Your Own Company  Get Some Experience: o Work for successful entrepreneur o Want to have three years experience in comparable business o Can run small-business part-time and still keep other job Buy an Existing Business  Ask to be apprentice for successful small-business owner  Learn about business and then ask to be assistant manager  Can let the manager take time off on weekends/holidays  Eventually offer owner to retire or work part-time and you take over business  Share in profits of successful business without risking money Franchising  Not creating product/services from scratch  Benefiting from experience of franchisor Inherit or Take Over a Family Business  Owned by smaller groups  Not just about generating profit  About personal identity, family legacy, community responsibility  Will work to keep business alive for future generations of family Managing a Small Business Begin with Planning  Number-one cause of small-business failure is poor management  Business plan is a detailed written statement that describes: o Nature of the business o Target market o Advantages business will have in relation to competition o Resources and qualifications of owners  Needed to talk to bankers/investors  Writing a Business Plan: o Must be able to convince prospective investors o Must be placed in the right hands o Should be 25-50 pages long and take at least 6 months to write Getting Money to Fund a Small Business  Venture capitalists (VCs): invest in new businesses in exchange for partial ownership of businesses  Do not want VCs to own to much of business or will not make a profit yourself  Angel investor: private individuals who invest own money in new companies before they go public  Business Development Bank of Canada Web site: o List of government assistance programs o Tax incentives for small businesses o List of VCs Knowing Your Customers  Market: people with unsatisfied wants/needs who have resources and willingness to buy  Must identify market and its needs then fulfill needs  Must be able to keep customers Managing Employees  Disadvantage: will make less money, fewer benefits and less room to advance  Advantage: find jobs more challenging, ideas more accepted, boss more respectful  Should not just promote or hire someone because they are family  Must have well-trained employees Keeping Records  Must follow progress of business on daily basis  Computer system can help with inventory control, customer records, payroll  Important to have a good accountant Looking for Help  Important to have a lawyer to help with leases, contracts, protection  Should have presence on the internet  Commercial account officer can help design business plan, give financial advice and lend money  Insurance agent can explain risks and how to cover with insurance Going International: Small-Business Prospects  Why small businesses do not go international: 1. Do not have enough money 2. Do not know how to start exporting 3. Do not understand cultural differences in markets 4. Paperwork can be too much  Advantages small businesses have over big businesses in international trade: o Buyers would rather deal with individuals than large corporations o Can ship faster o Have variety of suppliers o Provide more personal service and undivided attention CHAPTER EIGHT – MARKETING: BUILDING CUSTOMER AND STAKEHOLDER RELATIONSHIPS What Is Marketing?  Marketing: process of determining customer needs/wants then developing goods/services that meet/exceed expectations  Green marketing: efforts to produce/promote environmentally-sensitive products The Evolution of Marketing (1)The Production Era: o 1900s o Focused on distribution and storage o Demand was higher than supply o Did not need to convince people to buy (2)The Sales Era: o 1920s o Mass production techniques developed o Production exceeded demand o Emphasis on selling/advertising (3)The Marketing Concept Era: o High demand after war when soldiers returned (baby boom) o 1950s: marketing concept 1. A customer orientation: find out what customer wants and provide it 2. A service orientation: everyone in the firm should have same objective (customer satisfaction) 3. A profit orientation: focus on goods/services that will ear most profit (4)The Customer Relationship Era: o 1990s o Customer relationship management (CRM): process of learning as much as possible about customers and do everything to satisfy them with goods/services o Want long-term customer loyalty Non-Profit Organizations Prosper from Marketing  Marketing is crucial for profit and non-profit organizations  Canadian Blood Services uses TV ads  Non-profit sector is one of most competitive in Canadian marketplace  Ex. churches, schools, politicians The Marketing Mix  Marketing mix: ingredients that go into a marketing program  Four P’s: 1. Product 2. Price 3. Place 4. Promotion Applying the Marketing Process  Notice an opportunity  Do some research to see if idea is good  Identify groups of people who would be interested in product Designing a Product to Meet Needs  Product: any physical good/services/idea that satisfies a want or need  Concept testing: develop accurate description of product and ask people whether the concept appeals to them  Test marketing: process of testing products among potential users  May want to offer well-known brand names to attract people right away  Brand name: word/device used to distinguish a seller’s goods/services from those of competitors Setting an Appropriate Price  Might want to charge close to what competitors charge  Might ant to charge less to attract business (especially at beginning)  Charge more if offer higher-quality product  Take into consideration costs when pricing Getting the Product to the Right Place  Sell products through other stores  Sell in own store  Deliver to consumers  Must get product to consumer when and where they want it Developing an Effective Promotional Strategy  Promotion: techniques sellers use to motivate customers to buy their products  Ex. advertising, personal selling, public relations, coupons, samples  Must build relationship with customers  Must continually adapt to changes in consumer wants/needs  Listen to customers Providing Marketers with Information  Marketing research: analysis of markets to determine opportunities/challenges and find info to make right decisions  Want to know what customers want now and what are likely to want in future The Marketing Research Process (1)Defining the Question and Determining the Present Situation o Problems, opportunities, alternatives o How to collect and analyze data (2)Collecting Data o Use secondary research first because least expensive o Secondary data: info already collected by others and published in journals/books/online o Primary data: data gathered yourself o Observe customers while shopping to see behavior o Use a survey (made more accurate if it is in-per
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