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MGTA02H3 (363)
Chapter 3

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Department
Management (MGT)
Course
MGTA02H3
Professor
Chris Bovaird
Semester
Fall

Description
Chapter 3 – Understanding Entrepreneurship, Small Business, and New Venture Creation - ~380 business are started in Canada - Small business, new venture, and entrepreneurship Small Business - Reporting Canadian small business statistic government relies on two source of information:  Business Register (tracks businesses)  Labour Force Survey (tracks individuals)  Make estimates of employment and unemployment levels - Include in register business must have  One paid employee  Annual sales revenue ≥ $30K  Incorporated - Good-producing business = less than 100 employees - Service-producing business = few than 50 employees - Unincorporated business operated by self-employed person (no employee) would not be counted among the 2.2 million business in register - Small business: an owner-managed business with less than 100 employee The New Venture/Firm - Criteria to determine when new firm comes into existence  When it was formed  Is it incorporated?  If it sold goods and /or services - Business is new if  Operational within previous 12 months  Adopts to any main organizational forms (proprietorship, partnership, corporation, or co-operative  If it sells goods or services - new venture/firm: a recently formed commercial organization that provides goods and/or services for sale Entrepreneurship - entrepreneurship: process of identifying an opportunity in the marketplace and accessing the resources needed to capitalize on it - entrepreneurs: people who recognize and seize opportunities - intrapreneurs = people who exhibit entrepreneurial characteristics and create something new within an existing large - difference btwn intrapreneurs and entrepreneurs  intrapreneurs don’t have to concern themselves with getting the resources needed to bring new product to market since their employer provides the resources - starting new business deals with uncertainty, ambiguity, and unpredictability The Role of Small and New Businesses in the Canadian Economy Small Business - close to 98% of business in Canada are small - private sector: the part of the economy that is made up of companies and organizations that are not owned or controlled by the government  part of economy made up companies and organizations that are not owned or controlled by government New Ventures - new firms creates jobs - unincorporated business operated by a self-employed person (with no employees) would not be included as registered business The Entrepreneurial Process - entrepreneur must identify business opportunities and access resource needed to start a new business - some factors are: social, economic, political, and technological - three key process elements  entrepreneur  opportunity  resources  how they interact - mis-match = business might not start - fit = new business venture will likely become operational  next phase will result in: growth, stability (staying the same), decline, or demise (ceasing the exist) The Entrepreneur - picks entrepreneur carefully based on personal characteristic of entrepreneurs - characteristics  some are behavioral  personality traits  skills - not who the person is but what the person does - 2 main things entrepreneurs need to identify are: opportunity and access resources Identifying Opportunities - Generating ideas for new products, process, or services Idea Generations - Work experience is the most common source of ideas - 16% of the ideas are from personal interest/hobby - 11% chance happening  Idea comes about unexpectedly Screening - Faster you weed out “dead-end” venture ideas, more time and effort can be devoted to the remain - Idea creates or adds value for the customer  Product or service that creates/adds value for customers is one that solves a significant problem (in a new or different way) - The idea provides a competitive advantage that can be sustained  Sustaining competitive advantages involves maintaining it in the face of competitors’ actions or changes in the industry  Longer markets are in a state of flux, greater the likelihood of being able to sustain a competitive advantage - The idea is marketable and financially viable  Will sales lead to profit  Estimate market demands requires initial understanding of who the customers are, what their needs are, how the product or service will satisfy their needs better than competitors products will  Understanding of key competitors who can provide similar products, services/benefits to target customers  Sales forecast: an estimate of how much of a product or service will be purchased by prospective customers over a specific period  Total sales revenue = units expected to be sold X selling price  Forms foundation for determining financial viability of the venture and the resources need to start it  Determining financial viability means preparing financial forecast  Consist of an estimate of:  start-up cost
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