MGTA01H3 Chapter Notes - Chapter 3: Franchising, Small Business, Business Plan

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Published on 21 Apr 2013
School
UTSC
Department
Management (MGT)
Course
MGTA01H3
MGTA03 READING NOTES CHAPTER 3
Small business: an owner managed business with less than 100 employees
New venture/firm: a recently formed commercial organization that provides goods and/or services for sale
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
o Small businesses are usually independently owned and influenced by unpredictable market forces. As a result, the
provide an environment to use personal attributes
o People who show entrepreneurial characteristics and make something new within an existing large firm are called
intraprenuers”
the key difference is that intrapreneurs typically don’t have to concern themselves with getingg the
resources needed to bring hte new product to market since their employer provides the resources
starting a business involves dealing with a great deal of uncertainty, ambiguity, and unpredictability
private sector: the part of the economy that is made up of companies and organizations that are not owned or controlled by
the govt
IDENTIFYING OPPORTUNITIES
o Idea Generation
Abandoning traditional assumptions about how things work and how they ought to be, and seeing what
others do not.
The next most frequent sources of venture ideas are a personal interest/hobby (16%) and a chance
happening (11%)
o Screening
The idea creates or adds value for the customer
A product of service that does this is one that solves a significant problem or meets a significant
need in new or different ways
The idea provides a competitive advantage that can be sustained
Exists when potential customers see the product or service as better than that of competitors
It involves maintaining it in the face of competitors’’ actions or changes in the industry
The idea is marketable and financially viable
Estimating the market demand requires an initial understanding of who the customers are, what
ther needs are, and how the product or service will satisfy their needs better than competitiors
Sales forecast: an estimate of how much of a product or service will be purchased by the
propective customers for a specific period of time
o In order to determine financial viability involves preparing financial forecasts (consists of
start up costs, cash budgets, an income statement, and balance sheet
o Developing the opportunity
New ventures use on or more of the three main entry strats: They introduce a totally new product or
service, they introduce a product or service that will compete directly with existing competitive offerings
but add a new twist, or they franchise
Franchise: an arrangement in which a buyer (franchisee) purchases the right to sell the product or
service of the seller (franchiser)
Business plan: a document that describes the entrepreneur’s propsed business venture; explains why it is an
opportunity; and outlines its marketing plan, its operational and financial details, and its managers’ skills
and abilities
ACCESING RESOURCES
o Financial Resources
Debt financing refers to money that is borrowed
The borrower is obliged to repay the full amount of the loan in addition to interest charges on the
debt
Equity financing refers to money that the entrepreneur (or others) invests in a business in reture for
an ownership interest
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Document Summary

Small business: an owner managed business with less than 100 employees. New venture/firm: a recently formed commercial organization that provides goods and/or services for sale. 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 independently owned and influenced by unpredictable market forces. As a result, the provide an environment to use personal attributes: people who show entrepreneurial characteristics and make something new within an existing large firm are called. Private sector: the part of the economy that is made up of companies and organizations that are not owned or controlled by the govt. Abandoning traditional assumptions about how things work and how they ought to be, and seeing what others do not. The next most frequent sources of venture ideas are a personal interest/hobby (16%) and a chance happening (11%: screening.

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