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Chapter 3

Chapter 3


Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird
Chapter
3

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Chapter 3 Understanding Entrepreneurship, Small Business, and
New Venture Creation
THE LINKS AMONG SMALL BUSINESS, NEW VENTURE CREATION, AND
ENTREPRENEURSHIP
-Almost 380 businesses start everyday in Canada
-New firms create the most jobs, are noted for their entrepreneurship, and are typically
small.
-Small business, new venture, and entrepreneurship are closely linked terms but each
idea is distinct.
Small Business
-A bit tricky to define
- Measures used to define are the number of people the business employs, the
company’s sales revenue, the size of the investment required, or the type of ownership
structure the business has.
-Industry Canada is the main federal government agency responsible for small business.
-When reporting the business statistics, the government relies on Statistic Canadas two
sources of info: the Business Register and the Labour Force Survey.
-To be included in the register, a business must have at least one paid employee, annual
sales revenues of $30,000 or more or be incorporated.
-The Labour Force Survey uses information from individuals to make estimates of
employment and unemployment levels.
-There are 2.2 million business establishments” in Canada and about 2.5 million people
are self-employed.
- Majority of businesses in Canada have no employees, nor are they incorporated.
-Small business is defined as an owner-managed business with less than 100
employees. (WRONG DEFINITION - Bovaird)
The New Venture Firm
-Venture criteria: when it was formed, whether it was incorporated, and if it sold goods
and/or services.
-A business is considered to be new if it has become operational within the previous 12
months, if it adopts any of the main organizational forms, and if it sells goods or services.
-A new venture is a recently formed commercial organization that provides goods and/or
services for sale.
Entrepreneurship
-Entrepreneurship is the process of identifying an opportunity in the marketplace and
accessing the resources needed to capitalize on the opportunity.
-Entrepreneurs are people who recognize and seize opportunities.
-Small business owners and many successful managers in large organizations in both
the public and private sectors exhibit entrepreneurial characteristics.
-People who exhibit entrepreneurial characteristics and create something new within an
existing large firm or organization are called intrapreneurs.
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-Difference between intrapreneurs and entrepreneurs: intrapreneurs typically dont have
to concern themselves with getting the resources needed to bring the new product to
market since their employer provides the resources.
THE ROLE OF SMALL AND NEW BUSINESSES IN THE CANADIAN ECONOMY
-Small and new businesses play a key role in the Canadian economy.
Small Businesses:
- Majority of small businesses have fewer than five employees.
-Private sector refers to the part of the economy that is made up of companies and
organizations that are not owned or controlled by the government.
-Small businesses contribute to economy via GDP.
New Ventures
-New firms: source of job creation and vast majority of new products and services.
-An unincorporated business operated by a self-employed person would not be included
in Statistics Canadas Business Register.
THE ENTREPRENEURAL PROCESS
-To get the destination, the entrepreneurs must identify a business opportunity and
access the resources needed to capitalize on it.
-Three key process elements: the entrepreneur, the opportunity, and resources.
The Entrepreneur
-The two main things entrepreneurs need to do are to identify an opportunity and access
resources.
Identifying Opportunities
Ideal Generation
-As an employee, the prospective entrepreneur is familiar with the product or service, and
the customers, suppliers, and competitors.
-A chance happening refers to a situation where a venture idea comes about
unexpectedly.
Screening
-Entrepreneurs often generate many ideas, and screening them is a key part of the
entrepreneurial process.
oThe Idea Creates or Adds Value for the Customer
A product or service that creates or adds value for the customer is one
that solves a significant problem, or meets a significant need in new or
different ways.
oThe Idea Provides a Competitive Advantage that Can Be Sustained
A competitive advantage exists when potential customers see the product
or service as better than that of competitors.
oThe Idea Is Marketable and Financially Viable
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