MGT100: - L2

Reading §

Chapter 5 §

• Small business
  • Describe the characteristics of a small business (by Industry Canada).
    • Independently owned, employees < 100, revenues < $2 million
  • In what industries do small business play a significant role?
    • Provide jobs in construction, agriculture, wholesale trade, services, retail trade
• Discuss the contributions of small business to the economy
  • What are the 3 key ways small business contribute?
    • Provide new jobs, create new industries, innovate new ideas
  • How are new industries formed
    • When small business shift focus to meet consumer interest’s and preferences
    • When both business and consumers see a need for change
• Discuss why small business fail ^428ef2
  • What are some percentages for small business survival rate
    • $96\%$ in business for 1 year ($4\%$ close after 1 year)
    • $85\%$ in business for 2 year ($15\%$ close after 2 year)
    • $70\%$ in business for 5 year ($30\%$ fail within 5 years)
  • What are the 3 main cause of small-business failure
    1. Management inexperience
    2. Inadequate financing
    3. Difficulty meeting government regulations
• Describe the features of an effective business plan
  • What are the 5 main sections of a business plan?
    1. Executive summary
    2. Introduction
    3. Financial section
    4. Marketing section
    5. Resumes for the principals
  • Importance for business plan. ^a9f6d6
    • Writes out all the reasons a business can be successful (vision of founders & why the company is unique)
    • Document needed to obtain financing
    • Creates a framework for the organization
• Identify the assistance available for small business
  • What are the various ways the BDC (Business Development Bank of Canada) helps small business.
    • Provides long-term financial assistance and management counselling
    • Provides information, advice, training to owners
  • What are business incubators?
    • Programs community agencies set up to help small business (low-cost rental space, shared clerical staff, shared office equipment)
  • Why are small business good opportunism for women?
    • Helps with family and work balance
• Explain franchising
  • Differentiate franchisor with franchisee
    • Franchisor: permits a small-business owner (franchisee) to market and sell the franchisor’s product under its brand name in return for a fee
  • How does franchising benefit both parties
    • Franchisor: opportunities for expansion & greater profits
    • Franchise: name recognition, quick startup, support for the franchisor, freedom of small-business ownership
• Outline the forms of private business ownership
  • What are the 3 legal forms of business ownership
    1. Sole proprietorship
       • Owned and operated by one person
       • Pros: easy to set up and offer great operating flexibility
       • Cons: personally liable for all firm’s debts and legal responsibilities
    2. Partnership
       • Two or more individuals share responsibility for owning and running
       • Pros: easy to set up
       • Cons: do not protect either partner from liability
    3. Corporations ^8d7dbe
       • Separate legal entity from its owners; investors receive shares from stock in the firm
       • Pros: owners have no legal and financial liability beyond individual investments
       • Cons: hard to set up
  • What is the main characteristic of a not-for-profit corporation?
    • Goal does not include pursuing a profit
    • separate legal provisions
    • Exempt from paying income taxes
• Describe public and collective business ownership
  • Public ownership: a unit or agency owns and operates an organization
  • Collective ownership: owners work together to operate all or part of the activities in their firm
    • Allows small firms to pool resources, share equipment, experitise, and help each other
• Discuss the organizational structure of corporations
  • What are the 2 key elements of the incorporation process (成立过程)?
    1. Where to incorporate
    2. The corporate charter (公司章程)
  • Identify the 5 main levels of corporate ownership and management
    1. Shareholders
    2. Board of directors
    3. Top management (CEO, CFO…)
    4. Middle management
    5. supervisory management
• Describe mergers (并购), acquisitions (收购), and joint ventures (合资企业).
  • Merger: $>2$ firms combine to form one company Vertical merger: combines firms operating at different levels in production and marketing process
    • Horizontal merger: joins firms int he same industry
    • Conglomerate merger: combines unrelated firms
  • Acquisitions: firms purchase another
    • The buyer acquires the firm’s property & assets AND debt
  • Joint venture: partnership between companies for a specific activity

Chapter 6 §

• Describe what is an entrepreneur and its different types.
  • Differentiate entrepreneur with small-business. ^0195fb
    • Goal of entrepreneurs: create wealth and add jobs
    • Characteristic of entrepreneur: visionaries (see opportunities, take initiative to gather resources to start quickly)
  • What tools do entrepreneurs use to create a new business.
    • Combine ideas, money, employees, and other resources to meets a need
  • Differentiate entrepreneur with managers.
    • Manager: direct others to reach an goal
    • Entrepreneur: have drives and impatience that make companies successful (may hurt their ability to manage)
  • What do classic entrepreneur and social entrepreneur have in common.
    • See opportunities, set aside resources to develop new solutions
  • Differentiate social entrepreneur with philanthropist.
    • Philanthropist: support human welfare with donations
    • Social entrepreneur: support human welfare by providing new solutions
• Explain why people choose to became entrepreneurs ^74557a
  • What are the 4 main reasons people choose to become entrepreneurs?
    1. Be their own boos
    2. Greater financial success
    3. More control over job security
    4. Enhance quality of life
  • What factors affect the entrepreneur’s job security?
    • Depends on decisions of customers and investors
    • Depends on cooperation nd commitment of their employees
• Discuss factors support and expand opportunities for entrepreneurs.
  • Factors
    • Favourable public perception
    • Availability of financing
    • Falling cost
    • Widespread availability of technology
    • Globalization
    • Entrepreneurship education
    • Changing demographic and economic trends
  • Describe difference with entrepreneurs in different countries, new opportunities with globalization
    • $>9\%$ starting or managing new business
    • Globalization allows marketing aboard, hire international talent
    • Many Canadian companies have international sales (especially with US)
  • Identity educational factors that can help expand opportunities.
    • Entrepreneurship majors
    • Entrepreneurship emphasis (创业重点)
    • Courses to start business
    • Teaching in entrepreneurship by organizations
• Identity the traits of successful entrepreneurs ^3e009c
  • Define entrepreneurs vision
    • Overall idea for how to make their business idea a success
  • Importance for high energy level and strong need for achievement
    • Energy level: entrepreneurs need to work long hours (small staff number)
    • Need for achievement: helps them enjoy challenge for reaching difficult goals
• Summarize the process of starting a new venture (风险投资)
  • Process
    • Choose idea --> business plan --> obtain financing --> organize resources
  • What are the 2 most important considerations for choosing an idea?
    • Something one love/good at
    • Meets the need in marketplace
  • Differentiate debit financing & equity financing ^b6f84a
    • Debt financing: money borrowed that must be repaid
    • Equity financing: exchange of ownership shares for money
• Explain intrapreneurship (内部创业)
  • Why do large companies support intrapreneurship?
    • Keep entrepreneurs spirit alive to promote innovation and change
  • What is a skunkworks
    • A skunkworks project initiated by an employee who has an idea and then recruits resources from within the compnay to turn the idea into a commercial product

Lecture §

• PDF:
  • 100 - S2.pdf
• “Business and society”
• Wealth creation
  • What is wealth and what is a wealth creation
    • Wealth: the annual produce of the land and labour of society (Adam Smith)
    • Wealth creation
  • What is the Diamond of Sustainable Growth, and its four factors?
  • What is required to create wealth
    • Interdependence of business
    • The diamond
  • How is wealth created
    • Product/service with sell > cost
    • Trade to get pay for what you have and sell you what you want

    • Case study: house sells §

        ```ad-case
        - Buy a house, renovate it , sell it with a higher price
            - Print, stage, add asset, clean up the house
        ```
      

• Forms of business ownership
  • What are the 4 forms of private business ownership
    • Proprietorship
      • People and business combined together (personal level)
    • LLP (limited liability partnership)
      • Similar to cooperation
    1. Sole proprietorship
    2. Partner proprietorship
       • Prons: bring different things onto the table, risk is reduced, ★ partnership agreement (written)
    3. Cooperation
    4. Not-for-profit cooperation?
  • Pros and Cons for operation as a corporation
    • Pros
      • Limited liability
      • Business are separate from personal losses
      • Taxes are separate from personal filings
      • Easier to change ownership
      • Perpetual life (business don’t die with owner)
      • Easier to attract employee
    • Cons
      • Double taxation (corporate tax, personal tax)
      • Compliance to meet regulatory rules
      • Higher startup cost, more paper work
      • Less flexible
  • What is the basic structure for corporate management
    • Shareholders
      • What is the difference between preferred share and common share
        • Preferred stock gives no voting rights to shareholders while common stock does
        • Can be co-owned
      • Preferred shares
        • “More secure”, limited to dividend
        • ★ What are some characteristics of preferred shareholders (exceptions, not by default)
          1. Convertible (common share can be change to preferred share with a certain ratio)
          2. Redeemable (refundable)
          3. Participating (share the leftovers of dividend)
             • Make it more attractive
          4. Cumulative (dividend are cumulative, no interest)
             • Dividend does has to be pay every year
             • Dividend: leftover cash/income in company
          5. Callable (company choose to refund)
      • Common shares
        • “Real owners” earned the most, lose the most, not limited devident
    • Board of directors
      • Elected by the common shareholder
    • Corporate offices & managers
      • Selected by board of directors
  • What are some characteristic of franchising
    • Franchising agreements exist between franchisee and franchisor
    • Canada has 76,000 individual franchise businesses operating under 900 different brand names
    • These franchises employ more than one million Canadians
    • More than $100 billion in sales each year
    • Franchising overseas is a growing
    • Franchisees does not compete with each other
  • ★ Pros and Cons for franchising
    • Pros:
      • Existing supply chain
      • Existing business plan
      • Lower risk
      • Existing name recognition
      • Easier to hire
      • Can be easily adjusted for local market
      • Prior performance record
      • Tested management program
      • Savings through volume purchases
    • Cons:
      • Franchisee loss some control due to demand of franchisor (regulation limitation)
      • Connected regulation (negative branding)
      • High investment
      • Pay Future payments (royalties)
      • Has to be set up as a franchise
• Starting a business
  • Why to make BP
    • Help contemporary entrepreneurs prepare enough resources and stay focused on key objectives
  • What are 3 financing strategy for starting business
    • Seed capital: initial funding needed to launch a new vendor
    • ★ Debit & Equity financing
      • Debt: borrow money, has to be repaid (legal obligation)
        • Credit cards
        • Family and friends
        • Bank loans
        • Finance companies
        • Interest (tax deductible)
        • Higher risk involved (bankrupt)
      • Equity: sell ownership, don’t has to be repaid
        • Venture capitalists
        • Angel investors
        • Dividend (not tax deductible)
  • Why small business fail (3+1 major reasons).
    • Lack of business plan
    • Example for business regulation
      • Food licence
• Entrepreneurship
  • Characteristics of entrepreneurs
    • Having a vision
    • High energy level
    • Need achieve
    • Optimism
    • Tolerance for failure
    • Creativity
    • Tolerance for ambiguity
    • Internal locus of control
  • 4 reasons people choose to become entrepreneurs
  • What are some challenges for entrepreneurs
    • Highest risk/ highest return activity in business
    • Great difficulties in raising investment funds for a brazen, new idea
    • Reality is nearly always very different from what was planned
    • High failure rate - even after initial funding secured
  • Small business vs. entrepreneurial businesses
    1. Size
       • Small b. remains small; entrepreneurial b. start small, expect to grow big
    2. Age
       • Small b. remains stable, entrepreneurial b. grow up
    3. Growth goals
       • Small b. not expected to grow
       • Growth is priority for entrepreneurial b.
• David Birch Model
  • 
  • Mice
    • Pros: can typically change direction quickly
    • Cons: not powerful
    • Many do not aspire to grow large, so long as they remain attractively profitable
  • Gazelles
    • Pros: can change directions quickly
    • Cons: more powerful
    • A firm that seeks rapid growth AND above average profitability ($>20\%$ a year for 4 years, doubling in size)
    • Often includes a radical business innovation/ implementation of new technology
  • Elephants
    • Pros: very powerful, dominate in market
    • Cons: cannot change directions quickly
    • “Fortune 500”
    • Considerable overall marketplace power
    • Difficult for them to change direction quickly
    • Collectively, they have fired more people than they have hired in the past 25 year

• Creating wealth during a pandemic (case study) §

  ```ad-case
  Q: Is it a good to invest in Cheesecake Factory in COVID-19 **today**?
  - Given statistic
      - Revenue from 2020 droped
      - Revenue from 2021 raised back backup
      - Profit when to negative in 2020
      - Profit recovered back to positive in 2021 (not stable even before covid)
      - Stock prices droped in 2020, raised until 2023, droped throughout 2022
  - Analysis
      - Debate
          - Revange travel (already done in 2022, still remaining in 2023)?
          - Partner with delivery (?)
      - Reasons for a good time: 
          - Expanded operations in 2021
          - Already spent money, ready to collect profit
          - Pandanmic killed competition, if demand come back, this would benefit their sells with fewer competition
      - Reasons for not a good time:
          - Possibility of entering another recession
          - Lossed money during 2021, are they able to recover?
          - Malls are closed (down), negative effect for the factory
          - Competitors have already fired backrupt
          - Fined by ... for not misleading investors
          - Not able to pay rent for a period of time
          - New trend for moving to healier diet
    ```
  

Active Studying §

Summarize today’s lecture §

• [::Most important/focused topic] Cooperation, Entrepreneur
• [::Most difficult part, why, how to resolve] Class participation
  • Come with question prepared, raise hand quickly, follow with lecture quickly, raise hand with confidence

What part I didn’t understand, next step actions? §

• Franchisee vs franchisor