Business Test Notes
\ Chapter 4: The Nature of Entrepreneurship and Small Business
Entrepreneurship:
Entrepreneurship is the process of creating a new business venture or expanding an existing business by taking risks and innovating to provide unique products or services. An entrepreneur is someone who takes on this risk and puts their wealth, time, and effort into developing innovative products or ways of doing something.
\ Entrepreneur Characteristics:
Entrepreneurs tend to have a few key characteristics that set them apart from others, including a strong desire to act independently, a high need for achievement, a willingness to take risks, and an energetic nature.
\ Small Business:
A small business is an independently owned and operated business that is not dominant in its competitive area and does not employ more than 500 people. According to the Canadian Federation of Independent Businesses (CFIB), small businesses account for 99.8 percent of all employer firms and employ 10.7 million people, or 89.6 percent of all private-sector employees. Small businesses also create approximately 83.5 percent of the jobs in Canada and spend approximately $4 billion on R&D annually.
\ Industries that Attract Small Business:
Small businesses can be found in a variety of industries, including retailing, wholesaling, services, manufacturing, and technology. Retailing and wholesaling businesses can assist customers with almost every business function, and if eliminated, their functions must be passed on to another intermediary. Services, which include businesses that do not actually produce tangible goods, account for 75% of the workforce and have lower start-up costs. Manufacturing can provide unique opportunities for small businesses, as they can customize products to meet specific consumer needs. Finally, technology businesses depend heavily on advanced scientific and engineering knowledge, and the Internet has leveled the playing field by reducing start-up costs.
\ Advantages of Small Business Ownership:
Small business ownership can provide many advantages, including independence, enjoyment, financial rewards, low start-up costs, management, focus, and reputation. However, it's important to keep in mind that there are also disadvantages, such as high stress levels, limited financial rewards, time demands, and a high failure rate due to external shocks, undercapitalization, managerial inexperience or incompetence, and inability to cope with growth.
\ Top Ten Challenges for Small Businesses:
The top ten challenges for small businesses include underfunding, not understanding their competitive niche, lack of effective utilization of websites and social media, lack of a marketing and business plan, poor site selection for retail stores, pricing mistakes, underestimating the time commitment for success, not finding complementary partners to bring in additional experience, not hiring the right employees and/or not training them properly, and not understanding legal and ethical responsibilities.
\ Forms of Business Ownership:
There are several forms of business ownership, including sole proprietorship, partnership, and corporation. A sole proprietorship is owned and operated by one individual and is the easiest and least expensive way to conduct business. A partnership involves two or more people carrying on as co-owners of a business for profit, and it minimizes the disadvantages of sole proprietorship. A corporation is a legal entity whose assets and liabilities are separate from those of its owners, and it has many of the rights, duties, and powers of a person.
\ Financial Resources:
To start a small business, entrepreneurs typically need financial resources. These can come from the owner putting up a significant percentage of the capital needed, equity financing, using personal assets rather than borrowing funds, and venture capitalists. Debt financing can also be an option and includes government, mortgage, line of credit, trade credit, and bartering.
\ Chapter 5: The Importance of Management
Management
Management is a process that organizations use to achieve their objectives by using resources effectively and efficiently in a changing environment. Effective management refers to achieving the intended results, while efficient management means accomplishing objectives with minimal resources.
\ Managers
Managers are individuals in organizations who make decisions about the use of resources. They use planning, organizing, staffing, directing, and controlling to reach organizational objectives.
\ Staffing
Staffing involves hiring people to carry out the work of the organization. Downsizing, on the other hand, involves reducing the size of an organization's workforce.
\ Acquiring Suppliers
Acquiring suppliers is a management function that ensures products are made available to customers. It maximizes efficiencies and provides creative solutions.
\ Financial Resources
Financial resources are essential to pay for activities that are necessary for the organization's operations.
\ Management Functions
The functions of managers include planning, organizing, directing, and controlling.
\ Planning
Planning is the process of determining the organization's objectives and deciding how to accomplish them. The process includes identifying the mission, goals, and objectives of the organization, as well as creating strategic, tactical, operational, and crisis management plans.
\ Organizing
Organizing involves structuring resources and activities to accomplish objectives in an efficient and effective manner. It helps create synergy, establishes lines of authority, improves communication, and helps avoid duplication of resources. Organizing can improve competitiveness by speeding up decision-making.
\ Directing
Directing involves motivating and leading employees to achieve organizational objectives. It includes telling employees what to do and when to do it by using deadlines, determining and administering rewards and recognition, motivating employees by providing incentives, and asking workers to contribute ideas.
\ Controlling
Controlling is the process of evaluating and correcting activities to keep the organization on course. It involves measuring performance, comparing present performance with standards or objectives, identifying deviations from standards, investigating causes of deviations, and taking corrective action when necessary.
\ Levels of Management
There are three levels of management: top management, middle management, and first-line management. Top management includes the president and other top executives of a business who have overall responsibility for the organization. They spend most of their time planning and making strategic decisions. Middle management is responsible for tactical planning that implements the general guidelines established by top management, while first-line management is responsible for implementing the plans established by middle management.
\ Areas of Management
There are six areas of management: financial management, production and operations management, human resources management, marketing management, information technology management, and administrative management.
\ Skills Needed by Managers
Managers need technical expertise, conceptual skills, analytical skills, human relations skills, and leadership skills.
\ Leadership
Leadership is the ability to influence employees to work toward organizational goals. There are four leadership styles: autocratic, democratic, free-rein, and authentic.
\ Employee Empowerment
Employee empowerment occurs when employees are provided with the ability to take on responsibilities and make decisions about their jobs. It includes participative decision-making and leadership in teams.
\ Decision Making
Decision making involves recognizing and defining the decision situation, selecting the best option, implementing the decision, and monitoring the consequences. The best option always relates to analyzing risks and trade-offs.
\ Management in Practice
Management is not an exact process, and managers spend time on working with others, establishing and updating an agenda of goals and implementation plans, networking, and confronting complex and difficult challenges of the business world.
\ Chapter 6:
Marketing:
Marketing is a set of activities designed to expedite transactions by creating, distributing, pricing, and promoting goods, services, and ideas. The primary goal of marketing is to create value. Products must be conveniently available, competitively priced, and uniquely promoted.
\ Exchange Relationship:
The exchange relationship requires each participant to give up "something of value" to receive the "something" held by the other. The tangible product itself may not be as important as the image of the benefits associated with the product, such as the capability gained from using a product, the image evoked by it, or the brand name.
\ Functions of Marketing:
The functions of marketing include buying, selling, transporting, storing, grading, financing, marketing research, and risk-taking.
\ The Marketing Concept:
The marketing concept is the idea that an organization should try to satisfy customers’ needs through coordinated activities that also allow it to achieve its own goals. To implement the marketing concept, a business must have good information about what consumers want, adopt a customer orientation, and coordinate its efforts throughout the entire organization. Businesses must view the customer’s perception of value as the ultimate measure of work performance.
\ Evolution of the Marketing Concept:
The marketing concept has evolved over time, from the production orientation, to the sales orientation, and finally to the market orientation. The market orientation began in the 1950s and requires organizations to gather information about customers' needs, share the information throughout the firm, and use the information to build long-term relationships with customers.
\ Marketing Strategy:
Marketing strategy is a plan of action for developing, pricing, distributing, and promoting products that meet the needs of specific customers.
\ Selecting a Target Market:
Selecting a target market involves dividing the total market into groups that have relatively similar product needs. A market segment is a collection of individuals, groups, or organizations who share one or more characteristics and thus have relatively similar product needs and desires.
\ Market Segmentation Approaches:
Market segmentation approaches include the concentration approach, the multisegment approach, and niche marketing.
\ Bases for Segmenting Markets:
The bases for segmenting markets include demographic, geographic, psychographic, and behavioristic.
\ Developing a Marketing Mix:
The marketing mix refers to four marketing activities, including product, price, distribution, and promotion. The firm tries to control these activities to achieve specific goals.
\ Product:
A product is a complex mix of tangible and intangible attributes that provide satisfaction and benefits. A product can be a physical entity, such as a car or clothing, or a service, such as air travel or dry cleaning.
\ Price:
Price is the value placed on an object exchanged between a buyer and a seller. It is a key element of the marketing mix because it relates directly to the generation of revenue and profits.
\ Distribution:
Distribution involves making products available to customers in the locations and quantities desired. The Internet and online sales have greatly impacted distribution.
\ Promotion:
Promotion is a persuasive form of communication that attempts to expedite a marketing exchange by influencing individuals, groups, and organizations to accept goods, services, and ideas.
\ Marketing Research and Information Systems:
Marketing research is a systematic, objective process of getting information about potential customers to guide marketing decisions. Marketing research can be conducted inside or outside the organization and can involve primary or secondary data.