Business Test Notes 19/11/23, 1:28 AM

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,

about:srcdoc Page 1 of 7
Business Test Notes 19/11/23, 1:28 AM

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

about:srcdoc Page 2 of 7
Business Test Notes 19/11/23, 1:28 AM

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.

about:srcdoc Page 3 of 7
Business Test Notes 19/11/23, 1:28 AM

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

about:srcdoc Page 4 of 7
Business Test Notes 19/11/23, 1:28 AM

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.

about:srcdoc Page 5 of 7
Business Test Notes 19/11/23, 1:28 AM

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.

about:srcdoc Page 6 of 7
Business Test Notes 19/11/23, 1:28 AM

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.

about:srcdoc Page 7 of 7