TYPES- private and public
Shares of Stock and Shareholders’ Rights:
- Raise money by selling stocks to investors, then known as shareholders, profits from business are contributed to shareholders in dividends
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Preferred Stock –shares whose owners have first claim on the corporations assets and profits but have no voting right
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Common Stock- shares whose owners usually have last claim on corporation’s assets (after creditors and owners of preferred stock) but have voting rights.
Proxy- a legal document temporarily transferring the voting rights of a shareholder to another person
Board of Directors: A group of individuals elected by a firm’s stockholders and charged with overseeing, and taking legal responsibility for the firm’s actions.
Inside Directors- members of a corporation’s board of directors who are also full-time employees of the corporation
Outside Directors- members of a corporation’s board of directors who are not also employees of the corporation on a day-to-day basis
Public VS. Private Corporations: Public- a business whose stock is widely held and available for sale to the general public
Private- a business whose stock is held by a small group of individuals and is not usually available for sale to the general public (Eaton’s, Bata Shoes)
Advantages:
- Limited liability
- Continuity
- Greater likelihood of professional management
- Easier access to money
Disadvantages:
- Stockholder revolts
- Start-up costs
- Regulation
- Double taxation
Cooperatives- an organization that is formed to benefit its owners in the form of reduced prices and/or the distribution of surpluses at year-end, there are hundreds of types, but fall mainly under five categories:
Consumer cooperatives- these organizations sell goods to both members and the general public (MEC)
Financial cooperatives- these organizations operate much like banks, accepting deposits from members, giving loans, and providing chequing services (credit unions)
Insurance cooperatives- these organizations provide many types of insurance coverage, such as life, fire, and liability
Marketing cooperatives- these organizations sell the produce of their (farm) members and also purchase inputs for the production process (seed and fertilizer)
Service cooperatives- these organizations provide member with services such as recreation
Employee Stock Ownership Plan (ESOP)- an arrangement whereby a corporation buys its own stock with loaned funds and holds it in trust for its employees. Employees “earn” the stock based on some condition such as sonority. Employees control the stock’s voting rights immediately, even though they may not take physical possession of the stock until specified conditions are met.
Strategic Alliances- An enterprise in which two or more persons or companies temporarily join forces to undertake a particular project.
Subsidiary and Parent Corporations- Subsidiary: one that is owned by another corporation
Parent: A corporation that owns a subsidiary
History of Business in Canada:
Early Years:
Late 1400’s-ships financed by English entrepreneurs came to Newfoundland to fish for profit
1500’s- traded w/ Indians, England and Frances’s economy grew, however Canadian manufacturing was slow to develop
The Factory System and the Industrial Revolution:
Industrial Revolution- a major change in goods production that began in England in the mid-eighteenth century and was characterized by a shift to the factory system, mass production, and specialization in labour with advances in technology
Factory system- a process in which all the machinery, materials, and workers required to produce a good in large quantities are brought together in one place
Mass Production- the manufacture of a good of uniform quality in large quantities
Specialization- the breaking down of complex operations into simple tasks that are easily learned and performed
The Entrepreneurial Era:
Late 1800’s- many wealthy people, due to size and power of some firms, other businesses were getting hurt, some decided it was more profitable to collude then to compete, so they fixed prices and divided the market, although Canadian consumers called for more regulations, In 1889, first anti-combines legislation was passed.
The Production Era:
The period during the early 1900’s when American businesses focused almost executively on improving productivity and manufacturing methods
The Sales and Marketing Eras:
Sales Era- the period during they 1930’s and 40’s when businesses focused on sales forces, advertising, and keeping products readily available
Marketing Era- the period during the 1950’s and 60’s when businesses began to identify and meet consumer wants in order to make a profit
Global Era:
Last few years- technological advances in production, computer technology, information systems, communication capabilities, Buy foreign products, cut costs, increase efficiency, improve products and service quality. Variety of trends, opportunities, challenges.
Running The Small Business
- Small business enterprises in Canada account for 98% of the 900 000, and 19% of the total business revenue
- Canadian Awards for Business Excellence -> entrepreneurship and small businesses
The Increase in Small Businesses
Sine the 70’s, small business has been a growth industry, reasons are:
- Big businesses offer less job security since layoffs are more likely, a growing number of employees are also beginning to dislike forking for large corporation because they are impersonal, and efforts often go unrecognized
- Many large companies and government departments are being reduced in size, creating opportunities for subcontract work and consulting services. Former employees often leave their employment and start businesses to provide these services.
- For most of the past 15 years, it has been easier to start a small business than previously. The economy has grown, especially the service industry that requires less investment to enter.
- Persons who are self-employed earn almost 50 percent more on average then persons who are employees. Small business is financially attractive.
Small Business- an independently owned and operated business not dominates in its field of operations. It qualifies for the small business income tax under the Canadian Income Tax Act. Generally employing one to 1500 people.
Describing the Entrepreneur- entrepreneur- one who starts and operates a small business. Entrepreneurship- an individual’s willingness to assume the risks of establishing and operating a business
Characteristics and Advantages are: charismatic, coping, creative, improvising, opportunistic, challenge seeking, assertiveness, risk taking, self confident, tenacious, venturesome, goal oriented, need to achieve, need to be own boss and control time, need to provide product, wish for freedom, desire for adventure, and challenges, desire to make money, and make a living.
Disadvantages:
- Work long hours
- May go bankrupt
- Imbalance, poor management
Finding Information on Small Businesses-
Canadian Federation of Independent Business (CFIB)- non-profit, non-partisan lobby group representing small and medium size businesses
- Books, magazines, centres, organizations (listed above), government/ private agency
Becoming a Small Business Owner-
- Take over family business
- Buying an existing enterprise
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Starting a business-> microenterprise: an enterprise that the owner operates part-time from the home while continuing regular employment elsewhere
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Buying a franchise -> franchising: a contract between a manufacturer and a dealer that stipulates how a product or service will be sold, the dealer who agrees to sell the product/service is the franchisee, while the manufacturer is the franchisor.
Benefits are for the franchisee:
- Recognition
- Standardized appearance
- Management assistance
- Economies of sale buying
- Promotional assistance
Benefits are for the franchisor:
- Recognition
- Promotional savings
- Franchisee payments
- Attention to detail
Challenges for the Entrepreneur
Financing the Small Enterprise:
- Family, self, government, agencies, chartered banks, trust companies, profits
Retained Earnings- profits reinvested in the enterprise
Managing funds- debt: borrowed funds that require interest payments and must be repaid
Equity: money invested in the enterprise by individuals or companies who became owners
Managing the Small Enterprise:
- Planning in small enterprise- start-up and operation plan
- Organizing the small business-growth =concepts
- Influencing in small enterprise- independence, ambition, human resources, recruiting and retaining employees
- Controlling in small enterprises- monitor w/ feedback
Transitions in Business
- Fail up to five years beginning launch
- During expansion pass breaking-even point
- Maturity stage involves slowed or slight growth, success is assured “comfort”, expansion is sought after is regards to merging or taking over other enterprises
During these changes it differs from being entrepreneurial to being professionally managed, employs 50-100 people
Survival of Small Businesses
- 13-15% of business enterprises disappear each year
- One half of new business fail in first 3 years
- After ten years, 25% are still in existence
- Average life span is 7.25 years
- Females have twice as high survival rate then men
- Fails due to poor management, inadequate marketing, inadequate financial capabilities, inadequate production capabilities, personal reasons, disasters, other
Assistance for Entrepreneurs and Small business owners
- Federal support (industry, science and technology Canada)-> develops and implements national policies to foster entrepreneurship and the start-up growth, expansion of small businesses
- National Entrepreneurship Development Institute- a clearinghouse for info on entrepreneurship
- Canada Opportunities Investment Network- a computerized national investment matchmaking service operated through Chambers of Commerce
Helping With advice and Money
- Counselling Assistance for Small entrepreneurs- a program that offers one-on –one counselling by experiences business people to small businesses
- Government funding agencies
- Small Businesses Loans Act- federal legislation that guarantees private loans of specified amounts to small businesses
Developing People and Technology
- Federal government programs
Promoting Exports
- Greater field, more capital
Other Assistance to Small Businesses
- Consultants, bureaus, and publications- advice, (Ontario has 15 such network)
- Banks and other financial Institutions- loans
- Incubators and technology centres- centres where you can start enterprises with assistance and counselling (YMCA)
