Chapter 4/5 MiC

Question 1

What are some of the main problems faced by entrepreneurs? I.e. Why do many businesses fail? (4 marks) … see page 69, Made in Canada

Answer 1

Businesses may fail due to the personal characteristics of entrepreneurs:
- They are not willing to devote the immense amount of time and effort that is required of them
- Don’t know enough about the business and how to run it
- Failed to create a sufficient financial plan for the business in order to determine its ability to make a profit
- They may fail to understand the market in which they are selling their goods and services

Or from competition from other businesses, prices may be too high, the market could be too small/big, and businesses also may take months or years to build a sufficient number of customers.

Question 2

What is an “industrial incubator,” such as the Venture Center in Toronto, and in what ways do they help new/inexperienced entrepreneurs overcome the problems that can cause a business to fail? (5 marks) …pages 69-70, Made in Canada

Answer 2

• It is a response to the high rate of failure among newly established businesses. The Venture Centre provides a favorable environment where new businesses can grow. They have increased public awareness of small business opportunities.
• They help in multiple ways: low rent - during the first 2 years the venture center provides space for the business at 25% of industrial spaces. The next year it’s 50%, and the next it’s 75%, then the 5th year it’s 110%. Development officers - guide and assist entrepreneurs (financing, revisions, establishing cash flow forecasts) Cost sharing of services - businesses share common costs (secretarial, photocopying, etc.) Business advisory committee- lawyer, banker, accountant

Question 3

Explain what a franchise is, give an example of a franchise, and list at least three industries that typically have franchises. (5 marks) … pages 72-74, Made in Canada

Answer 3

A franchise is a business arrangement where one party (the franchisor) grants another party (the franchisee) the right to use its trademark, brand, and business model in exchange for certain fees and royalties. The franchisee operates under the established brand name and business system of the franchisor, following specific guidelines and standards set by the franchisor.

Three industries that typically have franchises include:

Fast food: Examples include McDonald’s, Subway, and KFC.
Retail: Examples include 7-Eleven, The UPS Store, and Ace Hardware.
Hospitality: Examples include Marriott International, Hilton Worldwide, and Holiday Inn.

Question 4

Describe one advantage that a private enterprise has over a crown corporation and one advantage that a crown corporation has over a private enterprise (for consumers in society). (2 marks) … page 106, Made in Canada

Answer 4

The private sector is made up of businesses or corporations owned by people, this has lots of competition so they have to compete for the consumer’s dollars so they must have a reasonable price and good service. In a crown corporation, it is not supported by profits so it is paid for by tax dollars no matter how much or little we use them. This makes sense for firefighters or police officers, but for goods and services, this is bad for quality and efficiency. However, the public sector allows people in remote areas to get the goods and services they might not have had otherwise as those places are less profitable.

Question 5

What is a sole proprietorship business?

Answer 5

A sole proprietorship is a business with a single owner who is solely responsible for all liabilities. In the eyes of legal and tax authorities, the business and the operator are the same.

Question 6

What is a Corporation business?

Answer 6

A corporation is a legally established business that can own assets and incur debt. Incorporating affects your business’s operational, accounting, tax, and legal requirements. Because it is defined by law, a corporation can technically exist forever. This means that if the owner dies, the company can continue as an operating entity—unlike in partnerships or sole proprietorships where company assets may be tied up in estate and taxation issues.

Question 7

What is a partnership business?

Answer 7

A general partnership is a business established by two or more owners. It is the default business structure for multiple owners the same way that a sole proprietorship is the default for solo entrepreneurs.

Question 8

What is a Co-operative business?

Answer 8

Cooperatives are businesses owned by “member-owners”. Co-ops are democratically controlled by their member-owners, and unlike a traditional business, each member gets a voice in how the business is run. Services or goods provided by the co-op benefit and serve the member-owners.

Question 9

What is a franchise?

Answer 9

With a franchise, a company licences its processes, intellectual property (e.g., trademarks), trade secrets and proprietary knowledge to an entrepreneur for a one-time fee and ongoing annual royalties.

Question 10

What is a franchisor?

Answer 10

The business that originally developed the products, services, and proprietary knowledge being licensed is called the franchisor.

Question 11

What is a franchisee?

Answer 11

An entrepreneur who buys a franchise is called a franchisee.

Question 12

Pros/Cons/Examples of a Sole Proprietorship:

Answer 12

Pros:
easy to establish
no general laws governing the establishment of a proprietorship
Each province has its own regulations
you make all the decisions
collect all profits(entrepreneur)
least regulated
all income taxed as personal
most common type of business

Cons:
The size of the operation is limited by the proprietor’s financial resources and their ability to borrow money.
Have to oversee every part of the operation and have to do a lot
Unlimited personal liability
Limited lifespan
Difficult to transfer ownership

Example:
lemonade stand
lawn cutting business
hotdog stand
dropshipping from Amazon

Question 13

Pros/Cons/Examples of a Partnership:

Answer 13

Pros:
simple and inexpensive to form
owners share profits
income taxed as personal

Cons:
unlimited liability
the limited life of a business
difficult to transfer ownership

Examples:
Abbotsford hospital and cancer center
Airbnb and Flipboard

Question 14

Pros/Cons/Examples of a Corporation:

Answer 14

Pros:
Public ownership
limited liability
ease of transferring ownership
unlimited life of a business
ease in raising cash/equity

Cons:
Strict regulations
can be difficult/expensive to form
income subject to double taxation (income tax is different for people and corporations, business and income are taxed)

Examples:
(Can Buy stock)
Walmart
Costco
Tesla
Amazon

Question 15

Pros/Cons/Examples of Co-operatives:

Answer 15

Pros:
The democratic and patronage dividend acts as a magnet to people, making them loyal members
each member gets the same voting rights
higher quality service

Cons:
difficulty in remaining competitive with private firms
hard to hire and work with aggressive manners without losing the ideals they’re founded on
can’t shop there unless you buy from there

Examples:
Vancity
MEC
Coast Capital Saving

Question 16

Pros/Cons/Examples of Franchises:

Answer 16

Pros:
Business assistance
brand recognition
legal protection

Cons:
limited creative opportunities
lack of control
lack of financial privacy

Examples:
Mcdonalds
Subway
KFC

Question 17

What is a crown corporation? Give some examples, including one from your province.

Answer 17

“Crown corporations are peculiar hybrid entities — somewhere between a government body and a private enterprise. They are wholly owned by the state but operate at arm’s length from the government. “ - An example is BC Hydro, BC Transit, BC Liquor
A company that the government runs

Question 18

1. How does a cooperative such as Alberta Wheat Pool or Vancouver City Savings Credit Union differ from a corporation?

Answer 18

In a cooperative, the members are also owners and each of them has the same amount of votes regardless of the amount of shares they own, whereas in a corporation you have as many votes per share you own.
Cooperatives also strive for equity and service within the members and company, however, corporations’ main goals are profit-based.

Question 19

2. How do Crown corporations differ from corporations?

Answer 19

Crown corporations are owned and controlled by some level of government and corporations are owned and controlled by private individuals.

Question 20

1. What are the common characteristics of the firms listed under each type of business organization?

Answer 20

All have an owner or founder
have some sort of liability
businesses
All of these businesses have a presence in the market and have some aspect of risk tied to them.

Question 21

2. What is the major difference between sole proprietorships and partnerships?

Answer 21

Sole proprietorships are owned by one person and partnerships are owned by 2 or more people.

Question 22

3. In what ways are sole proprietorships and partnerships similar?

Answer 22

They are both easy to form and have lots of liability, also they gain a lot if not all of the profits they earn. They are also for entrepreneurs but one is with 2 entrepreneurs and the other is with one.

Question 23

4. In what ways do corporations differ from sole proprietorships and partnerships? In what ways are they the same?

Answer 23

A sole proprietorship has one owner who has unlimited liability for the business. A partnership involves two or more people who combine resources for the business and share profits and losses. A corporation is considered to be a separate legal entity from its shareholders. Corporations are also easier to transfer over as shares are easily transmissible, however sole proprietorship and partnership die when the owner dies. However, some ways that these are the same are the way they operate with efficient business on the top of their mind and lots of competition.

Question 24

5. In what ways do public enterprises and cooperatives differ from corporations?

Answer 24

Corporations, public enterprises, and cooperatives all want to succeed in their industry, but they differ greatly in terms of ownership, goals, governance, and distribution of profits. Corporations are owned by shareholders and motivated by profit, while public enterprises are owned by the government and serve the public interest. Cooperatives are member-owned organizations that prioritize mutual benefit.

Question 25

What type of company is it where: The owner receives all of the profits and is responsible for all debts.

Answer 25

Sole proprietor

Question 26

What type of company is it where: Operated by two or more people who share costs and responsibilities.

Answer 26

Partnership

Question 27

What type of company is it where: Managed by a board of directors.

Answer 27

Corporation - board of directors is voted in by common share holders

Question 28

What type of company is it where: The easiest type of business to start and administer.

Answer 28

Sole proprietor

Question 29

What type of company is it where: The parent company often advertises on behalf of all its operators.

Answer 29

Franchise

Question 30

What type of company is it where: One vote per share.

Answer 30

Corporation

Question 31

What type of company is it where: One vote per owner, regardless of shares owned.

Answer 31

Co-operative

Question 32

What type of company is it where: The primary motive is service, not profit.

Answer 32

Co-operative

Question 33

What type of company is it where: The operator pays a monthly fee to the parent company.

Answer 33

Franchise

Question 34

What type of company is it where: Owned by members who buy products or use services offered by the business.

Answer 34

Co-operative

Question 35

What type of company is it where: Liability can be limited or unlimited, depending on the agreement.

Answer 35

Partnership

Question 36

What arguments are there (a) for and (b) against the privatization of Crown corporations?

Answer 36

For crown corporations: Often, Crown corporations provide services that would not be economically feasible for a private enterprise, such as delivering mail or providing passenger transport to remote or sparsely populated parts of the country. - serves more people police/ firefighters/military - fair for all Against Crown Corporations: Monopolies Our tax money goes to them level of service is less because it is government-funded efficiency/ productivity more tax dollars to spend on other things

Question 37

Do you think that, as a general rule, governments should privatize Crown corporations whenever possible?

Answer 37

yes because then it is more efficient and the level of service is better also then there are fewer monopolies However, some shouldn't be like BC Hydro and the military because then they can reach everyone and be equal in helping them, also then they can build ways to get power easily because they are the government, also start-up costs are very expensive for hydro.

Question 38

2. Under what conditions should governments (a) nationalize corporations and (b) privatize corporations?

Answer 38

Nationalize corporations: take a particular industry and make the government run it national security argument - valuable resource so that the industry is not financially incentivized Privatize corporations: more efficient less monopolies more productive less tax

Question 39

What is an entrepreneur?

Answer 39

Entrepreneurs are individuals who start their own businesses or who aggressively expand existing ones. They organize the other productive factors (land, labor, and capital) for the purpose of producing goods or services, and assume the risks involved in running the business.

Question 40

What are some of the problems faced by entrepreneurs?

Answer 40

supply runs out lose your best customers no one wants to buy your product because of recent changes your business partner dies lack money to mass produce and market the product lack of motivation or resilience fail to understand the market

Question 41

What are some characteristics of a successful entrepreneur?

Answer 41

Strategetic good design sense common sense listening to consumers able to find money to operate a business financially Risk takers putting themselves out there (in trade shows or opportunities) aggressiveness working to expand their company constantly intuition Hard work self-confidence bright ideas youthful energy Motivation work for themselves rather than someone else Objectivity seek experts

Question 42

2. In what industries are there franchises?

Answer 42

fast food retail restaurants hospice

Question 43

3. Why is franchising appropriate in these industries?

Answer 43

A known business company that works Trust building expects the same food or goods to be the same everywhere

Question 44

4. What are some of the advantages to (a) the franchisor, (b) the franchisee, and (c) the consumer of franchises?

Answer 44

Franchisees buy rights to the shop everything is spelled out for you on how to make sales and you have to pay them a cut of your profits low risk limited degree of freedom but they know their business will succeed The franchisor owns the business Gets profits from the franchisees grow business without doing as much work - grow your name manage people instead of the business. Consumer of the franchiser Know that the quality is going to be the same as the franchisee

Question 45

What qualities of a successful entrepreneur does Denise Meehan have?

Answer 45

hardworking and constantly looking to improve the established risk taker - dropped out of high school to pursue her business motivated

Question 46

2. Why did she franchise Lick's?

Answer 46

to grow her business and reach her goal of having a good quality service restaurant to feel good and encourage growth in the people she has met

Question 47

What kind of people was Ms. Meehan looking for franchisees?

Answer 47

People who were willing to spend time and energy to work with their employees Reliable people take responsibility and work hard Good at managing money and efficient

Question 48

What are the costs to Heather Priestley of being a franchisee? What are the benefits? What is Carol Harris's role in the business?

Answer 48

Costs Works 55-60 hours a week must pay a fee to the franchise must follow the regulations of the franchisor Benefits Won awards for being a local business with great cleanliness and customer service proven business with proven expertise and ongoing assistance Carol Harris's role partner to Heather Priestly successful real estate investor helped finance the business

Question 49

5. Is Heather Priestley an entrepreneur? Explain your answer.

Answer 49

Yes because the franchisor didn't believe in absentee ownership Heather had to run the restaurant like it was her own and had few regulations as to what to do She ended up successful and growing the business as well

Question 50

6. Are franchisees entrepreneurs? Explain your answer.

Answer 50

They can depend on the amount of freedom that the franchisor gives them, if the franchisor is like Mcdonald's then no because they don't start their own business or expand the business, but if it is like Licks then the franchisor gives them lots of freedom, and just places values in them, then they are able to grow the business in their own ways making them an entrepreneur

Question 51

1. Do you think you have the qualities and skills of a good entrepreneur? Explain. To what activities, other than starting up a small business, could you apply your entrepreneurial skills?

Answer 51

Yes Because: Good people skills Good money managing Good motivation and likes to take risks

Question 52

Why did Lynn Choromanski's store fail?

Answer 52

She thought her tenants were upbeat about the company's future and depended on others (the franchiser) to ensure that the business would survive a recession. Was unaware of the distinction between operating a business and purchasing a franchise. Franchises don't provide any independence or flexibility. There were severe restrictions on where she could get supplies, etc., so she was unable to purchase cheaper supplies.

Question 53

How can franchising be disadvantageous to franchisees?

Answer 53

The franchisee has to pay the franchisor royalty and other franchisee fees, which is considered a financial disadvantage. Furthermore, the franchisee has limited creative control over the franchise, as all locations must provide the same products and services to consumers; thus, the franchisee cannot change much about what their location offers. Moreover, even if the franchisee finds a supplier supplying the necessary goods to run the business at a lower price, the franchisee has to continue buying from the supplier that the overall franchise purchases from.

Question 53

Why would some people want to become entrepreneurs?

Answer 53

People become entrepreneurs for many different reasons; some of these reasons are listed here. Firstly, many people become entrepreneurs because they would instead work for themselves and enjoy independence. Second, many people have identified a gap in the services or products provided and believe they can fill it. Thirdly, entrepreneurs often have a possibility for financial success, which is another reason why many people become entrepreneurs. Lastly, many become entrepreneurs because they think they can benefit society with the goods or services they have created.

Question 54

What do Entrepreneurs organize?

Answer 54

Land, Labour and capital

Question 55

Would entrepreneurs want to work with someone? If yes, what type of people would they work with?

Answer 55

Yes they want to work with experts

Question 56

How can a sole proprietor raise its capital?

Answer 56

Bring one or more partners into the business and share the profits and losses. With this, they can undertake operations on a larger scale and handle responsibilities more efficiently. They can also gain expertise from others through decisions and discussions.

Question 57

What are some key reasons as to why businesses fail?

Answer 57

Hard work alone isn't sufficient enough to secure success, you also must have expertise and experience in the market. some entrepreneurs fail to understand the market for which they are selling their goods and services. Also to be a strong business you must have an entrepreneur with the right characteristics guiding it to keep it successful and efficient.

Question 58

When do you want to buy and sell shares?

Answer 58

buy low sell high

Question 59

if people buy or sell more shares what happens to the stock price

Answer 59

price rises as people buy and falls as they sell, people buy and sell based on speculation

Question 60

Why are crown corporations created?

Answer 60

They are generally created to fill a need the government feels is not being met by the private sector, which is either unable or unwilling to provide certain services the government deems necessary or in the national interest.

Question 61

In which sectors do crown corporations operate?

Answer 61

Crown corporations have been most common in sectors such as transportation, telecommunications, utilities and power generation, but they extend into many parts of the economy, including alcohol sales, gaming, finance, business development, insurance, agriculture and culture. Some Crown corporations provide administrative, support or oversight services to certain industries — the Canadian Dairy Commission, for example, sets reference prices and monitors supply for the dairy industry; the Canadian Commercial Corporation brokers defence contracts between foreign governments and Canadian companies.

Question 62

Are crown corporations government-funded?

Answer 62

The degree of financial support and government control of Crown corporations varies. Some are fully funded by government appropriations; others are financially self-sufficient or profit-making corporations that pay dividends, which the government, as the sole shareholder, collects.

Question 63

What are the two most common ways of establishing a corporation?

Answer 63

Federal corporation under canda's Business Corporation Act where if it going to operate in more than one province then it is incorporated federally If the business it just going to act in one province then it has provincial incorporation under provincial laws

Question 64

What does a corporation need if it wants to grow

Answer 64

Funds or capital by retaining the earnings of the corporation instead of distributing them in form of dividends to the owners Or by issuing securities like common share, preferred share, and the bond

Question 65

why are corporations subject to double taxation?

Answer 65

As a firm pays federal and provincial taxes on its profits. After-tax paid to shareholders are also subject to federal and provincial income tax on dividend income. A corporation's profits is therefore taxed twice