This Document Contains Chapters 1 to 2 Chapter 1 Your Great Adventure: Exploring Your Options I. Business Plan Building Block (SLIDE 1-2) At the end of each chapter you will begin a preliminary draft of what will become a complete and free-flowing business plan. All small businesses need a plan. In this first chapter we want you to get students on the rationale and the basic building blocks or components of a business plan. It will also help them discover their entrepreneurial bent and explore career options. II. CHAPTER LEARNING OUTCOMES (SLIDE 1-4 & SLIDE 1-5) After completing this chapter students should be able to: • Identify the role, skills, and characteristics of successful Canadian entrepreneurs. • Discover why you might want to become an entrepreneur. • Identify your entrepreneurial quotient. • Understand what it takes to be an entrepreneur and intrapreneur. • Understand the meaning of the terms micro business and small business. • Use mind maps to help you decide on the life you want. • Discover what success means to you. • Understand the rationale for a business plan and list the main components. • Improve your research and information-gathering skills. III. LECTURE OUTLINE 1. Building Your Road Map • This book with its Action Steps and Business Plan Building Blocks can be your students’ personal road map to success in small business. By having the students complete the Action Steps and Building Blocks, they’ll be drawing a customized road map for their small business success. Ask the students to complete the Action Steps in order to give them direction and the Building Blocks will provide them the foundation. They will start this journey by taking a careful look at themselves and their skills. • Review Figure 1.1,Entrepreneurial Road Map to learn how the different components of this book contribute to the creation of a business plan. • Encourage your students to believe in themselves and fuel the passions that will help them achieve entrepreneurial success. The text profiles many entrepreneurs like Chris Griffiths (in the opening vignette) who are passionate about what they do. Ask students to read their stories, and learn from their experiences. A case study is provided at the end of each chapter. Have students work through these studies starting with Chris Griffiths at the end of this chapter, page 25, and learn from his story. To get their creative juices flowing, ask students to go to Box 1.1, Bookmark This, on page 4, and visit some of the Web sites. These sites will introduce them to others like themselves who have decided to investigate the entrepreneurial option. 2. The Age of the Entrepreneur (SLIDE 1-6 and SLIDE 1-7) Discuss how now is a great time to be an entrepreneur in Canada and that Canada is a hot bed of entrepreneurial activities. Research shows that: • Canada has twice the percentage of self-employed people as the United States. • Most of our self-employed (60%) have a post-secondary education • About 1/3 are serial entrepreneurs • 40% of Canadians think being your own boss is the most rewarding career decision • 80% of all entrepreneurs say that starting a business was their best career decision 3. What Do the Numbers Say? (SLIDE 1-8 and SLIDE 1-9) This is the age of the entrepreneur and Canadians are leading the charge. Many Canadians, like Chris Griffiths in the opening caption, go into business for themselves. They have POP—that is they are Passionate, Opportunity seeking, and Persistent. World class companies like Yahoo!, eBay, Research in Motion, Sierra Wireless, and Red Hat, were all founded or co-founded by Canadians. Canada is an entrepreneurial hot bed. See, for example, Tables 1.1, Total Number of Self-Employed Persons (Thousands) by Gender, Yearly, 2004–2008 1.2, Total Number of Business Establishments, and Number of Establishments Relative to Provincial/Territorial Population and Gross Domestic Product, June 2009, and 1.3, Number of Private Sector Employees by Industry and Size of Business Enterprise, 2008 (pages 6–8). The numbers point to the following: • 2.6 million Canadians are self-employed (35% female vs. 65% male) • 98% of employer businesses have fewer than 100 employees • 57% of employer businesses are micro businesses (1 to 4 employees) • About 75% of small business employees work in the service sector • Almost 1/2 of our labour force work for small enterprises • Small business accounts for about 25% of our Gross Domestic Product (a key measure of economic production) 4. Small Business Entrepreneurs (SLIDE 1-10, SLIDE 1-11 and SLIDE 11-12) Small business entrepreneurs are the fuel of our private enterprise system. They provide the competitive zeal; create jobs, new ventures, and opportunities for others; and improve our economic growth and social fibre. Like Chris Griffiths in the opening caption, they are (SLIDE 1-10): • Visionary self-starters who love the adventure of a new enterprise. • Agents of change with POP. They are Passionate, Opportunity seeking, and Persistent. • Doers, who see a market need and satisfy that need by translating it into a successful business. The down side to being an entrepreneur is that (SLIDE 1-11): • 55% of small business owners work 50+ hrs per week • Only half took 1 week vacation in 3 years • 90% say running a business is stressful But those who own their own businesses report highest life satisfaction. Most research on entrepreneurship has come to the conclusion that entrepreneurs cannot be cloned. Nevertheless, if generalizations can be made some of the major characteristics are shown in SLIDE 1-12. Note that successful entrepreneurs are moderate risk-takers not extreme risk-takers. 5. Rev Up (SLIDE 1-13 & SLIDE 1-14) Explain to students how a typical employee thinks vs how a Master Entrepreneur® thinks by using SLIDE 1-13. Help your students build a road map to business success. In order to decide which road to take, they are going to have to do some research and define their personal goals. To begin, encourage them to: • Have the students complete Action Step 1, Compile your 24/7 Adventure Notebook on page 11. The students should organize their personal and business ideas in a 24/7 Adventure Notebook. Many entrepreneurs like Adrienne Armstrong of Arbour Environmental Shoppe, page 11 find the 24/7 Adventure Notebook a useful tool for organizing personal and business ideas (SLIDE 1-14). 6. Why Do You Want To Be An Entrepreneur? (SLIDE 1-14) There are all kinds of motivations for taking the entrepreneurial plunge. For Louis Garneau it was the freedom to pursue his interest in art and cycling. For Adrienne Armstrong becoming a “planet friendly” entrepreneur was a lifelong dream. Chris Griffiths wanted to pursue his passion to make a better guitar. Ask the students to complete Action Step 2, Find out why you want to be an Entrepreneur on page 12 7. What Does It Take To Become An Entrepreneur? (SLIDE 1-14) Students should assess their interests and abilities and discover if they have what it takes to make it in small business. Remind them that entrepreneurs are made, not born. So, if they are lacking in the skills department, they can always make a plan to learn and get more experience. • Encourage your students to complete the E-exercises in Box 1.2, page 12, and Action Step 3, Assess your interest and abilities and 4, Expand your self-assessment on pages 15 and 17. 8. What is a Social Entrepreneur? (SLIDE 1-15) More and more people are becoming interested in starting up a business that will help social, environmental and human causes. Students who want to start a business that contributes to social good are social entrepreneurs. Social entrepreneurs start businesses that help people with low income, or raise awareness for the environment or somehow provide products and services that are for the social and environmental benefit to society. 9. What is an Intrapreneur? (SLIDE 1-16 & SLIDE 1-17) Suppose your students decide not to become their own boss and find employment with a large national firm. Better still, suppose they start their own business and their entrepreneurial venture takes off. A few years down the road, you find yourself heading up a 300-employee multinational firm. They’re still going to have to foster entrepreneurship in a larger company—whether you own it or work for it. This process of making change in a large company is called intrapreneurship. A list of intrapreneurial responsibilities is provided on page 14. 10. “Inc.” Yourself (SLIDE 1-18, SLIDE 1-19 & SLIDE 1-20) • Encourage your students to mind map (see, Figure 1.3, Arbour Environmental Mind Map, page 15) their way to a picture of what they want to become and complete a success checklist (Action Step 5, “Inc.” Yourself, page 17). 11. What is Small Business? (SLIDE 1-21) There are about one million employer businesses in Canada; about 55% of these firms have 1 to 4 employees—the so-called micro business. Most small businesses provide services. The service-producing sector houses almost 80% of all our micro businesses • Review Table 1.3, Number of Private Sector Employees by Industry and Size of Business Enterprise, 2008 on page 8. There are several definitions of a small business. We suggest the one provided by the Canadian Federation of Independent Business: "A firm that is independently owned and operated and is not dominant in its field of endeavour." A small business is any venture with spirit, any business you want to start, or any idea you want to bring into the marketplace. A typical small business owner, according to this description, would employ anywhere from 1 to 20 employees. This represents about 85% of all businesses in Canada today. 12. Your Chances of Success (SLIDE 1-22) Do some small businesses fail? Of course they do! However, if you prove your business idea on paper first—in your business plan—there’s a good chance you’ll be successful. Slightly more than 80 percent of small businesses survive their first year. On average, any one particular company will be in business about 6 years. Only about 30 percent make it for 10 years. 13. Beat the Odds—Write a Business Plan (SLIDE 1-23, SLIDE 1-24, & SLIDE 1-25) Entering the world of small business demands a carefully designed business plan. A completed plan will be your blueprint or roadmap for operating your business start-up and measuring progress (SLIDE 1-23). It will help you set goals, organize, provide financial guidance, obtain advice, and secure investment (SLIDE 1-24). The broad components for a plan are show in Box 1.3, Business Plan Outline, page 16 (SLIDE 1-25). An example of a plan using this template is provided in Chapter 15. Other examples of business plan resources are shown in Box 1.4, Bookmark This on page 18. 14. Beat the Odds—Do Your Research (SLIDE 1-26 & SLIDE 1-27) There are three approaches to research. Aa combination of all three should be used. 1. Primary Research. This is research that is carried out by interacting with the world directly by talking to people (for example, bankers, accountants, and business owners). For example, see Action Step 6, page 19. 2. New-Eyes Research. This is the process of investigating the marketplace using your intuition and powers of observation. In new-eyes research, you might visit your competition, as was the case with Chris Griffiths, page 2. Completing Action Step 7, page 20, is a good way to get started on this type of research. 3. Secondary Research. This is research that involves referring to someone else’s primary research. (See, for example, Action Step 8, page 23.) 15. Think Points for Success Review the following think points with your students: √ Change is accelerating everywhere, and that includes the world of business. Change creates problems. Problems are opportunities for entrepreneurs. √ To find your doorway into your own business, gather data and keep asking questions. √ Be creative on paper, organize your ideas, test your assumptions, and develop your business plan for the marketplace. Create and maintain a 24/7 Adventure Notebook. Mind map. Confirm your venture with numbers and words before you enter the arena. √ Even though you may not be in business yet, you can intensify your focus by writing down your thoughts about the business you think you want to try. Stay flexible. √ Be clear on who you are and what you want to become. √ Develop a business plan. √ Do your primary and “new eyes” research. Get out and talk to people. That’s the way most entrepreneurs learn. √ Do your secondary research. √ Always be on the lookout for opportunities. √ Above all, follow your passions. 16. Checklist Questions and Actions to Develop Your Business Plan (SLIDE 1-29 and SLIDE 1-30) Review the following Checklist Questions and Actions to Develop Your Business: √ Are you organized? Do you have a central deposit for all your ideas? √ Do you have what it takes to be an entrepreneur? √ Have you assessed your interests, abilities, and weaknesses as they relate to owning a business? √ Have you assessed your past accomplishments and shortcomings? √ Do you have a list and a plan of new skills you will have to work on? √ Is your family or those you live with “on board”? √ Are you prepared to take the time and do the necessary research before writing a business plan? √ Have you interviewed entrepreneurs to see what it is really like to be in business for yourself? √ Do you have any business ideas that you are passionate about? IV. NOTES AND ANSWERS FOR END-OF-CHAPTER CASE STUDY Garrison Guitars, Part I Note: This case study will help students put to practice their knowledge of the learning opportunities of Chapter 1. You may wish to use this case for a one-hour tutorial type seminar or as a case assignment. We want you to go back and quickly reread the Chris Griffiths story in the opening vignette. Chris Griffiths was a successful entrepreneur who had POP—he was passionate, opportunity seeking, and persistent. Chris recognized a market need, satisfied this market need, and translated it into a financial benefit. We can all learn from Chris Griffith’s successful entrepreneurial experience. Now we want you to dig a little deeper and link on to the following Web sites: Text support • Innovation in Canada: Garrison Guitars case profile: http://www.collectionscanada.gc.ca/webarchives/20071115075409/http://www.innovation.gc.ca/gol/innovation/site.nsf/vdownload/pra_innov/$file/f694_ic_case_studies_e.pdf • Garrison Guitar: http://www.gibsonguitars.com We suggest you bookmark these sites. You’ll need them again when we continue with this case in Chapter 2. Case Questions 1. Mind mapping Mind mapping is a great way to get and record ideas. Many entrepreneurs like Adrienne Armstrong of Arbour Environmental (Figure 1.2) do mind mapping naturally. They are visionaries, and they think in pictures. But mind mapping is an entrepreneurial skill that can also be learned. In Action Step 5, we encouraged you to do a mind map of your future, or “what you want to become.” We now want you to hone this skill further. View the Garrison Guitar case. Then click on to the other sites provided above. Why was Chris Griffiths so successful? Mind-map your reasons. Answer: Mind Map for Chris Griffiths' Success 1. Visionary Approach: Chris Griffiths had a clear vision and identified a niche market for innovative guitars. 2. Passion and Commitment: His deep passion for music and commitment to quality drove the company’s success. 3. Innovation: He utilized advanced materials and manufacturing techniques to create unique products. 4. Persistence: Griffiths consistently pursued his goals despite challenges, showing resilience in overcoming obstacles. Note: You might want to inform students that this mind map will form the basis for helping them answer the remaining questions in this case study. You might also encourage students to get into groups and do a group mind map based on a group brainstorm. Additionally you might want to do a class brainstorm and then do a class mind map. Provided below are some of the major elements that students might include in their mind maps. • agent of change • vision • passion • persistence • intrapreneurship • international market need • business plan • primary research • new-eyes research • positive thinking • market need • willingness to work long hours • ability to work with people • team player • determined • independent thinker • goal setter • marketing skills • guerilla marketing • target customer • experience • interest and knowledge of the product. • high technology • risk taker • a love for his or her work • honest • networking • finance • action-oriented • listener • communication skills • ability to surround himself or herself with talent • inquisitive • a belief in innovation • competitive spirit • quality • value 2. Entrepreneurial and intrapreneurial skills Many people have an idea for an invention, but it never sees the light of day. Why is that? As we learn from this case, inventing a product and bringing it to market can be a risky and lengthy undertaking requiring entrepreneurial and, eventually, intrapreneurial skills. a. What entrepreneurial skills and personality traits helped Chris Griffiths launch his successful invention? To refresh your memory about entrepreneurial skills and personalities, you might want to go back to the section in the textbook (page 3) entitled “The Age of the Entrepreneur” or link on to the CFIB report at http://www.cfib.ca/research/reports/rr3000.pdf. Answer: Chris Griffiths' success stemmed from his passion for music and guitars, which drove his commitment. His opportunity recognition allowed him to identify and address a market need. Persistence helped him navigate challenges, while his creativity and innovation led to unique products that distinguished his company. Note: You may want to encourage students to go back and draw from their mind map (Question 1 above). You might want to remind students that according to the textbook, entrepreneurs are agents of change who are passionate, opportunity seeking, and persistent—doers who see a market need and satisfy that need by translating it into a successful business. Research on successful growth firms, by both PROFIT magazine and the Canadian Federation of Independent Business (CFIB), indicates that most entrepreneurs are made, not born. This research tells us that many of the entrepreneurial skills and traits displayed by Chris Griffiths can be learned. Major entrepreneurial skills and personality traits exhibited by Chris Griffiths include: Agent of change. Chris Griffiths was an agent of change. He successfully re-invented the way guitars were made. Passionate. Like most successful entrepreneurs, Griffiths had passion. His passion for quality and value-priced guitars was his driving force. Never giving up, he acted on the belief that his patented innovations—the Garrison Active Bracing System™ and Active Bracing Griffiths Integrated Blocking System™ —could create a truly competitive advantage, page 1. According to Griffiths “We are very passionate about building Garrison Guitars as a brand to be associated with innovative technology in an industry that is entrenched in tradition—to make it a value choice for consumers" Opportunity seeking. Entrepreneurs see problems as opportunities to create solutions. Chris had ability to recognize a market opportunity for quality, value-priced guitars, and do something about it. He and an engineering friend, Andy Fisher, toured North American guitar plants. They learned that the acoustic guitar industry was mired in technology of the 1960s. He sketched his idea on the back of an airline napkin. An inventive opportunity emerged—one that would allow him to produce quality guitars at a significantly lower price. It was a win-win opportunity—increased manufacturing efficiency (lower prices) and improved quality for the customer. Persistent. Entrepreneurs don’t give up easily when things look bleak. In Chris’s case, he had an idea that took six minutes to conceptualize and six years to realize. Persistence was key to his success. For example, when Chris needed start-up capital, his investors told him he would have to come back from his first trade show with letters of intent for the purchase of 7000 guitars—if the rest of the business plan financing was going to proceed. He had little time and the situation looked almost hopeless. But he did not give up. When Chris returned from the four-day trade show he had some 56,000 letters of intent to buy. Doer. Entrepreneurs invariably identify their primary motivations as “seeing a market need and acting on it.” According to Griffiiths, "My philosophy is that ideas are a dime a dozen…. It’s the execution of ideas that turns my crank". Visionary. Successful entrepreneurs have learned to visualize. Chris stayed true to his vision to find a way to produce guitars at a significantly lower price than quality guitars were being sold for. People-oriented. Entrepreneurs are not loners. They need people to succeed—after all, people are what drives business. When Griffiths explains why Garrison Guitars is such a raging success, he points first to his willingness to trust, listen to, and depend on people who understand the essential ingredients of technological and commercial success, and can adapt them to new situations. Independent thinker. Entrepreneurs are independent thinkers who want to control their own destiny. Griffiths consistently showed ability to set goals and the tenacity to solve problems. b. As the company grew, Chris began to take on more of an intrapreneurial role. Briefly describe the meaning of the term intrapreneur and explain how Chris used his intrapreneurial skills in the production phase. Note: You might want to encourage students, refresh their memories, and reread the section on intrapreneurship, page 14. Answer: An intrapreneur is an employee who acts like an entrepreneur within a company, driving innovation and growth from within. Chris Griffiths applied his intrapreneurial skills by leading the development and refinement of new guitar designs and manufacturing techniques, fostering a culture of innovation, and optimizing production processes to enhance efficiency and product quality. Intrapreneurs are agents of change who own or work in medium-sized or large organizations. The main objective of an intrapreneur, as a corporate agent of change, is to take a new idea and translate it into a profitable product or service. Chris recognized the need to encourage an entrepreneurial mind set among all his staff. His philosophy was to create “an environment where my co-workers feel comfortable to make their own mistakes as well because that’s how I learned.” In the production phase, the process was broken down into manageable pieces. He used team leaders and encouraged them to “manage their own 370 square metres.” According to Griffiths, the company was 65 people “…and they’re all entrepreneurs….I swear to you, they come into work every day and they treat the company as if it's their own.” 3. Roadblocks Along the way to success, Chris Griffiths was challenged with many barriers. Briefly describe how he overcame three major roadblocks. Answer: Chris Griffiths overcame major roadblocks by innovating with materials to address manufacturing challenges, securing funding through persistence and pitching to investors to support growth, and building a strong team to enhance production capabilities and drive the company forward. These strategies helped him navigate and surmount obstacles effectively. Possible answer: i. Demonstration of market opportunity One of his first major hurdles was to demonstrate there was market opportunity. “I decided if I wanted to produce a better guitar than is being produced now, I had better find out how they are produced now,” said Griffiths. He needed competitive market research to help him with this challenge. He applied for and received a grant from the National Research Council of Canada (NRC). Much of the money was spent doing new eyes research. Griffiths, Andy Fisher, and another engineer toured North American guitar factories. They learned that the manufacturing process wasn't much different than what he did at his own little shop. The acoustic guitar industry was locked in the technology of the 1960s. ii. Preparing drawings and building a prototype His next hurdle was to prepare the drawings and prototype. To solve this problem, Griffiths applied for and received help from NRC, the Industrial Research and Development Institute and the Genesis Centre at Memorial University. iii. Preparation of a Business Plan Chris needed a business plan to justify the concept and help find much needed start-up capital. To resolve this issue, Chris asked for and received help from the Genesis Centre. Here he received basic training and assistance in the preparation of a business plan. iv. Start-up Capital Griffiths received initial financial assistance from the Atlantic Canada Opportunities Agency and two angel investors. But that was not enough. He needed a total of $3.5 million. Griffiths pleaded for and finally received $250,000 from a venture capitalist. With this money he was able to complete a prototype, the patenting process, and launch the guitar at a major trade show in Los Angeles. He returned from LA with orders for 56,000 guitars. As a result of this demonstration of market need, the venture capitalist invested the rest of the required start-up capital. v. Production A challenging hurdle was the production phase. According to Griffiths, “The challenge was to take all the innovation that had been developed in the guitar's bracing system and bring it into a production facility.” To resolve the production hurdle, Griffiths hired the right people. He brought in an entrepreneurial team of experts to solve the manufacturing challenge. For example, he hired Andy Fisher (plant manager) who had experience with robotics and lasers. 4. Entrepreneurs are not loners As we learned in this chapter, entrepreneurs are not loners. They constantly learn and get help from others. Briefly explain the help that Chris Griffiths received from various people and organizations along the way. Answer: From the beginning Chris received help from Andy Fisher in developing his idea. Dave King, president and CEO of the Genesis Centre at Memorial University, provided advice and guidance during the business planning and development stage. He received help and financial assistance from the Atlantic Canada Opportunities Agency and two angel investors. He also received funding and engineering assistance from the National Research Council. Chris needed to get help from and work with venture capitalists. These major organizations and people helped Chris survive “emotionally, technologically and commercially.” Without all this help he clearly admits he would never have survived. 5. Market research Successful entrepreneurs need to carry out extensive and intensive market research, because research opens doors to knowledge and opportunities. Three approaches to research are primary, new-eyes, and secondary. Briefly describe or explain these three types of research. Answer: According to the textbook, page 19, the three types of entrepreneurial research are: 1. Primary research—interacting with the world directly by talking to people. 2. New-eyes research—use your intuition and observation to learn about the marketplace. 3. Secondary research—reading about someone else’s primary research. a. What is meant by the term “target customer”? Explain how Chris Griffiths used primary research to find his target customer and get the much-needed start-up capital. Answer: Target customers: customers with the highest probability of buying your product or service, page 19. Chris had an inventive idea; but his investors would not continue to finance the project unless Chris could justify he had customers ready to buy his guitars. Through primary research, his investors wanted him to get a list of at least 7000 target customers—by attending a major trade show in LA. Chris’s “guerilla” marketing skills kicked in. Before leaving for the trade show, he had contacted the 2200 delegates and lined up 120 meetings. After the four-day trade show and meetings, Chris returned to St. John’s with letters of intent for some 56 000 guitars. He had the target customers and now his investors were prepared to release the remaining start-up capital. b. New eyes research played a major role in the Garrison Guitar success story. Give one example of how Chris Griffiths used this type of research. Answer: Two examples of new-eyes research are: Example 1: The inventive idea for manufacturing guitars started with new-eyes research. Chris had an honest curiosity. “I didn't know what the results of asking him (Andy) all these questions were going to be. I didn't have this grand scheme in mind, I didn't think that there was any short-term gain from it.” Through intensive probing, Chris learned from Andy Fisher about CADCAM and the possibility of using this high tech process in the manufacturing of guitars. According to Chris, “The more he (Andy) told me about the sort of enhanced high tech manufacturing practices that were happening in other industries and, to the best of my knowledge really weren't being at that time applied to the guitar industry, the more excited I got.” Example 2. New-eyes research was the key method used to survey the competition. Chris Griffiths, Andy Fisher, and another engineer, toured major guitar factories right across North America. They brought their video and still picture cameras with them. They toured the facilities of competitors and found out exactly how they built guitars. In the flight on the way home Chris sketched out his idea and the birth of the Griffiths Active Bracing System. 6. Business plan In this case study, start-up financing required a comprehensive business plan: a. What is a business plan? Answer: Business plan: a blueprint or road map for operating your business start-up and measuring progress. b. What is the purpose of a business plan? Answer: A business plan outlines a company's goals, strategies, and the steps needed to achieve them. It serves as a roadmap for managing the business, securing funding, and guiding decision-making. Additionally, it helps identify potential risks and opportunities, ensuring the business is well-prepared for future challenges. Note: You may wish to explain that there are different purposes of business plans. Before writing a business plan, students should know who the potential target reader is. In this case, a major reason Chris needed the plan was to get start-up funding. His target audience was venture capitalists. According to the text, page 18, possible reasons for a plan include: • Lays out goals. • Provides an organizing tool. • Acts as a financial guide. • Helps obtain advice. • Helps secure investment. c. When Chris Griffiths submitted the first draft of his business plan to the Genesis Centre, what was its response? Answer: Members of the Genesis Centre thought the concept was “interesting”; but recommended to Chris that the plan needed more work. A major weakness was that it did not contain any discussion or plans regarding the management team. (comptroller, marketing manager, production manager, and so on). The Genesis Centre was also concerned that no prototype had been developed and that no primary market research had been done. Any financial backing would require evidence of primary target customers. They informed Chris that he would not be able to get funding on the basis of this plan. V. SUGGESTIONS FOR GUEST SPEAKERS 1. A popular option, for the first week of classes, is to invite two or three small business owners into your classroom. Ask them to describe their small business experience. Get them to tell the class if they had to do it again, what would they do differently? 2. Often, students in small business have difficulty conducting secondary research. Invite someone from your college/university resource centre or library to make students aware of the vast amount of information available; and to show students how to access this information. VI. INTERNET EXERCISES 1. Self Assessment Online self-assessments are a great place to test your entrepreneurial quotient. Encourage students to complete the E-exercises contained in Box 1.2, page 12. 2. Entrepreneurial Characteristics A good site that classifies the characteristics of entrepreneurs is “What Are the Characteristics of a Successful Entrepreneur?” at: http://www.aw-wrdsmth.com/FAQ/characteristics_successful_entre.html. Again this reinforces the theme that entrepreneurs cannot be cloned. 3. Test Your Understanding of Chapter 1 Have students go to the:book`s companion Web site at www.knowlescastillo6e.nelson.com. Click on to the Test Yourself link and complete the true or false/multiple choice, short answer, and matching exercise for Chapter 1. 4. Business Plans Have your students link on to one of the business plan sites provided in Box 1.4, page 18. Get them to bring in an example of a business plan. Here students learn that there are different formats for a business plan depending on the type and stage of business and the target reader. VI. SUGGESTED LESSON PLAN VII. SUGGESTED ACTIVITIES ACTIVITY #1: Course Introduction and Student Networking 1. Welcome students to the course. 2. Begin by sharing with them your background experience. For example, it would be of value for students to know what business or businesses you have operated and why you have chosen to teach/facilitate this course. 3. Explain that as an instructor and small business person, one of your main objectives is to satisfy the needs of your customer, i.e., the students in this class. One suggestion is to begin with a networking exercise to help you determine the needs or expectations of the class so you can satisfy their needs if at all possible. This exercise will also help them get to know each other. 4. Divide the class into groups of 4–7 students. Ask students to introduce themselves to members of their respective group. 5. Next, ask students to take a few minutes and decide what is the main reason for taking this course. Assign one person in the group to write down a major objective or reason for each member of the group. 6. Ask each group to assign a spokesperson to present the results to the class. 7. You may want to collect the results of the group discussions in case you want to refer to them later on. Keep these expectations in mind while you are teaching the course. Activity #2: Business Plan Building Blocks and Chapter Learning Opportunities Show and briefly explain SLIDE 1-2, SLIDE 1-3, SLIDE 1-4 and SLIDE 1-5. Activity #3: The Age of the Entrepreneur Welcome to the Age of the Entrepreneur! Show and briefly explain SLIDE 1-6 and SLIDE 1-7. Discuss the importance of the entrepreneur and how using technology and internet, starting a business today is now happening at a face rate. What Do The Numbers Say? Show and briefly explain SLIDE 1-8 and SLIDE 1-9. More information is contained in Table 1.1, page 6, Table 1.2, page 6, and Table 1.3, page 8. You might want to begin your discussion on the numbers by asking students: What do companies like Yahoo!, eBay, Research in Motion, Sierra Wireless, and Red Hat have in common? The answer is that they were all founded or co-founded by Canadians. This is the age of the entrepreneur and many Canadians are leading the way. A major point is that, chances are, in the future, most of your students will either own their own business or work for a small business. Activity #4: Entrepreneurs Are… Show and explain SLIDE 1-10, SLIDE 1-11 and SLIDE 1-12. Optional group exercise (30 minutes) 1. Divide the class into groups (4–7 members). Ask each group to name at least two successful small business owners. 2. Ask them to list reasons why the owners have been successful. 3. After about 15 minutes of discussion have group leaders/spokespersons present the results to the class. 4. When the discussion is completed, show and briefly explain SLIDE 1-10, SLIDE 1-11 and SLIDE 1-12. Activity # 5: Networking Break Encourage participants to network and learn more about each other during the break. Activity # 6: The Entrepreneurial Option See NETA Lesson Plan #1 Activity # 7: What is an Intrapreneur? Show and explain SLIDE 1-13 and SLIDE 1-14. Some students may decide not to own a business. Others may start their own business and a few years down the road find they’re heading up a large company. In both of these situations they will have to learn how to foster entrepreneurship in a larger company. This process of making change in a large company is called intrapreneurship. A list of intrapreneurial responsibilities is provided on page 14. Activity # 8: Inc. Yourself See NETA Lesson Plan #2 Activity # 9: What is Small Business? Show and explain SLIDE 1-18 Your might want to add here that there are about one million employer businesses in Canada; about 55% of these firms have 1–4 employees—the so-called micro business (Table 1.3, page 8). Most small businesses provide services. The service sector houses almost 80% of all our micro businesses (see Table 1.3, page 8). Activity # 10: Your Chances of Success Show and briefly explain SLIDE 1-19. Activity # 11: Creating a Business Plan Show and explain SLIDE 1-23, SLIDE 1-24 & SLIDE 1-25 Activity # 12: Conducting Research 1. Explain that in order to be successful in small business, research is a key factor. There are three approaches to research. 2. Show and explain SLIDE 1-23 and SLIDE 1-24. 3. Encourage students to complete Action Step 6, page 19, Action Step 7, page 20, and Action Step 8, page 23. Activity # 13: Summary, Q&A, and Preparing for Chapter 2 1. Recap the key points for each learning objective (using SLIDE 1-2, SLIDE 1-3, and SLIDE 1-4 if necessary). 2. Encourage students to complete the Business Plan Building Block on page 21. 3. Show SLIDE 1-29 and SLIDE 1-30 and encourage students to complete the Checklist Questions and Actions to Develop Your Business Plan, page 24. You may also want to briefly review the Think Points for Success, page 23. 4. Show SLIDE 1-31 and encourage students to complete the case study questions. 5. Respond to any questions that students may have. 6. Encourage students to go to the Nelson Small Business site: www.knowlescastillo6e.nelson.com. Click on to the Test Yourself link and complete the true or false/multiple choice, short answer, and matching exercise for Chapter 1. 7. Have students read Chapter 2 in preparation for the next lesson. Some instructors may want to encourage students to also prepare a mind map of key points contained in Chapter 2. Chapter 2: Spotting Trends and Opportunities I. Business Plan Building Block (SLIDE 2-2) A business plan begins with the “big picture”—the industry or market overview. Chapter 2 will help you to describe the industry and market trends for your business, and thereby, see the “big picture.” It will show you how to expand your knowledge of customer needs and their market niche and how to begin writing the description of your business. II. CHAPTER LEARNING OUTCOMES (SLIDE 2-3 and SLIDE 2-4) After completing this chapter, your students should be able to: • Use mind mapping and brainstorming to discover business opportunities. • Identify trends and market signals that will create opportunities. • Discover market forces that underlie the trends. • Understand how to analyze the potential for small business success by applying the life-cycle yardstick to industries, products, services, and locations. • Use diagrams and mind maps to explore market segmentation. • Determine what business you are really in. • Begin describing your business III. LECTURE OUTLINE 1. Recognizing Opportunities (SLIDE 2-5 and SLIDE 2-6) Chapter 2 is designed to help your students recognize emerging business trends and opportunities so they can put their passion and persistence to work. This will help them to brainstorm and to keep mind mapping and researching their ideas. What are the best business ventures to pursue today? Only they can answer the question. The best business for them is the one that they enjoy; uses those experiences, skills, and aptitudes that are unique to them; and serves a market need—as we learned from the Chris Griffiths experience in the opening vignette of Chapter 1 and Connie van Reenen’s new venture in the opening caption of this chapter. We are now firmly entrenched in the so-called information wave. Some have termed these times the knowledge-based era. We like to think about it as the entrepreneurial age. These times, to a large extent, are marked by the growth of a new craft economy distinguished by quality, small customized quantities, technology, and service. If your students stay in touch with change and the exploding market niches that change creates, they will always see more opportunities than they can pursue. In this new economy many large corporations outsource many of their products and services to small businesses. As we learned from the Tanya Shaw Weeks case study, page 317, outsourcing signals opportunity for enterprising small business entrepreneurs who can latch on to this trend. Action Step 9, page 32, will help them get some new perspectives on change. 2. Brainstorm Your Way into Small Business (SLIDE 2- 7) Brainstorming—a free and open exchange of ideas—is a powerful entrepreneurial technique used to help identify market trends and opportunities. Many entrepreneurs, like Pete and Geoff, page 32, record their brainstorming ideas using mind maps. The key to a successful brainstorming session is to create an open and non-threatening environment that stimulates the creative juices. Brainstorming tips are provided on page 33. 3. Be a Trend Watcher (SLIDE 2-8 and SLIDE 2-9) Industry or market trends reflect our economy’s response to change. And change creates entrepreneurial opportunities. Your students want to make sure that their business serves a need and market trends help them hone in on growth opportunities. Major trends creating opportunities for enterprising entrepreneurs are show in Box. 2.1, page 34. Even more trends are provided in the E-exercise, Box 2.2, page 34. Five pervasive macro trends that Canadian small business must embrace are: 1. Globalization. The export market accounts for about 45 percent (2006) of Canada’s gross domestic product (GDP). Today, one-third of Canadians owe their livelihood to the strength of the country’s global economy. Increasingly, “new breed” Canadian small businesses are seeking to participate in and benefit from this export trend. For example, exporting was a key factor contributing to the success of Garrison Guitars, profiled in Chapter 1 (opening caption). In the opening vignettes (Chapter 2) we learned how Labelle Florists and Pacific Western Brewing Co. found ways to capitalize on the fast-growing exporting trend. Much more information on exporting can be obtained by clicking on to the book’s support Web site at: www.knowlescastillo6e.nelson.com (see Box 2.3, page 35). 2. Technology. We remain deeply embedded in the so-called technology revolution—one which will continue to change the way we live and work. Many of today’s successful entrepreneurs such as Chris Griffiths (Garrison Guitars, Chapter 1), Tanya Shaw Weeks of Unique Solutions Design Ltd. (page 31), and Paul Schmitt of Webview 360 (page 36), are cashing in on this trend. Action Step 10 (page 36) asks them to explore new technologies in more depth. 3. Internet and e-commerce. Most Canadian households and business are now connected to the Internet. As shown in Figure Table 2.1, page 38, almost 65 percent of Canadian households and 82 percent of private businesses are connected. The question now facing the business community is: How do you profit from this connectivity? Successful companies like Job Shark, Webview 360.Com, and Labelle Florists are launching e-commerce (or e-business) strategies. E-commerce is a catchall term that includes any business function or business process performed over electronic networks. E-commerce accounts for less than 1 percent of total operating revenues for private firms (2004). Clearly, the e-commerce trend is just beginning. 4. Boomer trend. The baby boomers, those born between 1947 and 1966 and composed of about 10 million Canadians (30 percent of our total population), are now beginning to hit the big “60.” By 2010, half of them will be over 55, and 18 percent of them will be over the age of 60 (see Table 2.2, page 39, for example). Catering to the needs of retiring boomers is only one opportunity. There are all kinds of opportunities resulting from this trend. As this segment ages, not only in Canada but around the world, boomer needs will have a profound impact on sectors such as real estate, when boomers begin selling their homes, finance as they begin cashing in their RRSPs, and health care as boomers will be living longer and healthier. 5. Splintering of the mass market (SLIDE 2-9). For the consumer, five key factors have splintered the mass market: 1. A shrinking middle class. There are more high-end, affluent consumers and an increasing number of consumers who live at or near the poverty level (for example, part-time workers, single parents and contract workers). 2. Shifting sizes of age groups. Each group has particular well-defined needs—echo boomers (or Y generation); the tweens (8–14 year-olds); and the affluent over 80-year-olds are examples. All of these changing segments have specific needs that create opportunities. 3. Living arrangements are changing and evolving. These include: stepfamilies, dual-career families, single parents, and grandparents raising grandchildren. Each of these groups has a different need for such things as furniture, housing, transportation, food preparation. 4. Ethnic groups are shifting and growing. Our visible minority population has shown a three-fold increase since 1981. More facts on this growing trend are provided in Box 2.4, page 40. 5. Improved information access. The electronic and digital economy means that all Canadians are far more informed and particular about what they buy. We have now entered into what some experts have called the mass customization era. Successful business owners like Tanya Shaw Weeks of Unique Solutions, page 31, customize their products and services then sell them in large quantities. Shaw Weeks, for example, found a way to provide individualized sewing patterns for the mass market of women who wanted to customize their sewing creations. 4. Trends Create Opportunities (SLIDE 2-10 and SLIDE 2-11) Change creates market trends that lead to opportunities for enterprising entrepreneurs. Encourage your students to become a “trend tracker” so they can take advantage of the resulting business opportunities. Changes within the business and social world can be grouped into six major (SEPTIC) environmental categories. (Note: some teachers use the SEPTIC acronym to help students remember the six categories.) 1. Social/cultural: immigration, single parents, religion, ethnic shifts, aging population. 2. Economic: recessions, inflation, changing income levels, cost of housing, food, energy. 3. People (demographics): the boomers, the echo boomers, changing ethnic and multicultural patterns. 4. Technology: biotechnology, the Internet, nanotechnology, personal genomics, universal translation. 5. International (legal/political): who is in power and changing rules—locally, provincially, and nationally, tax laws. Where are the growing export markets? 6. Competition: deregulation, impact of the so-called box stores, foreign companies. Encourage students to scrutinize boomers carefully. Knowing the needs of this growing demographic force can reap huge benefits for the imaginative entrepreneur. By encouraging your students to complete Action Step 11, page 41, this will help them get started on the process of identifying change, subsequent trends, and market opportunities. Action Step 12, page 45, will help them come up with their own list of trends and opportunities. 5. The Life Cycle Stages (SLIDE 2-12) Trends (in industries, products, businesses, services, or even locations) can be divided into four life cycle stages: embryo or birth, growth, maturity, and decline (Figure 2.2, page 45). Encourage your students to watch for market signals to determine where their business is within the four-stage life cycle. This will help them to plan their marketing and pricing strategies. It will also help them discover niche opportunities even in mature or declining industries—the aftermarket, for example. One suggested strategy is to look for a growth segment in a growth industry. Action Step 13, page 46, will get them to match the life cycle stages with trends they have discovered. 6. Segmentation and Gap Analysis (SLIDE 2-13) Market segmentation involves breaking down potential markets into as many similar sub-segments as possible. Segmentation is a marketing technique that can help your students hone in on a market opportunity. This technique will help them identify opportunity gaps and combinations of gaps that may constitute markets. Figure 2.3, page 48, illustrates a mind map that dissects one segment of the health-care industry into sub-segments. Action Step 14, page 49, will help your students look for segments and market gaps. 7. Futurists Top Forecasts (SLIDE 2-14) Discuss the top forecasts as predicted by futurists: • Your phone will tell you when you’re in love • People will download and print their own auto parts and jewelry • Brain-to-brain telephathy • Micro-nations on artificial islands will shift global politics • Young people will read, old people will play video games Direct students to Box 2.5 for more trends. 8. Define Your Business (SLIDE 2-15) In the Mary Clark case, page 49, only by stepping back can your students answer the question of what business they are in (i.e., know who your customers really are and what satisfies their needs). It is important for your students to define their business in terms of the benefits to their customer. Mary Clark, for example, was not in the “stabling horses” business. Rather, she was in the business of providing services for young girls who wanted to ride horses. Table 2.3, page 50, can help your students to define their business. 8. Develop Your Pitch (SLIDE 2-16) Suggest to your students that they begin to formulate their “elevator pitch” or speech that can hook your listener into responding “tell me more.” It’s a clear, concise description of your business idea, the market need, how their business will satisfy that need, and how their business, the customer, and investors will benefit. Now your students are ready for Action Step 15, page 51. Encourage them to take a stab at defining their business and developing their elevator pitch. 9. Think Points for Success Review the following think points with your students: √ A valuable tool you can use for charting trends is the four-stage life cycle yardstick. √ The life cycle yardstick helps you find a growth industry, decide what business you’re really in, and discover gaps and segments that are promising. √ Once you know what segment you’re in, you can focus on market research with new eyes. √ Try to latch onto a trend that will help you survive (in style) for the next 10 to 15 years. √ Trends don’t develop overnight. The signs are out for all to read, months—even years—in advance. √ Develop a list of trends and opportunities. Keep this in your 24/7 Adventure Notebook. 10. Checklist Questions and Actions to Develop Your Business Plan (SLIDE 2-18 and SLIDE 2-19) Review the following Checklist Questions and Actions to Develop Your Business: √ What trends will influence your small business? √ What business are you really in? √ What segment of the market will be your niche? √ Is it a growth segment in a growth market? √ Initially define your target market, and determine how large that customer base is. √ Identify the secondary sources you will use as part of your market research. √ Does this business fit your vision and values? √ Other than making money, what are the goals of your proposed venture? (You should be able to establish four to six over the next three years.) √ For your business, what objectives do you wish to achieve this next year? IV. SUGGESTIONS FOR GUEST SPEAKERS Chapter 2 takes students into research, so you should make sure they are familiar with some of the key sources of information. Some possible guest speakers include: 1. A market researcher from the local newspaper, radio station, or TV station. Have your guest describe how he or she uses research information. You might also want this speaker to talk about demographic differences in different segments or areas of your community. 2. A real-estate expert from a commercial firm. People in real estate have a unique way of grasping trends and movements. Ask your speaker to talk about local growth areas, high traffic areas, and the sources for his or her information. 3. A planner. You can find planners working for the city, for the region, or for any large firm in your area. Ask your planner to talk about projected growth areas in your community. 4. A representative of the Business Development Bank (BDC). Staff from the BDC assist in the financing of small businesses and are usually available to talk to groups. Ask your guest to talk about sources of information for small business or trends in small business. Try to guide the discussion away from failure and into formulas for success. V. CLASS PROJECTS 1. Divide the class into groups of 4–7 students. Then list a variety of different businesses on the board. Divide these businesses into as many areas as you have student groups. In their groups, have students come up with a statement that describes what these businesses are concerned with overall. You should aim to get students to define businesses in terms of benefits to the customer. For example, a locksmith might be in the security business, or a trophy company might be in the recognition business. You may want to refer to Table 2.3, page 50. 2. Assign groups of students to specific chapters of Boom, Bust & Echo (by David Foot and Daniel Stoffman). Ask them to report back to the class on key points and supporting evidence. 3. Have each student profile a trade journal in the industry that is interesting to him or her. The key questions are: 1) Is this industry growing or declining? 2) How does it “feel”? Use these criteria—or develop your own—for the profile: • Name of publication • Industry that the journal caters to • Place of publication • Circulation (How often is it published? Number of subscribers?) • Cost (Fee? Does it come as part of an association membership?) • Web site (How useful is it?) • Intended audience (Beginners? Owners with years of experience?) 4. You can use a mind map on the board to explore and profile almost any industry. A mind map helps to pool knowledge from the group. Use the models from the text or from one of these books: Use Both Sides of Your Brain (Buzan) and Writing the Natural Way (Rico). 5. Have students “decode the secrets of the shopping cart.” They can do this individually while shopping, or you can take the whole class on a field trip and assign different students to analyze different shoppers. Getting the data is easy. All it takes is observation. Have students bring their results to class, put them on the board, and attempt to offer some conclusions. 6. Political scientist Neil Nevitte tells us that Canadian values and beliefs are changing. In his book, The Decline of Deference, Nevitte argues, for example, that we are becoming more permissive and less likely to bend to authority. In our family relationships we are becoming more egalitarian. Health and social relationships are more important to us than money, and we have become more accepting and tolerant of abortion and divorce. Ask students if they agree with these changing social values. Then ask how their parents would feel. This discussion should establish the fact that social values and beliefs are changing and this creates new types of business opportunities. VI. INTERNET EXERCISES 1. Market Trends Create Opportunities (Box 2.1, page 34) Link on to the “Entrepreneurship” page of the Atlantic Canada Opportunities Agency (ACOA): http://www.acoa.ca/e/business/entrepreneurship/ideas/sectioniv.shtml Read the article titled “Some Market Trends to Watch.” • What is the difference between a trend and a fad? • Get students to list an opportunity for 5 of the 13 trends identified in the article. 2. E-Commerce (Box 2.3, page 38) How much do you know about e-commerce? Take the interactive e-commerce quiz: http://strategis.ic.gc.ca/epic/internet/inecom-come.nsf/en/h_qy00034e.html 3. Building an Effective Web site (Case study question 5, page 54) Link on to the Manitoba efuturecentre “Building an Effective Web Site: www.e-future.ca/manitoba/en_CA/pdf/building_an_effective_website.pdf. Go to pg. 6: “What Should You Have on Your Website?” What are eight common sections and pages that should be contained on an effective Web site? Evaluate the Garrison guitars home page based on these criteria. Suggested answers are provided in Section IX below. 4. Outsourcing and Contracting Out (Case study question 4, page 54) i. Click on to “What is Outsourcing”( www.outsourcing-faq.com/1.html ) and watch the Web cast video. According to Peter Bendor-Samuel, a top authority on outsourcing, what is his distinction between outsourcing and contracting out? ii. What are the possible major benefits of outsourcing? VII. SUGGESTED LESSON PLAN VIII. SUGGESTED ACTIVITIES ACTIVITY 1: Review and Overview 1. Review Chapter 1 and answer any questions. (Show SLIDE 1-2, SLIDE 1-3, SLIDE 1-4 and SLIDE 1-25, if necessary.) 2. Introduce Chapter 2 and show and explain SLIDE 2-2 and SLIDE 2-3. This chapter takes students into researching market trends and opportunities. You may want to remind them that there is plenty of available information and various resources for seeking it out. Activity 2: Recognizing Opportunities See NETA Lesson Plan #1 Activity 3: Market Trends Create Opportunities 1. Show SLIDE 2-8 and explain that major trends can be categorized into six “SEPTIC” categories. Note: Some instructors use the “SEPTIC” acronym to help students remember the six categories. The major point here is that any one of these trends can create opportunities. You may want to stress the importance of the boomer trend. A list of opportunities is shown on page 38. 2. Show and explain SLIDE 2-9. 3. You may want to note that Action Step 11, page 41, will help students get started on the process of identifying change, subsequent trends, and market opportunities. Action Step 12, page 45, will help students come up with their own list of trends and opportunities. Optional brainstorming/trend analysis activity (20-30 minutes) 1. Show students only the trends column of SLIDE 2-9. 2. Break the class into groups to brainstorm at least one opportunity resulting from each of the trends shown in SLIDE 2-9. Allow about 15 minutes for class brainstorming. 3. Review the class answers. You may want to get a student to mind map the class brainstorming ideas. 4. Show and briefly review some suggested answers provided in the opportunities column of SLIDE 2-9. Activity 4: Life Cycle Stages 1. Show and explain SLIDE 2-10. One example of each life cycle stage is provided. (This slide is based on Figure 2.2, page 45.) You may want to ask students to think of more examples. 2. Action Step 13, page 46, will help students match the life cycle stages with the trends they have discovered. Activity 5: Networking Break Encourage students to network and learn more about each other during the break. Activity 6: Market Segmentation 1. Show SLIDE 2-11. Explain that once a person becomes familiar with market trends (demographic and industry), the next step is to try to break down potential markets into as many “digestible” sub-segments as possible. 2. Mind mapping is a technique that can help students identify niche opportunities or market gaps. Figure 2.3, page 48, is an example of how to mind map one segment of the health industry. You and your students may wish to do an exercise on mind mapping other opportunity segments. 3. Action Step 14, page 49, will help students look for segments and market gaps. Optional group activity (20-30 minutes) 1. You may wish to split the class into groups to brainstorm some opportunities arising from the growth of the 50+ year-old segment. 2. Mind map the results. (You may want to have a student do this.) 3. You may want to conclude this discussion by asking students to take a look at page 39 for a short list of opportunities arising from the boomer market. Activity 7: What Business Are You Really In? See NETA Lesson Plan #2 Activity 8: Develop Your Pitch Show and explain SLIDE 2-13. Action Step 15, page 51, will help students formulate an elevator pitch for their business. Activity 9: Summary, Q&A, and Preparing for Chapter 3 1. Recap the key points for each objective (using SLIDE 2-2 and SLIDE 2-3 if necessary). 2. Encourage students to complete the Business Plan Building Block on page 52. 3. Show SLIDE 2-18 and SLIDE 19 and encourage students to complete the Checklist Questions and Actions to Develop Your Business Plan, page 53. You may also want to briefly review the Think Points for Success, page 51. 4. Show SLIDE 2-20 and encourage students to complete the case study questions. Answers to the case study questions are contained in Section IX below. 5. Respond to any questions that students may have. 6. Encourage students to go to the Nelson Small Business site: www.knowlescastillo6e.nelson.com. Click on to the Test Yourself link and complete the true or false/multiple choice, short answer, and matching exercise for Chapter 2. 7. Have students read Chapter 3 in preparation for the next lesson. Some instructors may want to encourage students to also prepare a mind map of key points contained in Chapter 3. IX. CASE STUDY Note: This case study will help students put to practice their knowledge of the learning opportunities of Chapter 2. Some instructors may wish to use this case for a one-hour tutorial type seminar. As we discussed in the opening vignette and Chapter 1 case study, Garrison Guitars has become a raging success story. We can all learn from Chris Griffith’s experience. Now we want you to dig a little deeper, go back and link onto the following sites: • Innovation in Canada: Garrison Guitars case profile: http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04209.html • Innovation in Canada, The Practice of Innovation Facilitator's Guide: http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04194.html • Web cast video profile of Garrison Guitars, based on interviews with principals of the company: http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04697.html • Garrison Guitars: http://www.garrisonguitars.com/history.asp Case Questions and Answers 1. Entrepreneurial skills (e-skills) We introduced you to an e-skill called mind mapping in Chapter 1. In this chapter, we learned about brainstorming as an entrepreneurial skill, which will help you discover trends and business opportunities. a. Briefly, what is brainstorming? Answer: According to the text, brainstorming is a free and open exchange of ideas. Brainstorming is a creative problem-solving technique where individuals or groups generate a wide range of ideas and solutions without judgment. It encourages free thinking and open discussion to explore various possibilities. The goal is to stimulate creativity and uncover innovative solutions or opportunities. b. Trends create opportunities. Brainstorming is a skill that can be learned with practice. Get together with a group of friends or classmates. Brainstorm the possible trends that would help Chris Griffiths be successful in the manufacturing and distribution of guitars? Record your results in the form of a mind map. Answer: Trends for Success in Guitar Manufacturing and Distribution 1. Sustainable Materials: Growing demand for eco-friendly and sustainable materials in guitar production. 2. Digital Integration: Increasing interest in digital and smart guitar technologies for enhanced features. 3. Customization: Rising consumer preference for personalized and customizable instruments. 4. Online Retail: Expansion of e-commerce platforms and online marketing to reach a global audience. Note: Refer students to page 28 on brainstorming. Emphasize that every idea is a good idea. Encourage students to get as many ideas as possible—even if the ideas don’t seem plausible. The so-called “good ideas” can be sifted out later on. To get more information on trends, encourage students to link on the “trend” sites provided in Box 2.2, page 34. You may want to use this question as an in-class activity. Have students brainstorm and present their results in the form of a mind map. Here are some plausible and not so plausible brainstorming responses: • e-commerce (textbook) • exporting (textbook) • downsizing (textbook) • technology (textbook) • trend toward big box outlets (maybe get students to link on to “what are your goals for 2005”: (http://www.fastcompany.com/fast50_05/profile/?griffiths219 ) • boomer trend (hard to argue that Chris Garrison used this trend but brainstorms include all ideas not just realistic ideas) • splintering of mass market (e.g., quality, service, mass customization) • contracting out (some call this partnering) • outsourcing • cocooning (more leisure time) • dynamic partnering (text) • cutting costs (text) • the vigilante consumer (ACOA site, Box 2.2, page 34) • self improvement (ACOA site) • manufacturing (Note: According to the ACOA website manufacturing is a growth sector in the Atlantic Provinces: (http://www.acoa.ca/e/business/entrepreneurship/ideas/sectioniv.shtml) 2. Trends create opportunities Industry or market trends reflect our economy’s response to change. And change creates entrepreneurial opportunities. A knowledge of market trends will help you identify growth opportunities. a. Briefly, what is a trend? What’s the difference between a trend and a fad? (Hint: Link onto ACOA’s, “From Ideas to Business Opportunities” site provided in Box 2.2, page 34.) Answer: Trends are general changes in the market place that play themselves out over a longer term—5 to 10 years and maybe even longer. A fad is a relatively short term change in the market—which could last only a few days or up 3–4 years. b. Faith Popcorn is the author of The Popcorn Report, a bestselling book on market trends. She tells us that, ideally, a winning business idea should include or encompass at least three major trends. Five pervasive macro trends that Canadian small business must embrace were discussed on page 33. Briefly describe these five trends. Which of these five trends did Chris Griffiths take advantage of? Answer: The five major trends described in this chapter are: 1. Globalization and the resulting exporting trend The export market accounts for about 45 percent of Canada’s gross domestic product (GDP). Today, one-third of Canadians owe their livelihood to the strength of the country’s global economy. Small enterprises like Labelle Florists and Pacific Western Brewing Co., page 25, and winning PROFIT 100 companies are finding ways to capitalize on the fast-growing exporting trend. According to PROFIT magazine some 72 percent of Canada’s fastest growing companies tapped the international market in 2004—up from 50 percent in 2001. Increasingly, “new breed” Canadian small businesses are seeking to participate in and benefit from this export trend. As of March 2003, Griffiths' factory was building Garrison Guitars at a rate of 12,000 annually. His major markets were in the United States, Europe, and Japan (http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04209.html). As of 2005, Garrison Guitars had garnered 5 percent global market share. It was actively distributing to 35 countries worldwide and talks were in place with potential partners in many other countries including China, Hong Kong, Mexico, and Brazil. 2. Technology Note: You might want to have a general discussion on the meaning of the term technology. Go to http://atschool.eduweb.co.uk/trinity/watistec.html According to the text, page 35, technological breakthroughs such as powerful personal digital assistants, e-books, and toxin testers continually remind us that we remain deeply embedded in the so-called technology revolution—one which will continue to change the way we live and work. Technology affects every aspect of small business today—distribution, marketing, products, and so on. Many of today’s successful entrepreneurs such as Paul Schmitt with his 360-degree digital imaging technology are cashing in on this trend. Garrison Guitars are constructed using the patented Griffiths Active Bracing System™ and the patented Griffiths Integrated Blocking System™. These innovations replace the more than 30 wood pieces found in traditional guitar bracing systems with one glass-fibre component. The Garrison Guitars factory of today is a showcase for technological progress. It is equipped with the latest robotics, laser-cutting, computer-controlled milling, and ultraviolet finishing equipment. A unique projection-molding technology creates skeletal structures for guitars in 45 seconds, compared to the traditional assembly-line process, which takes between two and two and a half hours. (http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04209.html) 3. Internet and e-commerce Most Canadian households and business are now connected to the Internet. Almost 65 percent of Canadian households and 82 percent of our private businesses are connected. However, the trend to sell on the Internet is just beginning. For example, only about 7 percent of Canadian businesses sell goods and services over the Net. But the Internet is more than a sales tool. Successful companies like Job Shark, Webview 360, and Labelle Florists are launching e-commerce (or e-business) strategies. E-commerce includes any business function or business process performed over electronic networks. E-commerce accounts for less than 1 percent of total operating revenues for private firms (2004). Clearly, the e-commerce trend is just beginning. 4. Boomer trend The baby boomers, those born between 1947 and 1966 and composed of about 10 million Canadians, are now beginning to hit the big “60.” By 2010, half of them will be 55+, and 18 percent of them will be over the age of 60. There are all kinds of opportunities resulting from this trend. As this segment ages, not only in Canada but around the world, boomer needs will have a profound impact on sectors such as real estate, finance, health, and tourism. In this case study, it is not clear how Garrison has taken advantage of this demographic trend. But, it could be argued that as the boomers retire they will have more leisure time and thus more time to play a musical instrument. 5. Splintering of the mass market Today’s consumers are informed, individualistic, and demanding. Their buying habits are often difficult to isolate because they tend to buy at several levels of the market. Garrison Guitars uses its Web site to inform. This new vigilante consumer wants quality and service. Garrison guitars focuses on these consumer needs. The splintering of the mass market has also lead to the mass customization trend, which is the subject of the next question. 3. Mass customization The new electronic era means that Canadians are becoming far better informed, with a resulting trend toward individualism. Many Canadians search the Net, get product and company information from around the world, and buy what they want at the click of a button. Electronic access to information is a key factor in the splintering of the mass market. We have now entered a growing trend called mass customization. In this chapter, we learned how Tanya Shaw Weeks took advantage of mass customization (page 31). Go to the Garrison Web site. Show how Garrison Guitars has now begun taking advantage of this new mass customization trend. Answer: Mass customization is the ability of a company to customize its products and services efficiently and cost effectively in large quantities. You might want to suggest to students that Unique Solutions Web site has an informative “White Paper” on the issue of mass customization in the apparel business entitled “Mass-Customization for Clothing: Where’s the Fit?” (http://www.uniqueltd.com/content/pdfs/white_paper_fit.pdf) In 2005, Garrison Guitars launched its Online Custom Shop. (See, Garrison Custom Shop link: http://www.garrisonguitars.com/customshop.asp.) The Garrison Online Custom Shop offers existing Garrison options in any configuration. According to Chris Griffiths “This is just the beginning of The Custom Shop. In the future, Garrison will add exotic tone woods including Koa, Brazilian Rosewood, and other custom features.” 4. Outsourcing and contracting out a. Click onto “What is Outsourcing” (http://www.outsourcing-faq.com/1.html) and watch the video. According to Peter Bendor-Samuel, a top authority on outsourcing, what is his distinction between outsourcing and contracting out? Answer: Outsourcing is a process in which an organization transfers the ownership of a business process to a supplier. The supplier owns and controls the process. The buyer assigns a function to the vendor or outsourcer but does not dictate how this function is going to be processed. Contracting out is a process by which a firm or buyer purchases goods or services from another company (supplier or vendor). In this situation, the buyer owns and controls the process. When you contract out you tell a company exactly what you want and how it is to be processed or made. A good example of the distinction between outsourcing and contracting out can be found on: “Is ‘contracting’ or ‘contracting out’ just different terminology for outsourcing? (http://www.outsourcing-faq.com/2.html ). b. What are the possible major benefits of outsourcing? Answer: According to Peter Bendor-Samuel’s “What is Outsourcing” Web cast (http://www.outsourcing-faq.com/1.html), the major benefits of outsourcing are: • Economies of scale—the supplier can produce in large quantities and thus achieve lower costs per unit • Better/faster service • Access to superior expertise • Use of supplier capital • Speed of implementation In some cases, outsourcing can create value to the buyer. It allows the buyer to focus on its core business while receiving lower costs, better quality in a timely fashion while preserving its capital. c. In the commercialization stage, did Chris Griffiths choose to take advantage of the outsourcing or contracting out trend? (See http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04198.html) Answer: For the most part, Chris did not choose to take advantage of the outsourcing or contracting out trends. According to this case study, there are three ways to acquire new expertise or technology: buy it, hire someone with the requisite knowledge, or persuade someone to show the way for free. Buying technology (through contracting out or outsourcing) is usually too expensive for smaller or younger companies, so the most common techniques are to hire the right people and ask a lot of questions of knowledgeable people. Other reasons for not relying on outsourcing or contracting out include: • Lack of funding. In the initial stages Chris did not have the capital to pay the high and risky start-up fees to a potential supplier. Garrison would have to rely on venture capital and its own employees. • No immediate economies of scale. • No known expertise. • Desire to own and control the process. • Desire to support the local economy. In the later stages of commercialization (1995) Chris was faced with stiffer international competition. To become more efficient, Chris relied mainly on in-house staff. “I sold my team on the vision of keeping shop in Newfoundland” (http://www.fastcompany.com/fast50_05/profile/?griffiths219 ) In 2004, Garrison Guitars announced a partnership with MOL Marketing—to improve the level of service and product support for the Garrison line in Canada. This could have been a possible outsourcing arrangement. In 1995, Chris Griffiths announced his intention of building a line of guitars for sale in big box stores. This MOL partnership may be the mechanism for Garrison to service these types of distributors. In 2007, Chris sold his company to Gibson Guitars Corporation. 5. Building an effective Web site Link on to the Manitoba e-future centre “Building an Effective Web Site: http://www.e-future.ca/manitoba/en_CA/pdf/building_an_effective_website.pdf. What are eight common sections and pages that should be contained on an effective Web site? Evaluate the Garrison Guitars home page based of these criteria. Answer: The main point here is to get students to start thinking about what they would like to see on their own Web site. Web sites keep changing, so the answer below may differ from the time that students link on to this site. At the time of review (2006), we gave this site a “C” rating at best. You might want to encourage students to rank each of the criteria on a scale of 1–10 (1 = poor and 10 = excellent). We have rated Garrison on this basis and the result was 36/80. At the time of review, it is our opinion that the site needed considerable improvement. This may change and we will keep you updated. However, it is a good lesson for students. Even successful firms have room for improvement. You may also want to encourage students to link on to the 1-800-GOT-JUNK? home page (www.1800gotjunk.com/) and compare their results. In our case study, Chapter 6, we also ask students to evaluate the GOT JUNK home page. We gave this site an A to A+ rating. 1. About us Basic requirements: You should include a brief overview of your company, what you do, your key staff, and a brief history of your company (how many years in business, etc). Garrison site: Did not contain an “about us” link but some of this information was contained on the company link: (http://www.garrisonguitars.com/company.asp). At the time of review, key staff was not included. This site could do with an update. (our rating 6 out of 10) 2. Products and services Basic requirements: You need to tell people what you do and provide detailed information about each of your company’s products or services (how to order, reasons to buy, client testimonials, etc.) Garrison site: Yes, this site provided decent information on the guitars—models, features technology, warranty, and care. ( http://www.garrisonguitars.com/guitars.asp). The site also included information on how to order, reasons to buy, dealer location, and a good section on testimonials. (our rating: 8 out of 10) 3. Frequently asked questions (FAQ) Basic requirements: A well-developed FAQ page can provide answers to your clients’ most common questions. Garrison site: This section was not available (coming soon) at the time of this review. We expect that eventually this will be available. (our rating for now: 0 out of 10) 4. Customer support Basic requirements: You should tell visitors about your product and service support. It’s also a good idea to provide contact information for support staff. Garrison site: Contained basic information in the warranty link (http://www.garrisonguitars.com/guitars.asp) (our rating: 7 out of 10) 5. Contact information Basic requirements: Your customers have to be able to contact you. This section should contain all relevant contact information (company name, mailing address, phone, fax, e-mails). Garrison site: This information was provided on the “contact” link (http://www.garrisonguitars.com/contact.asp). It was well done. (our rating: 9 out of 10) 6. Value-added content (news, events, resource information, etc.) Basic requirements: A regularly updated Web site can encourage visitors to return often. A common strategy is to include news articles that provide company and related industry information, or a free, valuable offer. Garrison site: This site had the basic requirements including an online newsletter, players, news articles, and careers. At the time of review this section could be improved to include more events, freebies, contests etc. (our rating: 6 out of 10) 7. Site map or search function Basic requirements: You can include a site map that provides links to the major sections in your site. If your Web site is large, consider integrating a search function. Garrison site: At the time of review, the site map was not available. (our rating: 0 out of 10) 8. Privacy policy and legal information Basic requirements: Including and abiding by a good privacy policy in your site tells people you care about their privacy. You should also include any relevant legal or “terms of use” information in your site. Garrison site: At the time of review, no link existed. (our rating: 0 out of 10) 6. What business are you really in? In this chapter, we have encouraged you start thinking about the needs of a customer. We wanted you to start thinking about defining your business in terms of the benefits to your target customer. a. Who is the target or major customer of Garrison Guitars? Answer: The end-user for Garrison Guitars are those people with a love for playing guitars who want quality sound at a reasonable price. Garrison Guitars real target customers are distributors. These are businesses who sell the guitars to the end-user. b. What business is Garrison Guitars really in? Answer: Garrison is really in the manufacturing and distribution business. It is in the business of manufacturing the highest quality guitars at the lowest prices for a worldwide distribution partnership network that sells and services its value-added products. You might want to explain to students that Garrison guitars is not just in the manufacturing business. It can manufacture the best guitars at the lowest prices, but if its distribution business is not in place, it will not have the world market it needs to sell its product. Garrison must also develop a distribution network model that provides value-added service such as warranties, sales support, and training. For example, to improve the level of service and product support for the Garrison line in Canada, Garrison Guitars announced a partnership with MOL Marketing (in 2004). 7. Pitching your product Chris Griffiths spent several years perfecting and developing his idea. When it came time to manufacture his guitars, he needed venture capital—$250,000—to build his prototype, and a further $3 million to build a factory and complete the commercial implementation phase. Assume for a moment that you are Chris Griffiths of Garrison Guitars and you now need the $3 million. You have to satisfy the needs of your potential venture capitalists, and you do not have much time to convince them. You need an elevator pitch. a. What is an elevator pitch? Answer: Elevator pitch: According to the text, page 50, an elevator pitch is clear, concise description of your business idea that can hook your listener (in this case, a venture capitalist) into responding “tell me more.” An elevator pitch is a concise, persuasive speech designed to spark interest in a project, product, or idea within a short time, typically 30 to 60 seconds. It aims to quickly convey the key benefits and value proposition to potential investors or stakeholders. The goal is to capture attention and prompt further discussion. b. What are the basic needs of your venture capital investors? Note: You may want to refer students to the ACOA “Venture capital” site http://www.acoa.gc.ca/e/financial/venture_capital_doc.shtml#4_1 This site summarizes needs and requirements of a venture capitalist. Answer: The major needs of the venture capitalists in this case were: • A successful entrepreneur with a vision of where he wanted to take a company that was export market oriented, and had developed a new technology. (For example, refer to the comment by David King: (http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04722.html.) • A growth market. According to Chris Griffiths there was a “double digit demand for acoustic guitars with strong potential for exporting. • A well defined target customer with proof that the customer is prepared to buy. • A well defined product or service. • A product/manufacturing process that could not be easily replicated or duplicated. • A skilled and well-balanced management team. • A well thought out business plan. c. What are the key issues you would address in your elevator pitch? Note: This is a good question for an in-class activity. Get students into groups. Have them formulate an elevator pitch (20 min). Have one member of each group, a “pitcher,” present the pitch to the class. Have the class evaluate each elevator pitch on the basis of the three key issues explained below. A student vote could select the “pitcher of the week” award, or whatever. Answer: According to the text, page 50, the key issues addressed in an elevator pitch are: 1. What is the market? • What is your product or service? • What are the features and benefits? • What are the driving trends? Why does your target market need that product or service? 2. How does your business satisfy this market need? • What is your competitive advantage? • Who is your competition and why will your customer buy from you? 3. How do you, the business, and the target market benefit from this venture? • How will your business satisfy its financial objectives—make money? • Why will your customer be happy to buy your product or service? (Price? Service? Convenience?) Solution Manual for Small Business: An Entrepreneurs Plan Ron Knowles, Chris Castillo 9780176501808, 9780176252403
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