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New Venture Pest Analysis

In: Business and Management

Submitted By bigzee
Words 5075
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New Venture Final Report

Submitted: Friday, November 15, 2012 Instructor Name: Imad Kamal Lab ID #: D07 Student Names: Logan Chalkley Nikita Galaninskiy Rui Lin Zeeshan Mahmood Audrey Tulio

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Table of Contents
Executive Summary ........................................................................................................................ 2 Program for Itinerary Engineering .................................................................................................. 4 Porter’s Five Forces ........................................................................................................................ 5 PEST Analysis .............................................................................................................................. 12 Financial Feasibility and Market Potential ................................................................................... 14 Exhibits ......................................................................................................................................... 16
Exhibit A: ................................................................................................................................................ 16 Exhibit B: ................................................................................................................................................ 20

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Executive Summary
In 2009, the University of Waterloo (UW) welcomed 24,377 students (University of Waterloo, 2010) into their undergraduate programs. However, only 89.4% (University of Waterloo, 2010) of those students continued their education at UW the following year. This means that there were about 2583 students that were unable to continue at UW and had to dropout. In an interview with MacLean’s Magazine Deanne Fisher, director of student life at St. George Campus of the University of Toronto stated: “We do know from our surveys that the primary barrier to success for our first-year students is not financial, it’s their own academic performance,” (MacLean’s, 2010). Coming into university, students are often overwhelmed by the increased workload and freedom, and this generally leads to poor academic performance. One of the most widely recommended strategies for increasing academic performance is using your time effectively. Through effectively utilizing their time, an individual would be able to accomplish much more in the same amount of time. One of the best ways to effectively manage your time is through the creation of a day-to-day schedule. Currently, there is nothing available to assist a university student in the creation of a personalized day-to-day schedule. Program of Itinerary Engineering (PIE) allows university students to create a personalized day-to-day schedule with a few simple clicks. The service would be free for students as universities would pay PIE to purchase the service for their students. Through collaboration with universities, it would be able to ensure that we always have the updated course syllabus of all courses being offered in any given term. For a student to get a personalized schedule, they would simply login to PIE, select their courses, skill level and based on that information, PIE would be able to generate a day-to-day schedule for them to follow.

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PIE’s market strategy is to provide universities with a service that is hassle free and easy for their students to use. We strive to ensure that the schedules produced are highly accurate for all students, and fully customizable. We aim to provide students with an easy way to manage their time and achieve the best that they can at virtually no cost to them. We require a very low initial capital investment, and provide a unique and high quality service to an ever expanding target market of over 90 universities across Canada (Canada City, 2003) that welcome over one million students (AUCC, 2012) nationally. Combining the fact that we have a very low initial capital investment and a low maintenance cost allowing us to sell out product for a reasonable, yet profitable price.

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Program for Itinerary Engineering
PIE strives to provide high quality services to a large target market at a low cost. Having a product that fills a market niche, we will see aggressive growth in the future. The high quality service that we provide is sure to appeal to countless of universities and students across the nation. One of the most difficult aspects of university life is time management. The increased workload, combined with the new found freedom and countless activities taking place, can become extremely overwhelming. If students were able to manage their time effectively, not only would they be able to excel in their academics but also take part in extra-curricular all while enjoying university life. To tackle this problem, we propose the creation of the Program for Itinerary Engineering (PIE), a website that would make time management as “Easy as Pie”. PIE would be initially available for the University of Waterloo and Wilfrid Laurier University. It would contain a list of courses offered at the university during a given term. To use PIE, a student at a university signed up for our services would be able to log into our website using their university credentials. Next, they would input key information, such as their schedule and skill level in the courses, prior commitments and so on. Next, based on the information the student provides PIE would generate a rough day-to-day schedule for the whole term for the student to follow as a guideline. Students would be able to add events, modify and export their calendar, all with a few easy clicks. With PIE, students would be able to create a rough guideline for them to follow within a few minutes rather than spending hours plotting dates on a calendar. To get PIE up and running, we would need to find web hosting, and create the website itself. In the present day and age, there are countless web hosting companies, and tools to assist in the creation of websites. Taking the very limited resources of a startup into consideration, PIE

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is a technically feasible idea, as all the technology required for PIE is in existence and fairly cheap. The project is not capital intensive and would require a minimal initial investment.

Porter’s Five Forces
Five Forces Threat/Opportunity Impact on Profitability/Strategic Implication Profits: Increased since expenses are low. Strategic Implication: Our suppliers are low importance stakeholders, and as such, our strategy will be to monitor or buffer them; they do not need to be significantly involved with our decisions. This approach is supported by Savage’s work and Harrison’s work on how to manage stakeholders. Strategic Implication: We should pressure suppliers for lower pricing, or switch to alternative suppliers (website providers) that offer their services at a discounted rate. This would lower our expenses and in turn increase our profits. Strategic Implication: We can switch suppliers if they are not meeting our needs, so we should aim for short-term contracts; long-term contracts must be approached very cautiously. Strategic Implication: This will not significantly affect us as there are many free website providers as well. In the rare case that all website providers (suppliers) decide to raise their pricing, we may incur increased expenses and lower profits.

Bargaining Power of Suppliers

Low threat: Our only supplier is a website provider, and as explained below has low bargaining power.

Number / concentration of suppliers

Opportunity: Suppliers are unconcentrated and numerous, thereby increasing our venture’s bargaining power.

Switching costs

Opportunity: Switching costs relatively low

Attractiveness of Low threat: there are not substitute supplies many attractive substitutes

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Threat of forward integration

Negligible threat

Strategic Implication: We do not have to fear disclosing information to supplier. Spending on security will be low, and as such our profits will be higher. Strategic Implication: We must raise barriers to entry, such as creating brand loyalty via our affinity with university students Profits: the threat of new entrants will decrease the amount we can charge, and therefore decrease profits; we may have to offer discounted rates or promotions.

Threat from other potential Potential entrants Entrants / Barriers to Entry Opportunity for us to enter

Capital Requirements

Opportunity: low capital required, so we may enter easily Threat: other potential entrants may enter as well

Strategic Implication: Our venture will involve less capital risk. However, we need to be actively aware of others who may potentially enter and raise barriers as described above. Profits: With low start-up costs, it will be easy to cover our initial fees, and receive profit.

Technology / Know-how

Threat: we have not mastered the technology and knowledge involved Opportunity: we can make this a barrier of entry for others

Strategic Implication: we need to refine our know-how and create unique/ proprietary technology. Patent applications should be considered. This will become a good barrier of entry to prevent new entrants from catching up, decreasing our competition, and avoiding price wars, thereby increasing our profits. Strategic Implication: We must compose our proposal carefully to the universities to capture support early on so that we may proceed with our business plan. This may be a huge road block and as such we must do a comprehensive study of the

Regulatory approval

Threat: Approvals from the University of Waterloo and Wilfrid Laurier University are required to access student data

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viability of our venture beforehand. However, this barrier to entry will help prevent potential competition from entering, increasing our profits. Brand loyalty Opportunity: our research shows our target market is not particularly loyal to any form of time management tool used right now. 50% of students surveyed at Laurier are willing to use a website, and over 90% would consider it. Similar figures were found for Waterloo (48%, 88%). See Exhibit A for more info. Opportunity: The internet is very accessible. Strategic Implication: Our target market is accessible. In addition, we can create brand loyalty via our affinity to Laurier and Waterloo students to raise a barrier against external companies from entering. This would allow us to capture greater revenue, increasing our profits.

Access to distribution (and others)

Strategic Implication: Our team members are not required to all gather to make changes; work on the product can be completed wirelessly or at home. Strategic Implication: we need to create a competitive advantage: a good algorithm for time managing, proof that it works, and testimonials Profits: decreased due to losing market to substitutes

Substitutes

Threat: customers may choose to use paper planners, or simply not plan.

Number of good substitutes

Threat: Our research shows that the primary substitutes are paper calendars and basic phone calendars (see Exhibit A).

Strategic Implication: We need to show how electronic planners are more convenient and effective. Profits: Increased expense on advertising may decrease our profits in the short run, but increase them over the long run. Strategic Implication: Because our

Price /

Opportunity: paper planners,

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competitiveness of substitutes

wall calendars cost more than our product, which will average to only a few dollars per user per year. Substitutes range in $5-15 dollars per user per year.

revenue mostly comes from widespread adoption, we must create more incentives to use our product, like price. Profits: decreased; we charge less. Over the long-term the increased customer base will allow for increased revenue and profits.

Bargaining Power of Buyers Number/concentra Being that our target market tion of buyers is the two universities, the University of Waterloo and Wilfrid Laurier University, in our initial stages, our market is very concentrated. We are focusing on making contracts with both schools so we would start with two very large buyers. Standardization of Our website is very unique in products that it engineers the schedules for the students, instead of just being a place for them to write down deadlines etc.. This is very different from anything on the market as there are few websites and alternative methods of scheduling that allow the same customization. Switching costs Currently, the universities do not have any similar contracts to the one we are proposing so they can take on PIE at any This implies that one contract will generate a lot of revenue with our business. As we begin to expand to other educational institutions we can even more profit. The key is to make the deal, as each is worth a lot to our company. There are many institutions we can look into each has a lot of students that would benefit from our program.

This implies that customers are going to want our program specifically over others. This also means it is important for us to protect the idea and the software so that our idea is not copied. If we are not careful in securing our product our sales will drop drastically.

With no switching costs to start with our company, sales could begin immediately. There would be no sales lost due to schools waiting for other deals to

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time. Our contract will lock them in for a period of time which could help us to hold on to sales. Importance/discre tion of purchase Many first year university students, and other students as well, have difficulty organizing their time and it could be a reason for failure. By the universities making a contract with us, their students could focus more on school work and could consequently have a higher level success. An average of approximately 30% of students say they procrastinate all the time and the remainder of students admit to doing this often or occasionally. About 50% of students were extremely willing to change and the others expressed some willingness to change.

conclude before taking us on.

Upon realizing the many important benefits that our software offers, the universities will want to sign on as a service to their students. Once word begins to spread and more contracts are made, our profits will rise exponentially.

Rivalry among Existing Firms Number of competitors There are no companies in the market that offer a product that creates an itinerary for the user. This then means that our only competition would be indirect and include such things as agenda books, desk calendars, phone calendars, etc.. The less competition there is, the more we can charge for our product and the more sales we can expect to see. Consumers cannot buy a similar product anywhere else; if they want it their only choice is to buy it from us.

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Size/capability of competitors

Our group of direct competitors is very miniscule. Out of the people surveyed (see Exhibit A) only about 6% of users have ever used a website to keep track of their schedule. There is next to nothing on the market. As time goes on, more and more tasks and services are going online. Many people who took our survey said they use phone calendars in order to organize themselves. In talking to a time management professional (Exhibit B), there is demand for a program such as our own. It is becoming more and more needed with everyone’s busy lifestyles. The consumers-being the students-would pay nothing to switch from their current method to our software. Many of the programs and tools they use now were at a one-time cost and will cost them nothing to switch over. Also if our contracts with the school start and end with the different terms then students would be aware ahead of time of the services available to them; they could make a decision before buying a calendar, for example.

With little to no real competition, our goal would need to be persuading the schools that this is the best way to organize a busy school term. We would not need to focus on pulling buyers away from a similar product.

Growth rate of industry

Our product would allow students to keep their schedules digital and accessible with the added (and soon to be essential) features of saving time writing everything in as well as time-blocking.

Consumer switching costs

Students do not have a lot of money to spend and by having no switching costs, it would be an easier decision for them to at least try our software. It is our belief that once they experience the benefits and ease of PIE they will want to keep with it for the rest of their school careers.

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Degree of difference between products

As has been said, there is This means students and universities will nothing else that can create a need to switch to our company to utilise user’s schedule for them and such a convenient way of organizing. keep track of dates. The website would be very different from the old ways of calendars and agendas. As everything is only becoming more digital, there is no reason to believe that our product will go out of date. With a website it is also fairly simple to make updates to the program, even part way through a term. Update notices could be sent out, as they often are for other programs, if something needs to be changed. Also there will always be a need for time management and as our product is the most convenient way to go about it, there will always be a need for PIE. With our product having no foreseeable date of obsolescence, we could continue to make contracts indefinitely (provided we make updates as they become necessary).

Product perishability

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PEST Analysis
Although it may be very meager, the Program of Itinerary Engineering, or PIE, does deal with political/legal influences from the external environment. The factor of having “comprehensive legal framework (Marketline, 2012, p.18)” in the business environment brings to light the idea that having a business in Canada is worthwhile. According to Marketline, “starting a business in Canada is far easier than in other nations, as it takes an average of five days and one procedure [in comparison to the Organization for Economic Co-operation and Development (OECP)] average of twelve days and five procedures. (2012, p.18)” This information is vital to the company as it reaffirms to us that our business can be sustainable and begin in a quicker and more efficient way. An economic observation that is apparent is the certain growth of areas in Canada. In several regions, growth is not evenly distributed amongst provinces and territories as Quebec, Ontario, British Columbia and Alberta are seen to have a greater effect than others. In fact, in 2009, they “accounted for 85% of the country’s GDP. (Marketline, 2012, p.22)” Now, in terms of future business expansion, it would be in the company’s best interest to direct future operations to these provinces first before moving onto other parts of the country as the majority of the demand is found in these areas. Additionally, we would seek workers and employees as well as the four provinces make up “87% of the country’s total employed population of 17.3 million” as of May 2011 (Marketline, 2012, p.22). A social factor that must be addressed is the demographic size. As PIE refers to postsecondary students, a majority of the people from “the Baby Boom Echo” cohort would finished their post-secondary education by now or are currently in the midst of completing it which means that the demand for PIE would come from the “Millennium Busters”, which is a much

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smaller cohort, A section relating to the “baby boomers” and how they are heading towards retirement, explains that “the number of people aged 65 and above increased by around 13% from 2001 to 2006, whereas the number of children under 15 dropped 4% over the same period, (Marketline, 2012, p.22)”. But given that the revenue would be based on contracts with institutions who will admit students in a very selected process (through averages, extracurriculars, etc), we will assume that the amount of students attending post-secondary educations will be somewhat constant in the long-run. Lastly, another important social idea that must be taken into consideration are the constant changes educational employees are having to make. According to the report provided by Marketline, “Provincial and territorial ministries of education are constantly faced with the need to adjust to changes in the size and geographical location of the school-aged population. The continuing trend toward a reduction in the size of the school-aged population is part of that challenge, as school boards work to balance the need for facilities in areas where new schools are needed with the need to address the issue of declining school populations in other areas (2012, p.60)”. As mentioned above, the change in secondary schools experience is equivalent to the change that post-secondary institutions will face as the population will eventually reach the age and requirements needed for post-secondary education and brings to light the effects the existing cohorts already have. This gives our company a better understanding of the areas within provinces/territories and how our product can succeed in those areas. A technological factor that is affecting the general environment is the current challenge the educational system is not fulfilling for jobs. According to Marketline, “a high proportion of the Canadian population hold post-secondary qualifications, a low number have degrees,

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especially advanced qualifications that would provide skills and competencies to be used in business, (2012. p.25).” Given this, there is the possibility that this could be caused by many reasons, such as the lack of motivation students may face or the difficulty this upper education holds, which gives our product the opportunity and advantage of improving this challenge in this technological factor as PIE tries to enforce the idea of responsibility by managing one’s time wisely.

Financial Feasibility and Market Potential
Canadian universities are the customer target group for the Program for Itinerary Engineering (PIE). As the demand for university degrees is strong and continues to grow, universities would be more willing to buy software programs to help students organize their time in a more productive manner. For instance, in 2011, Canadian universities welcomed 1 015 000 undergraduate students, which is 35% greater than number of undergraduate students in 2000 (“Back to school quick facts,” n.d.). However, in order to successfully start up the business and attract customers to the early development stages of the company, the Program for Itinerary Engineering (PIE) will initially be offered at the University of Waterloo, which has 25 425 undergraduate students (University of Waterloo, n.d.) and Wilfrid Laurier University, which has 16 800 undergraduate students (Wilfrid Laurier University, n.d.). After conducting a survey among students at both universities, it was estimated that majority of our future stakeholders procrastinate from time to time and would find time management software very useful, which is proven to be true in Exhibit A. However, there are several competitors which have fewer features than PIE, but are quite popular in terms of constant use by students. According to Exhibit A, most use their phone calendars, paper calendars; electronic calendars and few actually use websites. But PIE unites a lot of great

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features from electronic calendars (e.g. push notifications, reminders for deadlines, integration into different calendar software) as well as contain some unique aspects (all deadlines of the courses, university event dates, workload/time ratio-meter, estimation on how to allocate your time, warning algorithm if the plan made is not efficient), thus making it better than other time management products. The Program for Itinerary Engineering requires a lot of time in developing the program itself. According to the Exhibit B, before creating a website for the PIE, the code should be developed and thoroughly tested in order to ensure consistency and that it will meet consumer expectations. And since PIE will be a website-based program, it will require a domain name, which is not too expensive. At Canspace, for example, which is Canada’s leading domain name registrar, it has the low cost of $9.75 per year (Canspace.ca, n.d.). Once our program has been created it will not be difficult to get the domain and have our product ready to market.

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Exhibits
Exhibit A:

Survey Data for the University of Waterloo

What year are you in?
20 Number of People 15 44% 10

Gender
M F 56%

5 0 1 2 3 4 5+

What Faculty are you in?
10 Number of People 8 6 4 2 0 Applied Health Science Arts Engineering Enviroment Mathematics Science

How often do you procrastinate?
12 Number of People 10 Number of People 8 6 4 2 0 Never Occasionally Often All the time 12 10 8 6 4 2 0

How bad you think procrastination is?

1

2

3

4

5

Scale of 1-5 (5 is the max)

Do you use technology to organize your time?
12 16 Number of People Number of People 14 10 12 8 10 6 8 6 4 4 2 2 0 0

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Paper Calender Paper Calendar Calender

Electronic Calendar Electronic Calender

Phone Calendar Phone Calender

Website Website

Agenda Agenda

Which of the following features are you interested in?
25 20 Number of People 15 10 5 0

a “how calendar screwed push including are you” calendar of open gym notificatio meter, ie, all times, club ns/remind how much deadlines ers for signups, work you for courses deadlines have left + other events how much time left 20 3 18 2 20 3 16 5

an estimate of how much time to allocate for each class/assig nment 20 3 14

warnings if integration your work integration integration into other plan may into google calendar into iCal result in an calendar software all-nighter

Interested In Willing to pay for 12 Number of People 10 8 6 4 2 0 1 2

12 2

8 2

12 1

6 1

How willing are you to to use a website that can help manage your time?
Number of People

12 10 8 6 4 2 0

How willing you are to change your procrastinaion behavior?

3

4

5

1

2

3

4

5

Scale of 1-5 (5 is the max)

Scale of 1-5 (5 is the max)

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Survey Data for Wilfrid Laurier University

What year are you in?
20 Number of People 15 10 5

Gender
15% M F

85% 0 1 2 3 4 5+

What Faculty are you in?
10 Number of People 8 6 4 2 0 Arts Business & Economics Music Science Social Work Education

How often do you procrastinate?
9 8 Number of People Number of People 7 6 5 4 3 2 1 0 Never Occasionally Often All the time 8 7 6 5 4 3 2 1 0

How bad you think procrastination is?

1

2

3

4

5

Scale of 1-5 (5 is the max)

19

Do you use technology to organize your time?
12 10 Number of People 8 6 4 2 0 Paper Calender Calendar Electronic Calender Calendar Phone Calender Calendar Website Agenda

Which of the following features are you interested in?
20 18 16 Number of People 14 12 10 8 6 4 2 0 a “how calendar screwed push including are you” calendar of open gym notificatio meter, ie, all times, club ns/remind how much deadlines ers for signups, work you for courses deadlines have left + other events how much time left 19 4 13 4 17 2 13 9 10 9 8 7 6 5 4 3 2 1 0 an estimate of how much time to allocate for each class/assig nment 16 6

warnings if integration your work integration integration into other plan may into google calendar into iCal result in an calendar software all-nighter

Interested In Willing to pay for 9 8 7 6 5 4 3 2 1 0

14 4

10 0

8 0

8 1

How willing are you to to use a website that can help manage your time?
Number of People

How willing you are to change your procrastinaion behavior?

Number of People

1

2

3

4

5

1

2

3

4

5

Scale of 1-5 (5 is the max)

Scale of 1-5 (5 is the max)

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Exhibit B: As a part of our preliminary research, we interviewed a number of professionals in the field to get their feedback on PIE. Their recommendations have been paraphrased below. Marilyn Nickerson, Councilor and Career Planner  Ensure that your website is easy to use, do not force users to have to go through a maze of options to get what they need but maybe add in an “Advanced options” section.  When writing the program to generate the rough schedule make sure you consult a professional councilor to make sure that your program outputs a good rough schedule  Before you approach any potential customers make sure that you give the schedule to a few people to try out so you can have something to back up your claims when you approach potential customers. Kurt Thachuk, Web Developer  Before you do anything, get a clear idea of what it is you want the program to do, meaning you should know how their skill level will affect how much they study, and so on before you buy a domain. Basically, write down the code on paper and figure out the best way to implement that code into a website, then based on that buy a domain and hosting plan that suits your needs  If you want to make an app for this as well, make sure you understand what you want the app to do, especially if you add in the export to iCal or Google Calendar function, what will your app do?  Do not bite off more than you can chew, go one step at a time and have a prototype ready before you try to approach any potential customers, by that I mean a rough website that does schedule generation, just you have not finished ironing out the wrinkles yet.

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Works Cited
Association of Universities and Colleges of Canada. (n.d.). Back to School Quick Facts. Retrieved from Association of Universities and Colleges of Canada: http://www.aucc.ca/wpcontent/uploads/2012/09/quick-facts-back-to-school-2012.pdf Association of Universities and Colleges of Canada. (n.d.). Undergraduate student enrolment surpasses million mark. Retrieved from Association of Universities and Colleges of Canada: http://www.aucc.ca/media-room/news-and-commentary/undergraduate-student-enrolmentsurpasses-million-mark Association of Universities and Colleges of Canada. (n.d.). Wilfrid Laurier University. Retrieved from Association of Universities and Colleges of Canada: http://www.aucc.ca/canadianuniversities/our-universities/wilfrid-laurier-university CanSpace Solutions. (n.d.). Domain Names - CanSpace Solutions. Retrieved from CanSpace Solutions: http://www.canspace.ca/domains.html Conference Board of Canada. (n.d.). University Completion. Retrieved from Conference Board: http://www.conferenceboard.ca/hcp/details/education/university-completion.aspx Macleans.ca. (n.d.). Universities aim to improve retention rates. Retrieved from McLean's: http://oncampus.macleans.ca/education/2010/09/27/students-who-dropout-over-grades/ Statistics Canada. (n.d.). Postsecondary Education – Participation and Dropping Out: Differences Across University, College and Other Types of Postsecondary Institutions. Retrieved from Tru: http://www.tru.ca/__shared/assets/Shaienks_2008_PSE_Participation_and_Dropping_Out23618. pdf University of Waterloo. (n.d.). Common University Data Ontario 2011. Retrieved from University of Waterloo: http://analysis.uwaterloo.ca/statistics/cudo//SectionK.php?year=2011

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