1.3 Enterprise, business growth and size. Flashcards
(27 cards)
Entrepreneur
A person who organizes, operates, and takes the risk for a new business venture.
Enterprise
The process by which new businesses are formed and new products/services are brought to the market.
Business plan
A detailed document outlining the objectives, operations, and financial forecasts of a business.
Capital employed
The total value of capital used in the business, including owner’s capital and loans. (total assets - total liability)
Revenue
The total value of sales made by a business. Price x quantity
Profit
TR - TC
Market share
The proportion of total sales in a market controlled by one business.
Internal growth
Expansion of a business by increasing output or developing new products.
External growth
When a business expands by joining with another (e.g. mergers, takeovers).
Merger
When two businesses agree to join together.
Takeover
When one business buys out another and takes control of it.
Horizontal integration
Merging with or taking over another business in the same industry at the same stage.
Vertical integration
Joining with a business in a different stage of the same production chain.
Conglomerate integration
Merging with or taking over a business in a completely different industry.
Economies of scale
Cost advantages a business gains as it grows.
Market capitalization
The total value of a company’s shares on the stock market (share price × number of shares). Share Price × Number of Shares Issued
Start-up capital
The finance needed to start a new business.
What are the key characteristics of a successful entrepreneur?
Innovation, risk-taking, self-motivation, confidence, decision-making ability, and leadership skills.
What is meant by internal (organic) growth?
Growth achieved by increasing output, sales, or developing new products without merging or taking over another business.
Name two benefits of business growth.
Economies of scale, increased market share, more brand recognition, higher profits.
What is the difference between a merger and a takeover?
A merger is when two businesses agree to join together, while a takeover is when one business buys another.
How can the size of a business be measured?
By number of employees, revenue, capital employed, market share, or output.
What is horizontal integration? Give an example.
When a business merges with another at the same stage of production in the same industry. E.g., two coffee shop chains merging.
What are the risks of business growth?
Diseconomies of scale, loss of control, culture clashes, increased competition.
