1.5

Question 1

What is an entrepreneur?

Answer 1

Organised a business venture, devises the product, decides how it will be produced, chooses an appropriate price and is responsible for the risks involved.

Question 2

Factors of production?

Answer 2

Labour
Land
Capital

Question 3

What is an intrapreneur?

Answer 3

Work from inside the business, taking risks to solve problems.

Question 4

How can market research and financial control reduce uncertainty? (Steps)

Answer 4

Conduct market research
⬇️
Write business plan - set targets
⬇️
Monitor business against targets
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Adapt business where needed
⬇️
Update business plan (last 3 steps repeat)

Question 5

Characteristics and skills of entrepreneurship?

Answer 5

Hard work
Motivation 
Risk-taking
Initiative 
Creativity
Resilience 
Perseverance/commitment 
Understanding the market

Question 6

Financial reasons for starting a business?

Answer 6

Profit maximisation

Profit satisficing - a level of profit that allows them to stay in business is enough

Question 7

Non-financial reasons for starting a business?

Answer 7

Ethical considerations
Social entrepreneurs
Self-actualisation
Creativity
Satisfaction of making things happen
Independence
Home working

Question 8

Factors that determine a businesses objectives?

Answer 8

Size and status
Short vs long term
Consumer pressure
Economic environment 
Importance of profit
Social objectives
Employee welfare

Question 9

What is sales maximisation?

Answer 9

Selling as many items as possibly regardless of other considerations such as profitability. This often means cutting prices.

Question 10

Why would a business use sales maximisation?

Answer 10

Build up customer base & loyalty
May become more competitive because of this
A not for profit organisation may do this simple to reach as many people as possible
Maximising sales clears unsold stock before launching a new version of a product

Question 11

Other objectives of a business?

Answer 11

Market share
Cost efficiency
Employee welfare 
Customer satisfaction
Social objectives

Question 12

What is a sole trader?

Advantages and disadvantages?

Answer 12

Self employed person who runs their own business.

Keeps all profit
Satisfaction of full control
Structure is simple to set-up and run
No legal costs

Risky
Responsible for all business debts
Long hours and hard work
Difficulty if sick or on holiday

Question 13

What is a partnership?

Advantages and disadvantages?

Answer 13

Two or more people working together

A partner may contribute and have useful skills/abilities
Responsibility can be shared; holidays and illness is covered

Business still has unlimited liability
Requires a legal partnership agreement
Partners can fall out

Question 14

What is a limited company?

Advantages and disadvantages?

Answer 14

Owned by shareholders

Shareholders have limited liability, not personally responsible for debts of business
The most shareholders can lose is their original investment

Rules governing the set up and running of the company
May be more difficult to raise finance because liability is limited

Question 15

What is a franchise?

Answer 15

Involves the granting of a license by one party (the franchise) to another (the franchisee). This entitled the franchisee to own and operate their own business using the original brand, resources and existing business model of the franchisor.

Question 16

Advantages & disadvantages to the franchisor of franchising?

Answer 16

Quick way to expand business
Franchisee provides much of the finance and takes responsibility for setting up and running the business
Receivers a regular management fee and/or a share of the profits

Does not get all the profits from the franchise
Does not have total control over the business

Question 17

Advantages & disadvantages to the franchisee of franchising?

Answer 17

Brand is know and brand loyalty is already established
Less likely to fail with the backing of the original company
Training, product development, marketing and advertising may be provided by franchisor

Franchisee has to buy some supplies from the franchisor
Cannot have full control of the business and has to share profit

Question 18

Advantages of becoming a public limited company?

Answer 18

Large amounts of capital raised from stock floatation enable the business to invest in expansion
Original owners of the business may make a lot of money
Business gains status and access to new sources of capital in the future

Question 19

Disadvantages of becoming a public limited company?

Answer 19

The original owners will lose some control
Wishes of shareholders may be in conflict with original owners
Shareholders usually expect a dividend and an increase in value of their investment which means company needs to increase profitability
Floating on the stock exchange can be costly
Has to comply with a range of regulatory and legal requirements and accounts will be available to the public

Question 20

What is opportunity cost?

Answer 20

Using any limited resource in one way means we sacrifice alternative uses. The next best alternative given up is the opportunity cost.

Question 21

Qualities of a good leader?

Answer 21

Will listen to and respect others
Will reflect upon what is happening around them and think of ways to improve the business
Will look at how they can improve their own skills
Give employees direction and motivate them to meet their full potential
Will set high standards and have high expectations of themselves and others
Will be able to encourage others whilst giving constructive advice & criticism
Will make difficult decisions