1.5 - Entrepreneurs and Leaders

Question 1

What is an entrepreneur?

Answer 1

A person who organises, operates and assumes the risk for a business venture and takes the risk in starting a new business.

Question 2

What are the benefits of business to society?

Answer 2

• create employment and develop human capital
• drive innovation through R&D and new products
• pay taxes on profits earned & collect taxes for government

Question 3

What may an entrepreneur need to do as the business grows?

Answer 3

• employ staff
• use the services of experts
• delegate responsibility to others
  Other key decisions include:
• moving to bigger premises
• changing suppliers
• expanding product range

Question 4

What decisions may an entrepreneur have to make once their business becomes established?

Answer 4

• managing resources including stocks, personnel and finances
• making marketing decisions about aspects of the marketing mix such as what price to charge and how to promote the business
• dealing with customers
• maintaining financial resources

Question 5

What are some barriers to entrepreneurship?

Answer 5

• may not be comfortable working for others
• lack of finance
• knowledge and know how
• risk- averse
• lack confidence

Question 6

What are some economic barriers to entrepreneurship?

Answer 6

• taxation
• market entry regulations

Question 7

What are some financial barriers to entrepreneurship?

Answer 7

• lack of start up capital
• lack of cheap labour
• lack of investment

Question 8

What is risk?

Answer 8

The probability that things aren’t going to go as planned. E.g. the chance that money invested could be lost

Question 9

What is uncertainty?

Answer 9

When businesses are unable to predict external shocks or future events - not measurable

Question 10

How can risk be anticipated by entrepreneurs?

Answer 10

• market research
• understanding the industry
• assessing personal losses
• business plans

Question 11

How can uncertainty be anticipated?

Answer 11

• keep up to date with current business climate events e.g. Economic and political changes
• make plans for unexpected events
• spread risk e.g. a number of products or suppliers

Question 12

What are some characteristics of an entrepreneur?

Answer 12

• creative
• hardworking
• resilient
• innovative
• self confident
• risk taker

Question 13

What are some financial motives for staring a business?

Answer 13

• profit maximisation - desire to earn substantial rewards
• profit satisficing - sufficient profit to enable a satisfactory standard of living

Question 14

What are some non- financial motives for starting a business?

Answer 14

• more control over working life
• need for flexible working
• want to be the boss
• change in personal circumstances e.g. redundancy

Question 15

What is a social enterprise?

Answer 15

• businesses trading for coil and environmental purposes

Question 16

What are some profit reasons for starting a business?

Answer 16

• want to make more money than current job
• want to earn more than minimum wage
• want to be self employed
• want earnings to be unlimited

Question 17

What are some non-profit reasons for starting a business?

Answer 17

• want to start a business as a legacy for children to take over
• want flexibility and work life balance
• want control in their life and to be independent and to be more creative
• want to be their own boss - don’t want to be ordered around

Question 18

What are some ethical reasons for starting a business?

Answer 18

• want to help others e.g. fair trade
• want to make a difference to the planet - eco-friendly
• want to start a business for the benefit of others e.g. community cafe
• want to give something back to society

Question 19

What are corporate objectives?

Answer 19

What the business as a whole wants to achieve

Question 20

What are functional objectives?

Answer 20

Set for individual functions of a business and are designed to support corporate objectives

Question 21

What is an example of a corporate and functional objective?

Answer 21

• if the businesses corporate objective is to increase sales, the functional objective may be to successfully launch 5 new products in the next two years

Question 22

What are some examples of corporate objectives?

Answer 22

• survival
• revenues - e.g. revenue growth, sales maximisation, market share
• cost efficiency or cost minimisation
• profits and profitability - e.g. specific level of profit, rate of profitability, profit maximisation
• employee welfare
• customer satisfaction - at the heart of most firms

Question 23

What are ‘SMART’ objectives?

Answer 23

S - Specific
M - Measurable
A - Achievable
R - Relevant
T - Time bound

Question 24

What is a sole trader?

Answer 24

A business owned by one person

Question 25

What is a partnership?

Answer 25

When two or more people (between 2 and 20) own a business.

Question 26

What is a private limited company (LTD)?

Answer 26

An incorporated business, so it can be described as a company. It is owned by shareholders however, only friends and family can buy these shares.

Question 27

What is a public limited company (PLC)?

Answer 27

A business that is owned and managed by shareholders. Anyone can buy shares in this type of company.

Question 28

What is a franchise?

Answer 28

When one business, the franchisor, gives permission to an entrepreneur, the franchisee, to set up a business using its brand name and selling its products.

Question 29

What is a social enterprise?

Answer 29

A business that trades for a social and/or environmental purpose.

Question 30

What is a lifestyle business?

Answer 30

A business that is set up and run by its founders with the aim of living or maintaining a certain lifestyle so that the owner can live their life as they like.

Question 31

What are the advantages and disadvantages of being a sole trader?

Answer 31

- can make your own decisions - quick and easy to set up - only need to register with HMRC - sole trader keeps all of the profits BUT - unlimited liability - may be difficult to raise enough money to establish or grow the business - high pressure - no one to share the load with

Question 32

What are the advantages and disadvantages of a partnership?

Answer 32

- partners can share ideas and decision making - risk of unlimited liability can be shared - financial information kept private BUT - may be disagreements - unlimited liability - profits are shared

Question 33

What are advantages and disadvantages of being a private limited company (LTD)?

Answer 33

- limited liability - more capital can be raised by issuing shares - control over business cannot be least to outsiders - higher status BUT - have to publish financial info - profits are shared - cannot raise large amounts of money like PLC’s

Question 34

What are the advantages and disadvantages of being a public limited company (PLC)?

Answer 34

- huge amounts of money can be raised from issuing shares - lower production costs as firm gains economies of scale - PLC’s can often dominate the market due to their size - easier to raise finance - institutions more likely to lend to PLC BUT - extremely high set-up costs - anyone can buy shares, which can lead to a divorce of ownership and control - financial information is available to the public

Question 35

What is stock market flotation?

Answer 35

This is when a company’s shares are offered to the public or when a company ‘goes public’.

Question 36

What is meant by an opportunity cost?

Answer 36

The cost of choosing the next best alternative

Question 37

What is a trade-off?

Answer 37

A trade-off involves choosing more of one and less than another, also known as a compromise