1.5 - Entrepreneurs and Leaders

Question 1

Entrepreneur

Answer 1

Person who organsises, operates and assummes the risk for a business venture

Question 2

Characteristics of an entrepreneur

Answer 2

1. Passionate
2. Calculated risk taker
3. Resilient
4. Visionary
5. Decisive

Question 3

Intrapreneurship

Answer 3

People within a business creating or discovering new business opportunities which leads to creation of new parts of the business or a new business

Question 4

Barriers to entrepreneurship

Answer 4

1. Lack of capital
2. Market and competition barriers
3. Legal and regulatory barriers

Question 5

Rewards for enterprise

Answer 5

1. Profits
2. Capital gains
3. Self esteem
4. Personal development
5. Sense of control

Question 6

Financial motives for starting a business

Answer 6

1. Profit maximisation
2. Profit satisficing

Question 7

Non-financial motives for starting a business

Answer 7

1. More control over working life
2. Pursue an interest or hobby
3. Being your own boss
4. Escape an uninteresting job or career
5. Change in personal circumstances

Question 8

Drawbacks of being an entrepreneur

Answer 8

1. Lack of financial security
2. High risk
3. Long working hours
4. High responsibility

Question 9

Mission

Answer 9

Qualitative statement of the business’ aims

Question 10

Aim

Answer 10

Long term plan from which business objectives are derived

Question 11

Objective

Answer 11

Time assigned target which must be achieved to realise the stated aim

Question 12

Examples of corporate objectives

Answer 12

1. Increase sales
2. Reduce costs
3. Improve cash flow
4. Improve customer satisfaction

Question 13

Examples of functional objectives

Answer 13

1. Successfully launch five new products in the next two years
2. Increase factory productivity by 10%
3. Reduce the average time taken for customer to pay invoices from 75 to 60 days
4. Achieve a 95% level of high customer service

Question 14

SMART objectives

Answer 14

1. Specific
2. Measurable
3. Achievable
4. Relevant
5. Time bound

Question 15

Factors influencing business objectives

Answer 15

1. Age of the business
2. Views of owners and managers
3. Competition
4. Corporate culture
5. Market conditions

Question 16

Features of strategic objectives

Answer 16

1. Focused on long term
2. Set by the board
3. Involve higher risk and uncertainty

Question 17

Features of tactical objectives

Answer 17

1. Focused on short term
2. Set by line management
3. Relatively low risk

Question 18

Mission statement

Answer 18

Short, clear statement that defines a business’s purpose, objectives, and values. It explains why the business exists and what it aims to achieve

Question 19

Criticisms of mission statements

Answer 19

1. Not always supported by the actions of the business
2. Often too vague and general
3. Often just stating the obvious

Question 20

Cost efficiency

Answer 20

Aim to achieve the most cost effective way of delivering goods and services to the required level of quality

Question 21

Benefits of cost efficiency

Answer 21

1. Lower unit costs
2. Improved cash flow
3. Higher operating profit

Question 22

Incorporated business

Answer 22

Company that has a legal identity separate from its owners, meaning it can own assets, incur debts, and enter contracts in its own name. The owners have limited liability, meaning they are not personally responsible for the company’s debts

Question 23

Unincorporated business

Answer 23

Company that does not have a separate legal identity from its owner(s). This means the owner is personally responsible for the business’s debts and liabilities, and the business ceases to exist if the owner leaves or dies

Question 24

Limited liability

Answer 24

When owners (shareholders) of a business are only responsible for the debts of the business up to the amount they have invested. Their personal assets are protected and cannot be used to repay business debts

Question 25

Unlimited liability

Answer 25

When owners are personally responsible for all debts of the business. If the business cannot pay its debts, the owner’s personal assets (e.g., house, car, savings) can be used to cover the costs

Question 26

Sole trader

Answer 26

Business owned and operated by one person, although they may employ others

Question 27

Benefits of operating as a sole trader

Answer 27

1. Quick and easy to set up 2. Owner has complete control over business decision making 3. Easy to shut down

Question 28

Drawbacks of operating as a sole trader

Answer 28

1. Has unlimited liability 2. Harder to raise finance 3. May have to pay a higher tax rate than a company

Question 29

Partnership

Answer 29

Business owned and run by two or more people who share responsibility, profits and risks

Question 30

Benefits of operating as a partnership

Answer 30

1. Greater potential to raise finance as each partner can provide finance 2. Business has expertise and efforts from more than one owner 3. Simple to set up

Question 31

Drawbacks of operating as a partnership

Answer 31

1. Unlimited liability 2. Profit sharing 3. Potential disagreements

Question 32

Limited company

Answer 32

Business that has a separate legal identity from its owners, meaning the company can own assets, sue and be sued in its own name

Question 33

Benefits of operating as a limited company

Answer 33

1. Limited liability 2. Easier to raise finance 3. Stable form of structure meaning business continues to exist even when shareholders change

Question 34

Drawbacks of operating as a limited company

Answer 34

1. Greater admin costs 2. Public disclosure of company information 3. Directors' legal duties

Question 35

Public Limited Company (PLC)

Answer 35

Shares are traded on the stock exchange, allowing the public to invest

Question 36

Private Limited Company (Ltd)

Answer 36

Shares are privately owned and cannot be sold on the stock exchange

Question 37

Not for profit organisations

Answer 37

Business that does not aim to make a profit for owners or shareholders. Instead, it reinvests any surplus income to achieve its social, environmental, or community-focused objectives

Question 38

Franchising

Answer 38

Business model where a franchisor (the original business) allows a franchisee (the buyer) to operate a business using the franchisor's brand, trademark, business methods, and support. In return, the franchisee pays an initial fee and ongoing royalties

Question 39

Benefits of operating as a franchisee

Answer 39

1. Established brand reducing risk 2. Franchisors provide training, marketing and operational support 3. Easier to secure finance

Question 40

Drawbacks of operating as a franchisee

Answer 40

1. Initial cost and royalties 2. Limited control 3. Franchisees must continue to pay for marketing, supplies and fees even if business performance is weak

Question 41

Opportunity cost

Answer 41

Measures the cost of the choice made in terms of the next best alternative forgone or sacrificed

Question 42

Trade off

Answer 42

When having more of one thing potentially results in having less of another

Question 43

Examples of trade offs

Answer 43

1. Less market research to reduce costs, but may cause a less successful product launch reducing sales 2. Higher quality standards to build reputation, but results in higher quality control and assurance costs 3. Increasing advertising online, but results in reduced advertisement on TV

Question 44

Roles of an entrepreneur

Answer 44

1. Identify opportunities 2. Innovate 3. Take risks 4. Manage resources 5. Create value

Question 45

Moving from an entrepreneur to a leader

Answer 45

1. Strategic focus 2. Delegation 3. Decision making 4. Team management and motivation

Question 46

Difficulties in developing from an entrepreneur to a leader

Answer 46

1. Relinquishing control 2. Developing leadership skills 3. Handling increased pressure and stress 4. Adapting mindset 5. Building trust