Chapter-3 Flashcards
Enterprise, business growth and size
Who is an entrepreneur?
Entrepreneur is an individual who has an idea for a new business and takes the financial risk of starting up and managing it.
Although business ideas may vary, what common traits or actions do most successful entrepreneurs share?
1) Have an idea for a new business
2) Are prepared to invest their own savings
3) Accept the risk of failure
4) Want to make all the decisions about the management of the business
Although an entrepreneur’s idea may vary, what do all entrepreneurs share?
1) A new idea for a good or service
2) Offering an existing good or service in a way that has not been offered before
3) Offering an existing good or service in a new location.
What are the characteristics of successful entrepreneurs?
1) Innovative
2) Self-motivated and determined
3) Self-confident
4) Multi-skilled
5) Strong leadership qualities
6) Initiative
7) Results driven
8) Risk-taker
9) Good at networking
What are the contents of a business plan?
1) The business
2) The business opportunity
3) The market
4) The objectives of the business
5) Financial forecasts
How business plans assist entrepreneurs?
1) The information it contains can be used to persuade lenders such as banks and investors to provide finance to the business.
2) The plan gives the business a sense of purpose and direction. It sets out the resources required by the business such as finance, the number and skills of employees needed, and how the goods and services will be marketed to consumers.
3) The objectives and financial forecasts provide the business with targets to aim at and enable the business to monitor it’s progress.
What is a business plan?
A business plan is a detailed written document outlining the purpose and aims of a business which is often used to persuade lenders or investors to finance a business proposal.
What is revenue?
Revenue is the amount a business earns from the sale of it’s products.
What is business start-up?
Business start up is a newly formed business. They usually start small, but some might grow to become much bigger.
What are the benefits of government while encouraging the start-up of new businesses?
1) Job creation
2) The entrepreneurs who start up new businesses bring ideas for goods and services that increase the variety of products available.
3) The more businesses there are in the marketplace, the greater the competiton.
4) Small businesses often provide specialist goods and services to consumers which larger businesses are less interested in supplying because they are only interested in mass marketing.
5) Start-up businesses begin life as a small business, but some will grow and become the larger business of the future.
6) Some start-up and smaller businesses often have much lower costs than larger businesses and can pass this on to the consumer though lower prices.
What are the most common types of government support?
1) Grants and interest-free or low-interest loans
2) Lower taxation rates on profits in the early years.
3) Rent-free premises for a certain period of time
4) Free or subsidised training schemes for employees.
5) Information, advice and support from specialist agencies.
How to measure the size of the business?
1) Capital employed
2) Value of output
3) Number of employees
4) Market share
Why owners want to expand their business?
1) Increase in profits
2) Increase in market share
3) Economies of scale
4) Greater power to control the market
5) Protection from the risk of takeover
What are the different ways business can grow?
1) Internal growth
2) External growth
When does internal growth occur?
1) Increasing the number of goods it can produce.
2) Developing new products.
3) Finding new markets for it’s products
When does external growth occur?
1) Horizontal integration
2) Forward vertical integration
3) Backward vertical integration
4) Conglomerate integration
What are the problems linked to business growth?
1) Internal growth is usually low.
2) When two separate businesses are brought together, managers and employees in each business may fear loss of their job or status.
3) If a business becomes too large then diseconomies of scale may occur.
4) Any two businesses that are brought together through integration are likely to have different ways of doing things.
5) The integration of two firms will change the control of the business for the original owners.
Why some businesses remain small?
1) Owner’s Choice
2) Market size
3) Access and availability of capital
4) Market domination
Why an owner may not want to expand the business?
1) The owner does not want the responsibility or workload of managing a larger business.
2) The owner wants to keep total control of the business and fears that growth will reduce the level of control they have over decision- making and day-to-day management.
3) The owner wants to maintain a close relationship with customers and provide a personal service. This much more difficult with larger businesses.
4) The owner does not take the risk of having growth as an objective .
What are the causes of business failure?
1) Poor planning
2) Liquidity problems
3) Poor management skills
4) Lack of objectives
5) Failure to invest in new technologies
6) Lack of finance
7) Poor choice of location
8) Poor marketing
9) Competition
10) Economic influences
