Module 3/SMALL BUSINESS MANAGEMENT Flashcards
What is an Entrepreneur
An entrepreneur is an individual who employs and
organises the factors of production to create a business
venture with the aim of making profits.
What is Corporate entrepreneurship
(‘intrapreneurship’)
Corporate entrepreneurship involves teams within an established company developing, launching, managing, and nurturing a new business.
What is Social entrepreneurship
‘Social entrepreneurship’
refers to the initiation of a combination of innovations
to address a problem in society.
Characteristics of Entrepreneurs
Goal and opportunity oriented
High level of commitment and determination
Success oriented
Self-confidence and reliance
Willingness to take moderate risks
What are some Benefits of entrepreneurship
Self-fulfilment or actualisation
Opportunity to make a difference
What are some Drawbacks of Entrepreneurship
Possibility of very long working hours
The risk of losing all of one’s assets
Operating a business can be very stressful
What is Opportunity Costs
A choice will have to be made on how resources should be allocated to meet the needs of each party. When one option is chosen, it means that other options have to be forgone. This concept is known as ‘opportunity cost’ which is the highest valued alternative that had to be sacrificed for the option that was chosen.
Entrepreneurship vs Intrapreneurship
Entrepreneurship is the process of starting a new business, while intrapreneurship is the practice of promoting innovation within an existing company
What questions are often asked when considering Opportunity Costs?
What to produce?
How should goods be produced?
For whom to produce?
What are the criteria for measuring size and growth of
businesses??
Volume of output- This method is generally used to measure the size of businesses in the same industry. The amount of output of each firm is compared in order to ascertain the firm with the highest volume of output
The labour force (Size of it)
Market share
This measures the amount of control that each firm in an
industry has.
Capital employed
Capital employed refers to the value of the assets used to
generate the revenue of the firm. The amount of money
invested in the business can give an indication of its size
What are some Strategies for Growth?
Internal growth
This is where a firm expands its existing operations without
the involvement of other businesses
External growth
This is a quicker method of growth and takes place by merger,
takeover or joint venture. A merger is where two or more . companies agree to join together to form a new company. A
takeover is where one company buys out or takes control of
another. A joint venture is a business arrangement between
two or more parties to pool their funds or resources in order
to carry out a specific task or purpose.
Small firm vs Large Firm
Size and financial requirements
Some people opt to start small businesses since they require
less capital outlay. The advantage of doing this is that, over
time, the business can expand if it is successful. If the business
fails, then the resources that will be lost would be far less
than for a very large firm
Management and Control
A manager in a smaller firm may also find it easier to communicate the vision of the firm to all of the employees while Larger firms may then become harder to manage because of the larger span of
control that each manager has, meaning that the manager
has to supervise a greater number of employees
Lack of Record Keeping
These small businesses are
often very cash oriented and with no proper record keeping
will be more susceptible to theft and misappropriation of
funds. Larger firms tend to have proper record keeping. Large
firms are able to hire qualified people to deal with its finances.
These firms usually have an entire finance or accounting
department which ensure that proper records are kept.
What is record keeping?
Record keeping is the process of organizing and storing documents, files, and invoices related to a business’s activities. It can be done manually or digitally.
What is Working Capital Deficiencies?, why is it bad?
A working capital deficiency, also known as a working capital deficit or negative working capital, occurs when a company’s current assets are less than its current liabilities.Cash is one of the
most valuable resources for the small business. The lack of cash can cause a total shutdown of the business.
Working Capital Deficiencies can be caused by?
Having too much inventory – this will mean that the
firm’s cash is tied up in stock which may take some time
to be sold
Debtors’ payment period – the firm may be giving
debtors too much time to make payments
Liability to creditors is too high – having too much
liability can also result in working capital deficiency
