1.1.3 The Role of Business Enterprise

Question 1

Purpose of business enterprise:

Answer 1

to produce goods or supply services for needs/wants of customers

Question 2

Purpose of business activity:

Answer 2

• to meet customer needs
• to add value: convenience, branding, quality, design, unique selling points

Question 3

Traits for role of entrepreneurship:

Answer 3

• shows the initiative in trying to exploit a business opportunity
• organises resources and makes key business decisions (organised)
• takes time to understand and calculate the risks involved
• makes an investment, often of their own money, to set up the business
• goes ahead, despite the risk that the business venture might fail - takes risks (risk-taker)
• willingness to undertake a new venture
• innovative
• hard-working
• persuasive
• leadership skills
• lucky
• risk-taking

Question 4

What is the dynamic nature of business?

Answer 4

• Businesses are constantly faced with change - some of these changes will be outside the control of the organisation
• Successful businesses will be able to meet these changes and demonstrate flexibility in the way their business operates
• Examples of external changes that businesses face include new legislation, changes in the economy, new technology, political events and social trends i.e. changes in what consumers actually “want” to buy!

Question 5

Enterprise:

Answer 5

another name for a business enterprise OR may describe the actions of someone who takes a risk by setting up, investing in and running a business

Question 6

Entrepreneur:

Answer 6

• someone who takes a calculate risk through starting business
• person who owns and runs their own business

Question 7

Goods:

Answer 7

• goods are tangible objects
• they are produced and consumed

Question 8

Services:

Answer 8

• services are activities
• they are intangible
• they are provided by other people or businesses

Question 9

Obsolete:

Answer 9

• A product that is no longer used or out of date
• e.g. can make a product obsolete by replacing it with something better

Question 10

Added value:

Answer 10

Added value is the increased worth that a business creates for its product OR the difference between what the business pays the suppliers and what the price they charge for the product (price charged – cost of supplies)

Question 11

Adding value:

Answer 11

Adding value = the difference between the price of the finished product/service and the cost of the inputs involved in making it

Question 12

What makes a business successful?/How do you add value to a business?

Answer 12

• branding
• USP/ features
• convenience
• quality design

Question 13

How can branding add value to a business?

Answer 13

• Businesses create well known brands
• Customers will see the label and be willing to pay extra money for the better quality and because they trust the brand they buy from regularly

Question 14

How can convenience add value to a business?

Answer 14

• It is usually quicker to buy something than to make it yourself at home
• Businesses can charge more money because of this

Question 15

How can a USP/features add value to a business?

Answer 15

The unique features means that the business can add to the price charged

Question 16

How can quality design add value to a business?

Answer 16

• Higher quality materials used = higher cost = higher price charged

Question 17

Why is added value important to businesses?

Answer 17

• Can justify the price increase for a product
• Can provide protection if competitors lower prices
• Can help with marketing
• Can help provide a USP
• Can help increase brand awareness

Question 18

How can a business add value?

Answer 18

• Build a strong brand
• Offer a unique selling point
• Deliver excellent customer service
• Add product features and benefits that customers want e.g. convenience
• Provide a high-quality product
• Produce a well designed product

Question 19

Benefits of adding value for a business:

Answer 19

• Charge a higher price
• Create a point of difference with competitors
• Protection against competitors offering lower prices
• Focuses business on its target market segment
• Goes towards paying off a company’s fixed costs, the higher the added value, sooner costs can be paid off and quicker business will make profit
• More value a business can add to its products the more chance business has of success, survival and long-term growth

Question 20

Supplier:

Answer 20

a business that sells (supplies) products to another business

Question 21

Production:

Answer 21

using raw materials, labour and machinery to make products

Question 22

Customer:

Answer 22

a person or organisation that buys the product/service

Question 23

Consumer:

Answer 23

the person that uses (consumes) the product/service

Question 24

How do entrepreneurs create new products

Answer 24

research and development —> invention —> potential product and processes —> innovation —> products ready to sell to customers

Question 25

How do entrepreneurs benefit the economy?

Answer 25

- creating products and services to meet people’s needs - creating jobs - generating economic activity through consumer spending - paying tax to the government - exporting goods abroad

Question 26

Unique selling point:

Answer 26

USP - way of adding value to product, can also help business compete

Question 27

Explain the roles of business enterprise:

Answer 27

- to produce goods or services - this means the business will take raw materials and create a product/service to sell - this leads to providing a product or service that will create an income for business as they receive sales revenue - to meet customer needs - this means the business will find out what customers want through research and then create that product - this leads to the customers buying the products and the business receiving sales revenue - to add value - this means the business makes the product appear to be worth more to the customer by adding convenience or branding - this leads to meeting customer needs and getting sales of products

Question 28

How can a business add value through improving the quality?

Answer 28

- One way that a business could add value is to improve the quality of its product - Customers would therefore be willing to pay a premium price for the product - This leads to a larger difference between the final price and costs of raw materials

Question 29

How can a business add value through providing a USP?

Answer 29

- A business could add value through developing a unique selling point - This will differentiate the product from its rivals - Therefore, customers will pay extra for the product as they feel the product is better than the competition