1.3 – Enterprise, Business Growth and Size Flashcards
Define Entrepreneur
A person who organizes, operates and takes risks for a new business venture
Qaulities of Entrepreneur
- Risk taker
- Creative
- Optimistic
- Self-confident
- Innovative
- Independent
- Effective communicator
- Hard working
Define Business Plan
A document containing business objectives and important details about operations, finance and owners of new business
Contents of Business Plan
- Owner
- Business
- Market
- Advertising
- Costs
- Expansion
- Business organisation
Pros of Business Plan
- More focus of mission
- Help motivate workers
- Help get loan/overdraft
Define Start-up
Company in first stages of operations
Why governments help start-ups?
- Provide employment
- Contribute to economy growth
- Contribute to country exports
- introduction of fresh idea/technologies
How governments support businesses?
- Organise advice
- Provide low cost land
- Provide loan at low interest rate
- Give grants for capital
- Give grants for training
- Give tax breaks/ holidays
How to measure business size?
- Number of employees
- Value of output
- Value of capital employed
Define Internal Growth
Expands its existing operations
Define External Growth
When business takes over or merges with another business (Intergration)
Define Merger
When owner of two businesses agree to join together to make one business
Define Takeover
When one business buys another business
Types of External Growth
- Horizontal
- Vertical (back/front)
- Conglomerate
Define Horizontal merger/integration
When one firm merges with/takes-over another one in same industry at same stage of production
Pros of Horizontal merger/integration
- Reduce competition
- Opportunities of economies of scale
- Increase market share
Define Vertical merger/integration
When one firm merges with/takes-over another one in same industry but at different stage of production
Define Backward vertical merger/integration
When one firm merges with/takes-over another one in same industry but at a stage of production behind ‘predator’ firm
Define Forward vertical merger/integration
When one firm merges with/takes-over another one in same industry but at a stage of production ahead ‘predator’ firm
Define Conglomerate merger/integration
When one firm merges with/takes-over a firm in different industry (diversification)
Cons of Growth
- Difficult to control staff
- Lack of funds
- Lack of expertise
- Diseconomies of scale
Why businesses stay small?
- Type of industry
- Market size
- Owners objectives
Why businesses fail?
- Poor management
- Lack of experience/planning
- Over-expansion
- Failure to plan for change
- Poor financial management
Why new businesses have greater risk of failure?
- Less experience
- New to market
- Don’t have lot of sales
- Don’t have lot of money to support business
