1.3 Enterprise, business growth and size Flashcards
What is an entrepreneur?
A person who organises, operates, and takes financial risks to start and manage a business.
What are the characteristics of successful entrepreneurs?
Hard-working, Risk-taker, Creative, Innovative, Optimistic, Self-confident, Independent, Effective communicator.
Advantages of being an entrepreneur
Independence
Can use own ideas and interests
Keeps all profits
May become very profitable
Chooses how to use time and money
Disadvantages of being an entrepreneur
High risk of failure
Must invest own money
May lack experience
Opportunity cost of lost income
Hard to find finance
What is a business plan?
A document that outlines a business’s objectives, operations, finance, and ownership details.
What are the contents of a business plan?
Description of product/service
Market research
Business location
Management structure
Financial information
Business strategy
How does a business plan help an entrepreneur?
Helps get bank loans
Reduces business risks through careful planning
Sets clear targets and direction
Why do governments support business start-ups?
Reduce unemployment
Increase output
Promote competition
Improve standard of living
Grow the economy
How do governments support start-ups?
Grants and low-interest loans
Training schemes
Tax reductions
Research facility access
Low-cost premises
What are methods of measuring business size?
Number of employees
Value of output
Capital employed
(Note: Profit is NOT a valid method)
What are the limitations of measuring business size?
Capital-intensive vs. labor-intensive differences
High-value goods may distort output value
Doesn’t always reflect efficiency or profitability
Why do businesses want to grow?
Reduce competition
Gain economies of scale
Increase market share
Spread risks
Better brand recognition
Attract more customers
What are the problems with business growth?
Cost of expansion
Diseconomies of scale
Management difficulties
May lack expertise
What is internal growth?
Growth using the business’s own operations, like opening new branches or launching new products.
What is external growth?
Growth by merging or taking over another business (integration).
What is a joint venture?
Two or more businesses start a new project together, sharing risks and rewards.
What is horizontal integration?
Merging with a business in the same industry and production stage (e.g., two cafés).
What is forward vertical integration?
Merging with a business at a later stage in the supply chain (e.g., factory buying a retail store).
What is backward vertical integration?
Merging with a supplier or earlier stage (e.g., bakery buying a wheat farm).
What is a conglomerate?
A business merging with another in a completely different industry.
Why do some businesses stay small?
Small or niche market
Personal goals of the owner
Lack of capital or skills
Dominated by large firms
Bespoke or personalized service
What are the main causes of business failure?
Poor management
Lack of planning
Cash flow problems
Changes in the market
Wrong location or pricing
Poor marketing
Diseconomies of scale
Why are new businesses more at risk of failing?
Less experience
Harder to find finance
No established customer base
Higher chance of making mistakes
