1.3 Enterprise, business growth and size

Question 1

Define entrepreneurs

Answer 1

someone who sets up their own business and usually runs it, ex: Lord Sugar

Question 2

Characteristics of successful entrepreneurs

Answer 2

• risk- takers
• confident
• organised
• independent
• flexible
• committed

Question 3

Define business plan

Answer 3

a complete description of a business and its plans for the next one to three years

Question 4

contents of a business plan

Answer 4

details of the owner, the idea, the market, the advertising and promotion, costs, cash flow and likely profits

Question 5

how business plans assist entrepreneurs

Answer 5

can judge whether an idea should go ahead or not -> prevents failure

Question 6

Why gvt support business start-ups

Answer 6

• employment
• opportunities for the poor
• new ideas & technology
• increased production
• exports

Question 7

How gvt support business start-ups

Answer 7

• support with the start-up process
• grants and loans
• removing obstacles (paperwork, low tax)

Question 8

Difference between grants and loans

Answer 8

Grant: don’t need to pay back
Loans: need to pay back

Question 9

methods of measuring business size

Answer 9

• # of employees
• value of output
• market share of the business
• value of the capital employed

Question 10

Limitations of methods of measuring business size

Answer 10

It is difficult to compare businesses in different industries, ex: a huge modern farm working with the latest machinery may employ only few people, where as a local supermarket will employ a lot.

Question 11

Why might owners want to expand the business?

Answer 11

gain advantages over competitors:

• win a greater share of the market
• able to develop new products/ sell to new markets

Question 12

Different ways in which businesses can grow

Answer 12

• internal growth (inside the business)

- external growth (joining together with existing businesses)

Question 13

examples of internal growth

Answer 13

using profits or asking owners for more capital

usually in early years

Question 14

examples of external growth

Answer 14

selling shares, merger, takeover

• Merger: two businesses combine to form a single company
• acquisition: one business gains control of part of another business

Question 15

business carry out external growth in order to

Answer 15

• buy new brands where sales are likely to be high
• acquire new inventories & technologies
• break into new markets - other countries

Question 16

why some businesses remain small

Answer 16

• flexibility in decision making
• low debts
• greater control
• direct interface with consumers
• scale is limited so good understanding of the market
• reduced complexity and stress

Question 17

Causes of business failure

Answer 17

• no cash
• low profit margins
• not meeting customer expectations
• external- competition, laws, customer tastes (can’t control)
• poor selling
• reliance on one customer

Question 18

why new businesses are at a greater risk of failing

Answer 18

• young people- inexperienced
• repayments on loans right from the start
• less experience of the market
• strength of existing competition
• sales forecast are too optimistic
• too focused on growth stage