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Business > 1.3 Enterprise, Business Growth + Size > Flashcards

1.3 Enterprise, Business Growth + Size Flashcards

1
Q

Define entrepreneur

A

A person who organises, operates and takes the risk for a new business venture

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2
Q

Entrepreneur advantages

A

Independence, control of business, able to use own interests + ideas

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3
Q

Entrepreneur disadvantages

A

Risk of failure, opportunity cost, lack of knowledge + experience

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4
Q

Characteristics of an entrepreneur

A
  • hard working
  • risk taker
  • creative
  • optimistic
  • self-confident
  • innovative
  • independent
  • effective communicator
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5
Q

Define business plan

A

A document containing the business objectives and important details about the operations, finance and owners of the new business

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6
Q

Name parts of a business plan

A
  1. Description of the business
  2. Products + services
  3. The markets
  4. Business location + how products will reach customers
  5. Organisation structure + management
  6. Financial information
  7. Business strategy
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7
Q

Explain benefits of a business plan

A
  • helps gain finance as bank is able to lend money to business
  • careful planning reduces risk of failure
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8
Q

Explain why government support start up businesses

A
  • reduces unemployment
  • increases competition
  • increases service output
  • benefits society
  • businesses can grow further
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9
Q

Explain methods used to support start up businesses

A
  • grants + low interest loans
  • lower tax rates on profits in early years
  • ‘enterprise zones’ provide low-cost premises for start up businesses
  • free or subsidies training for workers
  • information, advice + support from specialist agencies
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10
Q

Name ways of measuring business size

A
  • number of people employed
  • value of output
  • value of sales
  • value of capital employed (total value of capital used in the business)
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11
Q

Limitations to the methods used to measure business size

A
  • different measures may produce different results
  • a business may be capital intensive rather than labour intensive
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12
Q

Explain reasons owners may want to expand the business

A
  • increased profits
  • larger market share
  • gain competitive advantage
  • reduces risk of being taken over
  • economies of scale (factors that lead to a reduction in average costs as a business increases in size)
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13
Q

Define internal growth

A

Occurs when a business expands its existing operations

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14
Q

Define external growth

A

When a business takes over or merges with another business, it is often called integration

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15
Q

Define horizontal integration

A

When one business merged with or takes over another one in the same industry at the same stage of production

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16
Q

Define vertical integration

A

When one business merges with or takes over another one in the same industry but at a different stage of production, vertical integration can be forward or backward

17
Q

Define conglomerate integration

A

When one business merges with or takes over a business in a completely different industry, this is also known as diversification

18
Q

Advantages of horizontal integration

A
  • reduces number of competitors in the industry
  • opportunities for economies of scale
  • bigger share of the total market for both businesses
19
Q

Advantages of forward vertical integration

A
  • gives an assured outlet for its product
  • profit margin absorbed by the expanded business
  • retailer prevented from selling competing goods
20
Q

Advantages of backward vertical integration

A
  • gives an assured supply of important components
  • profit margin absorbed by the expanded business
  • supplier can be prevented from supplying other manufacturers
  • costs of components for manufacturer can be controlled
21
Q

Advantages of conglomerate integration

A
  • diversified it’s activities, spreading risks taken by the business
  • may be a transfer of ideas between the different sections of the business
22
Q

Explain problems of business growth

A
  • harder to control
  • poorer communication
  • expansion costs
  • integration is harder than expected (e.g. conflicts)
23
Q

Explain methods of how to overcome problems of business growth

A
  • operate business in small units
  • expand slower
  • ensure sufficient long-term finance is available
  • good communication
24
Q

Explain reasons why some businesses remain small

A
  • type of industry the business operates in
  • market size
  • owners objectives
25
Q

Explain causes of business failure

A
  • lack of management skills
  • changes in the business environment
  • liquidity problems or poor financial management
  • over-expansion
26
Q

Reasons why new businesses are more likely to fail

A
  • lack of finance + other resources
  • poor planning
  • inadequate research
  • lack of management skills

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