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Howorth/Car > 1.5 > Flashcards

1.5 Flashcards

1
Q

An entrepreneur

A

Sees an opportunity which others do not fully recognise, tries to meet an unsatisfied demand or to radically improve the performance of an existing business.

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2
Q

Entrepreneurship involves:

A

-Creating and setting up a business
-Running and expanding/developing a business
-Innovation within a business (intrapreneurship)
-Anticipating risk and uncertainty in the business environment

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3
Q

Issues in setting up a business

A

-Having the initiative to take advantage of a business opportunity
-Calculate the risks involved in the business
-Raising the finance to investment in the set up the business

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4
Q

Issues in expanding a business

A

-Carry out marketing research to see if there is demand to justify expansion
-Raise necessary finance
-Introduce new products and services
-Invest in new technology, better equipment to improve service
-Take on more skilled staff
-Changing the organisation of the business

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5
Q

Intrapreneurship is

A

An employee within a larger business who thinks like an entrepreneur
-Takes risks
-Solves problems
-Drives innovation
Understands trends
-Proactive in adding value

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6
Q

Uncertainty

A

Uncertainty in business is a situation in which there is degree of risk, and the consequences are not known or are unclear.

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7
Q

What are the 3 reasons business have uncertainty

A

-Economic reasons
-Competitor actions
-Changes in society

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8
Q

Why might someone want to start their own business

A

-Want to be their own boss
-Want to earn their own money / profit
-Want to start a business for a social reason
-Want to start a business to have something to hand over to their children
-Wanting to work in a more ethical way
-Wanting flexibility in hours or location

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9
Q

Financial reasons for starting a business

A

-Want to make more money than at current job
-Want to earn more than minimum wage
-Want to be self employed
-Want earnings to be unlimited

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10
Q

Non-Financial reasons for starting a business

A

-Want to start a business as a legacy for children to take over
-Want flexibility and work life balance
-Want control in their life, and to be independent, and to be more creative
-Want to be their own boss- don’t want to be ordered around

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11
Q

Ethical reasons for starting a business

A

-Want to help others e.g. fair trade
-Want to make a difference to the planet- eco-friendly
-Want to start a business for the benefit of others e.g. community cafe
-Want to give something back to society

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12
Q

Barriers to entrepreneurship

A

-Personal (Lack of self esteem, Risk averse, Fear of failure, Lack of technical skills)

-Economic (Taxation, Recession, Unemployment)

-Financial (Lack of start-up capital, Lack of cheap labour, Lack of investment)

-Political (Regulations, Unstable political landscape, Lack of govt support)

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13
Q

Business Objectives are

A

Are targets set for a business in the short or medium term.

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14
Q

Main business objectives

A

-Survival
-profit maximisation
-sales maximisation
-market share
-cost efficiency
-employee welfare
-customer satisfaction
-social objectives

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15
Q

Survival as an objective

A

-The initial objective of a new business is to survive the difficult time of gaining customers, establishing a good local name and building a reputation

-The objective is to reach a sustainable level of sales that allows the business to reach its break-even point

-A recession in the economy or changes in online spending may result in established businesses needed to survive

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16
Q

Profit maximisation as an objective

A

-Profits are a key focus for most businesses.
-Profit is needed to reinvested in the business to allow the it to grow, and also to reward the business owner for the risks they take.
-To maximise profits, the owner must manage costs and boost productivity among employees. They must also ensure that sales and profit margins are high.
-Businesses will compare their profits to previous years and to profits made by competitors

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17
Q

Sales maximisation as an objective

A

-Some businesses may set their objective as sales maximisation
-Profit figures tend to be annually so sales figures can be examined on a daily, weekly or monthly basis
-Managers will set targets for sales figures and offer bonuses to staff for achieving these targets
-Often found in a sales drive environment like an estate agents or a car dealership

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18
Q

Market share as an objective

A

-Market share is the % of a market that a business has, either in revenue or in units sold
-This may be an objective in a very competitive market
-To gain market share firms will try to provide better value or higher quality than the competition

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19
Q

Cost efficiency as an objective

A

Cost efficiency refers to using the least amount of resources or costs in completing a product or service.

-Cost efficiency can be achieved by:
-Paying minimum wage to unskilled workers
-Subcontracting where economically viable
-Lean production or construction where material, time and process waste is eliminated to save costs
-Lowering the average costs through economies of scale

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20
Q

Employee welfare as an objective

A

-Some businesses seek the harmonious relations with their workforce as an objective, and they aim to achieve this through employee welfare
-Benefits may include medical insurance, discounts, bonuses, profit sharing, crèche, canteens and gyms
-Employees that are satisfied are loyal and hard working, they have increased morale, motivation and productivity
-The business also benefits from an enhanced public image as a good place to work – which makes recruitment easier

21
Q

Customer satisfaction as an objective

A

-This objective is common in competitive market
-Businesses who follow this objective wills seek to monitor customer service levels through surveys and will focus on quality
-They will attempt to identify and understand what the customer wants and then provide this
-They also aim to reduce the number of complaints
-A customer centred approach will:
Ensure repeat sales
-Create brand loyalty to prevent customers from switching to similar brands
-Satisfied customers will tell others and reputation and word of mouth are very cheap ways of highly effective marketing to improve sales

22
Q

Social objective as an objective

A

-Social objectives are also known as corporate social responsibility or CSR objectives
-This may involve:
-Reducing impact on the environment
-Fair wages in developing countries
-Helping society
-Compliance with laws to minimise externalities like operating sensible hours so not as to noise pollute the local community

23
Q

What is a franchise

A

Where a small business owner buys the rights to sell the goods and services of a large, well-established company.

24
Q

Franchisee;

Franchisor;

A

Franchisee; This is the small business owner who is buying the rights.

Franchisor; this is the large business who are selling the rights e.g. Subway

25
Q

Franchise Advantages:

A

-The franchisor chooses the franchisees carefully – knows what characteristic that make a successful franchisee
-The franchisor decides how much money the franchisee must invest in the business
-The franchisor provides support – management advice & training – help franchisee solve problems.

26
Q

Franchise Disadvantages:

A

-Franchisee’s do not have freedom of running their own business;
-Bound by rules e.g. Can’t vary product or price
-Franchisee cannot sell the business without franchisors permission
-Franchisor can end franchise without consulting franchisee
-Franchisee pays percentage of profits in royalties
-Franchisee will never own the business outright

27
Q

A social enterprise is

A

A business that trades for a social and/or environmental purpose.
Social enterprises are businesses. Their mission is social and they achieve it by selling products or services.
Not the same as charity because they don’t receive grants or donations

28
Q

The aim of a lifestyle business is

A

The aim of a lifestyle business is to provide great quality of life for the owner
Owners start a business hoping to sustain a certain level of income
They may start a business doing something they really enjoy
It allows an entrepreneur to live how they want and still run a business

29
Q

Online business

A

-A business that operates on the internet via a website or app

30
Q

Ad of online businesses

A

Cheaper to set up
Wider range of customers
Collect more data about customers
Stock a wider range of items

31
Q

Dis of online businesses

A

Greater competition
Depends on distribution system
Less impulse purchases
Less trust than a physical store

32
Q

Sole trader

A

Business owned by one owner
Also known as a sole proprietor
Can employ people but they will not be involved in control of business
Small businesses
Has unlimited liability

33
Q

Ad of sole trader

A

Easy to set up – no complicated forms
Make decisions quickly – no agreement needed
Less capital needed
Taxed differently – National Insurance contributions are lower
All profits kept.
Can offer personal attention
Don’t have to make any information about the company public
They are their own boss.

34
Q

Dis of sole trader

A

Unlimited liability, this means that if the business has financial difficulties the sole trader could lose their own assets like their savings, house or car
Difficult to raise money – seen as a risk
Don’t have economies of scale (buying in bulk)
No one to take over for ill-health or holidays

35
Q

Partnership is

A

Joint owners of the business Between 2 – 20 partners

Unlimited liability, this means again that the partners are taking a risk they could lose their own personal assets
Profits shared = to capital invested (unless stated otherwise in Deed of Partnership)

36
Q

Ad of partnership

A

Easy to set up
Capital needed = small
Easier to raise extra capital
Profits go to partners = motivation
Smaller = good working relationships
No need to make public any information
Partners contribute with range of skills
Share problems and decisions

37
Q

Dis of partnership

A

Unlimited liability
Partners have disagreements;
-Control of business
-Sharing of profits
-Withdrawal from the partnership
-Inviting new partners into the business
If partner dies or becomes bankrupt = partnership is dissolved

38
Q

Private limited company (LTD)

A

Usually a smaller business, it can sell shares to invited people only

-Owners buy shares in the business
-Business has a separate legal identity
-Limited liability, those that own or buy shares in the business can only lose their original investment, their private assets remain safe
-Shares cannot be bought by the public
-Minimum 2 people – no maximum
-Expand by selling more shares, giving the business more capital
-Normally medium sized businesses

39
Q

Ad of LTD

A

Limited liability
Can raise extra capital by selling more shares – easier to expand
Can employ managers to run business if the owners don’t want to do it themselves
Can continue trading if shareholder dies (unlike partnership)
Has its own legal status – separate from the shareholder

40
Q

Dis of LTD

A

Accounts of the company cannot be kept private
Audited each year
Copy sent to Registrar of Companies
Available for public to see
More difficult and expensive to set up - more administration
Cannot sell shares on stock exchange

41
Q

Public limited company (PLC)

A

A business that can sell shares to anyone who wants to buy.

Normally start as LTD then become PLC so has Limited liability
Shares are made available for sales through the Stock Exchange
Share prices printed in national newspapers daily
People who can buy shares:
Public
Businesses
Financial institutions
Most shares in a plc owned by organisations rather than individuals
Can expand by selling more shares
Company has its own legal status

42
Q

Ad of PLC

A

Limited Liability
Easy to raise capital – issue more shares
Banks more willing to lend money to a large well-established company – less risk
Easier to grow and expand

43
Q

Dis of PLC

A

Expensive
a lot administrative work (paper work)
Raise at least £50,000
Issue more information about itself – expensive to produce
Has to prepare Annual Accounts – printed and sent to all shareholders
Also make them available for general public and competitors to see.

44
Q

Floating on the stock market

A

A stock market flotation is a costly way of raising new capital which involves selling a percentage of a company’s on a stock market for the first time.
In reality, a stock market flotation is only an option for businesses with a value usually over £50 million, given the costs involved.
In recent years, the number of flotations has declined. It is a lot easier for larger private companies by selling some or all of the business to venture capital funds.

45
Q

A trade-off

A

A trade-off arises where having more of one thing potentially results in having less of another.

46
Q

Opportunity cost is

A

Opportunity cost is the cost of missing out on the next best alternative. It compares the choices made against what you have given up by making that choice

47
Q

The Importance of Trade Off In Business

A

Most decisions in business are not right or wrong but are about the consequences of an action
Decisions are clearer if they look at the trade offs and the opportunity costs involved
This allows a business to make the best use of money, staff, time and resources.

48
Q

Barriers to entrepreneurship

A

-Personal (attitude, fight tirelessly)

-Educational (aren’t taught leadership, teamwork, negotiation, communication)

-Administration (Setting up the business, legal issues, paper work)

-Financial (Raising finance)

49
Q

3 most important factor of an entrepreneur becoming a leader

A

Delegate- when business grows leaders need to learn to delegate tasks

Listen- A good entrepreneur needs to gave open discussions, and be open to suggestions and criticism

Trust- when hiring an employee or taking on a new partner and entrepreneur will need to trust them. And give them responsibility and tasks.

Howorth/Car (9 decks)

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