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business > 1.5 > Flashcards

1.5 Flashcards

1
Q

what is a business?

A

any organisation that makes goods or provides services

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2
Q

what is an entrepreneur?

A

an individual who takes a risk to create or start a new business or project

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3
Q

what is an enterprise?

A

the skills needed to make a new idea work

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4
Q

what skills might be included in enterprise?

A

-risk taking
-showing initiative and make things happen
-undertaking new ventures

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5
Q

what are roles of an entrepreneur?

A

-creating and setting up a business
-generating business ideas
-spotting opportunities
-carry out research
-running expanding businesses
-intrapreneurship

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6
Q

generating business ideas:
-heart of successful entrepreneurship is spotting a good idea
-usually based on good understanding of consumer tastes and/ or their needs

A
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7
Q

what are the main sources for ideas?

A

-brainstorming
-thinking ahead
-observation
-personal ideas or experience

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8
Q

spotting an opportunity:
-innovation

A
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9
Q

what does innovation mean?

A

a new idea and bringing it to the market

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10
Q

how do you spot new opportunities?

A

-changes in society
-changes in the housing market
-changes in the economy
-carrying out small budget research

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11
Q

most entrepreneurs carry out small budget research before carrying out ideas

A
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12
Q

what is included in small budget research?

A

-check competitors prices within local area
-spend a day at a competitors
-produce a market map
-geographic mapping

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13
Q

what is geographic mapping?

A

plotting on a map the locations of all existing businesses in your market
-shows where competitors are

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14
Q

what is needed to run a business successfully?

A

-ability to obtain and listen to objective measures of its performance
-an obsessive eye for detail
-able to keep track and step back from day to day skills and think strategically
-need to love what you’re doing and love making customers happy

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15
Q

what 3 factors are needed to help a business expand successfully?

A

-establishing that extra demand exits
-ensuring the finance is in place
-ensuring the people are in place

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16
Q

what is an intrapreneur?

A

-an inteapreneur has the personal characteristics of an entrepreneur, but works with a large organisation

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17
Q

what are some barriers to entrepreneurship?

A

-lack of personal finance
-public sectors/employees don’t trust entrepreneurs
-gender (genetics, women are nurturers and men are risk takers)
-banks not willing to lend

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18
Q

what is the role of an entrepreneur?

A

-generate idea
-create and set up
-organising resources
-leadership
-running the buisness
-expanding the business
-innovate

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19
Q

what are characteristics?

A

-personality traits
-distinguishing feature or quality

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20
Q

what are the characteristics a successful entrepreneur will need?

A

-understanding of the market
-creativity
-determination
-passion
-resilience
-ability to cope with risk

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21
Q

what are skills?

A

the ability, coming from one’s knowledge, practice, aptitude etc, to do something well

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22
Q

what skills will a successful entrepreneur need?

A

-financial skills
-persuasive abilities
-problem solving skills
-networking skills

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23
Q

what are motives?

A

the reason for doing something

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24
Q

what are the financial motives for being an entrepreneur?

A

-profit maximisation
-profit satisficing (to satisfice means to find the ideal blend between different pressures)

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25
Q

what are non financial motives of an entrepreneur?

A

-independence
-home working
-ethical stance
-social entrepreneurship

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26
Q

moving form entrepreneur to leader

A

-although start up is hardest time for entrepreneur, many small firms find themselves struggling during periods of rapid growth

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27
Q

business effects of forecast rapid growth

A

-in certain circumstances managers can anticipate a period of rapid growth
-may be temporary or seem likely to be permanent
-most successful firms will be those that will devise a plan that is detailed enough to help in a practical way and is flexible to allow differences between forecasts & reality

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28
Q

when rapid growth is forecasted, firms can what?

A

-compare the sales estimate with available production capacity
-budget for any necessary increases in capacity & staffing
-produce a cash flow forecast to anticipate any short term financing shortfall
-discuss how to raise any extra capital needed

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29
Q

-timescales are important
-error can include
-increased work load on staff
-extra sales accounting staff
-warehouse manager
-cash flow worsens

A
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30
Q

what is overtrading?

A

the situation where a business expands at a rate that cannot be sustained by its capital base

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31
Q

risks of overtrading?

A

-business can run into liquidity problems
-inadequate funding is one of the most common reasons why apparently successful businesses end up failing

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32
Q

what is adequate finance ?

A

having access to sufficient levels of funding to meet firms needs
-adequate resources (incl finance) need to be available to respond to an unexpected upsurge in orders and unwanted fall in sales
-especially important to firms looking to expand

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33
Q

what are problems of adjustment from entrepreneur to leader?

A

-able to cope with additional workload
-staff find it hard to accept a new manager
-delegation is necessary

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34
Q

what is delegation?

A

means giving tasks and responsibilities to others in team / organisation, so you don’t have to do everything yourself
-helps get work done more efficiently

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35
Q

change in management structure or hierarchy:
-as business grows this has to change
-new staff recruitment, induction and training
-constant change in personnel and their relationships
-can be disconcerning for customers and suppliers and strong relationships are hard to build = customer loyalty hard to achieve
-with all these changes team spirit may be hard to establish
-spend too much time looking at promotion
-potential for inefficiency or chaos
-too many new staff may = too many mistakes
-if customer relations are weak, could result in loss of business

A
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36
Q

small business growth

A

-although start up is hardest time for entrepreneur, many small firms find themselves struggling during periods of rapid growth

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37
Q

risk of loss of direction and control:

A

-entrepreneurs who get sweeps by the success of the business are those whose firms will fail to sustain their growth
-may become side tracked by attractions of expense account living or become excited by success so open up several different businesses
-focus on what you’re good at

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38
Q

sometimes people are entrepreneurs not bosses

A
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39
Q

why does growth put a strain on a firms cash flow?

A

-new staff
-more produce to meet extra growth
-raw materials

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40
Q

why might rapid growth cause problems with management control?

A

-more layers of management needed
-have to employ new people

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41
Q

why might rapid growth turn into overtrading?

A

-businesses may expand at rate that cannot be sustained by capital base

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42
Q

why might entrepreneurs make poor leaders?

A

-can’t handle the pressure
-too much responsibility

43
Q

how might a growing company check that is is not overtrading?

A

-cash balance
-liquidity
-debt

44
Q

why might an entrepreneur need to move from being entrepreneur to leader?

A

-business expanding
-more people to manage
-more responsibilities

45
Q

difficulties in developing from entrepreneur to leader?

A

-adapt mindset
-lack of trust from employees
-lack of leadership
-more people to manage

46
Q

the strategy of objectives will have to involve what four functions?

A

-marketing
-finance
-operations
-human resources

47
Q

what are external factors that can get in the way of success?

A

-competitors
-economy
-government
-legislation
-society
-technology
-environment etc

48
Q

what is a mission statement?

A

a mission statement communicates the corporate aims of the firm to the stakeholders
ie it sets out the businesses purpose, principle business aims, identity, policies and values

49
Q

mission statements should make decision making easier when faced with a series of options managers can compare them in relation to the overall objectives of the business

A
50
Q

mission statements can motivate people, they know exactly where they are and what the business wants to achieve

A
51
Q

some mission statements are so unrealistic that employees pay little attention to them, they may lose faith

A
52
Q

from the mission statement comes objectives

A
53
Q

what are business objectives?

A

the medium to long term goals established to coordinate the business that help the business meet its overall aim/mission

54
Q

objectives should be _______ and have a ______ ____ ___

A

quantified
stated time scale

55
Q

to be effective objectives must be SMART
what does SMART stand for?

A

S- specific
M- measurable
A- agreed
R- realistic
T- time specific

56
Q

businesses have a number of objectives
what are they?

A

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

57
Q

what is unlimited liability?

A

the owner is personally responsible for the debts of the business and there is no limit to this responsibility
-may have to sell personal possessions to pay off any debts

58
Q

what is limited liability?

A

the legal duty to pay the debts of the business stays within the business itself
-owners and shareholders only loose what they put into the business

59
Q

who has unlimited liability?

A

-sole trader
-partnerships

60
Q

who has limited liability?

A

-private limited companies (ltd)
-public limited companies (plc)

61
Q

what are some traders?

A

when individuals set up in bus beds on their own
-do work for themselves , can hire people to work for them
-sole trader remains responsible for the overall business
-sole trader is actively involved in the running of the business

62
Q

What does it take to become a sole trader?
You will need to be?

A

-someone who is willing to work on their own
-confident to take their own decisions
-able to turn their hand to almost any aspect of the business
-skills & flexibility
-able to work hard
-good at managing stress
-self disciplined and motivated

63
Q

what are advantages of being a sole trader?

A

-independence, have full ownership of the business, can be highly motivating
-you get all of the profit
less people to disagree with ( rapid decision making, respond quickly to change)
-finance is private
-really easy to set up

64
Q

what are disadvantages of being a sole trader?

A

-unlimited liability
-pressure
-decisions may not always be accurate
-more difficult to raise finance due to banks not liking sole traders
-business is unincorporated
-long hours

65
Q

what does incorporated mean?

A

you have separate identity to your business

66
Q

what does unincorporated mean?

A

you do not have separate identity to your business

67
Q

what is a partnership?

A

a business made up of between 2-20 owners
-partners contribute capital of business
-partners have a say in the running of business
-shared profits

68
Q

what is a deed of partnership or a partner agreement ?

A

a written agreement between partners
-without this document, partners may disagree on who put most money/capital into the business or who it’s entitled to more of the profits

69
Q

what does a deed of partnership set out?

A

-who are the partners?
-how much money (capital) each patented has put into the partnership?
-how profits should be shared out?
-how many votes each partner has in any partnership meeting?
-how to resolve disputes if the number of voting for and against an issue are equal
-what happens if any partners want to withdraw from the business or if new partners are brought in?

70
Q

If there is no deed of partnership, the law says that every partner is ______, each partner gets _____ ______ of the profit and has the same voting power as any other partner

A

-equal
-equal share

71
Q

what are advantages of being a partnership?

A

-easier to raise finance
-finance is private
-different skill sets

72
Q

what are disadvantages of a being a partnership?

A

-unlimited liability
-have to share profits & decision making
-can be disagreements over decision making
-unincorporated

73
Q

what is a company?

A

a type of business owned by shareholders
-each share that is owned represents a pet of the company
-the more shares a person holds the more the coalition belongs to them
-to set up a company individuals have to complete documents and register the business at the COMPANIES HOUSE
-this process is know as INCORPORATION

74
Q

once a business is incorporated is has its own _____ ______, separate from its ______

A

-legal identity
-owners

75
Q

a company having limited liability is essential for companies to be able to raise money by selling shares

A
76
Q

having company status means what?

A

-the business must pay to have its accounts checked annually by an independent accountant (auditor)
-the company accounts must be made public

77
Q

what are advantages of being a company?

A

-limited liability
-able to raise finance from selling shares
-often perceived as being more established than some traders

78
Q

what are disadvantages of being a company?

A

-must pay the costs of registering
-has to make its financial accounts public
-has to pay for its accounts to be audited each year
-has to disclose information eg this years profit, what the business owns
-is subject to company law

79
Q

why become a shareholder?

A

-become owners of a business, if business is successful the value of their shares should increase
-receive profits of the business
-can influence the policy of the business
-most types of shares grant owners voting rights, each share is worth one vote, if someone owns more than 51% of the shares they can control the business and decide company policy

80
Q

what are dividends?

A

the part of the profits paid out to shareholders
-the more shares a person has the more dividends they receive in total

81
Q

all companies must have an ______ _____ _______ (AGM) to which the shareholders are invited and every shareholder must receive a copy of the company’s annual report
-report reviews performance of business over the last year
-at AGM directors and managers give an overview of the company’s position and respond to any questions the shareholder might have

A
82
Q

what are private limited companies (Ltds) ?

A

they are owned by shareholders and the owners can place restrictions on who the shares are sold to in the future
-can be wholly owned by one person but other people can be brought in as investors
-company is NOT LISTED ON THE STOCK MARKET, so remains under close control
-unlikely to be taken over
-much harder to raise finance
-most ltds are owned by families or small groups of friends

83
Q

what are public limited companies (plcs) ?

A

owned by shareholders but restrictions cannot be placed on the sale of these shares as the shares of these companies are sold on the stock exchange
-this can take place when a ltd expands to the pint of having share capital of more than £50,000 (ltd can choose wether it wants to be floated on the stock market
-easier to raise finance
-firms can be liable to a takeover as any member of the general public can but shares

84
Q

what is a franchise?

A

occurs when one business (franchisor) sells the right to use & sell its products / services to another business / person (franchisee)

85
Q

how to franchises work?
what are the basic elements of franchise agreements?

A
  • franchisor sells the right to the product in return for an initial fee & % of franchisees turnover
    -franchisee receives right to the name & the systems used by franchisor, may include access to materials & training
86
Q

buying a franchise:
-if you are buying a product that has already been on sale & therefore has a sales record
-this means you can see wether it works
-can also learn from other franchisees

A
87
Q

what are advantages of the franchise to the franchisor?

A

-able to expand the business quickly
-will earn revenue from franchisees turnover
-franchisee may have great entrepreneurial skills = greater revenue
-risk is shared

88
Q

what are disadvantages of the franchise to the franchisor?

A

-loss of control over how the product/service is presented
-some franchisees become powerful as they may acquire a number of franchises
-coordination & control problems as the franchise network grows
-difficult to control quality

89
Q

what are advantages of the franchise to franchisee?

A

-able to sell a recognised brand & product
-central services are provided eg training
-franchisor has experience in market & provide advice & guidance

90
Q

what are disadvantages of the franchise to the franchisee?

A

-some of your revenue is paid to the franchisor
-right to operate the franchise can easily be withdrawn
-franchisee may not feel like the business is their own

91
Q

what is a social enterprise?

A

-claims to “do good” for society, but good for whom is not stated
examples
-one water
-co operatives (worker owned business)
john lewis / waitrose

92
Q

what is a lifestyle business?

A

-created based on the needs of the entrepreneur
-with this type of business, usually rules about objectives etc might not apply
for example:
-a business may target plenty of customers above plenty of revenue

93
Q

what is an online business?

A

-decided on a structure like any other, only difference is the risks & rewards
-usually require less financial less financial outlay at the start up but may require a lot more time

94
Q

business choices must be made bearing in mind _______ _____

A

opportunity cost

95
Q

what is an opportunity cost?

A

the cost of missing out on the next best alternative when making a decision

96
Q

this concept of opportunity cost is highly important within business, as it is the _____ __ ______ ______ _______

A

heart of every business decision

97
Q

for a new business, two of the mosh important resources are ______ and _____, both have an opportunity cost

A

money
time

98
Q

for a new start up business what are the most important factors?

A

-do not tie up too much cash in stock
-do not overstretch yourself
-take care with every decision that requires cash

99
Q

what are personal opportunity costs?

A

-your own money investment
-loss of income from a previous job
-long working hours & pressurised decision making = stress
-time from family & friends

100
Q

what is an opportunity cost of developing one business idea opposed to another?

A

-an entrepreneur will need to follow only one business idea as two will be impossible to manage

101
Q

successful entrepreneurs are ones that can make ________ _______

A

successful decisions

102
Q

what factors are crucial when deciding between business start up opportunities?

A

-estimating potential sales that could be achieved by each idea
-considering carefully the cash requirements of each idea
-deciding whether the time is right
-decking whether the skills needed for your own set of skills

103
Q

in business there are many occasions when one factor has to be _____ ___ against another

A

traded off

104
Q

the key success will be to clear about what you want from the business

A

business (6 decks)

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