1.5 - entrepreneurs and leaders Flashcards
what is an entrepreneur and what are some of the characteristics that they obtain
= someone who makes a business idea happen, either through their own effort or by organising others to do so, as well as taking risks in order to satisfy customer wants and needs
- understand the market
- determination
- passion
- resilience
- ability to cope and calculate risk
define risk and how it would relate to entrepreneurs
= the possibility of financial loss or failure
- entrepreneur looks at the risk, compares them with the possible reward, and then makes a calculated decision
what are some skills required of a successful entrepreneur
- ability to read and understand key financial documents such as cash flow forecasts
- persuasive abilities
- problem solving skills
- networking skills(crowdfunding or social media endorsements)
what are some reasons for starting your own business
fill a gap in the market, deliver a service, monetary return - profit orientated = financial
provide product to benefit others, wants to be their own boss, ethical stance, work from home, more flexible hours = non - financial
what is profit maximisation
entrepreneurs aim to make the highest amount of profit possible, seeking to minimise costs and maximise revenue
SOLE TRADER +larger wages can be drawn from the profit
LTD / PLC = dividends will be larger on shares
= share price increases = attracts investors
what is profit satisficing
trying to find the most “ideal” profit, not just the biggest,
think about its long term future
new small businesses, if they want a successful long term business, profit satisficing is better than short term maximisation
what are some advantages of being your own boss - non finanical motive
- can work by themself - doesn’t need to answer to anyone
- independence within your own ideas - no creative blocks or restrictions
- Autonomy
- sense of achievement
explain the ethical stance as a non financial motive for becoming an entrepreneur
- stronger ethical convictions decide to start up their own business instead of relying on larger corporations who aren’t ethical in their actions
- gives the owner a large amount of control as long as they trade from an ethical stance
e.g. fairtrade, animal rights/testing , organic produce
why might working from home be seen as a non financial motivator for an entrepreneur
- convenient
- work life balance
- cheaper due to lessened commute
- control of when you work
however, most homeworkers have to accept the piece rate terms that give no secutiry of income and can end up working at a ver low hourly rate
why might engaging in a social enterprise be a non financial motivator for an entrepreneur
social enterprises are businesses trading for social and environmental purposes
- health benefits
- ethical
= central to what they do
= profits are reinvested to sustain and further develop their mission for change
what is a business objective
the goals set for the business as a whole - they dervice from the mission and aims set by the director
what are the business functions
marketing - advises business on trends and tastes, purchasing habits, how to advertise and promote
HR - recruitment, training, financial incentives, redundancy, dismissals
Finance - budgets, monitor spending levels to make sure costs are kept under control
Operations - manages supply chain, the flow of work, buying materials and components
explain SURVIVAL as an objective
- may avoid actions that look highly profitable yet have a high risk
- any sudden changes in the economy such as a recession may cause unexpected losses
- reach a sustainable level of sales so that a business reaches their break-even point
- able to raise prices of products in the future
explain PROFIT MAXIMISATION as an objective
- attempt to make as much profit as possible likely as fast as possible
- may follow this approach if a rival is attempting to buy them out
- companies may also “float” their shares onto the stock market
- provides a reward for stakeholders
- provides a measure of efficiency
explain SALES MAXIMISATION as an objective
- decisions are made that focus on rising profits
- salaries are often linked to sales levels
- sales data would be an indicator for performance
- sales-driven environment such as car dealerships
explain MARKET SHARE as an objective
% of a market that a business owns
- very competitive market where consumers may switch suppliers frequently
- investors judge based on increase/decrease - can be an indicator of financial problems
explain COST EFFICIENCY as an objective
can be achieved by:
- paying minimum wage to unskilled workers
- subcontracting where economically viable
- increase the perceived value of a product through strong branding
- lower average costs = economies of scale
explain EMPLOYEE WELFARE as an objective
- seel harmonious relations within their workforce
external = medical insurance, housing, education for family
internal = canteen/cafe, creche, uniforms
employees are therefore more motivated and determined to work harder, as their morale has increased.
enhanced public image and increased staff retention
explain CUSTOMER SATISFACTION as an objective
- common in the service industry
- monitor customer service levels through
- rarely a corporate objective
- generates customer loyalty
explain SOCIAL OBJECTIVES as an objective
- only mean something if business is willing to sacrifice some profit or market share
- can just be image related
- finanical objectives are usually a large priority
what is unlimited liability
adv/dis
= owners are liable for any debts incurred by the business - sell their own assets such as car, house, personal possessions
+ some tax advantages - dependent on profit
+ less rules to comply with
- more risky
- personal assets at risk
- harder to secure loans/capital
what is a sole trader
adv/disadv
=business owned by one person,, can employ people but they will not be involved in control of business = unlimited liability ADV \+easy to set up \+make decisions quickly \+less capital needed \+ doesn't have to make info public DIS - unlimited liability - difficult to raise money - no economies of scale
what is a partnership
adv/disadv
= between 2 and 20 partners who joint own the business,, may do decision making together ADV - shared knowledge and expertise - small amounts of capital needed - information not made public DIS - unlimited liability - partners may have disagreeements - shared profits
what is limited liability
adv/disadv
owners are not liable for the debts of the business - can only lose as much as the sum that they invested
- has to go through the process of incorporation to become a separate legal identity
+ less paperwork
+ not personally liable
+ more flexibility
- ownership harder to transfer
- more expensive
