1.5 - Entrepreneurs and Leaders Flashcards
What is an entrepreneur?
A person who organises, operates and assumes the risk for a business venture and takes the risk in starting a new business.
What are the benefits of business to society?
- create employment and develop human capital
- drive innovation through R&D and new products
- pay taxes on profits earned & collect taxes for government
What may an entrepreneur need to do as the business grows?
- employ staff
- use the services of experts
- delegate responsibility to others
Other key decisions include: - moving to bigger premises
- changing suppliers
- expanding product range
What decisions may an entrepreneur have to make once their business becomes established?
- managing resources including stocks, personnel and finances
- making marketing decisions about aspects of the marketing mix such as what price to charge and how to promote the business
- dealing with customers
- maintaining financial resources
What are some barriers to entrepreneurship?
- may not be comfortable working for others
- lack of finance
- knowledge and know how
- risk- averse
- lack confidence
What are some economic barriers to entrepreneurship?
- taxation
- market entry regulations
What are some financial barriers to entrepreneurship?
- lack of start up capital
- lack of cheap labour
- lack of investment
What is risk?
The probability that things aren’t going to go as planned. E.g. the chance that money invested could be lost
What is uncertainty?
When businesses are unable to predict external shocks or future events - not measurable
How can risk be anticipated by entrepreneurs?
- market research
- understanding the industry
- assessing personal losses
- business plans
How can uncertainty be anticipated?
- keep up to date with current business climate events e.g. Economic and political changes
- make plans for unexpected events
- spread risk e.g. a number of products or suppliers
What are some characteristics of an entrepreneur?
- creative
- hardworking
- resilient
- innovative
- self confident
- risk taker
What are some financial motives for staring a business?
- profit maximisation - desire to earn substantial rewards
- profit satisficing - sufficient profit to enable a satisfactory standard of living
What are some non- financial motives for starting a business?
- more control over working life
- need for flexible working
- want to be the boss
- change in personal circumstances e.g. redundancy
What is a social enterprise?
- businesses trading for coil and environmental purposes
What are some profit reasons for starting a business?
- want to make more money than current job
- want to earn more than minimum wage
- want to be self employed
- want earnings to be unlimited
What are some non-profit reasons for starting a business?
- 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
What are some ethical reasons for starting a business?
- 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
What are corporate objectives?
What the business as a whole wants to achieve
What are functional objectives?
Set for individual functions of a business and are designed to support corporate objectives
What is an example of a corporate and functional objective?
- if the businesses corporate objective is to increase sales, the functional objective may be to successfully launch 5 new products in the next two years
What are some examples of corporate objectives?
- survival
- revenues - e.g. revenue growth, sales maximisation, market share
- cost efficiency or cost minimisation
- profits and profitability - e.g. specific level of profit, rate of profitability, profit maximisation
- employee welfare
- customer satisfaction - at the heart of most firms
What are ‘SMART’ objectives?
S - Specific
M - Measurable
A - Achievable
R - Relevant
T - Time bound
What is a sole trader?
A business owned by one person
What is a partnership?
When two or more people (between 2 and 20) own a business.
What is a private limited company (LTD)?
An incorporated business, so it can be described as a company. It is owned by shareholders however, only friends and family can buy these shares.
What is a public limited company (PLC)?
A business that is owned and managed by shareholders. Anyone can buy shares in this type of company.
What is a franchise?
When one business, the franchisor, gives permission to an entrepreneur, the franchisee, to set up a business using its brand name and selling its products.
What is a social enterprise?
A business that trades for a social and/or environmental purpose.
What is a lifestyle business?
A business that is set up and run by its founders with the aim of living or maintaining a certain lifestyle so that the owner can live their life as they like.
What are the advantages and disadvantages of being a sole trader?
- can make your own decisions
- quick and easy to set up - only need to register with HMRC
- sole trader keeps all of the profits
BUT - unlimited liability
- may be difficult to raise enough money to establish or grow the business
- high pressure - no one to share the load with
What are the advantages and disadvantages of a partnership?
- partners can share ideas and decision making
- risk of unlimited liability can be shared
- financial information kept private
BUT - may be disagreements
- unlimited liability
- profits are shared
What are advantages and disadvantages of being a private limited company (LTD)?
- limited liability
- more capital can be raised by issuing shares
- control over business cannot be least to outsiders
- higher status
BUT - have to publish financial info
- profits are shared
- cannot raise large amounts of money like PLC’s
What are the advantages and disadvantages of being a public limited company (PLC)?
- huge amounts of money can be raised from issuing shares
- lower production costs as firm gains economies of scale
- PLC’s can often dominate the market due to their size
- easier to raise finance - institutions more likely to lend to PLC
BUT - extremely high set-up costs
- anyone can buy shares, which can lead to a divorce of ownership and control
- financial information is available to the public
What is stock market flotation?
This is when a company’s shares are offered to the public or when a company ‘goes public’.
What is meant by an opportunity cost?
The cost of choosing the next best alternative
What is a trade-off?
A trade-off involves choosing more of one and less than another, also known as a compromise
