1.5 - Entrepreneurs and leaders Flashcards
What is an entrepreneur
Someone who is willing to take risks
What is the ‘role’ of an entrepreneur
-able to take risks (move away from a stable career)
-able to organise resources e.g.
-able to make decisions e.g. prices to charge in restaurants
What are the barriers to entrepreneurship
-access to finance (e.g. disadvantaged background)
-fear of failure/lack of confidence (may worry about financial risks, entrepreneurship is inherently risky)
-lack of training/know-how (entrepreneurship requires a range of skills e.g. marketing, finance, management and leadership)
-entrepreneurial capacity (individuals ability to think creatively, take risks and seize business opportunity)
Risk VS uncertainty for entrepreneurs
RISK
-risks can be calculated and managed by working out the probability of the outcomes
UNCERTAINTY
-these are factors outside of the entrepreneurs control e.g. economical factors, environmental and the threat of new entrants
What are the skills needed for an entrepreneur
-communication
-team working
- problem solving
-organisation
-numeracy
-information technology
What are the characteristics needed for an entrepreneur
-creativity
-hard working
-resilience
-initiative
-self confidence
-risk taker
What are the financial reasons to why people set up businesses
-profit maximisation (generating substantial revenue and profit)
-profit satisfying (achieving a satisfactory level of profit)
What are the non-financial reasons to why people set up businesses
-ethical stance e.g. promoting fair trade
-Independence (not satisfied with traditional employment)
-home working (prefers more flexible hours and a better work-life balance)
what are the 2 main business objectives
-survival (survive initial market entry and ensuring effective cash flow management to remain in business)
-profit maximisation (profit to satisfy shareholders (as they receive dividends to generate more investment)
What are some other common business objectives?
-sales maximisation (generating maximum revenue possibly by selling its products/services)
-market share (% of sales in given market e.g. selling better quantity of products than its competitors
-cost efficiency (producing products at the lowest possible price)
-employee welfare (providing a healthy and safe working environment
-customer satisfaction (delivering high quality products e.g. xerjoff)
What are the different types of businesses
-Sole trader
-Partnership
-Private limited company
-Public limited company
-Franchising
-social enterprise
-lifestyle business
-online business
Explain a ‘sole trader’ and list advantages and disadvantages
A business that has a single owner
ADV
-easy and cheap to set up
-simple tax arrangments
-owner has complete control
DIS
-sole trader responsible for debts
-limited skill set (one owner)
-limited access to finance and capital
Explain a ‘partnership’ and list advantages and disadvantages
When two or more people join together to start a business
ADV
-easy and cheap to set up
-shared responsibility and decision making
-more skills and knowledge available
-increased access to capital
DIS
-partners have limited liability (owners personal assets at risk)
-profits shared
-potential disagreements between partners
Explain a ‘private limited company’ and list advantages and disadvantages
Ownership of a number is broken down into a specified number of shares e.g. bought by venture capitalists (dragons den)
-decision-making rests with CEO
ADV
-limited liability (owner does have personal responsibility for companies debts)
-access ro greater finance and capital
-easier to transfer ownership
DIS
-expensive and time consuming to set up
-annual financial reporting and auditing required
-shareholder have little control over the company
Explain a ‘franchise’
An individual buys the rights to operate a business model
-the franchisee operates under the franchisee’s established system
e.g. branding, marketing, training and assistance
Explain a ‘social enterprise’
a business that operates for the primary purpose to create a social or environmental impact
-profits are usually reinvested in the business
Explain a ‘lifestyle business’
small, owner operated business that prioritizes a specific lifestyle or personal interest
Explain a ‘online business’
a business which operates online
-this usually allows for low overhead costs and can operate from anywhere e.g. ecommerce stores
What are the benefits of becoming a PLC
-greater access to finance (a large amount of capital can be raised quickly through stock flotation)
-Shared risk (risk is shared across large amounts of shareholders)
-extended decision-making
Define ‘opportunity cost’
the lost of the next best alternative when making a decision
What is a ‘trade-off’ in terms of opportunity cost and can you give some examples
A trade-off occurs when 2 things cannot be fully achieved
Example’
Product - upgrading a product instead of putting R&D into the next best alternative
Pricing strategies - a business using competitive pricing, loses opportunity of trying price skimming
What are some difficulties entrepreneurs face when developing into a leader/ceo
-need to delegate (entrepreneurs need to learn to delegate responsibility and tasks)
-trust and verify (a leader must learn to trust and verify tasks are being completed)
-learning to listen (entrepreneurs are often driven by own ideas and need to learn to listen)
-having an open mind (leaders must be open to new ideas)
