1.5 entrepreneurs and leaders Flashcards
what is an entrepreneur
a person willing and able to create a new business idea and take risks in achieving success
what are the roles of entrepreneurs
- coordinate the resources needed to start a business
- make decisions - deal with successes and failures
- take risks -
example of an Entrepreneurial CEO - Starbucks
Howard Schultz
- in 1982 hired by Starbucks as Director of Retail Operations and Marketing
- he then left to start his own coffee company then returned to Starbucks in 1987 as CEO.
- then Starbucks expanded globally and became one of the most recognised brands in the world
intrapreneurship - what is it
- promoting entrepreneurial thinking and behaviour within an existing business
- take risks, innovate, develop new ideas
- increases motivation
intrapreneurship example - google
GOOGLE
- 2004 - introduced Gmail - free email service
- gained popularity due to large storage
- the ppl who created this were part of googles 20% policy which was a group of employees at google who dedicated 20% of their time to personal projects
- HUGE SUCCESS
4 barriers to entrepreneurship
- CAPACITY - how creative, riskful and able to seize opportunities they are
- FINACE ACCESS - not enough money to start up or expand
- LACK OF TRAINING - skills, marketing, management, leadership, business plan etc
- LACK OF CONFIDENCE/ FEAR OF FAILURE - its risky but higher risk = higher reward - need to be fearless
difference between RISK and UNCERTAINITY
RISK
- can plan for
- the possibilities f outcomes are known and understood
- conscious decision
UNCERTAINITY
- factors outside oof the entrepreneur’s control
- eg environmental factors - eg Japanese Tsunami 2011
- economic changes - covid, brexit
- changes to legislation and political party change
skills and characteristics needed for an entrepreneur
SKILLS
- communication
- team work
- problem solving
- organisation
- technology
CHARACTERISTICS
- creativity
- hard work
- resilience
- initiative
- risk taker
reasons why ppl start up businesses - financial and non financial
FINANCIAL
- profit maximisation - high revenue as possible
- profit satisfaction - happy with a average level of profit
NON FIANCIAL
- ethical stance
- social entrepreneurship
- independence - don’t want a boss
- home flexible working
survival and profit maximisation
survival
- the initial entry needs to generate enough cash flow to survive the start
profit maximisation
- after the survival then they can switch to focusing on profit maximisation
- getting as much revenue as possible
business objectives
- sales maximisation - low prices to achieve revenue maximisation when their product is price elastic in demand
- market share - % of total sales a company holds in a specific market, better quality products than its competitors
- cost efficiency - lowest possible cost - needed for a highly competitive market
- employee welfare - safe, benefits etc
- customer satisfaction - high quality products
- social - sustainable, ethical –> good reputation
sole trader - what pros cons
- business with a single owner
PROS - easy and cheap to start
- owner has all control
- owner gets all profits
- single tax
CONS - owner responsible for debts
- limited access to finance
- limited set of skills
- more difficult to grow and expand
partnership - what pros cons
- 2 or more people forming a business
PROS - easy to set up and cheap
- shared responsibility and decision making
- more skills and knowledge available
- more access to finance and capital
CONS - unlimited liability
- personal disputes btwn owners may affect business
- profits have to be shared
- hard to transfer ownership
whats a private limited company (Ltd)
- the ownership of the business is broken down into a specified number of shares
- shares can be sold by owner - normally to friends, family or venture capitalists
- decision making is normally with the person appointed to run the company - called CEO
pros and cons to a private limited company (Ltd)
PROS
- limited liability
- access to greater finance and capital
- easy to transfer ownership
- professional image and reputation
CONS
- £££ and time consuming to set up
- more complex legal requirements and regulations
- annual financial reporting and auditing are required
- shareholders have little control over the company - the founder imposes their agendas
what is franchising
- a business model where a person buys the right o operate a business model, branding and support from a larger company
- the franchise then operates the business under the franchisor’s established system and gets their training, marketing support and on going assistance
what are social enterprises
- a business that has the primary purpose to create social or environmental impacts - NOT TO GENERATE PROFIT
- profits are usually reinvested back into the business or used to create a positive social change or address an environmental issue
what does it mean if you become a public limited company (PLC)
- if a business grows fast it then needs lots of capital to fund its expansion
- to get this funding it can transfer from a Ltd to a PLC
- this is a complex process with lots of legal requirements and involves undergoing stock market flotation
what’s stock market flotation
when a business becomes a PLC and needs to raise capital by selling shares to the public on a stock exchange
benefits of becoming a PLC
- access to capital - lots of ££ raised fast. more cost effective than loaning from banks etc
- shared risks - risks are spread a larger number of shareholders
- increased liquidity - shares become more liquid (bought and sold easier) on a public stock exchange
- easier for shareholders to buy/sell - extended decision making - board of directors made of representatives of major shareholders. brings more expertise and perspectives
- greater public profile
The top three initial public offerings as of March 2023
- The Saudi Arabian oil company, Saudi Aramco, raised $29.4 billion in its IPO in December 2019
- The Chinese e-commerce company, Alibaba Group, raised $25 billion in its IPO in 2014
- The Japanese telecommunications company, SoftBank Corp., raised $23.5 billion in its IPO in 2018
what is an opportunity cost
- the loss of the next best alternative when making a decision
- like when someone is chosing between buying a new phone or a new pair of jeans but they chose the phone. the jkeans are the opportunity cost because they represent the next best alternative
what is a trade off
a trade off occurs when 2 things cant both be fully achieved
example of a trade off with a product
product - choosing to spend £ by upgrading an existing product may result in the loss of the next best alternative which could be research and development of a new product
