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Business > 1.5 entrepreneurs and leaders > Flashcards

1.5 entrepreneurs and leaders Flashcards

1
Q

What are the forms of business

A 
Sole trader
Partnerships
Private limited company
Public limited company
Franchise
Social enterprise
Online businesses
Lifestyle businesses
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2
Q

Explain about sole traders

A
  • easy to set up- no registration needed
  • requires a wide range of skills and flexibility
  • the owner can be their own boss but the hours are likely to be long
  • the owner keeps all profits
  • unlimited liability
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3
Q

Explain about partnerships

A
  • joint ownership of running a business
  • a contract of relationship will be set up through a deed of partnership
  • these are common in professions such as solicitors
  • similar issues faced by sole traders but with greater shared responsibility, risk and reward
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4
Q

Explain about private limited companies

A
  • must go through the process of incorporation
  • limited liability
  • has a higher status than a sole trader
  • will have wider access to capital
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5
Q

Explain about public limited companies

A
  • Can raise capital through selling shares to the public
  • size is measured by market capitalisation
  • has the ability to take over other businesses
  • can lose control of the business
  • registration to turn into PLC is long and complex-> need specialist lawyers and solicitors
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6
Q

Advantages of public limited companies

A
  • ability to raise large amounts of share capital and doesn’t need to be paid back
  • limited liability-> only lose what you invest
  • huge amounts of money can be made through stock market flotation
  • size makes it easier to gain economies of scale
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7
Q

Disadvantages of public limited companies

A
  • massive pressure to profit maximise so shareholders are increasing their wealth in hopes shareholders will get dividends
  • Registration to turn into a plc is long and complex so need lots of specialised lawyers and solicitors
  • accounts and info about business has to be disclosed so less privacy
  • greater external pressure from the media and pressure groups
  • board of directors is accountable to external shareholders
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8
Q

Advantages of sole traders

A
  • most straightforward option
  • owner owns all profits
  • owner directs all decisions
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9
Q

Disadvantages of sole traders

A
  • unlimited liability so personally liable for the debts of the business
  • capacity to raise capital is limited
  • lack of continuity
  • limited funds
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10
Q

Advantages of partnerships

A
  • share equally in the profits, entitlement to receive salaries and other benefits like cars or healthcare
  • easy to get started
  • ownership and control combined
  • more knowledge and expertise
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11
Q

Disadvantages of partnerships

A
  • unlimited liability so partners are liable for any debts
  • limited access to capital
  • potential for conflict leading to slower decision making -> ruins competitiveness
  • lack of continuity
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12
Q

Advantages of private limited companies

A
  • limited liability so personal wealth of shareholders is protected
  • easier to raise finance through internal shareholders
  • stable form of structure
  • provides more privacy of information than a plc
  • owners may pay less tax if they operate as a sole trader
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13
Q

Disadvantages of private limited companies

A
  • greater admin costs but cheaper than a plc
  • pressure to profit maximise
  • pay dividends to shareholders
  • shareholders don’t get involved in day to day running of business so there’s a divorce between ownership and control
  • harder to set up than sole traders or partnership
  • accounts published and publicly available
  • cannot raise large amounts through selling shares publicly
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14
Q

What’s a franchise

A

A limited company that licenses the right for individuals or groups to set up an identical operation in a new region

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15
Q

Advantages to a franchisor

A
  • Effective way to grow the business

* Franchisor gets a setup fee and royalty payments

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16
Q

Disadvantages to a franchisor

A

• risk of franchisee damaging brand if not run effectively

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17
Q

Advantages to a franchisee

A
  • Receive a ‘business in a box’- plans, products, marketing and a recognised brand
  • franchisor offers support and training
  • easier to get customers and finance as it’s an established business
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18
Q

Disadvantages to a franchisee

A
  • Expensive set up fees and little freedom to change business format
  • royalty payments so a share of sales go back to the franchisor
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19
Q

What’s a social enterprise

A

Not for profit organisations including cooperatives and mutual organisations.

May pay lower tax rates.

Have primary social objectives

Surpluses are principally reinvested in the business or community

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20
Q

Advantages of social enterprises

A
  • use social skills and life experience
  • target specific parts of a community
  • good brand image
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21
Q

Disadvantages of social enterprises

A

Need experts with specific skills, knowledge and expertise

May be difficult to make profit

Lack of public exposure and recognition

Have to compete in the commercial market and gave the same challenges and risks common to all businesses

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22
Q

What’s an online business

A

Providing products and services solely through the internet. Internet based businesses are the fastest growing business sector

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23
Q

Advantages of online businesses

A

Less overheads as no stores to rent, just need a warehouse

Accessible 24/7 so constant sales output

World wide access

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24
Q

Disadvantages of online businesses

A

Some people like to try before they buy

Not everyone has internet access

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25
Q

What’s a lifestyle business

A

A business run in order to sustain a particular lifestyle for its owners. Often run by a single person and linked to an interest, skill or enthusiasm

26
Q

What’s an entrepreneur

A

A person who is willing to take a risk in setting up and growing their own business. Entrepreneurs see business opportunities to make money and to meet the wants and needs of society

27
Q

What are the roles of an entrepreneur

A

Innovate and invent - create new ideas, products and services

Take risks- often willing to risk their career and financial security to make their idea work

Organise- they pull together resources such as capital, technology and people to set up a business

Make decisions- entrepreneurs are decisive and make decisions

28
Q

Why might an entrepreneur decide to set up their own business

A

Business experience - some start a new business using the experience of their current job or profession

Personal experience- a business may be based on a hobby or interest

Lifestyle choice- some people may set ip a business in order to be their own boss and work on their own terms

Spotting a gap- some people see an opportunity in everyday life and decide that they can meet this need

Skills- some people set up a business based on their interpersonal, artistic or technical abilities

29
Q

What is risk

A

The probability of something having a negative outcome that can be planned for

30
Q

What stages do entrepreneurs go through to set up a business

A

The idea- may come from a moment of inspiration
Research- into the market, customer needs, competition, profitability and potential suppliers
Planning- business plan
Financing- explore internal and external sources of finance
Location- for some this is a key strategic decision but not so much for online retailers
Resources- suppliers, HR, legal issues, utilities, manufacturing and marketing
The launch- may involve an opening event to create good public relations or activities to create awareness of the new business

31
Q

What are the functions that an entrepreneur must coordinate to run, expand and develop their business

A

Financial management- raising capital, managing costs, profitability and cash flow

Purchasing- loading with suppliers, deliveries, logistics

Administration- insurance, legal setup, tax and business records

Marketing- research, promotion and branding

Production- production of goods, storage, quality management and delivery

Managing people- recruitment, training, motivation and leading people

32
Q

What’s intrapreneurship

A

Refers to employees within a business who have the freedom and opportunity to develop their ideas and use their creativity to innovate

33
Q

What do intrapreneurial employees do

A

Solve problems, create new and exciting products and keep big businesses moving forward.

These employees add a huge amount of value and often give business a competitive advantage.

It is important for businesses to motivate and give employees the opportunity to develop these traits

34
Q

How can entrepreneurs reduce risk and prepare for uncertainty

A

Carry out detailed research

Produce detailed plans

Analyse external influences

Develop contingency plans

35
Q

What are the barriers to success

A

Lack of finance

Competition from large, established businesses

Risk aversion

Lack of ideas - not easy to find a competitive and unique business idea

Lack of entrepreneurial skills

Responsibility of becoming an employer

Legal barriers

36
Q

What are the characteristics of an entrepreneur

A

Self confidence- believe they can succeed

Self determination- drive to keep going despite problems

Self starter- willing to work independently and make decisions

Initiative- proactive and adapt to change

Commitment- entrepreneurs commit to the project and put in time to make it work, often working night and day

37
Q

Skills of an entrepreneur

A

Organisation- lots of coordinate when setting up alone

Financial management- cash flow management can be challenging for small businesses

Managing and communicating with people

Negotiating- negotiating deals and contracts with suppliers and customers

38
Q

Financial incentives for setting up a business

A

Profit maximisation- to generate as much wealth as possible

Profit satisfying- to generate enough income to live a comfortable lifestyle

39
Q

Non financial incentives for setting up a business

A

Ethical stance- running a business to support their ethical principles

Social enterprise- running a business for a social or environmental cause- not for profit

Independence and home working- entrepreneurs often want the control and flexibility of running their own business

40
Q

Why do businesses set objectives

A

Provide quantifiable steps to achieve aims

Clarify direction of the business

Measure success against targets

Motivate employees to achieve

Reward employees

41
Q

What are the financial objectives of a business

A 
Survival 
Profitability 
Growth
Market share
Shareholder value
Sales maximisation 
Cost efficiency
42
Q

Non financial objectives of a business

A 
Personal satisfaction 
Brand recognition
Sustainability
Customer satisfaction
Employee welfare
Social objectives
43
Q

What are the influences on business objectives

A

Size- objectives may change as a business grows and becomes more successful

Sector- public sector organisations are driven by meeting customer needs, not profit

Market- some markets are more competitive than others and this will determine objectives e.g targeting market share

Ownership- a plc must satisfy shareholders and so will set objectives around shareholder value

Owner- the owner may simply run the business for love of the job

44
Q

What’s the importance of profit maximisation

A

Profit is one of the main incentives of running a business. The wealth created through profit allows the owners of a business to reinvest the money into new projects and stimulate economic activity.

Profit is also important because it secures the long term success of a business

Profits can be reinvested to help the business grow and keep up with the demands of the ever changing business environment

45
Q

What does SMART stand for when talking about the appropriateness of an objective

A 
Specific
Measurable
Agreed
Realistic
Time related
46
Q

What’s a stock market flotation

A

When a company goes public and becomes a plc. This means that the company’s shares are offered on sale to the general public

As these shares can now be traded it has a significant impact on how the company operates

47
Q

What are the steps to be listed on a stock market

A

Issue a prospectus advertising the company to the public

Prospectus and info on company reviewed by lawyers

Minimum of £50,000 share capital has to be provided upfront

If successful, a certificate to sell shares will be issued

The initial public offering (IPO) goes live and the business can start trading on the stock market

48
Q

What’s bad about the process to be listed on the stock market

A

Expensive

Time consuming

49
Q

Examples of factors that may affect share price

A

Company’s performance

Business environment in which it trades

Fears for its future

Increase or decrease in profits

Job losses

Dividends

Takeover bids

Economic downturns- investors feel nervous and demand for shares falls leading to a fall in price

50
Q

What happens when share prices rise

A

Managers may receive a bonus

The company finds it easier to raise capital

Consumers with shares feel more confident To spend

The business may receive positive publicity

51
Q

What happens when share prices fall

A

The company may become vulnerable to a takeover

Price fall gives an indication of poor performance

The company finds it harder to raise capital

Consumers with shares feel less confident to spend

52
Q

What is opportunity cost

A

The benefit lost from the next best alternative

53
Q

Examples of opportunity cost

A

The benefits lost from launching a new advertising campaign instead of investing in employee training

The benefits lost from developing a new product instead of increasing production of an existing successful product

The benefits lost from purchasing a new vehicle instead of upgrading IT facilities

54
Q

What’s non monetary opportunity cost

A

Often opportunity cost cannot be calculated in financial terms

It’s frequently not possible to calculate the monetary value of a decision if the choose has an impact on brand awareness, employee morale or goodwill

55
Q

What are trade offs

A

A trade off will often involve the loss of compromise of another option or factor

For example improving productivity in a factory may lower the quality of the products being made e.g. increasing number of defects

When making decisions a business will consider the trade offs it makes when taking strategic decisions e.g. selling high volumes of low quality products vs selling low volumes of high quality products

56
Q

What factors will a business consider when making decisions

A

Investment appraisal

Risk vs reward- some businesses may avoid high risk strategies even if the rewards are huge, other may be more willing to take them

Gauging support - how popular a decision is may influence a certain course of action

Comparing advantages and disadvantages of each option based on the information available and research

Balance short term gains with long term benefits

The probability of success

57
Q

What will successful entrepreneurs do

A

Create and develop their business ideas

Experience growth

Eventually will be a large company with an organisational structure and a number of employees

At this point the entrepreneur has to become a leader of people

58
Q

What demands will an entrepreneur face when becoming a leader

A

Greater responsibility towards others

The need to motivate and inspire others

The need for strategic vision

59
Q

What are the difficulties of becoming a leader

A

Seeing themselves as a leader- entrepreneurs must accept the responsibility and adjust their mindset

Leaders need qualities like confidence, compassion and interpersonal skills

Sharing ownership and control of their business

Stress- larger businesses bring with them more responsibility

60
Q

What approaches may entrepreneurs adopt to over come the difficulties of becoming a leader

A

Stress management- use approaches to reduce stress levels and find time to relax

Education- complete leadership development courses and qualifications

Mentor- gain advice and support from a mentor

Delegate and trust- utilise qualified employees to lighten their load and take responsibility for aspects of running the business

61
Q

Why might some businesses prefer to remain small

A

To avoid many difficulties

Business (18 decks)

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