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Business Studies > 1.5 Entrepreneurs and Leaders (Done) > Flashcards

1.5 Entrepreneurs and Leaders (Done) Flashcards

1
Q

What are some characteristics of entrepreneurs?

A
  • Self-confidence.
  • Self-determination.
  • Being a self-starter (independent and decision-maker).
  • Judgement.
  • Commitment.
  • Perseverance (get through bad times and setbacks).
  • Initiative (proactive and dynamic).
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2
Q

What are the skills required by entrepreneurs?

A
  • Organising (have to plan, schedule, manage time etc)
  • Financial management (involves budgeting,arranging overdrafts etc)
  • Communication (interacting with different stakeholders)
  • Managing people (recruiting the ‘right people’, leadership etc)
  • Decision making (solving problems etc)
  • Negotiating (needed when dealing with suppliers and employees)
  • IT skills (will be able to run business more efficiently)
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3
Q

What are the financial motives for why people setup businesses?

A
  • Profit maximisation (try to make as much profit as possible in a given time period)
  • Profit satisficing (aim to make enough profit to maintain their interest in the business)
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4
Q

What are the non-financial motives for why people setup businesses?

A
  • Ethical stance (a minority of people setup a business in support of a moral belief)
  • Social enterprise (trade with the aim of improving human and environmental well-being)
  • Independence (want to be ‘their own boss’)
  • Home-working (enjoy more flexibility with hours)
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5
Q

What is a social enterprise?

A

A social enterprise (aka not-for-profit organisation) focuses on improving human and environmental well-being

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6
Q

What are the two benefits of home-working?

A
  1. The time and expense spent to and from work is eliminated
  2. They enjoy more flexibility (e.g. hours can fit around meals and breaks)
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7
Q

What are three methods used to cut costs?

A
  • Lay off staff to cut labour costs.
  • Find new suppliers to get cheaper resources.
  • Develop new working practises that use fewer resources.
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8
Q

What are two drawbacks of cutting costs?

A
  • product quality may get worse.

- customer service might suffer.

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9
Q

How can businesses aim to exceed customer expectations (to win their loyalty)?

A
  • Providing a platform for customer feedback.
  • Interacting with customers using social media.
  • Dealing with customer complaints promptly and effectively.
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10
Q

What do businesses need to do to have effective customer service?

A

They need to know what customers want, provide them with it on a consistent basis and receive feedback on how the business is doing.

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11
Q

How can a business develop a strong relationship with the local community? (3) By:

A
  • maintaining sensible open hours.
  • demonstrating responsibility for the environment, by minimising pollution for example.
  • providing employment for local people.
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12
Q

Give an example of a sole trader in the:
A) Primary sector
B) Secondary sector
C) Tertiary sector

A

A) fisherman.
B) small manufacturing business
C) tutor.

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13
Q

What is a sole trader?

A

A business that has a single owner.

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14
Q

What is the tertiary sector?

A

The production of services in the economy.

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15
Q

What is the primary sector?

A

Production involving the extraction of raw materials from the Earth.

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16
Q

What is the secondary sector?

A

Production involving the conversion of raw materials into finished or semi-finished products.

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17
Q

What is unlimited liability?

A

A legal status meaning the owner of a business is personally liable for all business debts.

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18
Q

What is a partnership?

A

A business that is owned by 2 or more people.

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19
Q

What is limited liability?

A

A legal status meaning a business owner is only liable for the original amount of money invested in the business.

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20
Q

What is a franchise?

A

A business model in which a business allows another operator to trade under their name.

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21
Q

Do sole traders have limited or unlimited liability?

A

Unlimited liability

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22
Q

What are three advantages of being a sole trader?

A
  • The owner keeps all the profit.
  • The business is simple to set up, with no legal requirements.
  • The business can be flexible and can adapt to change quickly.
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23
Q

What are three disadvantages of being a sole trader?

A
  • The owner has unlimited liability.
  • The business is usually too small to exploit economies of scale.
  • Independence may be a burden, e.g. if the owner is ill.
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24
Q

What are three advantages of being in a partnership?

A
  • The partnership is easy to set up and run, with no legal formalities.
  • Partners can specialise in their area of expertise.
  • More owners can raise more capital.
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25
Q

What are three disadvantages of being in a partnership?

A
  • Partners have unlimited liability.
  • Partners have to share the profit.
  • Partners may disagree or fall out with one another (could disrupt communication channels in the business).
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26
Q

What is a deed of partnership?

A

A legal document which states partners’ rights in the event of a dispute.

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27
Q

What happens if a deed of partnership has not been drawn up?

A

The arrangements between partners will be subject to the Partnership Act.

28
Q

What are two examples of partners’ rights in the Deed of Partnership?

A

1) how profits/losses are shared.

2) how much control each partner has (equity).

29
Q

What does a limited partnership involve?

A

-There is one or more sleeping partners (only provide capital) who
have limited liability.
-There is at least one partner with unlimited liability.

30
Q

What is a limited company?

A

A limited company is a company that has a separate legal identity from its owners.

31
Q

What are three common features to limited companies?

A
  • Capital is raised by selling shares.
  • The owners (shareholders) have limited liability.
  • Unlike sole traders and partnerships who pay income tax on profits, limited companies pay corporation tax.
32
Q

What common features do private limited companies share?

A
  • Business name ends in Limited or Ltd.
  • Shares can only be transferred privately from one individual to another.
  • Often family businesses owned by family members or close friends.
  • The directors tend to be shareholders and are involved in the running of the business.
33
Q

What is a private limited company?

A

A company owned by individuals who have privately bought shares. This form of company is usually owned by family members or close friends.

34
Q

What are three advantages of private limited companies?

A
  • Shareholders have limited liability.
  • More capital can be raised by issuing shares.
  • Control over the business cannot be lost to outsiders.
35
Q

What are three disadvantages of private limited companies?

A
  • Profits may be shared between more members.
  • It takes time to transfer shares to new owners.
  • Ltd’s cannot raise large amounts of capital/finance like plc’s.
36
Q

What is the difference between a franchisor and a franchisee?

A

The franchisor is a company which owns a franchise.

The franchisee is the business which uses the franchisors ideas and methods for a variety of fees.

37
Q

What services does the franchisor provide to its franchisees? (5)

A
  • It gives the franchisee a licence to make a product which is already tried and tested in the market place.
  • Provides a recognised brand name that customers trust.
  • Provides a start-up package, including help and advice about setting up the business.
  • Ongoing training, linked to maintaining standards, sales and new products.
  • Many franchises operate exclusive area contracts—> prevents competition between franchises and so helps sales.
38
Q

What fees do the franchisees have to pay for the services? (3)

A
  • There will be an initial start-up fee for advice, franchise name and equipment provided.
  • Most franchisors charge a percentage of sales for ongoing management services and the ongoing right to use the brand name.
  • There may be on-off fees charged for management services such as training.
39
Q

What are three advantages to franchisees of franchising?

A
  • Franchises are lower risk (idea has been tried and tested).
  • Franchisees get support from the franchisor.
  • Franchisees can benefit from national marketing campaigns organised by the franchisor.
40
Q

What are the three disadvantages to franchisees of franchising?

A
  • A franchisee’s profit is shared with the franchisor.
  • Setting up a franchise can be expensive.
  • Franchisees lack independence and must abide by strict operating rules.
41
Q

What are three advantages to franchisors of franchising?

A
  • Franchising is a fast method of growth.
  • Franchising is a cheaper method of growth- franchisees take some of the financial risk.
  • Franchisees are more motivated than employees.
42
Q

What are three disadvantages to franchisors of franchising?

A
  • Potential profit is shared with franchisees.
  • Poor franchisees may damage the brand’s reputation.
  • The cost of supporting franchisees may be high.
43
Q

What are four characteristics of social enterprises?

A
  • They have a clear social and/or environmental mission.
  • They generate most of their income from trade or donations.
  • They reinvest most of their profits.
  • They are majority controlled in the interests of the social mission.
44
Q

What are the four forms of social enterprises?

A
  • Co-operatives.
  • Worker co-operatives.
  • Mutual organisations.
  • Charities.
45
Q

Why do charities exist?

A

They exist to raise money for various causes and draw attention to the needs of disadvantaged groups in society.

46
Q

In a worker co-operative, what are employees likely to do? (3)

A
  • Contribute to production and be involved in decision making.
  • Share in the profit (usually on an equal basis).
  • Provide some capital when buying a share in the business.
47
Q

What are three characteristics of co-operatives?

A
  • Owned and controlled by their owners.
  • Members can purchase shares that entitle them to a vote at annual general meetings (AGM’s).
  • Run in the interest of their members.
48
Q

What do mutual organisations offer?

A

A wide range of affordable financial services, such as saving schemes, etc.

49
Q

Who owns:
A) Co-operatives?
B) Worker co-operatives?
C) Mutual organisations?

A

A) owned and controlled by their owners.
B) businesses jointly owned by their employees.
C) owned by their customers (aka members).

50
Q

What do lifestyle businesses aim to do?

A

They aim to make enough money and provide the flexibility needed to sustain a particular lifestyle.

51
Q

What are three examples of lifestyle businesses?

A
  • plumbers and electricians.
  • web design.
  • coaching.
52
Q

What are some features of lifestyle businesses? (4)

A
  • often a small business with one owner.
  • the business is likely to be home-based.
  • running the business is likely to be much less stressful.
  • the personal interests of the entrepreneur are likely to influence the nature of the business, so that time spent working is enjoyable.
53
Q

What are two examples of large online businesses and two examples of much smaller online businesses? (4)

A

Large online businesses: Amazon.com, eBay.

Small online businesses: retailers, bloggers.

54
Q

What are some common features in all online businesses? (4)

A
  • customers access the business via the internet.
  • collect payment for goods and services electronically, e.g. PayPal and credit cards.
  • online businesses have low set-up costs.
  • paid-for or sponsored advertising is their main source of revenue, e.g. Facebook.
55
Q

What do the majority of online businesses have on their websites? (4)

A
  • info on company history.
  • info on company aims.
  • info on products and services.
  • contact details.
56
Q

What does growth give a business? (4)

A
  • High profile in the market place.
  • larger revenue.
  • lower unit costs due to the exploitation of economies of scale.
  • higher profits.
57
Q

What are three features of public limited companies?

A
  • owned by shareholders.
  • run by a board of directors under the supervision of a chairperson who is accountable to the shareholders.
  • shares can be bought and sold on the stock market.
58
Q

What is a stock market flotation (aka initial public offering)?

A

When a company’s shares are offered to the public for the first time.

59
Q

What are two disadvantages of stock market flotation (aka IPO)?

A
  • time-consuming.

- expensive.

60
Q

What is one of the first jobs when undertaking an IPO?

A

To publish a PROSPECTUS (a detailed document that advertises the company to potential investors and invites them to buy shares before the day of the flotation).

61
Q

What are three things a prospectus is likely to contain?

A
  • a brief history of the business.
  • a description of its operation.
  • an application form to buy shares.
62
Q

Why is ‘going public’ expensive? (2 reasons)

A
  • advertising and administrative expenses.
  • minimum of £50,000 share capital.
  • etc.
63
Q

What are four advantages of plc’s?

A
  • Huge amounts of money can be raised from the sales of shares to the public.
  • Production costs may be lower as firms may gain Economies of Scale.
  • Because of their size, plc’s can often dominate the market, e.g. may be able to create barriers to entry—> preventing competition.
  • Easier to raise finance (financial institutions are more willing to lend to plc’s).
64
Q

What are four disadvantages of plc’s?

A
  • Setting-up costs for plc’s can be very expensive- could be millions.
  • As anyone can buy their shares, it’s possible for an ‘outsider’ to exert control on the company- could even take complete control.
  • Members of the public can inspect all of the company’s accounts so competitors may be able to use this information to their advantage.
  • Because of their size, it is more difficult to deal with customers at a personal level.
65
Q

What are five areas of growth when a business becomes successful and expands?

A
  • number of employees.
  • number and size of financial transactions.
  • number and size of customers.
  • quantity of resources used.
  • level and range of communication needed.

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