1.5 - Entrepreneurs & Leaders Flashcards
Entrepreneur
Sees an opportunity which others do not fully recognise, tries to meet an unsatisfied demand or to radically improve the performance of an existing business.
Involves;
- Creating and setting up a business
- Running and expanding/developing a business
- Innovation within a business (intrapreneurship)
- Anticipating risk and uncertainty in business environment
Issues in creating and setting up a business
- Having the initiative to exploit a business opportunity
- Calculate risks involved
- Raising finance to investment in the set up of the business
Issues when expanding a business
- Carry out marketing research to see if there is demand to justify expansion
- Raise necessary finance
- Introduce new products and services
- Invest in new tech, better equipment to improve service
- Take on more skilled staff
- Changing the organisation of the business
Intrapreneurship
An employee within a larger business who thinks like an entrepreneur
- Takes risks
- Solves problems
- Drives innovation
- Understands trends
- Proactive in adding value
Uncertainty
A situation in which there is degree of risk and the consequences are not known or are unclear
Why business faces uncertainty
- Economic reasons
- Competitor actions
- Changes in society
Motives for starting a business
- Own boss
- Earn their own money/profit
- Social reasons
- To have something to hand over to their children
- Wanting to work in a more ethical way
- Wanting flexibility in hours or location
Barriers to entrepreneurship
- Personal (lack of self esteem, risk averse, fear of failure, lack of technical skills)
- Economics (taxation, recession, unemployment)
- Financial (lack start-up capital, lack of cheap labour, lack investment)
- Political (regulations, unstable political landscape, lack govt support)
Examples of objectives
- Survival (reach a sustainable level of sales to reach break-even point)
- Profit maximisation
- Sales maximisation
- Market share
- Cost efficiency
- Employee welfare
- Customer satisfaction
- Social objectives
Franchise
Where a small business owner buys the rights to sell the goods and services of a large, well-established company
Franchisee (smaller business)
Franchisor (large business)
Usually an initial set up fee (costly)
% of sales turnover is paid annually (royalty)
Franchise adv and disadv
+/ - Franchisor chooses franchisees carefully
- Franchisor decides how much money franchisee must invest
- Franchisor provides support, management advice & training, help solve problems
-/ - Franchisees don’t have freedom, bound by rules
- Franchisee can’t sell business without permission
- Franchisee pays % of profits in royalties
- Franchisee won’t ever own the business outright
Social enterprise
- A business that trades for a social and/or environmental purpose
- Their mission is social and they achieve it by selling products/services
- Not the same as charity as they don’t receive grants/donations
Lifestyle business
- Aim is to provide great quality of life for the owner
- Something they enjoy
Sole trader
- Business owned by one owner
- Can employ people but they will not be involved in control of business
- Small business
- Unlimited liability
Pros and cons of sole trader
+/ - Easy to set up
- Make decisions quickly
- Less capital needed
- Taxed differently
- Keep all profits
- Can offer personal attention
-/ - Unlimited liability
- Difficult to raise money
- No economies of scale
- No one to take over ill-health/holidays
