3️⃣ Flashcards
pros of being entrepreneur (4)
- independence in using time, money
- decision freedom
- profitable, income could be higher than employee
- can incorporate personal skills and interest
cons of entrepreneur (3)
- risk of lose money
- total responsibility, hard to raise funds
- sacrifices, longer working hours
what’s in a biz plan? (5)
- organisation structure
- market analysis
- product summary
- revenue and expenses (financial plan)
- strategies
why do govs support start-ups?
- employment
- contribute economy growth
- contribute country exports if successful
- fresh ideas and tech
how do govs support start-ups?
- business advice
- land/rent at low cost for new firms
- loans at low interest rates
- give grants (gov given money) for capital
- financial aid for workforce training
how to measure biz size?
- num of employees
- output value
- value of capital employed
- sales value
limits of measuring biz size?
- num of employees doesn’t account for productivity
- output value doesn’t account for sales (unsold)
- capital employed doesn’t account for how efficienctly used
biz growth: internal?
expand existing operations
biz growth: external?
takes over (buys out owner of another biz)
OR
merges (agree to join firms -> 1 biz
HORIZONTAL MERGER/INTERGRATION
same industry, SAME SECTOR (pri/sec/ter)
samesamesamesamesamesamesame
e.x. chair manufacturer merges with table manufacturer
(side by side go horizontal)
benefits of HORIZONTAL merger/intergration?
- reduced competition
- increased share of total market
- economies of scale (less costs more production)
VERTICAL MERGER/INTERGRATION
same industry, DIFFERENT SECTOR (pri/sec/ter)
e.x. fabric manufacturer 👚 merges with cotton pickers 🧑🏿🌾
(tall cotton pickers are vertical)
BACKWARD VERTICAL
same industry, sector goes BACK
e.x. fabric -> cotton pickers
FORWARD VERTICAL
same industry, sector goes FRONT
e.x. cotton pickers -> fabric
predator biz
biz that takes the initiative to take over/merge
pros of backward vertical
- ensured supply of raw materials
- saves money (eliminate supplier profit)
- prevent supplier from supplying to competitor
pros of forward vertical
- ensures outlet for product
- saves money (eliminate retailer’s profit)
- prevent competitor from selling competitor products
CONGLOMERATE MERGER/INTEGRATION
DIFFERENT INDUSTRY, sectors can be both same or diff
a.k.a “diversification” (bc biz expands into new market
e.x. pizza x toothpaste
pros of conglomerate
- spreads risk (1 industry struggle other will b ok)
- global expansion (biz operates in >1 country)
- new ideas, improve quality and demand
e.x. pepperoni toothpaste!
business growth can bcome hard to deal w?
- hard to control staff, dpts expand
- lack of funds
- lack of expertise (bigger biz = bigger problems)
- diseconomies of scale (cost increase, profit decrease)
but some biz wanna stay small. why?
- industry (large scale expansion difficult for personal services)
- market size (small market no need expand)
- owner objectives (easy control, flexible)
some biz fail, why.
- poor management/planning (bad decisions)
- over-expansion (diseconomies of scale)
- didnt plan for change (customer tastes!)
- poor financial managment, cash shortage, employee no pay
