Business 1.1/1.2./1.4/1.5

Question 1

What is an entrepreneur?

Answer 1

An entrepreneur is a person who uses an idea and starts a business taking on the financial risks in the hope of making a profit (reward)

Question 2

What are some financial and non-financial motives of entrepreneurs?

Answer 2

-To earn an income

-Use redundancy money (money left from their previous job)

-Because they have identified a gap in the market

-Turn a hobby/passion into a business

-Earn an income and make profit

-To be their own boss

-To make use of skills

-Few job opportunities + the availability of governments grants to encourage small business start ups

Question 3

What are some characteristics and skills of an entrepreneur?

Answer 3

-Being a risk taker

-Taking the initiative and being proactive

-Being an effective organiser

-Having creativity and being innovative

-Being hard-working

-Being determined and having perseverance

Question 4

What are the sectors of the economy?

Answer 4

1)Primary–>Extraction of raw materials directly from the Earth or sea

2)Secondary–>Processing and manufacturing of products from raw materials

3)Tertiary–>Providing a service

(The UK’s economy is 79% services)

Question 5

What is an SME?

Answer 5

An SME is a ‘small/medium eneterprise’ containing 0-249 employees

Question 6

What are advantages of SMEs?

Answer 6

-SMEs create jobs (they employ around 16.3 million people, contributing to 60% of all jobs in the UK)

-SMEs buy products and services from other businesses,creating profits for them

-SMEs pay tax on their profits and their employees pay tax on their wages

Question 7

What are disadvantages of SMEs?

Answer 7

-Small scale, and more likely to fail in times of recession and hardship

-They have a high failure rate (around 80% fall within their first year)

-Smaller budgets

-They do not have economies of scale and therefore cannot charge lower prices to customers as they have higher production costs.

Question 8

Who are the various stakeholders affected by a business?

Answer 8

-Shareholders

-Directors and managers

-Employees/workers

-Customers

-Suppliers

-Government

-Local communities

Question 9

What is a business plan?

Answer 9

A business plan is a statement that outlines the way in which a business will attempt to achieve its objectives-giving a clear idea of its operations and direction

(It is there for future guidance and not to be forgotten)

Question 10

What is included in a business plan?

Answer 10

-The overview/executive summary

-The marketing plan

-The operations plan

-The human resources plan

-The financial plan

Question 11

What is included in a business plan? (details)

Answer 11

1)The overview or executive summary: The entrepreneur should first of all clearly describe the business idea.

2)The marketing plan: Includes the research carried out and a description of the pricing strategies,the promotional strategies,the product itself and where/how it will be sold

(4 Ps)

3)The operations plan: Includes the details of where the business will be located,production methods and any equipment needed. also the information on the costs of production and where the business will buy supplies may also be included

4)The human resource plan: The number of employees and the skills,experience and qualifications they require will be outlined

5)The financial plan: Will contain information such as:
-A sales forecast indicating potential revenues

-a cash flow forecast for the first 12 months

-a profit and loss and balance forecast for the end of the first year

-a break even analysis

-where the finance for starting running the finance will come from

Question 12

What are the potential benefits of a business plan?

Answer 12

-Presents the business owners with a clear set of instructions on how to run the business

-Allow business owners to check progress against objectives,monitor cash flow and take action when objectives are not being achieved.

-Needed for potential investors when seeking finance (e.g from banks)

Question 13

What are potential drawbacks of a business plan?

Answer 13

-An inaccurate business plan with unachievable objectives can give entrepreneurs false hope,leading to failed investments.

-For some products/services e.g in fast changing markets it could be harder to predict sales and costs accurately.

-Time consuming

-No business is guaranteed success

Question 14

What are the main sources of information and guidance available to entrepreneurs?

Answer 14

-The Government

-Business support charities such as the prince’s trust

-Banks and business financiers

-Venture capitalists and investors

Question 15

What is market research?

Answer 15

Market research is the process of collecting information and data about a business’s customers ,the marketplace and the activities of competitors within that marketplace.

Question 16

What is the purpose of market research?

Answer 16

-Discover the needs of customers

-Understand the structure of the market

-Discover whether or not market demand is increasing

-Establish at what stage is the product in its life cycle

Question 17

What are examples of primary and secondary data?

Answer 17

Primary–> -Questionnaires
-Focus groups
-Test marketing

Secondary–> -Official publications
-Industry magazines
-Internal information
-Online Desk research

Question 18

What is Qualitative data?

Answer 18

Data referring to attitudes, opinions, intentions, motives, and beliefs.

Question 19

What is Quantitative data?

Answer 19

Quantitative data us numerical data that can be tested using statistics.

Question 20

What are some issues with conducting market research?

Answer 20

-Money

-Time

-Availability

-Personalisation

Question 21

What is sampling?

Answer 21

Sampling means getting opinions from a number of people ,chosen from a specific group, in order to find out about the whole group

Question 22

What is random sampling?

Answer 22

Random sampling is selecting individuals from a group randomly, giving everyone an equal chance of being chosen.

-This avoids Bias
However… it assumes all members are the same (homogenous) and is not always representative.

Question 23

What is Quota sampling?

Answer 23

Quota sampling is where the population is segmented into specific groups with the same characteristics and then a number is selected from each group. (e.g. age or sex)

Hoewver…it can because respondents are not randomly chosen this can result in bias

Question 24

What is the Public Sector?

Answer 24

The public sector is businesses owned and run by the government, and public services such as the NHS, education, and police are businesses run by the government.

Question 25

What is the Private Sector?

Answer 25

Private sector businesses owned by shareholders and individuals run to make a profit, e.g., Tesco, JD sports, and your local newsagents.

Question 26

What are the aims of the Public Sector?

Answer 26

-To provide services that businesses would not provide at all e.g. streetlighting or would not provide in a way that everyone would be able to afford.

-Employment. (The public sector employs around 5.44 million which is about 16% of all workers)

Question 27

What are the aims of the Private Sector?

Answer 27

-Survival

-Growth

-Profit

Question 28

What is a Sole trader?

Answer 28

-A sole trader is a business owned by 1 person.

(they have UNLIMITED liability)

Question 29

What is a partnership?

Answer 29

-A business consisting of between 2 and 20 partners

(all partners have UNLIMITED liability)

Question 30

What are private limited companies? (PLCs)

Answer 30

-a (PLC) is a company where all the owners are called shareholders who put money into the company.

-They are expected to be paid a % of the profits known as a dividend.

-The business continues if the owner dies (ownership can be transferred)

-(they all have LIMITED liability)–> i.e. they only lose what they invested.

Question 31

What is LIMITED and UNLIMITED liability?

Answer 31

LIMITED- shareholders are only liable to lose the amount of money they invested in the business

UNLIMITED- if the business fails, the owners of the business are liable for all the debts in their business, and have to pay them if they are able to through selling their personal possessions.

Question 32

What companies hold UNLIMITED liability and what companies hold LIMITED liability?

Answer 32

LIMITED:
-Private Limited Companies (LTD)
-Public Limited Companies (PLC)

UNLIMITED:
-Sole trader
-Partnerships
-The owner of the business

Question 33

What are the factors affecting the choice of the legal structure of a business?

Answer 33

-Control–>How much control does the owner want?

-Finance–>How much finance does the business need to raise and from what source?

-Liability–> Does the business want limited or unlimited liability?

-Cost and complexity of formation–>can the business afford the cost to set up as a Ltd/Plc?

-Future needs

-Continuity–>Does the owner want the business to continue if they die?

Question 34

What are some examples of non profit organisations?

Answer 34

-Social enterprises–> a business designed to achieve specific social objectives as its primary purpose. The profits generated are primarily used to fund social programs.

-Charities–> businesses whose aim is to raise money for good causes, or to help people, animals and the environment.
-any profit is called a surplus (after their costs are paid e.g. rent) and must be given to a cause rather than the shareholders.

-Cooperatives and societies–> A co-operative is a business that is owned and run by its members. Co-operatives can be owned by the customers, employees or local residents. Co-operatives are set up to benefit their members.