Ch 1 Enterprise Flashcards
What is the purpose of a business?
An organisation that identify customers’ wants and needs, purchase resources and produce tangible products or intangible services to satisfy customers, mostly for profit
Definition of value added
Value addition is the difference between the price of the product and the cost of raw materials
Definition of capital goods
They physical goods used by industry to aid in the production of other goods and services.
What are the factors of production?
- Land - site for buildings and raw materials
- Labour - skilled/unskilled, permanent/temporary
- Capital - factories/offices, finance and machines
- Enterprise - risk takers, decision makers and coordinators
Define opportunity cost
It is the loss of the potential gain from other alternatives when one alternative is chosen. As resources are scarce, they can only be put to one use although they might have alternative uses
Why many businesses fail early on?
- Lack of record keeping
- Lack of working capital
- Poor management skills
- Changes in the business environment
What a business needs to succeed?
- Organised: help you complete tasks and stay on top of things to be done, won’t forget
- Keep detailed records: know where the business stands financially and what potential challenges you could be facing => gives you time to create strategies to overcome the obstacles
- Analyse competition: study and learn from your competitors
- Take risks: allows you to gain experiences and knowledge
- Understand risks and rewards: always calculate the positive and negative sides to a decision and weigh them
Qualities an entrepreneur is likely to need for success
- Innovative
- Committed and self-motivated
- Multi-skilled
- Leadership skills
- Self-confidence
- Risk taking
What are the roles of business enterprise in the development of a business and a country?
- Employment creation
- Economic growth
- Innovation and technological change
- Increased social cohesion
What is a social enterprise?
A business with mainly social objectives that reinvests most of its profit into benefiting the society rather than maximising returns to owners
Define entrepreneur
Someone who takes financial risk when starting a new venture. They will be the risk taker, decision maker and coordinator
Define triple bottom line
The 3 objectives of social enterprises:
- Economic: make a profit to reinvest back to the business and return to owners
- Social: provide jobs for local
- Environmental: protect it
Differences between a charity and a social enterprise
- Social enterprises have to fund their own capital, does not rely on donations
- Compete against other businesses within the market
- They need to make profit to survive
