Chap 3. Enterprise, Business Growth And Size Flashcards

1
Q

Define entrepreneur.

A

Someone who invests and takes the risk of starting a new business venture

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2
Q

Give some characteristics of a successful entrepreneur.

A

. Risk taker
. Hard working
. Innovative
. Creative
. Self confident
. Independent
. Leader
. Effective communicator
. Multi skilled

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3
Q

List some advantages of being an entrepreneur.

A

. Enjoys all profit made by business
. Own boss and does not take orders from others
. Acquires fame and becomes well known for managing a business
. Job satisfaction as he puts his ideas, skills and talents into the firm

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4
Q

List some disadvantages of being an entrepreneur.

A

. May lose all money invested in the business
. May have limited capital
. Shoulder all risks and responsibilities alone
. Unlimited liability
. If sick, there is lack of continuity of the business
. May not have necessary knowledge to manage firm

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5
Q

What is a business plan?

A

It is a document that give details about activities, objectives, finance and owners of the business

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6
Q

List the content of a business plan.

A

. Description of business
. Products and services
. The market
. Business location and how the products will reach customers
. Organisation structure and management
. Financial information
. Business strategy

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7
Q

Give 2 uses of a business plan.

A

. To help gain finance
. Careful planning reduces risks

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8
Q

List the 4 ways that we can measure size of businesses.

A

. Number of employees
. Value of output
. Value of sales
. Value of capital employed

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9
Q

Give the disadvantage of measuring size of a business by “number of employees”.

A

Some firms may use capital intensive and produce more compared to another firm who has more workers and produce less

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10
Q

Give the disadvantage of measuring size of a business by “value of output “.

A

Some firms may produce less output and have a greater value of output
E.g a jewellery store would produce 100 jewelleries and a value of Rs 1million compared to a match stick company producing 50 000 output but have a value of Rs 100000

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11
Q

Give the disadvantage of measuring size of a business by “value of sales”.

A

Some firms may make less sales but have a greater value of sales
E.g firm A may have a level of sale of 50000 and a value of sales of Rs 400000 while another firm B may have a level of sales of 200 and value of sales of Rs 30million

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12
Q

Give the disadvantage of measuring size of a business by “value of capital employed “.

A

Some firms may invest more but be of the same size
E.g firm A may invest Rs 3million and be a small cafe compared to firm B who invested Rs 50000 and is a tailor

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13
Q

Why will “investors” find it useful to measure size of a business?

A

To decide which business to put their money in

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14
Q

Why will “government” find it useful to measure size of a business?

A

To determine how much tax revenue it will get from different firms

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15
Q

Why will “bank” find it useful to measure size of a business?

A

To find out if the firm is able to pay their loan

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16
Q

Why will “consumers” find it useful to measure size of a business?

A

They will be concerned about the continuous supply of the required products, prices and quality

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17
Q

Why will “workers” find it useful to measure size of a business?

A

To determine job security, bargaining power for better salary and working conditions

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18
Q

Why will “owners” find it useful to measure size of a business?

A

To determine their position in the market

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19
Q

Why will “suppliers” find it useful to measure size of a business?

A

To determine if it is worth dealing with the business

20
Q

Why will “competitors” find it useful to measure size of a business?

A

To determine the strengths and weaknesses of their rivals

21
Q

Why do workers want their bysiness to grow?

A

. To be able to increase their sales and profits
. To attract a larger number of customers (increase market share)
. Improve reputation and image of businesses and owners
. Reduce risks of being eliminated by big rivals
. To attract big investors
. Improve credit worthiness of the business
. To benefit from economies of scale

22
Q

What is external growth ?

A

When a firm merges with another business or takeover another business

23
Q

What is internal growth?

A

When a firm expands its existing operations
E.g open new branches and extend its premises

24
Q

What are the 2 types of external growth?

A

. Merger/integration
. Take over

25
Q

Define merger/integration.

A

When 2 or more firms agree to join together and create one new business

26
Q

Define take over.

A

When a business buys another business and becomes the new owner of that enterprise

27
Q

List the Different types of integration.

A

. Horizontal integration
. Vertical integration
. Conglomerate integration

28
Q

Define horizontal integration.

A

Meeting of 2 firms of same industry and same stage of production

29
Q

Define vertical integration.

A

Meeting of 2 firms of same industry but of different stages of production

30
Q

Define vertical forward integration.

A

When 1 firm integrates another firm at a later stage of production

31
Q

Define vertical backward integration.

A

When 1 firm integrates another firm at an earlier stage of production

32
Q

Define conglomerate integration.

A

When 2 firms of different sector and different stage of production merges

33
Q

List the Advantages of horizontal integration.

A

. Reduces competition
. Benefit from economies of scale
. Greater possibility of applying specialisation and division of labour
. Sharing of knowledge, duties, responsibilities, skills and expertise

34
Q

List the disadvantages of horizontal integration.

A

. Conflicts may arise among owners
. Managerial problems due to too large business
. Firms may lay off surplus worked as they cannot afford to pay all workers
. Less competition leads to higher consumer exploitation

35
Q

List the Advantages of vertical forward integration.

A

. Better control over quality of product
. Producing firm will have an assured outlet
. Producing firm will have better control over firm
. Outlet will not sell rival’s brand

36
Q

List the Advantages of vertical backward integration.

A

. Cost of production decrease
. Producing firm will ensure regular supply of raw materials
. Producing firm can prevent raw material supplier to sell to rivals
. Can ensure good quality raw materials

37
Q

List the disadvantages of vertical integration.

A

. Risk of conflicts between owners due to different managerial style
. May not benefit from economies of scale
. Risk of job losses
. Too big to control

38
Q

List the Advantages of conglomerate integration.

A

. Diversifying is activities can spread risks
. Predator business can absorb market share
. Possibility gain economies of scale
. Possibility to apply specialisation
. Sharing of ideas, knowledge and skills

39
Q

List the disadvantages of conglomerate integration.

A

. Risk of conflicts between owners with different managerial style
. Poor communication if firm become too large
. Lack of proper control may lead to wastages
. Lack of experience to manage may affect performance
. Surplus workers may lose their jobs

40
Q

How can we fix the problem of “lack of finance” during business growth?

A

. Business should expand slowly
. Ensure sufficient long term finance is available

41
Q

How can we fix the problem of “too difficult to control” during business growth?

A

. Operate in smaller units
. Apply delegation and workers empowerment

42
Q

How can we fix the problem of “poor communication “ during business growth?

A

. Operate in smaller units
. Make use of latest technology

43
Q

How can we fix the problem of “conflicts may arise in case of merger” during business growth?

A

. Develop good communication methods
. Develop common ways of doing things

44
Q

Why do some firms remain small?

A

. MARKET SIZE- if there are too few people willing or able to buy the product
. SIZE OF CAPITAL - owner may have limited capital
. OWNER’S OBJECTIVE - they may prefer to keep firm small to have better control
. PERSONAL CONTACT - some may like personal contact with customers to satisfy exact needs
. REDUCE COSTS - small firms have less costs than large firms
. MORE FLEXIBLE - able to adapt quickly to changes in market condition

45
Q

List the causes of business failure.

A

. Poor management skills
. Lack of liquidity
. Increased competition
. Changes in business environment
. Diseconomies of scale