Chapter 1 - Enterprise Flashcards
Definition of Business:
Any organisation that uses resources to meet the
needs of customers by providing a product or
service they demand.
Difference of Demand and Effective Demand
Demand is the collective wanting of a particular good or service.
Effective Demand is being able and willing to pay for the product or service
What do Businesses do?
- Identify needs of consumers (firms
are also consumers) - The purchase resources (factors of
production) - Produce goods and services to
satisfy wants and needs
Consumer goods:
Tangible goods sold to general public
Durable: Cars, equipment, machines
Non-Durable goods: Food, drinks, sweets
Consumer services:
NON-tangible goods sold to the public
Insurance, hotel accommodation
Capital goods:
Physical goods used by the industry to be used in the
production of other goods Machines and equipment
Factors of Production
LAND: Everything that occurs naturally and can
be seen in nature
LABOUR: Work provided by people. If you need
more people than machinery to complete a job it
is called labour-intensive
CAPITAL: That which is used to utilise the
resources
equipment and finances
ENTERPRISE: Ability and enthusiasm to
combine all FOP to create a business
ADDED VALUE Definition
The difference between the cost of purchasing raw materials and the price the finished goods are sold for
Examples:
Packaging, Advertising, Store decorations etc
Value Added
SELLING PRICE - COST OF SALES = PROFIT
SELLING PRICE - COST of RAW MATERIALS = VALUE ADDED
Value Adding
SELLING PRICE - COST of RAW MATERIALS= ADDED VALUE.
How to add value
- Building a brand
- Delivering excellent service
- Product features and benefits
- Offering convenience
Local, National and international
Businesses
Local: Operate in small and well-defined part of country no expansion objectives or requirements
National: Operate across most of the country, no attempt to operate in a different country
International : Operate in more than one country
called multinationals
Multinational: business organisation that has its
headquarters in one country, but with operating branches, factories and assembly plants in other
countries
Entrepreneur Definition
Someone who takes the financial risk of starting and managing a new venture
Characteristics of a successful
Entrepreneur
Innovation
Commitment and self motivation
Multi-skilled
Leadership skills
Self confidence
ability to bounce back
Risk Taking
Challenges Entrepreneurs face
1.Lack of a business opportunity
2.Obtaining sufficient capital
3.Cost of a good location
4.Competition
5.Lack of a customer base
Challenge 1: Lack of a business
opportunity
- Need to identify Market Need or Market Gap
-The gap has to offer sufficient demand to be profitable business venture
Ideas come from:
1. Own Skills or hobbies
2. Employment experience
3. Franchising conferences and Exhibitions
4. Small Budget Market research
Challenge 2: Obtaining sufficient
capital
Difficult to obtain finance because:
1. Lack of Own finance limited savings
2. Not aware of available grants or funds
3. Lack of any trading record to give banks confidence in loans
4. Poorly produced business plan no investors
Challenge 3:Cost of a good location
Need to take low costs into consideration (as a start-up but it leads to the following problems:
1. Away from market potential
2. No Status
3. May cause family tension
4. Difficult to separate private and working life
Challenge 4: Competition
- Unless the business is so unique competition is a problem
- More established businesses can compete on a different level
- What can a new business offer its customers that is unusual? USP
Challenge 5: Lack of a customer base
Long term business success comes from customer base better services keeps
customers:
- Personal customer service and After (email customers, building relationships= will know customer preferences )
- Pre-and-after-sales service sales service (helping customer make decision on what to buy and helping them after purchase through installation, warranty support and addressing any concerns)
-Individual requests (customization)
Difference between risk and
uncertainty
Risk
- All business decisions involve risk
- You could reduce the risk through market research to avoid errors made by failed businesses
- Business planning reduces risk
Uncertainty
- Uncertainty cannot be foreseen, measured or calculated
- Plans made for the future will always be unforeseen and impossible to predict (covid is an excellent example)
Impact of entrepreneurs on
Economy
- Employment Creation
- Economic Growth
- Firms survival and growth
- Innovation and technological change
- Exports
- Personal development
- Increased Social Cohesion
Intrapreneurship
Term given to people who have some of the same qualities as
entrepreneurs and are encouraged to demonstrate the same skills as
entrepreneurs within an existing business
Differences
Entrepreneur:
Starting up a new business
RISK = Taken by the entrepreneur
REWARDS = To the entrepreneurs
Intrapreneur:
Developing innovative products and projects within an existing business
RISK = Taken by the business
REWARD = To the business
Intrapreneurship
Benefits to existing business:
- Injecting creativity and innovation into the business
- Developing new ways of doing business
- Driving innovation and change within the business
- Creating a competitive advantage
- Encouraging original thinkers and innovators to stay in the business.
Business plan:
Written document that describes a business, its objectives, its strategies, the market it is in and its financial forecast
A business plan includes
- Executive summary (overview of the strategies)
- Description of the business plan (nature of the product, target market, and entrepreneurs skills and experience)
- Marketing and sales strategy
- Management team and personnel
- Operations
- Financial forecast
Business Plans Benefits
- Forces owner to think about proposal strengths and weaknesses
- Gives owners and managers a clear plan
Business Plans Limitations
- Does not guarantee
success = gives false sense of certainty = May lead to inflexibility - Must be supported by research = time + money
