Chapter 1: Enterprise

Question 1

4 needs by a business?

Answer 1

Suppliers, customers, capital (start up and working) and labour (manual employees)

Question 2

What does added value mean?

Answer 2

Added value is the difference between the cost of purchasing raw materials and the price at which the goods are sold for.
In order to increase the profit margin.
(To pay for expenses)

Question 3

Define what an entrepreneur is?

Answer 3

An entrepreneur is someone who takes the financial risk of starting and running a new business venture

Question 4

Define what’s used in the primary sector, secondary and tertiary sectors?

Answer 4

Primary: Extracting and making use of raw materials
Secondary: when they manufacture products from natural resources.
Tertiary: this sector involves providing a service to customers

Question 5

List the 6 characteristics of a successful entrepreneur and why the are important?

Answer 5

1. Innovation- carving a new niche in the market, attracting new customers in innovative ways, presenting their firm/product as unique & different
2. Leadership skills- a successful leader who leads by example and has to encourage and motivate employees to achieve a target.
3. Multi-skilled- making the product or selling/promoting the product, whilst providing a service
4. Commitment- being self motivated and willing to work hard and be ambitious for the good of the firm.
5. The ability to bounce back (self-confidence) - having that self belief that you can respond correctly/ positively to any setbacks
6. A risk taker- the ability to take necessary risks in order to see results

Question 6

Explain why there are so many new business enterprises in the tertiary sector?

Answer 6

Everyone needs a service to be provided for them

Non physical form of help

Question 7

List 6 benefits for the economy that entrepreneurship (impact of enterprise) can have & explain why they are important?

Answer 7

1) increased employment- more jobs are created as a new firm requires labour as one of it’s fundamental needs
2) economic growth- a result in an increase in the output of goods and services by the new enterprise- can increase the country’s GDP!
3) firm can potentially grow/expand- thus more workers can be employed.

4) Innovation & technological change-
New firms tend to be more innovative and create dynamism in the economy.
Making the business sector more competitive.

5) Exports- more exports can be generated. This can create international competitiveness and increase the value of national exports
6) it will increase social cohesion because more people are employed. This decreases social problems

Question 8

Identify the challenges faced by entrepreneurship (the drawbacks)

Answer 8

1) identifying successful business opportunities is difficult-
- ideas can stem from hobbies or previous employment and a small budget market research. Therefore it’s difficult to find a market that will offer sufficient demand!

2) Sourcing finance/ capital
- lack of own funds
-lack of awareness regarding available financial support.
No trading record, which will give banks no confidence to grant loans.
A poorly produced business plan, that puts off investors

3) determining a location
Finding an area with the biggest market potential.

4)competition
Lack of a unique idea, market knowledge or resources!
tends to be the more established/older firms with a solid customer base.

5) building a customer base:
May have to offer personal service, lower prices, providing leniency (but this may lead to debt from debtors)

Question 9

How can small firms overcome entrepreneurship drawbacks?

Answer 9

-Sourcing capital:
Producing a good business plan- that intrigues investors
Grating a loan from banks (with business plan)

• Competition:
  Small firm can be competitive by offering a more personal customer service, with cheaper prices.

-Determining the right location:
Looking to situate the business where the target population/age is situated at.

Question 10

Explain what opportunity cost is?

Give an example

Answer 10

Opportunity cost is the benefit of the next most desired option that’s given up.
E.g limited resources:
Due to a scarcity or economic problem, if consumer chooses to buy IPod over sneakers, then sneakers become the opportunity cost.

Question 11

Explain why a country is likely to benefit from expansion of business enterprises?

Answer 11

More people are employed (as more jobs are created)
Therefore this will contribute to economic growth, as the number of outputs of goods and services can be increased!
Increase competitiveness again, as new enterprises take the places of declining/ liquidated firms

Question 12

What’s social enterprise?

Answer 12

Social enterprise is a business with mainly social objectives, that reinvest most of their profits into:
Benefiting society
(Not maximising returns to shareholders)

Question 13

What is triple bottom line? And what are the objectives?

Answer 13

TBL are the three objectives of a social enterprise:
Economic: to make a profit to reinvest back into the business
Social: to provide jobs and support disadvantaged communities.
Environmental: to protect the environment and manage the firm in an environmentally sustainable way

Question 14

Why do new businesses often fail?

Answer 14

Lack of record keeping (lack of accuracy of information)

Lack of working capital (not enough money to pay for day to day affairs; unable to fulfil important needs like buying stock, and paying suppliers on time.

Poor management skills: poor leadership, unable to multitask, poor communication, decision making etc

Changes in the business environment:
New competitors, legal changes (outlawing product), economic changes (recession) technological changes (more expensive)

Question 15

4 factors of production a business has to require?

Answer 15

Land, labour and capital and enterprise