Chapter 1.3 Enterprise, Business Growth And Size

Question 1

Entrepreneur

Answer 1

A person who organizes, operates and takes risks for a new business venture.

Question 2

Advantages of entrepreneur

Answer 2

• able to put own ideas into practice
• independecy
• famous and successfull if business grows
• profitable(income higher than employee)
• can make use of personal interests and skills

Question 3

Disadvantages of entrepreneur

Answer 3

• risks
• capital
• lacing of experience and knowledge
• opportunity cost of losing income of being an employee

Question 4

Business plan

Answer 4

Document containing business objectives and important details about the operations, finance and owners of the new business

Question 5

Advantages of business plan

Answer 5

• easier to get a loan/overdraft
• motivates employee
• lesser chance of losing sight of the mission

Question 6

Reasons government supports business start-ups

Answer 6

• reduce unemployement
• increases competition
• increases output
• benefit society (social enterprise)
• can grow further

Question 7

How does governments support business start-ups

Answer 7

• organizing training/support sessions that gives advice to new entrepreneurs
• provide low-cost premises
• low interest rate of loans
• help train employees
• provide research facilities

Question 8

Who is comparing business size important for

Answer 8

• investors(to decide which business to put savings into)
• workers(to have a general idea of how many ppl to be working with)
• banks(to see how important is the loan)
• competitiors(to compare size and importance with other firms)
• government(determine different tax rates)

Question 9

How is business size measured

Answer 9

• number of ppl employed(disadvantage:capital intensive firm may have lower employee but high output by machineries)
• value of output(may have high value output, less are sold)
• value of sales(misleading when comparing to a total opposite type of business)
• value of capital employed(company might use labour-intensive method which gives low output)

Question 10

Why expand businesses?

Answer 10

• higher profits
• more status/prestige
• lower average costs
• larger share of its market((greater sales)- more influencial

Question 11

Ways of how businesses grow

Answer 11

Internal growth-expands the business by hiring more staff/equipments/opening more shops to increase output(expanding internally) (easier but slow)
External growth-takeover or merging with another businesses(integration)

Question 12

Types of merging/intergration

Answer 12

Horizontal merger/integration
Vertical merger
Backward vertical merger
Conglomerate merger

Question 13

Horizontal merger

Answer 13

When one firm takesover or merge with another firm in the same industry in the same stage of production

• reduces number of competitors
• opportunities for economic scale
• allow businesses to have a bigger share of the total market

Question 14

Vertical merger/integration

Answer 14

When a firm takeover/merge with another firm in the same industry but in different stage of production

Question 15

Forward vertical merger

Answer 15

Integrates/takeover with a business in a later stage of production

• gives assured outlet for its product
• profit by retailer is absorbed
• prevents retailer to sell comepeting businesses’ products
• info abt consumers needs r obtained

Question 16

Backward vertical integration

Answer 16

When a firm merges/takeover another firm in an earlier stage of production

• assured amount of supplies
• profit of supllier is absorbed
• prevents supplier from suppling to other manufactures
• costs of supplies could be controlled

Question 17

Conglomerare merger/integration(diversification)

Answer 17

When a firm merges/takeover with a complety different(opposite) industry

• have activities in more than a country (allows firms to share risks)
• cam transfer ideas which improves quality/demand of product

Question 18

Problem of business growth

Answer 18

Larger business, hard to manage/control

Larger business, poor communication

Shortage of finances(used alot)

Need to adapt the change of management styles

Question 19

Larger business, hard to manage/control

Solution

Answer 19

Decentrilisation

Question 20

Larger business, poor communication

Solution

Answer 20

Decentrialisation, telecommunications

Question 21

Shortage of finances(used alot)

Solution

Answer 21

Expand more slowly, ensure suffcicient long-term finance(save up money)

Question 22

Need to adapt the change of management styles

Solution

Answer 22

Compelled to have a good communication with the workforce, workers need to understand and accept the change

Question 23

Businesses that stays small and advantages

Answer 23

-easier to manage and operate personal service(for businesses that offers personal service)
(the market size are to limited customers only)
to have close personal contact with employees and customers
-flexibility in controlling the business
-less stressful(to limited customers only)

Question 24

Causes of businesses failure

Answer 24

• poor management skills (due to the inexperience which leads to bad decision making)
• over-expansion(expanded too quickly, problems of management and finance that leads to diseconomies of scale)
• failure to adapat to the constant change of demands from customers.

Question 25

Entrepreneur character traits

Answer 25

• hard working (have long hours of work)
• risk taker(encouraged to be stepping out of comfort zone-forces innovation)
• creative(diff from others)
• optimistic
• self-confident(convincing)
• innovative(new original ideas)
• independent (able to work without help)
• effective communicator(raises profile)