Chapter 19- Role of an Entrepreneur Flashcards
Entrepreneurs
People who have a business idea and want to make money working for themselves. They are the owners of a business and without them the business world would not exist.
- Entrepreneurs are innovators because they try to make
money out of a business idea – such ideas might come from
spotting a gap in the market, a new invention or market
research – however many people set up a business copying
or adapting what another business does - Entrepreneurs are responsible for organising other factors of
production such as materials, labour and equipment – these
recourses are used to make or deliver products - Since entrepreneurs are the owners, they have to make all
the key decisions – they make decisions how to raise
finance, product, choice of production method – - Entrepreneurs are risk takers as they risk losing money they
put into the business if it fails.
In 2013 over 500,000 businesses were set up – however less than half of these were predicted to survive more than 5 years.
What makes a good entrepreneur?
• Business experience – if they already have the knowledge of the
market, they are minimising risk
• Personal experience – personal experience inside or outside
work can influence ideas
• Skills – may draw on broad skills for example good people skills
• Lifestyle – attract people who may want to make a lifestyle
change e.g. always wanted to live in city
• Good idea
Running and expanding a business
- Financial management: the business needs enough money to fund its
operations – this might require producing cash-flow forecasts, arranging
loans and overdrafts – making payments and chasing debts - Administration: accurate record keeping – a business must record all of
its transactions so that profit and tax liabilities can be calculated - Marketing: initially, depending on the nature of the business, marketing
might involve online business listing, developing a website, using an email
campaign, distributing leaflets/advertising etc. – however as the business
develops there may be a need to carry out more market research raising
the profile of the business - Purchasing: businesses will have to buy recourses – cleaning, printing
accountancy – best quality at the lowest possible price - Managing people: some entrepreneurs run their businesses
independently without the help of others – however, if business is
successful it will probably need staff to help out - Production: in manufacturing and construction, the production process is
an important business function – for example an entrepreneur setting up a
small factory to make soft drinks will need to organise the various
manufacturing processes, from mixing raw materials to bottling and
packaging products for distribution. – the entrepreneur will need to
monitor the quality and consistency
Intrapreneurship
Employees who use entrepreneurial skills without the risk to find and develop ideas for their employer.
Importance of Intrapreneurs
- Intrapreneurs are employers, usually in a large business, who use
entrepreneurship skills to find and develop initiatives that will have
benefits for their companies - These might be new products services or systems
- However, unlike entrepreneurs, intrapreneurs carry no financial risk.
- Intrapreneurs are usually employed in product development – the
advantages of employing intrapreneurial staff include the following:
• Intrapreneurs can drive innovation in a business and uncover new
commercial opportunities – this can help a business gain a competitive
edge and increase profits significantly
• A number of awards can be won by businesses if they develop unique or
ground-breaking products – these awards are prestigious and can
enhance the image of the business
• Individuals benefit by getting the opportunity to be creative without
having to meet the cost of failure – this should improve their job
satisfaction and help them develop entrepreneurial skills which they might
use in the future.
Barriers to Entrepreneurship
• Lack of finance – many providers of capital may be reluctant to provide
loans to entrepreneurs because the risks are high
• Lack of entrepreneurial activity – to be successful in business people
have to be equipped with the necessary entrepreneurial skills and
characteristics – running a business requires a multitude of talents and
skills, and needs considerable energy and commitment
• Legal Barriers – bureaucratic red tape can discourage potential
entrepreneurs – legislation and other regulations can be demanding and
complying with legislation related to employment, the environment,
consumers, corporate governance, health and safety taxation can divert
time and money away from running the business
• Lack of ideas – some people would like to run their own business, but do
not have any original ideas – a lot of markets are saturated or so
competitive that the potential for profit is limited
• Fear of failure – the failure fear for many business start-ups can be high
• Aversion to risk – entrepreneurs have to take risk – but many people are
at risk averse and are not inclined to undertake activities where the
outcome Is uncertain – there is a psychological barrier to enterprise and
one that is difficult to overcome
Anticipating risk
Business has control over risk so they can test it by going into a smaller MARKET BEFORE LAUNCHING LARGE ETC.
- Entrepreneurs can take measures to reduce the amount of risk they take –
for example, before launching a new brand product nationally, they could
test it out in a smaller market - Entrepreneurs usually know that if they take more risk, the rewards may be
greater – however so may the losses
Anticipating Uncertainty
keep money ready for disasters, look ahead.
- Dealing with uncertainty is more of a problem for entrepreneurs as they have
no control over the nature or timing of some events - For example, the outcome of an election might lead to uncertainty about
future policies, such as the status of the UK’s membership of the EU. Many
businesses feel that not belonging to the EU could be a disaster, and that any
uncertainty of status with the EU could cause businesses to postpone
investment in projects - There is nothing that businesses can do to prevent uncertain events from
happening, but they be able to make some preparations to deal with their
consequences - For example, they may set aside contingency funds to deal with unexpected
events
