Chapter 3 Flashcards
Entrepreneur
is a person who organizes, operates and takes risks for a new business venture
Business plan
The objectives and details of the operations, finance and owners of a new business.
Capital employed
The total value of capital used in a business
Internal growth
The business expands its existing operations, e.g. a retailer opening more shops.
Internal growth
The business expands its existing operations, e.g. a retailer opening more shops.
External growth
The business expands by merging with or taking over another business.
Takeover
A business buys out the owners of another business.
Merger
The owners of businesses agree to join their firms together to form one business.
Horizontal integration
The business integrates with another in the same industry at the same stage of
production - such as two fashion snoos
Vertical integration
The business integrates with another in the same industry but at a different stage of
production
- towards suppliers is backward vertical integration and towards the market/
customer is forward vertical integration.
Conglomerate
integration
The business integrates with another but in a different industry (also known as
diversification) - such as an insurance company merging with a food-processing business.
Characteristics of a successful entrepreneur
Hard working
Risk taker
Creative
Self-confident
Effective communicator
Creative
Optimistic
innovative
independent
A business plan includes
- Products and services that you will sell
- Costs of your business
- Location of the business
- What do I need to operate my business
How a business plan can assist an entrepreneur?
- Apply for bank loans
- Plan business to reduce risk of failure
Governments support businesses because:
New businesses creates jobs (reduce unemployment)
Increased competition (Businesses competing with each other means prices may be lowered)
Business may grow larger and contribute to the country
How business support business start-ups
- Loans at low interest rates
- Land to set up businesses at low costs
- Grants (money) to train employees
- Use research facilities at public universities
- Business advice from experts
Methods of measuring size of a business
Number of employees, value of output, value of sales, Capital employed
annotate limitations
Why might business want to expand?
- Increased chances of higher profit
- Better status and prestige of the owners and employees
- Lower average cost (more negotiating power)
- Increased control of the market (market share)
Ways in which businesses can grow
- Internal growth
- External growth
Types of merger
Horizontal integration
Vertical Integration
Conglomerate merger
Joint ventures
Problems of business growth
-Large businesses are difficult to control.
- Costs of expansion are high. Solution
- There can be poor communication in large businesses.
Why do businesses maintain small
- Type of industry
- Market size
- Owners objective
Why do business fail
- Poor management
- Failure to plan for change
- Poor financial management
- Over expansion
- Startup risk
