Chapter 3

Question 1

Entrepreneur

Answer 1

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

Question 2

Business plan

Answer 2

The objectives and details of the operations, finance and owners of a new business.

Question 3

Capital employed

Answer 3

The total value of capital used in a business

Question 4

Internal growth

Answer 4

The business expands its existing operations, e.g. a retailer opening more shops.

Question 5

Internal growth

Answer 5

The business expands its existing operations, e.g. a retailer opening more shops.

Question 6

External growth

Answer 6

The business expands by merging with or taking over another business.

Question 7

Takeover

Answer 7

A business buys out the owners of another business.

Question 8

Merger

Answer 8

The owners of businesses agree to join their firms together to form one business.

Question 9

Horizontal integration

Answer 9

The business integrates with another in the same industry at the same stage of
production - such as two fashion snoos

Question 10

Vertical integration

Answer 10

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.

Question 11

Conglomerate
integration

Answer 11

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.

Question 12

Characteristics of a successful entrepreneur

Answer 12

Hard working
Risk taker
Creative
Self-confident
Effective communicator
Creative
Optimistic
innovative
independent

Question 13

A business plan includes

Answer 13

• Products and services that you will sell
• Costs of your business
• Location of the business
• What do I need to operate my business

Question 14

How a business plan can assist an entrepreneur?

Answer 14

• Apply for bank loans
• Plan business to reduce risk of failure

Question 15

Governments support businesses because:

Answer 15

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

Question 16

How business support business start-ups

Answer 16

• 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

Question 17

Methods of measuring size of a business

Answer 17

Number of employees, value of output, value of sales, Capital employed
annotate limitations

Question 18

Why might business want to expand?

Answer 18

• 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)

Question 19

Ways in which businesses can grow

Answer 19

• Internal growth
• External growth

Question 20

Types of merger

Answer 20

Horizontal integration
Vertical Integration
Conglomerate merger
Joint ventures

Question 21

Problems of business growth

Answer 21

-Large businesses are difficult to control.
- Costs of expansion are high. Solution
- There can be poor communication in large businesses.

Question 22

Why do businesses maintain small

Answer 22

• Type of industry
• Market size
• Owners objective

Question 23

Why do business fail

Answer 23

• Poor management
• Failure to plan for change
• Poor financial management
• Over expansion
• Startup risk