chapter 3 Flashcards
what is an entrepreneur
person that organizes, operates and takes risks
characteristics of successful entrepreneur
1.innovative
2.determined
3.self confident
4.multi skilled
5.risk taker
6.hard worker
advantages of starting your own business
1.gain all profit
2.independant
3.flexible working hours
disadvantages of starting your own business
1.risk of losing all savings
2.limited capital
3.limited knowledge and experience
4.opportunity cost, lost benefit of stable money
why do governments support business startups
1.create jobs-> lower unemployment-> increase country’s output->less unemployed benefits-> better public spending
2.higher output->economic growth
3.increase competition->wider choice for consumers, better price and quality
how do governments support business startups
1.tax exemption
2.financial support-grant(not paid) or low interest loan(paid back)
3.advice/training
4.rent free premises
what is a business plan
a document containing business objectives, and important details about operations, finance, and owners
why write a business plan
1.clear target->more focused decisions
2.evaluate performance of business
3.gaining finance from bank
how to measure business size
1.no. of employees
limitations: comparing a labor intensive with a capital intensive, have part time workers
2.value of output
limitation:diff target market
3.value of capital employed
why business growth
1.higher access to customers, more sales, more profit
2.popularity, brand recognition, better relationship with suppliers
3.increase market share: company sales/total sales of market x100, more competitive
4.benefit from economies of scale: lower cost per unit
business either chooses to:
1.keep price as is and benefit from higher profit
2.lower price and become more competitive
how do businesses grow
1.internal-opening a new branch
2.external-takeover or merger
types of integration
1.horizontal integration: when a firm integrates with another in the same industry
2.vertical integration:when a firm integrates with another in the same industry but different sector
examples:backward vertical integration and forward
benefits of backwards vertical integration
1.assured supplier
2.absorb all profit
3.decide wether to supply to competitor
benefits of forward vertical integration
1.assured outlet
2.absorb profit
define conglomerate
when one firm integrates with another in a different industry (diversification)
