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IGCSE Business > Chapter 3-enterprise, Business Growth And Size > Flashcards

Chapter 3-enterprise, Business Growth And Size Flashcards

1
Q

What is an entrepreneur

A

A person who organises,operates and takes the risk for a new business venture

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2
Q

Advantages of being an entrepreneur (5)

A

Indépendance
Own ideas
Famous
Higher profit
Personal interest+skills

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3
Q

Disadvantages of being an entrepreneur (4)

A

Risk
Capital
Lack of knowledge/experience
Opportunity cost-lost income from not being an employee of another business

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4
Q

What is a business plan

A

A document containing business objectives, important finance details owners etc

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5
Q

What does a business plan include(7)

A

Description
Products and services
The market
Business location+how it’ll reach customers
Organization structure+management
Financial info
Business strategy

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6
Q

How do governments help new business start-ups (5)

A

Business ideas+help
Premises
Labour/pay someone to train
Finance
Research

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7
Q

What are loans for new businesses with low interest rates

A

Start-up loans

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8
Q

What is a businesses main expense

A

Wages

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9
Q

Who would want to compare business size (5)

A

Investors
Bank
Government
Competition
Workers

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10
Q

How can business size be measured (4)

A

Workers
Value of output
Capital employed
Value of sales

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11
Q

What is capital employed

A

Total value of capital used in a business

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12
Q

Why would an owner want to expand a business (4)

A

For higher profit
Status
Market share
Lower average costs

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13
Q

How can a business grow(5)

A

Internal growth
External growth
Conglomerate intergration
Vertical intergration
Horizontal intergration

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14
Q

What is a vertical merger

A

Same industry, different stage

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15
Q

Characteristics of successful entrepreneurs (8)

A

Hard working-long hours
Risk taker-making decisions
Creative - new ideas
Optimistic - look to a better future
Self confident - convince customers your product is worth it
Innovative - put new ideas into practice
Independent - work on your own
Effective communicator - talk clear and confident

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16
Q

What the financial plan of a business plan includes (5)

A

Predicted future accounting statements
Sources of capital
Predicted costs
Forecast cashflow and working capital
Projections of profitability and liquidity ratios

17
Q

Why business plans are important

A

Without them banks will not want to loan money as they have no proof that the business has thought and planned carefully and will be able to pay them back with interest

18
Q

Internal growth

A

A business expanding its existing operations
Eg. Opening a restaurant

19
Q

External growth

A

When a business takes over or merges with another business. Also known as integration as the businesses are intergrated into eachother.

20
Q

Takeover
Alternative name

A

Aquisition
When one business buys out anither and the predatory business absorbs the bought one

21
Q

Merger

A

When owners of 2 businesses agree to join their businesses together to make one business

22
Q

Horizontal integration

A

The integration of 2 businesses in the same industry and stage of production

23
Q

Vertical integration

A

Can be forward or backward
The integration of 2 businesses in the same industry but different stages of production

24
Q

Conglomerate integration
Alternative name

A

Diversification
When one businesses merges/takes over another business in a completely different industry

25
Q

Benefits of horizontal integration (3)

A

Larger market share
Economies of scale
Reduces the number of competitors in the industry

26
Q

Benefits of forward vertical integration (4)

A

Could stop the “forward business” from buying competitors products
Information comes directly from the manufacturer
Profit margin from the retailer is absorbed by the expanded business
Assured outlet for product

27
Q

Benefits of backward vertical integration(4)

A

Stops suppliers supplying to competitors
Controls prices from suppliers
Profit margin absorbed by expanded business
Assured supply of components

28
Q

Benefits of conglomerate integration(2)

A

Different ideas
Diversified activities in more than 1 industry - spread risks

29
Q

Why some businesses remain small (3)

A

Market size - some eg. Niche just dont have a lot of potential customers
Owners objectives - more in control of business
Type of industry - personal services

30
Q

Causes of business failure (4)

A

Poor managment
Liquidity/financial managment probles
Changes in business enviroment
Over expantion

31
Q

Why governments support business start ups (5)

A

To reduce unemployment - creates jobs
To increase competition - give consumers more choice
To increase output - economy benefits
To benefit society - creates social enterprise
To let them grow further - to become large and important in future

32
Q

Limitations of measuring business size through number of people employed

A

Some firms use production methods which employ few people but produce high output levels. Should 2 part time employees count as 1 or 2

33
Q

Limitations of measuring business size through value of output

A

Might produce only a few very expensive products per year

34
Q

Limitations of measuring business size through value of capital employed

A

Some companies may use labour-intensive methods which give low output levels with little capital equipment

35
Q

Problems resulting from expansion + solutions (4)

A

Larger business is difficult to control - operate in smaller units (decentralisation)
Larger business has poorer communication - operate in smaller units
Short on finance - expand slowly + ensure sufficient long-term finance is available
Integrating with another business is harder than expected - communicate well with the workforce

IGCSE Business (30 decks)

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