Chapter 3 Enterprise, Business Growth and Size

Question 1

Pros of being an entrepreneur

Answer 1

Independence, Put your own ideas into practice, potential to earn more as compared to being an employee

Question 2

Cons of being an entrepreneur

Answer 2

High chance of failure

capital - Usually, entrepreneurs have to invest their own money to start the business

lack knowledge while starting a business

opportunity cost of income from a stable job.

Question 3

Characteristics of an entrepreneur

Answer 3

Hard-working, risk-takers, creative, optimistic, innovative

Question 4

Measuring business size

and why could be misleading

Answer 4

The number of employees - some companies could be capitally intensive

the value of output

the value of sales - could be misleading since different companies are in different industries - sell different products

the value of capital employed - could be misleading since some companies are labour intensive.

Question 5

Benefits of horizontal integrations

Answer 5

Reduce the number of competitors
Have a bigger market share

Question 6

Why government support business start-ups

Answer 6

Reduce unemployment
increase competition
increase output.

Question 7

How governments support business start-ups

Answer 7

Training
Mentoring
Loans
Grants

Question 8

Benefits of expansion

Answer 8

More profit, Owners and managers get more famous, larger market share.

Question 9

Why some businesses remain small

Answer 9

The owner’s objective, could be easier to control, the business industry they’re in, the market size.

Question 10

Components of a business plan

Answer 10

Description
Product and services
market
location
management
financials
business strategy

Question 11

How does the government provide support via training

Answer 11

Provides courses for the unskilled and unemployed. Can get more of the population into work.

Question 12

How does the government provide support via mentoring

Answer 12

Having access to people who have run a successful business is vital for future business growth. Using their knowledge can be the key to having a successful business

Question 13

How does the government provide support via loans

Answer 13

sums of money that the business has to payback

Question 14

How does the government provide support via grants

Answer 14

sums of money that the business doesn’t have to pay back.

Question 15

Benefits of Forward Vertical Integration

Answer 15

» The merger gives an assured outlet for its product.
» The profit margin made by the retailer is absorbed by the expanded business.
» The retailer could be prevented from selling competing models of car.
» Information about consumer needs and preferences can now be obtained directly by the manufacturer.

Question 16

Benefits of Backward vertical integration

Answer 16

» The merger gives an assured supply of important components.
» The profit margin of the supplier is absorbed by the expanded business.
» The supplier could be prevented from supplying other manufacturers.
» Costs of components and supplies for the manufacturer could be controlled.

Question 17

What are some problems that arise with expansions and their solutions

Answer 17

Difficult to control
Operate the business in small units – this is a form of decentralization

Poor communication could arise
Operate the business in smaller units

Costs a lot - could leave the business short of finance
use profits from slowly expanding business to pay for further growth

Integrating with other business is more difficult than expected - eg managing styles.
Introducing a different style of management requires good communication with the workforce