chapter 3 - enterprise & enterpreneurship

Question 1

definition of:
entrepreneur

characteristics?

Answer 1

a person who organises, operates and assumes the risk for a business

-hard-working, effective communicator, innovative, creative, risk-taker, independent, confident, optimistic

Question 2

definition of:

business plan

Answer 2

a document that consists of the business objectives and important details of the operations, finance and owners of the new business

Question 3

how does a business plan help business?

Answer 3

• help in decision making (avoid wasting time targeting the wrong market)
• provide estimated cost (knows how much to spend)
• support loan application
• clear overview
• future plan (make decisions based on the goal)

Question 4

why gov support business start-up?

Answer 4

• increase competition
• reduce unemployment rate
• benefit consumers
• helps economy growth

Question 5

how does gov support business start-up?

Answer 5

• finance (lower interest rates)
• labour (provide trainings)
• business ideas (organise advise and support sessions)
• research (encourage universities to make research facilities available)

Question 6

why do business want to grow?

Answer 6

• increase market share
• lower average cost
• build branding-image to gain more prestige and status
• possibility to earn higher profits

Question 7

definition of:

internal growth

Answer 7

occurs when business expands its existing operations

Question 8

definition of:

external growth

Answer 8

occurs when business takes over or merges with another business

Question 10

definition of:

takeover

Answer 10

when one business buys out the owner of another business, which then becomes part of the predator business

Question 11

definition of:

merger

Answer 11

when the owners of two businesses agree to join their businesses together to make one business

Question 12

definition of:
-horizontal integration

advantages?

Answer 12

• when a business merges with or takeover another one in the same industry at the same stage of production
  advantages: reduce num of competitors, larger market share, opportunities of economies of scales

Question 13

definition of:
vertical integration

advantages?

Answer 13

-when a business merges with or takes over another one in the same industry at a different stage of production; forward or backward

advantages of forward

• closer to customers (know preferences)
• retailers could be prevented

advantages of backward

• closer to raw materials and supplies
• cost of components and supplies controlled

Question 14

definition of:
conglomerate

advantages?

Answer 14

-when a business merges with or takes over another one in a completely different industry

advantages:

• transfer of ideas between different sectors of business
• business has diversified, risk is spread

Question 15

how to overcome large business probs:

• difficult to control
• poor communication
• short of finance
• integrating with another business is more difficult than expected

Answer 15

• operate in smaller units (de-centralisation)
• operate in smaller units, use latest IT equipments
• expand more slowly, plan budget and ensure there’s sufficient for long term
• understand the style of management, have good communication with workforce

Question 17

definition of:

capital employed

Answer 17

total value of capital used in the business

Question 18

why business stay small?

Answer 18

• owners’ preference
• type of industry the business operates in
• market size

Question 19

why some business fail?

Answer 19

• poor management skills
• poor financial management
• failure to plan for change
• over-expansion

Question 27

methods of measuring business size?

Answer 27

-number of people employed
(capital-intensive firms use high cost capital equipment; employ lesser people)
-value of output
-value of capital employed
(labour-intensive firms use little equipments)
-value of sales