Enterprise & Business Functions Flashcards
defintion of ‘enterprise’
'’Business’’
OR
Actions of a risk taker who starts up their own business = entrepreneur
Entrepreneur definition
Someone who’s wanted to run/own their own business and is prepared to take risks
Entrepreneur characteristics and abilities
- Self confidence in what they’re doing and themselves
- Energy and enthusiasm for the business (even the boring parts)
- Being comfortable & able to face risk (financially, family)
- Motivation and communication
- Being able to work under pressure
- Creativity
- Persistence
- Drive
Why governments like and encourage entrepreneurs
- business reaches objectives/ is profitable = happy shareholders
- More employed = secure jobs
- consistent suppliers and orders = business growth = MORE TAXES PAID
- Exports improves UK’s trade balance
- Government receiving TAX REVENUE
What are the factors of production
Capital
Enterprise
Land
Labour
CELL
What’s the C in CELL for
Buildings, tools and machinery (NOT MONEY)
What’s the 2 L’s in CELL for
- Land - natural resources, fields, minerals, what can be grown/done on top of the land
- Labour - all of the Human Resources available I.e workers
What’s the E in CELL for
-Enterprise
The one who owns, manages, operates and organises the CLL to make the profit
What’s adding value
Selling a product at a price that’s higher than what it costs to produce it
Business functions
- large business = ran by lots of specialists
- new entrepreneurs = juggle a lot or all of it
- Finance + accounting
- HR
- Operations
- Production
- Marketing
What’s the chain of production
The stages that a product passes through until it reaches the end (consumer)
Chain of production importance?
That value is added at each step of the chain and becomes of more worth
Primary sector as business output
- Extracting the raw materials
- Farming, fishing, forestry, mining, oil/gas extraction
Secondary sector as business output
-Manufacturing and construction
Raw materials ➡️ semi finished and finished products
- Building houses, roads, factories
- Producing a car engine to contribute to the final assembly of the car
Tertiary sector as business output
- Businesses concerned with services
- Retailing, banking, transport
Which business sector is the largest and why?
- Tertiary sector
- Highest GDP output of 80%
- Our advanced de-industrialised economy
Why have manufacturing lost its value within the UK?
-imports + exports, manufacturing and production can take place anywhere
The private sector is?
Businesses that are owned and run by private individuals usually for a profit
The public sector is?
Businesses owned and run by central and local government
BBC and the NHS
Deindustrialisation definition
The decline in the secondary sector of the economy
What’s the third sector?
- Not the public or private sector
- Includes charities, community groups, faith groups, social enterprises and cooperatives
- They’re motivated by the ambition to achieves social goals rather than to maximise profit
(Improve housing, reduce poverty, help the environment)
Does the third sector receive a profit?
Profit can be made BUT
any that is made is reinvested into the business in order to improve the service that they provide
What legal forms can third sector businesses take?
associations of people with shared objectives / values
Some operate as a company BUT not for personal profit aimed reasons (charities, cooperatives)
What’s a sole trader?
- The simplest form of business organisation
- Owns the business
- Makes all the decisions affecting the business
- Can employ lots of people and not be the only person who works there
- Will have overall control
- The business and the owner are together and NOT separate = UN-INCORPORATED
Sole trader advantages
- Easy start up with few legal requirements
- Can be started with little capital
- Keeps all the profit after tax
- Can make their own decisions without consulting with others
- No shares in the business from others - no takeovers!
- Can be kept private (bar providing income tax information) & no accounts need to be published
Sole trader disadvantages
-Fully responsible for their own debts
= therefore responsible or forced to sell assets and possessions to cover the costs of the debt
-Unlimited liability ^^^
-Must preform all aspects of the business
= (marketing, finance etc.)
= cannot cover all these things perfectly
= some aspects will suffer more than others
- Difficult to raise capital to expand (small businesses seen as risky) so lack of opportunities to grow
-First years of business particularly stressful and hard to control
=long working hours to build up a business rep
-No continuity (sole trader dies means business is not passed on)
What’s a partnership?
- Two or more people running a business together
- Not a legal entity in its own right (like a sole trader)
- 2-20 max partners
- DEED OF PARTNERSHIP - legal document
What’s the DEED OF PARTNERSHIP have in and clarify?
- the responsibilities for each partner
- Finance arrangements (joint or separate accounts?)
- How much income each partner can take from the business
- How much money each partner is expected to contribute
- How decisions are going to be made
- Arrangements for taking on new partners
- Absence, sickness and holiday arrangements
Partnership advantages
- Easy to establish
- Partners are able to specialise in what they do best
- Shared work
- Different people of different skill sets can be employed
- Income tax being paid so business can be kept private (like a sole trader)
Partnership disadvantages
-Liable for any debts = unlimited liability
Contribute money to the business but don’t run it = limited liability
= ‘sleeping partners’
- A partnership must have at least one partner with unlimited liability
- Disagreements in decision making and a slower process
- Difficult to expand despite the maximum number of partners of 20 being involved = can still lack capital
- Shared profits and losses
