enterprise, business growth and size Flashcards
define entrepreneur
a person who organises, operates and takes the risk for a new business venture
what is the definition of a business plan
a document containing the business obj and important details about the owners of the new business
what should be included in the business plan (7)
description of the business products and service the market business location and how it will reach customers organisation structure and management financial information business strategy
why do governments supports business start ups(5)
reduce unemployment
increase competition- give customers more choice and compete with already established businesses
increase output - economy benefits from increased output of goods and services
benefit society- entrepreneurs may create social enterprises which offer benefits to society other than jobs and profit
can grow further -
how do governments support business start up (5)
business idea and help- gives advice by experiences business ppl
premises- enterprise zones proved low cost premises for them
finance - loans for small business at low interest rate or grants of business starts up on depressed area of high unemployment
labour- train employees and help increases productivity
research- encourage uni to make research facilities available to new business entrepreneurs
what are the 7 ways to measure business size?
number of people employed, value of output , value of sales and value of capital employed, number of outlets, value of business and market share
who would want to compare the size of business
investors, governments, competitors, workers, banks
describe number of ppl employed and its limitation
easy to calculate and compare
some firms use more machines
capital intensive
is 2 part-timers counted as 1 or 2 employees?
describe the value of output and its limitations
common in manufacturing industries
high level of output does not mean business is large
describe value of sales and its limitations
compare size of retailing business esp if selling similar products
misleading if business sells diff products
what is the meaning of capital employed
the total value of capital used in the business
describe value of capital employed
total value of capital invested into the business
labour intensive methods with low capital employed could give low level of outputs
describe market share and its limitation
provides useful compares against same industry
cant compare with diff industry
if market is small a bus with large share doesn’t mean large business
what are the 2 ways in which a business can grow
internal growth and external growth
define internal growth and its benefits
when a business expands its existing operations
opening in new area, moving market abroad hiring more employees
easier to manage but is slower
paid using profits of owners
staffed by existing resources
why do owners wants to expand their business (4)
possibility of higher profits for the owners
more status and prestige for the owners and managers- higher salaries
lower ave cost
larger share in market
describe the number of outlets and its limitation
does not show monetary value- may nOt be equal to the amount of products sold
describe value of business
price another business is willing to pay
inaccurate cuz bus may be bought for more than it’s worth
describe external growth
a business takes over or merges with another business
meaning of takeover or acquisition
when 1 business buys out the owners of another business which then becomes part of the predator business
what is the definition of merger
when the owners of 2 businesses agree to join their business tgt to make 1 business
3 examples of external growth
horizontal, vertical and conglomerate
what is horizontal integration
when 2 business merges with or takes over another one in the same industry at the same stage of prodcution
benefits of horizontal integration (3)
reduces numbers of competitors in the industry
opportunities if economic of scales
bigger total market share
define vertical integration
when one business takes over another one in the same industry but at a different stage of production
what is forward vertical integration and its benefits (3)
when a business integrates with another business in a later stage of production
gives assured outlet for its products
profits margin made by the retailers now absorbed by the expanded business
could prevent retailer from selling competing brands of products
manufacture now obtain info at customer needs
what is backward vertical integration and its benefits
when a business takes over another businesses which is at an earlier stage of production
assured supply of important component
profit margin of supplier not absorbed by expanding business
could prevent supplier from supplying to other manufactures
cost of components and suppliers for manufacturers cld be controlled
what is conglomerate integration and its benefits (2)
when one business merges with or takes over a business in a completely different industry . also known as diversification
able to spread risk taken by business
transfer ideas
what are the 4 problems resulting from expansion and how do you overcome them
hard to control- operate the business in small units -decentralisation
poor communication - decentralisation, use latest it equipment
short in finance- expand slowly, ensure long term finance is available
difficult that expected- just communicate well
why do business remains small (3)
industry they work in- a lot of competition, want that close bond to customers and rlly specialised
market size is small
owners dont want stress idk they just felt like it
what causes business failure (4)
lack of management skills- lack experiments or bad decisions
changes in business environment - fail to plan for changes , replace with technology
poor finance management- shortage of cash means they cannot workers, gov ect cant be paid
over- expansion -
why are new business at greater risk of failing (3)
lack of finance/ resources
poor planning and inadequate research
lack skills
what is an advantage of having a business plan
guidance of business
reduce risk of failure
support from bank loan
