Enterprise, business growth and size Flashcards
entrepreneur
a person who organizes, operates and takes risks for a new business venture.
Characteristics of entrepreneurs:
Hard working
Risk Takers
Creative
Effective Communicators
Optimistic
Self-confident
Innovative
Independent.
A business plan
a document containing the business objectives and important details about the operations, finance and owners of the new business.
How Business plans assist entrepreneurs
help motivate the employees.
It helps gain finance. easier to get a loan or overdraft
It forces the entrepreneur to plan ahead carefully, which reduces risk of the business failing.
The main parts of a business plan include
- check igcse aid
name, type of organization, business aim and forecast profit
Why do governments want to help new start-ups?
Reduce unemployment,
Increase competition,
Increase output,
if successful pay government more taxes
How do governments support businesses?
Organise advice
Provide low cost premises
Provide loans at low interest rates
Give grants for capital
Give grants for training
Give tax breaks/ holidays
How to Measure business size
Number of employees
Value of output
Value of capital employed
limitations of business size measurments
‘number of employees’ method to compare capital intensive firm
value of capital employed is not a reliable measure when comparing a capital-intensive firm with a labour-intensive firm.
Output value is also unreliable because some different types of products are valued differently, and the size of the firm doesn’t depend on this.
why Businesses want to grow
helps reduce their average costs in the long-run,
help develop increased market share,
helps them produce and sell them to new markets.
types of business growth
Internal Growth occurs when a business expands its existing operations
External Growth is when a business takes over or merges with another business.
what is a merger and take over
A merger is when the owner of two businesses agree to join their firms together to make one business.
A takeover occurs when one business buys out the owners of another business , which then becomes a part of the ‘predator’ business.
Definition and Benefits of horizontal integration
Horizontal merger/integration: This is when one firm merges with or takes over another one in the same industry at the same stage of production.
Benefits:
- Reduces number of competitors in the market, since two firms become one.
- Opportunities of economies of scale.
- Merging will allow the businesses to have a bigger share of the total market.
vertical integration
when one firm merges with or takes over
another firm in the same industry but at a different stage of production.
Definition and Benefits of backward verticle integration
Backward vertical integration: When one firm merges with or takes over another firm in the same industry but at a stage of production that is behind the ‘predator’ firm.
Benefits:
1. Merger gives assured supply of essential components.
- The profit margin of the supplying firm is now absorbed by the expanded firm.
- The supplying firm can be prevented from supplying to competitors.
