Enterprise, Business growth and size

Question 1

Do you think being a risk-taker is a more important characteristic of a
successful entrepreneur than being creative? Justify your answer. (6)

Answer 1

Risk-taker:
* A successful entrepreneur must take risks otherwise there is no business [k]
* Entrepreneurs take the risk of investing their own money [k] this may bring high rewards [an] however they may fail and lose their personal possessions
[an]
* Taking risks is a way to learn [k] if an idea is good or not [an]

Creative:
* New ideas [k] leading to increased sales/revenue [an]
* Creativity adds value [k] so higher prices can be charged [an].
* Creativity alone does not guarantee success [k] if customers do not purchase [an]

Example: Entrepreneurs take the risk of investing their own money [k] this may bring high rewards [an]. Being creative maybe a more important characteristic as making a business different to its competitors [k] can lead to increased sales [an]. In a competitive market creativity is especially important because it helps the business stand out from competitors. [eval] An entrepreneur can take risks, but if customers will not buy, they will not be successful. [eval]

Question 2

Identify characteristics of being a successful entrepreneur (2)

Answer 2

Risk taker / Creative / optimistic / hard working / innovative / independent / effective communicator

Question 3

Define Business plan (2)

Answer 3

A document containing the business aims/objectives and important details about the operations, finance and owners of a business [2]

Question 4

Explain four reasons why governments support business start-ups. (8)

Answer 4

• To reduce unemployment - as new businesses will create jobs
• To increase competition - as new businesses will increase the number of competitors providing more choice of goods and services
• to increase output - as new businesses will provide more goods and
  services for consumers to buy
• to benefit society - as entrepreneurs may create social enterprises for
  example providing jobs and profit for local disadvantaged groups
• may grow in the future - as large businesses started small at the
  beginning and the new start-up may become a large important business in the future

For example:
To reduce unemployment (1) as the country might have high unemployment and new businesses will create jobs (1).

Question 5

Ways to measure a businesses size

Answer 5

• Number of employees: Larger firms have larger workforce employed
  *Value of output: Larger Firms are likely to produce more than smaller ones
  *Value of Capital employed: Larger businesses are likely to employ much more capital than smaller ones

Question 6

Are number of employees to measure business size the best method? Explain your answer.

Answer 6

Employees might be misleading since capital intensive businesses can produce large output by employing very little workers

Question 7

Define internal growth

Answer 7

When a business expands its existing operations. for example, when a fast food chain opens a new branch in another country

Question 8

Define takeover and merger

Answer 8

Merger: when the owner of 2 businesses agree to join their firms together to make 1 business

Takeover: When a business buys out the owners of another business, which then becomes part of the ‘predator’ business

Question 9

Define and say the Benefits of horizontal merging

Answer 9

Horizontal merging: when a firm merges with or takes over another firm in the same industry and stage of production

Benefits:
* Reduces competitors in the market since 2 firms became one
* Opportunities for economies of scale
* Merging will allow the business to have bigger share of the total market

Question 10

Drawbacks of growth

Answer 10

• Difficult to control staff
• Lack of funds
• Lack of expertise
• Diseconomies of scale

Question 11

Identify 2 reasons why an owner might want their business to remain small

Answer 11

Access/availability/lack of capital (to expand)
 Personal preference / ownersí choice
 Size of the market
 Type of industry / need to maintain close employee / customers
relationships

Question 12

explain two ways a business plan could help nancy (6)

Answer 12

Access/availability/lack of capital (to expand)
 Personal preference / ownersí choice
 Size of the market
 Type of industry / need to maintain close employee / customers
relationship

Question 13

Define cost advantage

Answer 13

A company is able to sell its goods or services at a lower price than its competitors.

Question 14

Define economies of scale

Answer 14

Economies of scale are cost advantages that can occur when a company increases their scale of production and becomes more efficient, resulting in a decreased cost-per-unit.

Question 15

Define diseconomies of scale

Answer 15

When a company or business grows so large that the costs per unit increase