(Enterprise, business growth and size) Unit 3 Flashcards
Entrepreneur
a person who organizes, operates and takes risks for a new business venture
What is a business plan?
it is a document containing the business objectives and important details about the operations, finance, and owners of the new business
what is capital employed?
it is the total value of capital used in the business
What is internal growth?
it occurs when a business expands its existing operations
What is external growth?
it is when a business takes over or merges with another business. it is often called integration as one business is integrated into another business.
What is a takeover?
it is when a business buys out the owners of another business, which then becomes part of the predator business.
What is a merger?
it is when the owners of two businesses agree to join their businesses together to make one business
What is horizontal integration?
it is when one business merges or takes over another one in the same industry at the same stage of production.
What is vertical integration?
It is when one business merges with or takes over another one in the same industry but at a different stage of production. vertical integration can be forwards or backward.
What is conglomerative integration?
it is when a business merges or takes over a business in a completely different industry.
What are the benefits of being an entrepreneur?
- independence - able to choose how to use time and money.
- able to put own ideas into practice
- may become famous and successful if the business grows.
- able to make use of personal interests and skills
What are the disadvantages of being an entrepreneur?
- risk - many new entrepreneurs businesses fail, especially if there is poor planning
- capital - entrepreneurs have to put their own money into the business and even find other sources of capital
- lack of knowledge and experience in starting and operating a business.
- opportunity cost - lost income from not being an employee of another business.
What are the characteristics of successful entrepreneurs?
- hardworking - long hours and short breaks
- risk-taker - making decisions to produce goods or services that people might buy is potentially risky
- creative - a new business needs new ideas
- optimistic - looking forward to a better future is essential
- self-confidence - to convince people and banks that the business will be successful
- innovative - being able to put new ideas into practice
- Independent - entrepreneurs will often have to work on their own
- effective communicator - talking clearly and confidently
contents of a business plan
description of a business products and services the market business location and how products will reach customers organization structure and management financial information business strategy
Why do governments support business startups?
to reduce unemployment to increase competition to increase output to benefit society they can grow further
how can business size be measured?
> number of people employed
value of output
value of sales
value of capital employed
how do governments support start-ups
> business idea and help: organizing training for entrepreneurs
premises: enterprize zones provide low cost premises to start up businesses
finance: loans are given at low interest rates/ grants are provided
labour: grants to small businesses to train employees
research: encouraging universities to make their research facilities available to new business owners
measuring business
number of ppl employed
advantages
method is easy to calculate and compare with other businesses
limitations
> some firms use production methods that employ very few people but produce high levels of output
> should two part time employees be counted as one employee or 2
measuring business
value of output
adv
limitations
advantages
calculating value of output is common way of comparing the business
limitations
a high level of output doesn’t mean that a business is large when using other methods of measurements
measuring business
value of sales
adv
limitation
advantages
used when comparing the size of retailing businesses
limitations
could be misleading to use this measure when comparing the size of businesses that sell very different products
measuring business
value of capital employed
adv
limitations
total value of capital invested in the business
limitations
similar problem with number of ppl employed
a company employing many workers may use labour intensive methods
problems linked to business growth and how to overcome
> larger business is difficult to control ; can operate the business in small units
larger business leads to poor communication ; operate the business in smaller units and use latest IT equipment
expansion costs so much that business is short of finance ; expand more slowly and ensure sufficient long term finance
integrating with another business is more difficult ; introducing new style of management
why some businesses remain small
> type of industry business operates in
market size: total number of customers
owners objectives: some businesses prefer to stay small
