(Enterprise, business growth and size) Unit 3

Question 1

Entrepreneur

Answer 1

a person who organizes, operates and takes risks for a new business venture

Question 2

What is a business plan?

Answer 2

it is a document containing the business objectives and important details about the operations, finance, and owners of the new business

Question 3

what is capital employed?

Answer 3

it is the total value of capital used in the business

Question 4

What is internal growth?

Answer 4

it occurs when a business expands its existing operations

Question 5

What is external growth?

Answer 5

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.

Question 6

What is a takeover?

Answer 6

it is when a business buys out the owners of another business, which then becomes part of the predator business.

Question 7

What is a merger?

Answer 7

it is when the owners of two businesses agree to join their businesses together to make one business

Question 8

What is horizontal integration?

Answer 8

it is when one business merges or takes over another one in the same industry at the same stage of production.

Question 9

What is vertical integration?

Answer 9

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.

Question 10

What is conglomerative integration?

Answer 10

it is when a business merges or takes over a business in a completely different industry.

Question 11

What are the benefits of being an entrepreneur?

Answer 11

1. independence - able to choose how to use time and money.
2. able to put own ideas into practice
3. may become famous and successful if the business grows.
4. able to make use of personal interests and skills

Question 12

What are the disadvantages of being an entrepreneur?

Answer 12

1. risk - many new entrepreneurs businesses fail, especially if there is poor planning
2. capital - entrepreneurs have to put their own money into the business and even find other sources of capital
3. lack of knowledge and experience in starting and operating a business.
4. opportunity cost - lost income from not being an employee of another business.

Question 13

What are the characteristics of successful entrepreneurs?

Answer 13

1. hardworking - long hours and short breaks
2. risk-taker - making decisions to produce goods or services that people might buy is potentially risky
3. creative - a new business needs new ideas
4. optimistic - looking forward to a better future is essential
5. self-confidence - to convince people and banks that the business will be successful
6. innovative - being able to put new ideas into practice
7. Independent - entrepreneurs will often have to work on their own
8. effective communicator - talking clearly and confidently

Question 14

contents of a business plan

Answer 14

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

Question 15

Why do governments support business startups?

Answer 15

to reduce unemployment 
to increase competition 
to increase output 
to benefit society
they can grow further

Question 16

how can business size be measured?

Answer 16

> number of people employed
value of output
value of sales
value of capital employed

Question 17

how do governments support start-ups

Answer 17

> 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

Question 18

measuring business
number of ppl employed

Answer 18

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

Question 19

measuring business
value of output
adv
limitations

Answer 19

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

Question 20

measuring business
value of sales
adv
limitation

Answer 20

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

Question 21

measuring business
value of capital employed
adv
limitations

Answer 21

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

Question 22

problems linked to business growth and how to overcome

Answer 22

> 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

Question 23

why some businesses remain small

Answer 23

> type of industry business operates in
market size: total number of customers
owners objectives: some businesses prefer to stay small