Entrepreneurs and Leaders 1.5 Flashcards
1
Q
What is a business?
A
Organisation that exists to provide goods/ services on a commercial basis to customers
2
Q
What are goods?
A
Physical products
3
Q
What are services?
A
Intangible products
4
Q
What is an entrepreneur?
A
Person who is willing + able to create a new business idea or invention + takes risks in pursuing success
5
Q
What do entrepreneurs do?
A
- Organise resources
- Make business decisions
- Take risks
6
Q
How do entrepreneurs organise resources?
A
- Gathering + coordinate necessary resources to start/ operate business
7
Q
Why do entrepreneurs need to make business decisions?
A
- It determines success/ failure of business
- Use market research, creativity, business skills to make decisions
- Wrong decisions lead to wasted resources, lost ops, failure
8
Q
Why do entrepreneurs need to take risks?
A
- Take calculated risks by looking into market/ demographic
- Risks pay off with great rewards or lead to failure/ financial loss
9
Q
What is intrapreneurship?
A
Practice of promoting entrepreneurial thinking + behaviour within an existing business
10
Q
What does intrapreneurship involve?
A
- Empower employees to think + acts like entrepreneurs
- Encourage to take risks, innovate, develop new ideas
11
Q
Example of intrapreneurship with Sony Playstation
A
- 1990s= group of engineers at Sony proposed video game console to compete with Nintendo
- Rejected by management but engineers persisted + senior executive supported idea
- 1994= Playstation launch
12
Q
What can a business do to encourage intrapreneurship?
A
- Employee ownership of projects
- Risk- taking + failure acceptable
- Train employees in innovation
- Encourage networking + collaboration
13
Q
What barriers are there to entrepreneurship?
A
- Access to finance
- Entrepreneurial capacity (thinking creatively)
- Lack of training
- Fear of failure/ lack of confidence
14
Q
What is a risk?
A
Something that can be calculated + prepared for
15
Q
What is uncertainty?
A
Can’t be calculated due to it being an unexpected event
- Out of the entrepreneurs control (e.g. tsunami/ covid)
16
Q
What is an enterprise?
A
Skills + abilities to take risks + create profits
The creation of a business to meet the wants + needs of customers
17
Q
What are the skills required by entrepreneurs?
A
- Communication
- Team working
- Problem solving
- Organisation
- Numeracy
- IT
18
Q
What are the characteristics required by entrepreneurs?
A
- Creativity
- Hard working
- Resilience
- Initiative
- Self confidence
- Risk taker
19
Q
Why is profit maximisation a financial reason for setting up a business?
A
A profitable business generates substantial revenue and profit for themselves/ shareholders
20
Q
Why is profit satisficing a financial reason for setting up a business?
A
Entrepreneur isn’t solely focused on maximising profit but rather achieving a satisfactory level of profit
21
Q
Why is ethical stance a non-financial reason for setting up a business?
A
May have a particular ethical stance (env. sustainability/ social justice) they want to build business around
22
Q
Why is social entrepreneurship a non-financial reason for setting up a business?
A
Aim to create a business that seeks to address a social/ env. problem while earning a living
23
Q
Why is independence a non-financial reason for setting up a business?
A
Want to be their own boss + have control over work
Dissatisfied with traditional employment structure
24
Q
Why is home working a non-financial reason for setting up a business?
A
Start business from home which offers them more flexibility + better work-life balance
25
What are the drawbacks of being an entrepreneur?
1. Loneliness
2. Higher responsibility
3. Financial pressure
4. Hard work
5. Need for multi-tasking
26
What are business objectives?
- Specific intended outcomes of strategy
- Anticipated end results
- Targets adopted to achieve primary aims
27
What are the main purposes of business objectives?
- Make clear what needs achieving
- Provide focus for activity
- Inform management decision-making
- Help set targets
- Provide means of measuring performance
28
What is included in the hierarchy of objectives?
(Increasingly strategic up, increasingly detailed down)
1. Mission
2. Corporate/ strategic
3. Functional
4. Team
5. Individual
29
What does SMART stand for in business objectives?
S= Specific
M= Measurable
A= Achievable
R= Relevant
T= Time bound
30
What does specific mean in the SMART business objectives?
Objective should state exactly what is to be achieved
31
What does measurable mean in the SMART business objectives?
Objective should be capable of measurement- it is possible to determine whether it has been achieved
32
What does achievable mean in the SMART business objectives?
Objective should be realistic given the circumstances in which it is set + resources available to business
33
What does relevant mean in the SMART business objectives?
Objectives should be relevant to the people responsible for achieving them
34
What does time bound mean in the SMART business objectives?
Objectives should be set with a time frame in mine (need to be realistic deadlines)
35
What is the mission in a business and what does it provide?
Over-riding goal of the business + reason for its existence
Provides strategic perspective for business + vision for future
36
Why are mission statements criticised?
1. Not always supported by business actions
2. Too vague
3. Viewed as PR exercise
4. Not supported fully by senior management
37
What are corporate objectives?
What a business as a whole wants to achieve
38
What are functional objectives?
Set for individual functions of a business + designed to support corporate objectives
39
List some specific corporate objectives (set in terms of key performance measures)
1. Profit
2. Return on investment
3. Growth
4. Market share
5. Cash flow
6. Business value
7. Corporate image/ reputation
(increased sales, reduces costs, increase cash flow, improve customer satisfaction)
40
What type of businesses corporate objective would be survival?
- Established by loss-making business
- Firms struggling to handle a shock in external env.
- Business hit by competitive pressures
41
Examples of revenue objectives
1. Revenue growth
2. Sales maximisation
3. Market share
42
Examples of cost efficiency/ minimisation objectives
1. Lower unit costs
2. Higher gross profit margins
3. Higher operating profits
4. Improved cash flow
5. Higher return on investment
43
Examples of profitability objectives
1. Specific level of profit
2. Rate of profitability
3. Profit maximisation
4. Market profit margins
44
What is an unincorporated business?
Owner is the business, unlimited liability
45
What is an incorporated business?
Legal difference between the business + owners, separate legal identity
46
What is unlimited liability?
Owner of the business is personally responsible for all debts
- Assets may be used to pay off debts
47
What is a sole trader?
- Owns + runs business
- Registered as self employed
- Required to keep record of income
- Profit classed as income, so need to be taxed
- Unlimited liability
48
What are the advantages of being a sole trader?
1. Gets all the profit
2. Don't need to write documents
3. Keep control of business
4. Easier to set up
49
What are the disadvantages of being a sole trader?
1. Unlimited liability
2. Potentially pay more tax
3. Less ideas
4. No income if not working
50
What is a partnership?
Two+ people share the costs, risks, responsibility of business
- Register as self employed
- Partners share profit
51
What are the benefits of partnerships?
1. Risks, costs, responsibility shared
2. Scope for specialist skills
3. Financial records remain private
4. More capital raised
52
What are the disadvantages of partnerships?
1. Unlimited liability
2. Arguments with decision making
3. Partnership dissolved if partner dies
4. Trust is a big element
53
What is limited liability?
Shareholders can only lose the value of their investment in the share capital of the company
54
What are the disadvantages of becoming a company?
1. Need to make documents
2. Must register with companies house
55
What are the advantages of becoming a company?
1. Own legal identity separate from owners
2. Responsible for its own debt (limited liability)
56
What do companies need to do?
1. Pay to have accounts checked annually
2. Make company account public
57
What is a private limited company (LTD)?
- Cheap to set up (£15)
- Limited liability
- Owners place restrictions on who shares are sold to
58
What are the advantages of a private limited company?
1. Limited liability
2. Easier to raise finance
3. Stable form of structure
59
What are the disadvantages of a private limited company?
1. Greater administration cost
2. Public disclosure of info
3. Directors' legal duties
60
What is a public limited company (PLC)?
- Shares traded publicly
- Minimum capital requirement= £50,000
61
What is market capitalisation?
Total value of all the issued shares in a PLC
62
What is the market capitalisation equation?
share price x number of shares issued
63
What are the advantages of trading as a private limited company?
1. Access to capital
2. Publicity
3. Ability to take over other companies
64
What is a franchise?
Franchisor grants a license to another business to allow it trade using brand/ business format
65
What are the benefits for a franchisor?
1. Accelerate growth of service
2. Rapid geographical growth for minimum investment
3. Option to open solus branches
66
What are the benefits for franchisee?
1. Still own business
2. Advice, support, learning
3. Easier to raise finance
4. Lower risk
67
What are the drawbacks for franchisee?
1. Not cheap
2. Restrictions on actions
3. Problem selling business on
4. Long term rewards of hard work
68
What is a not-for-profit organisation?
Businesses trade in order to benefit the community
- Have social aims
69
What is a lifestyle business?
Business that generates a living for the owners
70
What is an online business?
Internet allows firms to connect with consumers effectively without meeting face to face
71
What is a public sector organisation?
Companies owned or controlled by the Gov
72
What is an opportunity cost?
The cost of a choice made in terms of the next best alternative foregone/ sacrificed
73
What is a trade-off?
A decision between 2 choices arising from scarcity of resources, where having more of one thing potentially results in having less of another
74
How does a trade-off arise from doing less market research?
Less successful new product launch (lower sales)
75
How do trade-offs arise from having higher quality standards to build reputation?
More quality control & assurance costs
76
How does a trade-off arise from having higher advertising online?
Reduced advertising on TV
77
How does a trade-off arise from choosing lower risk investments?
Gain lower rewards
78
What business issues could arise?
1. Matching production to demand
2. Financing business growth
3. Overtrading
4. Change in organisational structure
79
What personal issues may arise in a business?
1. Delegating
2. Maintaining effective communication
3. Co-ordinating large number of staff
4. Motivating others
80
Why is matching production to demand important?
- Need to forecast
- Overly optimistic forecast results in too much cash tied up in stock (cashflow problem)
- Underestimate demand= failure if 1st time customers arrive +product unavailable
81
Why is financial growth important for preventing business issues?
- Expand= output needs to increase, require extra cash to finance increased material/ rent
- Challenge for new business is raising extra finance
82
Why is overtrading a business issue?
1. Product becomes trendy
2. Boom in sales outstrips production
3. Big investment in new capacity
4. Sales still rising, cash outflows rise faster
5. Cash flow crisis due to overtrading
83
How is a change in structure a business issue?
- more staff= extra layers
- Span of control too wide, more managers required
84
Why is delegating a problem for an entrepreneur becoming a leader?
- Hard to let go of authority
- Need to feel trusted to make decisions
- Let go of control in order to grow
85
Why is maintaining effective communication important for an entrepreneur becoming a leader?
- Info needs to flow downwards to managers
- Boss needs to know what customers are saying
86
Why is co-ordinating more people important for an entrepreneur becoming a leader?
- Need to develop personal relationship with staff
- Employ effective managers who can take over role
87
Why is keeping an eye on big issues important for a leader?
- Understand where business is heading
- See what competitors are doing
88
What steps can be take to make the transition from an entrepreneur to a leader?
1. Learning to delegate
2. Trusting others
3. Listening to others
4. Open minded
5. Be less reactive
6. Develop emotional intelligence
89
What emotional intelligence can an entrepreneur develop to become a leader?
- Self awareness
- Self management
- Social awareness
- Relationship management
