Generating & Protecting Business Ideas

Question 1

What are the advantages of creating a business idea from previous experience? (4)

Answer 1

1. Good knowledge of the product and its features.
2. Motivation can be caused by an interest or passion in the product.
3. They may already have contacts from previous work.
4. They may have a established reputation in the market.

Question 2

What are the disadvantages of creating a business idea from previous experience? (4)

Answer 2

1. No room for another competitor as it’s an already established market.
2. The passion may not be shared.
3. The interest and passion may overestimate the market potential.
4. They may not have the entrepreneur skills.

Question 3

What are the advantages of creating a business idea from spotting a gap in the market? (3)

Answer 3

1. The idea will be based on customer needs.
2. Will be the first one on he market so have the first mover advantage.
3. There will be little competition.

Question 4

What are the disadvantages of creating a business idea from previous experience? (4)

Answer 4

1. There is little expertise in the market.
2. Perhaps it’s a gap in the market because its unsuccessful?
3. Competitors can act quickly and capture market share.

Question 5

Where does the source of business ideas stem from? (4)

Answer 5

1. Based on previous experience.
2. Product / service is familiar.
3. There is a gap in the market.
4. Brain storming.

Question 6

Explain how a franchise works?

Answer 6

The franchisor sells the right to use their business name and idea to the franchisee for a return fee and a share in profit.

Question 7

What are the benefits to a franchisor? (4)

Answer 7

1. They can expand their business quickly.
2. Revenue is almost certain.
3. The risk is shared in terms of cost.
4. The franchisee may have good skills which can increase revenue.

Question 8

What are the disadvantages to a franchisor? (3)

Answer 8

1. Loss of control on some aspects of the business.
2. Hard to control quality.
3. Communication problems can occur as the business expands.

Question 9

What are the benefits to a franchisee? (3)

Answer 9

1. They have a product that has been proven to be successful and is recognised.
2. Central services are provided.
3. Benefits from the franchisors experience.

Question 10

What are the disadvantages to a franchisee? (3)

Answer 10

1. Have to pay some revenue to the franchisor.
2. May not get intrinsic rewards as its not their business.
3. Right to operate the franchise can be withdrawn by the franchisor.

Question 11

What is the definition of a franchise?

Answer 11

A business that uses the name, logo and trading system of an existing business.

Question 12

What is a copyright?

Answer 12

Protection given to books, plays, films and music.

Question 13

What is a patent?

Answer 13

An exclusive right to use a process or product for a fixed period of time.

Question 14

What is a trademark?

Answer 14

A word , image, sound or smell that enables a business to differentiate itself from its competitors.

Question 15

Why would a business protect its ideas? (2)

Answer 15

1. Recover costs from bringing an idea into the market.

2. Increase investment as investments will be protected over time.