Lecture 5

Question 1

What are the positives and negatives of business births and deaths?

Answer 1

• number of new firms in the UK has decreased for the first time since 2010
  pros:
• replace inefficient businesses
• threaten existing businesses to become more efficient
  cons:
• loss of employment
• losses to investors

Question 2

What are some factors to determine WHEN and WHERE to start up a business?

Answer 2

When:
- level of employment
- government policies
- interest rates
- personal savings and assets
Where:
- population growth
- unemployment level
- wealth
- workforce qualifications
- government policies

Question 3

What are some issues relating to barriers to entry for a new business?

Answer 3

• economies of scale
• product differentiation
• capital requirements
• switching costs
• government policy and regulation

Question 4

What are some industry structures that favour small firms?

Answer 4

• low entry barriers
• diseconomies of scale
• high creative content
• personal service
• close local control
• new emerging industries

Question 5

What are the positives and negatives of entering into a web based business for a small firm?

Answer 5

Pros:
- inexpensive mean of advertising and set up
- low operating costs
Cons:
- lack of resources to fully exploit online capabilities
- lack of tech knowledge to deal with e-commerce issues
- access for consumer attention is competitive
EXAMPLE: shoes of prey - design own shoes and they will arrive in 4-5 weeks - out of business as failed to carry out market research

Question 6

What are the objectives of the global entrepreneurship monitor?

Answer 6

1) measure differences in entrepreneurial attitudes, activity and aspirations among economies
2) uncover factors for the level of entrepreneurship
3) identify policy implications for enhancing entrepreneurship

Question 7

What are the 3 phases of economic development?

Answer 7

• factor driven economy (subsistence agriculture, use of unskilled labour)
• efficiency driven economy (industrialisation, competitive advantage driven by economies of scale)
• innovation driven economy (knowledge intensive, driven by intellectual capital)

Disney et al. (2003) point to productivity gains being entirely due to new entrants