Lesson 3 - Enterprise, Business and growth

Question 1

Define an Entrepreneur

Answer 1

An Entrepreneur is a person who operates, manages and takes risk to make the business better.

Question 2

List the 8 Characteristics of Entrepreneurs.

Answer 2

1. Hard working
2. Effective Communicators
3. Risk takers
4. Optimistic
5. Innovative
6. Independent
7. Creative
8. Self-Confident

Question 3

List 2 Benefits of being an entrepreneur.

Answer 3

1. Can put own ideas into practice

2. May become famous and successful if the business grows.

Question 4

List 2 Disadvantages of being an entrepreneur.

Answer 4

1. Opportunity cost - Lost income from not being an employee if another business
2. Lack of knowledge and experience in starting and operating a business.

Question 5

Define a Business Plan

Answer 5

A Business Plan is a Business document which contains the objectives of the business and Important details about Operations, Finance and Owners.

Question 6

List 2 Ways on how a Business Plan assists entrepreneurs.

Answer 6

1. It helps the business gain finance since Banks ask for a business plan in order to decide whether or not to give the business a loan.
2. It reduces the risk of the business failing since it forces the entrepreneur to think ahead.

Question 7

List 3 reasons on why government supports new business.

Answer 7

1. Increased Output - New businesses increase the total output and this benefits the economy
2. Reduce Unemployment - New businesses created new jobs
3. Can grow further - Businesses can grow big and then support the government by tax revenue

Question 8

List 3 different ways government support new businesses.

Answer 8

1. Government orgnaizes support sessions offered by experienced business owners to new entrepreneurs.
2. Government offers loans at low rates and grants to businesses opening up in depressed areas of low employment
3. Government sets up Enterprise zones which offer cheap premises to new businesses

Question 9

List 4 methods of measuring business sizes and their limitations

Answer 9

1. Value sales - Different businesses sell different products.
2. Value of output - High level of output doesnt mean business is big
3. Number of Employees - Some businesses employ few people but produce high value output
4. Value of capital employed - Some companies may use cheap labor

Question 10

Define capital employed

Answer 10

Capital employed is the total value of capital used in the business.

Question 11

List 3 reasons why owners may want the business to expand

Answer 11

1. Higher status and prestige for the owners.
2. Business can benefit from economies of scale
3. Larger share of its market - Bigger businesses attract consumers.

Question 12

Define Internal Growth

Answer 12

Internal growth occurs when a business expands its existing operations.

Question 13

Define External Growth

Answer 13

External growth is when a business takes over or merges with another business.

Question 14

Define Horizontal Integration

Answer 14

Is when a firm takes over or merges with a firm in the same industry

Question 15

Define Vertical Integration

Answer 15

Is when a firm Takes over or merges with a firm in the same Industry but different stage of Production.

Question 16

Define Conglomerate Merger

Answer 16

Firm takes over or merges with a firm in another Industry. This is also known as Diversification.

Question 17

List 3 benefits of Horizontal Integration

Answer 17

1. Business can now benefit from Economies of Scale
2. Business now has a larger share of its market.
3. The Business has now reduced its number of competitors

Question 18

List 3 Benefits of Forward Vertical Integration

Answer 18

1. Merger gives an assured outlet for their products.
2. Profit margin made by retailer is absorbed by the expanding business.
3. Retailer could be prevented from selling Competitors products

Question 19

List 3 Benefits of Backwards Vertical Integration

Answer 19

1. Manufacturer can be banned from selling to competitor retailers.
2. Assured supply of Important Components.
3. Profit made by supplier is absorbed by expanding business.

Question 20

List 3 Problems of Business growth and how to overcome them

Answer 20

1. Over Expansion - Expand slowly and use profit from expansion to fund further expansion.
2. Poor communication - Operate business in small units and use the lasted IT equipment.
3. Larger business is difficult to control - Operate business in small units.

Question 21

List 3 reasons why some businesses stay small.

Answer 21

1. Owner’s objectives
2. Size of Market - Total Number of employees
3. Type of Industry - Businesses offering personal services are likely to stay small

Question 22

List 3 reasons why businesses fail

Answer 22

1. Poor management - Lack of experience can lead to poor decisions such as locating in area of high cost and low demand
2. Failure to plan for change
3. Risks of new businesses - Businesses fail due to lack of financial and other resources, poor planing. Owners of newer businesses may lac