Paper 1- Theme 1.5 Entrepreneurs and Leaders ✅

Question 1

define Enterprise

Answer 1

skills and abilities to take risks and create profits

Question 2

Define entrepreneur

Answer 2

Person who organises operates and assumes the risk for a business venture

Question 3

Characteristics of an entrepreneur

Answer 3

• ability to cope with risk (risk taker)
• self confidence
• creativity
• determination and perseverance
• passion
• resilience

Question 4

define skill and characteristic

Answer 4

skill= learned and acquired abilities to do something well

Characteristic = innate personal traits or attributes

Question 5

Skills needed by entrepreneurs

Answer 5

• persuasive abilities- need to persuade others to do think like supply goods on credit, work harder and more productively
• problem solving skills- investigate possible causes of problems
• financial skills- ability to read and understand key documents (like cash flow forecasts)
• networking skills- able to turn acquaintances into business friends and benefit from their networks as well (including based crowdfunding or social media endorsement)

Question 6

financial motives to become an entrepeneur

Answer 6

• profit maximisation

- profit satisficing

Question 7

non- financial motives to become an entrepeneur

Answer 7

• social entrepreneurship- support cause rather than make a profit
• independence- own boss, make own decisions
• home working and flexible hours- easy to maintain, work life balance in control
• follow passion or dream
• self worth and fulfilment
• ethical stance - freedom to practice their own ethical approaches
(starting to support others or a cause e.g making wheelchairs for disabes people)

Question 8

Define leadership

Answer 8

relationship through which one person, usually with more power, influences the behaviour or actions of other people

Question 9

Define a sole trader business

Answer 9

Business owned and controlled by one person

• unlimited liability
• may be one or two employees, but makes final decision

Question 10

Advantages and disadvantages of sole trader

Answer 10

Pros

• owner benefits from all profits
• no administrative costs to pay (low start up costs
• own boss- personal hours
• full control of business decisions

Cons

• unlimited liability
• hard to take time off for any reason
• limited finance availability
• unrealistic as business grows

Question 11

Define partnership

Answer 11

where (2-20) people share ownership as well as the equal responsibility for management, losses and profits

uses deed of partnership- states how profits are split, how much each partner invested and rules if a partner wanted to leave

Question 12

Advantages and disadvantages of partnerships

Answer 12

Pros

• each partner contributes skills
• share workload

Cons

• unlimited liability
• possible clash of interest and so conflict

Question 13

Define a ltd

Answer 13

Private limited company

• company where shares are sold privately with permission of the majority of shareholders (not on stock market)
• limited liability
• 2 to 20 owners and at least one director

Question 14

Advantages and disadvantages of ltd

Answer 14

Pros

• limited Liability
• shares kept within trusted circle (no risk of hostile takeover)
• profits are often retained

Cons-

• Harder to source funding
• less privacy than sole traders
• limited to 50 shareholders
• corporation tax needs paying to be limited

Question 15

Roles of an entrepreneur

Answer 15

• creating and starting up a business
• expand and grow business
• provide a product or service
• provide employment
• take calculated risks to gain possible returns

Question 16

Define plc

Answer 16

a company, with limited liability, that is able to raise capital by selling shares on the stock market

Question 17

define flotation

Answer 17

selling a share of a company’s ownership on the stock market for the first time

Question 18

Advantages and disadvantages of plc

Answer 18

Pros
- can raise shares through floating stocks —> spreads risk also

• control is spread by multiple owners, not just a few (like business angles)
• can access further SOF easier (e.g. banks)

-higher legal status adds prestige —> benefit from publicity on stock market
—> may increase bargaining power over customers, suppliers

Cons
- higher transparency of accounts —> legal pressure and pressure on brand image

• vulnerable to hostile takeovers, shareholders may not be trusted
• original owners may lose control
  —> less profits
  —> lose direction
• Shareholders may disagree (may lead to divorce of ownership and control)
• shareholders are short termist, want high share value and profits as dividends
• must have 50,000 of share capital generated in order to trade
  —> indirect costs of forming a plc and advising on flotation
• market capitalisation is controlled by external f

Question 19

Define social enterprise

Answer 19

Business that trades to tackle social problems, improve communities, people’s life challenges and the environment, and still make profit

Question 20

Advantages and disadvantages of social enterprise

Answer 20

Pros

• access grants from government
• USP –> can gain customers from being ethically and socially beneficial
• motivated staff, as valued and see beneficial aims
• long termist approach may provide distinctive capability

Cons

• relying on grants and investment
• -> government may invest in fledging industry, to improve economy
• -> lack of funding, from investors who want quick returns
• may miss out on potential business
• growth may be harder, as profits after social investment are often low

Question 21

Define a company

Answer 21

• organisation owned by investors (shareholders)
• separate legal entity to owner
• controlled by managers

Question 22

Define dividend

Answer 22

payment of profits from company to shareholders

-not paid if company not in profit
usually paid dividend per share and in the company’s financial cycle

Question 23

Define lifestyle business

Answer 23

aim to provide a great quality of life for owner, working on projects they enjoy

Question 24

pros and cons of lifestyle business

Answer 24

pros
•independence –> own boss and make business decisions
•more motivated as can do what you like doing, have flexible working (location of work, when and for how long)

cons
•may end up sacrificing personal time (have to keep tabs on competition, bills, employees)
•more stress, pressure and commitment
—> may be unable to enjoy leisure anymore

Question 25

Define an online business

Answer 25

-a company set up and run online - lower financial risks as can be tested online for success - limitless scalability - hard to engage in food customer service - sometimes lack of trust and credibility issues with new customers

Question 26

Define franchise

Answer 26

business model where a franchisor sells the legal rights to a franchisee, to use their brand identity (name, logo), products and processes

Question 27

Define franchisor

Answer 27

someone who sells their franchise (license) to a franchisee to allow them to trade using the brand or business format

Question 28

Define franchisee

Answer 28

someone who buys the right from a franchisor to copy their business format and sell their p/s

Question 29

Define royalties

Answer 29

percentage of total business profits made, given from franchisee to franchisor (in order to use their business concept)

Question 30

Pros and cons for a business starting a franchise (franchisor)

Answer 30

Pros - receive royalties and initial franchise fee from franchisee - expand quickly and cost efficiently (can be geographically) - use economies of scale for mass advertising and buying power as increase number of stores - low risk of success (only 6-7% of franchises fail) (risk is shared) - efficient way to organically expand geographically Cons - loss of control - risk of damaging brand name - associated costs with starting up franchisee (hiring of franchisee consultant, and constructing the franchise agreement - increase likelihood of legal disputes (time and cost consuming )

Question 31

Pros and cons for a franchisee opening a franchisee

Answer 31

Pros - existing customer base (brand is known and established) - take advantage of mass advertising and training - easier to attract finance - access to support network Cons - lack of freedom and control (over supplies, rules, design) - pay royalties and large initial fee - legislation restrict growth - may not be able to localise product - can be ended by franchisor without notice

Question 32

Factors deciding decision making of starting up a new business

Answer 32

- the potential sales of the idea - cash needed for the idea - whether the timing (in the market) is right - whether the entrepreneur and the staff have the skills needed for the idea to work

Question 33

define e commerce

Answer 33

buying and selling of goods and services using the internet.

Question 34

pros of being an e-commerce business

Answer 34

• Customer intelligence- gain insight into customers needs using website analysis tools • Widen the market geographically, beyond local customers - can identify strong demand in some countries and target your marketing to them •potential for rapid growth - easy and cheap to upscale - less credit on sales improves cashflow, increasing growth potential * low barriers to entry- can set up online within minutes or even seen through established marketplaces (e.g. eBay) * reduced overheads cost * easy store access at any time, increase convenience for customer, less time taken

Question 35

cons of being an e commerce business

Answer 35

* risk of security breaches and fraud if don't invest in latest cyber security (expensive) * online marketing may be easy to access consumer, but needs large budget to stand out from competitors (e.g. in paid search advertising) * website costs - design, creating & maintaining a professional website is expensive * still fixed overheads and staffing needed to store goods, deal with returns and distribute * hard to establish customer trust- without face to face interaction, or physical appearance (may need to invest in online customer service) * costs of adapting to the additional customer rights of e-commerce

Question 36

define m commerce business

Answer 36

the buying and selling of goods and services online through a wireless handheld mobile device

Question 37

m commerce specific pros and cons

Answer 37

pros: - provides customers with all information necessary in one click - new marketing channel- an direct marketing straight to mobile phones - easy access for customers at any time cons: - rural areas may have less access to network connections or internet, limits market - internet connection issue may frustrate customers and discourage them from continuing to purchase online

Question 38

roles of an entrepreneur

Answer 38

- anticipate risk and uncertainty - -> assuming risk - --> forecasting it - creating and starting up a business - --> provide people with P/S they desire - running and expanding a business - --> identifying business opportunities - provide jobs - -> allocating and motivating employees