Paper 1- Theme 1.5 Entrepreneurs and Leaders (& design mix) Flashcards
Define business
An organisation that exists to provide goods and services on a commercial basis to customers
Define goods
tangible products
Define services
Intangible products
Enterprise
skills and abilities to take risks and create profits
Define entrepreneur
Person who organises operates and assumes the risk for a business venture
Benefits of business to society
- employment
- drive innovation through R&D
- pay taxes to government on profits
- create wealth among society (investment returns)
Only doing entrepreneurial motives and characteristics and business objectives flash cards for 1.5 as in test
Shush
Characteristics of an entrepreneur
- determination and perseverance
- passion
- resilience
- ability to cope with risk
- courage
- creative
define skill and characteristic
skill= ability to do something well
Characteristic= feature of someone’s personality
Define risk
Risk= probability that things will not go as planned
e.g. the chance invested money is lost
Define uncertainty
when businesses are unable to predict external shocks or future events
e.g. spontaneous recession, global pandemic
Skills needed by entrepreneurs
- 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)
Motives for becoming an entrepreneur
- Profit maximisation
- profit satisficing -enough profit to be satisified
- ethical stance- morally correct behaviour meeting ethical beliefs
- social entrepreneurship- support cause rather than make a profit
- independence- ur own boss, make own decisions
- home working and flexible hours- easy to maintain, work life balance in control
Define leadership
relationship through which one person influences the behaviour or actions of other people
Importance of leadership
Source of inspiration
Better working environment
Provide direction (everyone aligned on objectives and aims)
Build effective teams
Barriers to entrepreneurship
Personal- risk averse, lack of self esteem, gender
Economic- taxation, market energy regulations
Financial- lack of start up capital
Political- unstable political landscape
Define intrapreneurship
Involves people within a business creating or discovering new business opportunities that leads to new parts of or even a new business being created
e.g gmail
Why encourage intrapreneurship
Create innovation within business
Motivate employees
Diversification
Encourage collaboration inside business
How to protect a business from uncertainty
- keep excess cash supplies
- reduce no of creditors, increase number of debtors
- diversify
- foster agility in decision making and actions
How to mitigate risk
Calculated risks
Diversify to spread risk
Persist through adversity
Define mission statement
Overriding goal of the business that provides a vision for the future, and usually considers then purpose of the business
good if motivate staff, is relevant for all stakeholders, differentiates from competitiors
Define aim
aim- long term plan from which objectives are derived
Define objective
Objective- target derived from goals, that must be achieved in order to realise the aim (All should be SMART)
Purpose of objectives
Provide direction
Motivate employees
Reduce uncertainty
Can measure performance
Define corporate objectives
overall business targets that translate down into each department of function
Define functional objectives
more specific objective that feeds into each corporate objective, focus on a specific function of the business (HR, operations, finance, marketing)
factors that influence the objectives made
position in market (amount of competition) size of business state of economy age of business political factors
Define a sole trader business
Business owned and controlled by one person
- unlimited liability
- may be one or two employees, but makes final decision
Advantages and disadvantages of sole trader
Pros
- owner benefits from all profits
- no administrative costs to pay (low start up costs
- own boss- personal hours
Cons
- unlimited liability
- hard to take time off for any reason
- limited finance availability
Define partnership
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
Advantages and disadvantages of partnerships
Pros
- each partner contributes skills
- share workload
Cons
- unlimited liability
- possible clash of interest and so conflict
Define a ltd
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
Advantages and disadvantages of ltd
Pros
- limited Liability
- shares kept within trusted circle (no risk of hostile takeover)
- profits are often retained
Cons-
- Harder to source funding
- limited to 50 shareholders
- corporation tax needs paying to be limited
How entrepreneurs come up with ideas
- personal experience (habits, interests)
- market research (e.g market mapping)
- business experience (insight to what works)
- observations (look for things like poor customer service)
Define plc
a company, with limited liability, that is able to raise capital by selling shares on the stock market
Advantages and disadvantages of plc
Pros
- float stocks
- larger scale of production
- higher legal status- benefit from publicity
Cons
- need 50,000 of share capital raised to be considered
- shareholders lose control and less profits
- Shareholders may disagree (may lead to divorce of ownership and control)
- shareholders are short termist, want high share value and profits as dividends
Define social enterprise
Business that trades to tackle social problems, improve communities, people’s life challenges and the environment
Advantages and disadvantages of social enterprise
Pros
- access grants from government
- can gain customers from being ethically and socially beneficial
- can do good for society
Cons
- lack of funding from investors who want quick returns
- rely solely on donations, may be hard to sustain
Define a company
- organisation owned by investors (shareholders)
- separate legal entity to owner
- controlled by managers
Define dividend
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
Define lifestyle business
aim to provide a great quality of life for owner
- started to profit satisfice
- work on projects something you enjoy
- live how they want (working time schedule, location)
- risky to start up, more pressure and commitment
Define an online business
-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
Roles of an entrepreneur
- creating and starting up a business
- expand and grow business
- provide a product or service
- provide employment
- take calculated risks to gain possible returns
Define franchise
business model that sells the legal rights to use their brand identity (name, logo), products and processes
(allows franchisee to sell a product or service under business name of the franchisor)
Define franchisee
someone who buys the right from a franchisor to copy their business format and sell their p/s
Define franchisor
someone who sells their franchise (license) to a franchisee to allow them to trade using the brand or business format
Define royalties
percentage of total business profits made, given from franchisee to franchisor
(in order to use their business concept)
Pros and cons for a business starting a franchise (franchisor)
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)
Cons
- loss of control
- risk of damaging brand name
- profits shared
Pros and cons for a franchisee opening a franchise
Pros
- existing customer base (brand is known and established)
- take advantage of mass advertising and training
- easier to attract finance
Cons
- lack of freedom and control (over supplies, rules, design)
- pay royalties and large initial fee
- hard to scale up
- can be ended by franchisor without notice
define a market
any place that buyers and sellers come together to exchange goods or services at a price
Define marketing
meeting the needs and wants of the customer, using a combination of the 4 p’s (product, place, promotion and price)
-target the right product for the right target market
what is a marketing strategy
A plan of how you’re going to achieve your marketing objective (feeds into corporate objective)
Define market orientation
Pros and cons
•outward looking approach to new product development, focus on consumer needs and wants
-adapts product based on needs (using market research)
Pros
- more likely to produce a product the customer would buy
Cons
- hard for dynamic markets
- costly, time consuming
Define product orientation
Pros and cons
inward looking approach to new product development, focus on what products can be made and the production process
Pros
- possible first mover advantage
- more money spent on product not market research
Cons
- may not be a market or demand for this product
Define marketing mix
Combination of factors to help the business take into account the customers needs when selling a product
Factors are product, price, place, promotion
Define design mix
Way in which all aspects of a products design (function, aesthetics, economic manufacture) are considered
Define the design mix fixtures
Function
-way in which a product performs in a way to do the job they were designed to do
Aesthetic
-degree of beauty or style as perceived by the user (some people as a differentiating feature)
Economic Manufacture
-must be capable of being manufactured at a cost below selling price (so it’s viable and makes a profit)
define social trends in terms of the design mix
- way society as a while behaves and the values that determine behave
- can alter importance of each design mix feature
How social trends have changed the design mix
•Resource depletion
- designed so consumption is sustainable (not affecting long term supplies by currently making products)
- less scarce materials (as cost more)
•waste minimisation
- eliminate waste before it’s produced or reduce its quantity or toxicity
• recycling
- reuse or recycle different parts
- may be a trade off for function or aesthetics
•ethical sourcing
- not damaging lives of employees that gather raw resources
- customers boycott buying products made in sweat shops or using child labour
Pros and cons of Being ethical
Pros
- protect natural world
- competitive advantage (charge premium)
- positive PR
Cons
- costly to implement
- ppl may see through “fake” marketing strategies
- may not receive monetary benefits short term
Define opportunity cost
Cost of missing out on the next best alternative when making a decision
Define a trade off
Examples
negative consequence as a result of a business choice made
e.g. choice of less market research for a lower cost has the trade off of less successful new product launch
Factors deciding decision making of starting up a new business
- 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
Opportunity costs in developing a new business idea
Personal opportunity costs
- entrepreneur sacrifice their own regular income
- investment may be at expense of personal assets
- long hours may sacrifice social time
Opportunity costs of one business idea opposed to another
- miss out on potential sales of other
- cost of launch and investment restrict other investment opportunities
Difficulties that entrepreneurs face when becoming a leader
- learning to delegate power and roles
- trusting others
- listening to other ideas
- developing an emotional intelligence
