Risks And Rewards

Question 1

What are the Risks for a business

Answer 1

• insufficient demand sue to poor market research or reaction of competitors
• poor execution due to poor management and lack of control
• external shock due to economic factors/ technology changes

Question 2

Rewards for a business

Answer 2

• capital/revenue
  -profit
• market share
• increased sales
• increased share price
• customer loyalty
• brand recognition

Question 3

Calculated risks

Answer 3

• one that has been carefully considered for which costs and benefits have been weighed up

Question 4

What is a business plan

Answer 4

• formal statement where a business:
• sets goals
• why they are attainable
• risks and rewards business expects
• marketing and financial plan
• production and staffing plans

Question 5

Financial forecasts

Answer 5

• avoid bankruptcy
• manage cash flow
• raise finance from investors

Question 6

Management and employees

Answer 6

• motivation of employees
• recruit experienced staff
• effective communication

Question 7

Market and sales

Answer 7

• develop promotional strategy
• target customer
• predict sales

Question 8

Operations

Answer 8

• invest money effectively
• manage supplies
• manage overheads and costs e.g rent

Question 9

Uncertainty

Answer 9

• happens when a business does’t know what is likely to happen in future and can’t measure/ predict an outcome

Question 10

How a business reduces risks
- starting a business

Answer 10

• detailed business plan
• match idea to available finance

Question 11

How a business reduces risks
- expanding a business

Answer 11

Re-invest to expand so finance growth without taking out debt
- carry out detailed research into new opportunities

Question 12

Reducin risks when
- entering international markets

Answer 12

• research legal, political and economic situation carefully
• select most appropriate method to enter market in another country