Role of an entrepreneur

Question 1

Define the term ‘entrepreneur’.

Answer 1

A person ho sets up a business and takes risks in the hope of profit or reward.

Question 2

What are the steps to setting up a business?

Answer 2

Step 1: Market research; finding out what customers want
Step 2: Start small at a market stall or similar context
Step 3: Draw up a business plan
Step 4: Grow the business

Question 3

Explain setting up an online only business.

Answer 3

A business can be set up online and be very successful. Sites like Ebay and Etsy mean entrepreneurs don’t even need their own website to and sites like Alibaba provide suppliers of materials so the entire business from start to finish can be done online.

Question 4

Explain setting up a business with Etsy.

Answer 4

In Etsy, creative entrepreneurs can find meaningful work selling goods in both global and local markets, where thoughtful customers can discover those goods and build relationships with the people who make and sell them. An Etsy economy empowers artists, designers and curators to start and grow businesses on their own terms.

Question 5

Explain setting up a business with ebay.

Answer 5

A seller lists items on ebay and chooses to either accept bids for the item or offer the buy it now option. In an online auction, the bidding starts at a price set by the seller and in the Buy it Now listing the first buyer gets the item.

Question 6

Explain setting up a business as a sole trader.

Answer 6

To become a sole trader, an entrepreneur needs to register as self-employed for tax. If their business is business to business customers may ask to see evidence they have registered with the UTR code

Question 7

Explain running a business.

Answer 7

Once a business is started the entrepreneur will need to turn their attention to the daily running of the business. This may include tasks such as completing the finances, buying stock, finding suppliers, listing stock for sale, contacting customers and chasing payment.

Question 8

Explain expanding a business.

Answer 8

There are lots of ways for an entrepreneur to expand a business:

• Opening another location
• Offering the business as a franchise and not a business opportunity
• Licensing the product
• Diversifying
• Targeting other markets
• Merging with or acquiring other businesses

Question 9

Explain intrapreneurship.

Answer 9

An employee within a larger business who thinks like an entrepreneur:

• Takes risks
• Creative or innovative
• Solves problems
• Focusses on processes to improve productivity
• Drives innovation
• Understands trends
• Self-confident
• Proactive in adding value

Question 10

List the different barriers to entrepreneurship.

Answer 10

Entrepreneurial capacity
Access to finance
Lack of training
Fear of failure
Lack of confidence

Question 11

Explain entrepreneurial capacity as a barrier to entrepreneurship.

Answer 11

There is a growing awareness that entrepreneurial skills, knowledge and attitudes can be learned and in turn lead to the widespread development of entrepreneurial mind-sets and culture which benefits individuals and society as a whole.

Question 12

Explain access to finance as a barrier to entrepreneurship.

Answer 12

Many entrepreneurs cannot start their business because of a lack of funding. Many banks are not keen to lend to start-ups because of a lack of historical data of sales making them a risky investment.

Question 13

Explain lack of training as a barrier to entrepreneurship.

Answer 13

Many entrepreneurs lack training on how to start a business. This can put people off who would like to start their own business but are not sure how to get it started.

Question 14

Explain fear of failure as a barrier to entrepreneurship.

Answer 14

Many potential entrepreneurs do not start a business for fear of failing or fear of the cost of failure, especially if they have to give up a regular salaried job for it.

Question 15

Explain lack of confidence as a barrier to entrepreneurship.

Answer 15

Many potential entrepreneurs lack the confidence to embark on a new adventure with their start up business. This can be overcome with training information and marketing when they are sure they have a product that will sell.

Question 16

Define the term risk.

Answer 16

The possibility that the business will have a lower than expected profit or loss.

Question 17

Explain financial risks in entrepreneurship.

Answer 17

Starting a business can be a financial risk for the owner as they may put their own cash and assets into a business. If the business is a sole trader or partnership then they have unlimited liability and could lose their personal assets to pay business debts.

Question 18

Explain lack of security in entrepreneurship.

Answer 18

If an entrepreneur has a regular job and decides to leave it to open a new business, this is a huge risk and they will have less security as their income will not be guaranteed. There may also be insecurity of sales due to several possible factors such as falling consumer incomes.

Question 19

Define the term uncertainty.

Answer 19

When a business is unable to predict external shocks or future events. Uncertainty is not objective.

Question 20

List the different forms of uncertainty.

Answer 20

Natural disasters
Health scares
Commodity price shocks
Changes in exchange rates
Changes in interest rates
Political affairs

Question 21

Explain health scares as an uncertainty.

Answer 21

Eg when a health minister said most of Britain’s eggs was effected with salmonella, egg sales dropped by 60 percent and farmers had to slaughter hens and destroy eggs.

Question 22

Explain commodity price shocks as an uncertainty.

Answer 22

Commodities are raw materials or primary agricultural products that can be bought and sold. If a business relies on commodities then price shocks could mean a significant impact on profit.

Question 23

Explain changes in exchange rates as an uncertainty.

Answer 23

An exchange rate is the value of one currency valued in terms of another. UK exporters benefit from a fall in the value of sterling however importers benefit from a rise in the value of the sterling.

Key factors that influence exchange rates are:

• economic uncertainty
• political stability and performance
• inflation
• interest rates

Question 24

Explain changes in interest rates as an uncertainty.

Answer 24

The UK interest rate is the cost of borrowing to customers. If interest rates go up then consumers are less likely to borrow money for cars, houses etc.
If consumers stop spending to save then the economy may enter recession.