Role of business and entrepreneurship Flashcards
Give three purposes of a business enterprise
Spotting and opportunity (eg: gap in the market)
Developing an idea (designing a product or service/planning production)
Satisfying customer needs
Define entrepreneur
A person who takes the risk of starting and running a business enterprise
What to do in an analysis question
Apply answer to the case study
Explain why
Give four characteristics of an entrepreneur
Determination
Creativity
Confidence
Risk-taker
What is a non-financial risk of running a business?
the strain of running a business can cause mental and physical illness
Give examples of non-financial rewards of running a business
Independence
Self-satisfaction
Making a difference (e.g: improving the lives of customers)
Purposes of a business plan
Reduce risk of business failure
Be as successful as possible (e.g by deciding how to market its products as effectively as possible)
Give the steps involved in developing a business idea
Identifying what the business will produce and sell and
the resources needed
Stating aims and objectives
Identifying who will be involved and the human resources required (e.g number of employees and the
skills and experience they should have)
Identifying target market
Identify Price, Product, Place, Promotion to appeal to said market
Identifying market resources needed
Identify how much finance is needed and for what
Identify how much money to be raised
Identify competitors and decide how to stand out amongst them
Business plan definition
A simple plan which sets out details or the product/service being sold and how it will be financed/ marketed, also includes details of market research findings
When might a business plan be written?
Before a business starts or when planning a major change to the way a business operates
Objectives have to be SMART, what does this mean
Specific
Measurable (stating how to measure the success of the plan, eg by using sales or profit)
Achievable
Realistic
Timely (including a deadline for achieving targets)
Define Sole trader
A business owned by one person
Define Partnership
A business owned by between 2 to 20 partners
What is a Private limited company?
Usually a smaller business that can sell shares to invited people only
What is a Public limited company?
A business that can sell shares to anyone who wants to buy
Give some advantages of sole-trader
Easy to set up
Owner has full control
No information about profits must be published
Give some disadvantages of sole-trader
The business stops when owner dies
Raising finance is limited because there is only one person to contribute to it and the business cannot sell shares to raise finance
Unlimited liability
Large workload and long hours
Give some advantages of partnership
Only needs a deed of partnership to set up
Easy for owners to control as partners (usually) make decisions between themselves
No information about profits must be published
Work is shared between partners
Give some disadvantages of partnership
The partners may disagree on decisions
Profits have to be shared between owners
New deed of partnership needed when an owner leaves or joins
Cannot sell shares to raise finance and only a few partners to invest in business
Unlimited liability
Which businesses are incorporated?
Private limited companies/Public limited companies
Which businesses are NOT incorporated?
Sole traders/Partnerships
What does incorporated mean
Having limited liability
Give some advantages of Private limited company
Shareholders can restrict who buys shares so it’s easy for the owners to control
The business continues even if shareholders sell their shares or die
Raising finance is not limited as new shareholders can invest and banks are willing to lend
Limited liability
Give some disadvantages of Private limited company
Requires legal documents to set up which take time to produce
The public can see information about the business
Give some advantages of Public limited company
The business continues even if shareholders sell their shares or die
Raising finance is not limited as new shareholders can invest and banks are willing to lend
Limited liability
Give some disadvantages of Public limited company
Requires legal documents to set up which take time to produce
More difficult for owners to control as anybody can buy shares
The public can see information about the business
What is a deed of partnership?
A document stating who owns the business, how much money each partner has invested and their role in the business
What is a share?
Part ownership of a business
What does it mean to have unlimited liability?
To be responsible for all the debts of the business
What does it mean to have limited liability?
The owners of the business can only lose the money they invested into it if it fails
Give an advantage and disadvantage of a limited liability business, less obvious one
A: Helps businesses raise finance as investors will not lose everything so they are more willing to invest
D: Can be complicate because of many legal documents to complete
What are Assets?
Things owned by the business, e.g stock, buildings vehicles and even reputation
Give an advantage and disadvantage of unlimited liability companies, less obvious ones
A: Easier to set up
D: Seen as risky to lend to
Define established business
A business that has been trading for some time
State the four main business objectives
Survival (businesses may survive for a short period without making profit))
Profit
Growth (e.g increasing sales or market share)
Providing a service (some owners want the satisfaction of giving a good service to customers/ improves reputation, attracts new customers)
Why might objectives change a business evolves?
They are at different stages of development
Their owners have different motivations
They are influenced by different market conditions
They are experiencing different economic conditions
What does the term evolving mean in business?
The way a business changes and develops over time
When might a business set a survival objective?
When it has just started so that it can become established and secure and make profit in the longer term
During a downturn of economic activity or when a market is very competitive
When might a business set a profit objective?
When it is established and wants to reinvest to expand and grow
When might a business set a growth objective?
When it is established and wants to gain more power in the market, increase profit and reduce competition
When might a business set a providing service objective?
When it strives to improve reputation and attract new customers
Give some examples of external stakeholders
Local community, suppliers, customers and government
Give some examples of internal stakeholders
Business owners, employees
Define stakeholder
Someone who has an interest in a business
What is an owner’s role in a business?
Provide finance to start up and expand a business
To manage of run a business
What is an employee’s role in a business?
Produce goods and services
What do employees want from a business
Satisfaction of having a job and earning income
To be treated well by employers
Enjoyment of social aspects of working with collegues
What is a customer’s role in a business?
To buy goods and services
What do customers want from a business?
Enjoy benefits provided by goods and services
Affordable prices
What is a supplier’s role in a business?
Sell goods for resale or sell manufacture material to make the goods
What do suppliers want from a business?
To make sales and earn profit
What is a government’s role in a business?
Help businesses, workers and communities
Encourage businesses
Why do governments want to encourage businesses?
Because it leads to high employment and benefits economy
Because it increases taxes payed to the government
What is a local community’s role in a business?
Provide workers
Monitor and influence business activities
What does a local community want from a business?
A local area which is prosperous
What are benefits of business activity for stakeholders?
Profits, jobs, incomes, quality goods and services, sales, taxes and prosperity
What are problems of business activity of stakeholders?
Financial losses, redundancy, poor goods and services, late or missed payments, bad publicity and negative impacts on the local environment and community
What are problems owners may experience from their business?
May lose money invested if business fails
What are benefits owners may experience from their business?
They will own profit if business is successful
What are benefits employees may experience regarding a business
Able to earn income from a business
What are problems employees may experience from a business?
May lose job if business fails
Their job may be replaced by automation such as robots
Employment conditions may be unfair, leading to stress
What are problems suppliers may experience from a business?
May lose money if the business does not pay for goods supplied
Cash flow problems in the business may mean payment to suppliers is delayed
What are benefits suppliers may experience from a business?
They will earn profit from selling goods
What are problems customers may experience from a business?
May be sold poor quality goods and services
May be overcharged
May experience poor customer service
What are benefits customers may experience from a business?
To obtain the right products and services at a reasonable price
What are the benefits a government may experience from a business?
Tax revenue from the owners, workers, suppliers and customers of a business
What are problems a government may experience from a business?
Government may be criticised if they don’t step in too stop very large companies from failing
Business failure on a large scale may damage the economy
What are benefits the local community may experience from a business?
They can earn money from jobs there
Benefit from the goods and services and convenience provided from a new business in their local area
What are problems a local community may experience from a business?
Can be affected by pollution and road congestion caused by business
Business may also take lots of space and take customers from small local businesses
