Role of Business, Enterprise and Entreprenership

Question 1

Why does a business exist

Answer 1

To satisfy the needs of the customer
Provide a good service that people will pay for
Be rewarded with profit

Question 2

What is the consequence of a product becoming popular

Answer 2

Demand rises and other businesses may also want to make the product because there is the opportunity of profit

Question 3

Give an example of when a business that existed and developed

Answer 3

Virgin began as mail order and grew into air travel

Question 4

give an example of an when an entrepreneur took an existing product, developed and improved it

Answer 4

Apple didn’t make the first mobile phone but saw how it could be developed

Question 5

What is enterprise

Answer 5

Seeing an opportunity to provide a product that people will buy / spotting an opportunity

Question 6

List 4 characteristics of an entrepreneur

Answer 6

1 Creativity - designing something not seen before
2 Risk taking - using own money
3 Determination - see things through
4 Confidence - confident that their idea will succeed and pass that feeling on to others who are bought into develop

Question 7

What are 4 rewards for taking risks

Answer 7

1 Financial - the bigger the risk the greater the reward, often said when referring to the amount of money money that may be made
2 Independence - many people work for others, entrepreneurs often want to be independent and take the risk of being the boss
3 Self satisfaction - take the risk of starting their own business to have the satisfaction of making their idea work
4 Changing customer habits- rewarded when customers change their buying habits eg to support ethical businesses I

Question 8

List 3 drawbacks of risk takers

Answer 8

1 Financial - money can be lost
2 Health - if money is lost or more effort/time
is needed the health of the entrepreneur may be effected because of the strain
3 Strained relationships - starting a business can be Tim me consuming and can damage personal relationships

Question 9

What are the 3 main purposes of business enterprise and entrepreneurship

Answer 9

1 Spotting an opportunity /gap in the market (improving a product, producing a product more cheaply)
2 Developing an idea (designing a product, planning production)
3 Satisfying customer need (producing product, marketing product

Question 10

Why would a small and large business write a business plan

Answer 10

Small business will write a plan before they start or if they are planning a big change
A large business plan to meet the needs of the owners who invested money

Question 11

GI’ve an example of when a business plans had to be changed

Answer 11

2016 leaving the EU, businesses were worried that leaving EU may add further costs to products eg BMW cars they sell to other EU countries

Question 12

What is a business plan

Answer 12

A plan which details how a business aims to achieve its objectives

Question 13

When is a business plan written

Answer 13

Before a business starts or when there is a big change

Question 14

State 2 reasons for planning business activity

Answer 14

1 To reduce risk
2 To help a business succeed by thinking about all the aspects of running the business

Question 15

List 4 roles of a business plan

Answer 15

1 Identify market - helps the business to think clearly about who it is targeting products at
2 Helping with finance - if a business needs finance from a bank and the business plan shows careful thought has been given to all aspects of starting a new business a bank is more likely to lend
3 Identifying resources a business will need - eg equipment, finance, skills, premises, this demonstrates careful thought to operations
4 Achieving business aims- by setting these out with a clear timeline shows careful thought and planning

Question 16

Identify 5 steps to developing a business plan

Answer 16

1 idea - identify what is to be produced, resources needed, aims objectives and how they will be met
2 People - who is involved, numbers, skills, experience
3 Market research, identify markets to target and market activities -price, product, place, promotion
4 Finance identify how much is needed, what for and where from.
5 `Competitors how is your product different better cheaper.

Question 17

What are SMART targets

Answer 17

Specific - clear achievements
Measurable - eg sales
Achievable - possible
Realistic - appropriate
Timely - deadlines

Question 18

Name 4 forms of business ownership

Answer 18

Sole trader
Partnership
Private limited companies
Public limited companies

Question 19

What are the 5 advantages of sole trader

Answer 19

1 Finance - easy and cheap popular for new businesses
2 Finance - can be set up with little capital
3 Control - in complete control to make decisions
4 Profits - keep all profit
5 Financial - information is private

Question 20

What are the 6 disadvantages of sole trader

Answer 20

1 unlimited liability - liable for all business debts so may have to sell own possessions to pay debts
2 Illness - if sole owner is ill it is hard to keep business going
3 Shortage of Capital - can be hard to find finance to start
4 Hours of work - may have to work long hours especially at the start can cause stress and illness
5 Skill shortage - sole trader may not have all the skills needed and has to employ others with specialism
6 Continuity - if sole trader dies business will cease to exist

Question 21

Which industries are partnerships common

Answer 21

solicitors, dentists accountants

Question 22

Name a rule of partnership

Answer 22

Has to be at least 2 partners but don’t have to have equal share of the business

Question 23

Name 5 advantages of partnership

Answer 23

1 Capital - there are more owners so easier to raise capital to expand
2 Easy to set up - need to complete deed of partnership
3 More skills in the business - more than one owner often partners have different skills
4 Workload shared - partners share work reducing stress
5 Financial information is private - doesn’t need to be shared

Question 24

Name 5 disadvantages of partners

Answer 24

1 profit is shared, this can cause problems if one partner feels he is doing more
2 Unlimited liability - each partner is liable for debts
3 Shortage of capital - if there are few partners
4 Slower decision making - more partners may lead to disagreements
5 Continuity - if one or more partners die the business may cease

Question 25

Why is a deed of partnership drawn up

Answer 25

As a partnership os more complicated
If no deed law states each partner is equal regardless of the capital they put in

Question 26

What 4 things are in the deed of partnership

Answer 26

1 Information of how the business operates
2 Role of each partner
3 How profits and losses are shared
4 How much each partner has contributed

Question 27

What is a sleeping partner

Answer 27

They provide capital but takes no part in running the business. Their liability for losses is ltd to how much capital they put in.

Question 28

What is limited liability partners

Answer 28

recent change in law allows partnerships to operate LLP it means liability for debts is limited to the amount of money they put into the business.

Question 29

What are private limited companies

Answer 29

have LTD after business name
The owners are called shareholders because each has invested money and so has a share of the business

Question 30

What does limited liability mean

Answer 30

That responsibility for debt is limited to the amount share holders put in

Question 31

What sort of liability do sole traders and partners have, what does this mean

Answer 31

Unlimited liability so may have to sell possessions if business gets into financial difficulty

Question 32

List 4 advantages of a private company

Answer 32

1 Limited liability - encourages investors as it is clear how much they risk
2 Continuity - if owner dies business can continue
3 Finance - banks are more prepared to lend as seen as less risky
4 Control - shares can only be sold with agreement of stakeholders, business can not be taken over without agreement

Question 33

List 4 disadvantages of private company

Answer 33

1 financial information is available to the public
2 Administration - private companies are complex and can be expensive to set up as there are many forms to complete and certain financial information has to be sent to companies house if not they receive a fine
3 Sales of shares is restricted - they can not sell shares to the public which reduces capital they could raise
4 Dividends - money paid to shareholders from profits and are expected by shareholders each year. If a director wants to use profit to expand it can cause conflict

Question 34

What is a public limited company

Answer 34

they can sell shares to the public through the stock exchange in london

Question 35

`list 3 advantages for a public limited company

Answer 35

1 Ability to raise large amounts of money - as shares can be sold to public to raise capital
2 Finance - find it easier to borrow as seen by banks as low risk
4 Ltd liability for share holders - share holders only liable for the amount they invested

Question 36

List 4 disadvantages of a public limited company

Answer 36

1 Possibility of a takeover - as share are sold to the public on the stock exchange the plc has no control over who buys shares, if a person buys 51% overall ownership of the business changes
2 Setting up- it is more complex and costly to set up, must have £50,000 shares as minimum
3 Size - large businesses and often have complicated management structure which can be inefficient
4 financial information is available to the public - have to publish accounts each year and make them available to anyone who requests them this could lead to another business buying shares with a view to taking over

Question 37

Which types of business ownership is suitable for startups

Answer 37

Sole trader, partner or private company

Question 38

Why does a start up need to consider money required when thinking about ownership and why

Answer 38

If amount needed is small then they can open as a sole trader, if a larger amount is required then a partnership or private ltd is appropriate as more than one person is providing capital

Question 39

Why is it useful for a start up to have ltd liability

Answer 39

if the person has personal wealth they may not want to risk it if business fails, they will know what they are risking

Question 40

When would a sole trader change business ownership

Answer 40

When they become more stabilised and needs more capital,

Question 41

List 5 possible objectives for a business
What is satisficing

Answer 41

1 profit - main objective for most to maximise profit (make as much as possible). Sometimes consumer feels they are not been treated well and sales can fall.
Satisficing is when a sole trader is just happy to earn enough profit to give them a good living
2 Growth - seen as a way to raise profit. Growth can take different forms eg sales growth, increase market share
3 market share - business increases %share of the market.
4 Survival - particularly important for a new business in first few months
5 Providing a service - linked to making a profit, the better the service the more customers it will attract and profit grows. Some businesses will want to provide customer satisfaction even if doesn’t lead to profit

Question 42

How and why may objectives change as a business evolves

Answer 42

When a business starts its main objective is survival, establish businesses may lower prices to stop this survival. The new business may have to steal customers so may put good service as an objective,
Ambition will drive them to achieve greater profit which will lead to growth eg bigger premises