Theme 1 - Entrepreneurs to leaders Flashcards
1.5.1-1.5.6
What is an entrepreneur?
An Entrepreneur is a person who sets up a business and is willing to take risks in the hope of a profit or reward.
What is a leader?
A leader is someone who takes the action of leading a group of people or an organisation, or the ability to do this.
What is Delegation?
Delegation means giving authority to others to carry out tasks (permission).
Entrepreneurs need to delegate tasks with others.
Why do businesses need to be proactive?
Businesses need to be less reactive to a dynamic market
e.g setting trends, be able to see gaps in the market, moving forward ahead of competition.
What is opportunity cost?
can be measured..
Opportunity cost can be measured as the cost of foregoing the next best alternative.
the option that is not chosen is an opportunity cost to a business
What is a trade-off ?
Trade-off is deciding how to use resources meaning one thing has to be reduced/ given up to increase/gain another.
What is emotional intelligence?
Emotional intelligence is to be able to use, understand and manage emotions in a positive way to reduce stress and anxiety.
What are the steps to setting up a business?
- Market research, find out gaps in the market
- Start small as a market stall
- Draw up a business plan
- Grow the business
What is Running a business as an entrepreneur
Entrepreneurs need to stay up to date with law, businesses sales and marketing techniques amd will usually continue doing market research and will need to set aims and objectives for the business as it grows
Completing the finances, buying stock, listing stock for sale, contacting customers, chasing payment.
Expanding a business as an entrepreneur
Opening in another location, offer the business as a franchise or business opportunity, license the product, diversify, target other markets, merge or aquire another business
What is Intrapreneurship ?
Intrapreneurship means an employee within a large business who thinks and acts like an entrepreneur
e.g takes risks, creative/innotiative, solves problems
What is risk in a business?
Risk is the possibility that the business have a lower than expected profit or loss.
What are financial risks?
Finacial risks are when an owner puts own assets into a business
An entrepreneur csn consider the probability of what they decide will have a negative effect on the business.
What is uncertantity in a business?
Uncertantity is when a business is unable to predict the external shocks or future shocks
e.g a product is recalled
What is commodity?
Are basic goods like raw material or primary agriculture product that can be bought and sold
What is exchange rate ?
Exchange rate is the value of one currency valued in terms of another
Factors influencing exchange rate:
-Economic value
- political stability
-inflation
-interest rates
What is interest rate?
Interest rate is the cost of borrowing to customers
What is innovation?
product/ways
An innovation taken to market and sold
the process of making something new or improved that better serves a business
Entrepreneurs need to be innovative and bring new products and ways of doing things to the market
What is a franchise?
A franchise is an authorization granted by governmentor or company to an individual or group enabling them to carry out specific commercial activities
A franchise is a business that operates under the brand and method of another busines
What are entrepreneurial characteristics?
Entrepreneurial characteristics:
-Creativity: when developing a business idea an entrepreneur needs to think of creative ways to improve and develop a business
-Hardworking: running a business isnt a job with fixed hours, an entrepreneur may need to tend to a problem at any time of the day and there is no one to delegate a problem to.
-Resilience: An entrepreneur needs to have the ability to keep going and remain optimistic even when things arent going well
-Intiative
-Self confidence: An entrepreneur needs to believe in their abilities, judgemnt and their business ideas.
-Risk taking: An entrepreneur needs to br willing to try new things that dont have a certain outcome and could potentially have a negative outcome.
What are entrepreneurial skills?
Entrepreneurial skills:
Communication skills: Entrepreneurs will have to communicate with lots of people and its important so that they can get the message across in a confident way
Team working skills: being able to share responsibilities and consider others and be reliable
-Problem solving skills: Entrepreneurs are responsible for responding to problems within a business and need to be able to clearly identify an issue
Numeracy skills: There are lots of numbers and figures that are involved in running a business as they need to be able to work out costs
Organisation skills: they need to have reliable systems in place to keep on top of day-to-day running a business
-Finacial skills
What are financial motives?
Financial motives relate to an entrepreneur setting up a business to make money
What is profitmaximisation?
An entrepreneur may aim to make the highest amount of profit possible
What is a limited company?
A limited company is a private company whose owners are legally responsible for its debts only to the extent of the amount of capital invested.
What is profit satisificing ?
An entrepreneur may aim to make just enough profit to keep the business moving plus another aim at the same time
e.g reward employees with higher wages
What are non financial motives?
Independance: not having to commute for someone else
Flexibility: Hard to balance work life and family life
Ethical reasons: Enviromental trading at heart, animal rights, fair wages, Organic crops
What is social entrepreneurship ?
Social entrepreneurship is when social enterprises are businesses trading for social and enviromental purposes.
What is a business objective?corporate objectives
A business objective is a goal set for the business as a whole
corporate objectives- they derive from the mission and aims set by directors
What is smart thinking?
S-specific
M-measurable
A-achieveable
R-realistic
T-time bound
What is a business mission, aim and survival?
mission- The aim set by a board of directors
aim- statement of where is heading.
Survival- Reach a sustainable level of sales to reach its break even point.
What is shrinkflation?
Shrinkflation is where manufacturer keeps the price the same but the product smaller.
What is market share?
The % of a market that a business has, in revenue or in units sold
What is cost effiency ?
Cost effiency is spending as little as possible to achieve same objective
e.g paying minimum wage to unskilled workers
What is employee welfare and customer satisfaction?
Employee welfare- maintaining the welfare e.g clean/safe enviroment means happy motivated workers
Customer satisfaction- Identify what the customers wants and provide it, ensure repeat sales and create brand loyalty.
What are social objectives?
Social objectives of business are goals that businesses can set to benefit society as a whole
What is business form?
The legal structure it takes in the uk
What is limited liability?
A limited company is a private company whose owners are legally responsible for its debts only to the extent of the amount of capital invested.
What is unlimited liability?
If a business goes into debt and there is no money in the business the owner would pay using their own personal assets e.g sole trader.
What is a sole trader?
A sole trader is a self employed person who owns as business as an individual.
They need to register as self employed for tax
What are the pros and cons of a sole trader ?
Pros:
-easy to set up-less form filling
-make decisions quickly
- less capital needed as there arent any legal costs for drawing up an ownership drawing
-all profits kept by owner
-own boss
Cons:
-Unlimited liability-can lose personal assets
-don’t have economies of sales
-no one can take over
- sole traders work long hours
-may have limited skills in areas like finance
- there’s no one to share responsibilities with
What are partnerships?
A business partnership is a legal relationship between two or more individuals or companies
2-20 partners share the risks, costs and responsinbilities of the business
profit and gains of the partnerships are shared among the partners
What are sleeping partners?
Sleeping partners contribute to capital investment to the business but are not involved in running the business.
What are pros and cons of partnerships?
Pros:
-Easier than a sole trader to raise extra capital as partner have their own sources of finance
- Profits go to partners
-Smaller businesses mean better working relationships
-Partners have a range of skills
-Shared problems and decisions
Cons:
-Unlimited liability
-Partners may have disagreements which will lead to stress and conflict
- any costs need to be shared between owners
Private limited company (LTD)
In a privately owned company the shareholders have to agree before anyone buys or sells shares
LTDS can expand and grow by selling more shares giving the business more capital, friends and family can buy shares making them part owners
Pros and cons of LTDS?
Pros:
-Limited liability- more financial protection
-can raise extra capitability by selling more shares
- employ managers in the business
- has its own legal status
- have more credibility as they have their own identity
Cons:
- requires alot of paperwork
- Account of the company cannot be kept private they have to be avalible to public
-expensive and complex to set up
- cannot sell shares on stock market
- harder for them to borrow money as their personal assets aren’t at risk banks are less able to give money back
What is a franchise?
A franchise is an agreement which allows entrepreneurs to use the business idea, name, model and reputation of an established business
In return the entrepreneur usually has to pay an initial fee plus ongoing royalty payments
When someone buys the legal rights to trade under another companies name
Whats a franchisee
The business owner who is buying the rights
What is a franchisor
Is the business that is selling the rights
Pros and cons of franchise
Pros:
-The franchisor choses the franchise carefully, characteristics that have more succesful franchisee
-the franchisor decides hpw muc money the franchise must invest
- the franchsior provides support advice and training
- easier and cheaper than starting from scratch
- franchisor can grow quickly as most of the costs and risks are taken on by the franchisee
Cons:
- Franchisees dont have freedom of running their own business
-Franchise bound by rules
What is social enterprise?
The business that trades for social and eviromental purposes.
How do intrapreneurs bring innovation into a business ?
Intrapreneurship can lead to innovation of technology used by businesses and intrapreneurs can come up with innovative goods and services during their experiments and research.
What are the barriers to entrepreneurship?
Lack of finances- when a business idea has very high start up costs, such as when a business requires initial investment in large machinery or technology-overcome this by raisng extra capital
Lack of confidence- The fear of failure and the risk of losing their investment or the security of a regular wage- overcome by developing a strong belief within their business
Lack of entrepreneurial capacity- This is a businesses ability to identify growth and development opportunities and use its resources creatively to pursue these- overcome this by finding ways to develop their businesses entrepreneurial capacity
What are different external factors that can be an uncertanity to a business?
Health scares- e.g in 2001 a severe outbreak of foot-and-mouth disease affected uk live stock. many animals killed which effected the profit of farmers
Political factors- e.g if a new political party is elected, it may take changes to taxation, funding etc
Commidity price shocks- suuden or drastic changes in the prices of commidites
Changes in exchange rate- e.g if the pounds value falls imported costs will cost UKs firms more
Change in legislation- E.g in 2018 the european general data protection regulation came into force- this legislation sets out how businesses need ti handle peoples personal data.
What is survial business objective?
Survival is the most important short-term objective
in 2014 less than half of entrepreneurs survived more than 5 years in the challenging business environment
Poor cash flow management happens if a business expands too quickly resulting in higher costs before they even increase sales- survival struggle
established businesses can also have a survival objective as they havr more competitive market
What is profit maximisation as a business objective?
Profit maximisation is often a long term business objective
medium term- earn a certain amount of profit by a certain period of time
help businesses to monitor how well its achieving its overall profit aim
What is sales maximisation as a business objective?
Sales maximisation is where a business focuses on increasing sales
This might be measured by the value of total sales and so help increase profits
It might also be measured by the volume of sales so business may try to increase number of items sold with less concern from making a large profit from it
What is increasing market share as an business objective?
Increasing market share may be an important objective for a new business when theyre trying to gain a foothold and become more established in the market
as they gain more market share the business is likely to become more well known
this will help to increase sales further as retailers will be encouraged to stock the firms products and more customers will be tempted to buy
What is improving cost efficiency as a business objective?
Improving cost effciecncy focuses on saving money for the business by reducing unit costs
By reducing unit costs the business will generate more profit on each unit sold and lower unit costs they may be able to reduce prices which will generate more sales and therefore increased profit.
Cost efficiency can be increased by scailing up and taking advantaged of economies of sale
What is improving employee welfare as a business objective
Improving employee welfare relates to anything that will improve the happiness and wellbeing of a staff member
Improving employee welfare will lead to more motivated staff and more motivated staff will lead to a highly productive firm.
What is increasing customer satisfaction as a business objective?
A satisfied customer will become a loyal customer and a loyal customer is more likely to make repeated purchases and recommended the business to others.
This leads to an increased revenue.
What is a social business objective?
A firm may focus on social objectives as a way of maximising profits as customers will be more likely to buy from a firm that they know is socially responsible
Some firms may set up their overall aim to improve a social problem
What is a social enterprise?
A social enterprise is a business that sets up with its core aim to use its profits to benefit society as a whole
They can often get government grants and their social benefits can encourage loyal customers
What is an online business?
An online business is a business that trades through the internet. They are relativley cheap and easy to set up because other fixed costs are low
Can be attrative way to start a business for an entrepreneur looking for a work to life balance
What is a lifestyle business?
A lifestyle business focuses on profit satisficing to obtain and maintain a work-life balance and a desired life style.
these businesses have low start up costs and usually limited growth.
What is an PLC?
An LTD may have potential for growth and decide to opt for the stock market flotation and transition into an PLC.
-Business can raise lots of capital by selling shares
-Shared finacial risks with much larger group of people
-Extends decision making because share holders can vote on decisions
- Higher prestige as they have PLC after their name
- Business has to share the profit with more people and generate a huge profit to share decent dividends
- Share prices on SM are influenced by national and global economy so owners have less control over share price and can make them vulnerable
-Supply and demand affect share value
If a person or business buys more than 50% of shares they become very powerful have control over any outcome of any shareholder and can even take over the whole firm
What is stock market flotation?
Stock market flotation is when a business publically sells shares on the stock market for the first time.
What are reasons that lead to a business having to make trade-offs?
-Design mix: If a decision was made to try and minimise the cost of making a product the trade-off might be that it doesnt look as good as competitors products
-Market research: A business might decide that thorough market research is too costly, and they may be confident that their product as a strong USP and instead chose to developing the product. So the trade off is that they will get less research and information they could of done from market research.
-Business ownership: A sole trader may choose to change to a partnership to help spread the risk the the trade off would be that the business now has to share their profits with all the partners.
-Promotion: A firm may try to promote its brand so it appeals more to buyers from a younger generation. The trade off is that it may lose some of its customers from its older generation.
-Pricing strategy: Launching a product with penetration pricing strategy may help to boost sales intiatily but the trade off is that it reduces the profit per sale.
What is a USP?
A USP is a unique selling point.
