THEME 1: SECTION 5 (entrepreneurs and leaders) Flashcards
3 reasons why entrepreneurs set up a business
- Independence
- It’s rewarding
- Flexibility
3 characteristics of an entrepreneur
- Creative
- Organised
- Good communication
2 Barriers to entrepreneurship
- Lack of money
- Lack of confidence/fear of failure
What are the first steps in setting up a business
- Spot a gap in the market
- Conduct market research
- Develop ideas
- Create business plans
- Find a way to finance the business
- Decide on the legal form of business
What is the difference between Profit maximisation and Profit satisficing?
- Profit maximisation = make as much profit as possible by reducing costs and increasing sales
- Profit satisficing = making enough profit, not pushing to maximise it
What are the main business objectives?
- Survival
- Sales maximisation
- Market share
- Cost efficiency
- Employee welfare
- Customer satisfaction
- Social objectives
What factors will determine business aims and objectives?
- size of business
- type of business
- level of competition
- mission statements
Advantages and Disadvantages of being a sole trader
Advantages:
-Don’t have to share profits with another owner
-Freedom
Disadvantages:
-Unlimited liability (responsible for businesses debts)
-Harder to retain staff
Advantages and Disadvantages of being a partnership
Advantages:
-More experience to include in the business
-Easier to retain staff
Disadvantages:
-Can lead to disputes which can create tensions
-Sharing profits
Advantages and Disadvantages of being an LTD
Advanatges: -Shareholders have limited liability, not responsible for any business debts -Easier to get a loan Disadvantages: -There are higher costs -Legally obliged to publish accounts
Advantages and Disadvantages of being a PLC
Advantages:
-Viewed as more prestige
-Shareholders have limited liability
Disadvantages:
Accounts are public and competitors can see
Buying more than half the shares = control over the business
What is a franchise?
An agreement (contract) which allows an entrepreneur to use another businesses idea, name, model etc. In return they pay a fee and usually a percentage of revenue
Define Opportunity costs
what a business owner misses out on when selecting one option over another.
Define the term Trade-off
Where having more of one thing potentially results in having less of another. ( ie minimising the cost of production causing a trade-off that the product doesn’t look as good anymore)
Why are entrepreneurs important?
- They create and set up businesses
- bring innovation to the business world
- enable new markets to be developed
What are some difficulties in developing from an entrepreneur to a leader?
- Adapting the mindset; being able to let go of controlling everything.
- Sharing ownership and control.
- Trust.
Define the term business objective
Business objectives are the specific, measurable results that companies hope to maintain as their organisation grows.
cons of each main business objective
- Survival = can lead to changes to profits or goods to survive in the short term
- Sales maximisation = no guarantee that higher sales equate to higher profits
- Market share = can be deceptive on actual growth
- Cost efficiency = can lead to poor image or quality
- Employee welfare = overall costs can be high
- Customer satisfaction = external uncertainties may lead to issues
- Social objectives= added costs that consumers may not even want
Drawback of being a franchisee
- limited creativity and independance
- limited privacy
- sharing profit
what is stock market flotation?
- stock market flotation = converting a private company into a public company by issuing shares available for the public to purchase.
