THEME 1: SECTION 5 (entrepreneurs and leaders)

Question 1

3 reasons why entrepreneurs set up a business

Answer 1

• Independence
• It’s rewarding
• Flexibility

Question 2

3 characteristics of an entrepreneur

Answer 2

• Creative
• Organised
• Good communication

Question 3

2 Barriers to entrepreneurship

Answer 3

• Lack of money

- Lack of confidence/fear of failure

Question 4

What are the first steps in setting up a business

Answer 4

• 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

Question 5

What is the difference between Profit maximisation and Profit satisficing?

Answer 5

• Profit maximisation = make as much profit as possible by reducing costs and increasing sales
• Profit satisficing = making enough profit, not pushing to maximise it

Question 6

What are the main business objectives?

Answer 6

• Survival
• Sales maximisation
• Market share
• Cost efficiency
• Employee welfare
• Customer satisfaction
• Social objectives

Question 7

What factors will determine business aims and objectives?

Answer 7

• size of business
• type of business
• level of competition
• mission statements

Question 8

Advantages and Disadvantages of being a sole trader

Answer 8

Advantages:
-Don’t have to share profits with another owner
-Freedom
Disadvantages:
-Unlimited liability (responsible for businesses debts)
-Harder to retain staff

Question 9

Advantages and Disadvantages of being a partnership

Answer 9

Advantages:
-More experience to include in the business
-Easier to retain staff
Disadvantages:
-Can lead to disputes which can create tensions
-Sharing profits

Question 10

Advantages and Disadvantages of being an LTD

Answer 10

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

Question 11

Advantages and Disadvantages of being a PLC

Answer 11

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

Question 12

What is a franchise?

Answer 12

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

Question 13

Define Opportunity costs

Answer 13

what a business owner misses out on when selecting one option over another.

Question 14

Define the term Trade-off

Answer 14

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)

Question 15

Why are entrepreneurs important?

Answer 15

• They create and set up businesses
• bring innovation to the business world
• enable new markets to be developed

Question 16

What are some difficulties in developing from an entrepreneur to a leader?

Answer 16

• Adapting the mindset; being able to let go of controlling everything.
• Sharing ownership and control.
• Trust.

Question 17

Define the term business objective

Answer 17

Business objectives are the specific, measurable results that companies hope to maintain as their organisation grows.

Question 18

cons of each main business objective

Answer 18

• 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

Question 19

Drawback of being a franchisee

Answer 19

• limited creativity and independance
• limited privacy
• sharing profit

Question 20

what is stock market flotation?

Answer 20

• stock market flotation = converting a private company into a public company by issuing shares available for the public to purchase.