Theme 1: Section 5 Entrepreneurs and Leaders Flashcards
Entrepreneur
Take risks to gain a reward (profit).
Creating a Business
Identify a gap In the market, market research
Innovative
Think of new products or take risks of making new products reality.
Barriers in Entrepreneurship
Lack of money or expensive technology, overcome this by raising capital (loan).
Risk
Probability on what they’ll decide will have a negative effect.
Uncertainty
Unpredictable and beyond control, exchange rates and political factors.
Commodities
Basic goods, agriculture or mining, raw materials.
Entrepreneur characteristics
Risk taker, hard-working and innovative.
Entrepreneur skills
Communicate with everyone, problem skills, reliable.
Profit Maximisation
Making as much profit as possible , reduce costs and increasing sales revenue.
Profit Satisficing
Making enough profit, not maximising it to suit their lifestyle.
Non-Financial motives
Not reporting to a boss , own ideas and work-life balance/flexibility.
Delegate Responsibility
Build trust, consult employees and verify decisions made to give responsibility.
Develop emotional Intelligence
Identifying/managing emotions, responding appropriately.
Become less reactive
Make decisions quickly, responsible for more people, consult staff.
Aim
Long-term target set by business.
Objective
Short-to medium-term target set by business.
Survivals the most important short-term objective
Poor cash flow management, expands too quickly results in higher costs before sales.
Profit objectives
Achieve a certain amount or profit each month or increase profit percentage over a year.
Monitors achievements.
Increasing market share increases revenue
Gain more market share, increase sales ,as retailers encouraged to stock the products, more customers tempted to buy.
Improving Cost efficiency
Saving money by reducing unit costs, generate more profit.
Improving employee welfare leads to lower cost and more sales
Improving well-being of staff, help stay motivated, more productive.
Social objectives
Maximising profits, customers more likely to buy from a firm that’s socially responsible. Ben and Jerry’s ‘cone together’ support refugees.
Sole Trader
Individual trading in their own name, self employed, electricians. Full financial control responsibility.
Sole Trader Advantages
Freedom, profit, simplicity= less form filling, saving on fees= no legal costs for ownership.
Sole Trader Disadvantages
Risk, time, Expertise, vulnerability no one to cover, unlimited liability responsible for debts.
Business Partnership
2-20 people, unlimited liability= owners shared responsibility.
Private limited company
Owners have to agree before anyone buy/sells shares.
Paid Dividends in return of investment.
Limited liability.
Public limited company
Anyone can buy shares.
Paid Dividends in return of investment.
Limited liability.
Dividends
Proportion of profits earned by the company, split between shareholders.
Sole Traders and Partnerships become Private Limited Companies
Allows the business to sell shares, more money for growth.
Limited liability, financial protection, take more risks than Sole Trader and Partnership.
Time consuming, paperwork.
Private Limited grow Into Public Limited Company.
Potential growth for stock market flotation(publicly sell shares first time) and transition.
Raises capital
Franchising
Agreement (contract) allowing to use business ideas, name model, in return fee, royal payments.
Grow quickly, cheaper.
Royal Payments
Percentage of Revenue or profit.
Online businesses more popular
Cheap and easy to set up, overheads, fixed costs low.
Work-life balance, technical issues.
Lifestyle Business
Motivated by flexibility, low start-up costs more limited growth.
Social Enterprise
Set up with core aim to use profits to benefit society, charity.
Trade-off
One thing has to be reduced or given up to increase or gain another, Apple creating fewer products, high quality.
Opportunity cost
Benefit that’s given up to do something else.
Design Mix
Minimise cost of product, low quality cheap product more sales
Market Research
Too costly
Business Ownership
Sole Trader changing to partnership spread risk
Promotion
Appeals to more potential customers.
Pricing Strategy
Boosts sales
