Topic 1 - Business Activity

Question 1

Explain the three purposes of business enterprise and entrepreneurship

Answer 1

SPOTTING AN OPPORTUNITY - a gap in the market, improving a product or service already provided, producing a product or service cheaper

DEVELOPING AN IDEA - designing the product or service, planning production

SATISFYING CUSTOMER NEEDS - producing the product or providing the service, marketing the product or service

Question 2

Explain the characteristics of an entrepreneur

Answer 2

DETERMINATION - solving and working out problems, not giving up

RISK-TAKING - prepared for a loss or risk of money

CREATIVITY - thinking of ideas and solving problems

CONFIDENCE - belief in themselves and their business

Question 3

Explain the FINANCIAL risks and rewards of entrepreneurship

Answer 3

R I S K S :
- if the business doesn’t succeed the risk of losing savings and other assets to pay off debts (limited liability)

R E W A R D S :
- could make a lot of money

Question 4

Explain the NON FINANCIAL risks and rewards of entrepreneurship

Answer 4

R I S K S :
- health, strain can cause mental/physical illness

R E W A R D S :

• independence, get to be your own boss, all decision making
• self-satisfaction, making their idea a success
• changing customer habits, improving lives of customers

Question 5

Explain the purpose of business planning

Answer 5

—> REDUCE RISK of failure

—> helps a business to SUCCEED

Question 6

Explain the steps of developing a business idea

Answer 6

1. THE IDEA - aims and objectives, the resources needed
2. THE PEOPLE - human resource requirements, employees, who’s involved
3. MARKET RESEARCH - target market, 4. P’s, marketing resources needed
4. FINANCE - finance needed and how, good business plan
5. COMPETITORS - how is your product different

Question 7

Explain the role of the business plan

Answer 7

IDENTIFYING THE MARKET - age, gender, age etc
IDENTIFYING THE RESOURCES - resources needed to operate eg workers, equipment
ACHIEVE THE BUSINESS’ AIMS AND OBJECTIVES - eg make a profit, expected sales, social objectives
RAISE FINANCE - identify how eg loan, selling shares or overdraft

Question 8

How can a business make and plan sensible objectives in a business plan

Answer 8

S pecific - clearly stating
M easureable - how to measure success (eg sales or profits)
A chievable - possible targets
R ealistic - appropriate for business
T imely - includes a deadline

Question 9

Explain the role of a business plan in a business

Answer 9

IDENTIFYING THE RESOURCES - needed for operating the business eg workers, machinery, equipment

IDENTIFYING THE MARKET - eg age, gender, income

ACHIEVING AIMS AND OBJECTIVES - eg making profits, expected sales, achieving social objectives

RAISING FINANCE - how, eg selling shares, loan, overdraft