Unit 01 Enterprise Flashcards
What is the purpose of business activity?
Business activity uses scarce resources ; raw materials in order to produce goods and services, it involves creating and adding value to resources and making them more desirable to the final purchaser.
Describe the concept of creating value?
All businesses aim to create value by increasing the difference between the cost of bought in materials and the price the finished goods are sold for.
Explain how a business can create value.
Advertising Branding Creating an attractive atmosphere Good Packaging Selling through established channels Well dressed and knowledgeable employees Offering convenience Having More product benefits
What is opportunity cost ?
The benefit of the next most desired option which is given up.
What are the characteristics of a SUCCESSFUL ENTREPRENEUR ?
Innovativeness- They must be able to challenge the existing way of doing things and come up with new ideas and solutions in order to attract customers and present their business as being different from others in the same market.
Self motivation and commitment - A willingness to work hard, a keen ambition to succeed, energy and consistency are all essential qualities of a successful entrepreneur.
Multi-skilled - An entrepreneur will have to make the product, promote it, sell it and keep accounts. These different business tasks require a person who has many different qualities, such as being keen to learn technical skills, being able to get on with people ; communicate and being good at handling money and keeping accounting records.
Leadership skills - The entrepreneur will have to lead and guide by example and must have a personality that encourages people in the business to follow them and be motivated by them.
Self confidence and an ability to bounce back - Many business start ups fail, yet this would not discourage a true entrepreneur who would have such belief in themselves and their business idea.
Risk taking - Entrepreneurs must be willing to take risks in order to see results. Often the risk they take is by investing their own savings in the new business.
What are the challenges faced by entrepreneurs ?
Identifying important business opportunities 🦾-
- Like their own skills or hobbies
- Previous employment experience
- Franchising conferences and exhibitions
- Small budget market research - the internet
Sourcing capital 💰
- lack of own finance
- lack of awareness
- lack of any trading records to present to banks as evidence in order to obtain finance
- a poorly produced business plan
Determining a location 📍
- It is very important to keep fixed costs low, therefore entrepreneurs may decide to operate from home. However there are drawbacks
- It may not be close to the area with the biggest market potential.
- It lacks status- a business with its own prestigious premises tends to generate confidence
- It may cause family tensions
- It may be difficult to separate private life from working life.
Competition 🙅🏽♂️
- a newly created business will experience competition from older, established businesses with more resources and more market knowledge.
Building a customer base
- The long term strength of the business will depend on encouraging customers to return to purchase products again and again.
They could do this by
- offering personal customer service
- knowledgeable pre and after sales service
- providing for one off customer requests that larger firms may be reluctant to provide for.
Why do new businesses often fail?
Lack of record keeping
- It is important to note that it is crucial to keep track of details regarding purchases, sales, delivery times, finance, labour hours etc..
Lack of cash and working capital
- Capital is needed for day to day cash, for the holding of inventories and to allow trade credit to customers, who then become trade receivables. Without working capital, the business may be unable to buy more supplies. All these factors may lead to the business shutting down.
Poor management skills - Entrepreneurs may have had work experience, but not skills at a management level. They may not have developed; Leadership skills Cash handling and cash management skills Planning and coordinating skills decision making skills communication skills marketing, promotion and selling skills
What are the potential risks in the changes of business environment?
Business environment is dynamic or constantly changing, this factor itself is a risk.
Businesses may also fail if any of the following changes occur,
new competitors
legal changes - outlawing the product
economic changes that leave customers with less disposable income
technological changes
What is the impact of enterprise on a country’s economy?
Employment creation Innovation and technological change Increased exports Economic growth Personal development
What is a social enterprise ?
A social enterprise is defined as a business with specific social objectives that serve its primary purpose. Social enterprises seek to maximize profits while maximizing benefits to society and the environment, and the profits are mostly reinvested back to the business.
What are the objectives of a social enterprise?
Social enterprises often have 03 main aims referred to as " triple bottom line " These are; Economic Social Environmental
What are the features of a social enterprise?
- Have a clear community mission (social, environmental, cultural or economic)
- Generate the majority of its income through business activities
- Reinvest the majority of its profits into achieving the community mission
Why does an economy need entrepreneurs?
Employment - Entrepreneurs need help help providing goods and services, this creates job opportunities.
Creating large businesses -
Most large businesses started with one person and one idea.
The new businesses that are created replace the ones in decline.
Economic growth - Quick responses to improved economic conditions can drive growth.
