UNIT 1 - Chap 3: Enterprise, business growth and size

Question 1

Entrepreneur?

Answer 1

Entrepreneur is a person who organises, operates and takes the risk for a new business venture.

Question 2

A business plan?

Answer 2

A business plan is a document containing the business objectives and important details about the operations, finance and owners of the new business.

Question 3

Capital employed?

Answer 3

Capital employed is the total value of capital used in the business. Internal growth occurs when a business expands its existing operations.

Question 4

External growth?

Answer 4

External growth is when a business takes over or merges with another business. It is often called integration as one business is integrated into another one.

Question 5

A merger? *

Answer 5

A merger is when the owners of two businesses agree to join their businesses together to make one business.

Question 6

What are the 2 adv of being an entrepreneur?

Answer 6

Adv
* independence – able to choose how to use time and money
* able to put own ideas into practice

Question 7

What are the 4 characteristics of successful entrepreneurs? (4)

Answer 7

1. Hard working - Long hours and short holidays are typical for many entrepreneurs to make their business successful
2. Risk taker - Making decisions to produce goods or services that people might buy is potentially risky
3. Creative - A new business needs new ideas – about products, services, ways of attracting customers – to make it different from existing firms
4. Optimistic - Looking forward to a better future is essential – if you think only of failure, you will fail!

Question 8

The 5 steps to a business plan

Answer 8

1. Description of the Business
2. Products and services they provide
3. Their target market
4. The location of the business
5. Financial Information- CFF, Income statement, SOFP

Question 9

Why governments support business start-ups?

Answer 9

• To reduce unemployment
• To increase competition

Question 10

Why the owners of a business may want to expand the business?

Answer 10

• The possibility of higher profits for the owners.
• Larger share of its market

Question 11

Why some businesses remain small?

Answer 11

• the market size
• the owners’ objectives.

Question 12

Causes of business failure?

Answer 12

• Lack of management skills
• Changes in the business environment

Question 13

Why new businesses are at greater risk of failing?

Answer 13

Many new businesses fail due to lack of finance and other resources, poor planning and inadequate research.

Question 14

What are the 2 disadv of being an entrepreneur?

Answer 14

Dis
* risk – many new entrepreneurs’ businesses fail, especially if there is poor planning
* capital – entrepreneurs have to put their own money into the business and, possibly, find other sources of capital

Question 15

What is Internal Growth?

Answer 15

When a business expands its EXISTING Operations e.g opening new branches

Question 16

What is the definition of Horizontal Integration?

Answer 16

When a business merges/takes over another business in the same stage of production. E.g. a chocolate producer taking over another chocolate producer

Question 17

What are the 2 adv of Horizontal Integration? (2)

Answer 17

1. Less competitors now in the industry
2. The business can now benefit from economies of scale e.g. purchasing EOS

Question 18

What are the 2 dis Horizontal Integration? (2)

Answer 18

1. Diseconomies of scale e.g. lack of co-ordination
2. Communication in the business is now more challenging as the business is larger