---

Enterprise, Business Growth, and Size

Understand and explain the concepts of enterprise and entrepreneurship

• Enterprise; Business skills, qualities and willingness to take financial and other business risks
• Entrepreneurship; The process of identifying a business opportunity, organizing the resources needed to start and run a business and taking the risks and rewards it involves

Understand and explain the characteristics of a successful entrepreneur

• Risk Taker; Entrepreneurs’s willingness to take considered risks is vital in business. An entrepreneur is not afraid of failure
• Confident; A successful entrepreneur will have a clear belief in their own abilities and ideas. Someone who lacks confidence will be unable to convince investors, banks, suppliers and customers.
• Hard-working; Many entrepreneurs have to work long hours,a t weekend and during holidays
• A good communicator; An entrepreneur must be a clear and confident communicator when sharing ideas with investors and when promoting their business

Understand and explain the contents of a business plan and how they assist entrepreneurs

• The contents of a business plan;
  • Aims and objectives of the business
  • Description of the goods and services it will offer
  • A plan for how and where production will be organised
  • The resources the business will require
• How do they assist entrepreneurs
  • It evaluates weather it is possible to turn the idea into a business
  • It sets out what and how things needs to be done and when to achieve objectives
  • It monitors how well the business is performing against the plan

Understand and explain why and how governments support start-ups, including through grants and training schemes

• Why do government support starts-ups
  • They reduce unemployment
  • It can boost economic growth
  • It can encourage social enterprise (enterprises that help the environment)
• How do governments support starts-ups
  • Grants; Non-repayable sums of money to help fund the business. Can be used for equipment, training and employing workers
  • Low-cost loans; Loans of money repayable at a low rate of interest. Can be used for equipment, training and employing workers
  • Training schemes; The government pays the cost of training a new employee. It can help increase the skills and knowledge of the employees

Identify different methods of measuring business size and their limitations

• Number of Employees
  • Firms with less than 50 employees are considered small. However not all large firms employ lots of workers
  • LIMITATIONS; Some large firms are capital-intensive and employ few workers using more machinery
• Capital Employed
  • The money invested in the productive aspects of the business by its owners.
  • LIMITATIONS; Some large firms may be labour-intensive and therefore their production requires a large employment and little capital
• Output or Sales
  • How much output firms produce (Number of products or revenue)
  • LIMITATIONS; A major shipbuilding company may produce one large product per year while a bakery will produce thousands of cakes
• Market Share
  • The proportion of total sales of a product achieves by one firm
  • LIMITATIONS; Not all markets are big. A local business may be very small in terms of market share, but very big in the local city.

Give reasons why some business owners may want to expand their business

• Banks may be willing to lend more money
• Suppliers of material may give discounts to large businesses buying these items in bulk
• A large firm may have more financial resources to invest more in machinery
• Business managers can increase their salaries

Give different ways in which business can grow

• Internal Growth; A business expands its existing operations. Equipment, employees, location. Slow but easy to manage
• External Growth; When a business merges or takes over another business. Also known as integration. It can happen in many different ways
  • Merger; Two or more businesses joining together
  • Takeover; When a company buys enough shares to take ownership of another business. May happen without the agreement of all owners
    • Horizontal Integration; Involves businesses engaged in the production of the same types of goods or service. This is the most common
    • Vertical Integration; Involves businesses at different stages of production. Car manufacturers + Car retailer
    • Lateral Integration; Involves businesses in different industries in the same or different stage of production. Also called conglomerate merger

Give problems linked to business growth and how they might be overcome

• Managing a large firm can be difficult especially if the firms is spread in different locations
  • Have local managers at each business and communicate with meetings
• Large firms may need a large quantity of materials and components
  • Expand more slowly and buy in bulk
• Large firms may be unable to attach workers with the right skills therefore a lot of money must be spent on training
  • Expand more slowly and adopt capital-intensive production methods

Give reasons why some businesses remain small

• The size of the market is small (local population is low therefore customer numbers don’t increase)
• Access to capital is limited (personal problem and credibility in banks is low)
• Some business may decide to remain small (Profit is good and running a large business is hard)

Identify and explain the causes of business failure

• Lack of management skills
  • Not everyone has the skills required or the money for courses to be a good manager
• Changes in the business environment
  • Business unable to adapt to changes may be affected by this
    • Changed in customer preferences
    • Increasing competition
    • Failure of major customers
• Liquidity problems
  • Happens when a business is unable to pay its employees, suppliers and other running costs

Identify and explain why new businesses are at a greater risk of failing

• Lack of skills and experience
• Lack of finance
• Failure to research and plan