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


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