Business theme 1.5

What is an entrepreneur?

A person who spots an opportunity and takes risks to set up a new business

What are entrepreneurial motives?

The reasons why an entrepreneur sets up their business

What are the characteristics of an entrepreneur?

• Opportunity spotter

• Creative

• Risk taker

• Resilient

What are the skills of an entrepreneur?

• Communication

• Problem solving

• Technological

What are barriers to entrepreneurship?

• Access to finance

• Lack of entrepreneurial skill

• Aversion to risk

What is intrapreneurship?

When employees within an organisation act in the same ways as entrepreneurs

What is risk?

A measurable unknown associated with a decision

What is uncertainty?

A non-measurable unknown associated with a decision

What are financial motives for entrepreneurs?

• Financially independent

• Financial security

• Profit maximising/ Profit satisficing

What are non-financial motives for entrepreneurs?

• Ethical stance

• Social entrepreneurship

• Independence

• Homeworking

What is a business objective?

Quantifiable targets or goals to be achieved by a business with a given time frame

What are some business objectives?

• Survival

• Profit maximising

• Sales maximising

• Market share

• Cost efficiency

• Employee welfare

• Customer satisfaction

• Social objectives

What is a sole trader?

An individual who owns and runs their own business

What are the dis/advantages of being a sole trader?

+ Cheap and easy to set up

+ Motivation is high as all profits go to sole trader

- Unlimited liability

- Limited capital for investment

- Difficult to find cover when sick

What is a partnership?

A structure when two or more people join up together to set up a business

What are the dis/advantages of being a partnership?

+ Risks, costs and responsibility is shared

+ More scope for specialist skills

+ Financial records remain private

- Arguments with decisions

- Partnership deed needs to be made

What is a private limited company (Ltd)?

An incorporated business that is owned by shareholders who tend to be family or friends of the entrepreneur

What are the dis/advantages of being a private limited company (Ltd)?

+ Limited liability

+ Raise money through sales of shares

+ Continuity of business existence even if shareholders change

- Financial records are public

- Greater regulatory requirements

What is a public limited company (plc)?

An incorporated business that is able to sell shares on a stock exchange

What are the dis/advantages of being a public limited company (plc)?

+ Greater access to cash for rapid expansion

+ Limited liability

- Public scrutiny

- Risk of hostile takeover

What is stock market flotation?

Making a company's shares available for public trading

What is and initial public offering (IPO)?

The process a business goes through when it first makes shares available to the public on a stock exchange to become a public limited company

What is a franchise?

The process where a business gives the franchisor the permission to trade using their name and goods/services.

What is a franchisee?

A business that is given permission from another business to trade using its name or goods/services in return for a fee and share of the profits

What are the dis/advantages of being a franchisee?

+ Lower risk

+ More resources

+ Established name

- High initial cost

- Loss of independence

What is a franchisor?

A business that sells a license giving permission to another business to trade using its name or goods/services

What are the dis/advantages of being a franchisor?

+ Growth

+ Displaced risk

- Shared profit

- Maintaining quality

- Risk to reputation

What is a lifestyle business?

A business set up by an entrepreneur to work on what they want/the way they want

What is an online business?

A business that only operates via the internet

What is an opportunity cost?

The cost of one course of action in terms of the next best alternative foregone

What is a trade-off?

All of the alternatives foregone when a decision is made by a business

What is a leader?

A person with the ability to influence and direct people in order to meet the goals of a group

Why is it difficult to become a leader?

• Reluctance to hand over control

• Loss of autonomy in decision

• Learning to trust others and not need to oversee everything

• Lack of experience