Business Activity and Entrepreneurship

Flashcards covering the nature of business activity, factors of production, adding value, the role of entrepreneurs and intrapreneurs, economic benefits of enterprise, barriers to entrepreneurship, and the purpose and elements of business plans.

What is the primary aim of business activity?

To satisfy people’s needs.

Define 'business' according to the notes.

A business is an organisation that uses resources to meet the needs of customers by providing a product or service that they demand.

List the three main actions businesses typically undertake.

Businesses identify the needs of customers, purchase necessary resources, and produce goods and services to satisfy those needs, usually with the aim of making a profit.

What are the four factors of production needed by businesses?

Land, Labour, Capital, and Enterprise.

What does 'Capital' encompass as a factor of production?

It includes the finance needed to set up and operate a business, as well as all manufactured resources used in production such as computers, machines, and factories (capital goods).

Who provides the 'Enterprise' factor of production?

Risk-taking individuals called entrepreneurs, who combine the other factors of production and provide managing, decision-making, and coordinating roles.

How is 'added value' defined in business?

The difference between the selling price of the products sold by a business and the cost of the materials it bought in.

Why is it crucial for a business to add value?

Without adding value, a business will not be able to survive as other costs have to be paid and investors expect a financial return.

What is a key role of an entrepreneur when creating and starting up a new business?

To have an idea, create a business plan, invest their own savings and capital, accept management responsibility, and accept the possible risks of failure.

Name three personal qualities of successful entrepreneurs.

Innovation, commitment and self-motivation, multi-skilled, leadership skills, self-confidence and an ability to bounce back, and risk-taking.

What is the distinction between business risk and business uncertainty?

Business risk can be foreseen, measured, or calculated (like the chance of a business failing), while business uncertainty cannot be foreseen, measured, or calculated and is impossible to predict (like the COVID-19 epidemic).

Name two benefits of successful business enterprise to a country's economic development.

Employment creation, economic growth, business survival and growth, innovation and technological change, exports, personal development, and increased social cohesion.

What is intrapreneurship?

The process of encouraging risk-taking and enterprise by employees within an existing business to help create and develop new opportunities.

How does an intrapreneur differ from an entrepreneur in terms of who takes the risk?

For an intrapreneur, the risk is taken by the existing business, whereas for an entrepreneur, the risk is taken by the entrepreneur themselves.

List three common barriers that entrepreneurs must overcome.

Lack of a business opportunity, obtaining sufficient capital (finance), cost of good locations, competition, and lack of a customer base.

What is the main purpose of a business plan for a new business?

To obtain finance for the start-up, as potential investors or creditors require detailed information about the business proposal.

Name three key elements that should be included in a typical business plan.

An executive summary, a description of the business opportunity, marketing and sales strategy, details of the management team and personnel, operations, and financial forecasts.

What is a limitation of a business plan?

It can create a false sense of certainty, leading business owners to rely too much on forecasts, or make entrepreneurs inflexible to new opportunities in a dynamic business environment.