Chapter 3 - Enterprise, business growth & size

Independence

________- able to choose how to use time and money.

Opportunity cost

________- lost income from not being an employee of another business.

Profit

________ depends on efficiency & skills of managers as well.

Failure

________ to plan for change: Changes in the business environment- technology, competition, economy- risk /uncertainty.

entrepreneur

A(n) ________ is a person who organizes, operates & takes the risk for a new business venture.

Backward Vertical Integration

________: One business takes over another business that comes after it in the chain of production.

Investors

________- where to put savings for a good return.

Reduce unemployment

________- creates new jobs.

Competitors

________- comparing other firms, usually in the same industry.

Horizontal integration

________ is when one business merges with or takes over another one in the same industry at the same stage of production.

Benefits society

________- supports disadvantaged groups.

Increase output

________- contributes to countrys economy.

Poor management

________: Lack of management skills and experience- Bad decisions (location, managers, promotion & products)

Poor financial management

________: shortage of cash (liquidity problems)- can not meet obligations (suppliers /government /landlords /bankers)

Risks of new business startups

________: More difficult to survive if new- need adequate financial resources, planning research, experience, decision- making skills.

Vertical integration

Forward ________: One business takes over another business that comes after it in the chain of production.

Conglomerate Integration

________: One big business integrates with another, smaller business, in a completely different market.

Labour intensive firms

________- lots of manual labor requiring many employees.

Increase competition

________- consumers have more choices.

Capital

________- entrepreneurs will have to put their own money into the business & find other sources of capital.

Independence

able to choose how to use time and money

Risk

many new entrepreneurs businesses fail

Capital

entrepreneurs will have to put their own money into the business & find other sources of capital

Opportunity cost

lost income from not being an employee of another business

Also used to help gain finance

careful planning reduces risks of failure

Reduce unemployment

creates new jobs

Increase competition

consumers have more choices

Increase output

contributes to countrys economy

Benefits society

supports disadvantaged groups

Can grow further

become important in the future

Investors

where to put savings for a good return

Government

different tax rates for small/large businesses

Competitors

comparing other firms, usually in the same industry

Workers

To have some idea of how many people are working with them

Banks

How important a loan might be compared to its overall size

Labour intensive firms

lots of manual labor requiring many employees

Profit = revenue

total costs

Forward Vertical integration

One business takes over another business that comes after it in the chain of production

Backward Vertical Integration

One business takes over another business that comes after it in the chain of production

Conglomerate Integration

One big business integrates with another, smaller business, in a completely different market

Expand slowly

ensure sufficient long-term finance

The total number of consumers is small

businesses are likely to stay small

Entrepreneur

An entrepreneur is a person who organizes, operates & takes the risk for a new business venture

5 benefits of being an entrepreneur

1) Freedom to choose how to invest time and money. 2) The ability to put down own ideas into practice. 3) Fame and success if business grows. 4) May become profitable & income might be higher than being an employee. 5) Ability to make use of personal income & skills

4 disadvantages of being an entrepreneur

1) The risk, as many new businesses fail. 2) Entrepreneurs must put their own money into the business. 3) Lack of knowledge & experience in starting & operating a business. 4) Lost income from not being a employee of another business

What are the seven details that make up a business plan?

1) What products/ services to provide. 2) Which market share I aim. 3) Future Business Plan. 4) Cash flow. 5) Business' main costs. 6) Location. 7) Resources required (machinery, finance, people)

Why does the government support start-ups?

1) Reduces unemployment. 2) Increases competition. 3) Increases the country's output. 4) Benefits society. 5) Can grow further & become important in future

Who would be interested in comparing businesses size ?

Investors, Government, Competitors, Workers, Banks

Profit =

revenue minus total cost

all ways of growth

Internal growth. Mergers, takeovers, buyouts. Horizontal integration, vertical forward/backward integration & conglomerate integration

Merger

When two or more companies agree to become one united company

Takeovers

Purchase of the controlling share (>50%) in another business

Buyout

The purchase of one firm by another

Horizontal integration

Horizontal integration is when one business merges with or takes over another one in the same industry at the same stage of production

Vertical integration

Businesses at different stages of production integrate.

Forward vertical integration

One business takes over another business that comes after it in the chain of production. This moves closer to the consumers

Backward vertical integration

One business takes over another business that comes after it in the chain of production. This moves further away from the consumers

Conglomerate integration

One big business integrates with another, smaller business, in a completely different market.