1.5 | entrepreneurs | Business | A-level | edexcel

• Entrepreneur


  A person who is willing to take a risk in setting up and growing their own business or sees an opportunity to make money whilst meeting the wants and needs of a customer
• Skills of an entrepreneur


  innovate and invent, take risks, organise, confident, decision maker, communication, negotiating financial management
• where can business ideas come from?

  business experience, personal experience, lifestyle choice, spotting a gap, skills
• what are the functions of an entrepreneur


  administration

  financial management

  marketing

  production

  managing people

  purchasing
• Intrapreneurship


  process of promoting innovation within the structure of an existing organization allowing individuals to come up with their own business ideas. these employees add huge amounts of value to a business
• barriers to the success of an entrepreneur

  lack of finance

  competition from large established businesses

  aversion to risk

  lack of ideas

  lack of entrepreneurial skills

  responsibility of becoming an employer

  legal barriers
• characteristic of an entrepreneur

  self confidence

  self determination

  self starter (work independently)

  initiative proactive and adapt to change

  commitment
• objectives


  specific, measurable, agreed, realistic, Time related short-term expectations
• why set objectives?


  - provide quantifiable steps to achieve aims

  - clarify direction of the business

  -measure success against targets

  -motivate employees to achieve

  -reward employees
• common objectives


  financial

  -survival

  -growth

  -marketshare

  -shareholder value

  - sales maximisation

  -cost efficiency

  
  

  Non financial

  -personal satisfaction

  -brand recognition

  -sustainabilty

  -customer satisfaction

  -employee welfare

  -social objectives
• what can influence business objectives

  size, sector, market, ownership, owner
• soletrader


  a business with 1 owner. the owner has unlimited liability so is responsible for all debts of the business which can sometimes be paid off with personal assets

  
  

  + easy to start up as you don't need to register your business

  - requires a range of skills and flexibility

  +owner can be their own boss

  - long hours may cause stress leading ti health issues

  +owner keeps all profits

  - unlimited liability
• partnership


  a business organization owned by two or more persons. they have unlimited liability so all partners are repsonsible for debts of the business and may have to pay it back with financial incentives. the debt be split via a deed of partnership.

  
  

  +joint ownership so more skills

  -contract of relationship (DOP)

  -unlimited liability

  +more input into decision making

  -decision making is slower

  - profits have to be split
• LTD (private limited company)

  A business owned by shareholders when shares are sold by invitation only. they have limited liability so the the shareholders are only responsible for the amount of capital invested in the first place.

  
  

  - must go through incorporation process (harder to set up)

  +limited liability

  + gain capital easier compared to a soletrader

  -accounts published and publicly available

  - shares can't raise large sums of money
• PLC (public limited company)


  A business owned by shareholders. Shares are bought and sold without restriction on the stock exchange. the shareholders have limited liability so are only responsible for capital invested in the first place

  
  

  + large amounts of capital can be gained from stock market floatation

  +finanace easier to raise by issuing shares

  +bigger size means its more likely to get economies of scale

  -accounts are available to the public

  -greater external pressure from media and pressure groups

  -board of directors is accountable to external shareholders
• Franchising


  selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits

  
  

  + effective way to grow your business

  +franchisor gets set up fee and royalty payments

  +franchisees receive a 'business in a box' (plans, products, marketing, a recognised brand)

  +Franchisees are provided with training and support

  -expensive set up fees and little freedom to change business format

  -Royalty payments - franchisor gets a percentage of sales

  -Risk of franchisor damaging business damaging reputation
• Social enterprise


  a not for profit organisation, these businesses pay less tax (charities and cooperatives)
• Lifestyle business


  a business ru in order to maintain a lifestyle for the owners. often run by a single person and linked to an interest skill or enthusiasms
• online business


  could be run as any legal format but provides products and services through the internet (e-commerce) internet businesses are now the fastest growing sector.
• stock market floatation


  when a company issues new shares to the general public
• how does an LTD become a PLC

  issue a prospectus advertising company to the public, reviewed by lawyers, minimum of £50,000 share capital must be paid upfront, if successful issued certificate to sell shares, initial public offering goes live and the business can start trading.
• share price


  The quoted price of one share on the stock exchange.
• what happens when share prices rise


  +managers receive a bonus

  +company finds it easier to raise capital

  +consumers with shares feel more confident

  +business may receive positive publicity
• what happens when share price falls

  - company may become vulnerable to take over

  -poor performance is indicated

  -company finds it harder to raise capital

  -consumersd with shares feel less confident to spend
• why might share price change

  performance, future anticipated performance, condition of economic environment
• opportunity costs


  the benefit lost from the next best alternative

  
  

  Examples:

  - benefits lost from laughing a new advertising campaign instead of training employees

  -the benefits lost from developing a new product compared to increasing production for an already existing product

  -benefits lost from purchasing a new vehicle instead of upgrading IT facilities
• trade-offs


  Alternatives that must be given up when one is chosen rather than another.

  
  

  for example:

  when improving factory productivity you may be lowering quality of products made
• what will a business consider when making decisions

  - investment appraisal

  - risk VS reward

  -gauging support

  -probability of success

  -balance short term gains with long term benefits

  -comparing pros and cons of each option
• what are the demands of becoming a leader?

  greater responsibility towards others, the need to motivate and inspire others, the need for s strategy vision.
• difficulties of becoming a leader

  entrepreneurs may have difficult accepting it as they have to change their mind set due to more responsibility.

  
  

  have to develop skills like confidence and compassion if they don't already have them

  
  

  have to be able to share ownership and control of business

  
  

  stress
• how to overcome the difficulties

  - stress management

  - education

  -mentor

  -delegate and trust