Enterprise

• Enterprise is the formation of a new business or development of a new good or service to be introduced to the market.
• The primary sector is made up of organisations that are at the first stage of production and use raw materials. Examples include farms, oil exploration companies and fishing fleets.
• The secondary sector is made up of organisations that are at the second stage of the production process. They are involved in using primary resources and turning these into products. Examples include manufacturers and printers.
• The tertiary sector is made up of organisations that provide services, such as estate agents and delivery businesses.
• SMEs are small or medium enterprises with a turnover of less than 50 million. Small enterprises are considered to be those who have less than 50 employees whilst medium enterprises have less than 250 employees. SMEs tend to be either sole traders, partnerships or private limited companies.
• SMEs provide employment for millions of people and are a key driver of economic growth and sustainability.
• Advantages of SMEs

  • SMEs create jobs – businesses require a number of employees to help run and operate the business. These people pay tax and spend income on other products and services which goes into the economy. SMEs are critical to the UK economy as they make up 67% of the UK private sector jobs and contribute 50% of GDP.
• Advantages of SMEs

  • SMEs create demand for products, which in turn creates more jobs and other businesses.
  • SMEs buy products and services from other businesses in order to produce finished goods, thus helping to generate wealth in the economy both locally and nationally.
• Advantages of SMEs

  • SMEs stimulate the economy by instilling confidence in people – having a healthy economy makes people more confident to invest.
  • SMEs help to create competition which is good for the consumer and growth.
  • SMEs (are required to) pay tax to the government, including business and corporation tax. This money goes to the government and pays for things such as hospitals, police departments and schools.
• Disadvantages of SMEs

  • SMEs have smaller budgets – they do not have the funds to compete with larger organisations and can’t invest anywhere near the same amount of money into R&D, advanced technology, marketing and promotions, etc. This may affect the SMEs' ability to offer high quality solutions to customers.
  • SMEs have less recognition as they are not as well known and thus find it harder to compete with larger businesses and obtain big profits.
  • SMEs often find it harder to raise finance due to their size.
  • SMEs do not obtain economies of a similar scale to that of larger businesses.
• Needs

  People have a limited number of needs which must be satisfied if they are to survive. This includes food, shelter, water, warmth and clothing.
• Wants

  Wants, however, are unlimited (infinite). People constantly aim for a better quality of life. A want is something a human desires, such as designer clothes, holidays, mobiles phones, etc.
• Are needs and wants fixed?

  Needs and wants are not fixed: they can change quickly as fashions and lifestyles change and also over the longer term as incomes increase and populations change. This means that markets are always changing. The business world does not stay still – new opportunities are constantly arising. An entrepreneur with an idea, commitment, funds and a little luck can succeed even in the most competitive of markets.
• Entrepreneurs Role

  • provides goods and services that customers want or need
  • creates and sets up a business which involves having a business idea and the financial capacity to make this idea a reality.
• Business opportunities

  A good starting point for identifying a business opportunity might be to find out what is missing in the local area. Finally, business opportunities can come from an entirely new product developed by the entrepreneur/ inventor.
• Entrepreneur

  An entrepreneur is someone who starts and runs a business. Perhaps he or she makes a product and then sells that product, or perhaps they provide a service. They quite possibly employ people and, of course, try to make a profit.
• The role of the entrepreneur

  • Setting up and owning/leading a business
  • Providing the finance to set the business up and also finance any growth that may occur
  • Organisation/managing/planning of their business
  • Risk taking
  • Decision-making
  • Create employment
  • Acting as innovator
  • Securing finance
  • Formulate a business plan
  • Undertaking market research
• Role of entrepreneur

  • Organisation/managing/planning of their business – this may range, for example, from setting up machinery, hiring staff to work in the business and marketing the products or services on offer.
  • Risk taking – there is no guarantee that a new business will succeed (in fact, there’s a higher chance of it failing) so the entrepreneur may well lose the money he/she initially put in to set up the business.
• Role of entrepreneur

  • Decision-making – decisions will be taken on various aspects of the business including finance, employment, marketing, etc.
  • Create employment – the majority of employees work for small enterprises.
  • Acting as innovator – bringing new products/services to the market.
  • Securing finance – money needed to fund the business can be raised both internally and externally.
• Role of entrepreneur(3)

  • Formulate a business plan – sets out vision for the development of the business.
  • Undertaking marking research – to establish the degree of competition and whether or not a gap in the market exists.
• Why do people start their own business?

  Entrepreneurial motives are the reasons that drive a person or people to set up in business. These include both financial and non-financial motives.
• Financial Motives

  • To earn a profit – the motive for profit is generally thought of as the prime reason why people start businesses. For an entrepreneur who is starting a small business for the first time, it is rarely just about money – even so, earning a decent income in the form of profit will be a major focus. Profit maximisation involves trying to make the maximum profit available to the entrepreneur.
• Non-financial motives

  • To turn a hobby or a pastime into a business – many new entrepreneurs are able to turn a hobby or a pastime into a business. Being fully involved in your hobby and creating an income from it is probably as satisfying a business experience as the small businessperson is likely to find. Often these entrepreneurs do not try to fully maximise profits, instead they balance work, customer satisfaction, and their own freedom to live a lifestyle that they are content with. This is known as ‘satisficing’
• Non-financial motives

  • To use redundancy money / create employment – some new business people are forced into setting up a business because of redundancy. Losing a job, with little chance of finding another one in the near future, is often reason enough to start a business. Most people who have been made redundant will receive a redundancy payment and this can be used as capital to start a business.
• Non-financial motives

  • To be their own boss – often, people just want to be their own boss; they want to be in control of their own destiny. The entrepreneur may want more freedom to work when and where they please, perhaps to fit in around family or other commitments.
•  key characteristics of an entrepreneur?

  • Being a risk taker – entrepreneurs are not always about new products or new ideas. They are often just doing things better than they were done before. However, they are all risk takers – they risk capital and their own time to try to create profits. They may remortgage the house, borrow from friends and family, or give up well-paid jobs to try to make a success out of their business idea.
• key characteristics of an entrepreneur

  • Taking the initiative and being proactive – successful entrepreneurs are able to take the initiative when required. They do not panic nor allow events to overwhelm them – they are proactive and able to change as needed.
• key characteristics of an entrepreneur

  • Being an effective organiser – the ability to organise effectively is central to running a business successfully. The entrepreneur may need to undertake a wide range of activities; from hiring labour and buying inputs such as raw materials, to producing the finished product for sale.
• key characteristics of an entrepreneur

  Having creativity and being innovative – creativity in business involves the ability to come up with innovative concepts and ideas, or developing a better way of doing things.

  
  

  Being determined and having perseverance – entrepreneurs also need to be determined, as new businesses have low success rates. Entrepreneurs must also have considerable perseverance and be willing to keep trying if initial ideas fail
• The importance of the entrepreneur to the success of the economy

  Many entrepreneurs are innovators. They bring new ideas to the market and drive the development of new technologies
• The importance of the entrepreneur to the success of the economy

  • Without entrepreneurs, our economy would not benefit from the boost they provide through added business ideas and wealth creation.
  • The government benefits from taxation which is generated from the revenues of an entrepreneur’s business.
  • Entrepreneurs have the vision and the willingness to take risks which drive businesses forward.
• Stakeholder

  A stakeholder is a person, group or organisation that is affected by and/or has an interest in the operations and objectives of a business.
• Internal Stakeholders

  • employees
  • managers
  • owners
• External Stakeholders

  • suppliers
  • society
  • customers
  • creditors
  • government
  • shareholders
• Internal stakeholders are groups within a business that are affected by the business's decisions.
• Shareholders

  Shareholders are the owners of a limited company. In theory, all shareholders share the common objective of sustained long-term growth, the outcome of which provides capital gain and increases income.
• Shareholders can come into conflict;

  • Institutional shareholders (investment and pension funds) are often driven by the need to achieve in the short term. This means that they require high dividends and strategies to achieve short-term growth from the businesses that they have invested in.
  • However, these strategies may be at odds with achieving long-term growth through reinvestment of profits and investing in brand value, which is what the individual, long-term investor may be looking for.
• Shareholders will be looking for:

  • high profits
  • high dividend
  • long term growth
  • prospect of capital gain
  • a say in the business
  • a positive corporate image
• Directors and managers in large organisations focus their efforts on achieving the long-term objectives of the business.

  They use the resources under their control to achieve maximum benefits for the business and to gain the most from the assets that they manage. Often the success or failure of the business will be reflected in the rewards they receive.
• Unfortunately for some businesses, the main long-term objective of some managers is the protection of their position. This idea of self-preservation is sometimes a motivator for middle managers, which can result in the establishment of whole layers of hierarchy belonging to managers whose role is to preserve their position.