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40 Cards in this Set
- Front
- Back
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Entrepreneur |
An individual who sets up and runs a business, taking the risks associated with this. This could be anyone from a small shop owner to wealthy investors as seen on Dragon’s Den. |
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Intrapreneur |
An employee who acts like an entrepreneur within the business, without having to risk their own money, by identifying and developing ideas that benefit the business. |
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Uncertainty |
External shocks or future events that businesses have no way of predicting. |
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Profit satisficing |
An entrepreneur may aim to make just enough profit to keep the business moving plus another aim at the same time |
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Profit marination |
An entrepreneur may aim to make the highest amount of profit possible |
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Social enterprise |
businesses trading for social and environmental purposes |
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Opportunity cost |
The benefits of the next best alternative that you give up when you make a choice between different options. E.g. if you start a business you will lose out on the benefits of pursuing a career. |
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Trade off |
The compromise that a business must make when facing a choice between competing options, due to having limited (scarce) resources. E.g. investing in employee training can mean cutting costs elsewhere. |
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Why is profit maximisation important |
Once a business has survived the first year or so it will seek to maximise its profits Every business decision focuses on how to make more profit To generate retained profit that can be re-invested into the business To provide rewards for stakeholders such as owners To generate data to compare month-by-month or year-by-year profit, possibly to attract new investors
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Market share def |
Market share is the % of a market that a business has, either in terms of revenue or units sold |
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Cost efficiency |
a way of saving money, or of spending less money: They pinpointed the departments in which cost efficiencies were possible. |
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Cost efficiency |
a way of saving money, or of spending less money: They pinpointed the departments in which cost efficiencies were possible. |
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Social objectives |
Social objectives are also known as corporate social responsibility (CSR) objectives This may involve: Reducing impact on the environment Fair wages in developing countries Helping society Compliance with laws to minimise negative external impacts, e.g. by operating sensible hours to reduce noise pollution in the local community |
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Customer satisfaction |
Businesses following this objective monitor customer service levels through surveys and focus on quality |
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Two types of employee welfare |
External examples: medical insurance, housing, education for family Internal examples: canteen, crèche, uniform |
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Sole trader |
Business owned and run by one person Also known as a proprietor Can employ people but they will not be involved in control of business Small businesses Has unlimited liability |
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Advs of PLC |
Limited Liability Easier to raise capital, i.e. issue more shares Banks more willing to lend money to a large, established company because of lower risk Easier to grow and expand Shareholders will appoint specialists to manage and run the company for them |
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Disadvantages of PLC |
Expensive a lot administrative work (paper work etc.) raise at least £50,000 Must publish more information about itself – expensive to produce Has to prepare Annual Accounts – printed and sent to all shareholders Also make them available for general public and competitors to see |
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Growth of PLC |
Once a limited company has grown in size and needs further investment, which it cannot get from its current pool of owners, it may consider becoming a plc. |
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Franchisee |
Franchisee; this is the small business owner who is buying the rights. |
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Franchisor |
Franchisor; this is the large business who are selling the rights e.g. Subway |
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Advs of Franchise |
The franchisor chooses the franchisees carefully – knows what characteristic that make a successful franchisee The franchisor decides how much money the franchisee must invest in the business The franchisor provides support – management advice & training – help franchisee solve problems |
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Disadvantages of franchises |
Franchisees do not have freedom of running their own business; bound by rules, e.g. can’t vary product or price Franchisee cannot sell the business without franchisor’s permission Franchisor can end franchise without consulting franchisee Franchisee pays percentage of profits in royalties Franchisee will never own the business outright |
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social enterprise |
A social enterprise is a business that trades for a social and/or environmental purpose. |
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Opportunity costs |
The benefits of the next best alternative that you give up when you make a choice between different options. E.g. if you start a business you will lose out on the benefits of pursuing a career. |
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Learning to delegate |
When the business grows an entrepreneur will need to learn to delegate some of these tasks out to others so that they can focus on the more strategic areas of the business such as developing a new product |
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Adv of sole trader |
Quite easy to set up Less capital needed They are their own boss Make decisions quickly Can offer personal attention to customers All profits kept for the owner |
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Trusting others |
When hiring employees or taking a business partner an entrepreneur will have to learn to trust others Often this will mean letting go of an idea that they have been nurturing or delegating tasks out to new employees |
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Self-Awareness |
Self-Awareness is your ability to accurately perceive your emotions & stay aware of them as they happen |
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Self-Management |
Self-Management is your ability to use awareness of your emotions to stay flexible & positively direct your behaviour |
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Social Awareness |
Social Awareness is your ability to accurately pick up on emotions in other people & understand what is really going on |
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Relationship Management |
Relationship Management is your ability to use awareness of your emotions & the others’ emotions to manage interactions successfully |
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Disadvantages for sole trader |
Unlimited liability, this means that if the business has financial difficulties the sole trader could lose their own assets such as personal savings, house etc. Difficult to raise finance, e.g. seen as a risk No one to take over for ill-health or holidays |
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Partnership |
Between 2 – 20 partners Partners = joint owners of the business Unlimited liability, this means again that the partners are taking a risk that they could lose their own personal assets Sharing of profits is based on how much capital each partner has invested (unless stated otherwise in Deed of Partnership) |
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Advs of partnership |
Easy to set up, e.g. not too much capital Easier to raise extra capital Profits shared among partners Small business means closer working relationships Partners contribute with range of skills Share problems and decisions |
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Disadvantages of partnerships |
Unlimited liability Partners have disagreements, e.g. Who has most control of the business? How will profits be shared? What if a partner wants to withdraw from the business? How are new partners introduced? If a partner dies or becomes bankrupt then the partnership is dissolved |
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Private limited company LTD |
Made up of people who know each other quite well, e.g. friends and family might buy shares in one business Shares cannot be bought by the public Owners control who buys the shares At least one director; no maximum Expand by selling more shares, giving the business more capital Normally medium-sized businesses Limited liability, those that own or buy shares in the business can only lose their original investment, their private assets remain safe |
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Advantages of LTD |
Limited liability Can raise extra capital by selling more shares; easier to expand Can employ managers to run business if the owners don’t want to do it themselves Can continue trading if shareholder dies (unlike partnership) Has its own legal status separate from the shareholder: The company can sue and be sued The company can own property |
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Disadvantages of LTD |
Accounts of the company cannot be kept private: Audited each year Copy sent to Registrar of Companies Available for public to see More difficult and expensive to set up, e.g. more administration Cannot sell shares on stock exchange Limited by ‘Articles of Association’ as to type of business it can undertake |
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Public limited company PLC |
Only 2 people needed to set up – no upper limit People who can buy shares: Public Businesses Financial institutions Most shares in a plc owned by organisations rather than individuals Shares bought and sold on the Stock Exchange Share prices printed in national newspapers daily Can expand by selling more shares Limited liability Company has its own legal status Normally start as Ltd then become PLC |
