1.5 Entrepreneurs and Leaders
- Created by: AmyBennet
- Created on: 15-04-17 14:46
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- 1.5 Entrepreneurs and Leaders
- 1.5.1 Role of an entrereneur
- Creating and setting up a business
- The role of entrepreneurs
- They are innovated and spot a gap in the market
- Responsible for organising production
- Risk takers
- Owners have make key decisions
- Stages in setting up a business
- 1. Idea
- 2. Research
- 3. Planning
- 4. Financing
- 5. Location
- 6. Resources
- 7. Launch
- The role of entrepreneurs
- Running and expanding/ developing a business
- As the business grows, the entrepreneur will need to delegate more
- Some entrepreneurs focus on new projects after their business is set up
- Innovation within a business (intrapreneurs-hip)
- Intrapreneurs work inside a business, taking risks to solve problems
- Focus on product development
- They have entrepreneuri-al skills but use them within a business
- Barriers to entrepreneurs-hip
- Fear of failure
- Lack of finance
- lack of entrepreneuri-al capacity
- Legal barriers
- lack of ideas
- Aversion to risk
- unsupportive environment
- Anticipating risk and uncertainty
- Risks are predictable
- Financial planning is important
- Uncertainty isn't predictable
- Uncertainty can be minimised by being well informed
- Successful businesses are usually flexible and able to respond to change
- Creating and setting up a business
- 1.5.2 Entrepreneurial motives and characteristics
- Characteristics and skills
- Hard work
- ICT skills
- Risk-taking
- Organised
- Creativity
- Communication
- Reasons why people set up a business
- Financial motives
- Profit satisficing
- Profit maximisation
- Non-financial motives
- Ethical and green considerations
- Social enterprise
- Independence
- Self-actualisation
- Home working
- Creativity
- Financial motives
- Characteristics and skills
- 1.5.3 Business objectives
- Business objectives
- Objectives are the short term goals the business needs to meet to work towards achieving a long term aim
- Why do businesses need objectives?
- Gives employees something to work for
- To motivate owners
- To help make decisions
- Survival
- Becomes the most important objective when:
- A business is in the early stages of development
- There are difficult trading conditions
- There is a takeover bid
- There are new competitors in the market
- Becomes the most important objective when:
- profit maximisation
- Some entrepreneurs are motivated by the desire to get rich
- Shareholder favour this so dividends increase
- Focus on keeping costs low
- Raising prices as high as possible before customer loyalty is damaged
- Sales maximisation
- Can be used to gain a larger market share
- Growth can stabilise a business
- Earns customer loyalty
- Could mean price cuts
- Market share
- Businesses want to increase market share
- Increases revenue and raises the profile of the business
- Output levels are higher
- Can have more control over price if the market leader
- Cost efficiency
- Tries to reduce costs
- Perused when trading conditions are difficult
- profit margins are higher
- Can gain a competitive edge in the market
- a business may lay off staff, find new suppliers, recycle material, save energy
- Quality may suffer
- Employee welfare
- Workers are more motivated and therefore more productive
- A number of things can be changed to improve this
- A better environment
- Staff are given more ideas
- Staff have the right tools
- This is likely to reduce staff absenteeism
- Social objectives
- Shows concern for the local area
- Customer satisfaction
- Satisfied customers are more likely to return
- Businesses try to exceed customer expectations
- Business objectives
- 1.5.4 Forms of business
- Sole trader
- Advantages
- Owner keeps all the profit
- The owner has complete control
- Simple to set
- Flexible
- May qualify for government help
- Disadvantages
- Unlimited liability
- May struggle to raise finance
- Owners have to work hard with long hours
- Non-perpetual succession
- Can't exploit economies of scale
- Advantages
- Partnership
- Advantages
- Easy to set up and run
- Partners can specialise in their area of expertise
- More owners can raise more capital
- Doesn't have to publish financial information
- Dissadvantages
- Unlimited liability
- Profit has to be shared
- Could be disagreements
- Advantages
- Private limited companies
- Advantages
- Limited liability
- More capital raised by issuing shares
- Control can't be lost to outsiders
- Owners have tax advantages
- Disadvantages
- Have to publish financial information
- Profits are shared between more members
- Can't raise large amount of finance due to not selling shares on the stock exchange
- Advantages
- Franchising
- Impact to franchisees
- Advantages
- Lower risk
- Get support from franchisors
- Set up costs are more predicable
- Can benefit from national advertising campaigns
- Disadvantages
- Franchisee's profit is shared with franchisor
- Expensive way to start a business
- Little independence
- Advantages
- Impact to frnachisors
- Advantages
- Fast method of growth
- Franchisees take some of the financial risk
- Franchisees are more motivated than employees
- Disadvantages
- Potential profit is shared with franchisees
- Poor franchisees may damage brand reputation
- Cost of supporting franchisees may be high
- Advantages
- Impact to franchisees
- Social enterprises
- Aims of improving human and environmental well-being
- Lifestyle business
- Created to fit around the entrepreneur's own interests
- Online Businesses
- Low set up costs
- Sponsored advertising is main source of income
- Public limited companies
- Growth to PLC and stock market floatation
- Advantages
- Large amounts of capital raised
- Business gains status
- More able to make mergers
- Disadvantages
- Some control will be lost
- Shareholders may have different goals to owners
- Shareholders paid dividends
- Floating on the stock exchange can be costly
- Advantages
- Growth to PLC and stock market floatation
- Sole trader
- 1.5.5 Business choices
- Opportunity costs
- Every purchase or activity has an opportunity cost
- It is the cost of giving something up in order to buy something else
- Using any limited resources in one way means alternative uses are sacrificed
- The next best alternative give up is the opportunity cost
- not just about financial decisions
- Choices and potential trade-offs
- Where there is a choice, choosing between alternatives there is an opportunity cost
- Trade-offs occur when two things cannot both be fully acheived
- Opportunity costs
- 1.5.6 Moving from entrepreneur to a leader
- Difficulties
- adapting the mindset
- stress
- Sharing ownership and control
- Lack of leadership qualities
- Overcoming difficulties
- Delegation and trust
- Respect
- Maturity and experience
- Education
- Reduce stress
- Difficulties
- 1.5.1 Role of an entrereneur
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