1.5 Entrepreneurs and Leaders

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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
      • 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
    • 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
    • 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
      • 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
    • 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
      • 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
      • 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
      • 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
        • 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
      • 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
    • 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
    • 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

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