Enterprise and Entrepreneurs.
Enterprise- Process in which new businesses are formed and new products and services are produced and services created and brought to the market. They are lead by Entrepreneurs.
Entrepreneurs- Individual that have an idea that they develop by setting up there own business. Take risks but can receive huge profits, others may not.
Characteristics of a successful entrepreneur:
- Determination/ Persistence.
- Passionate about the business.
- Ability to spot and take good opportunities.
- Relevant skills and expertise.
- Willingness to take risks.
Reasons why Businesses fail
- Lack of finance.
- Poor infrastructure.
- Skills Shortages.
- Complexity of regulation or red tape.
Opportunity cost: The real cost of taking a particular action or the next alternative forgone.
Example: the 'real cost' of an evening spent revising could be the missed opportunity of attending a concert.
Motives for becoming an entrepreneur
Motives for becoming an entrepreneur:
- Long term interest rates that make it easier to borrow money to start a business.
- Change in political climate so that the government supports enterprise and the entrepreneurial spirit.
- Increasing affluence, this means that people start to look for meaning in there lives (maybe fulfilling a dream).
Government support entrepreneurs by:
- reducing business taxes.
- improving support to businesses.
- introducing legislation to promote competition.
- giving financial support to not for profit orgainisations.
Franchising: when a business (the franchisor) gives another business (the franchise) the right to supply its products or services.
Benifits of a franchise:
- Involve the least risk due to the fact that they have already got an established name
- financing the business is easier because banks are more willing to lend money to someone with a good reputation.
- Franchisors are going to offer training
- may fail due to lack of market research
- costs may be higher than expected
- Have to approved by the franchisor
Protecting business ideas
Protecting business ideas
Copyright- legal protection against copy for authors, composers and artists.
Patent- an official document granting the holder the right to be the only user or producer of a newly invented product or process for a specified period.
Trademark- signs, logos or words displayed on a companies products or on its advertisement including sound and music which distinguish its brands from those of its competitors.
Transforming resournces into goods and services
Transforming resournces into goods and services
Resources (inputs) - the elements that go into producing goods or services.
Factors of Production - the four elements Land, labour, capital and enterprise.
Land - all the natural resources used in making your product.
Labour - the physical and mental effort involved in production.
Capital - goods that are made to help produce other goods e.g. machienery.
Improving the effiency of the FOP
- improving the fertility of the land
- using renewable / recycled resources
- greater education and training of the work force
- increase the level of investment in capital equipment
- improvements in entrepreneurial skills
Production: the process wherby resources are cnverted into a form that is intended to satisfy the requirements of potential customers
Outputs: the finished products resulting from the transformation process.
- Natural resources.
- semi-finished / finished goods.
- Primary production. (farming, fishing, forestry etc.)
- Secondary production.
- Tertiary production. education, restaurants hairdressing.
The process of increasing the worth of the resources by modifying them.
Other services such as marketing also add value by:
- creating a Unique Selling point.
- Identify an attractive mix of design, function, image and service.
Sales revenue - cost of materials of brought in materials.
Unique selling point- a feature product or service that allows it to be differentiated from other products.
Developing business plans
Purpose of a business plan:
- important part of a business plan.
Business plan: A report describing the marketing stratergy, operational issues and finanicial implications of a business start up.
- useful in helping entrepreneurs to clarify there objectives.
- you know exactly what needs to be done.
- essential document in persuading lenders to invest capital into the business.
- needs to be very accurate and realistic.
- many underestimate how much this business will cost.
- many overly optimistic on the potential business and sales.
Content of a business plan:
- Details of the business.
- personal information.
- marketing plan.
- production plan.
- fixed assets (premises and equipment).
- financial forecasts.
- details of finance needed and repayment.
- collateral offered (offering personal assets as security).
- Long term plans.
- SWOT analysis.
Conducting market research.
Marketing: anticipation and satisifying customers wants in a way that delights customers and also meets the needs of the business.
Marketing research: the systematic and objective collection, analysis and evaluation of information that is intended to assist the marketing process.
Purpose of marketing research:
- Achieving objectives (target sales figure).
- identifying trends.
Primary research: the collection of information first-hand for a specific purpose. e.g. questionnaires.
Secondary research: the use of information that has already been collected for a different purpose.
Qualitative / Quantitatve data.
Qualitative market research: the collection of informatin about the market based on subjective factors such as opinions and reasons.
- get a greater insight into what it needs to do to appeal to its consumer and new customers.
- can highlight issues the business was not aware of.
- Hard to interpret data.
Quantitative data- the collection of info about the market based on numbers.
Random sampling: a group of respondants in which each member of the target population has an equal chance of being chosen.
Quota sampling: a group of respondants comprising several different segments, each share a common feature (e.g. Gender). The number of interviews in each classification is fixed to reflect their percentage in total target population, but their interviews are selected non-randomly by interviewer.
Stratified sample: a group of respondants selected according to particular features.
Problems with sampling:
- may not be representative
- may be bias.
- difficult to locate suitable respondents.
Factors influencing sampling method.
Factors influencing sampling method:
- cost and avaliability of finance
- importance of market segmentation.
- whether business targeting a specific group of customers.
What is a market? A place where buyers and sellers come together
based on area targeted by businesses. such an area maybe local, national and international.
Factors affecting demand.
- competitors action
- consumers incomes
- success of businesses' marketing.
- Seasonal factors.
Types of market segmentation:
1.) Demographic segmentation- age, sex, income
2.) Geographic segmentation - regions, cities and neighbourhoods.
Benifits of market segmentation.
- advertising can be targeted at specific market segments so that advertising spend is more effective.
- the most profitable and least profitable customers can be identified.
- least profitable markets can be avoided
- it becomes easier to identify new products
- helps the firm improve exsisting products and customer service.
Market size, Growth and share
Market size - this is the total value or volume of sales in the market. it can be measured in money terms.
Market size =.
number of units sold X price.
market growth =.
change in size of market / original size X 100.
Company sales/ market sales X 100.
Factors influencing market.
- Economic growth.
- nature of product.
- change in taste.
- social changes.
Choosing legal structures
Unincorporated and incorporated businesses
- sole trader.
- Private limited company.
- Public limited company.
Limited liability: a situation in which the liability of the owners of a business is limited to the fully paid-up value of the share capital.
Unlimited liability - businesses are liable for all the debt they may get into.
Types of Legal Structure.
Sole trader- business owned by one person.
Partnership - businesses with 2 or more people to operate.
Private limited company - small to medium sized business that is usually run by family or small group of individuals who own it.
Public limited company - A business with limited liability. a share capital of over £50,000, at least 2 share holders.
Advantages of sole trader:
- easy and cheap.
- more privacy.
- unlimited liability.
- limited skills.
Ownership - providing finance and therefore taking risks
Control - managing the orgai