Section A: Key terms and recall
Define the term 'enterprise'. [2 marks]
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Enterprise is the willingness and ability to take risks, organise and manage a business, and seek out new opportunities. [2 marks]
List four characteristics of successful entrepreneurs. [4 marks]
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Four characteristics of successful entrepreneurs are: - Willingness to take risks - Creativity and innovation - Strong leadership skills - Ability to plan and organise. [1 mark each, 4 marks total]
Name three methods of measuring business size. [3 marks]
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Three methods of measuring business size are: - Number of employees - Value of output - Capital employed. [1 mark each, 3 marks total]
Explain one limitation of using the number of employees to measure business size. [2 marks]
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One limitation is that it does not take into account the productivity or efficiency of the employees. A business with fewer employees could be larger in terms of output if each employee is very productive. [2 marks]
Give two reasons why a business might want to grow. [2 marks]
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Two reasons why a business might want to grow are: - To increase profits - To gain a larger market share. [1 mark each, 2 marks total]
Section B: Applying your knowledge
Sarah is starting a small bakery. She has written a business plan outlining her goals, strategies, and financial projections. Explain how a business plan can assist Sarah. [3 marks]
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A business plan can assist Sarah by: - Providing a clear roadmap for her business, helping her to stay focused and organised. - Helping her to secure funding from investors or loans from banks by demonstrating the viability of her business. - Identifying potential challenges and risks, allowing her to plan for them in advance. [1 mark each, 3 marks total]
A local government offers grants and training schemes to support new businesses. Explain why governments might support business start-ups. [3 marks]
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Governments might support business start-ups because: - They can create new jobs, reducing unemployment. - They can stimulate economic growth and innovation. - They can increase tax revenue for the government. [1 mark each, 3 marks total]
A small café decides to open a second location in a nearby town. What are two potential problems linked to this business growth, and how might they be overcome? [4 marks]
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Two potential problems and their solutions are: - Problem: Maintaining consistent quality and service at both locations. Solution: Implement standard operating procedures and train staff thoroughly. - Problem: Managing increased operational costs. Solution: Carefully monitor expenses, negotiate with suppliers, and gradually expand the menu and services. [2 marks each, 4 marks total]
A small family-run shop has been operating successfully for many years but has decided to remain small. Suggest two reasons why this business might choose to remain small. [2 marks]
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Two reasons why this business might choose to remain small are: - The owners value the flexibility and independence of running a small business. - They may not have the resources or desire to manage a larger business. [1 mark each, 2 marks total]
Section C: Explain and analyse
Explain why new businesses are often at a greater risk of failing compared to established businesses. [4 marks]
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New businesses are often at a greater risk of failing because: - They may lack established customer bases and brand recognition, making it harder to attract and retain customers. - They often have limited financial resources and may struggle to cover initial costs and sustain operations until they become profitable. - They may lack the experience and expertise of established businesses, leading to poor decision-making and management. - They face intense competition from established businesses, which can make it difficult to gain a foothold in the market. [1 mark each, 4 marks total]
Analyse the causes of business failure and discuss how a business can reduce the risk of failure. [6 marks]
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Causes of business failure include: - Lack of management skills and experience. - Inadequate market research and understanding of customer needs. - Poor financial management and cash flow problems. - Changes in the business environment, such as economic downturns or increased competition. - To reduce the risk of failure, a business can: - Invest in skilled management and provide ongoing training. - Conduct thorough market research to understand customer needs and market trends. - Maintain careful financial planning and monitoring to ensure adequate cash flow. - Stay informed about changes in the business environment and adapt strategies accordingly. - Diversify products or services to spread risk. [1 mark each, 6 marks total]
Section D: Challenge
A small tech start-up has developed an innovative new product but is struggling to attract investors. The founders are considering different strategies to grow the business. Evaluate the potential benefits and drawbacks of each strategy and recommend the most suitable course of action. [6 marks]
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Potential strategies and their evaluation: - Seeking venture capital: Benefits include access to significant funding and expertise. Drawbacks include giving up a portion of ownership and control. - Crowdfunding: Benefits include raising funds from a large number of people and generating buzz for the product. Drawbacks include the risk of not reaching the funding goal and potential dilution of equity. - Bootstrapping: Benefits include maintaining full control and ownership. Drawbacks include limited resources and slower growth. - Recommendation: The most suitable course of action depends on the specific circumstances of the start-up. If the founders are willing to give up some control, seeking venture capital could provide the necessary resources for rapid growth. If they prefer to maintain control, bootstrapping with additional support from grants or accelerators could be a viable option. [2 marks for evaluating each strategy, 2 marks for recommendation, 6 marks total]