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Business and Enterprise Fundamentals
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Business and Enterprise Fundamentals
Business and Enterprise Fundamentals
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Question
What is the purpose of business activity according to the material?
Answer
The purpose of business activity is to add value to raw materials and semi-finished goods to satisfy the needs and wants of consumers.
Question
Define 'Opportunity Cost' as presented in the material.
Answer
Opportunity cost is the benefit of the next most desired option which is given up when a choice is made.
Question
What are the four factors of production and their respective returns?
Answer
1. Land - natural resources; return is rent. 2. Labour - manual and skilled work; return is salary or wages. 3. Capital - finance and man-made goods used in production; return is interest. 4. Enterprise - organizes other factors and takes risks; return is profit.
Question
How can a business increase 'added value' according to the text?
Answer
By increasing selling price through higher quality, advertising, better packaging, or product improvements, and by decreasing cost price through waste reduction, finding cheaper supplies, reducing product quality, and improving efficiency with training and technology.
Question
What characterizes a dynamic business environment and why is it important?
Answer
A dynamic business environment is rapidly changing, leading to shifts such as new market entrants, changes in laws, economic shifts, and technological advances. Businesses need to adapt to remain successful.
Question
Identify three key reasons why many new businesses fail in the early stages.
Answer
Poor record-keeping, lack of working capital, and poor management skills.
Question
What are the key characteristics of entrepreneurs and intrapreneurs?
Answer
Entrepreneurs are passionate, innovative, committed, resourceful, proactive, self-confident, and multi-skilled. Intrapreneurs also think innovatively but work within existing businesses generating ideas and driving projects without bearing full financial risk.
Question
Differentiate between an entrepreneur and an intrapreneur based on purpose, risk, and reward.
Answer
Entrepreneur: Purpose is to set up a new business; risk and liability fall on the entrepreneur; reward is profit. Intrapreneur: Purpose is to innovate within an existing business; risk falls on the business; reward is profit, sales, or promotion within the business.
Question
What are the advantages and disadvantages of a sole trader business?
Answer
Advantages: Easy to set up/manage, complete control, ability to choose working times, personal contact with customers. Disadvantages: Limited finance, unlimited liability, possible intense competition, lack of continuity, and inability to specialize.
Question
Explain the role and impact of joint ventures and strategic alliances in business growth.
Answer
Joint ventures and strategic alliances allow sharing of costs, risks, strengths, and resources; they enable rapid growth, innovation, entering new markets, and sharing ideas, improving competitiveness.
Question
What are the SMART criteria for setting business objectives?
Answer
S - Specific: clear focus related to business activities. M - Measurable: quantifiable to track progress. A - Achievable: realistic and attainable to maintain motivation. R - Realistic and Relevant: aligned with resources and goals. T - Time-specific: set within clear deadlines.
Question
Why is having a clear mission statement important for a business?
Answer
It communicates core aims to stakeholders, motivates employees, informs about the business vision, and helps guide behaviors and decisions.
Question
Explain three effects of enterprise on an economy.
Answer
Employment creation, economic growth, and innovation including technological change.
Question
What issues can arise during mergers or takeovers, and suggest solutions?
Answer
Issues include diseconomies of scale, coordination problems, cultural clashes, and management challenges. Solutions involve delegating authority, decentralizing management, motivating managers, and cultural adaptation.
Question
What distinguishes a public limited company from a private limited company?
Answer
Public limited companies can sell shares to the public and access substantial capital but have higher legal formalities and share price fluctuations. Private limited companies have limited liability, share ownership limited to friends/family, and cannot sell shares publicly.