1. Enterprise

Question 1

What is the purpose of a business?

Answer 1

An organisation that identify customers’ wants and needs, purchase resources and produce tangible products or intangible services to satisfy customers, mostly for profit

Question 2

Definition of value added

Answer 2

Value addition is the difference between the price of the product and the cost of raw materials

Question 3

Definition of capital goods

Answer 3

They physical goods used by industry to aid in the production of other goods and services.

Question 4

What are the factors of production?

Answer 4

• Land - site for buildings and raw materials
• Labour - skilled/unskilled, permanent/temporary
• Capital - factories/offices, finance and machines
• Enterprise - risk takers, decision makers and coordinators

Question 5

Explain the nature of the economic activity

Answer 5

All resources are scarce in relation to people’s wants and needs. Resources could include the 4 factors of production and time. Therefore, scarce resources must be allocated => there’s a choice needs to be made

Question 6

Define opportunity cost

Answer 6

It is the loss of the potential gain from other alternatives when one alternative is chosen. As resources are scarce, they can only be put to one use although they might have alternative uses

Question 7

Explain the concept of change in business

Answer 7

Business operates in a dynamic environment since the world experiences constant changes in terms of technology due to innovation

Question 8

Advantages of change in a business

Answer 8

• Staying current: makes product more attractive to potential customers and maintain current ones => more competitive
• New opportunities: change means business is forced to be flexible and adaptable in a new environment
• Encourage innovation: changes require the business to step out of the comfort zone and find a different approach to the problem => creativity is promoted, focused on market research
• Improved attitudes: a change means that employees also step out from their old style/approach to working

Question 9

Disadvantages of change in a business

Answer 9

• Change does not equal progress
• Increased costs: either costs a sum of money or opportunity cost
• Resistance: the lack of knowledge and the fear of unknown is risky
• Choosing the wrong solution: lack of knowledge leads to the business implementing the solution prematurely => negative effects on stakeholders

Question 10

Why many businesses fail early on?

Answer 10

• Lack of record keeping
• Lack of working capital
• Poor management skills
• Changes in the business environment

Question 11

What a business needs to succeed?

Answer 11

• Organised: help you complete tasks and stay on top of things to be done, won’t forget
• Keep detailed records: know where the business stands financially and what potential challenges you could be facing => gives you time to create strategies to overcome the obstacles
• Analyse competition: study and learn from your competitors
• Take risks: allows you to gain experiences and knowledge
• Understand risks and rewards: always calculate the positive and negative sides to a decision and weigh them

Question 12

Qualities an entrepreneur is likely to need for success

Answer 12

• Innovative
• Committed and self-motivated
• Multi-skilled
• Leadership skills
• Self-confidence
• Risk taking

Question 13

What are the roles of business enterprise in the development of a business and a country?

Answer 13

• Employment creation
• Economic growth
• Innovation and technological change
• Increased social cohesion

Question 14

What is a social enterprise?

Answer 14

A business with mainly social objectives that reinvests most of its profit into benefiting the society rather than maximising returns to owners

Question 15

Define entrepreneur

Answer 15

Someone who takes financial risk when starting a new venture. They will be the risk taker, decision maker and coordinator

Question 16

Define triple bottom line

Answer 16

The 3 objectives of social enterprises:

• Economic: make a profit to reinvest back to the business and return to owners
• Social: provide jobs for local
• Environmental: protect it

Question 17

Differences between a charity and a social enterprise

Answer 17

• Social enterprises have to fund their own capital, does not rely on donations
• Compete against other businesses within the market
• They need to make profit to survive