1.1 Enterprise & Entrepreneurship Flashcards
All 36 cards in this deck
Name the three reasons why new business ideas come about.
Changes in technology; changes in what consumers want; products and services becoming obsolete.
How can changes in technology lead to new business ideas?
Technology allows new products to be created, and entrepreneurs then look to create demand for the new product.
How can changes in what consumers want lead to new business ideas?
Existing products may no longer meet customer needs, so an entrepreneur spots a new business opportunity in the market.
What does it mean if a product or service is obsolete?
It is no longer used or needed because it has been replaced by something newer or more advanced.
e.g. DVDs replaced by media-streaming services.What are the two ways new business ideas come about?
Original ideas, and adapting existing products, services or ideas.
What is an invention?
Creating something that did not previously exist.
What is innovation?
The successful commercialisation of an invention, or adapting a product over time to improve its features.
Give one advantage of adapting an existing product instead of creating an original idea.
Any one of: the business already understands the market; lower development costs; it takes less time and creative input to launch.
Give one drawback of adapting an existing product rather than creating an original idea.
It may not be as innovative, so it may not fully meet changing customer needs and customers may buy a competitor's new product instead.
Name the three risks of business activity.
Business failure, financial loss and lack of security.
Name the three rewards of business activity.
Business success, profit and independence.
Why is starting a business a financial risk for an entrepreneur?
A new business needs financial investment to start up, and if the business fails the entrepreneur could lose this money.
What is meant by 'lack of security' as a risk of starting a business?
The entrepreneur may give up their job, losing the regular income from wages or a salary.
What is meant by business failure?
The business cannot continue trading, e.g. because there is not enough demand for its product.
What is meant by 'independence' as a reward of business activity?
The entrepreneur is their own boss and makes their own business decisions.
True or false? Taking a risk when starting a business guarantees a reward.
False. The business may fail and the entrepreneur may make a financial loss instead.
What are the three purposes of business activity?
To produce goods or services, to meet customer needs, and to add value.
What is a good?
A tangible item that can be touched, used, stored and owned.
e.g. cars, televisions.What is a service?
An intangible action that cannot be stored and gives customers access for a period of time.
e.g. a fitness class, a train journey, accountancy.True or false? Hairdressing is an example of a good.
False. Hairdressing is a service, because it is intangible and cannot be stored.
What is added value?
The difference between the selling price of a product and the cost of the inputs used to make it.
Name the five ways a business can add value.
Convenience, branding, quality, design and unique selling points.
How does improving quality add value?
Customers are willing to pay a premium price, creating a bigger difference between the price and the cost of raw materials.
How does a unique selling point (USP) add value?
It differentiates the product from rivals, so customers pay extra because they feel it is better than the competition.
How does convenience add value?
Locating in a convenient place or making the product easy to buy means customers will pay more for it.
How does branding add value?
A well-known, trusted brand makes the product more appealing, so customers will pay a higher price for it.
How does design add value?
Attractive or better-functioning design makes the product more appealing, so customers will pay a higher price.
What are the three roles of an entrepreneur?
Organising resources, making business decisions and taking risks.
True or false? Being a sole trader is a role of an entrepreneur.
False. It is a type of business ownership; the roles are organising resources, making decisions and taking risks.
Give two causes of changes in what consumers want.
Any two of: fashion trends; the state of the economy; an ageing or otherwise changing population; new lifestyles and leisure habits; new technology.
What is planned obsolescence?
Deliberately designing a product to have a short life, so that customers replace it with a newer version.
What is the difference between a customer and a consumer?
A customer buys the product; a consumer is the person who uses it. They may be different people.
Give the two ways a business can increase the value it adds to a product.
Reduce the cost of its inputs, such as raw materials, or make the product worth a higher price to customers, e.g. through branding, quality, design, convenience or a USP.
Why is adding value important to a business?
The value added on each sale helps cover fixed costs, so the more value added, the sooner the business makes a profit and the better its chances of surviving and growing.
What is a unique selling point (USP)?
A feature or benefit that makes a product or service different from those of its competitors, giving customers a reason to buy it.
What is an entrepreneur?
A person who starts and runs their own business, taking risks in the hope of making a profit.