Pearson Edexcel Business Studies Theme 1 summary notes

1.5 Entrepreneurs & leaders
1.5.1 Role of an entrepreneur
Business - organisation exists to provides goods/services on a commercial basis to customers
Enterprise -skills & abilities to take risks & create profits, creation of business to meet customer needs/wants
Entrepreneur - organises, operates & takes risk in starting new business (with view to profit/award)
Start up - new business enterprise, formed by one of more entrepreneurs
Role of an Entrepreneur
 Create & set up business – calculated risks, spot business opportunities, (lead &) make decisions
 Run & expand/develop business – risks to grow
 Innovation within business (intrapreneurship) – catalyst for creation
 Anticipating risk & uncertainty in business environment – risk tolerant

Stages of setting up a business
1. Idea/concept
2. Research - market, product/service, competitors, customer needs/desires – primary & secondary
3. Plan - resource, finance, costs, staffing, forecasts, advertisement, licensing
4. Financing - loan/overdraft, crowd funding, investment from 3rd parties, own money/savings
5. Location - physical premises - rent or buy, or online (e-commerce)
6. Resources – raw materials, product, staff, equipment, legal
7. Launch – pr, marketing, awareness
Where ideas from?
 Personal experience - day-to-day activities, interests & jobbies, bad experiences
 Observations - watching customers closely, look for poor customer service
 Skills - recognise/develop your skills and using them in business
 Lifestyle choices - change in location/pace/style of living
 Business experience - knows what works, more realistic business plan, less need for market research
Successful?
 Financial management - cash flow, forecasts, banking, accounts, profit & loss
 Administration - record keeping - pay taxes, suppliers, shareholders, staff, auditors, sales, costs - organised
paperwork
 Marketing - sales, advertising, customer relationships
 Purchasing - test cost for suppliers
 Managing people & recruitment
 Production
Barriers in entrepreneurship
 Lack of finance – capital, lack of cheap labour & investment
 Lack of experience/knowledge/skills/idea
 Discrimination - gender & race
 Legal - employment, insurance, health & safety, patents & intellectual property, red tape
 Fear of failure - aversion to risk
 Overcrowded market - competition, barriers to entry
 Political – unstable, corruption
Expanding
 Research & plan
 Financial backing
 More resources / materials / equipment – invest, employ more
 Location?
 Marketing & branding
 New products / services
 Tender for contracts

, Intrapreneurship - within business creating new opportunities - new parts of business or new business Origins
1985 - Steve Jobs - Macintosh team went back to garage inside of business
Encouraging Intrapreneurship
 Give workers allocated time not do usual work, instead be creative, come up new ideas
 Pay extra / more perks to ppl w good new ideas - let have ownership of project
 Hire people thinking set up own business but instead bring into business
 Encourage discussion/collaboration
 Trust & respect - accept failure & risk taking
 Training

Risk - probability that things won’t go as planned, can plan
 Chance money invested is lost
 Possibility entrepreneur personally liable for debts – liability
 May not get another job or face stigma of failure
Dealing with risk Reducing risk
 Take calculated risks rather than gamble  Detailed research
 Spread risk - diversifying (don’t put all eggs in one basket)  Detailed plans
 Look for higher returns to take account of risks  Analysing external influences
 Keep going despite adversity - persistence is key  Contingency plans
Uncertainty – unable to predict external shocks or future events
 Inflation, exchange rates, Interest rates & other external


1.5.2 Entrepreneurial motives & characteristics
Entrepreneur Characteristics - Personality traits needed to be successful entrepreneur
 Determination, persistence, passionate & resilient
 Leadership Skills – can be learnt
 Innovative  Organisation
 Growth mindset – ambition, initiative  Financial management
 Energetic  Communication
 Decisive, self-starter  Negotiating
 Calculated risk-taker
 Focused, committed
 Results-orientated
Drawbacks of Entrepreneurship
 Occasional loneliness & isolation
 Can’t blame others when things go wrong
 Financial pressure
 Hard work - multi-tasking
 Strain on family & social life
 Higher stress levels
 Difficult to have a sick day
 Roller-coaster of emotions
Entrepreneurial motives – reasons/factors for becoming entrepreneur & starting business
Financial Motives

Profit Maximisation Profit Satisficing
 Desire/motivation earn substantial rewards  Sufficient profit - satisfactory standard of living
 Long-term profit maximisation consistent with  Take fewer risks
building valuable business  Trade-off is lower returns
 Initially, may accept losses as business established  Associated with 'lifestyle' business