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Transcript of Enterprise
Starting a Business
Generating and Protecting
Transforming resources into goods and services.
Inputs are the factors of the production such as raw materials. Outputs are the services or goods produced, moreover production is the transformation of resources into goods or services. To produce a product a business starts with an input, then carries out a process to produce the output which is the service or the goods.
Definition of Enterprise
The process by which new businesses are formed in order to offer products and services in a market.
Invention, Creation, Innovation
A project or understanding that...
Involves difficulty or risk.
Requires effort or courage.
Definition of Entrepreneur
An individual who sets up and runs a new business and takes on the risks associated with the business.
Characteristics an Entrepreneur needs when starting up a business
Take risks - Setting up a new business is risky, even if the entrepreneur has carefully researched the market, there's always a chance that customers may reject the product.
Show initiative - Successful entrepreneurs have the drive, determination and energy to overcome hurdles and launch new businesses.
Undertake new ventures - An entrepreneur has to have the imagination to spot business opportunities that will fill gaps in the market.
Example of Opportunity Cost
The opportunity cost of going to college is the money you would have earned if you worked instead. On the one hand, you lose four years of salary while getting your degree; on the other hand, you hope to earn more during your career, thanks to your education, to offset the lost wages.
Definition of Opportunity Cost
Whenever a decision is made in business, there is always an alternative that was not chosen. This alternative is called the opportunity cost.
Entrepreneurship can take a number of forms including spotting a gap in the market or developing a new or innovative product or process.
Motives for becoming an Entrepreneur
To be my own boss or control my own life
To make money
To create something new
To prove they could do it
Because they were not rewarded at their old job
Because they were laid off from their old job
The definition of adding value is the difference between the price of the finished product/service and the cost of the inputs involved in making it. A business always has the ambition of adding value to a product.
Why government support entrepreneurs:
Create jobs and help keep unemployment low
Invest and innovate
Generate substantial export earnings
Pay substantial amounts of tax
Encourage competition in markets
Government support for enterprise and entrepreneurs
- A smaller part of a larger market in which customers have more specific needs and wants.
- A business structure where a firm is allowed to trade using the brand and business format of an existing firm.
- A set of exclusive rights regulating the use of a particular expression of an idea or information. Copyright is one way in which a business can protect relevant products.
- The right to be the only user or producer of a specified product or process.
- A word, symbol, or phrase used to identify a particular company's product and differentiate it from other companies' products.
Sources of business ideas
Business ideas often come from brainstorming and three main sources:
People who have experience and knowledge of working in a particular market or industry often have many ideas for successful businesses.
Applying this experience and knowledge to new business has several benefits - you are likely to have...
a better and more detailed understanding of what customers want.
knowledge of competitors, pricing strategies, suppliers, etc.
potentially less need for start-up market research, as you may already have all the knowledge you need to support the start-up of your particular business idea.
the ability to make more realistic assumptions in the business plans about sales, costs, cash flow forecasts and other figures.
industry contacts, who may be able to provide further advice and potentially become the first customers of the start-up.
Advantages of having business experience
as a source for business ideas
Disadvantages of having business experience as a source for business ideas
However, some people believe that "familiarity breeds contempt". This basically means that if you have knowledge of the industry, you may disregard some things that should be considered; for example, you think you know everything about the industry so you may not carry out enough research.
Detailed experience of an industry means that the entrepreneur will not have a "fresh approach" - someone who is new to a market may be able to exploit approaches that have worked in other industries and therefore make an impact with the start-up.
Hobbies and interests, day-to-day dealings in life and even frustrating experiences can spark a business opportunity for some entrepreneurs.
It is often said that one of the best ways to spot a business opportunity is to look for examples of poor customer service. For example; complaints, difficulties when trying to return a product, constant long queues, etc.
Such examples suggest that there is an opportunity to do something better, quicker or cheaper than the existing businesses and their products.
Advantage of having personal experience
as a source for business ideas
Disadvantage of having personal experience as a source for business ideas
Although hobbies & interests can be an inspiration for a business idea, you have to be careful to not just assume that because you are interested in something, everyone else is as well; because there may not be a market for the product or service you have an interest in or passion for.
Many people have tried to turn their hobby into a business and found that it generates only a small contribution to household income. This is because their idea does not 'take off' as well as they had thought it would.
Business ideas can arise as a result of observing everyday life and activities. Watching what goes on around you can be a good way of spotting an idea.
Often, ideas for a business occur as a result of seeing a product or service in another country and bringing it back to the UK.
This can be an advantage of observation because it can bring something new and 'fresh' to the UK that nobody has seen before. A unique product or service is likely to attract the attention of potential customers, as many people like to try something new.
Advantage of using observation
as a source for business ideas
Disadvantage of using observation as a source for business ideas
However, bringing a product or service to the UK that originated in another country may not always be a successful business idea.
Just because it was a success in one country does not mean that it will succeed here; in fact, that may be the reason why it does not already exist in the UK - maybe a similar idea was tried out many years ago and was unsuccessful!
Below are the factors of production:
Land: Defines all the natural resources that is used in production such as coal, fish and water.
Enterprise: Is bringing together other factors such as making decisions
Labour: This is usually the physical effort involved in production, however could also be mental effort.
Capital: Is the goods that are made in order to produce other goods and services. For example vehicles and computers.
Transformation is the way a business transforms its inputs into outputs. Feedback is extremely important in the transformation process as it allows a business to make changes to its process.
Identifying a product or market niche
There are always going to be segments of the population whose needs for particular products are not being met – leaving room for the small business to succeed by meeting those needs.
Niche marketing is tailoring a product to a particular type of customer.
It is adapting a company's offerings to match, more closely, the needs of one or more sub-segments where there is little or no competition.
Characteristics of niche markets
High cost per unit, therefore higher selling prices for customer - this is good for the business as they can easily charge premium prices.
Low volume of sales compared to mass markets.
Large enough to be profitable - but often not large amounts of profit are made.
May be able to defend itself against attacking larger, major competitors - through the customer good will it has built up.
Less competition - as smaller market.
Clear focus - targets particular customers.
Builds up specialist skills and knowledge appropriate for the particular niche.
grants a license (
) to another business (
) to allow them to trade using the
brand / business format
Advantages of setting up as a franchise
It is still your own business
Developed brand that has been tested and is more familiar with customers.
You receive advice, support and training.
Easier to raise finance - as you will be working under an established brand umbrella.
No specific industry expertise required.
It is a lower risk method of market entry - lower failure rates than brand new unknown businesses.
Disadvantages of setting up as a franchise
It is not cheap! The initial set up fees are very high PLUS you have to constantly pay money to the franchisor in terms of "royalties" - these are payments made for the right of ongoing use of the brand.
There are restrictions on actions - this could limit the creativity of the entrepreneur.
Restricted to selling in one geographical area, as you cannot move this business around.
Outputs are what the business produces, they can be both goods and services.
What would KFC's output be?
A copyright provides important protection for many industries, e.g; media, publishing, design, etc.
Protection is automatic for any original work.
It can control how copyrighted work is exploited, e.g. license, royalties, etc.
Copyrights are widely used to protect creative work of all kinds.
Did you know...
...in general, a copyright lasts for 70 years after the author's death!
Before a patent can be applied, there are strict rules that must be followed:
The process must be:
Capable of industrial application - this means that the invention must be able to be made or used in some kind of industry.
- Patents give the entrepreneur and business the right to take legal action.
- Protection of the product/process lasts for 20 years.
- Able to license the right to use the product/process.
Inputs Processes Outputs
A trademark is something that identifies a product. For example, a symbol, name or logo.
It must be distinctive in order to obtain a trademark.
A trademark protection lasts for 10 years.
The trademark symbol is often 'TM', or 'R' if it is a registered trademark.
Nuts and bolts
Added value = £25,000
Did you know...
...in the UK, the cost of registering a trademark is around £200!
Did you know...
...the process of registering a patent can take over a year!
Watch this clip to get a better understanding of inputs and outputs.