Enterprise Growth and Size

Key Topics

• Enterprise and Entrepreneurship
• Business Plan
• Government Support for Enterprises
• Measuring Business Size
• Business Growth Factors
• Internal and External Business Growth
• Problems and Barriers to Growth
• Business Failure Causes
• Risks for New Businesses
• Examination Questions and Techniques

Enterprise and Entrepreneurship

Characteristics of an Entrepreneur

• Risk Taker: Invest personal funds; faces loss if business fails.
• Creative and Innovative: Identifies market gaps; provides unique products.
• Optimistic and Self-Confident: Believes in their idea despite market conditions or disagreements.
• Independent: Can work alone or with a team.
• Effective Communicator: Can relay ideas to customers and investors.
• Hardworking: Persistent in driving business success.

Business Plan

• Describes business objectives, operations, finance, and owners.
• Essential for securing bank loans; sets clear business targets.
• Includes asset identification and cost estimates.

Government Support for Enterprises

Reasons for Support

• Employment: New businesses create jobs, boosting economic productivity.
• Competition: Encourages diversity in goods/services, lowers prices, and improves quality.

Methods of Support

• Lower rent, cheap loans, grants, training, tax breaks.

Measuring Business Size

Methods

• Number of Employees: Example - Apple has 161,000 employees.
• Output and Sales Value: Apple's sales and capital investments.
• Limitations: Depends on business being capital vs. labor-intensive.

Business Growth Factors

• Reducing Competition: Captures more market share.
• Economies of Scale: Lowers production costs, increasing profit.
• Spreading Risk: Offers varied products, capturing different market segments.

Internal vs. External Growth

Internal Growth

• Expanding operations, new stores, market expansions, product development.

External Growth

• Includes mergers and takeovers.
• Joint Ventures: Example - BMW and Mini in EV manufacturing.
• Horizontal Integration: Merging with same-industry firms (e.g., Starbucks and Costa).
• Vertical Integration: Forward and backward merging (e.g., roastery with stores or farms).
• Conglomerate: Merging across industries (e.g., car and laptop companies).

Problems and Barriers to Growth

• Financial constraints, lack of expertise, diseconomies of scale.

Business Failure Causes

• Poor Management: Bad decisions, wrong location, or market targeting.
• Resistance to Change: Failure to adapt to market trends.
• Poor Financial Planning: Lack of cash flow and expertise.
• Diseconomies of Scale: Increased costs despite growth.

Risks for New Businesses

• Lack of experience, market competition, insufficient sales, financial challenges.

Examination Questions and Techniques

• Importance of creativity and risk in entrepreneurship.
• Role of business plans in securing loans and setting targets.
• Evaluating methods to measure business size.
• Government support's best strategies for startups, such as grants.