in this video I'm going to be guiding you through chapter 1.3 Enterprise growth and size in chapter one understanding business activity these are the syllabus statements Enterprise and Entrepreneurship so what are the characteristics of an entrepreneur first of all we have our risk taker they take personal risk as they invest their personal money or funds into the business if the business fails all of that goes away they need to be creative and Innovative in order to identify gaps in the market so they are able to provide a product that the market requires but not available at the moment they need to be optimistic and self-confident meaning that they need to be optimistic of the market despite its conditions and also self-confident so if people are disagreeing with their business idea they're still able to successfully execute their idea into the market they need to be independent meaning that they can work by themselves or with other people they need to be an effective Communicator so they can communicate their new product or new idea to potential customers or investors and also they need to be hardworking next we move on to the business plan so what is a business plan A business plan contains a business objective details about its operations finance and owners so Banks usually want this plan in order to give out bank loans and it also helps set clear targets for the business and owners show planning and it identifies what assets they own and estimates costs of the business in the short to medium term again Banks use this document to assess how much money that they are able to lend the new business next we move on to reasons for government support our first reason is that they want employment so the government tends to like very low levels of unemployment which means that the productivity of the economy is high so new businesses will create new jobs because they need to hire more employees and therefore resulting in higher income and people with higher income usually will demand more goods and services in the economy which makes a healthy economy increase output because the more goods and services are able to be supplied to the consumers and therefore they're able to buy more this will improve the standard of living of the people in the economy to promote competition so there's more choice of goods and services being available in the economy so what happens is prices will therefore be lowered due to its competitive nature and the quality of goods and services will be higher due to its competitive nature which is the benefit of competition so what are the methods of government support well first of all we've got lower rent access to cheap loans so this means that we have a lower interest rate being paid for these loans grants so free money from the government training received or training given by the government and also tax breaks so receiving a lower tax rate for businesses and this is all to promote business activity and how they support new businesses next we move on to measuring the size of businesses now how do they do this they do this by measuring the number of employees so in Apple's case they have 161,000 employees globally they can measure by output so Apple has sold over 454 million products in 2023 the value of sales is $383 billion the value of their Capital employed so this is their Machinery that they have invested in is $62 billion and their profits so far in 2023 is $96 billion so this makes them a very very large company however there are some limitations to this the first limitation is that it depends whether the business is capital intensive or labor intensive if they are capital intensive it means that the capital expenditure will be very high with a very low employee count on the other hand if it's labor intensive that means employee account will be very high with a very low capital expenditure and it also depends on the range of the value of the goods sold and also High average costs if the average costs are very high this means that their profit margins will be very low despite if the business is very large or very small in this section we are going to explain why some businesses grow and why others stay small firstly is to reduce its competitors this will allow them a better chance of capturing the market or more customers unfortunately this will lead to less choice for customers and more demand for its goods and services secondly they gain economies a scale this means that they lower the average cost of production which leads to a lower price for its customers and and as a result more profit for the business they gain a larger market share so a greater portion of the total market for them they have the ability to influence industry's Trends remember this ad here this was the iPhone 10 and it's not next this is to spread risk so this allows them to offer different products in different market segments so for example the Hilton is able to capture the high income family and the low income family this protects them from sudden changes in the market this also increases their customer base so what happens is that allows them to reach more potential buyers higher brand recognition and better stability and growth cuz usually when a customer starts using your product they are repeat customers think of the iPhone what will your next phone be if you are an iPhone Ione user typically it would be another iPhone so now we look at the different ways of growth internal and external so internal growth is is using its own existing operations to grow some examples could include open opening up new stores entering new markets in different countries develop new products and to diversify its services or goods and services external growth on the other hand is when the business takes over or merges with another business this is also known as integration this is done through merges or takeovers firstly we have a joint venture a joint venture is when two or more businesses agree to start up a new project our example here is BMW and mini and their project is to manufacture electric vehicles in China the benefits of this is that they get increase its capital Shar the costs access to new skills and access to New Markets and this benefits both companies horizontal integration is when the firm merges with or takes over another in the same industry so for instance um a store will be merging with another store so let's say Starbucks and Costa they are in the same industry at the same stage of production vertical integration so forward for instance this is when the firm merges with another firm in the same industry but but at a different production level that is ahead so for instance a Coffee Roastery merges with a store so this is for forward vertical integration next we have vertical integration which is backwards so this is when one firm merges with another firm in the same industry but at the stage of production that is behind so for instance a coffee rooster merges with a farm lastly we have a conglomerate so this is when a firm merges with another firm in a completely different industry so for instance a car company merges with a laptop company and that is a conglomerate so what are the problems linked to growth so the barriers to growth is well it really depends on whether you have the money to do so and it also depends on the level of expertise you have or not in in the market and also the this economy is a scale so this economy is a scale is when your average cost increases as your firm gets larger so this this is a big problem and this will be explained in further detail in the finance unit so why do some businesses choose to stay small first reason is it really depends on their objective so if their objective is to offer bespoke services to individual clients it's very difficult to get big also depends on how big the market is for instance Niche markets an example of this will be a super yacht also the CEO or the entrepreneur might lack skills it also depends on the type of of Industry again explained in the small Market SE section here and also it might be dominated by large businesses so for instance a small convenience store would be very very difficult for them to expand if they are right next to a Walmart or an Asda so what are the main causes of business failure firstly it's poor management so some CEOs just make bad decisions such as Kodak not going digital back in the '90s they open in the wrong location they have the wrong supplier so this means that there will be higher priced or lower quality and maybe they're just targeting the wrong Market Al together our next reason of why businesses fail is because failure if a plan for change this is because everything changes like consumer tastes consumer Fashions and consumer trends Everything Changes back in the day we had to go to a video store called Blockbuster we had to drive there Park rent a film and come back home and watch it and now we have something amazing called Netflix and why didn't Blockbuster go onto the internet I don't know why but now they're bankrupt and that's why we don't see any Blockbusters on the street our next reason is poor financial planning this means that they could let cash which leads to insol y they might have a lack of expertise in terms of financial planning like expert accountants and last but not least the this economy is a scale which increases its average cost as the firm grows so what are the risks of a new business then so the business risks are usually less experience or not enough experience compared to your competitors you're new to Market it means that the more larger firms will be able to lower their price and price you out insufficient which leads to insufficient sales and also Financial issues so these are the risks for business these are the reasons for business failure now moving on to our solved examination questions our first question is is being creative the most important characteristics of of being a successful entrepreneur yes new and unique ideas are made to satisfy the potential Gap in the market no risk is the most important because if you don't take risk you don't know whether your idea is accepted or not although being a creative entrepreneur is important it avoids risk of not being first in the market which will therefore lose your Competitive Edge and that's why risk is the most important and that will give us six out of six okay next question identify and explain two ways in which the business plan might help hashim's new business to be successful way one help get a bank loan this will be able for the bank to clearly see if the business is able to repay its debt for the gift shop set clear Targets this will allow the business to achieve their aims and objectives using these targets as they are a soul Trader now if you don't know how to get six out of six or anything to do with exam technique please follow the link in the description below next question do you think that the number of employees are the best way to measure the size of a tertiary sector business justify your answer yes because the more employees are needed to fulfill higher levels of demand no because more money invested in capital goods will indicate that the business is large why because they invest more in machines and factories and the evaluation well it depends if the tertiary sector business is capital incentive because if it is then it will have a very low employee count contributing to higher output due to machines and this will be our our third six out of six question lastly do you think that offering financial help such as grants is the best way for a government to support business startups yes because money is directly given to the business which they can invest in a good location however taxes are the best way because it decreases the cost of production and this could mean that they could reinvest this money into the business even further however upon valuation lowering tax is not the best way for a startup because demand might be insufficient or very low at the beginning which could lead to business failure therefore I think that grants the best for a startup because they have limited access to Banks as they are not willing to lend to a startup business and that will get us six out of six I hope that was helpful I hope you guys have a good day byebye