The Nature of Enterprise (OCR GCSE Business)

Revision Note

Written by: Lisa Eades

Reviewed by: Steve Vorster

What is Enterprise

Business enterprise refers to the spotting and pursuit of a business opportunity that has the potential to make a profit
- It involves forming an organisation, known as a business or enterprise, that provides customers with the opportunity to buy products or services
Enterprises can range from small businesses run by a single person to large corporations with thousands of employees
Some examples of enterprises include:
- A local bakery or restaurant
- A firm of lawyers
- A clothing store or retail chain
- A manufacturing company that produces cars or electronics
- A software development company

Enterprises carefully plan their operations, manage resources such as money, materials, and people, and make decisions to ensure they stay competitive and profitable
- They also need to comply with relevant laws and regulations to ensure that they are allowed to continue to operate

Characteristics of Entrepreneurs

An entrepreneur is a person who is willing and able to create a new business idea or invention and take risks in pursuing success
- These risks can be financial, personal or creative
- Successful entrepreneurs can identify and pursue opportunities, create value for customers and build thriving businesses

What Entrepreneurs do

Role	Explanation
Organising resources	An entrepreneur must be able to gather and coordinate the resources necessary to start and operate a business E.g. When Michael Dell started his computer company from his garage, he had to organise resources such as space, computers, software tools, and employees and manage the finances
Making business decisions	Entrepreneurs must be able to make decisions that will determine the success or failure of their business E.g. A restaurant owner may need to decide what type of food to serve, where to locate the restaurant, and what prices to charge. These decisions require a combination of market research, creativity, and business skills Making the wrong decisions can lead to wasted resources, lost opportunities, and ultimately business failure
Taking risks	Entrepreneurship involves taking financial, personal, or professional risks E.g. An entrepreneur may invest their life savings into a new venture or quit a secure job to start their own business They may also take risks by introducing new products or entering new markets These risks can pay off with great rewards, but they can also lead to failure and financial loss As their business grows, an entrepreneur may make the decision to employ staff to help with its day-to-day operations The entrepreneur may take on the role of mentor, supporting new staff members to carry out their tasks in a particular way

Entrepreneurs often posses a valuable set of characteristics and skills

Diagram: Skills and Characteristics of Entrepreneurs

Entrepreneurs possess a range characteristics including resilience, creativity and the willingness to take a risk

The skills and characteristics commonly possessed by entrepreneurs

Perhaps one of the most important skills of an entrepreneur is the ability to communicate persuasively
- Persuade potential financial backers of the merits of their idea
- Encourage people to join them in creating the product/service
- Convince customers of the value of their product/service
They should also be able to solve problems, be well-organised and possess key skills such as numeracy and competency in the use of IT
Entrepreneurs should be prepared to work with others and build teams to improve the chances of business success
A range of personal characteristics are particularly important for entrepreneurs
- Being prepared to work hard, often for long hours, with little financial reward
- Resilience and self-confidence are needed to recover quickly and move on from setbacks
- Creativity and a willingness to embrace innovation
- Being prepared to take the initiative in making decisions, pursuing opportunities and taking risks
All of the skills work together to create and drive an innovative idea towards success

Examiner Tips and Tricks

You could be asked to explain the entrepreneurial characteristics of a business owner. In explain questions you must use evidence from the stimulus material to support your answer.

Risk & Reward

Entrepreneurs must manage the risks associated with failure, financial loss, and lack of security while striving to achieve the rewards of success, profit, and independence

Diagram: Risks and Rewards of Business Activity

Entrepreneurs balance risks, such as business failure and financial loss, with rewards , such as profit and independence

Entrepreneurs balance risks, such as business failure, financial loss and lack of security, with rewards, such as business success, profit and independence

The Risks of Business Activity

Risks of Business Activity	Explanation
Business failure	Business failure affects businesses of all sizes and is a risk to both new and established businesses It occurs when a business is unable to meet its financial obligations or when it cannot generate enough revenue to sustain its operations The impact of business failure can be devastating, resulting in job losses, bankruptcy, and financial ruin for the owners and investors
Financial loss	This occurs due to factors such as poor financial management, economic downturns, or unexpected events such as natural disasters The impact of financial loss can be severe, resulting in reduced profitability, reduced competitiveness, and reduced ability to invest in growth
Lack of security	This is a risk that businesses face in terms of data security, intellectual property theft, or physical security A security breach can result in reputational damage, legal liability, and the loss of customer trust

There are many ways in which entrepreneurs can reduce the risks associated with starting up and running a business, including:
- Careful management of cash flows into and out of the business
- Conducting thorough market research before and during trading
- Setting clear aims and objectives
If risks are minimised and an enterprise survives and thrives, entrepreneurs can be well-rewarded

The Rewards of Business Activity

Rewards of Business Activity	Explanation
Business success	This is the ultimate reward that business owners strive for It occurs when a business meets or exceeds its objectives, such as generating revenue, achieving profitability, or expanding its operations
Profit	Profit is a measure of the success of a business Profit enables businesses to reinvest in growth opportunities, pay dividends to shareholders, and provide financial stability to the business
Independence	This reward is often overlooked but is crucial to the success of a business Independence allows businesses to make their own decisions rather than being subject to the demands of external stakeholders such as investors or creditors

Last updated: 26 July 2024

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