OCR GCSE (9-1) Business (J204) · Spec 1.1, 1.2, 1.3, 1.4, 1.5 and 1.6
Enterprise, planning, aims and growth
Read the notes, then try the questions. Each one is marked the moment you press Check, and shows the right answer and why.
Key ideas
- An entrepreneur spots an opportunity, such as a gap in the market, and takes the risk of starting a business. The reward can be profit, but it is never guaranteed.
- Entrepreneurs often show determination (they keep going when it is hard) and creativity (they come up with new ideas).
- A business plan makes the owner work out costs, resources, markets and aims before spending money. It helps to reduce risk, and a bank may ask to see one before it lends. A plan cannot remove risk.
- Common types of ownership are sole trader, partnership, private limited company (Ltd) and public limited company (plc). In a limited company the owners' risk is limited to the money they put in.
- Common aims are survival, profit, growth, market share and providing a service. A business can change its objectives, for example from survival to growth once it is steady.
- Stakeholders are the people and groups affected by a business, such as owners, employees, customers, suppliers and the local community. Their interests can clash.
- Organic (internal) growth comes from the firm's own sales and new products. External growth is a merger or takeover. Same industry and same stage is horizontal. Different stages of the same supply chain is vertical. A move into a different market is diversification.
Key terms
- Entrepreneur
- A person who takes a risk to start and run a business, hoping for a reward.
- Risk and reward
- The chance of losing money set against the chance of making profit.
- Business plan
- A document setting out the aims, markets, resources and finances of a business.
- Stakeholder
- A person or group affected by what a business does.
- Organic growth
- Growth from within, for example selling more or launching new products.
- Horizontal merger
- Two firms in the same industry at the same stage of production join together.
- Diversification
- Moving into a new, unrelated market.
Common mistakes
- Saying a business plan stops the business failing. It only helps to reduce risk, because forecasts can be wrong.
- Mixing up horizontal and vertical. Horizontal means the same industry and stage. Vertical means a different stage, such as a supplier.
- Saying a reward is guaranteed. Profit is a possible reward. The risk of losing money is always there.
- Calling every aim "profit". Survival, growth and market share are different aims and can matter more in some years.
Exam tip
In Section A, read all four options before choosing. For a 2-mark explain, give a point and then develop it with "because" or "so". For a 3-mark analyse, build a chain: say what it is, link it to the business in the text, then say what it means for the business.
Free practice questions
6 questions, 16 marks. Answer, then press Check. The marking guide explains how the marks are worked out. Nothing is saved.
- Question 1 · Multiple choice[1 mark]
Omar spends his savings on a van to start a mobile pet-grooming business. What is the main risk he is taking?
- Question 2 · True or false[4 marks]
Decide whether each statement about entrepreneurs is True or False.
1. An entrepreneur takes on the risk of losing the money they invest.
2. A successful reward is guaranteed for every entrepreneur.
3. Spotting an opportunity can lead to a new business idea.
4. Most new businesses make a profit in the first month.
- Question 3 · Fill the gaps[4 marks]
Complete each sentence about business planning using the word bank.
Word bank: profits · resources · reduce · dividends · increase · objectives · plan
A bank may ask to see a business before agreeing to lend start-up money.
Planning helps to the risk that the business fails.
A plan lists the the business needs, such as equipment and staff.
A plan also sets out the aims and of the business.
- Question 4 · Matching[5 marks]
Match each business aim to the example that shows it.
- Question 5 · Multiple choice[1 mark]
Two independent bakeries in the same town agree to join together and trade as one business. This is an example of a:
- Question 6 · Multiple choice[1 mark]
Which is an example of organic (internal) growth for a hair salon?