Hello and welcome to another business sirtis GCSE in GCSE presentation.
Today's topic is enterprise business growth and size.
So we talked about the fact is it production previously and tampering number one.
When we talked about the four factors of production being land labour capital and enterprise.
So Enterprise is the fourth factor of production which is a quality of combining the factors of passion
and taking on the risks of combining them.
So an entrepreneur is an individual that possesses the quality of enterprise so he bears the responsibility
and takes the risk of combining the other factors of production.
So he decides what to do with the land how to make use of the labour and how much capital is needed
he takes on all these questions and answers them.
So be entrepreneur when you run your own business you tend to have your own sort of advantages and disadvantages.
The advantages are.
Think of yourself running your own business.
So think of yourself creating your own YouTube content are gaining music or maybe someday owning a cardsharp
where you sell games and cards comic books.
So what you can do as your own boss is you tend to decide what time you want to work for so you could
tend when you're sharp.
Or you could decide when you want to record your own music.
The other thing is you get to decide on what ideas to implement so you get to decide the direction in
which you want to take your business to it.
The disadvantage however is most new businesses tend to fail.
This could be roughly an approximate of 80 percent so there is a very high tens of businesses you know
tending to fail because it's similar to thinking about someone dropping out from school to playing soccer.
So there are millions of.
There are a lot lots of kids that drop out from school and they only want football and it makes a grand
stage.
And he has the background story of strapping on from school and making it through to the high end.
The other thing is.
Because of an individual.
So think about most corporate companies big companies so they have trained professionals they have proper
management degrees they have X and they tend to generally experience overtime by working in different
roles.
So in comparison to that a new entrepreneur it doesn't necessarily have all the expertise and knowledge
required to running a business.
So he may have some knowledge regarding his own business but he might not know.
So say if you own a restaurant so you might know regarding the menus.
The choleric items in everything but you might lack the decision making with regard to what suppliers
to choose or regarding decision making like financing.
How do you want to finance your restraint overtime.
How much working capital you need.
What kind of message are you and what kind of.
Stopgaps that could be used.
How are you going to solve them.
So.
The last quality last disadvantage would be investing their own capital.
So an entrepreneur who invests his own capital into the business now this creates two problems.
First of all if the business fails you tend to lose.
You would lose essentially all your investment so you might lose all your earnings.
I have been through all over the years.
The other thing is if you want to expand your business there is only so much funding that you have access
to because your own capital is always limited.
The next question is what makes a successful entrepreneur.
Now this is the secret sauce that so many centuries people have been wondering and trying to figure
out.
So at the end of the day there are certain qualities that tend to exist in common with all successful
entrepreneurs.
So they tend to work very hard and they work long hours.
Most of the time when youre working for something for your own business you tend to be really motivated
passionate in you would work say 20 hours in a day.
So the ability to work long hours and the ability to commit yourself is one of the factors.
The second quality would be the be you take risk.
Now think about.
A revolving door.
And someone asks you to walk through that door with their being a 50 percent chance that you might not
make it through the.
On the other side.
So there is a 50 percent chance that you walk through that door.
You might not come out of it alive but then again they say that if you do come out alive you get a one
million dollar prise.
Or I say you win the lottery and you make much more hundred million.
So how many people do you think would actually take on that risk of walking through that revolving door
in order to win that money when there is a 50 percent chance that they might not make it.
So this and believe me to take risks is a very empowering quality that most people do not have.
Most people try to pay it safe.
An entrepreneur takes calculated risks.
The other quality is being creative.
So think about a customer and he's trying to buy two similar items.
Cq asks ask himself like why should I go for your product over someone else.
That's why more businesses try to create a differentiating product differentiating point a unique selling
point.
So entrepreneurs tend to get creative regarding this problem and try to create a differentiation which
attracts customers and fosters customer loyalty.
The other quality is being motivated as you're investing your own time and money into your own business.
There is a lot of challenges and a lot of times where entrepreneurs would go through extreme periods
of stress.
So in order to cope with those situations you need to be an entrepreneur you needs to be extremely motivated
and be positive through those rough times.
The last quality will be an effective communicator.
So essentially is out to bring you more.
You have to communicate with different stakeholders ufp Communicate with your customers your employees
their bank suppliers government.
So you need to in order really need to manage all those kind of communications he needs to know what
is going on.
He needs to be able to answer questions he needs to be able to provide information to every single external
stakeholders in order to make sure the business runs smoothly.
So we tip.
We move on to the next part where we find out why governments support start-ups start-ups are essentially
new business organizations and most governments.
Provide extreme leniency or extreme benefits to stay out of companies because they play a crucial role
in the development of an economy.
So start of companies reduce unemployment by creating jobs.
Every single small organizations that is Crede it tends to employ two or three or four individuals into
their business.
Now this adds up a lot and it keeps for a lot of the employment in society.
The second factor to be increased competition so the more businesses they are providing say similar
products the more competition exists now the real winner is the customer because when there is competition
there is always going to be lower prices and better quality.
The other factor.
Why governments have for it.
Is there might be a shortage of output regarding certain products.
So you need externals you need small businesses to provide for those shortage and this they create their
own output in order to meet the demand so its like the demand and supply.
So because there is a demand.
And there is less supply.
So you have small businesses new start-ups that try to provide the supply in order to meet the demand.
So sometimes he has started a charity organizations that provide goods and services that increase social
welfare.
You have a lot of teria organizations that focus on the old aged aged individuals or those with the
handicapped or handicapped individuals or young kids or how to deal with veterans.
So these are not profit meeink making and most companies are not being profitable and they don't want
to be involved.
So this gap is filled by start-up businesses that take on this role of providing social welfare.
And as you remember the government's main intention on public sector is to increase social welfare.
So they support any start of business that's helps them in order to reach their goals of these things
or welfare.
The other thing is every small plan.
Every big tree one day started as a small plane.
So you have a budding tree from a seed.
It goes into a tree.
Similarly small businesses have the chairs.
There is a small chance of them becoming a really big business.
When you grow in size you tend to pay more taxes you create more jobs thus you help the economy.
So governments try to provide aid to start over in differing forms.
First of all they have centres where they provide advice through its experienced individuals staff.
So we studied previously that entrepreneurs sometimes lack the experience and knowledge in order to
run their own business.
So they tend to address this issue by providing centres where you can contact individuals that provide
you advice regarding matters.
They also provide you with incentives like reduce costs of premises and they might because the first
sign of business they might reduce the rent of or reduce their purchase costs.
So let me give my provide fewer loans from the National Bank at lower interest rates and they could
provide huge subsidies for training of your workers.
So there there are schemes where government finances education after workers or retraining workers in
alred for the workers to gain skill sets new skill sets.
And last but not least is tax exemption so if a government is looking looking to bolster a certain area
of the area or a certain industry they could provide certain tax exemptions injury to influence that
sector.
So when you're starting a new business you need to have a business plan that is fundamental and to start
up a business plan is a document that contains business objectives with details regarding these operations
finance and its owners.
So a business plan is essentially a document where you have.
We explain every small details regarding what are your objectives.
How are you going to run your operation so how are you going to get your supplies.
How are you going to manufacture Harry you know some people you know your products to customers and
then you have financing.
Where are you going to get your working capital worry and get your long term and short term finances.
So every small detail is addressed in a business plan.
Now when you're going to a bank asking for a loan in order to finance your business you need to have
a business plan.
So think of any individuals coming up to you and asking for a loan.
Normally common sense dictates you asking them why would you provide them your money.
What's the benefit to you.
Are they trustworthy.
So this is essentially a trust test.
So if you have a solid business plan if you have an answer to all those are the questions that are being
asked then you could essentially be trusted with the financing.
So a business plan also allows a business entrepreneur to think out.
So when you're writing down something or in your own you know investigating every small details it helps
you identify potential shortages cashflow risks so you don't identify areas where you need to focus
more of your time.
So it also helps you plan for your future.
So when you think about the beginnings you think over a period of time like over four months what you
would need to invest in and what you need to man it.
So the diagram here is that a cash budget.
So this is a very essential that you show a plan regarding your finances.
You show how there might be different months where you might have a shortage of cash and where you could
supply the shortage.
May take out a bank loan or maybe you are receiving a certain receives in the leader.
Look you know in the next months that will cover the shortage is created pretty easy.
So the next part would be comparing business size now business size can vary in importance to the yardstick
used to measure it.
So you have different.
Different tools different types of measuring a business size than you.
There are different ways to measure a business life and business size in determining the size of a business
is important because you have stakeholders such as investors investors want to know the risks and reward
they would get by investing in your business so that would be very dependent on your size.
Also the government also is involved in determining a size because normally tax rates are depending
on the size of your business so there could be on your revenue or there could be other other rules set
by the government tax code.
The banks are so.
Try to understand whether you would be able to repay a loan or whether they're assets that could be
sold in order to pay the loan back.
Competitors also try to identify the organization's size to know the risk it faces from their very night
vision.
And workers tend to provide tend to.
Try to determine their job security and maybe potentially they have a pride in their sons working for
a big company such as say you work for a company like Google or Apple or maybe a famous gaming company
like you.
What is.
There's a lot of pride involved in war for a big branded business.
So we talked about different yardsticks.
Now one of the artist is number of employees so labour intensive firms employing more workers compared
to capital intensive firms.
So there are two types of business labour intensive and capital intensive labour intensive means you
have more individuals working in the business you have more persons involved and capital intensive is
where you have more machinery rather than individuals working in the business.
The other yardstick that could be used is a value of output.
So this is essentially the value of your goods that you manufacture.
So it's used in manufacturing business.
So the limitation will be there.
A firm may produce a few number of very expensive products.
So you might have in the middle of industry where you have luxury brands that produce a very small unit
but their values are really high compared to the other big.
A big manufacturer of cars low cost tepe cars that are being sold to the larger public.
So you need to think carefully when you're determining the size of a business and by using one you are.
The other two that could be used in terms of revenue.
So the value of sales.
So does it tend to be in this tensors use in retailing businesses that sell similar goods.
So you have an example of.
A gaming shop in a pharmaceutical shop.
So when you tend to measure it in terms of value of sales you might have.
A small business where they sell less amount units of products but they have an extreme value of those
items.
So that could be you that could really inflate the picture of the size essentially So your revenue might
be high but essentially at the end of the day you could be a very small very small business.
The other factor could be the value of capital employed capital employed is defined as a told value
of capital invested into a business.
And business that tend to use capital intensive method could provide a misleading picture.
So think about a capital intensive business and business that you use uses a lot of machinery equipment.
So when you're trying to measure to businesses when you're trying to compare to business this size and
you try to use solely their capital value.
So normally a caballo incentive would look a lot larger and then those that are using labour intensive
methods.
So it could be you maybe say you example.
You work in a fire.
So you could use a tractor essentially Or you could use many individuals to do the work.
So depending on the type of tools you use in the value of your business you could be rather misleading
because you use one measure.
So we move one to understand why businesses see growth.
Now businesses seek growth in order to retain higher profits.
The more you sell the more profits you earn higher profit higher revenue lower cost enable you to earn
higher profits.
You also very low also higher prestige.
So your brand name increases when your size increases and also the lower the average costs lower the
average costs when you buy when you tend to increase your scale of operations when you tend to be involved
with more manufacturing and more selling.
So think about yourself going to the local shop and when you try to tend to buy a large sum of goods
you tend to get a discount.
This is true for businesses as well.
The more the larger scale businesses have an advantage of a law average costs.
So business also seek growth because it helps them achieve a higher share of the market.
You sell more.
That means that you also are.
It's serving tending to the needs of more customers of the population.
So there are two main ways a business can attain growth.
They could be internal growth or external growth through internal growth would be a business seeking
to reinvest its all profits in order to expand its scale.
So this is organic.
So over the years a business earns parfit and then it saves it up and gradually it buys a new location
and it's a very slow but it's a very calculated and controlled expansion external growth is where business
gets involved in either a takeover merger with another business so he could essentially buy out another
business or it could essentially agreed to run along side with another business so they could become
partners.
So external growth could be in three forms they could be horizontal integration vertical integration
or a conglomerate merger.
So horizontal integration is where one firm measures or takes over another firm in the same industry
at the same stage of production.
So the same industry meaning you could be you should be in this in if you're in the fast food industry
it should be in the fast food industry during the automotive industry you should be in the automotive
industry.
So here an example is say you need a fast food company.
McDonald's is the fast food company.
So McDonald's decided to take over one of the fast food chains in Saudi Arabia.
So that would mean that it is taking over in firm in the same industry.
The important part is it should be at the same stage of production.
So either being manufacturing or retailing.
So fast food like gunnells say Imagine if it was only retailing and then he takes over and another retailer
in Saudi Arabia that is horizontal integration.
So then you have vertical integration now vertical integration is when one firm merged with or takes
over another firm in the same industry.
So bear in mind both horizontal and vertical integration involved in being integrating with someone
in the same industry but here you have a different stage of production.
So you could essentially as a manufacture take over your retailer.
Or take over or merge with your supplier.
The last forum is a conglomerate merger.
So the last phone is growth.
This is when one business merges with or takes over him in a completely different industry.
So you could be a food manufacturing set and you decide that you want to take over another automotive.
So say McDonalds decides to take over Ferrari.
There will be a conglomerate merger because both of them deal in completely different industry.
So the benefits of integration the horizontal integration.
Allows the merger to reduce the number of competitors in the industry.
Say he took over Aston meitner Aston Martin to go for it.
So what will essentially happen is one business takes over the market share of the other.
This allows for opportunities of economies of scale economics of skill.
Is a cost savings that arises due to a business increasing its scale of operations.
So this is again back to that example of you buying more raw materials the more materials you buy.
It could be bulk buying where you could share your expenses.
There are other opportunities for economic skills so there suggest for example think about Aston Martin
Ferrari combining their businesses.
Now do you think we would need two sets of management to run the same business.
They could essentially run with the same one set of management could run both the businesses.
These this is an example of economics of scale.
Combined businesses would provide a larger share of the total market.
We talked about that already where astrakhan could essentially buy at Ferrari and take over their market
share.
So you have in terms of vertically in vertical integration remember it is about taking over merging
with a firearm in the same industry back but at different stage of production so that they could be
for a word of backword.
So you ever manufacture if you take over your supplier.
That would be backward.
If you take over your retail year that is forward you will talk about dining details later.
But a forthright vertical integration essentially allows you to have the luxury often assured outlet
so as a manufacturer if you take every retailer you know they're somewhere where you can sell your products
you could also take over the profit margin.
So every stage of production has a cut of profit margin so there is a profit margin.
If we use state and you could essentially wipe that an increase here you could also prevent the retailer
from selling your competitors product like this is true for you know if a manufacturer takes over.
Van Ness the chocolate manufacturer takes over her shop and it could essentially you know prevent other
companies chocolate from being sold.
Manufacturers also Or as you know business they're involved in the previous stage of production sometimes
lack that touch with consumers sometimes lack the information they need that marketing information.
So they could collect this information first hand from the next step.
Now back with vertical integration similary provides an assured source of materials.
So you have a supplier that will provide you good quality components in order to run your business.
There is also an existing Buffet margin issue which is similarly absorbed and also you can prevent your
suppliers from providing to be competitive.
The last thing being is the cost of components could be controlled.
So when you're buying from your suppliers you could control your casks by knowing exactly how much and
what is being supplied to you.
So without We talk about vertical integration so think about a fast food shop.
So think about the different stages involved in eating a burger served you at a restaurant.
So you have a forum where you have the raw materials sitting in the beef or chicken or it is produced
and this is sent over to the manufacture which converts them to Paddys.
So these patties and then sold to retailer will turn them into brokers they're safety.
So if you're talking about vertical integration of vertical integration backword would be for the food
manufacturers to buy out the farm.
So back well meaning you're buying someone in the pva stage of production now for it would be buying
out the next stage of pressures the manufacturer will essentially buy at the retailer.
So this is the difference between backward and forward.
So conglomerate integration is where a business is involved in taking over merging with in another in
a completely different industry.
So this helps you diversify your activities which reduces the risks of failure.
So think about an airline's company a chocolate company meriting with or you know one of them merging
together an individual owning an airline company a chocolate company and a cartoon.
Company.
Walt Disney.
Now what would happen is say for example there is an.
Say for example is industry suffering so say for example people become more health conscious and stop
they start avoiding chocolates so I know this is very unlikely but if this scenario were to happen then
the business would if the chocolate sector fails the business would not totally shut down because it
would have other options whereas airline industry or air its cartoon industry would the media industry
is going to work fine and cover up for it.
And the thing is there is a transfer of ideas.
So airline catering where they serve food to their passengers.
So the airline could essentially ask the Chocolate Manufacturers there how can we present better desserts
to our customers and the Chocolate Manufacturers could provide ideas.
The media industry could provide for content to the airline industry so you can see the scope where
industry tend to overlap with one another and a conglomerate could be helpful for all of them.
So there are problems too.
Business growth there tend to be some sort of solutions they're providing.
So the problem with one would be large businesses is difficult to control resulting in the economies
of scale.
So when you have large aberrations what you have is.
There might be places where say there is a fast food chain a hundred shops and they're all ordering
raw materials when essentially the raw materials needed has already been ordered.
So this creates overlapping of expenses and creates wastage.
So these creates diseconomies of scale.
Now one of the solutions could be decentralization where you tell the individual small units do have
their own freedom of decision making which reduces the risks of taking wrong decisions.
Another thing would be poor communication.
So when you're communicating with many different branches you could the message could get lost or the
message could be varied in this.
This completely changed so the meaning could be completely changed from source to the end so say is
that you could provide a year start this test where you could whispering something into one of your
classmates and ask this message to whispered along 10 or 20 individuals.
EdTech what the final individual actually heard the message as so this would give you an example of
how problematic communication could be.
Thankfully you could name the employed the latest equipment i.t. equipment to help you with your communication
so you can have Skype.
You could have more emails you have more webcam more and more other tools that helps communicate.
So normally when businesses grow.
There is also a cost of expansions with creeds financing issues.
And this may create a problem where you might not be able to pay off certain expenses because he invests
all merge.
So the solutions could be you planning now in ensuring there is long term finance available with helping
expansion so that when you expand a business you should always seek to use long term financial solutions.
Integration may also cars unexpected problems so there is say for example when you think about asked
and Ferrari combining together so there could be different styles of different cultures in the business
and this could create problems.
What you could do is introduce a change management system or we could introduce a management style where
you can accommodate four different cultures and help both of them get along with their differences.
So reduce the differences and increase the common harmony between them.
Then again you have some business that actively on purpose decide to see small.
This could be because of the type of industry the business operates in.
Now your business could be operating in an industry where it should retain small it should retain close
and personal relations with its customers.
So when you become a large company that is very hard for a business owner to keep in touch with every
single individual or attend tailored to your individual needs.
The other thing could be market size.
So a plumber or hair salon there is or hairdresser or you thinking about these kind of carwash you can
have these things that the customers may be very small.
There is not a large you know demand for it every day.
So you have small businesses for them that restricts their growth.
Be given.
The other thing could be.
And the owners objected.
So when you expand your business you take the risks of more stress and challenge.
And some people may not be willing or ready to sacrifice that amount of effort for the required so sometimes
profit is.
The bigger picture the bigger picture could be.
Being happy rather than sacrificing your happiness in order to be more profitable by expanding it.
So I've been learning about businesses failing in the start where we learned a new business tend to
fail.
So most of the reasons some of the common reasons are overexpansion or where the businesses are without
actually deciding.
Without being growing expanding in a controlled environment.
Rapidly expand the.
Do not take account for of all the expansions of say in manufacture.
Certainly decides to increase it.
Ask would.
Ten point ten times now if there are no customers for it at the end of the day.
All you're going to do is manufacture goods that are going to be stored in the warehouse.
So this creates a chaos chaotic environment for the lack of in control could result in increased expenses
and wasted.
Also poor communication and communication again where the message is distorted over time could create
problems for financial management.
So cash is normally King.
Cash is king.
If at the end of the day no matter how profitable your business is if you do not have the cash to pay
off your expenses your business is going to fail.
So that is why financial management is very essential.
If you do not control your finances no matter what your ideas or how successful they are your business
are going to fail.
The third thing being risk of new start-ups so new businesses tend to lack the financial backing and
resources and research needed to survive so new.
The lack of expertise in the knowledge fields leads to poor decision making and less financial resources
to far back on too which results in business here.
Last but not least you think about the recipe of a successful business.
So essentially first of all you need to create a business plan where you a map out all the details regarding
your business.
Second thing is you need to manage your finances so this is a continuous process where you always make
sure that you have enough in your cash to run you need to be expensive.
If you need you need to plan for investing in the future you make sure you get sources where you can
provide for and also proper communications where you need to communicate with all the different stakeholders
involved stakeholders being your customers employ your employees your government suppliers banks.
Everything needs to be Camy here.
So these are the essential recipes off of business being successful.
So thank you for being with me.
And this is the end of chapter 3.
Hope to see you very soon.
Never video so you can revise any.
Watch this or worse shortly Surely if you're hungry by looking at all the food examples then maybe you
should take a break in break and have a snack.
Take care.
Bye.