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Cambridge Igcse Enterprise Courshoughton Online Ebook Texxtbook Full Chapter PDF
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Cambridge IGCSE® Enterprise Coursebook
Medi Houghton, Matthew Bryant
and Veenu Jain
Cambridge IGCSE®
Enterprise
Coursebook
Contents
Introduction to enterprise
Introduction to enterprise
Learning summary:
In this chapter you will learn about:
■ the meaning of enterprise
■ stakeholders
■ enterprise capability
■ different ways of being enterprising at home and at school.
Introduction to enterprise
What is enterprise?
Enterprise is another word for an organisation or business managed by one or
more individuals who are able to take the initiative to make decisions and take
calculated risks. All business activities use resources like land, labour, capital and
enterprise to produce goods and services that people want to buy.
Enterprise also refers to the characteristics/qualities that make people want to
set up and run a business. It is the ability to be innovative, take initiative, make
decisions and bear the risk of setting up and running a business.
KEY TERMS
Stakeholders
An entrepreneur who starts up a business may be the main owner, but
there are many other stakeholders. A stakeholder is an individual, group or
organisation with an interest in the activities of a business. An entrepreneur
should make decisions with the interest of all stakeholders in mind.
Stakeholders can be internal (directly involved with the running of the company)
or external (outside parties that can affect and be affected by the business).
Figure 0.1 shows the main stakeholders in an enterprise.
Introduction to enterprise
TIP
Never dismiss an idea as being too simple or not good enough. Always give it a go
and find out how you can develop it further.
Employees
Internal
Owners/
shareholders
Stakeholders
Customers/
consumers
Government
Local community
External
5
Suppliers
Lenders
Competition
Employees: Employees are the people who do the work in an enterprise and
earn a living from the operations of a business. To keep employees happy and
productive an enterprise must provide them with fair wages, job security and
good working conditions.
Owners/shareholders: Having invested in the enterprise, owners and
shareholders want the business to grow and make profits. Healthy profits and
the growth of an enterprise are important to attract further investment.
Cambridge IGCSE Enterprise
KEY TERMS
Analyse: Examine in detail to show meaning, identify elements and the relationship
between them.
Evaluate: Judge or calculate the quality, importance, amount, or value of something.
Identify: Name/select/recognise.
Explain: Set out purposes or reasons/make the relationships between things
evident/provide why and/or how and support with relevant evidence.
ACTIVITY 0.1
TIP
Make sure your spoken and written communication is simple and clear.
PROJECT PROMPT
Summary
You should know:
■ the two main types of enterprise: a social enterprise (not-for-profit) and a
business enterprise (where the aim is to make a profit)
■ making well-thought-out decisions, being innovative and taking risks are
the three main characteristics of an enterprise
■ entrepreneurs who start up an enterprise have to be mindful of the
interests of all stakeholders
■ stakeholders are people and organisations that have an interest in the
activity of a business. They can be internal (within the organisation) or
external (outside of the organisation). Employees and shareholders are
internal stakeholders, whereas lenders and suppliers are some examples of
external stakeholders.
■ you can be enterprising in everything you do at home and at school by
taking more initiative and responsibility and being organised and creative.
10
11
Chapter 1
Setting up a new enterprise
Learning summary
In this chapter you will learn about:
■ the different stages of the enterprise process
■ the key points to consider at each stage
■ the characteristics of different types of business organisations.
Cambridge IGCSE Enterprise
12
Action planning:
• This involves, making plans for the enterprise activity keeping the costs,
budget and financial capability in mind.
• Breaking down goals into achievable tasks.
13
• Using resources and team members most efficiently. Allocating roles
according to people’s strengths, skills and attributes to increase the chances
of success.
• Setting appropriate timescales and milestones, working towards the goals set
out earlier.
Monitoring Progress
• Constantly monitoring and evaluating progress against the objectives set out
is a way to make sure that projects are tracked and any deviations identified.
Cambridge IGCSE Enterprise
• If tasks are not done and objectives not met on time, corrective action/
adjustments need to be done in response to any deviations from the plan.
This is essential to ensure that objectives are met and goals achieved within
the allocated budget and time.
TIP
Word processing and spreadsheet software tools can be very useful for recording
ideas and plans, and for creating timelines for target setting and monitoring.
Putting data and figures into tables makes it easier to understand the
information. Use a spreadsheet to store information and perform calculations.
14
ACTIVITY 1.1
Your group has been given the task of starting a new club in school. Brainstorm
for ideas with your team. Some examples of new clubs that could be offered are:
• helping children in the lower classes with maths/science/English
• sports club offering a popular or sport of your choice
• debating club.
Once you have decided on which club your group will be starting, discuss all the
things you need to consider to get it running. Consider the various stages of the
enterprise process and what you need to do. You can make an enterprise process
mind map or make a list of the points.
1 Which club has your group decided to start? How did you identify this club as
the best one to start?
2 What planning do you need to do in order to start the club? One of the things
to think about is the venue where the club will meet. What other things should
be considered?
3 How will you implement the plans that you have made?
4 How will you ensure that your club is running successfully?
Chapter 1: Setting up a new enterprise
PROJECT PROMPT
As you start your enterprise project, have an overview about how your project
will develop through various stages of the enterprise process
1 When identifying the problem/need of your project, identify the various
factors that you will have to consider. Think about the research you will
have to do to make informed decisions. What will be the aim/vision of
your enterprise? Consider the risks involved in starting and running your
enterprise.
2 Analyse how the solution that you have found to the need/problem identified
in your project is the most creative and effective.
3 When making your action plan, think of all the financial and marketing
aspects of your enterprise.
4 Find out about all sources of help and support from the government and
other organisations that you could use.
5 Think about what milestones you might set to be able to monitor the progress
of your project.
6 At each stage, remember to reflect on what worked well and what could have
been improved.
15
Sole trader
Private limited
Limited company
Public limited
Types of business
organisations
Partnership
Co-operative
Charities
Social enterprise
Not-for-profit
Franchise
Sole trader
This is a business that is owned and run by just one person though it may employ
staff. A sole trader is an unincorporated business. This means it is not a separate
entity from the owner. The owner has unlimited liability and is liable for all the
debts of the business and stands to lose his/her investment as well as personal
assets if the business
goes into debt. KEY TERMS
However, this is one Sole trader: A business that is owned and run by
of the most common just one person though it may employ staff. It is an
types of business unincorporated business in which the owner has
organisations, unlimited liability for all the debts of the business.
mainly because it is Unincorporated business: A business that does not
cheaper and simpler possess a separate legal identity from its owner. The
to start. Examples owner(s) have full liability for the business.
include hairdressers, Unlimited liability: Shareholders/owners are liable for
all the debts of their organisation and stand to lose their
photographers,
investment as well as personal assets if the business goes
freelance writers and into debt.
artists.
16
Advantages of being a sole trader:
• Cheap, quick and simple (less documentation and legal formalities) to start.
• The owner can keep all the profits.
• The owner can make his/her own decisions and has full control of their business.
Disadvantages of being a sole trader:
• The owner is fully responsible for all debt, also known as unlimited liability
• It is difficult to raise finance, so often the owner has to rely on personal savings.
Partnerships
This is a business that is owned by two or more people, who are known as the
partners. Partnerships cannot normally KEY TERM
have more than 20 partners though this
can vary from country to country. This Partnership: A business that is
owned by two or more people,
sort of a business organisation is also
known as the partners. This
unincorporated and so the partners have sort of a business organisation
unlimited liability. Lawyers, accountants is unincorporated and so the
and small businesses owned by two or more partners have unlimited liability.
people are usually set up as partnerships.
Chapter 1: Setting up a new enterprise
Advantages of partnerships:
• Cheap, quick and simple (less documentation and legal formalities) to start.
• The partners can keep all the profits.
• The partners have full control of their business.
• The decision-making and workload is shared.
Disadvantages of partnerships:
• The partners are fully responsible for all debt (also known as unlimited
liability).
• It is difficult to raise finance, so often entrepreneurs have to rely on personal
savings.
• Disagreements and conflicts between partners can slow down the business.
• The decision made by one partner is legally binding on all the others.
Limited companies
Limited companies are incorporated businesses that are a separate legal entity
from their owners. A limited company is owned by its shareholders who own a 17
• Since the company is a separate unit from the owners, it will continue to exist
even if one of the owners leaves or dies.
Co-operatives
This type of business organisation is KEY TERM
owned and managed by people who use
its services and who work there. There Co-operative: A type of business
organisation that is owned and
are different types of co-operative. managed by people who use its
• A consumer co-operative is owned services or who work there.
by consumers who buy its goods or
18 services.
• A producer co-operative is owned by producers of goods who have come
together to sell their goods.
• A worker co-operative is one which is run by its employees.
Advantages of co-operatives:
• Co-operatives are democratic.
• The members (whether consumers or employees) work together. There are
fewer chances of conflict as members share a common interest.
• The owners/shareholders in a co-operative usually have limited liability.
• Co-operatives usually get some sort of tax relief from the government.
• Most co-operatives are treated as separate legal units and so the death of a
member does not affect its continuity.
Disadvantages of co-operatives:
• It is difficult to raise finance as co-operatives cannot issue shares.
• Accounts have to be made accessible to the public.
• Members may not necessarily have the required skills to run the business and
so have to hire professionals who may be expensive.
Chapter 1: Setting up a new enterprise
Advantages of franchises:
• The franchisee has a greater chance of success as they are selling a
well-known product/service.
• The franchisor may provide some support to the franchisee by providing
advice and training.
• The franchisor may contribute funds or do some advertising at national level,
reducing the franchisee’s costs. 19
• Easier to gain loans from bank, as the business is seen to be low-risk.
Disadvantages of franchises:
• The franchisee will have to pay a license fee and possibly a percentage of the
revenue to the franchisor.
• The initial costs of setting up a franchise business may be high.
• The franchisee will not have full control over how he can run his business as he
will have to follow the controls set by the franchisor.
Social enterprises
A social enterprise is a business with social objectives and ethical values aimed
at benefitting the community. The money earned is reinvested in the business or
used for a social cause. There are different types of social enterprise.
Not-for-profit enterprises
• Not-for-profit enterprises are directly involved in producing goods or providing
services, but in a socially responsible way.
• They often sell products or services in order to reinvest their profits into the
business for the benefit of the community and not-for-profit maximisation of
its owners/shareholders.
Cambridge IGCSE Enterprise
Charities
• Charities raise money by doing fundraising activities and collecting donations.
• Charities work to provide quick solutions to immediate disasters/adversity
and their impact is often short lived.
Consider your skills and personality when deciding what type of organisation
your enterprise will be.
ACTIVITY 1.2
PROJECT PROMPT
What type of a business organisation will best suit your enterprise? Explain why
you think this sort of organisation will be best suited to you.
It isn’t a requirement for the coursework, but it would still be useful to think about
which type of organisation will best suit your enterprise.
What are the disadvantages of this sort of organisation and how could you
minimise them?
Chapter 1: Setting up a new enterprise
MINI CASE STUDY
Having suffered abuse as a child, Betty Makoni founded the Girl Child
Network Zimbabwe in 1998. It started as an informal discussion group/
club in a classroom. Its main aim was to allow girls a safe space to meet
21
and talk freely about their problems and fi nd possible solutions. In
collaboration with the social services department and other government
regulatory bodies, it is now at the forefront of identifying and tackling
abuse and has mentored thousands of girls around Zimbabwe. Its
model is being used in other parts of Africa and it has grown into an
international charity, Girl Child Network Worldwide. It is a not-for-profit
organisation with the social aim to protect and promote the rights of girls
all over the world.
Questions:
1 What characteristics of the Girl Child Network make it a social
enterprise?
2 Using the case study, explain the main differences between a sole trader
and a social enterprise.
3 What do you think are the main challenges faced by a social enterprise
like the Girl Child Network?
4 What do you think are the driving factors behind people working for
such an enterprise?
Cambridge IGCSE Enterprise
MINI CASE STUDY
Questions:
1 Discuss the main advantages to a business entering the restaurant
industry either by buying a franchise or opening a restaurant as a
limited company.
2 Discuss the challenges that may be faced by a McDonald’s franchisee.
3 What are some of the advantages to McDonald’s when expanding by
offering its franchises?
4 Explain the role and importance of suppliers as stakeholders in McDonald’s.
Exam-style questions
1 State one advantage and one disadvantage of a partnership. [2]
2 What type of a business organisation is your enterprise?
Explain two of its main features. [4]
23
3 In the McDonald’s case study above, identify two stakeholders
and explain their involvement in the enterprise. [4]
4 Describe the different stages of the enterprise process. [6]
5 With reference to your own enterprise, explain the importance
of planning in the enterprise process. [6]
6 Compare and contrast the characteristics of a sole trader and
a limited company. [10]
KEY TERMS
Summary
You should know:
■ the six stages in the enterprise process: identification of problem/need,
exploring different solutions, action planning, implementing the plan,
monitoring and evaluating success and failures
■ sole traders, partnerships, limited companies, franchises and co-operatives
are different types of business organisation that exist to maximise profit for
the owners. Each has their own legal status, advantages and disadvantages.
■ social enterprises work for the benefit of the community and not for the
maximisation of the owners’ profit
■ charities and not-for-profit organisations are examples of social enterprises.
24
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