Business enterprise and entrepreneurship

The idea

Enterprise is the process of spotting an opportunity and turning an idea into a trading business, taking on risk in the hope of reward. An entrepreneur drives this: generating the idea, organising resources, making decisions and bearing the risk of failure. Motives include profit, independence, a gap in the market, social aims or turning a hobby into income. Entrepreneurs create added value, defined as the difference between the selling price of a product and the cost of its bought-in materials, components and services. Value can be added through convenience, branding, quality, design, and a unique selling point (USP). They also face risks such as uncertain demand, cash-flow problems, rising costs and personal financial exposure.

For example: Someone opening a café must secure premises, staff and stock before knowing whether customers will come.

What earns the marks

• Defines enterprise as the process of identifying a business opportunity and organising resources to exploit it.
• Defines an entrepreneur as the individual who takes the initiative and risk in starting and running a business.
• Explains motives for starting a business, such as profit, independence, filling a market gap or social objectives.
• Explains risks and rewards, including uncertain demand, financial loss, personal liability, profit and independence.
• Describes how entrepreneurs create added value, calculated as the selling price minus the cost of bought-in materials, components and services.
• Identifies methods of adding value, including convenience, branding, quality, design, and a unique selling point (USP).

Common mistakes and how to put them right

• Conflating added value with broader economic contributions like job creation.

  Put it right: Added value is specifically the selling price minus the cost of bought-in materials, components and services.

• Assuming entrepreneurs always succeed.

  Put it right: Many new businesses fail because of cash-flow problems, weak demand or poor planning.

• Believing risk means only money.

  Put it right: Risk also includes time, reputation, health and personal security.

Exam tips

• Anchor answers in a specific business idea so risk, reward and added value are concrete rather than abstract.
• Distinguish clearly between the entrepreneur as a person and enterprise as a process when the question uses either term.
• When calculating or discussing added value, always refer to the formula: selling price minus cost of bought-in materials, components and services.