The Association of Business Executives

QCF

Entrepreneurship and Business

Development
December 2011
Suggested Answers

STRUCTURE OF PAPER: Answer BOTH sections

SECTION A: Answer ALL SIX questions

SECTION B: Answer ONE question

Q1
Q2
Q3
Q4
Q5
Q6

14 marks
14 marks
14 marks
14 marks
15 marks
14 marks

Either Q7 or Q8

15 marks

TOTAL MARKS AVAILABLE FOR THE PAPER

100 marks

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

SECTION A
Candidates must answer ALL SIX questions in this section.
Questions do not carry equal marks. The mark allocation is shown after each question.
Section A is worth 85% of the total marks available for the paper.

Question 1
Q1
(a)

Identify and discuss the four common and essential attributes of successful
entrepreneurs. Give examples of attributes to support your answer.
The common and essential attributes of entrepreneurs are as follows:
-

personal attributes: innovative, determined; external focus; team leader

technical skills: product/service knowledge; market/industry
understanding
management competencies: marketing; finance; HRM
entrepreneurial management behaviour: opportunity identification;
resource leveraging; networking; decision-making
6 marks

Q1
(b)

Identify and explain the three key reasons why an individual creates a new business
venture. Give appropriate examples to support your answer.
Entrepreneurial motives that could be explored include:
-

Push (necessity-based) motives vs. pull (opportunity-based motives)

Personal/life style motives: high income and independence
Desire for growth company flotation and trade sale as exit strategies
8 marks

Q1

Total Maximum Marks for Question

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

14
marks

Question 2
Q2
(a)

Identify the typical resource scarcities faced by small businesses in their development
and growth phases and outline how these challenges might be overcome.
Relevant resources which may be scare for small businesses are:
-

Finance
Marketing and distribution networks
Competitive suppliers and manufacturing capability
Complementary technologies
Services
Intellectual property rights

Suggestions as to how these issues can be overcome can be made with

reference to outsourcing, strategic alliances and licensing.
7 marks
Q2
(b)

Identify and briefly explain the key issues that a small business (with growth potential)
should consider when developing a Business Development Strategy.
The Business Development Strategy is used to underpin the main Business
Plan and it sets out a standard approach.
The 'Strategy' should ask the following questions:
Who does the firm target?
What does the firm want to sell?
Where - are the customers?
When - will they be approached?
Which - are the appropriate target personnel?
Why - would they want to meet with the firm?
How - will they be reached?
7 marks

Q2

Total Maximum Marks for Question

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

14
marks

Question 3
Q3

Identify and discuss the market research techniques and sources of data that a small
business might use to enhance its competitive position.
There should be an explanation of quantitative and qualitative research, the role of
primary and secondary data and the key sources of information.
The sources that could be discussed include:
Secondary sources: internal records, personal contact networks, trade associations,
Chambers of Commerce, competitors
Primary sources: surveys and questionnaires, face-to-face interviews, telephone
surveys, mail questionnaires, omnibus surveys, focus groups, observation and geodemographic databases.

Q3

Total marks for question

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

14
marks

Question 4
Q4

Explain the rules and principles of one of the following and discuss whether it is a costly
barrier to competitiveness:
(i)

The Market Research Society Code of Conduct

(ii)

The Advertising Standards Authority Code of Conduct

(iii)

The Data Protection Act

Answer 4[i]
The principles of the MRS Code:
1)

Researchers shall ensure that participation in their activities is based on voluntary

informed consent.

2)

Researchers shall be straightforward and honest in all their professional and

business relationships.

3)

Researchers shall be transparent as to the subject and purpose of data collection.

4)

Researchers shall respect the confidentiality of information collected in their

professional activities.

5)

Researchers shall respect the rights and well-being of all individuals.

6)

Researchers shall ensure that respondents are not harmed or adversely affected
by their professional activities.

7)

Researchers shall balance the needs of individuals, clients and their professional
activities.

8)

Researchers shall exercise independent professional judgement in the design,

conduct and reporting of their professional activities.

9)

Researchers shall ensure that their professional activities are conducted by

persons with appropriate training, qualifications and experience.

10)

Researchers shall protect the reputation and integrity of the profession.

These should be summarised and, following a discussion, a judgement should be made

as to whether the Code is a costly barrier to competitiveness.
Answer 4[ii]
The Code should be summarised and, following a discussion, a judgement made as to
whether it is a costly barrier to competitiveness.
The principles of the Advertising Standards Code of Conduct are:
The Advertising Codes contain wide-ranging rules designed to ensure that advertising
does not mislead, harm or offend. Ads must also be socially responsible and prepared in
line with the principles of fair competition. These broad principles apply regardless of the

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

product being advertised.

In addition, the Codes contain specific rules for certain products and marketing
techniques. These include rules for alcoholic drinks, health and beauty claims, children,
medicines, financial products, environmental claims, gambling, direct marketing and
prize promotions. These rules add an extra layer of consumer protection on top of
consumer protection law and aim to ensure that UK advertising is responsible.
The ASA administers the rules in the spirit as well as the letter, making it almost
impossible for advertisers to find loopholes or get off on a technicality. This common
sense approach takes into account the nature of the product being advertised, the media
used, and the audience being targeted.
The Advertising Codes consist of two types which are non-broadcast and broadcast.
Answer 4[iii]
The eight principles of data protection are:
1)

Personal data shall be processed fairly and lawfully and, in particular, shall not be
processed unless
(a) at least one of the conditions in Schedule 2 is met, and (b) in the case of
sensitive personal data, at least one of the conditions in Schedule 3 is also met.

2)

Personal data shall be obtained only for one or more specified and lawful
purpose, and shall not be further processed in any manner incompatible with that
purpose or those purposes.

3)

Personal data shall be adequate, relevant and not excessive in relation to the
purpose or purposes for which they are processed.

4)

Personal data shall be accurate and, where necessary, kept up to date.

5)

Personal data processed for any purpose or purposes shall not be kept for longer
than is necessary for that purpose or those purposes.

6)

Personal data shall be processed in accordance with the rights of data subjects
under this Act.

7)

Appropriate technical and organisational measures shall be taken against

unauthorised or unlawful processing of personal data and against accidental loss
or destruction of, or damage to, personal data.

8)

Personal data shall not be transferred to a country or territory outside the

European Economic Area unless that country or territory ensures an adequate
level of protection for the rights and freedoms of data subjects in relation to the
processing of personal data.

These should be summarised and, following a discussion, a judgement should be made

as to whether the Act is a costly barrier to competitiveness.
Q4

Total marks for question

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

14
marks

Question 5
For new businesses and those in early development, identify and explain:
Q5

The common difficulties experienced by these businesses.

(i)
The key problems facing start-up businesses that could be explained include:

Q5
(ii)

A lack of funding
The absence of any credit history
No sales i.e. pre-revenue.
Cash flow/liquidity problems.

5 marks

The different sources of funding available to these businesses to solve the difficulties
identified in (i).
The solutions include:
- Personal finance (and friends) cheap, accessible but involves personal
relationships and repayment
- Bank overdraft quick and relatively cheap, interest only on balance but
repayable on demand
- Term loans longer term, fixed rate of interest allowable, cannot be
withdrawn but secured on assets, can be expensive and repayment of
capital required
- Small Firms Loan Guarantee scheme useful when no adequate security
but once-only arrangement fees
- Hire purchase and leasing tax treatment and interest allowable, asset
only security but cannot sell the asset
- Suppliers delayed payment is cheap but may damage supplier relations
- Factoring, invoice discounting, stock finance using current assets as
security for a loan but may create an impression of financial distress.

Q5

Total Maximum Marks for Question

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

10
marks
15
marks

Question 6
Q6

Explain what is meant by the term corporate entrepreneurship (intrapreneurship).

(a)
Corporate entrepreneurship refers to the formal and informal process of
creating new businesses, products, services, and processes to create value
and generate new business growth inside existing organisations.
Business Week (February 2011)
Q6
(b)

4 marks

Identify and explain the environmental factors that need to be developed by an

intrapreneur in order to create an enterprise culture within a large organisation.
The following factors are all indicators of an enterprising organisation:
People are encouraged to have ideas
Good ideas can come from anyone in the organisation. Set up systems so
that people can easily put forward ideas. If there are suggestions that are
taken up, ensure the person who originated the idea is recognised in some
way. Dont restrict this to having ideas for goods or services, encourage
people to think about their work environment, customer service, team-building
and other areas of the business, so that they get into the habit of making
suggestions and seeing them implemented.
Build on this by setting up regular ideas meetings or creative forums that
bring people together from different parts of the organisation for
brainstorming sessions.
People work in teams
By working together groups of people have more to offer than lone
individuals. They will have complementary skills that may need to be
developed through training and practice.
People are given authority and freedom to try things
In order to get people to come up with ideas and new ways of working that
can save money or bring in new streams of income, they need to be given a
degree of freedom to experiment. This means empowering staff with the
authority to do so. This demonstrates the trust management has in their
employees and also allows said staff the space and time to try ideas out
properly.
Success is celebrated
Regularly celebrate the organisations achievements so that people feel they
are part of a dynamic business. They are more likely to be enthused and
want to contribute to maintaining the success of the business. By making a
point of thanking them, they will feel recognised and will be encouraged to
continue contributing.
Communication is open and regular
People naturally want to talk about what theyre doing and what they think is
going on. So, it is important that information flows around the business and
not just from the top down. People should feel they can ask questions,

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

10
marks

explain what is and isnt working for them and have a clear understanding of
the direction in which the business is going. Communication takes many
forms including memos, newsletters, email, face-to-face meetings,
telephone conversations etc.
Planning is at the heart of the organisation
Planning is the process of explaining what the organisation wants to achieve
and how it is going to get there. This needs to be applied to every aspect of
the work. By being clear about what everyone wants to achieve, everyone
can work towards the same end. This will give the organisation focus and
energy. It also helps to identify some of the potential barriers and problems.
Everyone has belief in the organisation
When competing with other organisations, including other businesses, the
differentiation of the enterprise is that it has a social purpose, something that
people can get behind and really believe in. This can generate a genuine
feeling that their organisation is better and more worthwhile than the rest.
Q6

Total Maximum Marks for Question

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

14
marks

Section B
Candidates must answer ONE (and only one) question in this section.
Each question carries 15 marks.
Section B is worth 15% of the total marks available for the paper.

EITHER: Question 7
Q7

Discuss the processes used by entrepreneurs to identify and generate creative ideas
that lead to successful innovations.
Peter Druckers Seven Key Sources of Ideas:
1) Unexpected happenings i.e. accidental innovations such as the post-it notes and
Sony Walkman.
2) Incongruous happenings i.e. an unmet need.
3) A need for process improvements i.e. float glass making.
4) Changes in industry or market structure i.e. e-commerce.
5) Demographics i.e. changing lifestyles, age and gender profiles.
6) Changes in perception, mood and meaning i.e. health, beauty, green marketing,
organic foods etc.
7) New knowledge search engines and the knowledge economy.
In addition, the following can be discussed:

Q7

Scanning the external environment for `windows` of opportunity the macro

(STEEP: social, technological, economic, environmental and political) and microcompetitive environments

Open-source innovation user (customer) generated ideas (unmet needs)

Internal processes: brainstorming; quality circles; focus groups; project teams;

suggestion boxes etc.

Total marks for question

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

15
marks

OR: Question 8
Q8

Using examples from an entrepreneurial venture of your choice, explain the main types
and dimensions of innovation that an entrepreneur might exploit for competitive
advantage.
Discuss the role of creativity and innovation in achieving competitive advantage
Explore the 4ps of innovation space The Innovation Diamond:
- Position (marketing and business model innovation)
- Paradigm (mental model) - changing perceptions
- Process innovation
- Product/service innovation
Explain whether the innovation is radical or incremental.

Q8

Total marks for question

Please note that these are not fully-worked model answers, but they are
intended as a guide to the type of answer expected.

15
marks