Chapter 1

Setting up a new enterprise

Some Important terms
1- Enterprise
An organization or business managed by one or
more individuals who are able to take
Lesson objectives

 What is enterprise process?

 Toanalyse the different stages of the
enterprise process
What is the process of enterprising?
Enterprise process is the various stages in starting and
running an enterprise.
 Identifying the problem, need or want
 Exploring creative solutions
 Action planning
 Implementing the plan
 Monitoring progress
 Evaluation of successes and failures.
Identifying the problem, need or want
 Group discussions, brain storming, individual reflection should be done
to understand the need or want.
 Collecting ideas from stakeholders
 Risk assessment
 Identifying the opportunity/ idea
 Thorough research about the market need.
 Clear aim & vision to work towards
 Expected rate of return t be considered
 Evaluating the skills available and planning for any skills gap.
Exploring creative solutions

 Looking for innovative and creative ways

 These creative ideas needs to be analysed and evaluated
to find the best solution.
 Use of mind maps help in developing an effective
enterprise plan
Action planning
 Making plans keeping the cost, budget and financial
capacity in mind.
 Breaking down the long term plan (objectives) into
achievable tasks
 Allocating these tasks to different team members,
according to their strength, skills and attributes
 Setting short target timescales and making sure that the
goals are achieved by then.
Implementing the plan

 Enterprise activities to be carried out effectively and

lawfully.
 Timescales and health & safety issues should be frequently
referred to.

 The tasks and activities should be directed towards

meeting objectives
 Decision making needs to be quick, flexible and responsive
Monitoring progress

 Monitoring progress against the set objectives

 Actions are tracked and deviations from the plans are
identified.
 Corrective actions to be taken if plans are deviated.
 Monitoring to check if objectives are met, goals are
achieved within the allocated time period and budget
Evaluation of successes and failure

 Review the final outcome against achievement criteria

 Suggestions on improvement in future
 Skills, attitudes, qualities and the experiences should be
assessed and reflected upon for the success of future
activities.
Activity 1.1.

 Come up with a club name, its aim and its main activity.
You can invent an idea or innovate an existing idea.
 Remember to go through all the enterprising processes
and make a note of them on a sheet of paper:
 the name of the club
 its main aims and
 its main activity.
Types of business organisations

Social enterprises

Non profit organisations

Charitable trusts
Sole trader
 It is a business owned & controlled by one person
 He organizes other factors of production, invests his money & take risk to
start & run a business.
Advantages
 Low start up costs & easy to set up
 Freedom to be his own boss
 Incentive to be efficient as the owner gets all the profit.
 Flexible quick to respond to changes as one person takes decisions
 Personal contact with customers can promote sales & with employees can keep them
motivated.
Disadvantages
 Unlimited liability: He is liable to pay for the debts of the business from his personal
funds.
 Limited finance to expand the business
 sole trader may lack all the essential skills to run the business .
 Lack of continuity: the firm can close down if the sole trader dies or goes bankrupt or
decides not to run the business.
Partnership
 It is a business set up between 2 & 20 people who share their profit, decision
making &responsibilities to run a business.
Advantages:
1. Partners bring new ideas &skills to the business
2. More capital become available to expand
3. Partners can share the decision making
Disadvantages
 Partners can disagree which leads to conflict
 Partners have Unlimited liability
 Partnership lacks capital
 the business doesn’t have a separate legal entity: if one of the partners leave or die
the firm gets dissolved.
 If one of the partner is inefficient then the firm will suffer.
 Profits have to be shared
 Companies
 1.Private limited company(LTD)
 2.Public limited company(plc)
Private limited companies
Features:
 Capital is generated by selling shares.
 Shareholders are the owners of the business. they buy shares which represent part
ownership in the company.
 The company exists separately from its owners.
 The firm can make legal agreements /contracts
 The company’s accounts are kept separate from its owners.

If a business is a separate legal entity, it means it has some of the same rights in law as a
person. It is, for example, able to enter contracts, sue and be sued, and own property.
Advantages

 Owners have limited liability

 The firm can have more capital for expansion & growth .
 The firm has separate legal entity
Disadvantages
 Lots of legal formalities to start the business.

 If the business needs capital on short notice then it cannot raise capital
by selling shares to public.
 The shares cant be transferred or sold with out the consent of other
shareholders.
Public limited company
 Min of 2 share holders with no maximum.
 It issues shares to public through stock market.
 It is larger than a private limited company
 Its affairs are public.
 Owned by members of public called “shareholders”
 Shareholders elect “board of directors” to represent them, who are
responsible for day to day running of the business.
Advantages
 Large amount of capital can be raised
 Shareholders have limited liability. They are liable only up to the amount
that they invested in the shares.
 Shares are easily transferable.
 Firms have separate legal entity, that is the owners are not held
responsible for the company’s dealings.
Disadvantages
 Expensive to form- legal procedures & restrictions such as prospectus,
documents, etc.
 There may be separation of ownership & controls.
 The firm may become too large to be managed efficiently
 Firms affairs can’t be kept secret. Accounts have to be published to the
public.
CO-OPERATIVES

They are a group of people who work together and pool their resources.
Features of Cooperatives
1. All members have one vote whether they have purchased more shares than
the others.
2. All members work equally and share the decision making tasks.
3. A manager may be appointed for day to day management.
4. The profits are shared equally among members.
Forms of co-operatives

1. Producer co-operatives
A group of workers who design and produce products like any other
manufacturing unit.
2. Retail co-operatives
They form with the aim of providing their members with good quality
consumer goods at reasonable prices.
Franchising

 A franchisor is a business with a product or service idea

that it does not want to sell to consumers directly. Instead
it appoints franchisees to use the idea and sell it to the
consumers.
 Egs : McDonalds restaurants and The body shop
Characteristics of franchised businesses

1. It is the business (franchisor) that conceives the idea.

2. It sell the license to use the brand name/ product name.
3. It realises huge profit out of the sale of the license
4. It does not get involved in the management of the business.
5. It usually incurs expenses related to advertising and training of staff
6. They supply all the resources to the franchisee.
7. They usually provide the shop and the décor and the prices to be charged.
Advantages to the franchisor

1. The sale of license to use the brand name are a major source of profit.
2. Expansion expenses are borne by the franchisee.
3. The franchisor does not manage the retail shops themselves and so can stay
away from management problems which arise.
4. Expansion will be much faster since it does not have to finance for the new
outlets.
Advantages to a franchisee
1. Chances of business suffering a loss are reduced as they are selling
products with a well known brand name.

2. Training for staff will be done by franchisor.

3. Decisions regarding décor and layout are already done by franchisor

4. Banks will be ready to lend loans without much hesitation to a well

known and profitable business.

5. All resources are supplied from a single source – franchisor.

Social enterprise

 It is a business with social objectives and ethical values aimed at benefitting

the community.
 Types of social enterprise
a) Non profit organisations: those organisations producing goods / services but in
socially responsible way.
b) Charities: raise money by doing fund raising activities for a social cause.
 Task - RBL
 Group A: work on discussing the advantage and disadvantage of a sole trader
business and make a presentation on one successful sole trader business in UAE.
Also mention which HPL strategies have been used for your research
 Group B: work on discussing the advantage and disadvantage of a Partnership
business and make a presentation on one successful partnership business in
UAE. Also mention which HPL strategies have been used for your research
 Group C: work on discussing the advantage and disadvantage of a Public Ltd
company and make a presentation on one successful Public Ltd company in UAE.
Also mention which HPL strategies have been used for your research
 Group D: work on discussing the advantage and disadvantage of a Franchise
business and make a presentation on one successful Franchise business in UAE.
Also mention which HPL strategies have been used for your research
All students to write their answers in the book and take print outs of their research
work and stick it in the notebook.