Complete enterprise for Cambridge

IGCSE answers to practice questions

Unit 1
1 You only need to identify three different ways of being enterprising at school
or at home. Three ways of being enterprising at school might be by using
technology for learning, working as part of a team or developing new skills
and using them in different situations. Three ways of being enterprising
at home might be by organising a household job, taking responsibility for
younger children or earning money for the family.
2 The question gives two ways of being enterprising: working/learning as part
of a team and developing new skills and using them in different situations.
You are required to explain how you have used these two ways to be
enterprising either at school or at home. You could perhaps apply one to the
home environment and one to the school context. For example, you could
write about working as part of a team at home, such as in relation to taking
it in turns to carry out various tasks in the home. In the school context, you
could write about the development of new skills and the use of them in
different situations. For example, you could write about developing a new IT
skill and how you used it in a particular lesson. There are four marks in this
question, so your explanations need to be quite detailed.
3 In this question, you need to explain why ‘problem solving’ is an important
way of being enterprising. You need to be able to explain the usefulness
of problem solving in the enterprise context, such as by writing about the
challenge of overcoming a problem or difficulty in a positive and imaginative
way. An important aspect of this is the ability to look at a particular problem
from different perspectives. Sometimes this might require the need to ‘think
outside the box’.
4 You will need to explain why the relationship between an enterprise and its
customers needs to be a good one. You could focus on a number of different
things, such as the fact that this relationship will help to determine the
success of an enterprise and even its very survival. When customers buy
products, they pay money and this generates revenue for the enterprise.
In order to ensure that customers do buy the products of an enterprise,
it is important that the enterprise understands the needs and wants of its
customers. There is often a great deal of competition in markets and if the
relationship between an enterprise and its customers is not a good one, the
customers may simply buy products from alternative enterprises.
5 In a ‘discuss’ question, you will need to look at different points of view. In
this particular question, you will need to explain that some enterprises aim
to make a profit, but that this will not always be the case as some enterprises
have an alternative aim and these are known as not-for-profit or social
enterprises. In your answer, you will therefore need to distinguish clearly
between a business enterprise, i.e. one that provides products with the aim
of making money and therefore a profit, and a social enterprise, i.e. one that
does not have the aim of making a profit, such as a charity, which is a not-for-
profit organisation.

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Unit 2
1 In this question, you will need to identify and explain one advantage and one
disadvantage of setting up a new enterprise as a limited company. Limited
companies have a number of advantages and disadvantages and you only
need to choose one of each. For example, one advantage is that they have
limited liability and you could explain that this means that shareholders
cannot lose their personal possessions if they invest in an enterprise that fails.
An example of a disadvantage is that there is often a divorce of ownership
and control and you could explain that this means that although you
might be a part-owner of an enterprise, you will not necessarily be able to
control what goes on in the enterprise on an everyday basis. There is one
mark for each of two identifications and an additional mark for each of two
explanations.
2 You will need to explain the advantages and disadvantages of a sole trader
and a partnership as alternative ways of setting up a new enterprise.
Advantages of a sole trader include the fact that they are usually relatively
easy to establish and they enable the owner to keep the profit after tax has
been deducted. Disadvantages of a sole trader include the fact that there is
unlimited liability, which means that the owner may lose personal possessions
if the enterprise goes out of business owing money, and there may be
difficulties in raising sufficient finance to expand the enterprise. Advantages
of a partnership include the fact that they may find raising additional finance
easier than a sole trader and that different partners can specialise in various
aspects of the work. Disadvantages include the fact that disagreements
between the partners can make decision making difficult and that a decision
by one partner is legally binding on all the others.
3 In this question, you are required to explain how a social enterprise is
different from other types of business organisation. You need to demonstrate
you understand that whereas most enterprises have the aim of profit
maximisation, a social enterprise has as its aim the reinvestment of any
profit into the community in some way. A charity is a good example of a
social enterprise as it seeks to raise money to support a ‘good cause’. The
Re-Cycle (Bikes to Africa) case study is an example of a not-for-profit social
enterprise, taking unwanted bikes from the UK to Africa where they can be
put to productive use; this enterprise does not aim to make a profit from its
activities but, instead, aims to improve the lives of thousands of people in
Africa.
4 In this ‘discuss’ question, you will need to consider both the arguments
for and the arguments against setting up a new enterprise through a
franchise arrangement. You will need to explain what is meant by a
franchise arrangement, distinguishing between the roles of the franchisor
and the franchisee, and then consider some of the advantages of such an
arrangement, such as the fact that the brand name will be very familiar to
customers and the fact that much of the advertising and training will be paid
by the franchisor, keeping costs down. You will then need to consider some
of the potential disadvantages, such as the fact that the franchisee will need
to pay the franchisor for the use of the brand name and the fact that the
activities of the franchisee may be limited, restricting the freedom to run the
enterprise in a certain way. Remember that in a ‘discuss’ question, you will
need to look at both points of view in order to gain maximum marks.

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5 In this question, you need to discuss how important it is for an enterprise

to effectively monitor the progress of its action plan. You need to explain
what is meant by an action plan and then go on to consider the importance
of effectively monitoring it. Monitoring the progress of an action plan helps
to ensure that it is being implemented correctly. If it is not being carried out
effectively, the monitoring of its progress will indicate what may need to
be changed in order to enhance its effectiveness. An important part of the
question is the inclusion of the phrase ‘how important’ and you will therefore
need to address this, e.g. you could say that the effective monitoring of the
progress of an action plan is very important and explain why you think that
this is the case. If you do not explicitly address this aspect of the question, you
will not be able to gain the maximum mark.

Unit 3
1 In this question, you need to identify and explain two personal attributes,
characteristics or skills that are needed to be a successful entrepreneur. There
is one mark for each of two identifications and an additional mark for each of
two explanations. You could identify and explain any two, such as leadership,
team-building, problem-solving, resourcefulness, innovation, taking
calculated risks, creativity and determination to succeed.
2 You will need to explain why it may sometimes be necessary for an
entrepreneur to take a calculated risk. You could start your answer
by stressing that risk is an important aspect of enterprise and that an
entrepreneur is a risk-taker. It is not possible to guarantee the success of an
enterprise and so an entrepreneur will often need to take a risk. Evidence
suggests that there is about an 80% chance of a new good or service being
a failure in the marketplace. You then need to explain what is meant by a
calculated risk, i.e. you need to demonstrate you understand that there is a
relationship between risk and reward. The calculation of the risk may be as
a result of conducting market research to discover the potential demand for
a product. The example of Jennifer Liu illustrates one situation where an
entrepreneur decided to take a calculated risk.
3 In this question, you are asked to explain why effective team-building
skills and problem-solving skills are needed to be a successful entrepreneur.
Effective team-building skills are needed because there is only so much that
one entrepreneur can do by themselves, especially if an enterprise is a large
one. An entrepreneur will need help and support from others and an effective
team will help to encourage a high level of support for, and commitment
in, an enterprise, making the success of the enterprise more likely. Effective
problem-solving skills are also needed because problems can ‘derail’ an
enterprise if they are not dealt with. Problems will need to be solved and
this will often require imaginative, innovative and radical solutions that may
come about as a result of thinking ‘outside the box’.
4 This question will give you the opportunity to write about an entrepreneur
you have studied. You will need to discuss how this person used their
personal attributes, characteristics and learned skills to be successful. The
two case studies of Attoysius Attah and Hooi Ling Tan, along with the other
case studies in Unit 3, will give you an idea of how other entrepreneurs
have used their personal attributes, characteristics and learned skills to be
successful.

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5 In this question, you are required to evaluate the likely importance of self-
confidence, resourcefulness and a determination to succeed to the success of
an entrepreneur. You could stress that self-confidence is often necessary to
keep an entrepreneur going, especially when an enterprise is experiencing
difficulties. The example of Sir Richard Branson is a good one in relation to
the importance of self-confidence. An entrepreneur needs to be confident in
their ability to succeed. Resourcefulness is also important to the success of
an entrepreneur. An entrepreneur needs to be able to use resources to meet
new and different situations. The example of Shimi Shah is a good one in
relation to resourcefulness. A determination to succeed is also important to
the success of an entrepreneur. An entrepreneur needs to remain committed
to, and passionate about, what the enterprise stands for. They need to focus
on a vision for an enterprise and what needs to be done to achieve it. The
examples of Frans Aupa Indongo and Gossy Ukanwoke are good ones in
relation to a determination to succeed. Remember that the command word in
this question is ‘evaluate’. You will therefore need to go beyond a description
of these three aspects and evaluate how they relate to entrepreneurial
success, i.e. you will need to judge the importance of these aspects to the
success of an entrepreneur.

Unit 4
1 In this question, you need to be able to explain how an enterprise can
have a social impact. You need to stress that this impact can be positive or
negative and give examples of each. For example, a positive social impact of
an enterprise could be through supporting different community activities.
This can often be seen in relation to sporting events. A number of enterprises
emphasise this wider commitment to the community in their policies on
corporate social responsibility. A negative social impact of an enterprise could
be where pollution is created as a result of the activities of an enterprise. This
could be in the form of noise pollution or traffic congestion.
2 This question requires you to explain how changes in real income can create
opportunities for an enterprise to arise. You will need to explain what is meant
by real income, i.e. an increase in real income refers to an increase in income
that is above the rate of inflation. If people have an increase in real income,
they will have more money to spend and as the level of demand for products
increases, supply will need to increase. This will provide opportunities for new
enterprises to be established and for existing enterprises to grow.
3 It is necessary in this question to be able to distinguish between a risk-keen
and a risk-averse entrepreneur. You need to show that you clearly understand
the differences between these two types of entrepreneur, with a risk-keen
entrepreneur aiming to maximize profits and recognizing that a high level
of profit is often associated with a high level of risk, whereas a risk-averse
entrepreneur is one who wants to avoid risk as much as possible and so is
extremely cautious, even if this means that less profit will be made by an
enterprise.
4 In this question, you need to discuss how a SWOT analysis could be of use to
an enterprise. You need to demonstrate that you understand what is meant
by a SWOT analysis, in relation to the strengths, weaknesses, opportunities
and threats that an enterprise is likely to experience. You need to stress that
strengths and weaknesses relate to the internal aspects of an enterprise,
whereas opportunities and threats relate to the external aspects. You need
to provide appropriate examples of each of these four elements in order to
indicate how a SWOT analysis could be of use to an enterprise.

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5 In this question, you need to evaluate how a PEST analysis could be of use
to an enterprise in identifying potential risks. You need to make it clear that
you understand what is meant by a PEST analysis in terms of the political,
economic, social and technological factors that could affect an enterprise. In
particular, potential risks to an enterprise can be identified in terms of these
four aspects. You would need to include appropriate examples of each of
these four aspects of a PEST analysis. You will again need to remember that
the command word in this question is ‘evaluate’. You will therefore need to
go beyond a description of these four aspects and evaluate how they relate to
the identification of potential risks to an enterprise, i.e. you will need to judge
the importance of these four aspects to the ability of an enterprise to identify
potential risks.

Unit 5
1 In this question, you are required to explain what is meant by the term
‘negotiation’. You need to demonstrate you understand that it refers to an
interaction of influences that aims to reach an outcome that will satisfy the
interests of those involved. These influences include resolving disputes,
agreeing upon courses of action, bargaining for individual or collective
advantage and reaching outcomes to satisfy the interests of those involved.
2 You need to explain why it is important to set clear objectives in the planning
stage of the negotiation process. You can explain that the negotiation process
is likely to be more successful if the aims and objectives of the process are
made absolutely clear. This will enable the negotiation to remain focused
on what is needed. Such objectives are often described as SMART, i.e. they
should be specific, measurable, achievable, realistic and time-based.
3 In this question, you will need to explain why it is important to check
understanding when conducting a negotiation. It is important that the
bargaining positions of each side in the negotiation process are made
very clear as this will help to avoid any confusion and misunderstanding.
Very often, summaries of what has happened at the various stages of the
negotiation process can help as a means of checking that everybody fully
understands what is happening. The checking of understanding is therefore
very important to avoid misunderstandings that could undermine the
negotiation process.
4 You need to discuss how agreement can be reached in the negotiation process,
distinguishing between ‘hard’ and ‘soft’ bargaining positions and between
‘win-lose’ and ‘win-win’ situations. The various strategies and compromises
involved in the reaching of agreement can all be discussed.
5 In this question, you need to evaluate the various factors that could threaten
the success of a negotiation. These could include poor communication leading
to confusion and misunderstanding, poor working relationships between
the different negotiators, a lack of mutual respect, poor problem-solving
skills, a lack of clarity and assertiveness at key points in the negotiation
process, an excitable reaction to difficult situations, the use of threatening
and confrontational language, a great deal of shouting and an inability to
listen to what others are saying. You will again need to remember that the
command word in this question is ‘evaluate’. You will therefore need to go
beyond a description of these various aspects that could threaten the success
of a negotiation and evaluate the extent to which each of them could be a
contributory factor to the lack of success.

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Unit 6
1 In this question, you need to explain two sources of start-up funding for
an enterprise. These could include two from personal savings, financial
contributions from family and friends, bank overdrafts, loans, leasing and
mortgages, community sources, including charities and social enterprises,
grants and subsidies, crowdfunding and selling shares. There are two marks
for an explanation of each of the two sources.
2 You will need to explain what is meant by the concept of trade credit by an
enterprise to a customer, making it clear that it is a sum of money that an
enterprise allows a customer before requiring payment. It refers to a period
of time to make a payment, i.e. payment is delayed or deferred. This period
of time will usually be for 30, 60 or 90 days. Trade credit is given by an
enterprise to a customer in order to attract customers.
3 In this question, you will need to clearly distinguish between a cash flow
statement and an income statement. You will need to make it clear that a
cash flow statement refers to the movement of money into an enterprise
(inflow) and a movement of money out of an enterprise (outflow) over a
period of time, whereas an income statement (also known as a profit and loss
statement) refers to an income and expenses statement which shows the sales
revenue of an enterprise over a period of time and all of the relevant costs
involved in earning that revenue. The income statement, unlike the cash flow
statement, will show whether an enterprise has made a profit over a period
of time.
4 You will need to discuss why it is important that the financial records of
an enterprise are accurate and up to date, stressing that they will give a
clear summary of the finances. This is important in relation to the various
stakeholders of an enterprise, such as shareholders, especially in terms of any
share dividend that will need to be paid to them. It will also be important
for purposes of tax payments and it will also be a legal requirement to keep
such records. Such information will also be helpful in terms of an enterprise
making forecasts about the future. The case study of Flame of Africa is a
good example of the importance of keeping accurate and up to date financial
records.
5 In this question, you need to evaluate the extent to which finance for a new
or expanding enterprise should come from government. You can consider
the potential role of grants and subsidies from government, perhaps as part
of an enterprise support programme, and also the potential disadvantages of
such support, such as the fact that such financial support may be given on
certain terms, or that an enterprise would need to be located in a certain area
of a country, e.g. one of high unemployment. Government financial support
could then be contrasted with private sector support, such as through
the selling of shares. You will again need to remember that the command
word in this question is ‘evaluate’. You will therefore need to go beyond a
description of these different sources of finance and evaluate the extent to
which finance should come from government, i.e. you will need to make a
judgement.

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Unit 7
1 In this question, you will need to explain what is meant by legal compliance
as a business objective. You need to make it clear that legal compliance refers
to the process or procedure to ensure that an enterprise follows the relevant
laws, rules and regulations. These could relate to how it produces its products
or how it conducts its affairs. A good example would be legal compliance in
relation to health and safety laws.
2 You will need to clearly distinguish between short-term and long-term time
periods, using appropriate examples of planning by an enterprise. You should
point out that these time periods do not have any precise definitions and
that the timeframe may vary from one industry to another. You will need to
include relevant examples. For example, in the short term, an enterprise may
plan to increase its workforce. In the long term, an enterprise may plan to
expand its capacity by building a new factory.
3 In this question, you will need to outline the main components of a business
plan. You would need to write about the name and address of the enterprise,
the product, the results of any market research that had taken place, the skills
and experience of the workforce, the method of production, equipment and
the financial details of the enterprise, especially in relation to costs, revenue
and profit.
4 You will need to discuss why it is important for an enterprise to update its
action plan on a regular basis. It is not possible to predict everything with
certainty and so an action plan needs to be seen as a work in progress. You
could consider such reasons for updating as the need to take into account
any challenges or threats faced by an enterprise since the action plan was first
drawn up and any opportunities that have arisen in the market, such as an
increase in the level of demand for an enterprise’s product.
5 In this question, you will need to evaluate the extent to which an
environmental objective of an enterprise could conflict with its aim of
maximising growth. You can point out that although enterprises may
have different aims and objectives, there is always the possibility that
there may be a conflict between some of them. In the context of this
question, you could discuss the importance of an enterprise wanting to act
in a way that is seen to be protective of the environment, working with
such pressure groups as Friends of the Earth and Greenpeace. However,
you could then go on to say that this may create additional costs for an
enterprise and could therefore have a significant impact on the profit
made by the enterprise and therefore on its ability to maximise growth. It
is an ‘evaluate’ question and so you need to discuss the potential conflict
between the environmental objectives and the growth objectives of an
enterprise.

Unit 8
1 In this question, you need to explain why enterprises often ‘brand’ their
products. You need to demonstrate that you know that a brand refers to a
name, image, logo, symbol or trademark that is used to clearly distinguish
one product from another. Branding is often a key part of an enterprise’s
marketing strategy to attract customers to its products rather than those of
a competitor. It will seek to establish a high level of brand loyalty so that
customers will keep buying products from the enterprise.

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2 You will need to explain why marketing is important from both the
perspective of an enterprise and a customer. In terms of marketing helping
to achieve the aims of an enterprise, you could refer to increasing consumer
awareness of the enterprise and of the product that it is selling, establishing
and maintaining brand loyalty and increasing or defending the sales, market
share or profit of an enterprise. In terms of marketing from the perspective
of customers, you could refer to increasing knowledge of the enterprise and
of the products that it sells and to the ability of customers to therefore make
more informed decisions as a result.
3 In this question, you need to explain why customer retention is such an
important aim of enterprises. You could explain one reason is that if there is a
high level of customer satisfaction, consumers will keep buying an enterprise’s
product and this will be crucial to its continued success in a market. Also,
once a high level of customer loyalty and customer retention is established,
it is likely to lead to a consistent share of the market and consistent, and
possibly increased, profits. You could also point out that it has been estimated
that it takes an enterprise between 5 and 10 times more time, effort and
expense to gain new customers than it takes to retain existing ones, therefore
making customer retention very cost effective.
4 You will need to discuss why it is important for an enterprise to conduct
market research. The main reason is that an enterprise will need to establish
whether demand for a product exists and market research will enable an
enterprise to identify potential customers. This will help an enterprise because
instead of hoping that a market exists for a product, it will be able to move
forward with more confidence if the market research clearly identifies a
demand for a product. You could stress how this illustrates a consumer or
demand orientation, rather than a producer or supply orientation.
5 In this question, you need to evaluate the potential effectiveness of online
communication and social media as methods of marketing communication for
an enterprise. You could consider the usefulness of online communication,
stressing the importance to an enterprise of having a website. The Mr
Stanford case study provides a useful example of this. You could also stress
the importance of email as a form of communication in business. You also
need to consider the importance of the different forms of social media,
including Twitter, Facebook, Linkedin, Whatsapp and Instagram. These all
give an enterprise an excellent opportunity to communicate directly with
existing and potential customers. You need to avoid providing simply a
descriptive answer in relation to these forms of communication. It is an
‘evaluate’ question and you will therefore need to make a judgement about
the potential effectiveness of these methods of marketing communication for
an enterprise.

Unit 9
1 You will need to clearly distinguish between formal and informal sources
of help and support for an enterprise and you will need to use appropriate
examples to support your answer. A formal source of help and support
will involve agencies and organisations that can be regarded as official and
institutional, such as government/business agencies, financial institutions,
teachers and business networks. An informal source of help and support will
be less official and institutional, such as friends, peers and family members.

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2 In this question, you will need to explain how a financial institution could
provide help and support to an enterprise. You can stress that financial
institutions, such as banks, building societies, credit unions and friendly
societies, can provide help and support to entrepreneurs who have an account
with them. This advice will be particularly useful in relation to financial
matters relating to an enterprise. A particular example of such help and
support that you could refer to is in relation to the production of a strong and
effective business plan.
3 You will need to explain how other entrepreneurs could provide assistance
to a start-up enterprise. You could refer to the fact that other entrepreneurs
can offer advice and guidance that would be useful to a start-up enterprise,
especially in terms of that advice and guidance reflecting many years of
entrepreneurial experience. Contact with such people is likely to be through
business and enterprise networks. Sometimes, these other entrepreneurs may
be willing to act as mentors, so you will need to explain what is meant by
a mentor. Their advice is likely to be extremely useful and constructive to a
start-up enterprise.
4 In this question, you will need to discuss to what extent a business and
enterprise network will be an effective source of advice and guidance
to someone planning to start an enterprise. You should discuss the role
of business and enterprise networks as a source of advice and guidance,
explaining how they provide opportunities for people who share similar
business and enterprise interests to come together to discuss mutual concerns,
giving people the opportunity to learn from the experiences of others. The
Pune Business and Enterprise Network is one example. However, you need
to avoid simply giving a descriptive account of the role of such networks.
The question is a ‘discuss’ question and you will need to discuss the extent
to which such networks will be an effective source of advice and guidance
to such a person, i.e. you will need to suggest that they are likely to be
effective to a very large extent. However, you should consider some potential
drawbacks, e.g. one entrepreneur’s experience may not be relevant to another
entrepreneur.
5 You will need to evaluate the various factors that could undermine the
potential effectiveness of a business and enterprise network. These could
include the informal nature of some networks, with the result that nothing
ever gets achieved. It may be that some are no more than ‘social clubs’ with
only very limited effectiveness. Some established entrepreneurs may be
reluctant to share their knowledge with new entrepreneurs for fear of giving
away ‘trade secrets’ to potential competitors. It is an ‘evaluate’ question, so
you need to go beyond simply describing the various factors; instead, you
need to make a judgement about them. For example, you could consider
which of the various factors are likely to be more significant than others
in undermining the potential effectiveness of a business and enterprise
network.

Unit 10
1 In this question, you need to clearly distinguish between formal and
informal communication in an enterprise. You need to point out that formal
communication refers to official channels of communication, while informal
communication refers to unofficial channels of communication. You need to
stress that whether communication is formal or informal really depends on
the audience. You could include some examples to support your answer, e.g.

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writing an official report for investors or having a formal business meeting

are both examples of formal communication, whereas sending an email
to a friend or talking to a friend at lunch are both examples of informal
communication.
2 You will need to explain why communication between an employee of an
enterprise and a customer needs to be formal rather than informal. You
need to stress in your answer that it is formal because it involves official
communication that is approved by an enterprise, i.e. the employee is acting
in an official capacity on behalf of an enterprise.
3 In this question, you need to consider the advantages and disadvantages of
email as a form of communication between an enterprise and both internal
and external stakeholders. You can stress that email is particularly appropriate
for communication with internal stakeholders as it is quick, convenient and
can be used for many different types of message. Emails are also useful as
a way of communicating documents because they can easily be attached to
messages. Emails can also be used as an effective method of communication
with external stakeholders. For example, they can be used in marketing and
for confirming in writing what has been agreed over the telephone. They are
likely to be a particularly useful method of communication with suppliers.
However, you also need to consider the potential disadvantages of email as a
method of communication. For example, sometimes people rush in writing
and sending emails and so they may not be as carefully checked as a letter.
Also, it is easy to send an email to the wrong person. You need to make
sure that in your answer, you have considered both the advantages and
disadvantages of email and both internal and external stakeholders.
4 You need to discuss the importance of providing appropriate documents
for an effective presentation. You can refer to the use of both visual
aids and handouts. A popular visual aid in presentations is the use of
PowerPoint slides. Handouts are useful in supporting what is being
covered in a presentation. You can link the importance of such documents
to the effectiveness of a presentation and you also need to focus on the
appropriateness of such documents. For example, you could consider some
of the guidance that is given on the construction of presentation slides, such
as the 10-20-30 rule, which you could explain in your answer. A PowerPoint
slide that is very difficult to read would not be appropriate for an effective
presentation and could contribute to a very ineffective presentation, leading
to what has been termed ‘death by Powerpoint’ (not literally!).
5 In this question, the quote indicates that meetings seem to go on for ever,
never achieving anything, and you need to discuss why it is important to
analyse whether a meeting has been successful. You need to demonstrate
that you understand the importance of analysing whether a meeting has
been successful or not. For example, a meeting can be expensive in terms
of the time that people have spent in it and so the analysis of the success
of a meeting is important in terms of cost effectiveness. It is also important
to analyse the success of a meeting to discover whether it has achieved its
objectives; if it has not, this could lead to a reduced level of motivation in
an enterprise and a feeling of alienation if people are required to attend
ineffective meetings.

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