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Business AS CIE

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  1. enterprise as
    6 主题
  2. business-structure as
    6 主题
  3. size-of-business as
    3 主题
  4. business-objectives as
    3 主题
  5. stakeholders-in-a-business as
    2 主题
  6. human-resource-management as
    8 主题
  7. motivation as
    4 主题
  8. management as
    2 主题
  9. the-nature-of-marketing as
    7 主题
  10. market-research as
    3 主题
  11. the-marketing-mix as
    6 主题
  12. the-nature-of-operations as
    3 主题
  13. inventory-management as
    2 主题
  14. capacity-utilisation-and-outsourcing as
    1 主题
  15. business-finance as
    2 主题
  16. sources-of-finance as
    3 主题
  17. forecasting-and-managing-cash-flows as
    1 主题
  18. costs as
    4 主题
  19. budgets as
    1 主题
  1. Business AS CIE
  2. enterprise as
  3. enterprise risk-uncertainty-and-business-enterprise
课 1, 主题 5
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enterprise risk-uncertainty-and-business-enterprise

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Exam code:9609

The distinction between risk and uncertainty

Uncertainty

  • Business uncertainty is when a business cannot predict what is going to happen or directly influence it

    • Uncertainty cannot be prepared for because it is unknown and cannot be measured

    • Factors that typically cause uncertainty include:

      • Environmental factors such as the Japanese Tsunami in March 2011

      • Economic changes such as Covid lockdowns, Brexit or collapses in the banking system

      • The entry of new competitors

      • Changes in local and national legislation (laws)

      • Changes in the political party governing the country

Risk

  • Risk can be measured, allowing business owners to make informed decisions before taking action

    • Research, market insight and creating a business plan can help to reduce risk

    • E.g. Awareness of increased demand for music on vinyl, extensive market research and a strong business plan convinced entrepreneurs Joel Magill and Will Greenham to set up Smugglers Records in the small seaside town of Deal

Risk versus uncertainty 

Diagram contrasting risk and uncertainty; risk gauge indicates levels, uncertainty shown by a puzzled person. Caption explains differences.
The difference between risk and uncertainty

  • Entrepreneurs have varying levels of risk they are willing to accept

    • Risk-averse entrepreneurs may prefer to start small and achieve slow growth

    • Some entrepreneurs may prefer to share risks with others in a partnership or protect their personal assets by forming a private limited company

  • Successful entrepreneurs can manage risk and quickly respond to uncertainty in the business environment

An example of entrepreneurial response to uncertainty

Brian Chesky (Airbnb Co-founder)

Airbnb Response to the Covid-19 Pandemic

  • In 2020, the COVID-19 pandemic caused many people to cancel their travel plans and stay home to avoid exposure to the virus

  • This had a major impact on Airbnb’s business

  • Rather than wait for the pandemic to pass, Chesky quickly pivoted their business strategy to meet the changing needs of their customers

  • They launched a new service called “Online Experiences,” which allowed people to participate in virtual tours, cooking classes and other experiences from the comfort of their own homes

  • Airbnb also took steps to address the health and safety concerns of its customers by implementing enhanced cleaning protocols and providing hosts with a guide on how to prepare their homes for guests during the pandemic

  • By quickly pivoting his business strategy and addressing the concerns of his customers, he was able to drive his business forward and position Airbnb for continued success in the future

Business enterprise and the development of a country

  • Government policy often includes support to entrepreneurs to encourage them to set up new businesses or take steps to grow their business

    • The Philippine government recognises the contribution that small businesses make to its economy and offers a range of incentives to entrepreneurs, including

      • Training programmes to equip business owners with the skills they need to operate an enterprise

      • A streamlined application process for low cost government-supported loans

      • Mentor initiatives where entrepreneurs are partnered with an expert who can provide advice on training and business development services

      • The Go Loka! project, which provides product development training, access to a marketing platform and promotional events

      • Exemptions from income tax and minimum wage law for a limited period 

How small businesses contribute to a country’s economic development

Increase the country’s level of output to achieve economic growth

Improve choice and service for consumers

  • This results in higher living standards and raises tax revenues for governments to spend on improved public services

  • E.g. The Ugandan government has remodeled its education system to include entrepreneurship as a core subject in secondary schools and has established innovation hubs to help entrepreneurs launch successful startups

  • Competition for existing businesses can lead to greater innovation and better customer service

  • E.g., Robinhood offers a commission-free share trading platform that makes investing accessible and affordable for a broader range of individuals and has challenged traditional financial institutions in a market that had changed little in many decades

Reduce the level of unemployment

Social enterprises often support disadvantaged groups

  • New or growing businesses create jobs and increase labour skills

  • This is particularly important for African youth (15-24 years) who constitute around 37% of the working age population but account for about 60% of the continent’s jobless total

  • E.g. During the Covid-19 pandemic Fuzzlab provided its chatbot free of charge to UK social housing organisations

  • This meant tenants could continue to access 24/7 support for any housing-related enquiry at a time when customer service staff were unable to carry out their work

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