the role of business enterprise in the development of a country

Enterprise – The Role of Entrepreneurs and Intrapreneurs

Learning Objective

To understand how business enterprise contributes to the economic development of a country and to evaluate the factors that affect entrepreneurial and intrapreneurial success.

1 Enterprise – Nature of Business Activity

1.1 Factors of Production & Adding Value

• Land (natural resources) – raw materials, location, climate.
• Labour (human resources) – skills, effort, management.
• Capital (physical & financial) – machinery, buildings, money.
• Enterprise (entrepreneurial ability) – organising the other three factors to create a product or service.

Value is added when inputs are transformed into outputs that are worth more to consumers than the sum of the inputs. Example: Turning cotton (land) + workers (labour) + sewing machines (capital) + a designer’s vision (enterprise) into a ready‑to‑wear T‑shirt that sells for more than the cost of the raw cotton.

1.2 Opportunity Cost & Choice

Because resources are limited, choosing one activity means giving up another. The forgone benefit is the opportunity cost.

Numerical example: A farmer can use 10 ha of land to grow wheat (profit £20 000) or soybeans (profit £25 000). If wheat is chosen, the opportunity cost is the £5 000 profit that could have been earned from soybeans.

1.3 Dynamic Business Environment

• Technological change – e.g., rapid adoption of AI tools after 2020.
• Regulatory change – e.g., post‑COVID health‑safety standards.
• Market trends – shifting consumer preferences toward sustainable products.

Enterprises must continually adapt to survive and grow.

1.4 Why Businesses Succeed or Fail

• Effective use of the factors of production.
• Accurate assessment of opportunity cost.
• Ability to innovate and respond to a dynamic environment.
• Access to finance, skilled labour and markets.
• Sound management and leadership.

1.5 Scale of Business Activity

Level	Typical Market Reach	Governance & Ownership
Local	One town or city	Often sole trader or partnership
National	Across the whole country	Limited company, possibly listed on a domestic exchange
International	Exports to several overseas markets	Subsidiaries or joint ventures abroad
Multinational	Operations in many countries, often with regional headquarters	Complex corporate structure, dual‑listed or cross‑listed shares

2 Business Plans (1.1.1)

A business plan is a written document that sets out the purpose of a new venture, how it will achieve its objectives and the resources required.

Key Elements (≈150 words)

1. Executive Summary – concise overview of the business idea and objectives.
2. Market Analysis – size of the market, target customers, competition, trends.
3. Products / Services – description, unique selling points, life‑cycle.
4. Organisation & Management – legal structure, ownership, key personnel.
5. Operations Plan – location, technology, supply chain, production process.
6. Financial Projections – start‑up costs, cash‑flow forecast, break‑even analysis, profit & loss.
7. Risk Assessment – identification of major risks and mitigation strategies.

Benefits vs. Limitations

Benefits	Limitations
Clarifies the business idea and sets realistic goals.	Time‑consuming to research and write.
Helps attract finance (banks, investors, grants).	May become outdated quickly in fast‑moving markets.
Provides a benchmark for monitoring progress.	Over‑reliance can stifle flexibility.

3 Business Structure – Economic Sectors & Ownership Types (1.2)

3.1 Economic Sectors

Sector	Main Activities	Examples
Primary	Extraction and production of natural resources.	Farming, mining, fishing.
Secondary	Manufacturing and construction.	Car factories, textile mills.
Tertiary	Service provision.	Retail, banking, education.
Quaternary	Knowledge‑based services.	IT consultancy, research & development.

3.2 Ownership Forms

Form	Legal Status	Typical Size & Funding
Sole trader	Owner is personally liable.	Micro‑business; financed from personal savings.
Partnership	Two or more owners share liability.	Small‑to‑medium; pooled capital.
Limited company (Ltd)	Separate legal entity; limited liability.	SME to large; can raise equity.
Public limited company (PLC)	Shares traded on a stock exchange.	Large; access to public capital markets.
Co‑operative	Member‑owned, democratic control.	Varies; often sector‑specific (e.g., agriculture).

4 Qualities Required for Success (Entrepreneurs & Intrapreneurs)

5 Role of Entrepreneurship in Creating a New Business

Entrepreneurship is the engine that turns an idea into a functioning enterprise. The typical start‑up pathway is:

1. Idea generation – spotting a gap or need in the market.
2. Feasibility study – testing the idea against market size, competition and resources.
3. Business plan – outlining objectives, marketing strategy, financial projections and organisational structure.
4. Financing – securing capital (personal savings, bank loan, venture capital, crowdfunding).
5. Launch – setting up a legal structure, producing the first product/service and beginning sales.
6. Growth & scaling – reinvesting profits, expanding market reach and possibly diversifying.

Each stage directly links to the syllabus wording “creating/start‑up a business”.

6 Role of Intrapreneurship in the Ongoing Success of an Established Firm

Intrapreneurs keep established firms competitive by:

• Developing new product lines or services that meet emerging customer needs.
• Introducing process improvements that reduce waste and lower costs.
• Creating internal start‑ups (spin‑offs) that can become separate profit centres.
• Fostering a culture of continuous improvement that encourages all staff to suggest innovations.
• Providing a pathway for talent retention by offering employees challenging, growth‑oriented projects.

7 Barriers to Entrepreneurship

Barrier	Explanation	Possible Mitigation
Financial constraints	Limited access to start‑up capital or credit.	Micro‑finance schemes, government grants, angel investors.
Regulatory & legal hurdles	Complex licensing, high taxes, restrictive labour laws.	Simplified registration procedures, “one‑stop‑shop” business centres.
Cultural attitudes	Societal risk‑aversion or stigma attached to failure.	Entrepreneurship education, media campaigns celebrating success.
Skill deficit	Lack of managerial, technical or marketing skills.	Vocational training, mentorship programmes, incubator support.
Market access	Difficulty reaching customers, especially internationally.	E‑commerce platforms, export promotion agencies, trade fairs.

8 Business Risk & Uncertainty

Risk – a situation where the probability of an outcome can be estimated (e.g., 30 % chance of losing the initial investment).

Uncertainty – a situation where the probability of outcomes is unknown or cannot be quantified (e.g., the impact of a sudden regulatory change).

Simple Risk‑Assessment Framework (common in Cambridge exams)

1. Identify the risk.
2. Estimate its likelihood (Low, Medium, High).
3. Estimate its impact on profit, reputation or operations (Low, Medium, High).
4. Calculate a risk rating: Likelihood × Impact.
5. Decide on mitigation actions.

Example – Tech start‑up

• Risk: Low market adoption.
• Likelihood: Medium.
• Impact: High (loss of R&D investment).
• Rating: Medium × High = High → Mitigation: conduct market trials before full launch.

9 Role of Business Enterprise in National Development

• Job creation – reduces unemployment and raises household incomes.
• Tax revenue – funds public services such as health, education and infrastructure.
• Innovation – new products and processes increase overall productivity.
• Balance of payments – export‑oriented firms bring in foreign exchange.
• Social change – meeting unmet needs improves living standards and promotes inclusive growth.

Data point: In most OECD economies, small‑ and medium‑size enterprises (SMEs) account for ≈ 60 % of total employment (OECD, “SME and Entrepreneurship Outlook”, 2023).

10 Impact of Entrepreneurs

Area	Contribution
Job Creation	Start‑up firms employ staff; SMEs provide the majority of jobs in many economies.
Innovation	Introduce new products, processes and business models, raising productivity.
Economic Growth	Higher output and GDP through new markets and increased competition.
Foreign Exchange	Export‑oriented start‑ups bring in foreign currency.
Social Change	Address unmet needs, improve living standards and promote inclusive growth.

11 Impact of Intrapreneurs

Area	Contribution
Innovation within Firms	Develop new products/services without the risk of forming a separate company.
Cost Efficiency	Improve processes, reducing waste and increasing profitability.
Competitive Advantage	Keep established firms ahead of rivals through continuous improvement.
Talent Retention	Provide growth opportunities for employees, reducing turnover.
Economic Spill‑over	Successful intrapreneurial projects can spin‑off into new enterprises.

12 Linking Enterprise to National Development – Flow Diagram (Suggested)

13 Case Study Snapshot

1. Country: South Korea
2. Key Drivers: Strong government support for start‑ups (tax incentives, R&D grants) and corporate R&D programmes.
3. Results: Rapid growth in high‑tech exports; per‑capita income rose from US$5 000 (1970) to over US$35 000 (2022); economy shifted from agriculture‑dominant to manufacturing‑ and services‑dominant.

14 Key Points to Remember

• Entrepreneurs create new businesses; intrapreneurs innovate within existing firms.
• Both drive job creation, innovation, tax revenue and GDP growth.
• Success depends on personal qualities (risk‑taking, creativity, resilience, vision, networking, leadership) and a supportive environment.
• Barriers – finance, regulation, culture, skills, market access – must be recognised and mitigated.
• Distinguish risk (quantifiable) from uncertainty (non‑quantifiable); use a simple risk‑assessment matrix.
• Government policies (tax relief, finance schemes, education, infrastructure) amplify the contribution of enterprise to national development.

15 Potential Exam Questions

1. Explain how entrepreneurs contribute to the economic development of a country. (8 marks)
2. Discuss the role of intrapreneurs in enhancing the ongoing success of an established firm. (6 marks)
3. Evaluate the effectiveness of government policies in supporting business enterprise. (12 marks)
4. Identify and explain three common barriers to entrepreneurship and suggest one way to overcome each. (8 marks)
5. Distinguish between business risk and uncertainty and illustrate how a start‑up might assess one major risk. (6 marks)