Creative destruction

Question 1

Define creative destruction

Answer 1

The ongoing process of creating new products and services to replace old ones. New products meet customer needs better, making previous versions inadequate or obsolete. Some jobs are lost while others are created, and established businesses tend to come under threat

Question 2

List the things an entrepreneur does when starting a new business

Answer 2

• Create new ideas and puts them into action by taking risks
• Weigh up past mistakes, potential profitability and gaps in the market
• Weigh up their own personal situation
• They way up the potential return on investment
• They weigh the opportunity cost of starting the business

Question 3

How can entrepreneurs expand a business?

Answer 3

• Widen their product range
• Taking over or merging with another firm
• Employing more workers

Question 4

What do entrepreneurs need to ensure when attempting to grow?

Answer 4

• That they have the necessary capital
• That any means of growth are sustainable

Question 5

What is adding value?

Answer 5

Selling the final product for more than the cost of the input

Question 6

How can entrepreneurs add value?

Answer 6

• Innovate and produce better quality products that can be sold for a higher price
• Develop a strong brand to sell at higher prices
• Improve efficiency to reduce their production costs and make bigger profit margins