Business Studies Chap 16

Question 1

Explain factors that must be considered before start-up

Answer 1

-The culture of the organization
-Environmental changes
-Customer services
-Business growth
-Cost-savings

Question 2

The culture of the organisation

Answer 2

-Entrepreneurs must decide what the culture of their business will be before starting up
-They must train the staff to know the culture of the business, for example, they must know what the dress code/customer service

Question 3

Environmental changes

Answer 3

-New tech forces businesses to change some of their original plans
-New competitors enter the market and driving existing businesses out of the market

Question 4

Customer services

Answer 4

A good customer service requires entrepreneurs to:
-identify their potential customers before start-up
-change the market plan to accommodate customer needs

Question 5

Business growth

Answer 5

-Many businesses want to grow too quickly, which can cause problems such as lack of infrastructure
-The long-term vision of the size of the business must also be reflected in the organogram of the business

Question 6

Cost-saving

Answer 6

-Hire temporary employees or use independent contractors to save costs
-Businesses could do a joint advertising campaign with other businesses that sell complementary products to reduce the advertisement cost.

Question 7

Outline aspects that must be considered when initiating a business

Answer 7

Strategy
-is a plan of action that must be carried out by an entrepreneur
-Systems and processes should be in place for the business to achieve its goals
Operations
-Bus. must implement the activities that are outlined in the action plan
-need to be implemented, staff must be employed and trained
Productivity
-is the effectiveness of production in terms of the rate of output per unit of input
-Ensure that costs are decreased, and outputs are increased to maximize profits

Question 8

Discuss reasons why businesses need funding

Answer 8

-Cover the start-up cost of buying premises/machinery/raw materials etc.
-Run the business and have enough money to pay employees/suppliers of raw materials etc.
-Pay for the cost of input such as wages, telephone, and other expenses
-Expand the businesses as the orders/sales increase and bigger premises need to be established.

Question 9

Outline the sources of funding

Answer 9

Bank loans
-Bus. may apply to borrow money from the bank
-The bank will specify the amount and duration of the loan
Trade credit
-is an agreement between a supplier and the bus.
-Suppliers normally allow bus. between 1-3 months to settle their debts
Equity Capital
-The capital that is contributed by the owner of a bus. is known as the owner’s interest
-When the owner puts additional funds into the business his/her equity increases
Debt capital
-If a bus. needs to borrow funds, it’s known as debt capital
-It is very important that businesses must be solvent at all time

Question 10

Describe factors that influence the choice of funding

Answer 10

-The nature of finance
-The amount of capital needed
-Risk
-Cost of finance
-Period of finance