U5 Ch.21 Starting Business

Question 1

Decisions to make when starting a business

Answer 1

1. Ownership Structure
2. Location
3. Sources of Finance
4. Production Method

Question 2

Ownership structures for startup

Answer 2

1. Sole Trader
2. Partnership
3. Private Limited Company
4. Co-operative

Question 3

Certificate of Incorporation

Answer 3

enables limited company to begin trading. Issued when CRO recieves and processes all relevant documents that are required from business

Question 4

CRO

Answer 4

Companies Registration Office. Organisation where info on Irish companies and business names is stored and managed.
-Incorporates companies (i.e. the authority for registering them)
-Receipt and registration of relevant documents required to set up company
-Making info available to public e.g. company name and registered office

Question 5

Factors entrepreneur should consider when deciding structure

Answer 5

-business type
-number of owners
-tax and administrative implications

Question 6

business startup location factors

Answer 6

1. Employees (qualified + training facilities)
2. Market (income?)
3. Raw Materials (accessible?)
4. Infrastructure (transport?)
5. Land (affordable + expanision?)
6. Government (grants?)

Question 7

Business startup finance sources

Answer 7

difficult for new business to raise finance and convince investors. Long, short and medium will all be needed

Question 8

Business startup Production Methods

Answer 8

1. Job Production
2. Batch Production
3. Mass(flow) Production

Question 9

Business startup Production Method Factors

Answer 9

1. Economies of scale?
2. skilled workers?
3. demand?
4. personalization needed?

Question 10

Job Production

Answer 10

Goods are made to order. A unique product is made to customer’s specification.
1. Highly skilled labour (higher wages)
2. more expensive advanced machinery required
3. expensive high quality raw materials
4. No Economies of scale
e.g. tailor-made clothes

Question 11

Batch Production

Answer 11

Goods are produced for stock. Limited number of identical items are made in a production run.
1. less skilled labour (lower wages)
2. Machinery is flexible and when one batch ends it can be used to make another
3. multiple items made at same time is more efficient w/ less waste
4. Some economies of scale benefits
e.g. clothes made in different sizes

Question 12

Production run

Answer 12

machinery is configured to make one product for a period of time

Question 13

Mass(flow) production

Answer 13

Goods are produced for stock in very large quantities. Identical items made continuously.
1. unskilled assembly line workers (low wages)
2. Large investment needed for amount of machinery
3. Lots of economies of scale benefits
e.g. toilet rolls / pens / batteries

Question 14

Implications of changing production methods

Answer 14

1. Investment (available for large amount of machinery set-up and maintenance?)
2. Ability to adapt (harder to adapt to changing consumer needs when produced on mass scale)
3. Quality (will it be maintained)
4. Satisfaction (consumer has less personalized product)
5. Stock control changes (larger scale production needs more efficient stock control)

Question 15

Subcontracting

Answer 15

(Outsourcing). business employs another firm to manufacture or produce part of a product or a whole product

Question 16

Subcontracting Advantages

Answer 16

1. Less Costs (no machinery purchases)
2. Less staff needed
3. Meet demand quicker (no need for set-up time)
4. Less regulations to worry about

Question 17

Subcontracting Disadvantages

Answer 17

1. Less control over quality
2. IR problems (if reduces amount of staff needed)
3. Subcontractor may decide to become competition

Question 18

Business Plan

Answer 18

detailed written document which includes info about business. Outlines aims and objectives and strategies, such as marketing and production, to achieve them

Question 19

Reasons for business plan

Answer 19

1. Obtain Finance
2. Measure Performance (benchmarking)
3. Identify Problems (in future and put measures in place)
4. Formulate Strategies

Question 20

Sections in Business Plan

Answer 20

1. Business Details (directors, shareholders, legal[ownership] structure)
2. Production (type, required machinery, targets, lead times)
3. Marketing (market research results, marketing mix[4P’s] to maximize market share)
4. Finance (set-up costs, sources, cash flow forecast, production budgets, forecasted revenue and costs)
5. Product details (g + s that will be sold and their USP)

Question 21

How business plan affects stakeholders

Answer 21

1. Employees (employment security and identify promotion opportunities with expansion)
2. Investors (persuade that business is capable of making a profit and offering a good return on their investment)
3. Manager (measure actual performance against goals and see if business has progressed satisfactorily)
4. Suppliers (ensure business is viable and can sustain any line of credit given to it)
5. Financial Institutions (required for loan capital to make a decision regarding financial approval)

Question 22

Challenges for business start-ups

Answer 22

1. Raising finance
2. Recruiting top staff (unable to pay as high wages as other successful business)
3. Competition (with well-established brands)
4. Affording materials/machinery for chosen production method

Question 23

Why new business fail

Answer 23

Usually not just one but a number of factors including:
1. poor management (poor decision-making)
2. Insufficient Capital
3. Unsuitable Location
4. Poor Business plan
5. Too rapid expansion