Unit 3
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- Created by: liznick
- Created on: 28-04-14 21:00
Public Limited Companies
Advantages to its stakeholders
- Has limited liability- they only risk the amount they have invested in the business in the event of failure-cant loose personal possesions- owners can't loose possesions
- Can sell shares to anyone- via the stock exchange- stakeholders can buy shares- more money for the business
- Likely to be in the media frequently- Hebden Carpets "regular apperances in the media"- attracts more attention and publiciy- Stakeholders can see its progress- affects local community- more jobs if doing well
- Gives Hebden Carpets a more prestigious profile- have been PLC for 32 years- attracts more people
- Large plc's may find it easier to get a loan from banks- helpful when raising money for their large investment
- Cheaper borrowing and bulk purchasing- economies of scale- suppliers benefit from the business purchasing more- Hebdens can buy more supplies for overall less price
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Public Limited Companies
Disavantages to its stakeholders
- Accounts have to be published showing detailed financial information- competition could benefit from this- depends on current success of busines, if doing well people can see and might buy shares ADVANTAGE, if not people might decide not too- affects the stakholders e.g. owners/ managers and customers
- Have to pay a percentage of profit to shareholders- dividends- less money for stakeholders
- Hebdens owners may lose control because anyone can buy shares- affects the stakeholders
How they are financed
- Grants
- Loans
- Selling shares via Stock Exchange
In conclusion- e.g. advantages outweigh disadvantages...
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Hebden Carpets
For undertaking the large investment
- Sales have risen steadily for vinyl flooring products since 2000 in Europe
- Cheaper to have factory in Poland- could continue with high uneployment areas for employees
- Good distribution network in Europe and good relations with many retailers
- Could be easier to get a bank loan as they are a well established and successful plc- needed for investment
- Profits from vinyl are 50% higher than for carpets
- Could please the Shareholders- improves their financial performance#
- Cash flow forecast shows....
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Hebden Carpets
Against undertaking the investment
- Hebdens dont have much competition in UK- could open factory here to produce vinyl
- Got a USP if produced in UK- "Made in Britain"- could then sell online abroad- good promotional technique
- Already had success/ many awards, in media- could continue in the UK, could be jeopardised in Poland
- Hebdens market research shows its competitive
- £124 million is a lot of money- could instead expand product range in UK- open/ expand factories,- continue to employ from high unemployment areas
- Could loose customers in the UK
Conclusion
- e.g. could be a high risk project
- might be more successful if save the money and use it in the UK instead
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Sole Trader
- Pros
- Have all the control over the business
- Make all of the decisions, you are your own boss
- Keep all profits
- Full ownership
- Cons
- Only have your ideas within the business
- You are responsible for everything
- Unlimited liability
- Inflexible
Financed
- Personal savings
- Investment from friends and family
- Loans
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Partnership
Pros
- Can share responsibility
- Less pressure on the partners
- Opinions get shared
- Flexibility
- Raise capital
Cons
- Disputes over decisions and ideas
- Unlimited liability
- No full ownership
Financed
- Partners' savings
- Loans
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Private Limited
Pros
- Has limited liability
- Accounts dont have to be published- private
- Easier to raise finance- shares
Cons
- Cant sell shares to anyone- less money
- Growth may be limited
- Disputes- loss of control
Financed
- Grants
- Loans
- Suppliers
- Leasing
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Public Limitied
Pros
- Has limited liability
- Can sell shares to anyone
- Raise lots of money
Cons
- Accounts have to be published- could be good or bad
- Pay percentage of profit to shareholders- dividends
Financed
- Grants
- Loans
- Selling shares via the stock exchange
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Sources of finance- credit cards
Credit Cards
Pros
- Allow you to purchase items and pay them off in monthly investments
- May offer cash back
- You can use them practically everywhere
Cons
- May spend more money than you have
- Cost of interest and fares
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Sources of finance- retained profit
Pros
- Long term finance
- No fixed obligation of interest
- Cost effective
Cons
- Not making any excess profit
- Wasted money
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Sources of finance- sale of assets
Pros
- Way of making money on items that you no longer need
- Instant money
Cons
- You might need these items at another time
- Losing resources
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Sources of finance- loans
Pros
- Not repayable on demand
- Interest rates may be fixed so wont change
- Quick
Cons
- Have to pay the money back by a certain time with interest
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Sources of finance- Renting assets
Pros
- Way of making money on items you dont always use
- May make profit
Cons
- Assets could get damaged or abused
- You might need these items at another time
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Sources of finance- government grants
Pros
- You dont have to pay the money back
Cons
- Takes a lot of time to be approved
- Great deal of competition to get the grant
- Not easily available
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Sources of finance- venture capital
Pros
- get capital
Cons
- Venture capitalists get some of your profit
- Take some of your control
- May have disputes
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Business Plan
Main sections
- Cover
- Contents Page
- The executive summary- main points
- Key features of the business
- Aims and objectives
- Industry analysis- understanding the market you are selling to
- Market research
- Marketing- 4P's
- Human resources
- Financial forecasting
- Operational requirements- IT, machinery
- Appendix and research
Why needed?
- To set out clear plans supported by accurate forecasts, validity purposes and records, guide for success, bank requirement, sets out key aims and objectives
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Business Plan
Key stakeholders interested in a business plan
- The business's owners
- Banks and other investors
- Suppliers
- Employees
Advantages
- Enables you to measure how you are getting on
- Sets a direction
- The plan is flexible and adaptable
- Source of finance
- Initiates strategic thinking- what your strategy will be
- Building relationships
Disadvantages
- Takes a lot of time, data could be inaccurate, false certainty-projection/projection-biased, can be inflexible if followed
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Business Resources
Labour intensity: Pros
- Provides employmeny and therefore brings income and opportunities for individuals
- flexible
- Job production- made specialised/ personalised products e.g. wedding cakes
- Cheaper in the short term
- Better for small businesses- cheap
Cons
- Usually used to produce products on a small scale- normally seen in small scale enterprises
- Have to fund for wages, recruitment, training, benefits etc
- Inconsistent effor- quality
- Hours- breaks- holidays
- Different personalities
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Business resources
Capital intensity: Pros
- Can produce on a large scale
- high rate of success- produce things quickly and efficiently
- flow production- conveyor belt
- Low competiiton
- Low risk of losing your investment
- 24/7 work- flexible hours
- Consistent qulity/ precise
Cons
- Requires a relatively high level of capital- short term cost
- Can be costly and time consuming
- Have to pay for repairs if they break- stops production
- Consistent effors- e.g. Toyota breaks
- Inflexible to change production
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