Unit 3

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

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...

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....

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

• 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

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

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

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

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
  
• 
  

Pros

• Long term finance
• No fixed obligation of interest
• Cost effective

Cons

• Not making any excess profit
• Wasted money
  

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

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

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

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

Pros

• get capital

Cons

• Venture capitalists get some of your profit
• Take some of your control
• May have disputes

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

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

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
  

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