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Essay Questions (100 Marks) Question 1 You have decided to open a business and seeking for investors to invest in your business. You want to ensure that the capital pumped into your business by the investors has to produce more wealth for your firm. Investors will face losses if your business fail. However, if your business is a success, they will be rewarded. Describe the THREE (3) basic types of capital that entrepreneurs need and give example of hoe each capital is maximum utilised to your business success. (30 marks) Question 2 Hariharen has decided to initiate a textile business in a new area. He is confident that the business has potential to succeed. Unfortunately, he is not familiar with that business. His friends advised him to make an evaluation on the business prior to start-up. His friends also told him that entrepreneurs networking is an important component for the entrepreneurs to develop and establish their businesses. Explain the SIX(6) elements below of the industrial environment to be assessed by Hariharen before starting his business. i. Consumers ii. Competitors iii. Suppliers iv. Financial institutions v. Government agencies vi. Non-government organisations (30 marks) Question 3 Shahul Hamid is planning to buying an existing frozen food distribution company. However, he is a little sceptic on his decision as he isn’t very sure of the issues involved in buying an existing frozen food distribution. Therefore, Shahul Hamid approached you to advise him on the advantages and disadvantages buying this business. Discuss the advantages and disadvantages below with Shahul Hamid before he decides to buy the existing company.
Advantages a. Immediate operation b. Existing intangible assets c. Established group of employees and suppliers d. Quick Cash Flow Disadvantages a. Cost b. Location may have become unsatisfactory c. Inherited employees may be unsuitable d. Outstanding Contracts
Advantages a. Immediate operation b. Existing intangible assets c. Established group of employees and suppliers d. Quick Cash Flow Disadvantages a. Cost b. Location may have become unsatisfactory c. Inherited employees may be unsuitable d. Outstanding Contracts
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Step-by-step
1.Question 1:
Business people require different kinds of cash-flow to effectively lay out and work a business. These are:
1. Monetary Capital: Monetary capital is how much cash or monetary assets expected by a business person to begin and keep a business. The monetary capital can be utilized to buy hardware, rent or buy an area, recruit representatives, buy stock, and cover bills. Monetary capital can be acquired from financial backers, banks, or individual investment funds.
For instance, if a business visionary needs to begin an eatery, he/she would require monetary funding to lease or buy an area, buy cooking hardware, employ
workers, and purchase stock.
2. Human Resources: Human resources is the aggregate information, abilities, and experience of a business person and his/her representatives. This kind of capital is significant for the progress of a business since it guarantees that the representatives are equipped for completing their jobs and obligations really. Human resources can be created through preparing, recruiting qualified workers, and advancing from inside the association.
For instance, to begin a product improvement organization, he/she would require human resources to recruit experienced developers and fashioners who can foster quality programming items.
3. Social Capital: Social capital is the organization of connections and associations that a business person works with others and associations. These connections can be utilized to get data, assets, and amazing open doors that can assist with developing the business. Social capital can be worked through going to systems administration occasions, joining proficient associations, and building associations with clients and providers.
For instance, to begin a showcasing organization, he/she would require social cash-flow to interface with possible clients, providers, and other industry experts who can give important knowledge and open doors to development.
2. Question 2:
Prior to beginning a business in another space, Hariharen needs to assess the modern climate to guarantee that his business can possibly succeed. The
following six components of the modern climate ought to be surveyed:
1. Buyers: Hariharen needs to recognize the necessities and needs of possible clients in the new region. This incorporates figuring out their inclinations, ways of behaving, and buying propensities. He can acquire this data through statistical surveying and overviews.
2. Contenders: Hariharen ought to recognize the fundamental rivals in the new region
furthermore, break down their assets and shortcomings. This incorporates grasping their items and administrations, estimating systems, showcasing strategies, and client base.
3. Providers: Hariharen needs to recognize likely providers in the new region and
survey their dependability, quality, and valuing. This incorporates recognizing providers for
unrefined components, gear, and different assets expected for the business.
4. Monetary Organizations: Hariharen needs to recognize possible monetary establishments
in the new region that can give advances, credit, and other monetary assets
expected for the business. He ought to evaluate their loan fees, reimbursement
terms, and qualification models.
5. Government Organizations: Hariharen ought to recognize applicable government offices in the new region that can offer help and help for the business. This incorporates grasping guidelines, assessments, and grants expected for the
business.
6. Non-Government Associations: Hariharen ought to recognize significant non-government associations in the new region that can offer help and help for the business. This incorporates grasping expected organizations and joint efforts with local area associations, industry affiliations, and other significant gatherings.
Explanation:
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Question 3
Shahul Hamid is planning to buy an existing frozen food distribution company. However, he is a little skeptical of his decision as he isn’t very sure of the issues involved in buying an existing frozen food distribution. Therefore, Shahul Hamid approached you to advise him on the advantages and disadvantages of buying this business.
Advantages:
a. Immediate operation: The advantage of buying an existing frozen food distribution company is that it provides an opportunity for immediate operation. This means that Shahul Hamid can start running the business right after the acquisition process is completed, which saves time and effort in setting up a new business from scratch.
b. Existing intangible assets: Another advantage of buying an existing frozen food distribution company is that it comes with existing intangible assets such as goodwill, brand recognition, and customer base. These intangible assets can be leveraged to gain a competitive advantage over other companies in the same industry.
c. Established group of employees and suppliers: When Shahul Hamid buys an existing frozen food distribution company, he acquires an established group of employees and suppliers who are already familiar with the company’s operations. This means that Shahul Hamid does not have to spend time and resources hiring and training new employees or finding new suppliers, which can be time-consuming and costly.
d. Quick cash flow: An advantage of buying an existing frozen food distribution company is that it provides quick cash flow. The company already has existing customers and contracts, which means that Shahul Hamid can start generating revenue immediately after the acquisition.
Disadvantages:
a. Cost: One of the main disadvantages of buying an existing frozen food distribution company is the cost involved. The cost of acquiring an existing company can be significant, and Shahul Hamid needs to ensure that he has sufficient financial resources to cover the cost of acquisition.
b. Location may have become unsatisfactory: Shahul Hamid needs to be careful in selecting the right company to acquire. If the company’s location is unsatisfactory, it may not be able to generate enough revenue to cover the cost of acquisition.
c. Inherited employees may be unsuitable: Another disadvantage of buying an existing frozen food distribution company is that Shahul Hamid may inherit unsuitable employees. These employees may not have the required skills or work ethic, which can negatively impact the company’s operations.
d. Outstanding contracts: When Shahul Hamid buys an existing frozen food distribution company, he also inherits any outstanding contracts that the company may have. This means that he needs to honor these contracts even if they are not profitable, which can impact the company’s profitability.