Reference no: EM133340311 , Length: word count:1500
Learning outcome 1: Demonstrate an understanding of the multi-disciplinary nature of business, displaying knowledge of entrepreneurial and commercial thinking
Learning outcome 2: Demonstrate knowledge and understanding of the principles underpinning business enterprise and apply critical thinking skills to business concepts such as marketing, ethics, finance, and business structure
Learning outcome 3: Understand the application of marketing in business including topics such as the product lifecycle, the marketing mix, and market segmentation
Learning outcome 4: Identify and apply appropriate use of financial information to support business decisions
Learning outcome 5: Demonstrate understanding of graphical and tabular information
Learning outcome 6: Effectively communicate analysis of business issues using either written or oral communication.
Learning outcome 7: Analyse and synthesise key concepts to demonstrate effective communication skills, demonstrating ability to persuade and influence in your interactions
Learning outcome 8: Develop research skills using reputable sources to find and use appropriate evidence to support proposals and opinions.
Business
Read the case study below and write a report that analyses the situation using the questions that follow as subheadings.
Case Study:
Barclays and Stephen are two friends who are both passionate cyclists. Although neither of them has experience in retail business, they have often discussed the idea of opening a small bicycle shop in Cambridge, UK. They believe that their enthusiasm about cycling will lead to them having great success.
Barclays has recently received an inheritance of £50,000 and has agreed with his friend that he will invest the money in starting up their business, ‘Bespoke Cycles'. They have found a suitable shop premises in Cambridge and they are beginning to put together their financial plans.
Neither Barclays nor Stephen has owned their own business before, so for them this is an exciting idea and they believe they can make it a success. They intend to target both commuters and families with young children as their target market segments.
The entrepreneurs have not yet considered all the potential costs of their new business idea, but have managed to gather some data. Below is information that Stephen has collected as part of the planning for the new business.
|
Shop space rental:
|
£3,500 per month
|
|
Estimate of business start-up costs to be paid in cash
|
£40,000 (shopfitting, etc.)
|
They have already negotiated with suppliers in India and will get one month's credit on their supplies.
They assume all sales will be in cash,
They feel the shop will be popular and have made the following forecast regarding sales and monthly costs. They have not created a cash-flow forecast before.
|
£
|
January
|
February
|
March
|
April
|
May
|
June
|
|
Sales
|
5,000
|
15,000
|
19,000
|
15,000
|
18,000
|
30,000
|
|
|
|
|
|
|
|
|
|
Cash outflows
|
|
|
|
|
|
|
|
Insurance, Rent, Rates & council tax
|
6,000
|
6,000
|
6,000
|
6,000
|
6,000
|
6,000
|
|
etc.
|
|
Staff wages
|
2,000
|
3,000
|
3,000
|
3,000
|
3,000
|
6,000
|
|
Launch marketing
|
10,000
|
|
|
|
|
|
|
Other overhead costs
|
5,000
|
5,000
|
5,000
|
5,000
|
5,000
|
5,000
|
|
Total
|
23,000
|
14,000
|
14,000
|
14,000
|
14,000
|
17,000
|
|
Variable Costs of supplies
|
40% of sales
|
Barclays and Stephen are not sure whether they should apply for a bank loan. Barclays and Stephen will each take £1,000 per month from the business.
You are required to complete an analysis of the above case study using the following questions as SUBHEADINGS:
Question 1. Prepare a cash flow forecast. Remember that the entrepreneurs have no experience in producing cashflow forecasts so they have forgotten some important items - you need to add these.
In your forecast you should show:
1. Total Cash Inflows
2. Total Cash Outflows
3. Net Cash Flow
4. Opening Balance
5. Closing Balance
a. Considering your cash flow forecast, what advice would you give Barclays and Stephen on how to improve their cash flow? Explain your advice.
b. Barclays and Stephen don't know if they need to borrow any money. Do you think that they do need to borrow anything? If so, propose what amount you think they need to borrow and explain this with data from your cash flow forecast.
2. Barclays and Steph need to develop a marketing plan for their business. Propose how they can apply the marketing mix (4Ps) to their new business venture. Include an explanation of the marketing mix and show how they could use it.
3. Consider the ethical issues that their business may face and propose what they should do about these.
4. Explain any other problems that you think the new business may have and whether you believe that their business idea can be a success.