Competition is also a factor for Donald Powell to consider before locating a business. If there is too much competition, it may force Donald Powell’s company to lower prices for products and he may even lose many of his customers. Too much competition is not an advantage.
Although this factor should not be worth considering, the government can be a factor worth considering when locating in an area of high unemployment. The government will grant you money and give you other benefits. However, in Crawley, the government will not help you, as you are not locating in an area of high unemployment.
Although this factor should not really be worth considering, as Donald Powell will be setting up his retail company in Crawley, pressure groups can also influence the location of someone’s business. This is only if your business is harming the environment in any sort of manner. However, as I had stated previously, this factor will be irrelevant, as Donald Powell will not be cutting down any trees or damaging the environment in any way.
Q3 What type of business would be most suitable for Mr Powell
Donald Powell must choose carefully which type of business organisation to operate as. The main types of business organisations he could operate as are:
- Sole Trader
- Partnership
- Public Limited Company (plc)
- Private Limited Company (LTD)
Being a sole trader is the easiest and most common form of business to set up. If Donald Powell decided to operate as a sole trader, he would be the owner and manager of his own business. Being a sole trader has its advantages and disadvantages.
If Donald Powell were to become a sole trader, he would receive all of the profits his business has generated.
Donald Powell, as a sole trader, would also be able to make all of the decisions in his business.
Privacy is also an advantage for Mr Powell as all business affairs would remain private.
As a sole trader, Donald Powell can quickly change trade if his previous one proves to be unsuccessful. This can happen overnight.
However, there are also some disadvantages to being a sole trader. Unlimited liability is one of them. Ultimate responsibility for any debts will lie solely with Donald Powell. This would have to be repaid by his wealth or personal possessions.
Since it is very unlikely that any single individual will posses all the required qualifications and business acumen to a run a successful enterprise, Donald Powell may find it impossible to compete with traders employing people specialising in different aspects of the trade.
As a sole trader, Donald Powell may find the responsibility of owning, managing and working the business a heavy burden.
Working hours may also be a disadvantage as Donald Powell would be likely to have to work long hours.
If Donald Powell was to become sick or was to die, the business may collapse.
The last disadvantage would be lack of growth. It would be difficult for Donald Powell’s business to grow, as the money invested in the business (capital) is likely to be very limited.
If Donald Powell was to operate as a sole trader, he would experience a lot of advantages such as receiving all of the profit, making all of the decisions e.t.c…. He also has a lot of serious disadvantages such as not being able to advertise his shares, lacking business skills e.t.c…. E.g. If Donald Powell lacked necessary business skills, he would find it very difficult to cope and be successful. This is why I have come to the conclusion that this type of business is unsuitable for Mr Powell.
Forming a partnership with at least one person and a maximum of twenty can lessen some disadvantages experienced by a sole trader (Donald Powell). This is a popular type of business. This type of company has many advantages and disadvantages.
Each partner will invest capital into the business and this will increase Donald Powell’s business financial resource.
Partnerships can take advantages of larger scale businesses opportunities. This is a good advantage for Donald Powell
The responsibilities of the business would be shared between all of the owners known as partners. This would take a little weight off Mr Powell’s shoulders.
In a partnership, business affairs would remain private between the partners. This could increase Donald Powell’s business awareness as well.
With several partners working within the business, each one can specialise in what they are best at e.g. accountancy e.t.c... (Speacialition increases productivity) This could be very useful for Mr Powell as he may lack some business skills. Therefore, he can do what he is best at.
There are four main disadvantages to being in a partnership. The first one is unlimited liability. All partners are equally liable for any debts the business builds up. Therefore, Donald Powell can lose all of his personal wealth and possessions to repay debts.
With shared decision-making, there is always a likelihood of Donald Powell or any of the other partners disagreeing to someone’s decision. However, this can be solved with a legal document called a Deed of Partnership. This outlines how decisions should be made, profits shared e.t.c...
As the number of partners is limited, so is the capital. This can hinder the business growth. This is a disadvantage for Donald Powell.
I think operating in a partnership would be quite a good choice of business for Mr Powell as it has many advantages such as specialisation, more capital e.t.c… However, there are also a few disadvantages such as disagreements, unlimited liability e.t.c… And although it seems that the advantages outweigh the disadvantages, I still think this is not the most suitable type of business for the needs of Donald Powell.
If Donald Powell decided to operate as a plc, (public limited company), he would be the owner and manager of his business perhaps along with a few other people. Being an owner of a plc has its advantages and disadvantages.
The liability of the owners such as Donald Powell to pay the debts of the company is limited only to the money invested in shares. This would encourage share ownership, as Donald Powell’s personal wealth is kept secure, should the company fail.
Shares can be advertised and sold through the stock exchange. The shares can be sold to any member of the public. This can allow Donald Powell to raise a vast amount of capital.
If Donald Powell made a mistake which proved to be very serious, his business would be sued, not Donald Powell himself.
As Donald Powell’s business becomes larger, there will be a lot more scope for specialisation. Specialist in different jobs could be employed. Employees will concentrate on only a few tasks they are good at. Not only will this allow Donald Powell’s business to run things much more efficiently, but also Mr Powell will not need to worry whether he lacks certain business skills. (Specialisation increases output).
As Donald Powell will be running a larger business, banks will be more willing to lend larger business loans, as he will be likely to repay them on time. Loans with a lower rate of interest may be obtained. As Donald Powell’s business will be a lot larger, he will be more likely to buy things in bulk. Hence, the unit cost of production will fall. (Get cheaper).
Any owner that purchases more than 50% of the company’s shares can be said to have taken over the business. This can happen anytime if shareholders (such as Donald Powell) are willing to sell their shares. E.g. BMW mounted a successful take over of Rover.
Large businesses can be difficult for Donald Powell to control and manage leading to inefficiencies e.g. managers wasting money and leading to disagreements and industrial action. This can lead to rising unit costs in production known as diseconomies of scale.
Donald Powell’s interests e.g. growth, market share may differ from shareholder’s interests e.g. profit leading to higher dividends
The setting of a PLC is time consuming and costly.
Finally, if a partner dies or leaves the partnership, the partnership is formally ended. Therefore Donald Powell does not have a guarantee whether the business will carry on.
Public limited companies are the largest type of business organisation and always have the letters plc after their name e.g. Tesco PLC.
I think this would be the best business organisation for almost anybody and the probability of them becoming successful would be high. However, after mentioning the advantages and disadvantages of a public limited company, Donald Powell’s funds will not be sufficient to run this type of business, as he clearly stated on the work sheet that he will set up his local retail business using his redundancy payment of £10,000.
A private limited company is quite inexpensive to set up but cannot advertise the sale of its shares
If Donald Powell decided to operate as a LTD, (private limited company), he would be the owner and manager of his own business. Being an owner of a LTD has its advantages and disadvantages.
If Donald Powell were to operate as a LTD, his first advantage would be the limited amount of liability. The liability of owners (shareholders) to pay the debts of the company is limited only to the money invested in shares. This encourages share ownership, as Donald Powell’s personal wealth is kept secure should the company fail.
As shares can be sold, capital is much easier for Donald Powell to raise.
Thirdly, in law, the company, not the owner, is sued. So, if Donald Powell were to make a mistake, the company not Donald Powell would be sued.
Donald Powell’s private limited company would be unaffected by the death or illnesses of any of the other owners.
However, as I mentioned before, as capital is easier to raise for Mr Powell, it is still limited. Shares can not be advertised and therefore can only be sold to known people i.e. family and friends e.t.c... This means the amount of capital Donald Powell can raise is limited.
A private limited company’s shares are not available on the stock exchange.
Lastly, the accounts for Donald Powell’s company are not private information.
I think this is the best type of business organisation for Mr Powell as private limited companies are quite inexpensive to set up and would enable him to take advantage of larger scale business opportunities. His liability would be limited, shares could be sold e.t.c… However, capital would still be fairly difficult to raise.
Q4 What are the best sources of help for Donald Powell
If Donald Powell were looking for public sector help, he could turn to many sources, such as the Regional Aid Programme. The Government would provide grants to attract Donald Powell’s business in relatively poor economic areas. This helps to reduce unemployment in areas of high unemployment. However, in this case, the Regional Aid Programme would not help Donald Powell as he is setting up his business in Crawley, which is a good economic area.
Secondly, there is the Department of Trade and Industry (DTI). The DTI provides a consultancy service for businesses. Therefore, if Donald Powell were experiencing any problems with his business, the business consultant would visit Mr Powell and give him advice on his business. This source can be very useful for Mr Powell.
The Central Statistical Office is another source of help as they would provide data for Donald Powell on a wide range of issues that may be useful to Donald Powell e.g. spending patterns, inflation e.t.c… Donald Powell could use these statistics to help him.
The Training and Enterprise councils (TEC’s), are located in most large towns and would offer Mr Powell local services for his business e.g. local day seminars e.t.c… TEC’s would also grant Donald Powell money to start up his business for about a year. This source of help would be very useful for Mr Powell as he may lack some business skills and money to start up his business.
One source of help is where the Government would guarantee banks loan repayments for Donald Powell’s business. This encourages banks to lend and provide finance for Mr Powell, as they would not otherwise. Up to 85% of the loan is paid back should Donald Powell’s business fail. This source of help is called the Loan guarantee scheme.
The British Overseas Board supports the activities of UK exporters through mounting exhibitions, providing information and publicising the activities of UK businesses in foreign countries. This source of help would not be very useful for Mr Powell, as he will not be exporting goods out of the country e.t.c…
Lastly, the European Union (EU). The EU provides grants to the public sector (Donald Powell’s business is in the public sector). Grants may be provided for research, development, job creation schemes, training schemes, improving infrastructure and developing energy supplies. The EU would help Mr Powell enormously.
In the public sector, there are many sources of help. I think all of these sources are good to help Donald Powell excluding the British Overseas Trade and the Regional Aid Programme. The rest of the sources of help can build a good foundation for Donald Powell’s business. The DTI can provide a consultancy service for Mr Powell’s business, the CSO can provide Donald Powell with a range of statistics, and TEC’s can provide Donald Powell with training courses. Therefore if Donald Powell lacks some certain business skill, the TEC’s can help him. The loan guarantee scheme would also be very useful to Donald Powell as he would not have to be too worried about his business failing as 85% of loans would be paid back by the government. The EU can also help by granting money to Mr Powell to improve his business in a variety of ways.
If Donald Powell were looking for private sector help, he could turn to banks. Banks would provide advice for Donald Powell’s business and would also offer sources of finance e.g. loans e.t.c… All the main high street banks have specialist advisers and services geared to support small businesses, such as Donald Powell’s.
Management consultants are another source of help. Donald Powell would pay a management consultant to assess his business and indicate how it can be improved.
Accountants can anylase Donald Powell’s accounts and give him valuable finance advice e.g. how he can avoid cash shortages and what cost to control.
Trade associates provide advice for Donald Powell’s business concerned with industry e.g. changes in technology, fashion e.t.c…
Lastly, the Chambers of Commerce. These are voluntary organisations comprising on business with a locality. They would protect the interest of Donald Powell’s local business e.g. stopping road layout change that might affect businesses encouraging pedestrianisation of the roads. They are the local voice of businesses.
In the private sector, there are many sources of help. In my mind, the most useful ones seem to be banks, management consultants and Trade associates. This is because they all provide the necessary thing for Donald Powell to run his business e.g. banks provide him with advice and loans, Management consultants assess Donald Powell’s business and tell him what needs improving and Trade associates can advise Donald Powell’s business concerned with industry. Accountancy is also fairly important but not the most.
Conclusion:
After looking at my findings, I have come to the following conclusions:
Donald Powell’s retail outlet should either be a record store, men’s designer wear shop, a cookery store or a clothes shop (For males and females), as these were the top four results in my survey.
Secondly, I have concluded from the results of my questionnaire that 42% of the public order goods and services on the Internet, online.
Donald Powell should set up his business in the County Mall as lots of people go to shop there.
Before locating his business, Donald Powell should think about:
- Competition
- Government
- Infrastructure
- Labour
- Land
If Donald Powell were to operate as a sole trader, he would experience a lot of advantages and disadvantages such as receiving all of the profit, making all of the decisions e.t.c…. He also has a lot of serious disadvantages such as not being able to advertise his shares, lacking business skills e.t.c… e.g. If Donald Powell lacked necessary business skills, he would find it very difficult to cope and be successful. This is why I have come to the conclusion this type of business is unsuitable for Mr Powell.
I think operating in a partnership would be quite a good choice of business for Mr Powell as it has many disadvantages such as specialisation, more capital e.t.c… However, there are also a few disadvantages such as disagreements, unlimited liability e.t.c… Nevertheless, I still think there is another type of business suitable for Donald Powell.
If Donald Powell were to run a plc, the probability of him becoming successful would be high. However, after mentioning the advantages and disadvantages of a public limited company, Donald Powell’s funds will not be sufficient to run this type of business, as he clearly stated on the work sheet that he will set up his local retail business using his redundancy payment of £10,000.
I think this is the best type of business organisation for Mr Powell as private limited companies are quite inexpensive to set up and would enable him to take advantage of larger scale business opportunities. His liability would be limited, shares could be sold e.t.c… However, capital would still be fairly difficult to raise.
In the public sector, there are many sources of help. I think all of these sources are good to help Donald Powell excluding the British Overseas Trade and the Regional Aid Programme. The rest of the sources of help can build a good foundation for Donald Powell’s business. The DTI can provide a consultancy service for Mr Powell’s business, the CSO can provide Donald Powell with a range of statistics and TEC’s can provide Donald Powell with training courses. Therefore if Donald Powell lacks some certain business skill, the TEC’s can help him. The loan guarantee scheme would also be very useful to Donald Powell as he would not have to be too worried about his business failing as 85% of loans would be paid back by the government. The EU can also help by granting money to Mr Powell to improve his business in a variety of ways.
In the private sector, there are many sources of help. In my mind, the most useful ones seem to be banks, management consultants and Trade associates. This is because they all provide the necessary thing for Donald Powell to run his business e.g. banks provide him with advice and loans, Management consultants assess Donald Powell’s business and tell him what needs improving and Trade associates can advise Donald Powell’s business concerned with industry. Accountancy is also fairly important but not the most.
Recommendation:
After looking at all of my findings, I have come to the following recommendations:
Donald Powell should make sure his company is on the Internet as 42%, nearly half of the people order goods and services online.
The most popular choice of store was a record store along with a men’s designer wear shop, cookery store and a clothes shop. (For males and females). In general, clothes shops are in most demand. I have concluded from these results that Mr Powell should set up a unisex clothes shop Therefore, the shop will be more popular as both members of sex will go and visit it.
Mr Powell’s infrastructure must be very good. However this is not really a problem as Crawley has many train stations, motorways, airports and other strong road links. E.g. Gatwick airport, M25, Crawley train station, M23 e.t.c… (See map)
I would recommend Donald Powell to locate his retail store in the County Mall, as many people shop there most often. However, locating Donald Powell’s business may also have some disadvantages, such as being expensive and not having a lot of space.
I would recommend Mr Powell to operate as a private limited company as it is quite inexpensive to set up and would enable him to take advantage of larger scale business opportunities.
Name: Rajvir Sangha
Position: Pupil of business studies
Date: 20/01/03