A disadvantage of a business plan is that possible incorrect market research may lead to the business plan becoming useless and unsuccessful. Market research may become incorrect when market conditions change (e.g. a new competitor). Another disadvantage of a business plan is that it takes time to produce and therefore, can be expensive. For a business plan to be worth producing, entrepreneurs would need to spend a lot of time and resources looking into and examining the target market. This time could have been used to advertise or even sell the business’s products.
2. Compare the advantages and disadvantages of a business plan? (8-10)
An advantage of a business plan is that it can reduce the risks as you would be able to anticipate any problems. If problems are identified in advance, businesses would be better able to deal with them, however business plans take time to produce and therefore can be expensive. For a business plan to be worth producing, entrepreneurs would need to spend a lot of time and resources looking into and examining the target market. This time could have been used to advertise or even sell the business’s products. Therefore, the profits raised from selling products may well equal the (unnecessary) costs and expenses caused from not producing a business plan.
Also, business plans can provide guidance as targets could be set from the market research done. This is useful because by having a sense of direction, everyone involved in the business knows what they are supposed to be doing. However, if the market research is incorrect then the targets would be misleading and the business plan will be useless. Market research may become incorrect when market conditions change (e.g. a new competitor). Therefore, businesses have to be careful when examining their target market because if the market research is invalid then there is a higher chance that the business will become unsuccessful. Overall, in order for a business plan to be of usefulness, a business would need to research the market thoroughly; if not, the business plan may go wrong.
In conclusion, a business plan has its advantages and disadvantages. When a business produces a plan, they would have to think about whether the risks, time and costs involved can be covered by the advantages of a business plan.