Question 1
If Luke plans to start up his business as mentioned in the case study, he would have to set aims and objectives of the business. These aims and objectives will ensure his business will run on track and operate accordingly. These will become the foundation of the business and no business operations will go astray from it.
a) Aims and Objectives
One of the business aims and objectives will be “educate people especially the older generation, on how to use various usages of Internet and e-mail”. This aim will become the guideline for Luke on how to handle his business according to his plan. This is also the main purpose on why Luke wants to set up his business.
Another possible aim for his business will be “keeping the customers satisfy with the service provided and update them with the latest changes in the technology environment”. This aim ensures Luke will provide satisfying services to his customers and the image of the business will not be tarnished because of unsatisfying service. Hence, updating customers with latest changes will keep them satisfied and sustain the business.
Besides setting the two main aims and objectives, Luke has to set some short-term objectives or aims as well. For example, he can implement objective like “Achieving 5000 customers by the end of the first year.” By setting this objective, Luke will clearly know that he must achieve this target once the business reaches one year old. This will also help him to come out with different business strategies to attract more customers.
Another example of short-term aim he can create is “Gain RM 50 000 profits by the end of second year”. Considering the profit gained for the first year needed to cover up the investment spent during the opening of the business, gaining RM50 000 profits by the end of second year will be a challenge for Luke. This challenge will help him strives to achieve his aim. Therefore, the aims and objectives will act as a motivator to help him in sustaining and running of the business.
Question 2
Based on the case study, I would recommend Luke to take up partnership if he is going to form a business with Eric. There are various reasons to support my suggestion on why Luke should form a partnership business with Eric. Among the reasons, include:
a) Lack of Business Knowledge
Luke who has a qualification in Information Technology might lack of business knowledge to run certain areas in his business. Although the business he wanted to set up very much related to the Information Technology field, he still requires some knowledge in the business field to run his business efficiently. In order to overcome this, he should take Eric who has a qualification in Business as his partner in the business. A business which is owned and run by two specialists, each has extensive knowledge in respective field will ensure the business to run more efficiently and successful.
b) Insufficient Fund
As a fresh graduate, Luke will certainly have very little capital to start his business. He wants to start his business immediately once he finishes his degree and he is left with very little time to save up for his business. Therefore, taking a business partner will help him solve this problem as each partner will contribute and invest on the business. Luke will have enough funds to start his business if Eric becomes his partner and contribute fund to the business.
c) Lower Risk
A partnership business is considered as the best solution for a young entrepreneur like Luke to start up his business. This is because, if the business suffers any losses, it is shared among the partners and each partner does not need to face a high risk of bankruptcy. Even though a partnership has unlimited liability, the risk has been lowered down as each partner is responsible towards the business and shares the losses. Hence, it is safer for a new entrepreneur to start up his business with partnership.
d) Taxation Advantages
Another reason why Luke should form a partnership is that he can enjoy the benefit of reduced taxation. A partnership business will only be taxed with individual tax and not corporate tax. This can help Luke’s business to maximise its profits by avoiding the corporate tax. On top of that, the individual tax is shared among the partners, which further reduces the amount a partner has to pay. Therefore, Luke and Eric should form a business partnership to enjoy the taxation advantages.
Question 3
There are numerous forces in the business environment that could possibly affect Luke’s new business. No matter they are internal or external environment, they still pose a challenge or problem to Luke’s business. Some of them include:
1) Internal Environment
a) Financial Resources / Capital
As a new entrepreneur, Luke will face a challenge in gathering financial resources or capital to start his business. If he manages to gather enough capital to run his business, he still has to manage his financial resources carefully to avoid unnecessary loss and risk. Planning must be done in advance so that the business will have enough savings for immediate and future uses. Hence, financial resources will affect Luke’s business.
b) Equipment and Materials
To start his business, Luke has to determine the exact or approximate equipment and materials he has to use to run his business. All the equipment and materials purchased must be useful for the business itself and sufficient for the customers to use during each lesson. Insufficient of equipment might project a negative image to the potential customers and affect the business. Therefore, Luke has to consider his equipment and materials needed carefully to prevent negative impact on his new business.
2) External Environment
a) Technological Environment
The technological environment is changing rapidly and drastically. There are always new technology being invented everyday and this affect almost every business. Since Luke’s business is very much related to technology, his business will receive a greater impact when technology changes. His business, which includes providing lesson regarding the usage of Internet and e-mail, are experiencing changes daily. He must make sure what he teaches are up to date and stays alert whenever there are any updates. Thus, Luke’s business will face a challenging technological environment and it is an uncontrollable environment.
b)Customer
Another uncontrollable environment that will affect Luke’s business is the customer itself. The customer plays the biggest role in any business because they influence the demand level and they have the buying power. In the case of Luke, the numbers of people attending his lessons and paying for his services determine the success of his business. If many people are paying for his services, this means his business is in good condition and marketable. However, the customers are affected by various factors such as cultural, social and psychological factors. Luke must market his service according to the targeted group, which consists of older people who lack of knowledge in Internet and e-mail in order to gain maximum customers. Therefore, the customers are affecting Luke’s business directly.