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Exercise
Use the following template to plan for your future budget and submit it to your
lecturer. Compare this plan budget to the actual budget in your business plan.
Category Budget
Example: rent
2. In the following table inset the amount of funding you
needed and the resources to get the funding.
Funding Amount
3. Discuss how financial ratios are used to analyse and
interpret a firm's financial statement.
4. List down your asset, liabilities, revenue and expenses
for your new business venture.
Asset:
Liabilities:
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5. Case study
PARTNERING FOR SUCCESS
Organizing Buying Groups to Cuts Costs and
Maintain Competitiveness
One challenge that businesses confront is cutting cost in
ways that don't erode their ability to remain competitive.
Many cost-cutting techniques, such as scaling back on
hiring, lowering marketing expenses, or reducing
inventory, may save money but may also decrease a
business' chances to remain competitive. One technique
that can help to conserve a product-based business'
financial assets without adverse side effects is to join or
organize a buying group.
A buying group, or buying co-op, is a partnership
that bands small business and start-up firms together to
attain volume discounts on products and services. An
example is the independent supermarket consortium
Copernic, a not-for-profit European grocery buying group
that combines the buying power of retailer in Belgium,
France, Switzerland, Germany and Italy. The cost of
running the organization is split among the members, as
is the savings made on grocery products. A similar
buying group is the U.K.-Based United Aftermarket
Network, which supplies its members in the vehicle trade
with parts from leading motor manufacturers that have
been bought at a group discount.
In Thailand, Stockbuz is another successful
example of a group-buying operation, which has solved
a problem for both yarn producers and manufacturers of
apparel. The clothes makers forecast demand based on
sales data, seasonality, and retailer feedback and buy
fabrics in bulk from the yarn producers. This, in turn,
helps reduce market uncertainty for the fabric producers
and ensures orders are honoured. There are similar
buying co-ops other industries.
The beauty of buying groups is that they generally
allow businesses to obtain the exact same product for a
lower price, with no undersirable impact (other than the
membership fee) on the other parts of their operation.
The money that's freed up can go directly to a business'
bottom line or be used to invest in customer service or
other methods to increase competitiveness. There is no
national directory of industry buying groups. The best
way to find out whether there are buying groups
servicing an industry is to conduct Internet research and
ask among industry participants.
Questions for Critical Thinking
....0 OMAWTED Che four fima prial objectives of afir86%
profitability, liquidity, efficiency, or stability- does
participating in buying cooperative contribute to the
most?
2. Identify three ways, other than buying cooperatives,
that small businesses partner with other small
businesses to cut costs without sacrificing their
competitiveness?
3. In an effort to improve the financial position of their
firms, do you think the majority of entrepreneurs
spend an equal amount of time focusing on (1) cost
cutting and (2) increasing revenues? If not, which of
the two do you think they spend more time on and
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2. Identify three ways, other than buying cooperatives,
that small businesses partner with other small
businesses to cut costs without sacrificing their
competitiveness?
3. In an effort to improve the financial position of their
firms, do you think the majority of entrepreneurs
spend an equal amount of time focusing on (1) cost
cutting and (2) increasing revenues? If not, which of
the two do you think they spend more time on and
why?
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