The fashion industry and international markets
The fashion industry is competitive and requires an effective strategic plan to venture into international markets. There are many complications in entering a foreign market such as the registration processes and market analysis. Therefore, Jack may enter the European and Asian markets by licensing resident companies to sell its garments. Licensing requires little business resources, relieve the company from performing market research and reduces losses associated with market uncertainties.
Partnership for Susan and Martin
Besides, Susan and Martin may form a limited liability partnership. A partnership refers to an agreement between two or more people to finance and conduct business with the aim of maximizing profits. Partnership is the most appropriate business for Susan and Martin because its profit is not subject to corporate tax and relieve them from personal liability if the business undergoes liquidation.
Debt and equity financing for new businesses
Debt and equity financing are the most appropriate methods of raising capital for new businesses. Under debt financing, business owners raise money by borrowing from financial institutions or individuals and retain control of the business. However, debts attract interests, and failure to repay the amount owed may affect the reputation of the business. Equity financing incorporates outsiders into the management of the company through the purchase of shares. Equity financing reduces the liability of the company to third parties and increases chances of business success as investors support research, development, and offer valuable information on how to make the business better. All stakeholders work together to ensure there is a return on their investment hence the most suitable method of financing start-up businesses.
Essay #1: Methods of selling in Foreign Market
The fashion industry is very competitive and requires sound strategies to increase brand success in the international market. Based on Diamond Porter’s competitive advantage model, a business may expand its operation to emerging markets to upsurge its revenue. However, the company must understand the level of competition, the strength of competitors, natural resource endowment and political atmospheres (Picken 10). Jack’s decision to invest in Europe and Asia is a sound approach to maximize revenue.
Nevertheless, there is a need for extensive market research to evaluate the viability of the venture. The European market is more predictable than the Asian, due to the divergent cultural and religious beliefs. As such, Jack may approach the market through a joint venture, by licensing or franchising.
The joint venture would help Jack to reduce the risk associated with entry into a new market. A joint venture with an established men’s garment line will help Jack to minimize competition and exploit the strength of the resident company to boost its revenue (Pride et al.). Secondly, Jack may license a company in Europe and Asia to produce and sell its cloths using its brand name. Licensing is an important strategy to enter a new market because it requires diminutive company resources, low commitment to international expansion, increases the market for foreign goods as well as protection of intellectual property (Picken 33). Jack may also, sell his cloths in Asia and Europe through franchising, which is also a form of licensing. Franchising enables the franchisor to transfer the business model, brand and production rights to a franchisee (Pride et al.). Franchising helps in reducing bureaucratic procedures in entering a foreign market. However, the proposed methods may be futile if there is no goodwill and trust among the partners. I would advise Jack to use licensing as a method to sell its cloths internationally as it is less expensive and reduces losses resulting from market uncertainties.
Works Cited
Picken, Joseph C. "Strategies For Entering New Markets." Organizational Dynamics, 2018, pp. 5-77. Elsevier BV, doi:10.1016/j.orgdyn.2018.08.009.
Pride, William M et al. Foundations of Business. 6th ed., Boston, Massachusetts: Cengage Learning, 2018, pp. 1-544.
Essay #2: Forms of Business Units
The food and beverage industry is one of the most competitive and profitable. The increasing health concerns and demand for organic food is going to boost the request for gourmet prepared food. First, Susan may enter the market as a sole proprietor. However, her decision to bring in Martin renders sole proprietorship irrelevant. Although, sole proprietorship enhances control and efficiency in decision-making, it has limited access to capital and prone to management problems in the absence of the owner (Pride et al.). Besides, liability may extend to Susan’s property if the business is undergoing liquidation. The second business model is a limited liability partnership. A partnership is a business formed and owned by two or more people (Salaman 50). Susan and Martin may become partners. One significant advantage of collaboration, is that it widens access to funds, ranging from owners contribution to loans from financial institutions. A limited partnership will protect Susan and Martin from personal liability, if the business falls under liquidation. However, the proceeds from the association will have to be shared according to the partnership agreement or the ratio of their capital contribution and responsibility in the business (Pride et al.).
Moreover, Susan and Martin may draft the article of association and a memorandum of understanding to register a private limited company. The company is an independent entity that exists in isolation from its owners (Pride et al.). The business would relieve Susan and Martin from personal liability in case of insolvency. The firm would also have extensive access to capital from financial institutions. Conversely, external influence on companies by government agencies through strict monitoring affects its activities and reduces business proceeds through corporate tax. The fourth business that Susan and Martin can form is S Corporation. S corporation does not attract corporate tax, limited to 100 stockholders and has broad access to capital (Pride et al.). S corporation would save the partners from double taxation and personal liability. However, it is over-regulated just like companies. I would advise Susan and Martin to adopt limited liability partnership as the proceeds do not attract corporate tax and the liability of the business does not extend to the owners.
Works Cited
Pride, William M et al. Foundations of Business. 6th ed. Boston, Massachusetts: Cengage Learning, 2018, pp. 1-544.
Salaman, Graeme. Understanding Business Organizations. Abington: Routledge, 2001, pp. 1-450.
Essay #3: Debt and Equity Financing
Debt financing is the process of acquiring loans from individuals and financial institutions with the promise of making future settlements (Pride et al.). Joel and Barbara may obtain capital through borrowing from financial firms. Debt financing requires collaterals such as guarantors, endorsers, accounts receivables, equipment, and real estate. Raising capital through debt financing enables business owners to have control over business operation without interference from shareholders. The interest paid on loans is taxable hence reducing the tax liability of the business. Besides, the lenders do not influence the company and do not share business profit. Despite the advantages of debt financing, ineffective debt repayment plan may affect credit rating if the business fails to refund in time.
Equity financing is the process of raising initial capital by selling shares to the investors. It entails the sale of ownership rights to raise money for the business (Parker). Capital is raised through the initial purchase offer (IPO) by leading firms. Although the method is used in funding public, limited companies listed on stock exchange, private companies may also raise capital through IPO (Pride et al.). The shareholders become owners of the business and influence the operation of the business. Besides, the stock exchange security authorities regulate equity financing to reduce capital inflow from foreign investors (Parker). The investors provide valuable business assistance by analyzing business prospectus to increase returns on their investment. However, equity financing may transfer control of the business to investors if a large proportion of capital is financed through the sale of shares. As such, investors’ interest would undermine the owners’ interest. I would advise Joel and Barbara to raise capital through equity financing to avoid liability to financial institution which do not have an interest in the company’s success. Investors would offer guidance and support market research that would lead to increased revenue and returns in investment.
Works Cited
Parker, Tim. "Small Business Financing: Debt Or Equity?” Investopedia, 2018, https://www.investopedia.com/financial-edge/1112/small-business-financing-debt-or-equity.aspx. Accessed 30 Nov 2018
Pride, William M et al. Foundations of Business. 6th ed. Boston, Massachusetts: Cengage Learning, 2018, pp. 1-544.
