1-Prepare a cash flow forecast. Remember that Priti and Simran have no experience in producing cash-flow forecasts, so they have forgotten some crucial items shown in the case.
Cash in start
Bank Loan Payment
Insurance, Rates etc.
Variable Cost per customer
Project Raw Materials
Legal and Accounting
Other sundry costs
Net cash flow
Cumulative cash flow
a-Considering your cash flow forecast, what advice would you give on how to improve their cash flow position? Justify your advice.
Cash flow tables are of great importance to start up business in terms of every
entrepreneur. A cash flow table which is prepared well shows us a small business to succeed
or not. To talk about a successful business is of great importance that the cash flow table
contents positive figures. And also, it shows that it is successful sustainable the business. If the
cash flow shows the tragic statistics, we can talk about the crisis, which is threaten lost of
liquidity in terms of sustainable for a business. It is no doubt that the cash flow needs to
contain positive numbers to sustain the enterprise's success with more investment.
( Lamont, 1997)
When we examine the business which is planned to establish by Priti and Simran, the
situation is a little bit different and confused. Although the cash flow figures seem positive at
the beginning, they have problems not to sustain for their business in long term. Significantly,
there have been missing costs in their cash flow. So they have planned less sales rate than the
way it should be. Because of this reason, they have to increase their sales rate of their products.
For this reason,It is logical that Priti and Simran should not start up this business with these
cash flow data. First of all, when we consider the limited budget and using a significant amount of bank
loan, they have to increase their target customer. They should establish a more comprehensive customer network
using advertisements.And also they should this by cheaper ways. Using social media and online
advertisement channels seem more logical in terms of the limited budget. By this way, their business
can be sustainable. Otherwise, it is so challenging to be existing in the fashion market for a long time.
b-Priti and Simran think that they need to borrow £50,000. Do you believe that this is the right amount of money to borrow? Propose what amount you think they need to borrow and justify this with data from your cash flow forecast.
It is of great importance building logical credit for the future. If the enterprise doesn't
have any good loan history, It can not evaluate well the business opportunities which face
sustaining existence of its.Paying a regularly small amount of loan will regularly
establish the big loan in the future. Entrepreneurs should be careful here. Payments should be regularly
and on time for your small loan. Even a late payment can cause no to get chance for future
finance. If the loan is used, it should be for purchasing equipment, talents, new ideas and
good business opportunities.(Bates,1990)
When we examine the situation of Priti and Simran, they will use the loan for starting
up a business in the fashion sector as a design company. This is an exceptionally good aim to use loan.
But they have done some mistakes while establishing a cash flow forecast. They couldn't
consider adding some costs in the cash flow. In my opinion, the loan which they plan is not
enough for the business. When we examine the cash flow, the first two months seem to cover the
costs.But it is just a bank loan effect which is used. They couldn’t estimate such as less the mont
hly sales rate. Because of this reason, they need to loan more than 50000. The loan amount should be
85000. And also, They need to find out effective marketing strategies to reach target customers
and have to increase their sales over %30 percent. And they should learn all costs to do good
cash flow for the business in the fashion sector. Besides, They need to find ways of effective
For example, they can do an advertisement as online. They can use social media effectively
in the advertisement. This is the best way to decrease advertisement costs.
2- Priti and Simran need to develop a marketing plan for their fashion store. Propose how they can apply the marketing mix (4Ps) to their new business venture
The creation of effective marketing strategie is of great importance in order to be
successful at the competitive market in terms of every business. The most important thing
that is to obtain sustainable success in the market is using the 4P marketing mix.
It is known that the 4Ps of the marketing mix is determined as the price, product, promotion
and place which play critical roles in establishing a successful marketing strategy.
It is of great importance that determines a price for the product by taking expectations of the competitors and customer into consideration.
It is of great significance for the companies that to establish their location providing
easy access to the market where their target customers are and present their products that is
superior to the other similar int he market.
Finally, it is crucial that present and makes attractive their products by using
effective advertisement ways for companies.(Goldsmith, 1999)
when we think the effective ways of advertisement for Priti and Simran, we can see
that they have a limited budget than they need. So they have to find out the most effective
advertisement ways according to their account.
For that reason, it seems that they can choose an online advertisement as the Cost of
advertising is slightly cheaper than TV or fashion magazines. And also, It is of great
importance that they reach more customer to increase their sales rate when considering
negative figures in their cash-flow. They can start up the business the place where has more
potential customers and suppliers so that they can also increase their sales rate and figures.
The fashion business is global and managing its supply chain involves several ethical issues. Consider the ethical issues that Priti and Simran’s business might face concerning the supply chain and propose what Priti and Simran should do about these?
The fashion business is global and managing its supply chain involves several ethical issues.
Mostly, it targets that examines the main barriers to ethical fashion consumption. The
sector content of fashion has significant global supply chain complexity. It becomes the
variety of impacts and challenges across the supply chain from raw materials to design
manufacture, packaging, logistics, consumer use. Because of this reason, the sector is
sensitive to the supply chain. Especially when we consider current stiff competition, intensive
resource use and the exposure of penurious labour conditions in terms of sustainability in
In the fashion industry's supply chain, especially within the designs' scope, they are
partially ethically vulnerable. Firms can put some obstacles in the supply chain to protect their
designs. Similar obstacles apply to both company employees and supply chain employees.
The protection of designs is of great ethical importance in terms of sustaining the activities of
the companies.(Roberts, 2003)
Priti and Simran should care some rules such as not overcharging the customers or
stealing customer from the competitors in order to operate a fashion business. And also, it is
important that they find out an ethical pricing strategy that will not affect badly the balance in
the market. Besides they have to care competitors' designs.So they have to create different
design than their competitors.And they should protect their own design in ethical borders.Most
important issue is to follow Corporate Social Responsibility guidelines such as protecting the
environment to be ethical towards the environment and society.
It is no doubt that a company will be sustainable,if they do all of the ethical rules.
Explain any other problems that you think Priti and Simran may have when setting up their business and whether you believe that their business idea can be a success.
When we examine carefully the case study of Priti and Simran,their planed enterprise
seems risky, and hopeless for the future. They should reconsider their plans about start-up
the business. First of all, I think that their cash-flow prediction seems not enough for their
initial investment the costs of the company to cover. And also, their aimed monthly sale figures
are far from covering their monthly fixed costs for future,although it seems to cover at the
beginning. Because it is effective of the bank loan that is used to cover the costs at the
beginning. This effect is decreasing month by month. Their sales rate is approximately around
%13.5 percent. Even though this rate seems enough now, they have to review their sales rate
again. Their cash flow is limited for the advertisement
They should sperate their cash of big amount for advertisement to reach targeted customers.
In addition, they should focus on 4Ps, and find out most effective ways to use them
in the markets.And also, we understand that they don't have an idea about tax system and the
role of competitors in the market. Before Priti and Simran start up the business, they should do
more market research.If they don't do anything to increase their monthly sales rate, It seems
that their business is going to be unsuccessful.
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