Analyse and evaluate the financial risks involved with establishing a Essay

Analyse and evaluate the financial risks involved with establishing a new business - Essay Example s, risk exposures have deeper impact on the organization’s standing, especially financial risks which undermine the new business resources required for jump-start the project. Financial risks refer to cash flow volatility, future investments, erosion of debt capacity or profitability level of the firm (Altman 1993). In the following essay, the researcher shall discuss how financial resources are critical for executing business plans, marketing budget and achieving organizational goals. In doing so the researcher shall describe and conclude that different types of financial risks may lead to business failure in terms of disruption in operations, decrease in working capital and exposure to environment risks. To begin with, one needs to understand that financial risks are not separate from business or management risks. For a new business, effective resource management is critical for its survival. Financial resources have even more importance for a start-up business because it helps secure employees, suppliers, service providers and attract customers (Altman 1993). Consequently, the type of financing a new business secures, defines its scope and risk challenges. For a new business, various types of financing ranging from banks, venture capitalists, owners personal assets etc. are available. Suppose a new business adopts bootstrap financing for its operations (Welsch 2003). This is a popular financing technique for new firms to finance short term funding requirements without having to commit to external organizations for the long term. These include short term borrowing from friends or family, micro financing, credit card, quasi-equity arrangements, cooperative assets, lease or client bas ed funding etc. However, according to Neeley (Welsch 2003), bootstrap financing is a low cost source of financing but poses high risks to the business because it is a short term funding method, which can be discontinued at any time, resulting in disruption of cash flows to the

Environmental Factors Paper Research Example | Topics and Well Written Essays - 1000 words

Environmental Factors - Research Paper Example Marketing environment factors profoundly influence company's marketing operations. The paper attempts to explore various environmental factors such as free-trade Agreements, global demographic changes, increased competition, technological advances, legislative compliance that influence marketing decisions of General Motors (GM) in its domestic and international operations. Impact of Free-trade Agreements In 1994, the US entered into a Free Trade Agreement with Mexico and Canada called NAFTA. Just in the prior year in 1993, GM exported only 1600 vehicles to Mexico but in 1999, gearing its marketing efforts, the company could export 52,000 vehicles to Mexico despite currency crisis in Mexico (The Trade Partnership, 2004). This demonstrates that GM could take advantage of free trade agreement to boost their sales. Demographics and Physical Infrastructure People’s behavior, characteristic, their growth trends will largely influence the demand of goods and it becomes extremely impo rtant for a company to know about demographic changes taking place locally and globally so that company can divert its marketing efforts to exploit these changes. Different countries have different population growth rates. Higher population growth rate in a country or region is likely to create higher demand for a product. China and India both have huge populations of over 120 billion with huge untapped market of passenger vehicles. Both have been growing at much higher GDP growth rates relative to world average. GM recognized this fact and directed its marketing efforts toward fastest growing automobile markets in the world. GM formed a joint venture with Shanghai Automotive Industry Corp. Group (SAIC), China in 1997. The joint venture markets its most popular brands such as Cadillac, Buick and Chevrolet and in 2010, it sold 1 million vehicles. China sales are rising at a record rate and in 2011 it touched over 1200,000 units. In order to harness full potential, GM has formed 11 jo int ventures in China and currently, GM is a leader among all automakers in China selling almost 2.5 million vehicles there. Saturated markets of Western Europe and many developed countries show either negative or near zero population growth rates and it is obvious that GM is not likely to achieve favorable results by any level of marketing efforts in that region (General Motors China, 2012). Legal/Political Environment Marketers need to understand the legal/political environment of the country before embarking on the business in an alien land. GM expanded into the countries such as China, India, and Russia for manufacturing and marketing their products only after when these countries liberalized in their bid to become market economies. No company would like to work in a hostile environment. Legal setup is equally important so that whenever required the company can approach an independent judicial system for a fair hearing and remedy. The company needs to follow local laws on enviro nment, on emission standards, corporate laws and the laws that are enforced by regulatory bodies in that country. That is why it becomes extremely important for the company to get fully acquainted about all applicable legal requirements of the country where it plans to market its products. This will also ascertain whether it is in the benefit of the company to operate there or not if the stringent laws may impede its growth. The Foreign Corrupt Practices Act (FCPA) of 1977 and Social Responsibility The