LEARNING AIM A: EXAMINE THE

BUSINESS PRINCIPLES AND

PRACTICES THAT DETERMINE
BUSINESS DECISIONS
INTRODUCTION

In the capacity of an assistant at a small business advisory firm, I have been tasked with
providing guidance to Shiro, an aspiring entrepreneur, regarding two potential business
options. The purpose of this report is to conduct a comprehensive evaluation and analysis of
these options, considering essential factors such as business ideas, objectives, and key
decision-making principles. By examining these elements, this study aims to assist Shiro in
making an informed and optimal decision for his company's future.

About the business

Shiro, a college graduate with a background in business and history, possesses

multilingual skills. They reside in a vibrant city renowned for its popularity as a city
break destination. This city boasts numerous cultural attractions that captivate visitors
from across the globe, spanning various age groups. With a vision to establish a venture
focused on eco-friendly city tours, Shiro's business objectives encompass the following:

• Advocate for environmental sustainability

• Achieve profitability within the first year of operation

Shiro has diligently explored two potential avenues for their small business, considering
various factors and possibilities

Option 1- Analyze Marketing Quality research for using e-rickshaws

Conduct thorough market research to identify the demand for electronic

rickshaws in the city. Analyze the competition, target customer demographics,
and assess the potential profitability of the businesss.Also Choose the Right
Vehicle Select high-quality electric rickshaws that are durable, energy-efficient,
 and suitable for city roads. Consider factors such as battery capacity, charging
time, mileage, passenger capacity, and overall reliability. It may be beneficial to
collaborate with reputable manufacturers or suppliers of electric rickshaws

Option 2- Analyze Marketing Quality research for using e- rickshaws\

the Market Conduct through market research to understand the demand for electric
bikes in the city. Identify the target audience, assess the competition, and evaluate
the Research potential profitability of the business. Consider factors such as the
popularity of cycling, tourism, commuting patterns, and any existing bike rental
services Also Establish Rental Stations Determine the number and locations of
rental stations strategically throughout the city. These stations should be easily
accessible and conveniently located near popular tourist attractions, transportation
hubs, or residential areas. Ensure each station has sufficient parking space,
charging infrastructure, and proper security measures

Shiro should aim to operate in areas where there is a Tourist Destinations: Tourist
destinations, both within cities and in popular tourist spots, can be lucrative areas
for e-rickshaw services. Many tourists prefer exploring destinations at a leisurely
pace and may find e-rickshaws a convenient and eco-friendly mode of
transportation for sightseeing. By operating in tourist areas, Shiro can attract a
steady flow of customers and benefit from seasonal peaks in demand Commercial
and Business Districts: Commercial and business districts often have a high
concentration of offices, shopping centers, hotels, and restaurants. E-rickshaw
services can cater to the commuting needs of office workers and provide convenient
transportation for shoppers or diners moving within the district. By targeting these
areas, Shiro can tap into a regular customer base and potentially form corporate
partnerships for employee transportation Educational Institutions: Areas near
universities, colleges, and schools can be potential locations for e-rickshaw
services. Students and staff members often require transportation for short
distances within campuses or between campuses and nearby residential areas. By
focusing on educational institutions, Shiro can establish a consistent customer base
and offer convenient mobility options for students and faculty Residential Areas:
Residential neighborhoods with a high population density and limited public
transportation options can be viable areas to offer e-rickshaw services. Shiro can
provide transportation solutions for daily commuting, shopping trips, and other local
mobility needs within the residential community. By becoming a reliable
transportation provider in these areas, Shiro can build a loyal customer base

When considering areas for electric bike rentals, Shiro should evaluate factors such
as bike infrastructure, local regulations, competition, and the demand for
alternative transportation options. Additionally, proximity to charging stations,
parking facilities, and popular destinations can influence the feasibility and success
of the business.

Recreational Areas: Parks, waterfronts, and recreational areas attract people

looking for outdoor activities and leisurely rides. Electric bike rentals can cater to
individuals and families seeking an enjoyable and eco-friendly experience while
exploring nature or recreational spots. By establishing rental stations near popular
recreational areas, Shiro can tap into a niche market and attract both locals and
tourists Also In University Campuses College and university campuses are
vibrant environments with a large population of students and faculty members.
Electric bike rentals can be popular among students for commuting between
classes, accessing different parts of the campus, and traveling to nearby areas.
Shiro can establish partnerships with educational institutions to provide convenient
and affordable mobility options within the campus, potentially leading to increased
usage and word-of-mouth referrals
BUSINESS IDEAS AND OBJECTIVES

Business idea-A business idea is a concise description or concept that outlines a

potential product, service, or venture with the goal of meeting customer needs,
solving a problem, or fulfilling a market demand. It encapsulates the core value
proposition, target audience, revenue generation potential, and differentiation
factors of the proposed business. A business idea provides the foundation for
further development, planning, and execution of a business plan to bring the idea
to fruition and create a successful enterprise

Business objectives- A Business objectives refer to specific, measurable, and

time-bound goals that a company sets to achieve desired outcomes and drive its
growth and success. These objectives outline the specific results or achievements
that a business aims to accomplish within a defined timeframe. They provide clarity
and direction for the organization, guiding decision-making, resource allocation, and
performance evaluation. Business objectives can include various aspects such as
revenue targets, market share goals, customer satisfaction metrics, operational
efficiency improvements, product development milestones, or expansion into new
markets. They serve as a roadmap to focus efforts, align the organization, and
measure progress towards strategic goals
ECONOMIC TRENDS

Economic trends refer to the patterns and changes in economic indicators and
factors that influence the overall state of an economy. These trends provide insights
into the direction and performance of various economic aspects, such as GDP
growth, employment rates, inflation, interest rates, consumer spending, and
business investment. Economic trends can indicate the overall health and stability
of an economy, and they often impact businesses in terms of market conditions,
customer purchasing power, cost of capital, and industry-specific factors.
Monitoring economic trends helps businesses anticipate and respond to changes,
make informed decisions, and adjust their strategies accordingly to stay
competitive and thrive in the marketplace

Option 1- Offer Competitive Pricing: Determine a fair and competitive pricing

structure for the rickshaw rides. Conduct a cost analysis that factors in
maintenance, charging expenses, labor costs, and profit margins. Consider offering
discounts or loyalty programs to attract and retain customers

Option 2- Offer Flexible Rental Options: Provide various rental options to cater to

different customer needs. This can include hourly rentals, half-day rentals, full-day
rentals, or even long-term rental plans. Consider offering discounted rates for
extended rental periods or loyalty programs for frequent customers

COMPETITION

Competition in business refers to the rivalry and interaction between companies

operating in the same industry or offering similar products or services. It involves
the efforts of businesses to attract customers, gain market share, and outperform
their competitors. The competition can be intense, with companies striving to
differentiate themselves, develop unique value propositions, and gain a competitive
advantage. It often leads to innovation, improved quality, better customer service,
and competitive pricing strategies as businesses seek to capture and retain
customers in a crowded marketplace. Understanding and analyzing the competitive
landscape is crucial for businesses to develop effective strategies, identify market
opportunities, and stay ahead in their industry

Option 1- competition in the e-rickshaw business involves various factors such as

product differentiation, pricing, marketing, distribution, after-sales service,

compliance, innovation, and partnerships. Businesses must strategically navigate
these aspects to gain a competitive advantage, attract customers, and succeed in
the dynamic e-rickshaw market

Option 2- competition in the e-bike business involves factors such as product

differentiation, branding, pricing, distribution, after-sales service, technology,
compliance, customer experience, sustainability, and collaborations. Businesses
that strategically address these aspects can gain a competitive edge, attract
customers, and succeed in the dynamic e-bike market

MARKET CONDITIONS

The prevailing economic, social, and competitive factors that impact the buying
behavior, demand, and profitability of goods or services in a specific market. These
conditions include factors such as consumer trends, competitive landscape, industry
regulations, technological advancements, economic indicators, customer
preferences, and market saturation. Understanding market conditions is essential
for businesses to make informed decisions, develop effective strategies, and adapt
to changing dynamics to stay competitive and meet customer needs

Since both options, option 1 and option 2, are related to e-vehicles, market
conditions will have an equal impact on both. Shiro needs to be aware of one of the
most common market conditions, which is that not all customers may be able to
afford E-rickshaws and E-bikes because they are often more costly than traditional
E-vehicles

Shiro might highlight the distinctive qualities of his e-rickshaws or e-bikes, such as
their high levels of fuel efficiency, ability to replace conventional vehicles with
something more environmentally friendly, etc.  Promoting discounted prices,
package deals, and referral bonuses can also encourage customers to check out the
e-rickshaw or e-bike services offered by Shiro.

Additionally, The demand for E-bikes is rising as people become more conscious of
sustainability and the need for environmentally friendly transportation options.
People are seeking for ways to lessen their environmental effect as social
awareness rises, and E-bikes offer a desirable substitute for traditional gasoline-
powered bikes. The introduction of new competitors might also have an effect on
the market share and pricing strategies of the already established firms

INTEREST AND SKILLS OF ENTREPRENEUR

Interest: The genuine enthusiasm, passion, and curiosity an entrepreneur has

towards a particular industry, product, or market. It is the driving force that
motivates them to pursue entrepreneurial opportunities, explore new ideas, and
invest time and resources into their business endeavors. Interest helps
entrepreneurs stay engaged, resilient, and committed to achieving their goals

Skills: The specific abilities, knowledge, and expertise an entrepreneur possesses

that are relevant to running a successful business. These skills can include:
Business Acumen: Understanding key business concepts, such as finance,
marketing, operations, and strategy, and being able to apply them effectively in the
entrepreneurial context

Creativity and Innovation: Thinking outside the box, generating new ideas, and
finding unique solutions to business challenges

Adaptability: Being flexible and open to change, embracing new technologies and
market trends, and adjusting business strategies as needed

Financial Management: Understanding financial statements, budgeting, cash flow

management, and making informed financial decisions for the business

Resilience: Having the determination, perseverance, and ability to bounce back

from setbacks, learn from failures, and stay focused on long-term goals

Interest and skills of an entrepreneur are crucial for identifying business

opportunities, navigating challenges, making strategic decisions, and building a
successful and sustainable venture. By leveraging their interests and skills,
entrepreneurs can bring their ideas to life, create value, and make a positive impact
in the business world

Entrepreneurial interest and skills will have an equal impact on both options 1 and
option 2, as skills is necessary in both cases. Develop a User-Friendly App or
Online Platform: Create a user-friendly mobile app or website that allows customers
to easily locate nearby rental stations, check availability, make reservations, and
complete the rental process. The platform should also provide information about
specifications, rental rates, and any terms and conditions and Implement Marketing
and Promotion: Develop a marketing strategy to create awareness about the
electric rikshaw and bike rental service. Utilize online advertising, social media
platforms, local directories, and collaborations with influencers or bloggers to reach
the target audience effectively. Offer referral programs or discounts for customers
who recommend your service to others Also Offering Competitive Pricing Determine
a fair and competitive pricing structure for the rides. Conduct a cost analysis that
factors in maintenance, charging expenses, labor costs, and profit margins.
Consider offering discounts or loyalty programs to attract and retain customers

LIKEYLY DEMAND

Likely demand in the business of electronic rickshaws and electric bikes refers to
the anticipated level of customer interest, willingness to purchase, and market
demand for these types of vehicles. It represents the potential number of
customers or buyers who are likely to seek and purchase electronic rickshaws or
electric bikes based on various factors such as market trends, consumer
preferences, and economic conditions

Market Demand: The total demand for Shiro's eco-friendly city tours within a specific
market or customer segment, reflecting the willingness and ability of potential customers to
purchase and participate in the tours

Aggregate Demand: The overall demand for eco-friendly city tours across all markets and
customer segments, representing the collective demand from all potential customers in the
broader market

Option 1- Due to growing environmental and air quality concerns, e-rickshaws

have gained popularity in numerous cities. E-rickshaws are thought of as a cleaner
alternative to conventional gas-powered rickshaws because they produce no
pollution. With newer models delivering longer battery lives and upgraded
technology for greater performance on the road, Shiros e-rickshaws could become
more dependable and effective over time.(Anon., n.d.)

Option 2-E-bikes typically cost less to operate than automobiles or motorbikes. E-

bikes also require less maintenance, and the cost of electricity is frequently less
than the cost of fuel. E-bikes can be parked in compact locations and are suitable
for use in city streets, parks, and bike lanes. They are therefore a practical choice
for commuting

PRODUCT INNOVATION

Product innovation refers to the process of developing and introducing new or

improved products or services to the market. It involves creating and implementing
novel ideas, features, functionalities, or design elements that provide added value,
address customer needs, or differentiate the product from competitors. Product
innovation can encompass various aspects, including technological advancements,
design improvements, enhanced performance, increased convenience, or the
introduction of entirely new products or product categories. The goal of product
innovation is to create offerings that resonate with customers, drive market growth,
and contribute to a company's competitive advantage

Option 1- select high-quality electric rickshaws that are durable, energy-efficient,

and suitable for city roads. Consider factors such as battery capacity, charging
time, mileage, passenger capacity, and overall reliability. It may be beneficial to
collaborate with reputable manufacturers or suppliers of electric rickshaws Prioritize
passenger safety by equipping rickshaws with seatbelts, proper lighting, and
functional brakes. Conduct regular maintenance checks on the vehicles to ensure
they are in optimal condition. Consider installing GPS tracking devices for real-time
monitoring and emergency assistance if needed

Option 2- Select high-quality electric bikes that are suitable for urban
environments. Consider factors such as battery range, charging time, durability,
comfort, and safety features. Collaborate with reputable electric bike manufacturers
or suppliers to ensure you have reliable and well-maintained bikes

FACTORS THAT INFLUENCE IN THE FORMULATION

OF BUSINESS IDEAS AND OBJECTIVES

Implication Of Human resource: The implications of human resources

emphasize the strategic importance of effectively managing and nurturing the
human capital within an organization. By recognizing the value of employees and
implementing practices that support their development, engagement, and well-
being, organizations can achieve higher levels of productivity, innovation, and
success in the competitive business landscape
Option 1: Shiro Need to have 6 employees As Shiro hired 4 drivers because he would buy 4
e-rickshaws. 2 employees will be in charge of the accounting, while 3 will look after the
storage yard. And 1 will be manager who will manage all employers and report shiro

Option 2 will require 8 employees for Shiro. 3employees who would take charge of in-store
e-bike reservations. 4 workers would maintain and repair the e-bikes while 1employee
would distribute detailed maps and safety advice leaflets.

Implication of Physical Resources

Physical resources are tangible assets that are required and available for a business
to operate. These are goods that take up space, have a monetary worth, and are
utilized in the company's operations. (Anon., n.d.)

For any form of business, physical resources are needed. Physical resources are
used by product-based businesses to provide things for sale and to run the
business. Service-based businesses use physical resources to support the delivery
of the service, such as having a work area, equipment for the service, and
resources to support the service. (Anon., n.d.)

Option 1- Charging Infrastructure: Establishing a network of charging stations or

infrastructure to ensure the availability of charging facilities for the electronic

rickshaws, allowing for timely recharging of the batteries and minimizing downtime
Batteries: Sourcing and managing high-quality batteries that offer sufficient range
and performance for the electronic rickshaws, ensuring they are well-maintained,
monitored, and replaced when necessary to ensure reliable operation Spare Parts
and Maintenance: Maintaining an inventory of essential spare parts and
components specific to electronic rickshaws, along with establishing a well-equipped
maintenance facility or partnering with service providers for regular servicing,
repairs, and maintenance of the vehicles

Option 2-Procuring or manufacturing electric bikes that are suitable for the intended

purpose, considering factors such as battery capacity, motor power, design,

durability, and safety features harging Infrastructure: Establishing a network of
charging stations or infrastructure to ensure the availability of charging facilities for
the electronic bikes, allowing for timely recharging of the batteries and minimizing
downtime Batteries: Sourcing and managing high-quality batteries that offer
sufficient range and performance for the electronic bikes, ensuring they are well-
maintained, monitored, and replaced when necessary to ensure reliable operation
pare Parts and Maintenance: Maintaining an inventory of essential spare parts and
components specific to electronic bikes, along with establishing a well-equipped
maintenance facility or partnering with service providers for regular servicing,
repairs, and maintenance of the bikes

Implication of Financial Resources

The implication of financial resources emphasizes the importance of effectively

managing and leveraging financial assets to achieve the organization's goals,
maintain financial stability, and create value for stakeholders. By recognizing the
significance of financial resources and implementing sound financial management
practices, organizations can enhance their financial performance, sustainability, and
long-term success. funds at the business's disposal that are used to cover current
expenditures and expenditures for expanded reproduction, as well as to meet financial
commitments and provide economic incentives to employees

To start up a business shiro need to have some capitals and funds as well in both business
idea as predicted in option A shiro need to have sales revenue for the year cost $98 000,
while in option B shiro supposed to have $118 700. For the Financial resources of the
business stability

Ownership Types

Ownership types refer to different legal structures or forms in which a business or

organization can be owned and operated. These ownership types determine the
rights, responsibilities, and liabilities of the owners and influence factors such as
decision-making, profit distribution, and legal obligations. Here are some common
ownership types:

Sole Proprietorship: A sole proprietorship is a business owned and operated by a

single individual. The owner has complete control over the business, bears all the
risks and liabilities, and receives all the profits.
Partnership: A partnership is a business owned and operated by two or more
individuals who share the profits, losses, and management responsibilities
according to a partnership agreement. There are different types of partnerships,
including general partnerships and limited partnerships.

Limited Liability Company (LLC): An LLC is a hybrid ownership structure that

combines elements of a corporation and a partnership. It provides limited liability
protection to its owners (called members) while allowing flexibility in management
and tax treatment.

Corporation: A corporation is a legal entity that exists separately from its owners
(shareholders). It offers limited liability protection to shareholders, allows for easy
transfer of ownership, and has a formal governance structure with a board of
directors.

Cooperative: A cooperative is owned and operated by a group of individuals or

businesses who pool their resources to meet common needs or achieve mutual
goals. Each member has equal voting rights and may share in the profits or benefits
of the cooperative.

Implication for structure

Flat organizational structure refers to a decentralized organizational design with

minimal levels of hierarchy and a more horizontal distribution of power and
authority. In a flat structure, there are fewer layers of management, resulting in a
more direct and open communication flow between employees and a broader span
of control for supervisors. Decision-making is often decentralized, empowering
employees and fostering a collaborative and agile work environment. This structure
promotes autonomy, flexibility, and quicker responses to changes and challenges.
However, it may also lead to blurred job roles, a potential for role overlap, and
limited vertical career progression opportunities.

Matrix structure

Matrix structure is an organizational design where employees report to both a

functional manager and a project or team manager. It combines a vertical hierarchy
based on functions or departments with a horizontal structure based on projects,
products, or cross-functional teams. In a matrix structure, employees have dual
reporting lines and work on multiple projects or initiatives simultaneously. This
structure promotes flexibility, cross-functional collaboration, and efficient resource
allocation. However, it can also create complexities in terms of reporting
relationships, coordination, and potential conflicts between functional and project
priorities.

Hierarchical structure

Hierarchical structure refers to an organizational design characterized by multiple

levels of authority, with each level having a clear chain of command and control. In
a hierarchical structure, power and decision-making authority flow from top to
bottom, with higher-level managers overseeing and supervising lower-level
employees. This structure emphasizes vertical communication and control, with
each level of management having specific responsibilities and authority. It provides
clear lines of reporting, well-defined roles and responsibilities, and a clear hierarchy
of decision-making. However, it can also result in slower communication, limited
autonomy for lower-level employees, and potential bottlenecks in decision-making
due to the centralized authority

Business location

Local Business: A local business refers to a company or enterprise that primarily

operates within a specific local area, such as a neighborhood, city, or region. It
serves the local community and caters to the needs and preferences of local
customers. The scope of a local business is typically limited to a specific geographic
location.

National Business: A national business is an enterprise that operates and

conducts business activities across an entire country. It has a broader reach than a
local business and serves customers throughout the nation. National businesses
may have multiple branches or locations within the country, and they adapt their
strategies and offerings to cater to the diverse needs of the national market.
International Business: International business refers to the operations and
activities of a company that extend beyond national boundaries. It involves
conducting trade, providing services, or establishing business operations in multiple
countries. International businesses engage in cross-border transactions, navigate
diverse cultural and regulatory environments, and may have offices, manufacturing
facilities, or distribution networks in various countries. They typically adapt their
strategies to accommodate global markets and compete on an international scale.

Shiro should aim to operate in areas where there is a Tourist Destinations: Tourist
destinations, both within cities and in popular tourist spots, can be lucrative areas
for e-rickshaw services. Many tourists prefer exploring destinations at a leisurely
pace and may find e-rickshaws a convenient and eco-friendly mode of
transportation for sightseeing. By operating in tourist areas, Shiro can attract a
steady flow of customers and benefit from seasonal peaks in demand where as in e
Bike Recreational Areas Parks, waterfronts, and recreational areas attract people
looking for outdoor activities and leisurely rides. Electric bike rentals can cater to
individuals and families seeking an enjoyable and eco-friendly experience while
exploring nature or recreational spots. By establishing rental stations near popular
recreational areas, Shiro can tap into a niche market and attract both locals and
tourists Also In University Campuses: College and university campuses are vibrant
environments with a large population of students and faculty members. Electric bike
rentals can be popular among students for commuting between classes, accessing
different parts of the campus, and traveling to nearby areas. Shiro can establish
partnerships with educational institutions to provide convenient and affordable
mobility options within the campus, potentially leading to increased usage and
word-of-mouth referrals
LEARNING AIM B: REVIEW AND
INTERPRET BUSINESS DATA AND
INFORMATION

Introduction: In this part of my research Study, I will review the financial aspects of
Shiro's business. Further I will interpret the financial information. Evaluating and reviewing
the financial aspects will help me in concluding an effective decision for Shiro's Business.

REVIEWING AND INTERPRETATION OF BUSINESS DATA

Option 1

Yearly costs
E-rickshaw maintenance and repairs $2100

Insurances $5000

Cost of goods sold 7% of

sales
revenue
Utility and other bills $1800

Staff wages $25 000

Rent of storage yard $52 000

financial information

Price per vehicle for a three-hour city tour $60

Predicted sales revenue for the year $98 000

Daily fixed costs $300

Variable costs of a three-hour city tour $20

assets and liabilities

Trade payables $2000

Inventory (refreshments) $1100

Cash in bank $3500

FINANCIAL CALCULATION AS PER OPTION-1

Total current assets

The formula for calculating total current assets is:

Total Current Assets = Inventory (refreshments) + Cash in bank

$1100 + $3500 = $4600

Total current liability

Total current liabilities = Trade payables= $2000

Fixed costs

Daily fixed costs* 360

400*360 = $108000

Variable costs

Variable costs of a three-hour city tour =$20

Expected sales volume

Expected sales volume = total sales revenue / price per unit

Total sales revenue= ($98000 x 7) / 100 = $6860

$98 000 – $6860 = $91140

Expected sales volume = $91140 / $60 = $1519

Cost of goods sold (or cost of sales)

$98 000* 7% = $6860

Expected profit

Expected profit= total sales revenue - cost of sales

$98000 - $6860 = $91140

Interpretation

Total current liabilities of a firm refer to the short-term debts and obligations that the
company owes to its creditors and suppliers. The liabilities of Shiro are $2000, which is low
compared to their current assets, which is just $4600. Shiro's current liabilities recede its
current assets which means it is in a good condition. This indicates that the company has
less to payback. The fixed cost of the Shiro is $108000, which is not good, as the fixed cost
is higher which could be a disadvantage for generating revenue. The expected sales volume
is average. Shiro must try to boost its sales volume in order to achieve better growth and
revenue for the company. The expected profit is $91140which is higher than current
liabilities.

Option 2

Yearly costs
Rent of store $80000

Wages $7200
Insurances $7000

Utility and other bills $2000

E-bikes maintenance and repairs $5000

Cost of goods sold 5% of sales

revenue
financial information
Predicted sales revenue for the year $118 700

Price of a half day e-bike rental $50

Variable costs of a half day e-bike rental $10

Daily fixed costs $200

assets and liabilities

Trade payables $1300

Inventory (refreshments) $800

Cash in bank $2500

FINANCIAL CALCULATION AS PER OPTION-2

Total current assets

The formula for calculating total current assets is:

Total Current Assets = Inventory (refreshments) + Cash in bank

$800 + $2500= $3300

Total current liability

Total current liabilities = Trade payables= $1300

Fixed costs

Daily fixed costs* 360

200*360 = $72000

Variable costs

Variable costs of a half day e-bike rental = $10

Expected sales volume

Expected sales volume = total sales revenue / price per unit

Total sales revenue = ($118 700 x5) / 100 = $5935

$118 700 – $5935 = $112 765

Expected sales volume = $112 765/ $50 = $2255.3

Cost of goods sold (or cost of sales)

$118 700 * 5% = $5 935

Expected profit

$118 700 - $5 935= $112765

Interpretation

Total current liabilities of a firm refer to the short-term debts and obligations that the

company owes to its creditors and suppliers. Shiro has $1300 in liabilities, which is less
when compared to their $3300 in current assets. Shiro has greater current assets than
current liabilities. This can be a sign that the business would be at ease to fulfill its
immediate obligations. The Shiro's fixed cost is $72000, which is not suitable because a
larger fixed cost could be harmful for generating money. Theexpected sales volume is
average. To improve the company's growth and revenue, Shiro must work to increase its
sales volume.The expected profit is $112765 which is higher than the current liabilities.
Conclusion:

Up to this point, I've explained about the both option of eeco tours by the financial
calculation

LEARNING AIM C: FORMULATE

DECISIONS AND SOLUTIONS TO
BUSINESS PROBLEMS.

FACTORS INFLUENCING BUSINESS PERFORMANCE

There are many factors that affect a company's capacity to function at its highest level, but
three in particular have the greatest influence on its success. The three factors are:

 Production Cost
 Profit
 Pricing

Production cost

Production cost refers to the expenses incurred in the process of manufacturing or

producing goods or services. It includes various components such as raw materials,
labor wages, equipment and machinery, utilities, overhead costs, and any other
expenses directly associated with the production process. The production cost is a
crucial factor in determining the profitability of a product or service, as it affects the
pricing strategy and overall financial performance of a business. By accurately
calculating and managing production costs, businesses can make informed
decisions regarding pricing, resource allocation, and operational efficiency.

Option 1- The product cost for option 1 is $50,000 which is inadequate to get start the
business
Option 2-The production cost in option 2 is $75000 which is more then enough to get
start the Buisness in which he can enjoy the profit himself.

Pricing refers to the process of determining the monetary value or price at which a
product or service is offered to customers. It involves setting a price that is
perceived as fair and reasonable by customers while also considering the costs
incurred in producing and delivering the product or service. Pricing strategies are
essential for businesses to generate revenue, cover expenses, and achieve
profitability. Pricing decisions can be influenced by various factors, such as market
demand, competition, target customer preferences, value proposition, and overall
business objectives. Effective pricing strategies aim to find a balance between
maximizing sales and optimizing profitability in line with market dynamics and
customer perceptions.

Option 1- E-rickshaw Charging cost for two-hour city tour is $40

Option 2- A rent of e-Bikes for a half-day cost is $50

PROJECTED INCOME STATEMENT OF BOTH

OPTIONS FOR SHIRO’S BUSINESS

Cost of In an income statement, revenue represents the total income generated

from sales of products or services. Goods Sold (COGS) includes the direct costs
associated with producing or acquiring the goods sold. Gross Profit is calculated by
subtracting COGS from revenue

Purpose -Operating Expenses encompass all the expenses incurred in running

the business, such as rent, utilities, salaries, marketing costs, and other
administrative expenses. Net Profit is calculated by subtracting operating expenses
from gross profit

To create an accurate and meaningful projected income statement for Shiro's

business, you will need to gather and analyze detailed financial data specific to the
chosen option, including revenue projections, cost estimates, and operating
expenses. These projections can be based on market research, historical data,
industry benchmarks, and informed assumptions

Advantages”

1. Performance Evaluation: The income statement provides a clear overview of a

company's financial performance over a specific period. It allows stakeholders to
assess the profitability and efficiency of the business by comparing revenues,
expenses, and net profit or loss.

2. Decision Making: The income statement helps in making informed business

decisions. It provides insights into revenue sources, cost drivers, and areas of
potential improvement. This information aids management in identifying areas for
cost reduction, revenue enhancement, and overall business optimization.

3. Financial Planning: Businesses use income statements to forecast and plan for
future financial activities. By analyzing historical performance and trends,
companies can project future revenues, expenses, and profitability, helping with
budgeting, goal setting, and resource allocation.

4. Investor and Creditor Assessment: Income statements are crucial for

investors and creditors to evaluate a company's financial health and viability. It
assists them in assessing the company's profitability, cash flow, and ability to meet
its financial obligations.

Disadvantages”

1. Limited Snapshot: The income statement provides a snapshot of financial

performance for a specific period, typically monthly, quarterly, or annually. This
limited view may not capture long-term trends, cyclicality, or seasonal fluctuations
that could impact the overall financial position of the business.
2. Subject to Manipulation: Income statements can be susceptible to
manipulation, as companies may employ accounting techniques or adjust timing to
present a more favorable financial picture. This can lead to misleading information
and inaccurate assessments of the company's financial performance.

3. Ignores Non-Financial Factors: The income statement primarily focuses on

financial data, overlooking important non-financial factors that can impact business
performance, such as customer satisfaction, employee morale, and market
dynamics. It is essential to consider both financial and non-financial metrics for a
comprehensive understanding of the business.

4. Lack of Standardization: There is no universal format for income statements,

which can make it challenging to compare financial performance across different
companies or industries. Varying accounting practices and reporting standards can
hinder meaningful comparisons and benchmarking.

income statement of option 1:

Revenue

Total revenue $98 000

Cost of good sold $5 935

Gross profit $91140

Operating expenses

Expenses ( rent, staff wages, utility and other bills, maintenance) $95800

Net income $6500

Interpretation:

In the income statement of Shiro’s business for the 1 option, the total revenue of the
company is $98 000 in which the cost of goods sold is $5935 which gives a gross profit of
$91140. The operating expense for Shiro’s business is $95800 and the net income is
$6500.

income statement of option 2:

Revenue

Total revenue $118 700

Cost of goods $6 510

Gross profit $112765

Operating expenses

Expenses ( rent, staff wages, utility and other bills, maintenance) $92 500

Net income $5935

Interpretation:

In the income statement of Shiro’s business for the 2 option, the total revenue of the
company is $118 700 in which the cost of goods sold is $6 510 which gives a gross profit of
$112765 The operating expense for Shiro’s business is $92 500 and the net income is
$5935

RATIO ANALYSIS

Ratio analysis is a financial analysis technique that involves examining and interpreting the
relationships between different financial ratios to assess a company's performance,
profitability, liquidity, solvency, and efficiency. It provides insights into the company's
financial health and helps in making informed business decisions.

PURPOSE OF RATIO ANALYSIS

The purpose of ratio analysis is to evaluate a company's financial performance and
assess its strengths, weaknesses, and overall financial health. It helps in
understanding the company's profitability, liquidity, solvency, efficiency, and other
key aspects of its financial operations. Ratio analysis enables businesses, investors,
and creditors to make informed decisions, identify trends, benchmark performance
against industry standards, and monitor financial progress over time. Ultimately,
the purpose of ratio analysis is to gain insights into a company's financial position
and make informed judgments about its financial performance and prospects.

Ratio analysis for option 1

Profitability Ratio:

Gross Profit Ratio = Gross Profit*100/ Net Sales

a. Gross Profit Ratio: $91140*100/ $98 000= 93%

Interpretation: The gross profit is $91140. The gross profit ratio stands at 93% which is
$98000.

Net Profit Ratio = Net Income*100/Revenue

b. Net profit ratio:$6500*100/ $98 000 = 7%

Interpretation: In order to know the net profit ratio we had to divide net income which is
$6500 with the revenue which is $98 000. The answer we get is 7% which is the net profit
ratio.

Return On Capital Employed

c. ROCE: $91140*100/ $98 000 = 93%

Interpretation: The return on capital employed is 93%.

Liquidity Ratio:

Current ratio = current assets/ current liabilities

a. Current ratio: $4600/$2000 = 2.3

Interpretation: the current ratio of option 1 is 2.3 as compared to the benchmark 2.3
indicates that the current assets are twice as large as current liabilities.

Quick ratio = current assets – inventory/ current liability

b. Quick ratio: $4600 - $1100/ $2000 =1.75

Interpretation:A quick ratio of 1.75 is seen as favorable. It shows that Option 1 has
sufficient liquid assets to meet its immediate obligations.

Ratio analysis for option 2

Profitability Ratio:

Gross Profit Ratio = Gross Profit*100/ Net Sales

a. Gross Profit Ratio: $112765*100/ $118 700 = 95%

Interpretation: The gross profit is $112765. The gross profit ratio stands at 95% which is
$118700.

Net Profit Ratio = Net Income*100/Revenue

b. Net profit ratio:$5935*100/ $118700 = 5%

Interpretation: In order to know the net profit ratio we had to divide net income which is
$5935 with the revenue which is $118700. The answer we get is 5% which is the net profit
ratio.

Return on Capital Employed

c. ROCE: $112765*100/ $118700 = 95%

Interpretation: The return on capital employed is 95%.

Liquidity Ratio:

Current ratio = current assets/ current liabilities

 a. Current ratio: $3300/$1300 = 2.5

Interpretation- the current ratio of option 2 is 2.5 as compared to the benchmark 2.5
indicates that the current assets are twice as large as current liabilities.

Quick ratio = current assets – inventory/ current liability

b. Quick ratio: $3300 - $800/ $1300 =2

Interpretation- A quick ratio of 2 is considered to be good. It indicates that a Shiro company

has enough liquid assets to cover its current liabilities. Current liabilities are debts that must
be paid within one year, such as accounts payable, accrued expenses, and short-term debt.

REASON FOR FORMULATING THE OUTCOME OF A BUSINESS DECISION

OPTION-1

Pros:

 A well-established customer base

 A stable source of revenue
 A network of contacts that can be valuable
 Have perfect location
 Will attract wider range of audience

Cons:

 Need marketing and upgraded social apps and leaflets

 Need more fund be needed for more establishment

OPTION-2

Pros:

 Best for mostly tourist places

 Less expensive and more profitable
 It will have more profit with digital marketing

Cons:

 Charging points and e-bike stands should be available in mostly crowded areas
 Need More workers and Best Mentanance For e-bikes
LEARNING AIM D: Prepare Business
Documents to present Business decisions.

In this Summary I am going to Provide a concise overview of the business decision

for Shiro's business its purpose, and the anticipated outcomes. Highlight the key
points and benefits of the decision in a clear and compelling manner

Threats of new entrants-Threats of new entrants for Shiro's business of e-bikes

and e-rickshaws refer to the potential challenges and competition that can arise
from new companies entering the market. These new entrants may pose a threat
by introducing similar or innovative products, creating increased competition,
potentially leading to a loss of market share for Shiro's business. Factors such as
market saturation, capital requirements, government regulations, technological
advancements, supply chain and distribution networks, and brand
recognition/customer loyalty of existing players can all influence the level of threat
posed by new entrants.

Threats of substitutes-for Shiro's business of e-bikes and e-rickshaws refer to

alternative modes of transportation or solutions that can potentially attract
customers away from using e-bikes and e-rickshaws. These substitutes can include
conventional modes of transportation, ride-sharing services, electric scooters,
walking and cycling, public transportation, and carpooling/car-sharing. These
alternatives may offer different features, cost advantages, convenience, or other
benefits that pose a competitive challenge to the demand for e-bikes and e-
rickshaws

Bargaining power of buyers for Shiro's business of e-bikes and e-rickshaws

refers to the influence and leverage that customers have in negotiating favorable
terms, prices, and conditions when purchasing these products. It reflects the ability
of buyers to demand discounts, request customization, switch to alternative brands
or suppliers, or exert pressure on pricing and product features. Factors that can
affect the bargaining power of buyers include the availability of substitutes, the
level of competition in the market, the cost sensitivity of buyers, the importance of
the product to buyers' operations, and the overall volume of purchases

Bargaining power of suppliers for Shiro's business of e-bikes and e-rickshaws

refers to the influence and leverage that suppliers have in negotiating favorable
terms, prices, and conditions when supplying necessary components, parts, or raw
materials to Shiro's business. It reflects the ability of suppliers to control the
availability, quality, and pricing of inputs, as well as to impose restrictions or
requirements on the buyer. Factors that can affect the bargaining power of
suppliers include the concentration of suppliers in the market, the uniqueness of
their products or services, the availability of alternative suppliers, the cost of
switching suppliers, and the importance of the supplier's inputs to Shiro's business

Rivalry among existing competitors for Shiro's business of e-bikes and e-

rickshaws refers to the level of competition and intensity of competitive interactions
within the market. It represents the degree to which existing competitors vie for
market share, customers, and profitability. Factors that influence rivalry among
competitors include the number and size of competitors, their market share,
product differentiation, pricing strategies, marketing efforts, technological
advancements, customer loyalty, and industry growth rate. Higher rivalry among
existing competitors can result in increased price competition, innovation,
marketing campaigns, and efforts to differentiate products, ultimately affecting the
profitability and market position of Shiro's business

Financial data interpretation

Financial risks- The market for eco-friendly city tours can be competitive, with many other
companies offering similar services. It can be difficult to stand out and attract customers,
especially if the business is new or lacks a strong reputation

Strategic risks for Shiro's business of e-bikes and e-rickshaws refer to potential
challenges and uncertainties related to the strategic decisions and actions taken by
the business. These risks can include intense competition, technological
advancements, innovation gaps, market dynamics, expansion risks, and
brand/reputation concerns. Managing strategic risks involves proactive planning,
market research, innovation, and adapting to changing market conditions to ensure
long-term success and competitiveness

Legal risks for Shiro's business of e-bikes and e-rickshaws refer to potential
threats and uncertainties arising from non-compliance with laws and regulations.
These risks can include issues related to product safety, intellectual property rights,
contracts, labor laws, environmental regulations, and local business licensing
requirements. Managing legal risks involves ensuring compliance, staying updated
on relevant laws, obtaining necessary permits and licenses, and implementing
proper risk management strategies to mitigate legal liabilities

Proposal: Shiro E-Bikes and E-Rickshaws, as aimed to revolutionize urban

transportation by providing sustainable, affordable, and convenient mobility
options. I am confident that the innovative product e-bike will meet the growing
demand for eco-friendly transportation solutions, contributing to a greener and
more efficient future as in my point of view e-bikes are more easily accesable for
the customers and it generate more and more profit which tends to a high business
Shiro has a 2 options however Option 2 is the better option financially as it is affordable and
also need of customers

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https://www.entrepreneur.com/business-news/7-tips-for-making-quality-business-decisions/429618