safahJ
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#1
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#1
analyse.....
Last edited by safahJ; 1 year ago
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abbbbbb.
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#2
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(Original post by safahJ)
Selling directly to gyms, RunFit is a large company based in Wales. In response to disgruntled shareholders pushing for growth, CEO Mika Williams pitched a rapid expansion plan to her financial director last week. Her goal is to move more into the competitive home fitness market, developing smaller treadmills and cross trainers for use at home.
Her idea went down well, as she had suspected it would. The expansion would not only have the potential to open up new revenue streams, but she hoped it would also decrease unit costs as the company would be able to buy in bulk, getting better discounts on components used to build machines, from suppliers. Despite Mika’s confidence in the potential success of the expansion plan, backed up by considerable market research, she did have one primary concern – she did not know where the money was coming from. The expansion was estimated to cost at least £5m. With profitability low, she knew the company could not afford to stay still.

thats the case study, what drawbacks would there be of going ahead with the expansion 8 marker
is this economics?
Maybe include the part about "she did not know where the money was coming from" and "£5 million." This investment is very risky and expensive which could result in RunFit to become bankrupt if this expansion fails, so the firm is forced to shut down (if variable costs are not covered). Then you could say that this is likely as the "profitability is low," too so this is highly likely. You could include the shut down points diagram for this question.

You could also talk about managerial problems, if she expands Runfit too large. This may cause diseconomies of scale....etc.

Hope this helps! I am sorry if this didn't.
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toptutor234
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#3
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#3
hello, may I help you with the task.
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safahJ
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#4
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#4
(Original post by toptutor234)
hello, may I help you with the task.
What points do you have in mind?
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uzyuz
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#5
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#5
(Original post by safahJ)
Selling directly to gyms, RunFit is a large company based in Wales. In response to disgruntled shareholders pushing for growth, CEO Mika Williams pitched a rapid expansion plan to her financial director last week. Her goal is to move more into the competitive home fitness market, developing smaller treadmills and cross trainers for use at home.
Her idea went down well, as she had suspected it would. The expansion would not only have the potential to open up new revenue streams, but she hoped it would also decrease unit costs as the company would be able to buy in bulk, getting better discounts on components used to build machines, from suppliers. Despite Mika’s confidence in the potential success of the expansion plan, backed up by considerable market research, she did have one primary concern – she did not know where the money was coming from. The expansion was estimated to cost at least £5m. With profitability low, she knew the company could not afford to stay still.

thats the case study, what drawbacks would there be of going ahead with the expansion 8 marker
Hi, I assume this is a business question. If the question is asking for 2 drawbacks with short evaluative sentences, you can argue that a) as she hasn't planned the finances it would be a higher risk and could lead to a great waste of financial resources and time- however, considering the existent growth and promise of further growth, as well as the pressure of unhappy shareholders, the risk is what an entrepreneur such as Mika should be willing to take.
In addition, another drawback of going ahead would be that profitability is low. This is an indicator that she may need to rethink her business plan first in order to maximise profits, rather than investing into expansion. With an improved business plan, the expansion would be much less of a risk and would likely give Mika a better chance of using retained profits as a source of finance for the expansion. This would mean that if it was a business failure, she would not have to claim insolvency due to failure of being unable to pay some sort of external finance (such as a loan).
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mailom
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#6
Report 8 months ago
#6
(Original post by uzyuz)
Hi, I assume this is a business question. If the question is asking for 2 drawbacks with short evaluative sentences, you can argue that a) as she hasn't planned the finances it would be a higher risk and could lead to a great waste of financial resources and time- however, considering the existent growth and promise of further growth, as well as the pressure of unhappy shareholders, the risk is what an entrepreneur such as Mika should be willing to take.
In addition, another drawback of going ahead would be that profitability is low. This is an indicator that she may need to rethink her business plan first in order to maximise profits, rather than investing into expansion. With an improved business plan, the expansion would be much less of a risk and would likely give Mika a better chance of using retained profits as a source of finance for the expansion. This would mean that if it was a business failure, she would not have to claim insolvency due to failure of being unable to pay some sort of external finance (such as a l
Assess two possible drawbacks to RunFit plc of going ahead with the expansion. (10 marks)
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