Essay on Benefits And Risks Of A Business

1105 Words Apr 28th, 2015 null Page
As a goods-producing business, its flagship beverage called healthy potion is generating considerable income, and expanding continuously. However, in the long term, the business with a single product, may not earn constant revenues to cover its expenses, due to the changeable demand affected by consumer preferences. Hence, diversification strategies could be applied to the business. This case study also evaluates debt and equity financing, followed by a fund raising scheme. It suggests that a combination of debt and equity funding is acceptable, and the level of equity financing may be greater than debt financing.
Strategic Analysis
The coexistence of the rewards and the risks in diversification may maximise business value or depreciate it (Markides 1997). Accordingly, to reduce the uncertainties involved in this high-stake transition, healthy potion sole trader could apply SWOT analysis to the business in a structured way (Martín-Collado et al. 2013).
Initially, the business is likely to encounter internal situations which are strengths and weaknesses (Hill and Westbrook 1997). In terms of the strengths, healthy portion business has achieved product differentiation, since it sells an exclusive beverage, requiring plant extracts from north-western China. The raw materials are unique and the production technology is confidential that cultivated the core competence (Needle 2010 cited in Ji 2015, p. 6). Moreover, compared to soft drinks that are popular in the market, plant…

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