AOU.B202.TMA04.2008-2009

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AOU.B202.TMA04.2008-2009 Powered By Docstoc
					                          FACULTY OF BUSINESS STUDIES
                                          Jordan Branch

                                       TMA COVER FORM

      Course # …202…… Course name: Understanding Business
      Function…………………………………..
      TMA No: …4……….…                                Mark Allocated to TMA ………………

Part (I): STUDENT INFORMATION (to be completed by student)
1. Name:Ayda Kayyaly                            2. Registration #: 050931
3. Section #:              4. Tel. :079/6750818              5. E-mail:aydakayyali@yahoo.com
 I confirm that the work presented here is my own and is not copied from any source.
Student's signature:

Part (II): TUTOR'S REMARKS (to be completed by tutor)
Tutor name:                                       Signature:
Date TMA received:                                Date returned:
TUTOR'S REMARKS:

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                                      TMA FORM (PT 3)
                                       Jordan Branch


Part (I): STUDENT INFORMATION (to be completed by student)
1. Student name: Ayda Kayyaly                   2. Registration #:050931
3. Course #: 202                 4. TMA#:4        5. Date TMA received:
Tutor name: Waleed Saleh                          Date returned: 31/1/2009
Reason for late Submission




          Category                                      Weight      Achieved

          Q1                                               20%

          Q2                                               20%

          Q3                                               20%


          Student analytical skills                        10%

          Use of figures & tables                          5%

          Overall presentation                             5%

          Total Mark                                      100%




                       TUTORS SIGNATURE __________________________
                                        __________________________




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By Ayda Kayyaly
ID # 050931


                                        Introduction




In this assignment in section one I will state the prerequisites for start – up business
and what should the entrepreneur do in the early stages of starting the business. And
discuss different models to assess the effectiveness and the environment of the
business.


In section two I will discuss, compare and contrast between different types of the key
sources of finance for business start – ups.


Lastly; I will give a brief description of the National Microfinance Bank aims, nature
of operations and their target group.




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To open a new business - let us say purchasing a famous fast food franchise- has
many things to take in consideration to assess the capability of the potential of the
new business success. Therefore; there are many fundamental steps to follow.

    Feasibility study: a study undertaken to decide a project's possibility to bring
     about the successful completion of the project objectives. It is a general
     assessment of the possible of an idea to be transformed into a business. The
     results of this study are used to make a decision whether or not to proceed
     with the project.
    Market Research: is a “process of collecting, analyzing and presenting useful
     information about consumers” (Maidenhead, McGraw – hill, 1992)

       Market research includes the general research into the market which includes
       environmental issues such as government activities and economic shifts. Any
       one need to start a new business should conduct a research and make sure
       whether the gained information will be worthy more than the cost of collecting
       this information.

       The research aims to collect information and use it to reach a decision. The
       first step of the market research is to define the problem and set objectives.
       The second step is to collect the information either by primary research
       through questionnaires, interview. Or secondary resources by check the
       existing information in newspapers, directories,...etc the suitable way to check
       first the secondary sources because it is cheaper, quicker. In my status I can
       check the available resources done before to make the procedures easier but I
       have to take in my consideration the secondary research are mostly out of date
       as a result it might be not accurate . So I have to be cautious while dealing
       with this kind of information.

       After checking the secondary research I should conduct the primary research
       by identifying which method to be used and who I can meet or interview to get
       the needed information by.

       The final step of the market research is analyzing the results of the research
       this technique could be carried by different methods such as qualitative data
       analysis is about the why, and quantitative data analysis is about the how and
       what.

            Problem        Objective      Secondary             Primary           Execute           Analyze
          recognition       settings                            Research          primary          results of
                                           Research
                                                                                  research          research



                                                Present the findings of the research in a suitable form

       The market research process




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        Good market research will reduce the risk of any failure of new business if
        undertaken wisely.

        SWOT analysis into my new business this will help me a lot to specify the
        Strengths, Weaknesses, Opportunities and Threats. as I am the one who is the
        decision maker; I am supposed to examine the internal structure and external
        environment to understand the circumstances in which my business operate
        this simple business technique will lead me to prosperous work by:

        Strengths: as I mentioned before, that I purchased a famous franchise that
         will ease my mission by ;
             1. I do not need to work and pay for “Brand Building” by advertising
                 and work hard to become familiar to the people. The advantage of
                 the International Franchise that people knew it before the shop open.
             2. I will compete the other by applying on my products the franchise
                 criteria and quality.
             3. the strategy of franchise that taking care and help partner (who I am)
                 with: Interior and Exterior Design ,Lease Negotiations ,Operation
                 ,Concepts ,Inventory, Recipes, Training ,Financing Support Building
                 Supplier Relationships . Hereby; I will not find any difficulties to
                 conduct my business in the contrary; if I face any problem in any
                 field I can get the proper advices.
        Weaknesses: everything in the world has two faces the good and the bad
         one, despite all the advantages from the International franchise I may have
         some weaknesses I have to deal with such as:
             1. I have to pay percentage for the franchise of my profit.
             2. They have control by watching how the business works. The way of
                 marketing the employee skills and products, this will limit my
                 movements.

       Opportunities: with the big growth of International franchise, comes big
        opportunity. While other segments of the traditional fast food industry
        continue to grow, the business will grow and expand to open many branches in
        different areas in Jordan.
       Threats: as we know the external environment changes rapidly, this may lead
        to other competitors to enter the market, and that requires continues
        improvement to my products and strategies to maintain the competitive
        advantage, also the possibility of launching new regulation by the government
        to restrict the movement of the international franchise to help the domestic
        shop grow and expand the local business

 STEP checklist (Social, Technological, Economic and Political). To examine
  the circumstances in Jordan and to help me build my new business as follows:

       Social factors: concerned with values, lifestyle, age structure of population,
        class and income – structure of local population for example number and type
        of people living nearby (The majority of our Jordanian society consists of
        youth)



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   Technological Factors: this issue is focusing on the equipments. Equipment &
    machines needed to carry the process and products technology. For example
    the availability of shop – display , electronic communications , new check –
    out
   Economic Factors: is focusing on economic growth, inflation, market trends
    and market circumstances.
   Political Factors: follow the regulation and policies in Jordan. to open a
    business, I have to take the state permission and do the registration in the
    Ministry of the industry and trade, then the Great Amman Municipality has to
    visit the business to do the inspection from many sides: the place is it suitable
    and healthy, the safety, health and cleaning of the shop. As a very important
    thing which I have to comply with the regulation of Labour and Worker in
    Jordan by enrolling the employee to the Social Security and Health Insurance.

 Investment appraisal: this is a quantitative models to gather data and take
  decision which enable the entrepreneur to check the profitability of the
  business and decide whether to carry the business out or not, investment
  appraisal is useful to calculate the benefits, expenditures, cost............. there
  are many methods to use such as:

         1. Payback period, which focus on the short run and insists on the
             importance of liquidity.
         2. Accounting Rate of Return which uses to measure the profit and
             evaluate the business, but it pays no attention to the time value of
             money.
         3. Net Present Value which considering timing of cash flow.
         4. Internal Rate of Return, consider time value of money and take in
             consideration the cash flow.

Question 2:

To start a new business you should have a start- up capital to buy equipment, rent
a shop and buy stock. Before starting trading or providing a service for the people,
some owners of new business seek finance from banks or from financing
organizations that provide different kinds of financing. The type of finance
depends on the nature of the business. For example a big company seeks to use
mixture of finance sources than the small company.

The sources of finance are varied; I will discuss a few numbers of them as follow:

    1. Bank Loan: is an amount of money borrowed for a specific period of time
       Repayment is made with interest. Bank loan is useful to borrow large
       amount and repayment are the same every month. For example; I bought a
       car last year. I took JD 6,500 loan from Standard Chartered Bank with
       interest rate 8% to repay the amount by fixed monthly instalments of the
       amount of JD 140 for five years.
    2. Overdraft: is an agreement between the bank and the business owner
       (lender), the bank permit to the borrower to take more money from their
       account than they have put in with limited time. Overdraft is flexible but
       the interest rate is high. An example: I have a business and I have JD 1000


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     in my account but I need to pay the salaries which are JD 1500 , so I can
     withdraw more than I have in my account (overdraft) to repaid the JD 500
     in 2 weeks with interest rate.
3.   Business Credit Card: this concerned with purchasing goods or
     equipment and pay for them later, a statement sent to the purchaser on the
     end of the month stating how much the borrowed amount , the buyers is
     given a specific period of time to pay. The bank gives limit to the amount
     to borrow on the credit card. The amount must pay in full at the end of
     each month, if the amount paid in full there is no interest unless there is
     residual balance an interest rate charged on the buyer. This kind of finance
     is enable the business owner to borrow flexible amount in fast procedures
     for short time but the interest rate -if any- is very high. An example: I want
     to buy equipment for my business, so I can charge this equipment on the
     credit card and pay the amount on the end of the month with no interest
     rate or I can pay fixed payment each month with interest rate.
4.   Venture Capital: it is type of capital provided to start – up enterprises,
     usually made as cash in exchange for shares in the invested company.
     Venture capital comes from banks or from rich individuals. The new
     business usually been controlled by the person or the bank who made
     venture investment especially over company decision and they get good
     share of the company’s ownership.
5.   Government Loans: this kind of loans helps small business with small
     loans with certain terms and conditions that must be satisfied by the small
     business before this business granted the loan, the government set a
     condition which is the loan remain within the small business category,
     these terms and conditions must comply constantly by the business owner.
     This kind of loans has specific control on them. Government loan is a high
     interest rate loan and it is not easy to get.
6.   Mortgage: is the transfer of property to a lender as a security for a loan of
     money. In another word it is transfer of property from the owner to the
     mortgage lender with a condition that the property will return to the owner
     when the term of the mortgage has achieved. Mortgage is a security for the
     loan that the lender makes to the borrower. For example: I have a land and
     I need money to start up new business, so I offer my land to get money
     from a bank or any individual , the land becomes owned by the bank until I
     repaid the loan in full then the land returned to me.
7.   Shareholders: this kind of investment fulfilled by taking on a partner
     business or expanding operation they have the option to sell shares through
     the underwriting through investment banks or through private replacement.
     The disadvantage is bringing in new more people and the profit has to be
     shared. For example: recently Imar Company advertised in the media to
     the public to underwrite its shares with relevant dividends.




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Question 3:

I have visited and interviewed Mr. Mohammed Hmoud the Credit Manager of
National Microfinance Bank, who gave me useful information about the bank.

 The National Microfinance Bank is one of Jordanian private shareholders that
work to finance micro and small businesses and was established and registered
officially on 15/7/2004.

The idea of National Microfinance Bank was based on prince Talal bin Abdul-
Aziz, plan to establish bank for the micro and small entrepreneurs in the Arab
World.

In March 2006, National Microfinance Bank gives out its first loans in parallel
with the opening of three branches in Karak, Zarqa and Wehdat.

The purpose is to contribute in the development of the country poverty
improvement by increasing the productivity of the existing micro and small
entrepreneurs of Jordan, specially on women to improve their standard of living
through direct and indirect provision of lending and other financial services that
suit their needs, other target groups; the military servicemen families and the
retired people who have social security pension.

National Microfinance Bank goals are to provide sustainable lending and financial
services and reach the urban and rural area by opening branches by focusing on
meeting the needs and expectations of the micro and small entrepreneurs specially
the areas which no served by others yet. In addition designing and building
flexible loans and cover all the Jordan’s districts and targeted groups.

National Microfinance Bank clients must be from the same geographic area where
the branch is located and the client must have an existing business, having a
registered shop is not a must, National Microfinance Bank also provides credit for
non – registered and home – based business.

The credit officers have the responsibility to visit the client and conduct a basic
assessment on the status of the business and determine the ability of the client to
repay the loan. Credit officers try to understand the needs of their clients like to
conduct feasibility study which served through their partnership “IRADA” and to
decide whether the client could be served by National Microfinance Bank
products or not and if there is a certain adjustment need to be made or completely
different products needs to be introduced.

National Microfinance Bank loans: the bank provide credit for existing micro and
small business with the amounts ranging from JD 200 – JD 2,500, two ways of
financing are introduced: Islamic compliant way ( Murabaha) and the usual way.
As for the repayment it ranges from one month to 48 months depending on the
cash flow of the business.

If I want to start a business I would love to seek finance from National
Microfinance Bank because of:


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       1. Simplicity of its procedures so I can get the loan in just 24 hours.
       2. I can choose between Islamic loans and the usual loans as National
          Microfinance Bank have five loans products, the first one “ Watani” has
          maximum loan of the amount of JD 1,000 and repayment period of 12
          months, the second “ Mashrooie” has maximum loan of the amount of JD
          5,000 and the others for the military servicemen families and retired
          people ( brochures attached)
       3. The prices of their products are to be lower than the prices of the
          microfinance market.
       4. National Microfinance Bank is committed to provide financial services
          and loan to its client according to best practice microfinance
          methodologies and truth.
       5. High quality of customer service.

Conclusion:

Any start- up business needs many studies and analysis, the models I used (SWOT,
STEP ....) are powerful technique for understanding the nature of the market, new
business in the start need support and there are many sources of investment.




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                                 Attachment (2)
Please fill the form below & submit it with the assignment. This information will
help the Faculty in making the necessary changes to improve the students
learning environment.

Business graduate       How much did          Self-assessment of   State the actions
skills outcomes         the assignment        your current level   you think if taken
                        contributed to        of Knowledge &       by the
                        my Knowledge          skill-               tutor/faculty will
                        & skills              high/medium/low**    improve your
                        development?*                              skills.
Searching for &         1 2 3 4 5             1     2      3       Having more face
selecting                                                          to face classes
information, using
(online) library
services & other                     X              X
information sources,
developing
confidence in
managing
information.
Learn from non-text     1    2   3   4   5    1     2      3
as well as text-based
materials, &
enhance your
general study skills.
Gather & evaluate       1    2   3   4   5    1     2      3
information about
organizations from a
variety of sources.
Research a given        1    2   3   4   5    1     2      3
topic using the
internet




References:
               - Chishall, P.: Marketing research, 4thEdn (Maidenhead, McGraw –
               hill, 1992)




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