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Future Century Gaming Pty Ltd operates an online gaming platform targeting players aged 18–40 in Australia - HSC - SSCE Business Studies - Question 25 - 2023 - Paper 1
Question 25
Future Century Gaming Pty Ltd operates an online gaming platform targeting players aged 18–40 in Australia. It has been in operation since 2012, providing subscripti... show full transcript
Worked Solution & Example Answer:Future Century Gaming Pty Ltd operates an online gaming platform targeting players aged 18–40 in Australia - HSC - SSCE Business Studies - Question 25 - 2023 - Paper 1
Step 1
Outline some of the challenges including the global factors of costs, skills and supply the business may need to consider in recruiting and retaining staff
Answer
The global factors impacting recruitment and retention for Future Century Gaming Pty Ltd include:
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Cost Factors: The business may face higher salary demands in international markets due to competition and cost of living differences. Economic fluctuations can also affect hiring costs, as currency valuation may influence wage levels.
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Skill Availability: There may be a scarcity of qualified game designers and developers in certain regions. The business must analyze global talent pools to ensure they have access to the necessary skills required for their expansion.
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Supply Chain for Talent: Adapting to global labor markets means understanding diverse cultural norms, legal regulations, and employment laws in various countries, which can complicate hiring and retention strategies.
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Recruitment and Training Costs: Investing in effective recruitment and training programs is essential. The initial capital required could be significant, and the skill gaps may necessitate continuous training to keep up with technology advancements.
Step 2
Compare the use of debt and equity finance as sources of finance
Answer
Debt and equity financing each have unique advantages and disadvantages that the business must weigh:
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Debt Financing:
- Advantages: The business retains full ownership and control since lenders do not have a stake in the company. Interest payments may be tax-deductible, reducing the overall cost of borrowing.
- Disadvantages: The company incurs a legal obligation to repay the borrowed amount along with interest, which can lead to cash flow issues if sales do not meet projections. Additionally, excessive debt could jeopardize the company’s financial stability.
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Equity Financing:
- Advantages: Raising capital through equity does not require repayment and puts no financial strain on cash flow. Investors often bring additional expertise and networking opportunities.
- Disadvantages: Issuing equity dilutes ownership and control. Investors may expect substantial returns on their investments, which can lead to pressure on the business to grow quickly.
Step 3
Recommend ONE source of finance this business could use to fund its expansion
Answer
Based on the analysis, I recommend that Future Century Gaming Pty Ltd pursue equity financing for its expansion into global markets. This approach allows the business to raise substantial capital without the immediate pressure of repayment, which can be critical when entering new markets with unpredictable returns. By seeking venture capital or private equity, the company can leverage additional resources, industry expertise, and connections that these investors often provide, thus minimizing risks associated with expansion.