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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 challenges that Future Century Gaming Pty Ltd faces while attempting to expand into global markets can be categorized into several factors:
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Costs: Global competition can raise operational costs, including recruitment and salaries. Diverse markets have varying wages, impacting overall budget planning.
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Skills: The company may face a shortage of locally available skilled labor. International recruitment can be complicated by varying professional standards, qualifications, and language barriers.
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Supply: Fluctuating supply of qualified candidates can create inconsistencies. Moreover, time zone differences and geographical distance may hinder smooth communication and collaboration.
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Cultural Differences: Adapting to different work cultures and practices can affect team dynamics and retention strategies.
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Legal and Compliance Issues: Navigating the legal requirements for international hiring, including work permits and taxation, can be cumbersome.
Overall, Future Century Gaming must strategize to mitigate these challenges while ensuring it attracts and retains talent effectively.
Step 2
Compare the use of debt and equity finance
Answer
When considering financing options for expansion, Future Century Gaming has two main avenues: debt and equity financing.
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Debt Finance:
- Advantages:
- Retains ownership and control as no shares are diluted.
- Interest payments are tax-deductible.
- Provides access to larger sums of money and can be structured in various ways (e.g., loans, bonds).
- Disadvantages:
- Requires regular repayment, which can strain cash flow.
- If payments are missed, it can result in damage to creditworthiness and potential bankruptcy.
- Advantages:
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Equity Finance:
- Advantages:
- No repayment obligations, which lowers financial risk.
- Attracts investors who may offer strategic advantages beyond capital.
- Disadvantages:
- Dilutes existing ownership, which can lead to less control.
- Dividends may need to be paid, reducing future profits.
- Advantages:
Both options have their merits and drawbacks. The choice depends on the company's financial health and long-term strategic objectives.
Step 3
Recommend ONE source of finance this business could use to fund its expansion
Answer
I recommend that Future Century Gaming consider debt financing as the source of funding for its expansion into global markets. Given its established operations and potential revenue streams, securing a bank loan or a commercial line of credit would be a viable option.
This approach allows the company to retain full ownership while gaining immediate access to funds necessary for scaling operations. The current low-interest rates could facilitate cheaper borrowing, making this a strategic choice. By effectively managing cash flow and ensuring revenue generation from new markets, Future Century Gaming can comfortably meet its repayment obligations. Additionally, as the business grows, it can re-evaluate its financing structure to consider equity options in the future if necessary.