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UNIVERSITY OF SOUTH AUSTRALIA

Assignment Cover Sheet – Internal Please note: All text based assessment tasks should be submitted electronically using learnonline Gradebook. A cover sheet is automatically created and includes your name and student ID therefore you should not upload or embed the document in your assignment. If submitting your assignment in hard copy you should complete and attached this Assignment Cover Sheet. Please check your Course Outline or contact your School Office for assignment submission locations. Name: Ho Yan Leung Mail ID

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Email: [email protected] Course code and title: BUSS 2057 Small Business Financial Management School: School of Commerce

Program Code: DBCA

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Day, Time, Location of Tutorial/Practical: Assignment number:

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I declare that the work contained in this assignment is my own, except where acknowledgement of sources is made. I authorise the University to test any work submitted by me, using text comparison software, for instances of plagiarism. I understand this will involve the University or its contractor copying my work and storing it on a database to be used in future to test work submitted by others. I understand that I can obtain further information on this matter at http://w3.unisa.edu.au/ltu/integrity/default.asp Note: The attachment of this statement on any electronically submitted assignments will be deemed to have the same authority as a signed statement.

Signed: Ho Yan Leung

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Date: 6 July 2016

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John is planning to start a business of bakery products, which is in the initiation stage and he should be an originator-inventor1. His wife and he will manage the business together.

He is independent, self-confidence and a risk-taking person because he undertakes an unfamiliar industry, do not request assistance from third parties and put all compensation into the business. He also gets the advantage on considering the demand of bakery products on community because originator-inventor should provide a useful product for the society1. But an O-I should be innovative, creative and visionary who is able to access technology in the environment, visualize a better way to satisfy the customer need1, for example he should use computerize system to record the routine and create useful product which is not existed in the current market.

However, he fails to either develop the marketing and management skills himself or acquires them from external resources1. In the case, John was an engineer and he will employ an experienced baker who is responded to production to increase his own experience, but he still lacks of related knowledge and experiences on managing a business. Moreover, according to Beddall Inquiry (1990), it violated the finance theory because John and his wife start their venture with no education or experience in financial matters2. For example he believe finance is just collecting cash from customers and paying suppliers but we should record the transactions, payments and the payroll of the baker. He also expected his wife who does not have any background or experiences in accounting and financing activities to manage. Furthermore, it does not separate the ownership and management because he is in sole proprietor.

Furthermore, it is expected that there will not having enough money in the development and further stage because John has already used all money to set up the business – initiation stage. He has planned the future fund but it is not sufficient to handle the development and further stages in the lifecycle. He does not create a long-term plan for the instigation1. He expected to get overdraft from ABC bank successfully but the bank may not borrow the fund in the reasons of no stable income or no profit currently. The bakery may force to stop if the fund cannot successfully get in the development stage. It also violate finance theory that business should dominated by wealth maximisation2. Because small business lack of options in raising funds, liquidity should be the first concern instead of wealth maximization. 1 Peacock, R. W. 2004. Understanding small Business: practice, theory and research. Second edition. Adelaide: Scarman Publishing. 2 Kroeger C, 1974, Managerial Development in the Small Firm, California Management Review, Vol 17, pp41-47.

To conclude, John does not have enough managerial skills to fulfill the requirements which listed in the Peacock (2004). He does not have sufficient perceptual, conceptual skills and the managerial qualities which is the major skills of O-I1. He also does not have a long term planning for the instigation of the business in imitation stage and fulfill the primary functional emphasis in development stage1. Furthermore, in small business, ownership and management are responded by one person, and they usually suffer a shortage in investment and resources2. Therefore conflicts appeared comparing with the financial theory and the financial decision making in a small business....