SCHOOL OF MANAGEMENT AND PUBLIC ADMINISTRATION

MG305: NEW VENTURE CREATION

FINAL EXAMINATIONSEMESTER 1, 2013

Time Allowed: 3 hours plus 10 minutes for reading

100 marks (50% of final grade)
100 marks (50% of final grade)

INSTRUCTIONS
1. This exam has two sections:
a. Section A: 40 marks
b. Section B: 60 marks
2. Answer all questions in sections A. In section B, answer any 6 out of 9
questions.
3. Write your answers in the answer booklet provided.
4. This exam is worth 50% of your overall mark. The minimum exam pass
mark is 20/50.

Section A (40 marks). Section A is compulsory. Answer all questions.

Question 1 (20 marks)
Case 1Coffee chain considers Fiji franchise
A leading Philippine coffee company has set its sights on establishing its international
franchise in Fiji next year.
This was after its successful opening in China, Saudi Arabia, Papua New Guinea and
Malaysia.
Figaro, the leading Philippine coffee company plans to complete its 100 stores before the
end of the year and was already focusing on Fiji's market.
Franchise manager Mike Barret said Fiji was the perfect location for Figaro's next branch.
"Fiji locals and expats will soon enjoy Figaro's wide array of beverage and food products
from specialty and traditional European coffee, ice blended concoctions to delectable
pastries, gourmet sandwiches, pasta, personal sized pizza and salad greens for the health
buffs," Mr Barret said.
He said Figaro's European store concept and design would soon be built in Fiji.
"Figaro will let Fiji experience the European coffee shop ambiance with a very relaxed
atmosphere conducive to short business meetings, social gatherings or simply having your
lunch, dinner and night cap."
He said Figaro planned to offer a semi-fine dining style of service to expats and Fiji locals
introducing Philippines' love for coffee from the crop to the cup.
"It is Figaro's vision to share the passion and love of the Philippine coffee worldwide in its
continued global expansion and tapping also the Philippines' locally produced coffee beans
to better serve its customers.
"Sharing the passion to love coffee from the crop to the cup, Figaro had established the
coffee passion in the Philippines and in other parts of the world to redefine coffee
experience."
A necessity for people on-the-go, Mr Barret said coffee had grown to be more than just a
breakfast beverage as Figaro continued to share the heritage of coffee-making in different
parts of the globe. The company boasts to be the best choice for a franchise because they
provided continuous comprehensive training and marketing support to all its franchisees.
(Source: Fiji Times, 24 April 2013, www.fijitimes.com.fj)
(a) Using appropriate examples, discuss the advantages and disadvantages of franchising to
Fijian entrepreneurs. (10 marks)
(b) How can a prospective franchisee evaluate a franchise opportunity? Explain. In
evaluating whether or not to buy a franchise operation, the potential investor should
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ask a series of questions. What questions should the potential investor ask about the
franchisor, the franchise, the market and the potential investor (himself or herself).
(10 marks)

Question 2 (20 marks)

Case 2Bens Family Business
Consistency, sacrifice and quality are the three main ingredients that have made Ben's
Trading Ltd the success story that it is today. Few local companies come close to emulating
what this company has achieved in a relatively short period of time. However Ben's Trading
took out the award for large exporter of the year at the PM's Exporter Awards night.
Fiji's largest dalo exporting company has risen from relative obscurity to win the indigenous
Exporter of the Year Award for three consecutive years since 2007 and Agriculture
Exporter of the year Awards for two years in a row since 2008. Bens's Trading Ltd has been
a shining light for local agro exporters and more importantly indigenous Fijian businesses.
Displaying a business sense that belies his academic achievements, Managing Director Peni
Moi has led the export company with admirable commitment and purpose since establishing
the business in 2002. From a modest background, Moi has emerged as one of Fijis most
dedicated and successful entrepreneurs.
Running from an inconspicuous yard at Vuninokonoko, Navua, Ben's Trading Ltd ships
around 18 to 20 container loads of dalo and frozen cassava to New Zealand, Australia and
the United States a month.
Moi employs close to 150 people around Fiji mostly as processors at his Navua base.
At least 90 per cent of large commercial dalo farmers in Fiji sell their produce to Ben's
Trading Ltd, which means that thousands of people, particularly in rural parts of the country
rely on him for their livelihood.
Moi goes to great lengths to ensure a steady supply of quality dalo to importing countries,
even chartering boats to get his dalo on time to Navua and cash in the hands of farmers.
"Some of my importers are not even aware of the lengths that I go towards providing them
with good quality dalo and cassava, under- costing included, just to make them happy," he
said.
Moi's truck traverses remote locations, carting dalo from the interior of Naitasiri, Namosi,
Taveuni, Koro and inaccessible parts of Vanua Levu like Bua.
It is his sheer will to get his produce to the processing area on time which sets him apart
from competitors.
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The unassuming 43-year old native of Naivuruvuru in Verata, Tailevu, initially started
buying dalo for a businessman before he decided to follow his instincts and establish his
own export operation.
When he realised that he had the potential to penetrate into the dalo export market, he never
looked back. Although his educational background has been sparse, Moi has been blessed
with an acute business brain that is based on honesty and Christian values.
"The business has expanded in quite a short time which was challenging for me," said Moi.
The businessman said local dalo exporters should not feel threatened by his continuing
expansion.
"I'm not trying to compete against our local dalo exporters. That's not my intention. I would
rather focus all my energy on neutralising our Pacific Island competitors like Samoa and
Tonga.
"I believe that targeting this market will not only benefit the company, it will benefit the
whole nation."
Moi is confident of increasing and expanding in future to keep the Fiji banner flying higher.
Despite the obstacles the government and businesses face and the agro market problems
encountered in Australia, our exports continue to grow to all parts of the world, earning
foreign exchange for Fiji.
(Source: Fiji Times, Friday, 26 November 2011)

(a) What are the economic contributions made by the family business entrepreneurs, such as
Ben, to the economy of Fiji? Discuss. (10 marks)
(b) Using relevant examples, explain and list the problems family businesses or the small
businesses encounter in the Pacific Island countries. (10 marks)

SECTION B (60 marks)

Section B has 9 questions. Answer any 6 questions. Each question is worth 10 marks.
Question 1
(a) Explain the top ten blenders that entrepreneurs come across during the establishment
of their business.
(b) What are the different types of angel investors? Explain.
Question 2
(a) What are the benefits and drawbacks of equity and debt financing?
(b) If a venture has its choice between long-term debt and equity financing, which
would you recommend? Why?
(c) Why would a venture capitalist be more interested in buying a convertible
debenture for $50,000 than in lending the new business $50,000 at a 10 % interest rate?
Question 3
(a) Of what value are an export management company and a freight forwarder to
entrepreneurs who are seeking to export goods?
(b) What is a joint venture and how does it work? List the advantages and disadvantages
of a joint venture?
Question 4
(a) Briefly identify and describe the stages of development for a new venture?
(b) How can entrepreneurs build an adaptive firm?
Question 5
(a) Explain the advantages and disadvantages of a partnership and a corporation?
(b) What are trade secrets? Why has Coco-Cola benefitted from protecting its formula
through trade secret rather than patenting the formula?
Question 6
(a)What are the barriers to entry of new ventures? How do they affect new venture
assessment?
(b) What are the critical factors in assessing a new venture? Explain.
Question 7
Explain the various segments that are covered in the business plan. What is the
difference between s regular business plan and a sustainable business plan?
Question 8
(a) How does the net present value method work? Explain the internal rate of return
method.
When would an entrepreneur use this method?
(b) What are the main purposes of triple bottom line accounting?
Question 9
(a) What are some of the factors that affect the pricing decisions of the entrepreneur?
(b) What are some of the psychological factors that affect pricing of the entrepreneur?
Explain.
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The End