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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 in relation to recruiting and retaining staff
Answer
The global challenges faced by Future Century Gaming Pty Ltd include:
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Costs: The growing cost of hiring skilled professionals in the competitive global market can increase operational expenses. Companies often need to offer higher salaries and benefits to attract top talent.
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Skills: There is a scarcity of qualified game developers and designers, especially in niche areas such as virtual reality or augmented reality gaming. This skill gap can hinder the ability to innovate and expand effectively.
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Supply: The availability of skilled labor may vary significantly by region. Emerging markets may have a different educational focus or industrial experience, affecting the supply of suitable candidates.
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Cultural Differences: Recruiting internationally necessitates an understanding of different cultural approaches to work, which can influence team dynamics and management strategies.
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Legal and Regulatory Challenges: Different countries have varying labor laws, which can complicate recruitment and retention strategies. Ensuring compliance can be resource-intensive.
Step 2
Compare the use of debt and equity finance
Answer
Comparing debt and equity finance reveals distinct advantages and disadvantages:
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Debt Finance:
- Advantages: Debt retains ownership within the company and does not dilute existing shareholders' equity. Interest payments on debt are often tax-deductible, effectively reducing the overall cost of borrowing.
- Disadvantages: Debt creates an obligation to repay and can lead to financial strain, especially during periods of low revenue. High levels of debt also increase the risk of bankruptcy.
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Equity Finance:
- Advantages: Raising funds through equity does not impose repayment obligations, thus reducing financial risk. Equity investors may provide valuable expertise and networks to help grow the business.
- Disadvantages: Issuing equity dilutes control and ownership among existing shareholders. Furthermore, equity financing may be more costly in the long run due to potential dividend payouts and the expectations of investors for higher returns.
Step 3
Recommend ONE source of finance this business could use to fund its expansion
Answer
Given the challenges and comparisons made above, equity financing could be the most suitable option for Future Century Gaming Pty Ltd to fund its expansion. This approach allows the business to acquire the necessary capital without the immediate pressure of debt repayment, making it easier to navigate the uncertainties of entering new markets. Additionally, attracting equity investors can provide the company with more than just funds; it may also bring strategic guidance and a network of resources to facilitate their transition into global markets.