Benefits of WDP using technology in business

E-commerce

Websites

Websites

What can WDP use the Web for:

1. Marketing all their products – creating awareness of their services.

2. Advertising their services

3. Emailing - communicating with its customers.

E-commerce

What is e-commerce? E-commerce means to sell products or services

over the internet. What can WDP use e-commerce for:1. Customers can order WDP products online

and pay for then using their credit or debit card. Once paid for WDP will forward them their design package e.g. web page, e-mail facilities etc.

Benefits of WDP using e-commerceAdvantages: 1. WDP can sell products anywhere in the

world, thus increasing their market share.2. WDP can reduce costs as the cost of

downloading information on their services is paid for by the internet user not WDP.

3. There is no need for WDP to hire a large sales team as most of the sales take place over the net.

Exam Question

What are the advantages to WDP of communicating electronically via the website, email and e-commerce? 6 marks

Sources of finance that WDP can use to help achieve their objectives

Objectives: • Market all products on line.• Increase the use of e-commerce• Survive within a competitive market

Why does WDP need to raise finance?

In order to raise finance to achieve their objectives for 2009 WDP will need to raise finance. This can come from both internal and external sources.

Internal sources = re-invested profits, share capital.

Short-term external sources = overdraft and loans.

What is an overdraft?

An overdraft is when a business draws more money from its bank account than it currently has in its account.

Advantages of use: 1. WDP can borrow money when needed.2. Interest is only paid when the money is taken

out.Disadvantages: 1. Banks can insist that I can be repaid

immediately.

What are loans?

A loan is a sum of money borrowed from a bank. The loan has to be re-paid in fixed monthly instalments.

Disadvantages of use: 1. Interest is payable on the loan.2. Banks may require WDP to provide security or

collateral against the loan. Which means the bank will sell some of WDPs assets if it fails to make the payments.

3. Can be affected by a raise interest rates.

How could a change in interest rates affect WDPs loan or overdraft repayments?What are interest rates?

Is the percentage that is charged for borrowing.

High interest rates: Will mean that the charge for borrowing money will be high. WDP will have to pay a lot of interest on top of its borrowing.

Low interest rates: Will mean that the charge for borrowing will be low. WDP will have to pay back less interest on their borrowing.

Illustration of interest ratesIf WDP borrowed £8000 from the bank in the

form of a short-term loan, in order increase the use of e-commerce, with an interest rate of 5%.

1. How much would WDP need to pay back to the bank in total?

2. If interest rates increased to 9%. How much in total would they need to payback to the bank.

Exam question

1. WDP are considering approaching the bank for a bank loan as additional finance to help them achieve their objectives.

Discuss the advantages and disadvantages of this decision. 6 marks.

2. Outline the affects on WDP if interest rates increase during the year they have taken out the bank loan. 4 marks