Essay Sample on Assumptions: Risk & Uncertainty in Business Plans & Projects

Introduction

Assumptions are contemporary ideas presumed in the implementation of a business plan and decision-making process of a project. More so, assumptions are generally categorized as disclosure of risk and uncertainty. Thus, identifying assumptions before implementing a business plan assists in recognizing threats that may affect the project. Hence, helping the project managers develop appropriate strategic techniques to prevent future risks after implementing the plan. Effective execution and planning of the assumptions are significant in enhancing the success of the project (Ashe-Edmunds, 2019). Therefore, this paper entails the identification of assumptions in the project of developing long-lasting battery and fast charging devices for Apple iPhone, factors that may affect those assumptions, how to solve those contingencies, and cross-cultural, economic, and geopolitical factors that impact the business environment of the project.

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First, the customer base is a crucial assumption to address before implementing the business plan. The belief that the consumers will be eager to buy products from the project, enhance the development of more products to generate enough sales to make more profit. The customer base assumption encourages the project managers to exhibit more figures than required to prevent potential customers from buying the products from competitors (Ashe-Edmunds, 2019). For instance, if the company needs 100 people to buy the long-lasting batteries and the fast charging devices each day, then the project managers should plan on requiring an exponential number around ten times the number of consumers anticipated each day.

Second, the assumption regarding the management experience and expertise. Usually, firms do not run themselves, and the products require to get produced according to the consumer's needs and preferences. Thus, assuming the founders of the project will run the company, profitably eventually leads to disappointment. Therefore, the business plan should consider the fact that although the founders may produce and deliver the required gadgets to the consumers, they may not have the skills and abilities to run other departments in the firm like accounting, finance, and organizing (Mccormick. 2013).

Furthermore, profitability is the ambition of each entrepreneur with a business plan. However, the profitability assumption needs to be ascertained by financial planning, sales projections, and market research. Thus, the profitability of any company does not mainly depend particularly on the sales; instead, it centers on the production cost and selling of the products. Hence, the assumptions help in determining which pricing strategy to implement in the business plan after calculating the overhead and manufacturing cost of the project.

Moreover, assuming to have adequate capitalization and funding leads to the failure of many businesses. Most business owners assume that the sales are adequate to fund the operations after starting the business plan. However, business takes a long period to recover from the start-up costs even when they are making profits from their products. Therefore, ensuring to have adequate capitalization to run the business until the break-even period is essential to demonstrate in the business plan of the project.

In the preparation to start up the business plan, various factors affect the assumptions planning. The strengths and opportunities are the internal factors affecting planning. For instance, the company culture, the image may affect how the local community promotes and support the firms; thus, affecting the customer base and profitability assumptions. More so, the work experience, technical knowledge, and personal characteristics affect the planning of the business. Also, weaknesses and threats are the external factors affecting the planning strategy. The weakness factors entail the resources that the business lacks, the non-profitable areas of the business, and the departments with the highest production costs while the threats factors encompass the competitors and external forces from the economy.

The mitigation strategy helps to address the risks and threats before the manifestation. Thus, the strategy tries to reduce the impacts of the risks before occurring, for instance, preventing competition by producing high-quality, long-lasting batteries and fast charging devices for the Apple iPhone. Moreover, the implementation of contingency planning, which is the same as risk avoidance, assists in dealing with factors affecting the business plan (Mccormick. 2013). The contingency plans may get formulated for either individual or group of risks. Hence, the planning occurs after identifying the risks and performing the risk analysis process to enhance the extent determination of their impacts. Also, contingency planning can be used to budget the funds set aside to deal with the internal and external factors affecting the business plan.

The level of education is one of the socio-cultural factors that impact the business environment. Mostly education affects the lifestyle of individuals, their attitudes, and thinking. The project of developing batteries and chargers of Apple iPhones will attract countries with a highly educated population has the brand of Apple is perceived for high-class personnel. Thus, the managers should major first with the countries with well-educated people (Castano, Mendez, & Galindo, 2015). Also, the level of literacy in a given community or country determines the marketing, advertising, and packaging strategies the companies to implement to sell their products in the markets

Consumer behavior is one of the economic factors that may hinder or help the company of developing long-lasting batteries and charging devices of the Apple iPhones. The level of spending, the consumers, will spend money on buying either the batteries or charging devices of the iPhones plays a significant role in determining the future of the company. Moreover, the bargaining power of the consumers and the supply and market demand of the batteries and charging devices of iPhones affects the performance of the firm locally and globally.

The rise in protectionist sentiments entails geopolitical factors that influence the business environment. The political tensions in many countries trigger the economic sanctions and uncertainties of the economy (Caldara, & Iacoviello, 2018). Also, the geopolitical factors enhance the slowdown of the economy and disrupt the supply chains; thus, it may affect the supply of the batteries and charging devices of iPhones across the countries.

Nonetheless, to ensure the project operates according to ethical obligations, it is crucial to balance the desire to increase the profits against the preferences of the stakeholders. More so, identifying the ethical management of the project of the stakeholders and the surrounding environment in general. Operating according to the ethics enhance the social contract between the business and the society.

Furthermore, operating the business plan fairly to the customers, stakeholders, and employees promotes the satisfaction of consumer's needs, healthy competition. Hence, making the organization legal to operate in various countries. Also, acquiring the Fair Labor Standards Acts and a business license facilitates the project to be legal (Ashe-Edmunds, 2019). Complying to all government regulations within the state, federal and local statutes, and the rules administered by the legislative faculties helps the operations developing batteries and charging devices of iPhones to be legal and ethical. The project will partner with other company associates to participate in the reduction of carbon footprints to prevent global warming by improving climate change effectively.

Conclusion

In conclusion, assumptions entail disclosure of risk and uncertainty. Hence, helping the project managers develop appropriate strategic techniques to prevent future risks after implementing the plan. Therefore, the manager needs to ascertain assumptions to enable the business plan to operate profitability and in the long run duration.

References

Ashe-Edmunds. S. (2019). What Are the Key Assumptions of a Business Plan? Retrieved from https://smallbusiness.chron.com/key-assumptions-business-plan-60273.html

Caldara, D., & Iacoviello, M. (2018). Measuring geopolitical risk. FRB International Finance Discussion Paper, (1222). Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3117773

Castano, M. S., Mendez, M. T., & Galindo, M. A. (2015). The effect of social, cultural, and economic factors on entrepreneurship. Journal of Business Research, 68(7), 1496-1500. Retrieved from https://www.sciencedirect.com/science/article/pii/S0148296315000545

Mccormick. A. (2013). Why You Need to Question Key Assumptions in Your Business Plan. Retrieved from https://www.thebalancesmb.com/question-key-assumptions-in-your-business-plan-1200853