Question

Ruby, a recent fashion design school graduate, has received praise for her clothing designs from her peers and friends on social networking sites; this has inspired her to set up a store where she can design and sell apparel. After experiencing some success with sales, she recruits two employees to handle customers at the store. However, she handles other day-to-day affairs herself, while continuing to design clothes.

Which of the following is likely to be a pitfall of this organizational structure established by Ruby?

A. Once the firm starts growing and attracting more customers she is likely to feel overloaded.
B. Hiring more employees will result in loss of intellectual property.
C. People are highly unlikely to buy clothes from a store run by a fashion design student.
D. The online admiration of her designs will not translate into sales.

Answer 1

The likely pitfall for Ruby's business structure is that she may become overloaded with responsibilities as her business grows. Entrepreneurs like Berkeley must carefully select an appropriate business structure when they start a new venture to avoid such issues.

Step-by-step explanation:

The likely pitfall of the organizational structure established by Ruby, a fashion design graduate who has set up a store to design and sell apparel, is: A. Once the firm starts growing and attracting more customers she is likely to feel overloaded. This outcome can occur because Ruby is handling most of the day-to-day operations herself while continuing to design clothes.

The more the business grows, the more responsibilities she will have, which can lead to burnout or a decrease in the quality of the business operations or her designs. In the scenario where an entrepreneur like Berkeley is looking to open a new business, she has several business structures to choose from. The correct choice depends on various factors including the level of control she desires, the desired simplicity or complexity in operation, legal liabilities, tax implications, and plans for future growth.

Answer 2

A. Once the firm starts growing and attracting more customers she is likely to feel overloaded.

Step-by-step explanation:

Ruby, from the case, is a talented designer. Startups often face financial challenges at commencement, hence the business founder is tempted to take up more roles than she is suited for. This could have an impact on her areas of competence. Hence, as the firm grows, she is likely to feel that she is doing so much work which may not be in line with her core skills.