The analysis of the non-store retailing sector in the UK - Essay Example

?Entrepreneurship and Innovation Table of Contents Part A 3 0.A Brief of the Venture 3 1.Feasibility Study of the Venture 4 1 Market Feasibility: PEST Analysis 4 1.1.2.Product Feasibility: SWOT Analysis 5 1.1.3.Financial Feasibility: CAMPARI Analysis 6 Part B 9 2.0.A Business Plan 9 2.0.1. Stage 1 Funding 9 2.0.2. A Summary of the Targeted Market 11 2.0.3. Operational Activities 13 2.0.4. People Requirements 16 References 18 Bibliography 22 Annexure 24 Part A 1.0. A Brief Description of the Venture The venture is intended to be related with the non-store retailing of paperback books in the UK market. The concept of non-store retailing was introduced by the late 1990s (Krafft & Mantrala, 2009). The supply chain in the particular segment of non-store retailing is concerned with the channels such as vending machines, internet based selling, direct selling, and other similar elements that allow a customer to consume her demanded product/service without visiting a store (Lamb & Et. Al., 2008). In the quite a few developed markets including the US and the UK, the trend to purchase goods through vending machines and online stores have developed to be a common cultural and social phenomenon. However, the products/services mostly marketed through non-store retailing are beverages, oil, and other similar goods (Stiegert & Kim, 2009). Furthermore, the demand for non-store selling is recorded to rise significantly in the recent trend deriving almost 24.4% of annual growth (Office for National Statistics, 2011). Initiating non-store retailing as an effective marketing tool for paperbacks shall be the prime objective of this venture. 1.1. Feasibility Study of the Venture 1.1.1. Market Feasibility: PEST Analysis Political Environment In the former years, the retail sector was recorded to fall significantly although the non-store retail sector was identified to grow with record hikes. One of the fundamental reasons was the fluctuations in the political environment of the UK. This depicts that political factors have a significant influence on retailing sector of UK but has a minimum affect on the non-store retailing sector (Retail Think Tank, 2011). Economical Environment The economic factors have a significant impact on non-store retailing sector. The current trend in the economic environment of UK is identified to have rising tax rates by 20%, decreasing employment rates as well as increasing inflation that can cause significant turmoil to the venture in terms of fluctuating demands (Griffiths & Shaikh, 2011). Social Environment The social indicators of the UK depict to support the non-store retail segment to a large extent. The current trend in the industry reveals that shoppers are increasingly tending to consume products/services through non-store channels developing UK retail market to be among the largest online markets of the world (Pinnington, 2011). Technological Environment The non-store retailing sector is largely depended on the technological factors in terms of internet marketing and machineries that support vending out of stores. Currently, the technology industry in UK is witnessed to grow significantly that in turn provides substantial support and opportunities to the non-store retail business (Robinson, 2010). 1.1.2. Product Feasibility: SWOT Analysis Strengths: Are available at cheaper rates than hardbacks Convenient while travelling and are also referred to as travel books (Shaffer & O'Donnell, 2011) Weaknesses: These products have a significant demand among individual customers but are not quite favoured by library customers Are considered to have inefficient quality assurance in comparison to hardbacks (Shaffer & O'Donnell, 2011) Opportunities: Increasing demand for cheap products in the book publishing industry Lower production cost in comparison to hardbacks Can be distributed through various channels rather than only through retail stores (Shaffer & O'Donnell, 2011) Threats: The rising significance and demand for e-books are notably among the biggest threats of the paperbacks The product is highly dominated by the digital publishing (Bosman, 2011) 1.1.3. Financial Feasibility: CAMPARI Analysis Character: Due to the reason that the business enterprise is a sole venture, the finances are most likely to be provided by the entrepreneur to a large extent. Notably, the entrepreneur can also consider the sort-term as well as long-term secured loans to finance the enterprise. Ability: The non-store retail is considered to have lesser requirements of finances to that of in-store retailing. However, the capital required for the start up of the business venture shall be quite challenging to be served by the entrepreneur and therefore the role of business angels should be considered with significance. Margin: Considering the various aspects in relation to the market and product feasibility, it can be stated that business properties can be provided as margins to the sources of finance such as banks and individual lenders. The properties can be land and machineries owned by the business, equipments and inventories as well. Purpose: At the initial stage, the purpose of the business venture shall be to attain growth and recognition by increasing production in the UK market of paperbacks retailing through non-stores. On the similar context, the prime objective of this planning will be to reduce the operational, market as well as financial risks associated with the establishment of fresh venture. Amount: Proportionately, larger amount of the finances required shall be obtained from governmental loans and banks as well as individual lenders or business angels in the market. Besides these, the entrepreneur should provide with a percentage of required finances rather than establishing the business entirely based on the lenders. Repayment: The repayment of debts depends largely on the interest rates and the term period. It is in this context that the debts should be repaid within a short-term period so as to free the enterprise’s assets and reduce the financial risks in terms of credit risks. Insurance: As the venture is concerned with the marketing of paperbacks and vending machineries, it is quite essential for the business to be completely secured from accidental risks and thus a significant amount should be considered as insurance coverage to secure the business. Part B 2.0. A Business Plan 2.0.1. Stage 1 Funding The sole purpose of Stage 1 funding in the venture is to increase the production of the enterprise in order to accelerate its growth prospects in the UK market. It is worth mentioning that the operations intended to be dealt by the venture is largely related to the distribution of paperbacks. Thus, the venture is likely to play the role of a significant distribution channel as retailer rather than a production unit. However, in this context, the turnover can be referred to as the sales revenue earned by the venture by distributing increasing number of paperbacks. With this concern, the venture shall consider selling through vending machines and online marketing sites after accumulating a significant and feasible number of products from the wholesalers or the producers operating in the business segment. Therefore, the supply chain of the enterprise requires sufficient finances to acquire real estate properties to warehouse the products gathered from the manufacturers. It shall also require adequate number of vending machines and online operators to serve the potential customers in the targeted markets. Considering these facts, sufficient amount of finances shall be required for the purchase of real estate, machineries, and paperbacks from the wholesale markets. Furthermore, finances shall be required for the completion of legal formalities such as obtaining trade licences and other similar legislations. In this regard, the approximated finances required shall amount around ? 45,500 (refer to Annex 1). Along with the initial requirements, it is also essential for the entrepreneur to forecast the venture’s ongoing funding requirements so as to manage the cash flows of the business. With this concern, the ongoing funding requirements and a budgetary cash flow forecast on a monthly basis from the month of April 2012 to March 2013 has been presented as Annex 2. With reference to the data presented in the cash flow statement forecast of the venture from April 2012 to March 2013, it can be apparently identified that majority of the capital required shall be collected through credit loans which will be repaid through out the year on a quarterly basis. The inventory will be managed in First-In-First-Out (FIFO) method allowing 50% of the inventory for credit sales and 50% for cash sales. Notably, the credit is intended to be retrieved in the preceding month. From a strategic point of view, the amount of inventory purchase shall increase gradually that in turn shall raise the profitability of the venture as well as reward efficiency in credit management to face the Death Valley situation (Mahdjoubi, 2007). 2.0.2. A Summary of the Targeted Market The targeted market for marketing paperbacks through non-store retail channels are fundamentally the urban places of UK taking into account with considerable significance the airports, railway stations and other travellers hubs and destinations. It is basically due to the reason that paperbacks are commonly termed to be among the best choices of leisure while travelling. Along with the airports and railway stations as well as the busiest bus stops in the city, two or three vending machines shall also be located in few of the eventful streets of the UK. It is worth mentioning that after the completion of six months of the venture’s establishment, more vending machines shall be located all around the mega cities of the UK as depicted in the cash flow statement (refer to annex 2). It is worth mentioning that paperbacks are released after a significant time-period since the release of hardback version of the books substantially at a cheap rate (Lorimer & Et. Al., 2005). With this concern, the venture shall initially focus on fiction books especially for the age group of children and adolescents, i.e. from 7 to 15 years olds. The prime intention in this context is to gain a competitive advantage over the demand for e-books which is considerably less in the case of children and adolescents. It is because of the fact that e-books are mostly demanded by customers within the age group of 18 to 45 years that has in the recent years surpassed the sales of paperbacks (Kolaja, 2011). However, the market segment considering children as well as adolescents have limited demand for e-books or digital libraries and tend to favour cheap paperbacks of their favourite books. Therefore, concentrating on the urban demographics of the UK targeting the children as well as adolescents is expected to be highly beneficial for the venture. 2.0.3. Operational Activities The business segment of non-store retailing provides with significant cost efficiency to the marketers with minimum maintenance as well as distribution expenditure. It also rewards with the virtues of direct interaction and stronger influence to the consumer buying decision in relation to the products/services intended to be marketed (Krafft & Mantrala, 2009). Therefore, non-store retailing liberates the retailer from setting up of a store to sell the products/services to the targeted customers. With concern to the rising demand for paperback books in the global as well as in the UK market, it can be stated that non-store retailing can be highly beneficial subjected to various limitations in the external business environment (BML, 2003). However, in UK the business segment is regulated intensely by the Financial Services Agency (FSA) that creates significant constraints in terms of regulatory barriers. Non-store retailing also increases the dependency of retailers on the technological environment to a considerable extent (Seymour & Cheung, 2011). Considering these facts regarding the industry structure it can be stated that an effective planning should be executed to attain both the operational as well as financial objectives of the venture with due consideration to the legal factors related to the non-store retailing industry. For instance, the operational objective of the venture is to attain the recognition of a competitive and growing non-store retailer of paperbacks in the market segment comprising of children and adolescents based on the urban regions of the UK. On the similar context, the financial objective of the company is to attain a sustainable growth with increased profitability and efficient cash flow system. From a realistic point of view, it is quite certain that in its start up stage a venture shall incur loss or lesser cash inflow in comparison to the total cash outflow (Almeida, 2004). With this concern, it is quite necessary that the flow of cash is managed with superior efficiency and in a well-planned manner in order to obtain growth after adequately covering stages of ideation and survival (Mahdjoubi, 2007). Figure: 1. Early Stages of a Venture Source: (Mahdjoubi, 2007) From the financial planning depicted in the Annex 1 and 2, the venture can be apparently identified to face deficits in its cash management for the initial three months. However, the venture is expected to earn substantial growth in the later phase deriving increasing profits for the investors. With this concern, the venture shall intend to increase its inventory purchase capacity and derive higher profitability in the non-store retailing industry of the UK. Furthermore, the strategies intended to be adopted by the venture in relation to its financial stability and credit management is concerned with the repayment of the credit loans amounting to almost ? 30,000, along with other operational expenditures of the company. In the modern day context, promotion possesses a significant impact on the sales growth and overall profitability of a venture. For instance, as a sales promotional technique, advertising tends to create a significant impact on the consumer buying behaviour generating higher sales prospects for the venture. This in turn shall play a significant role in supporting the overall growth of the business to a certain extent (Chandon & Et. Al., 2000; Ramanathan & Dhar, 2009). Therefore, the venture shall consider aggressive advertising strategies constantly for the initial three months and later concentrate on the promotional strategies once in two months. Maintenance of the machineries shall be considered on a monthly basis after two months of the initiation with the intention to serve customers with efficiency thus derive superior customer satisfaction that in turn shall reward efficient brand loyalty to the company in a long-term perspective. To be precise, the financial and operational strategies adopted by the company shall be categorised in long-term and short-term periods with due consideration to the company objectives. This would reward the company with greater efficiency in both operational as well as financial management. 2.0.4. People Requirements It is quite certain that the venture shall require an efficient and committed team to execute the developed operational as well as financial strategies both from the long-term and the short-term perspectives. This depicts that the venture should also focus on the development of an effective corporate governance system with specified roles and responsibilities of every member. With this concern, experts have stated that entrepreneurial training and education is quite vital for entrepreneurs in order to achieve competency and efficiency in the global market scenario (Nelson & Johnson, 1997; Antonites, 2003). It is due to the fact that sufficient and effective training develops in-depth understanding of the entrepreneurs regarding their venture that in turn facilitates their managerial skills such as managing people and selection of effective strategies among others (Papulova & Et. Al., 2007). Therefore, to operate this venture, the entrepreneur should also possess sufficient understanding of the industry structure, operational and financial risks associated with the operations as well as its future growth prospects. Significant managerial skills are required to manage human resources and the diversified activities in the supply chain. Furthermore, the entrepreneur also requires the ability to identify the future opportunities and challenges to direct the business operations in an effective manner (Riverin, 2007). To be precise, the entrepreneur should have all the qualities of the leadership pyramid as depicted in the diagram bellow that is further subjected to proper training and experience. Figure: 2. Pyramid of Managerial Skills Source: (Papulova & Et. Al., 2007) References Almeida, H., 2004. The Cash Flow Sensitivity of Cash. The Journal of Finance, Vol: 4, pp. 1777-1804. Antonites, A. J., 2003. Entrepreneurship Training. University of Pretoria. BML, 2003. Expanding The Book Market: A study of reading and buying habits in GB. BML/Arts Council England. Bosman, J., 2011. Paperback Publishers Quicken Their Pace. The New York Times. [Online] Available at: http://www.nytimes.com/2011/07/27/books/e-books-accelerate-paperback-publishers-release-dates.html [Accessed August 16, 2011]. Chandon, P. & Et. Al., 2000. A Benefit Congruency Framework of Sales Promotion Effectiveness. Journal of Marketing. Griffiths, P. & Shaikh, F., 2011. UPDATE 1-UK Retail Sales Fall In Feb, Prices Surge. Article. [Online] Available at: http://uk.reuters.com/article/2011/03/24/idUKLDE72N0WB20110324 [Accessed August 16, 2011]. Kolaja, C., 2011. The Next Generation of Readers: Progressive and Paperless. Business Insider. [Online] Available at: http://www.businessinsider.com/the-next-generation-of-readers-progressive-and-paperless-2011-5 [Accessed August 16, 2011]. Krafft, M. & Mantrala, M. K., 2009. Retailing in the 21st Century: Current and Future Trends. Springer. Lamb, C. W. & Et. Al., 2008. Marketing. Cengage Learning. Lorimer, R. & Et. Al., 2005. Book publishing I. CCSP Press. Mahdjoubi, D., 2007. Action Business Planning: A Brief Description. University of Texas at Austin. Nelson, R. E. & Johnson, S. D., 1997. Entrepreneurship Education as a Strategic Approach to the Economic Growth in Kenya. Journal of Industrial Teacher Education, Vol: 35, pp. 7-21. Office for National Statistics, 2011. Retail Sales. The Economy. Papulova, Z. & Et. Al., 2007. Importance of Managerial Skills and Knowledge in Management for Small Entrepreneurs. Prague. Pinnington, D., 2011. The Changing Shopper Journey: Exploring the Potential Role of Social Media and Mobile Commerce in the Purchase Journey. Shoppercentric Ltd. Ramanathan, S. & Dhar, S. K., 2009. The Effect of Sales Promotions on Size and Composition of the Shopping Basket: Regulatory Compatibility from Framing and Temporal Restrictions. University of Chicago. Retail Think Tank, 2011. What are the prospects for UK retail in 2011? KPMG White Paper Series. Riverin, N., 2007. Policies for Developing Entrepreneurship Skills and Culture. OECD. Robinson, J., 2010. UK's Internet Industry worth ?100bn – Report. The Guardian. [Online] Available at: http://www.guardian.co.uk/technology/2010/oct/28/net-worth-100bn-uk [Accessed August 16, 2011]. Seymour, C. & Cheung, V., 2011. Retailing Review. Barclays Corporate. Stiegert, K. W. & Kim, D. H., 2009. Structural Changes in Food Retailing: Six Country Case Studies. FSRG Publication. Bibliography Blanchflower, D. G. & Shadforth, C., 2007. Entrepreneurship in the UK. Foundations and Trends in Entrepreneurship, Vol. 3, pp. 257–364. Cox. L. J., 2002. Understanding Entrepreneurship. Entrepreneur’s Toolbox. Morris, M. H. & Et. Al., 2010. Corporate Entrepreneurship & Innovation. Cengage Learning. Karlan, D. & Valdivia, M., 2006. Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions. Center for Global Development. Kuratko, D. F. & Hodgetts, R. M., 2008. Entrepreneurship: Theory, Process, and Practice. Cengage Learning. Smith, H. L. & Romeo, S., 2010. Entrepreneurship And Innovation: Oxfordshire’s High-tech Economy –Firm Survival, Growth and Innovation. Uddevalla Symposium. Wilson, N. & Strokes, D., 2002. Cultural Entrepreneurs and Creating Exchange. Journal of Research in Marketing & Entrepreneurship, Vol: 4, pp. 37 – 52. Yoruk, D. E. & Radosevic, S., 2000. International Expansion and Buyer-Driven Commodity Chain: The Case of Tesco. University College London. Zhang, J. & Et. Al., 2010. Crafting Integrated Multichannel Retailing Strategies. Harvard Business School. Annexure Annex 1: Annex 2: Read More