Minor in Entrepreneurship - Assignment Example

? Minor in Entrepreneurship New Venture Fundamentals Learning Your Industry All materials in these training programs, including videos, assessment tools and workbooks, are the property of My New Enterprise ®. Copyright and other intellectual property laws protect these materials. Reproduction or retransmission of the materials, in whole or in part, in any manner, without the prior written consent of the copyright holder, is a violation of copyright law. Gaining Industry Knowledge Every industry develops a unique personality over time. This personality is shaped by social trends, economic forces, technology, customers, competition, education, government regulations, and advocacy groups. The nature of an industry ultimately determines its coststructure, prices, required investments, and profit potential. The more you know about your unique industry and the factors that shape it, the more likely you will be to navigate the inherent risks and build a successful new enterprise. Here are some of the issues you need to understand when launching and building a new business: 1. Industry Characteristics 2. Competitive Rivalry 3. Influence of Suppliers 4. Substitute Products Most successful entrepreneurs develop an intimate knowledge of these factors by working in the industry in which they start their business. If they haven’t held a job in the industry they are serious and frequent product consumers. Personal experience in the industry provides excellent exposure to the products, services, suppliers, important contacts, competitors, strength and weaknesses of competitors, key customers, channels of distribution, and marketing strategies. In nearly every success story we have collected, extensive experience in the industry revealed the missing piece that led to the business opportunity. Successful entrepreneurs continue to experience their industry first hand after they launch their new venture. All organizations exist in geographical space; the center is the furthest away from customers; the boundary is the place where customers, products and competitors all interface. Thriving business builders spend a great deal of time in the boundary of their organization rather than inside an office: they interact with customers, work with front-line employees, and study their competitors’ products and services. Living in the boundary provides personal and up-to-date information about new innovations, reactions from consumers, tactics of competitors, changing conditions, and new business opportunities. Abraham Lincoln, one of our greatest American presidents, is a superb example of “living in the boundary” in the political arena. According to Lincoln, the best way to assess an opportunity was to gather data personally. During his first few years in office, Lincoln spent more days out of the White House than he did in it. He inspected every state regiment that passed through Washington, D.C., he met with his generals in the field, he spent time with the troops in their encampments, he visited the wounded in hospitals, he spent many days in the telegraph office at the War Department to obtain real-time information, he studied new weaponry, and even took charge of several battles, coming under fire on more than one occasion. This approach gave Lincoln first-hand information for quick decisions and effective strategies without having to rely on second- or third-hand information from others (Donald Phillips, Lincoln on Leadership, New York: Warner Books, 1992). In like manner, successful entrepreneurs spend a considerable amount of time on the edge of their organization, rather than in the center. This gives them a broad and deep understanding of their industry and provides valuable information for decision making and strategic planning. By contrast, company founders who fail often create ideas in a vacuum, and then try to push them into unfamiliar territory. In this scenario, the learning curve is long and steep, and the fragile venture quickly burns through capital, passion, goodwill and team members. So if you have worked in your industry, you have a real advantage in starting and growing your business – you have tacit and intuitive knowledge of your customers, suppliers and competitors. If you have not worked in the industry, you can still gain considerable knowledge of your market, but you have a great deal of work to do. You will need to spend as much time as possible experiencing and absorbing every aspect of your industry. Whether you have worked in your industry or not, the following questions will help you evaluate and summarize the unique nuances of your marketplace. Most important, this evaluation will help you better understand the critical factors for success in your industry. The internet has made research easy; everything you need is at your fingertips. Here are some of the sources that will help you answer the questions that follow: Internet Resources Resources through the USU Library: IBIS World and Standard &Poors are both very valuable resources for industry information. These databases are free to students through the library website. www.naics.com(Website for the North American Industry Classification System – NAICS. The site providescodes and descriptions of all industries). www.investopedia.com/features/industryhandbook/default.asp (This site contains excellent free information on a number of industries) www.fedstats.gov (Excellent demographic data on all 50 states and some national industries) www.census.gov (Free economic census data on a number of industries) www.zapdata.com (After registering, you have access to hundreds of free industry reports. You can also buy reports on specific companies for a few dollars each) www.referenceforbusiness.com/industries (Free information on numerous industries) www.sbdcnet.org (Free information on small business, industries and demographics) www.bizstats.com (An excellent source for free industry data, small business statistics and financial ratios. For more detailed data you can buy an annual membership for $99) www.hoovers.com (Excellent information on thousands of companies and industries. Some basic information is free – more detailed reports sell for $129. You can sign up for a free trial and collect a great deal of data. You can also pay for a monthly membership) www.marketresearch.com (The world's largest and continuously updated collection of market research for sale. The site has thousands of industry and company reports – some are very pricey, others are more reasonable) www.thomasnet.com (Excellent regional and national information for locating and evaluating suppliers, vendors, and various service providers) www.easidemographics.com(After registering, you can get free demographic data on cities, counties and states) Google Searches The U.S. market for (Industry name) (Industry name) statistics (Industry name) market size (Industry name) trade associations (Industry name) trade shows (Industry name) companies Search for and study competitors’ websites (Competitor’s name) market share (Competitor’s name) revenues (Competitor’s name) press Suppliers in (Industry name) 1. Industry Characteristics The most attractive industries are fairly new and growing at 10 percent or more per year. They produce at least $50 million in annual sales, but are not much larger than $1 billion. Industries that are too large are generally dominated by a handful of well-established competitors, which makes it difficult to enter the market and compete. Attractive industries also have multiple channels for distribution (retail, wholesale, internet, catalogue, resellers, agents, business to business, etc.). Products in these industries usually realize a 50 percent gross margin or better. This allows for a 10 to 20 percent profit margin and a strong return on investments made. Finally, in attractive industries it is possible to build a $2 million business with 10 employees in a relatively short period of time (three to five years). If you cannot build a company to this size, it will remain a small lifestyle business, vulnerable to an eventual demise. What is the business opportunity that you are analyzing? What is the industry that best matches this opportunity? Why? This paper analyzes the business of providing skin care treatment to the clients; it includes facials treatment and body massage. This opportunity is marches with that of Beauty Spa industry; this is because it provides those services that endeavor to improve one status of beauty, relaxation, and health through care treatment What is the NAICS code for this industry(www.naics.com)?(You need to know what industry you are in to gather information about it.) This business opportunity is in the industry coded 812199 What is the NAICS description for this industry? According to NAICS description of the industry is that which is specifically engaged in the provision of personal care services with inclusion of such services as Saunas, ear piercing, and tattoo parlors. What is the current annual sales revenue for this industry? The current annual sales revenues for $ 9.7 billion, this is an increase comparing the annul revenue that was collected for the same industry in 2007 (five years ago) that stood at $ 9.4 billion. What is the percent of growth or decline for this industry for each of the past five years? YearSales Revenue% Increase/Decrease This recorded an increase of 3.19% considering the two values in 2007 and 2012 What is the expected growth rate for this industry for the next five years? YearExpectedRevenue% Increase /Decrease It is expected that the increase in the demands for Spa services, there will even be more increase that is remarkable in the total revenue collected in the industry by 2017. In the next five years, it has been projected that the industry will record an increase of about 10% considering the annual revenue in 2012. The industry is expected to have a boom in the near future since there in rapid increase for the demand of the services. During this period, it is also expected that the employment rate in the industry will increase by 14% in 2016 (NAICS & SIC, 2013). What industry associations provide publications, information and support in this industry? There are several industries that do provides complementary services to Beauty Spa, they provide the all-important information of providing publications and information that supports the industry in terms of the creating awareness and sourcing customers for them. They include industries like health club facilities, health studios and physical fitness, and fitness spas without accommodation. What trade shows, consumer shows, supplier shows and other gathering places take place in this industry? In order to market the beauty spa industry, several trade shows aimed at increasing its revenue in future have been organized. For example in the month of April, there was trade show in Las Vegas that comprised of exhibition and lectures coupled with over 80 workshops. These shows have been organized into those for the suppliers, consumers and those that are structured for gatherings. It is believed that with strong tradeshow marketing, there will be demand for the industry by the public, as they will be made aware of the opportunities available. List the possible channels for product distribution in this industry (retail, wholesale, internet, catalogue, resellers, agents, business-to-business, etc.) and indicate how attractive each may be to your business. Possible Channel How Attractive? With reference to this business, the channel for distribution for this business opportunity will be direct from the service providers to the customer given that this is a service and not products that needs to be distributed through a structured way. There is no need of involving others in the distribution chain, the service will be offered directly to the clients hence the business will assume direct services to the clients with only employees in the premises. Facial scrub and massage are services that are given on the client body and this informs the channel’s choice. What is an average gross margin on products in this industry? The average gross margin for the services in this industry is about $ 35 What profit margin (net operating income) does the typical company realize in this industry? Following the margin that is realized in the industry, a typical company in this industry will be making a net profit of about $ 10, 000 a month. In order to be successful in the industry, the proprietor has to take some of the steps in ensuring that it survives, this includes marketing of the product using popular magazines, internet, and the dailies. There should also be professionalism in the work that is offered in the business premises; this is because there is a stiff competition in this industry, this present a competitive landscape that will eliminate those who cannot cope. Based on your research and experience, what are the critical factors for success in this industry? 1. Professionalism in work 2. State of the art facilities 3. Accessibility of the business 4. Varieties of the services to the clients 5. Competitive prices for the services 2. Competitive Rivalry To build a successful business you need to understand your competition. It is important to acknowledge these competitors, the strengths and skills they possess, and what you can learn from them. Customers always have choices or other means of solving a problem, even if their solution is different from what you are proposing. So don’t ever assume there are no competitors for your business. The better you understand your competition, the better you can compete with them. This exercise helps you identify your top competitors, and evaluate their strengths and weaknesses. List your major competitors Location/yrs.in business/revenue Strengths of this company Weaknesses of this company 1. Ballston Spa Business and Professional Association 6 years in business The company has the state of the art facilities They have relatively high charges 2. Pamperzhou Day Spa 10 years with a revenue of $ 100 million The business is experienced in the market and has a strong customer base There facilities are not up to date and are incapable of providing a variety of services 3. Lisa Waldron 2 years It has professionals that are highly trained It has no wealth of experience in the business Now list the same competitors you reviewed above and indicate which specific target markets they are pursuing. Also list the channels of distribution they use to reach these markets. Knowing your competitors target markets and channels of distribution can help you identify unique niches and opportunities that may exist. The most important part of this exercise is to outline a strategy for competing with each of the competitors you have listed. List your major competitors Target markets or customer niches they are pursuing Channels of distribution they are using How will you compete with this company? What are your obvious advantages? 1. Ballston Spa Business and Professional Association They are pursuing customers who are close to their premises Direct to the consumers We are putting a spirited advertisement using all routes possible including the internet 2. Pamperzhou Day Spa They are targeting customers who want to belong to a class Direct to the consumers We are going to put up a state of the art facilities for proper delivery of the services 3. Lisa Waldron They consider pulling all the customers from all sources Direct to the consumers We are hoping to institute our own resource centre that is going to create our own professionals 3. Influence of Suppliers Every business requires inputs from suppliers and vendors: raw materials, parts, products, labor, financial services, insurance, other services, etc. You will have more control over these inputs when: (1) there are many suppliers and vendors in your industry, (2) the inputs you need are common rather than unique, and (3) it is easy to switch from one supplier to another. This exercise helps you identify the critical inputs you need in your business, the various suppliers available to you, and the ones you would prefer as partners. List the inputs needed for your business (products, services, etc.) List possible suppliers for this product or service After researching each supplier, which one would you prefer to use and why? 1. Waxing and laser hair removal No supplier required because the facilities are fixed No supplier required 2. Massage and nail care No supplier required because the facilities are fixed No supplier required 3. Body treatment and face No supplier required because the facilities are fixed No supplier required 4. Substitute Products Every company competes with other companies that produce similar products. There are also products that are very different from each other that meet the same need for the customer. For example, if I need to go downtown I can drive my car, ride my bike, take a bus, or call a taxi– all different solutions that meet the same need. The various options people have for satisfying their needs are called substitute products. Substitute products often set price and quality standards in an industry. When building a business, you need to develop strategies for making your products at least as attractive – and preferably more attractive – than all potential substitutes. This exercise will help you identify substitute products, evaluate why they are attractive, and develop strategies for competing with these other products. There is no substitute for the products in this case because we only deal in services and the difference is brought by the quality of the services that is offered in your business. This explains why we are very particular about the quality of our services. For better services, our business needs professionally trained individuals and state of the art facilities that will provide the desired quality for the clients. What are the main substitutes that threaten your product? Why might this substitute product beattractive to your customers? What can you do to help your products stand out and be preferred by potential customers? Read More