The Success and Level of Future Achievement of the Business - Research Paper Example

? Enterprise and Entrepreneurial Management Contents Contents 2 Introduction 3 Demographics and segmentation 4 Target market 4 Market need 5 Competition 5 Barriers to entry 6 Regulation 7 SWOT Analysis of the business entity 8 Importance of market research 8 Reference List 10 Introduction In the most basic form, market research can be described as the process through which organizations attempt to discover consumer requirements as well as consumer perception about the services or goods produced by the company. The aim of market research is to understand those demands and develop services and products to meet those requirements. Market research involves different data collections processes and can be categorized into primary market research and secondary market research. The major advantage of primary research is that the originality of the research helps in gathering more relevant data and up-to-date information for the business (Leedy and Ormrod, 2005). However, primary data collection is tedious and time-consuming which can be a problem in markets which are fast changing. Also, primary research is expensive and needs a great deal of involvement. Secondary research or desk research involves data processing of already collected and established data. Previously published documents are consulted such as, press articles, government reports or previous researches. The major advantage of secondary research is that it is quicker and easier to complete. With easy access to internet, secondary data collection has become much simpler and useful. The major disadvantages include deviation of the exact issue and redundant information. The data may also be biased as it is gathered by other groups. The various market research methods include surveys, focus group and face to face or telephonic interviews. Also, before launching any new service or product in the market, it is always advisable to test the market in order to understand the general response (Koch, 2000; Saunders, Lewis and Thornhil, 2009) Market research is a crucial component of any business planning process. Proper market research requires the possession of expert knowledge and critical information about the target market as well as the understanding of the attractiveness of the target market from financial viewpoint. Market analysis is a qualitative and quantitative assessment of a target market (Creswell, 1994). Various factors such as, market size in terms of value and volume, various segments of customers and their demographic profile, buying patterns, economic and legal and social environment are extensively studied (Carter and Jones-Evans, 2006). In order to perform an effective market research before finalizing a business plan, various factors needs to be analysed. In the current report market research has been conducted for setting up a restaurant business. Demographics and segmentation The first step of market research is assessing the market size. The approach of market research will depend on the business type as well as the investors. In the present report, a restaurant is going to be established. The target segment can be between 25-40 years with a disposable income and seeking trendy, upscale and comfortable dining options. They are frequent with bars and other restaurants in the region. They prefer good experience more than just service and value a cosmopolitan, unique and sophisticated environment. Value and volume Another important factor is the determination of total market value. The first step will be to avail public data or statistics regarding business establishment market. This includes total number of potential consumers as well as the total market value. For example, below is a situation where the researcher wants to open a restaurant either in City A or in city B. City A B Market Value 300 Million pounds 150 Million Pounds Potential Customers 2 big Organizations 1000 Smaller organizations Competition 2 Competitors 15 Competitors Thus, in the above example, the business entrepreneur should opt for city B, as it has a higher number of potential customers which makes it a more accessible market than city A. Target market The target demographics can include young budding professionals, established business entrepreneurs and service professionals, high-end and working couples, successful mid- aged professionals, tourists as well as wealthy customers from outside target market. Considering the demographics, it can be easily said that the restaurant is targeting a wide range of customers under a particular income range. Thus, the market for the restaurant can be described as growing. With the help of proper marketing strategies as well as word-of-mouth advertising, the restaurant will be able to attract neighbours, colleagues, friends and partners of their initial customers. The ethnic restaurant’s entertaining and appealing environment will provide an unbeaten quality with an exceptional price. From the grand opening itself, the restaurant will form a strong identity. Market need Restaurant industry is risky and highly competitive and most of the new restaurants fail because of inexperience and lack of required skills. In order to succeed in this industry, the restaurant will focus on experience and excellent dining service instead of merely concentrating on profits, during its initial years. The target segment might have preference for food with high quality and fat-free ingredients, since they are able to spot the difference in quality Presentation and appearance matters a lot to these segments. Since they have enough disposable income, the overall experience becomes essential for them. With increasing globalisation and inter-mingling of various cultures, customers are demanding larger variety such as, selective dining environment and international cuisines. These customers are no longer ready to accept a menu which is limited. Competition It is one of the most critical and determining section of the market research. The major objective here is to understand and evaluate the competition. Before considering the competitor data, it is important to understand the metrics of measurement. For example, it is important to understand whether the restaurant is interested in unique visitors, comparing revenues or traffic ranks. Another important activity is to establish a benchmark and segregate the competitors on the basis of that benchmark. This will help in determining which strategies of the competitors are worth following. The second step would be to consider the latest trends. In case of new cuisines and new food sections, evaluation will be more difficult compared to that of the similar existing products or services in the target market (Lewis, Massey and Harris, 2007). The next step is the evaluation of historical trends. Firstly, they help in understanding the growth speed as well as the impact of various entities. For example, competitors in similar industry might observe complimentary ups and downs. Thus, historical data regarding restaurants which offer similar products and services will help in understanding the strength of competition. Evaluation of quarterly as well as annual growth is also important to assess the health of the competition (Frank, 2008). Other important information which needs to be collected are current as well as past strategies of the competitor restaurants, used media strategies, weaknesses and strengths, best selling cuisines, menus or services, advertisement strategies, potential threats as well as potential opportunities from the competitor restaurants. An easy and quick way to compare the businesses service or product with similar attributes is by making a competition grid (Pannerselvam, 2004). This will help in determining the features and offerings which renders the restaurant business and competitors as attractive as well as unattractive. It will also help to pinpoint the exact cuisines and menus which are suited for the target market. Barriers to entry The goal of the restaurant business is to determine and evaluate the factors, drivers or resources which influence these forces in order to shape them in favour of the strategy implementation process. New entrants introduce themselves in the market with new capacities. The effects of these threats depend on the strength of the industry barrier, strategic decisions which influence the industry and overall incumbent reaction (Bain, 2001). Other entry barriers include product differences, economies, switching costs of buyer, brand identity, distribution, capital requirements, government policy and expected retaliation as well as cost disadvantage. Instead of creating the restaurant business around a pre-conceived thought, the market research will be conducted and built on a concept surrounding customers. The market analysis will identify the key drivers which will be considered as the opportunity areas. While planning and assessing the current restaurant business plan, it is critically important to understand the various obstacles that might hinder the path of a successful establishment (Srivastava and Rego, 2011). They are known as entry barriers. When there are low barriers, the number of competitors is high. While in case of high entry barriers, only few competitors can exist. In this case of restaurant business, one of the entry barriers could be capital associated with the acquisition of technological equipments, hiring of good chefs and capital for inventory management. In order to overcome this barrier, the entrepreneur can outsource a part of the establishment or lease the required restaurant equipments till the actual heightened pace of the business is achieved. Another entry barrier in the restaurant business will be the cost advantage acquired by large restaurant chains. Since they are able to buy raw materials at a much lower cost, it is almost impossible for new businesses to gain profits during the initial years. Other areas which an entrepreneur needs to consider during market research are as follows: The entrepreneur should evaluate the source of raw materials, whether they are difficult to obtain or easy to source. The demand for the raw materials is also an important factor to evaluate the competition level for the restaurant business. Understanding the level of required technology as well as available technology in the restaurant business in their different regions. Access to various resources such as, proprietary resources and supplier exclusivity as well as access to distribution channels such as, proprietary network and distribution exclusivity. Access to the preferred location of restaurant business establishment. Regulation Regulations are legal obstacles that a business faces during its establishment. In case of restaurant business, these regulation barriers can be legal obligations such as, concessions and licences (Ashton, 2007). It is important to evaluate the controlling authorities in the region before establishing the restaurant business (Brush and Vanderwerf, 1992). If the business consists of national or international clients or investors, then these regulations become more complicated and strict. Another important regulatory barrier would be patents which can also be a competitive hurdle. Market research will help in evaluating these barriers and develop alternative strategies in order to safeguard the business against these regulations. SWOT Analysis of the business entity Another important aspect of market research is SWOT analysis which assesses the strengths and weaknesses of the restaurant as well as evaluating the threats and opportunities to the business (McDonald and Hawkins, 2012). SWOT analysis can also be used to study competitors which will help in business evaluation and also, to develop winning strategies. The strengths in this analysis will be helpful in utilizing the advantage of the various opportunities which the restaurant faces and also, help in minimising future threats (Queensland Government, 2013). The weaknesses can be further divided into two groups, those which require improvement before taking advantage of the opportunities as well as those which need to be completely overhauled in order to remove the threats from the business horizon. Importance of market research For a business idea to step into the next level, it is important to prove, with the help of reliable information, that it is needed or wanted by its target market (Bhide, 2000). If the business ends up using biased participants for primary research or pilot testing, it will only result in the unsuccessful launch of services and products. Apart from this, a business plan based only on figures might not be able to cater to the exact requirements of the market. Even after this, many start-ups undertake minimal research before launching their businesses. The key evaluation for an entrepreneur is to be realistic about the success and level of future achievement of the business (Timmons and Spinelli, 2008). The key objective of market research is to gain perspective as well as be informed. It also helps in enabling the right process of decision making with the best abilities. Since the business is progressing towards an unknown direction, it is essential for the entrepreneur to gather right information from an unbiased market (Brandenburg, 2013). Important information to be collected are such as, background of the target market, success rate of similar services and products as well as target market’s past and present purchasing habits. By collecting and analysing this information, business will be able to recognize the shortcomings in the current idea as well as opportunities in order to make amendments. Market research increases the entrepreneur’s chances of funding. It also helps in evaluating the potential entry barriers such as, regulations, government laws and authorities and patents. Once the entrepreneur has recognized and assessed these barriers, it becomes much easier for him to formulate strategies for overcoming them. Reference List Ashton, R., 2007. The entrepreneur’s book of checklists. New Jersey: Prentice Hall Bain, J.E., 2001. Barriers to new competition. Cambridge: Harvard University Press, Bhide, A., 2000. The origin and evaluation of new business. New York: Oxford. Brandenburg, E., 2013. Why market research is so important for a start-up business. [online] Available at: http://www.smallbusiness.co.uk/starting-a-business/ideas-and-business-planning/2371778/why-market-research-is-so-important-for-a-startup-business.thtml [Accessed 16 November 2013]. Brush, C. and Vanderwerf, P., 1992. A comparison of methods and sources for obtaining estimates of new venture performance. Journal of Business Venturing, 7(2), pp. 157-170. Carter, S and Jones-Evans, D., 2006. Enterprise and small business: Principles, Policy and Practice. New Jersey: Prentice Hall. Creswell, J. W., 1994. Research design: Qualitative and quantitative approaches. London: Sage. Frank, T. R., 2008. Technological innovation: Generating economic results. Emerald Group Publishing Limited, 18, pp. 201-225. Koch, R., 2000. The financial guide to strategy – How to create and deliver a useful strategy. New Jersey: Prentice-Hall. Leedy, D., and Ormrod, E., 2005. Practical research. New York: Merril Prentice Hall & Pearson. Lewis, K., Massey, C., and Harris, C., 2007. Learning by doing: Six dimensions of complexity in researching SMEs. Qualitative research in accounting & management, 4(2), p. 151-63. McDonald, S. and Hawkins, D., 2012. Enterprise and entrepreneurial management. Harlow: Pearson. Pannerselvam, R., 2004. Research methodology. New Delhi: PHI Learning Pvt. Ltd. Queensland Government. 2013. Example SWOT analysis. [online] Available at [Accessed 16 November 2013]. Saunders, M., Lewis, P. and Thornhil, A., 2009. Research methods for business students. 3rd ed. New Jersey: Pearson Education. Srivastava, T. N., and Rego, S., 2011. Business research methodology. New Delhi: Tata McGraw-Hill Education. Timmons, J. and Spinelli, S., 2008. New venture creation: Entrepreneurship for the 21st century. New York: McGraw-Hill. Read More