Managing the New Enterprise - Essay Example

MANAGING THE NEW ENTERPRISE, INDIVIDUAL ESSAY By Lecturer: of Affiliation: and Managing the New Enterprise, Individual Essay Introduction Managing and building a prosperous business in the new enterprises is one of the critical and challenging aspects for many entrepreneurs. Raising equity finance for starting up a new venture is challenging and a risk exercise. Inadequate capital or lack of capital is one of the business barriers to growth, which can rarely be overcome by friends, families, bank loans, business angles and venture capitalists. Managing the new enterprise and expanding it requires adequate capital, but raising the required capital is challenging. Entrepreneurs may raise business capital from different places such as business angels or venture capitalists in order to meet their business goals. The business would not be suitable through a business angel in case one fulfills certain conditions. Venture capital is sometimes seen as a risk capital invested in a business venture or in a project, but venture capital and business angles can significantly improve business activities. Advantages of Raising Equity Finance Raising equity finance in relation to Peter and Julie’s ideas such as from venture capitalists and business angels is advantageous to entrepreneurs. First, business angels can enable the new enterprise to achieve great success; thus, investors will realize their investments lest the business venture is doing well. Burns (2007, p. 123) argues that business angels can enable the entrepreneur to improve their business activities. Secondly, venture capital plays a significant role in driving business growth and employment activities. This is crucial because it deliverers valuable skills, helps in strategy and decision making; thus enabling the company increase their performance levels. It also allows the development of new technologies in the business and their applications; thus contributing to high productivity levels. Venture capital is not for every entrepreneur even though how profitable it would be. This is because it is not a business solving needs of an entrepreneur, but rather helping the entrepreneur to achieve high profitability or revenue levels. Moreover, venture capital and business angels are among the most compelling forces driving business economy-wide advancement to increased business productivity. The business may focus on advancing fundamental business performance means; thus, the two equity finances would be the potent forces for contributing to increased business performance. Raising venture capital and business angle is crucial because it will enable new ventures to develop and reach their business goals successfully (Fraser and Simkins 2010, p.22). Every entrepreneur expects to create a winning business; thus getting enough capital for the business is crucial. Berman, Knight, Case and Berman (2008, p. 46) argue that it is only few entrepreneurs who become successful in raising equity finance for managing their business. It is also only a few entrepreneurs who are able to generate equity finance and few of them can meet the angel or venture capital fund requirements. Disadvantages of Raising Equity Finance However, raising equity finance from business angels or venture capitalists is disadvantageous. First, venture capital investments will contribute to high risk especially in situations where other forms of finance such as credits and bank loans are not available. This is because of high risks; thus, the elements of dealing with this issue may lead to significant failures and raising equity finance is costly, as well as, time consuming (Jennex 2008, p. 67). Secondly, the business owner will lose a certain power in making management decisions and the business would be unsuitable for investment. This is in case certain conditions are not fulfilled when using business angel. For instance, the business will fail or collapse in case the business owner and the manager are unable to develop a personal relationship with a business angel; thus, the business will be at risk. Thirdly, investors will not actually take the piece of the business; thus, the business owners should be aware of that and agree to take on investments. Therefore, the business owner is expected to act in their best of interests since the investors own a piece in their business. In case the business does not make any profit in the first year, the investor is not expected to receive any payments. Lastly, the lengthy and complex business requires detailed business plan with proper financial projections. During the deal negotiation, the investor should have to make legal payment and accounting fees in order to become part of the business owners. Key Elements of a ‘Business Plan’ that Peter and Julie Need to Prepare in Order to Raise the Finance and Market the New Products, for Which They are Planning to Seek Funds The process of attracting equity finances should begin with the preparation of the business plan. The business plan is an effective tool employed by investors in evaluating the prospects of the business (Bangs 2002, p. 37). Peter and Julie should prepare and write a business plan, which should include business products information, objectives of the business, marketing strategies, financial projections that direct them towards achieving the stated objectives of the company. The business plan will enable the new business to seek business financing and it is one way of communicating about the proposed company’s strengths or potentials. Thus, for effective and successful business performance, the preparation of the business plan is vital. This is because it will enable the business to raise finance, as well as, market their new products successfully; thus increasing profitability level. Background Information of the Business Alpha Personal Care Systems is the company that was established by Peter Butler, a nine year experienced entrepreneur in packaging design, after his arrival in Canada, in 1961. In 1985, Peter decided to start the business with a friend, Julie McBride, an accountant manager with experience in packaging and advertising activities related to retail and industrial products joined the business. The aim was to share resources and overheads; thus increasing organisation performance level. The company started manufacturing variety of similar products. Alpha Personal Care Systems was later incorporated with Click Company, where Peter owned 90% and the rest percentage was owned by Julie. The Alpha Personal Care Systems Company covered the dental application services only, and Click Company took the initiative of licensing the exclusive global patent rights and invention in hygiene application. Mission/Vision The mission of the new business is designing and packaging innovative products that would meet the demanding needs of customers; thus enabling the company to increase the profitability level. The vision of the company is to advance and manufacture numerous products in the next five years in order to increase the marketing shares; thus generate a lot of revenues. Product or Service The company will manufacture high technological and variety of similar products. The company will manufactures dental care products of varied types. It will employ technology in designing better-looking devices for preventing the head of the toothbrushes from detaching the handle while ensuring that the prices for products could be kept low. The technical designs of the products will be presented to patent right to the Attorney of Toronto in order to protect the patent due to varied numbers of similar products. Alpha technology will also have a patent in order to protect the products and services of the company; thus enabling them to achieve a competitive advantage in the market. Objectives of the Business Designing products of high quality that have retainable and disposable head that would be sold in convenient multiple packs in order to lower packaging costs; thus improving the business performance. There is need to license and change the patent rights of the toothbrushes products far more regularly because of diverse number of similar products; thus increasing revenues and profitability level of the company. Personalizing the retainable handle of the products; thus enabling the company to achieve a competitive advantage in the global market. Designing and packaging high quality products that will meet the demanding needs and the expectations of customers; thus increasing financial growth of the company. Market Analysis The marketing analysis is one of the most difficult sections of the business plan, but the most significant part in the business plan. Peter and Julie can only achieve success in their new business in case they develop an effective marketing strategy of the company. When analyzing the market, it is significant to reveal the way entrepreneurs would turn their ideas into the products or services that customers will want to purchase (Sutton and Klein 2003, p. 46). The objectives in this case will aim to convince lenders or investors to offer enough funds or resources to support the business. Zimmerer, Scarborough and Wilson (2008, p. 71) argue that marketing analysis is an effective way of determining the potential targeted market and the niche in it; thus enabling the company to improve sales. Therefore, Peter and Julie should take into considerations the following marketing aspects when carrying out marketing analysis. Marketing Definition Defining the target market and the niche through describing the potential customers, their location, and determining their psychological consumption of products is crucial. Cannon (2006, p. 79) argues that defining the targeted market is one of the key aspects towards achieving successful business performance. There is need for the Alpha Company to discuss the way their new products and services would be received in the marketplace and define those who will receive them. Identifying the targeted group of customers and understanding the consumption patterns of the targeted customers are necessary. This is because they will enable the company to take actions for reducing any risks that may impact organisation performance; thus increasing their revenues. Marketing Size Describing the current size of the market is crucial because it will enable the entrepreneur to make significant decision of marketing their new products in a certain market. The marketing size should be determined based on the statistical data reviews and discussions with potential distributors, marketing representatives and customers (Hisrich 2010, p. 89). According to Dijk (2008, p. 121), defining the market size is one way of that will enable the company to improve organisational sales. This is crucial because it will enable the company to manage growth successfully and overcome any marketing crisis that might impede products sales in the market. Marketing Trends Marketing trend will define the growth potential of the market and it will include the way business entrepreneurs believe the market will be in two to three years in case they launch a new product in the market. Mann and Gotz (2006, p. 31) argues that describing the marketing trend is a significant aspect that can increase the organisational performance. Understanding or estimating the marketing trend will improve technological developments of accompany, change customer needs and support growth estimates. For instance, Apple Company is one of the companies that have significantly improved their performance level of because of describing the marketing trends for new products that launch in the market. Therefore, Alpha Company will also improve and achieve success of launching the new product in the market in case they offer realistic and clear assumptions of the marketing trends. Market Strategy This section offers the sale projections, market shares and targeted or segmented markets that will enable the company to increase their financial growth. Rockley, Kostur and Manning (2003, p. 134) reveal that employing effective marketing strategies is essential because it will enable the company to achieve their staged objectives and increase their financial growth. In most cases, many companies employ the 4 marketing mix of pricing, product, place and promotion marketing strategies as effective sales strategy for increasing organisational revenues (Kao, Kao and Kao 2002, p. 25). In addition, employing SWOT analysis or the five forces of Porter analysis can contribute to effective financial growth in a company. This is because porter’s five force of analysis are effective in enabling the company to determine the factors, which are favorable or unfavorable for achieving a competitive advantage. SWOT Analysis Taborda, (2011, p. 32) argues that SWOT Analysis is an effective strategic tool for analysis the marketing environment in order to determine the factors, which can favor or not favor business activities. Employing this strategy will enable Peter and Julie to determine their strengths, weakness, opportunities and threats; thus respond or act to the situation effectively. This will enable them to implement effective strategies that can enable them to overcome marketing and financial crisis. This will enable them to launch their new product successfully in the competitive market. For instance, many multinational companies such as Apple, MacDonald and Wal-Mart companies that use SWOT analysis tool have become among the competitive companies globally. Pricing Strategy This strategy will enable Alpha Company to increase the financial growth of their new products launched in the market. This is through employing pricing policy of selling the product at the minimum or maximum price in order to achieve a competitive advantage. Dietrich and Krafft (2012, p. 77) argue that pricing strategy is an effective way of competing with competitors in the competitive market. This is because it will enable the business owner to price products in relation to that or their competitors; thus gaining acceptance of the new launched product in the market. This will also enable the company to increase their market shares and provide for an increased financial growth. Product Differentiation and Promotion Strategies Differentiating products is one way of attaining a competitive advantage in the global competitive market (Timmons, Spinelli and Zacharakis (2005, p.32). product differentiations one-way of raising high financial growth of the company; thus improving business performance. Employing product warranty polices will also enable the company to protect their products; thus increasing organisational sale. For instance, the case for Samsung vs. Apple disputes over patent issues reveals the way companies make effort of protecting their products in order to increase financial growth. Product promotion is also another way of increasing financial growth of the company. Meier, Sinzig and Mertens (2005, p.55) argue that product promotion is one way of increasing sales for the new launched product s in the targeted market. Financial Analysis The financial information required in the company depends on the nature and financing aspects. This is essential because it will increase the amount of financing requested; thus increasing financial equity or lending of money or funds (Baumer, Kreutter and Messner 2012, p. 112). For instance, the type of lending the two entrepreneurs are seeking is venture capitalists and business angles. Therefore, Peter and Julie should present clear financial information to their investors and present the financial status, which includes the current financial statement already in operation in the company. However, financial projections should be included with an effective estimated budget that clearly indicates the desired financing, capitalization, use of funds and future financing (Timmons, Spinelli and Zacharakis, 2005). Thus, the financial projection must be the main aspect for the marketing expectations. Conclusions In conclusion, raising equity finance in relation to Peter and Julie’s ideas such as from venture capitalists and business angels is advantageous to entrepreneurs. This is because it can enable the new enterprise to achieve great success; thus, investors will realize their investments. Venture capital and business angles plays significant roles in driving business growth and it will enable new ventures to develop or reach their business goals successfully. However, venture capitalists and business angels will contribute to high risk in business especially in situations where other forms of finance such as credits and bank loans are not available. The key elements of a ‘business plan’ that peter and Julie need to prepare in order to raise the finance and market the new products took into considerations varied aspects. First, it determined the mission and the vision of the company, which will direct the company. The objectives also guided the company towards achieving their goals successfully. Peter and Julie can only achieve success in their new business in case they develop a marketing strategy of the company. The market analysis took into consideration, the marketing trend, market size and targeted market. Employing a marketing strategy is crucial and this should take into consideration the SWO analysis, pricing strategy, production promotion and distribution of products. Lastly, carrying out financial analysis through offering financial statement and financial projections of the company is vital; thus enabling the company to meet their stated objective successfully. Bibliography Bangs, D. H. (2002). 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Zimmerer, T., Scarborough, N. M., & Wilson, D. (2008). Essentials of entrepreneurship and small business management. Upper Saddle River, N.J: Pearson/Prentice Hall. Read More