Entrepreneurship: CepatPrints Entrpereneurial Challenge - Term Paper Example

Module and I/C number> of Facilitator> Contents Introduction Entrepreneurship is the creation of new enterprise (Low & MacMillan 1988) and in most cases these are often small businesses employing fewer than 500 people (Bartol & Martin 1998), which would include CepatPrint as it employes fourteen people. CepatPrint is targeted at small and medium sized businesses (SMEs) and this in itself reflects the contributory aspects of entrepreneurship, as small businesses are known to contribute to: economic growth by fuelling business start ups (Bartol & Martin 1998); contribute to innovation (Aldrich & Auster 1986); create employment opportunities; offer an alternative avenue into business for women and ethnic minorities (Bartol & Martin 1998) and generate home businesses (Zimmer & Scarborough 1996). This clearly demonstrates the economic and social contributions of entrepreneurship. This report will look at how CepatPrint can capitalise on the opportunities offered by the Internet for its distribution channel, order fulfilment and market presence. The Internet and its business capabilities The internet came into being in the 1970s and was mainly used by the military to share information (Veeramani 2000). However by the early 1990s the use of the internet had expanded into the public domain and this was due to the increase in ownership of the personal computer. As more individuals owned their own personal computers, the demand for internet access increased, which started off with simple uses such as email, typing and storing digital information (Veeramani 2000). As with all technology, internet technology began to develop at a rapid pace to accommodate concerns over speed and safety which resulted in the development of web browsers and the use of the internet for e-commerce in the 1990s (Veeramani 2000). This signalled the beginning of a new era for businesses as the new opportunities presented by the internet’s e-commerce and e-business capabilities promised significant cost savings, new distribution channels and new markets. E-commerce has enabled businesses to conduct transactions over the internet as it enables instant communication and interaction, as well as providing real time access to information, products and services (Veeramani 2000, Pratt 2002). This has meant that the notion and concept of opening hours, location and customer services have been transformed. E-commerce also provides economic benefits by reducing the cost of searching and the cost of transmitting information which has led to efficiencies in transaction costs and the consolidation of supply and demand (SBA 2004). Consumers would also be provided with better information about price, quality and terms of trade. E-commerce would also expand markets and competition which would lead to lower prices and increased quality (SBA 2004). As a result of the opportunities presented by e-commerce and the technology available in this area, small businesses have been quick to capitalise on this and set up their internet presence. This was significant for small and medium sized businesses as they could compete with the larger organisation without having to invest in expensive infrastructure like building and costly marketing campaigns. Small and medium sized businesses were able to identify market niches and improve their customer search process in response to this (Pratt 2002). Printing technology is undergoing rapid advances as photochemical processes are being superseded by digital reproduction (Pratt 2002, SBA 2004), which is environmentally friendly and more cost effective in the long run, as it will eliminate need for procurement. However this new technology has got to be complimented with personnel trained in information technology as customers are now after total business solutions which include after care, image management and communication needs (Pratt 2002, SBA 2004). Customers are also looking for services at a low price, and of high quality, as well as a quick response which the internet is capable of providing. This would result in more short runs, more consistency and flexibility of service which is essential in the current business climate. Therefore, in addition to the capabilities the internet provides, businesses have to take the consumer into consideration and treat them as part of the value process, as they want a closer relationship with the supplier. This has been advocated by the increased use of the internet by customers, and suppliers of e-commerce sites. PEST Analysis Political The Malaysian government is still experiencing resistance to its e-government efforts which reduces the scope for opportunities and improvements in terms of e-business and e-commerce. There are also concerns regarding security and privacy in dealing with e-commerce as the government has to be able to ensure privacy for any personal information it obtains, and small businesses are also concerned about the risk of inappropriate disclosure of proprietary business information (SBA 2004). Malaysia is also a fairly new country formed in 1957 and this leaves scope for development in policies and the socio-cultural aspect of the population. For instance, Malaysia is still missing minimum wage legislation, despite a high number of self-employed individuals (Raj et al 2005). This also means that CepatPrint will have to organise and manage itself so that it becomes adaptive and responsive to the social and cultural changes, and not just the technological ones. Economic Malaysia is an emerging market, and the state has actively followed a policy of encouraging investment particularly in the electronic industry and other capital intensive industries (Raj et al 2005). This presents opportunities to CepatPrint, as both these industries often require and undertake in enormous publicity and advertising, and present themselves as a potential market. Malaysia also came out of a severe recession and has managed to maintain low levels of unemployment and low inflation rates, however there is a lack of corporate reform which is likely to affect businesses such as CepatPrint as support from the business community and network will be difficult to come by. Socio-cultural Malaysia consists of three main ethnic groups: Chinese, Indian and Malaysian (Pratt 2002). This introduces an equal opportunities and diversity issue for business, as each of these groups has to be catered for. This requires human resources to standardise all material to make it acceptable to all and for CepatPrint, may even mean a multi-lingual service and website to maximise the market potential. Technological The e-commerce segment has been growing in Malaysia however there still is the issue of getting companies to exploit the e-business opportunities and business-to-business concepts (Ebejer 2002). The Malaysian government is also implementing its e-government readiness initiatives which involve setting up community centres to ensure widespread internet access (Ebejer 2002). Other technological issues include the lack of high-speed connections and software incompatibility, and this would involve integrating the new e-commerce systems with their internal systems. Technology is also being replaced at an alarming rate which means small firms will have the costs of keeping up with this technology, for example, the current photochemical process used by CepatPrint will gradually be phased out with digital technology. However e-commerce started with electronic data interchange (EDI) technology, and this has now changed as most of this technology can be offered directly through the internet, further reducing the costs of initiation (SBA 2004). E-commerce also means taking payment by credit card and some small businesses are not ready or not willing to take this step. Five Forces Model This industry has low barriers to entry and this is demonstrated by the competitiveness of the industry (Porter 1980) and the fact that CepatPrint’s market share is insignificant. The low barrier could also be a result of the increased availability of personal computers and software which CepatPrint’s market may find more effective to have. The cost advantages in this industry would be related to personal reputation and the provision of a novel service, as the cost advantages would be low. Competitors are also more likely to retaliate to any new business or novel idea by using copycat techniques, which would quickly reduce the economies of scale (Porter 1980). In this industry, differentiation is not the defining factor for a business, but successful business will achieve economies of scale through increasing availability of their products and services and through cost savings. The previous recession has also been responsible for these low barriers as less money was available to spend on the adoption of e-commerce and business (SBA 2004). Whilst large companies would have been affected, small businesses tend not to allocate money to investments, where the perceived benefits are unknown, for instance, e-commerce and it’s all its safety concerns, may actually deter smaller businesses. The power of buyers in this industry is high because if a new piece of graphics software was released onto the market, it would reduce demand drastically especially for the small and medium sized business, and it would probably force larger players to downsize. This is a possibility considering the rate of technological change. This power is further reinforced by the fact that Malaysia has a low unemployment figure and a sizeable portion of self-employed bodies. As a result, the cost of switch would be low for this industry, due to the lack of differentiation. The power of suppliers is low as Malaysia does not have the resources to manufacture its own electronic equipment; therefore it has to import most of this equipment (Pratt 2002). This makes the supplier exempt from laws that would help them shift this balance. However the cost of switch will be high, as this equipment would have required enormous investment, and a switch could compromise quality and speed of service. As suppliers do have power, their only route into obtaining this would be through forward integration which would include expanding into the design and printing business to reap some of the profits. This would be possible as customers are fragmented and the presence of a branded business would in some way bring these groups together in the recognition of the brand. The threat of substitutes is high in this industry because of the sheer number of businesses operating. The lack of differentiation also contributes to this. Competitive rivalry is high as well and this can be attributed to the low economies of scale which result in aggressive practices. Internal Analysis The use of technology in CepatPrint is very limited. For instance by looking at the work process, one can identify where value can be added. When work orders are received, it seems the business then raises a purchase order, which incurs idle days as they will have to wait for the material to arrive instead of holding a small inventory that is regularly restocked with popular stock. The process of taking a work order also needs to be centralised to one location so as to capture all the requests and interest. The purchase orders are also initially handwritten before entry onto a spreadsheet. This process is decentralised, and can leave room for errors and mistakes as handwriting can be illegible and sometimes the most intricate details cannot be captured on duplication, so certain requirements could be missed out. After accounts have received the order, it seems work may begin, and the process is split between small and big orders, which will result in the under and over-utilisation of one piece of equipment. Some of the work is outsourced, and no investigation has been carried out to determine if CepatPrint can undertake this work. Outsourcing is an unnecessary cost for a small business when they could be investing in new technology. This results in a heavy workload for the artists with little scope to build in quality into the process. The use of current technology in this business is hindering the internal value chain as CepatPrint is only concentrating on its inbound logistics, operations and outbound logistics and totally ignoring its marketing and sales, and after-care service. By neglecting these two, CepatPrint has no concept of its failures or errors, and it does not have a feedback system to enable continuous improvement. This work process is not contributing to economies of scale, learning and capacity utilisation as the process and units are fragmented and decentralised. As CepatPrint is a small organisation, it needs to focus on a centralised structure first. Decentralised structures tend to work better with larger organisation, each unit knows how to interact and communicate with the rest of the organisation. Summary of Strategy CepatPrint has got to follow a strategy which incorporates value and quality in its work processes. One of its first strategies will include re-aligning the organisational structure by making it more centralised. Technology streamlines processes and reduces the number of tasks individuals have to take. Technology also stores information by allowing a single entry point for all information which also allows for analysis and assessment. Errors are more likely to be picked up using technology, as integrated checks can be ordered which prevent incorrect or inappropriate information being entered. CepatPrint will need a database-based system, where new orders are logged, and this information is available to all in the business. This database system would also keep track of its materials, and initiate the re-order of stock so as to shorten the time it takes to start on an order. By centralising, CepatPrint will have various challenges which will include re-organising the workforce, or even reducing their numbers. As a result of the multitasking nature of the organisation, CepatPrint managed to build up underutilise its resources as most were not in use as they were dependent on another process. For instance, the Sales and Marketing positions can be merged into one role as they are involved in the Marketing and Sales part of the value chain. A new role for managing service and after-care should be introduced to collect feedback and provide a system for continuous improvement through listening to the customers and implementing the necessary changes. The operations and the inbound logistics links in the value chain would also need to be reorganised, as the Operations should contain the artists, whilst the inbound logistics needs to be trimmed to have one role which incorporates the Office Manager and Order Processing. Other roles and tasks can be delegated so that other staff are trained to be artists so relieve the pressure on the existing employees, and others could be trained to maintain the e-commerce and e-business systems. The cost savings that will be achieved from this re-organisation could then be used to purchase plate production equipment and train employees in its use and maintenance to cut out their dependence on outsourcing. Recommendation As with the implementation of any project, CepatPrint will also need to take a few precautions so that they do not get a lot of resistance and so that the project will not fail. The general manager must support this project in the first instance, as the employees will be looking up to them for leadership and guidance. In a country with a low unemployment rate, care also has to be taken on the addressing the issue of redundancies and job losses. The single biggest recommendation is communication. The general manager will need to discuss the prospect of introducing internet capabilities and the benefits they will bring to the organisation. This should be followed by feedback, questions and input from the employees, and no ideas should be “rubbished” or deemed less important. Employees need to be aware the changes and the implications of these changes to their well-being and work. For instance, training and education for working on the internet and maintaining the systems will have to be introduced, and these could either simplify a job, or create a new one. Sufficient time should also be given with regular updates on the progress. If the technology can be purchased, this should be introduced on a trial basis, so that employees can evaluate the change process and decided whether they would like to participate in it or be excluded. Conclusion This report sought to determine how CepatPrint could capitalise on the opportunities offered by the Internet for its distribution channel, order fulfilment and market presence. The Internet through its e-commerce and e-business capabilities offers small businesses the opportunity to make cost savings and increase their market share by being available and visible. A PEST and industry analysis revealed no serious barriers or threats to the industry, as any could be overcome, and they also revealed the scope for CepatPrint to follow a differentiation strategy in an industry where it did not exist. An internal analysis also revealed how CepatPrint had been under-utilising its resources and how full utilisation can be attained through centralisation and process re-engineering. 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