Entrepreneurship and Innovation - Case Study Example

Entrepreneurship and Innovation Table of Contents Entrepreneurship and Innovation 1 Table of Contents 1 Executive Summary of the Venture 2 Part A 2 Description of the Venture 2 Major Issues of the Venture 3 Feasibility Study of the Venture 3 Product and Service 4 Technology 5 Competition 5 Part B 6 Segmentation and Target Market 6 Marketing and Sales Strategy 9 People Requirement 9 Financial Requirement 11 References 14 Bibliography 16 Executive Summary of the Venture This report describes opening of a new venture i.e. to open a clothing store in the UK. It involves the market feasibility study of the apparel industry in the UK. The clothing venture will provide all type of clothing and accessories according to customers’ choices and fashion trends. The target customer will be both male and female and the male and female customer segments are further divided into sub-segments. The people will be recruited and given jobs according to their strengths and skills in particular field. This report illustrates the estimated financial needs and total forecasted net cash flow in the first operating year. The venture will differentiate their products and services by innovative promotional activities to attract customer and increase their customer base. Part A Description of the Venture The venture is to open a clothing store that will provide people variety of clothes and accessories. It will offer most inclusive selection of clothes in stores as well as in online shopping. By offering a complete selection of fashionable items, the new venture will quickly gain good response among customers and also increase the sales. The new venture will certainly fulfil the need of customers by providing most inclusive selection and by having good educated employee force. The business venture will constantly monitor the competitive business condition to ensure innovation and differentiation in their products. The clothing venture will adhere to maintain strict control in financial activities. The major creativity which will distinguish the products of the new venture will be to provide multi-sport wear to match the lifestyle of customer, tailored customer service and variety of sizes to choose which can fit the potential customer. Major Issues of the Venture One of the chief issues for new clothing venture is the recent decline of apparel manufacturing industry. The chief reason for this demur is that the retailers are relocating their production offshore. Due to low cost advantage in other countries, several clothing brands relocated their production offshore that resulted in job cuts of employees in the UK. The new clothing venture will outsource their products from British manufacturing companies because the demand of British products is at present increasing. The outsourcing from British manufacturing company will help to boost the confidence of the apparel industry and determine the problems of producing apparel goods in the UK. The new clothing venture can create job opportunity for several people in the UK (Freitag, 2011). Feasibility Study of the Venture The fashion sector of the UK is active compared to many of the markets. The fashion market is influenced by international market and it is dominated by seasonal style, disparity and desire of people. Therefore, businesses related to clothing and fashion need to consider the diversity of people’s opinion and thoughts towards brand and fashion. The fashion sector of the UK provides complete view of customer’s purchasing behaviour (Experian Information Solutions, 2010). The clothing market of the UK has shown excellent growth. In between 2004–2008, the expenditure on clothing items in the UK had increased by 10%. The supermarket such as ASDA and Tesco had accounted for increasing in sales of clothing products than other outlets. In the year 2008, the supermarkets’ share had raised to 23% compared to 10% in the year 2000. It is expected that this expansion will continue because of increase in customer expenditure on non-food products. The clothing market is benefited because of direct advertisements in the form of fashion and programs in television. The spending on advertising of clothing market was calculated as £56.7 million in the year 2009. As the economic condition is improving after facing the recession of 2008–09, the clothing market share is expected to increase largely by 18.6% by 2013 (Report Buyer, 2009). Product and Service The new venture will offer variety of brands to the customers. All kind of fashionable clothes in variety of sizes will be available in the new clothing venture that will include t-shirts, tops, jeans, jackets, ready made suits, kid’s dresses, accessories related with the clothes and others. Certain brands that will be available in the venture are Marks & Spencer, Next, Arcadia, Debenhams, Tesco, New Look and John Levis. These are ranked as top UK brands with a good market share in clothing industry (tutor2u, 2002). Technology The advanced technology and point of sale program will be utilised to maintain inventory and tracking the sales. SKU (Stock Keeping Unit) will be implemented in the new venture to identify products and thus to maintain stock. This is popular in retail clothing business. SKU will help to track the stock and products of the venture scientifically. For point of sale, the venture will implement RMS (Retail Management System) software of Microsoft. The RMS software will help in successful marketing activities, better customer relationship management, inventory control and management, purchasing management, data analysis and employee management (Microsoft, 2011). Competition There are several competitors for the upcoming clothing venture in the UK. The new business would build their new identity and loyal customer base apart from the competitors. In the initial period, the new clothing venture will offer the customers a reasonable rate of discounts in bulky purchases. It will offer seasonal sales discount to attract customer. It will make available all kind of products according to choices and preferences of different cultures of the UK. The detailed record of customers will be maintained according to buying behaviour and number of purchases made in order to develop good sales promotion. Part B Segmentation and Target Market Market segmentation is important to manage the customers, make recruitment and plan the distribution. In this business, the target market will be divided as two segments: male and female. Under female segment, there will be several sub-segments. The female sub-segments are divided into four parts. The first female segment is those customers who have mid range spending habit. These customers fall between age group of 18 and 35. They usually buy for self and are ready to give full price. Their buying pattern and wardrobe express their personality. This type of customers prefers differentiating products. They normally spend above average and don’t prefer to bargain much. This type of customers doesn’t buy bulky items rather they prefer major products which can develop their personality and looks. They try to avoid the crowd and prefer informal clothes such as boots, t-shirts, jeans and others. They also use online shopping if they find anything that suits them. The second category is those customers who prefer sporty looks and purchase less costly items. This customer falls under age group of 36 and 55. This type of customers desire to look better and prefer practical clothes. Their major priority is accomplishing the objective of the day rather than looking good. They possess less knowledge and interest about fashion. The product price and realism are important for them in purchasing a product. These customers normally spend below average but their spending per product is more than average. They prefer to buy sport items because of simplicity and low cost. They purchase more clothes for their kids rather than their man. The third segmentation of female customers is those who are enthusiastic in fashion. They can skilfully choose their clothing items within the budget. This type of customers falls under age group of 18–25 years. Fashion is quite vital for them and they are keen in following the latest trends but with lesser cost. They often restrict their choice because of high price. Their spending for clothes is lower than national average but high fraction of their disposable earnings is wasted on purchasing fashionable items that prove their passion for fashion. They search for right item which is most important for them. They buy in lesser quantity but the perfect outfit. Their choices are sensible which help them to select clothes without compromising the style. Their spending on per product is a little more than average. As they want to look stylish, practicality, comfort and durability are not important for them. They prefer to purchase strappy tops, trendy jeans, boots, nice accessories to match with jeans, belts and others. Lastly, the fourth segmentation involves those customers who have sensible spending pattern and want to purchase clothes for their kids. These customers fall under age group of 26-35. Sensible mothers fall under this category those who care for their child. Their budget is limited and always follows rational approach to purchase practical clothes. This type of customers does not focus on fashion or style rather they care for time and money. They don’t care for looks and don’t prefer to spend much time for shopping. They prefer to buy t-shirts, shorts, shoes, trousers, dresses, underwear and cardigans for their children. Price is an important issue for them and their spending on clothes is less than average because they choose sensible items (Experian Information Solutions, 2010). The male sub-segments are divided into five categories: The first segmentation is those people who want to appear young within budget. People between age group 36-45 fall under this category. This type of customers wants to keep up with current trends and fashions. Price is important factor for them and they prefer to purchase high quantity inexpensive products. They prefer discount and do not care for product quality. The second target segmentation is young males who are highly fashion conscious and prefers stylish clothes at reasonable price. This type of customer is between 18–25 years of age. They want to wear fashionable brand and seek perfect look. Their total spending is less than average. They spend on major items and do not worry for price for those products that can make them look better. Besides retail market they prefer shopping from internet as well. The third target segmentation is those people who want fit clothes, but prefer basic wardrobes. These customers fall under age group of 26–35. They are not so much aware of fashion trends and prefer casual, sporty clothes which are easy to put on. Price is important issue for them, thus they do not want to spend money on unnecessary clothes. The fourth male target segmentation is those people who prefer formal look and mainly focuses on their career. People who belong to age group between 36 and 45 fall in this category. This type of customers prefers professional look which can suit their job and spend money on work clothes. They prefer ready-made suits. Product quality is most important for them and they do not prefer to bargain much. This type of customers is conservative in style and spends above average for them as well as their kids. The fifth target market segmentation is people of middle age group who do not possess strong opinion about fashion. These people come under age group within 46–55 years. They do not waste time in considering the choice of clothing products. They purchase clothes as a necessary item rather than fashionable item. They spend moderately on clothes and prefer to purchase high quantity in lesser money. They prefer to let their wives buy clothes for them (Experian Information Solutions, 2010). Marketing and Sales Strategy The marketing strategy of clothing venture will focus mainly upon sales promotion and good customer service. This will help to uphold loyal customers and increase sales. The promotion of clothing venture will be synchronised with the objectives of the business. The pricing of various products of the venture will be flexible. The sales people will provide good information about trends and fashions about clothing products which will help to differentiate the products with other clothing malls. The clothing venture will develop creative promotional strategy which can help to attract the target customer towards the clothing mall. People Requirement The employees will be recruited for new venture according to the abilities of work, creativity and customer handling. Their tasks will be divided according to their strengths in any particular job. The business venture needs excellent customer service skill and behaviour to manage different types of customers. This is one of the vital elements for the success of the venture. The employee’s performance will be evaluated quarterly to identify their drawbacks and weaknesses. Through proper training those identified drawbacks can be removed completely. The evaluation of employee performance will help in the steady growth of the clothing business venture. The people of new venture will be as follows: Manager: The manager will be responsible for every managerial, clerical and administrative decision regarding venture. He will control the purchasing pattern, inventory management and decision regarding sales promotion. The manager must have minimum 5 years experience and should possess good knowledge in accounting, finance, marketing and operation. Three managers will be recruited for managing marketing, human resource and finance/accounting department. Sales people: Initially in this venture, six sales people will be allocated to assist in sales. If they face any problem while handling the customer the sales people will be increased. The sales people will provide every possible support to the customer regarding any product, enquiry or objection. Supporting Sales people: Three supporting sales people will be recruited to assist the sales people in case of over crowding or problem in customer handling. Besides supporting sales, people will support in unpacking of products, managing the inventory and trading the products. The job of supporting employee will be mostly ‘behind the scene’, except when they are needed in selling activities. Accountant: For maintaining the sales transaction, three employees will be recruited. They will be in charge of handling the accounts, cash transactions, calculating discounts and receiving cash. The sales people will be provided training about technical and managerial function. The technical function encompasses knowing about different clothing products, fabrics and proper fits. This training will be provided before working in an actual field. The managerial functions include handling customer complaints, tackling different types of customers and maintaining good customer relationship. The proper training will have significant effect on sales and it can transform a casual buyer into loyal customer (Palo Alto Software, 2011). Financial Requirement The salary of each manager will be estimated as £30000 per annum; salary of each sales people and supporting sales people will be estimated as £10000 and £11200 respectively per annum. The salary of accountant will be estimated as £15000 per annum. The forecasted costs of payroll are shown in following table: Personnel Requirement Salary in £ Manager (30000 × 3) 90000 Sales People (10000 × 6) 60000 Supporting Sales People (11200 × 3) 33600 Accountant (15000 × 3) 45000 Total Payroll Expenses 228600 The forecasted sale in first year is estimated as £1840000. The estimated fixed cost will be £302600 which includes the general expenses and payroll expenses; and the variable cost is estimated as £1119000 which includes cost of sales and direct sales expenses. The contribution will be 1840000–1119000 = 721000 P/V ratio = 721000/1840000 × 100 = 39.18% Break Even Point = 302600/39.18% = £772332.82. That means the clothing venture needs 772332.82/12 = £64361 sales per month to break even and make profit. The forecasted cash flow is estimated as £263300 in first operating year. The cash flow statement of the clothing venture is shown below: Operations Amount in £ Amount in £ Cash receipts from customers 1840000 Cash paid for Cost of Sales 1104000 Direct Sales Expenses 15000 Payroll 228600 General operating and administrative expenses 74000 Income Tax @ 37.07% as on 2008 155100 1576700 1576700 Net Cash Flow from Operation 263300 Source: (Trading Economics, 2010). References Experian Information Solutions, 2010. Fashion Segments. Business Strategies. [Online] Available at: http://www.experian.co.uk/assets/business-strategies/brochures/fashion-segments-factsheet.pdf [Accessed May 4, 2011]. Experian Information Solutions, 2010. Type 1 Ana: Individual Urban Trend. Assets. [Online] Available at: http://www.experian.co.uk/assets/business-strategies/brochures/fashion_segments_handbook_females_small[1].pdf [Accessed May 4, 2011]. Experian Information Solutions, 2010. Type 1 Philip: Youthful Aspiration. Brochures. [Online] Available at: http://www.experian.co.uk/assets/business-strategies/brochures/fashion_segments_handbook_males_small%5B1%5D.pdf [Accessed May 4, 2011]. Freitag, A., 2011. UK: The Business of Fashion. The Ethical Fashion Source. [Online] Available at: http://source.ethicalfashionforum.com/article/uk-the-business-of-fashion [Accessed May 4, 2011]. Microsoft, 2011. Microsoft Dynamics RMS. Products. [Online] Available at: http://www.softwareadvice.com/retail/microsoft-retail-management-system-profile/ [Accessed May 4, 2011]. Palo Alto Software, 2011. Management Summary. Sports Clothing Retail Shop Business Plan. [Online] Available at: http://www.bplans.co.uk/sports_clothing_retail_shop_business_plan/strategy_and_implementation_summary_fc.cfm [Accessed May 4, 2011]. Report Buyer, 2009. Clothing Retailing. UK - Market Report 2009 Seventh Edition. [Online] Available at: http://www.reportbuyer.com/consumer_goods_retail/clothing/clothing_retailing.html [Accessed May 4, 2011]. tutor2u, 2002. Market Analysis - Introduction to Market Share. Marketing. [Online] Available at: http://tutor2u.net/business/marketing/market_analysis_marketshare_intro.asp [Accessed May 4, 2011]. Trading Economics, 2010. Taxes on Income; Profits and Capital Gains (% of Revenue) In the United Kingdom. United Kingdom. [Online] Available at: http://www.tradingeconomics.com/united-kingdom/taxes-on-income-profits-and-capital-gains-percent-of-revenue-wb-data.html [Accessed May 4, 2011]. Bibliography Thompson, A., 2005. Business Feasibility Study Outline. Entrepreneurship. [Online] Available at: http://www.rochester.edu/entrepreneurship/pdfs/Business_Feasibility_Study_Outline.pdf [Accessed May 4, 2011]. Read More