Entrepreneurship - Assignment Example

? ENTREPRENEURSHIP …………………….. ………………………… …………… Table of Contents Table of Contents 2 Key factors related to Business Location 3 1- Technology: 3 2- Retail Compatibility 4 3- Competition and customer traffic 4 4- Retail saturation index 5 5- Reilly’s Law of Retail Gravitation: 5 Major recommendations for effective Business Plan 6 SWOT analysis of Fashionable Household Manufacturer and Retailer 9 Weaknesses: 11 Opportunities 11 Threats 12 Entrepreneurial Strategies 12 1- Product Innovation 13 2- Process Innovation 13 3- Business Concept Innovation: 14 References 16 Books: 16 Journals: 17 Key factors related to Business Location Successful entrepreneurs seek better business opportunities, take risks beyond security expectations, select appropriate location, identify and apply effective business strategies and possess the tenacity of converting ideas in to reality (Kuratko, 2008, p. 3). An entrepreneur is one who discovers opportunities, brings innovative ideas to explore these opportunities and to make them profitable business venture and think creatively to stay long in the business field. Among various opportunities and factors affecting the business, location decision is highly critical to future success. As Awe (2012, p. 40) noted, business location itself is a business opportunity since the strong, visible, accessible and high-traffic location seem to be a success pathway to most businesses. Following are the major five key factors that need to be considered while choosing the location for manufacturing and retailing of fashionable household business. 1- Technology: No matter whether the business is manufacturing or supplying technology products or not, it has become extremely important that businesses in today’s rigorously competitive market landscape have to take in to account the technology especially when it decides on location. For manufacturing and retailing of fashionable household goods, communication, fashion designing and other technological factors seem to have greater significant roles in the business. The firm needs latest and advanced technology for manufacturing, designing, architecture, furnishing, layouts, developing electrical appliances, marketing etc and therefore accessibility and availability of technology seem to be critically important determinant while choosing the right location for the business. Mareno, Castillo and Masere (2007) emphasized that the location decision for a retail business largely depends on technology factors such as communication and network facilities too. The contemporary business environment is greatly influenced by competition for which technology is the leading factor and therefore technology is the most important factor that determines the competitiveness of a business (Dosi, Teece and Chytry, 1998, p. 3) 2- Retail Compatibility While choosing the location, it is important for a fashionable household retailer to foresee which out of the two options- being single-free standing and being one among a cluster of businesses in all the projected cities namely Bristol, Plymouth, Exeter and Bournemouth- will be profitable and successful. Shopping malls and shopping centers attract large numbers of customers but a single-standing shop attracts relatively less customers. Retail compatibility refers to the maximum advantages that a retailer is able to enjoy by locating its business near to other shoppers (Zimmerer, Scarborough and Wilson, 2008, p. 528). Two compatible retailers within a close proximity area will certainly show increased sale with a direct proportionate customer interchange between them (Akehurst and Alexander, 1996, p. 109). For a start up business, retail compatibility is an important factor to be considered while thinking about the location. Shopping malls or centers attract huge numbers of customers and have to spend less on advertising. 3- Competition and customer traffic A particular business location will be saturated by many competitors and the business area can be said to be small if the location has many stores and they do compete with each other (Zimmerer, Scarborough and Wilson, 2008, p. 528). While starting and selecting the right location for fashionable household retail shop, it is highly important that the competition, competitive rivalry among the firms inside the business circle, competitive strategies other firms have implemented and customers attraction to each of the competitors are to be considered. The potential customers who are expected to pass by the business location is another important element. Even if the business an entrepreneur planned is well-shaped, lowest in initial cost and situated in a best location in a town place or etc, but it failed to attract sufficient numbers of customers, the business will profit him relatively little (O'Malley, 2008, p. 71) 4- Retail saturation index Retail saturation in a specific business location is the ratio of demand for a particular product divided by the total available supply of the goods (Dunne, 2007, p. 226). Retail saturation index thus can help a business evaluate whether starting business in a particular location will be profitable or not. Severity of retail saturation helps a retailer identify the profit potential. It can be assessed as follows: Total numbers of customers in a specific location X average expenditure per person for fashionable household goods ? total square feet of selling area. 5- Reilly’s Law of Retail Gravitation: J. W Reilly used Law of Retail Gravitation for estimating the attractiveness and effectiveness of a business to its potential customers. According to this law, two trade areas attract customers from an intermediate city or town in the vicinity of breaking point in almost direct proportion of to the population of two trade areas and also in inverse proportion to the distance to the intermediate city from these two trade areas (Samli, 1998, p. 70). Reilly’s law o Retail Gravitation helps a retailer estimate the trade limits between two areas by identifying the breaking point between them. For the fashionable household shop, this law will be an important tool to assess its market strength and identify the potential targeted customers. Major recommendations for effective Business Plan A well-written and well-thought about business plan will provide a pathway to profits for any new or existing firm. Business plan is a description of the business, its mission and vision, the project, marketing, research, development, management, critical risks, financial projections, situational analysis etc that demonstrate a clear picture of what the enterprise is and where the entrepreneur projects to go and how he proposes it will get there. Though an entrepreneur can establish a business as he is an opportunity seeker (McDaniel, 2002, p. 57), innovator (Carsrud and Brannback , 2007 p. 7) creative thinker (Treffinger Isaksen and Stead-Dorval, 2005, p. 3) and manager with functional abilities of direction, supervision, decision making, coordination, risk bearing, control and problem solving etc (Brockhaus, 1987, p. 1), he can make it successful, competitive and ensure competitive advantages only if he plans how and what it should. It is because, as Kuratko (2008, p. 348) stressed, business plan is entrepreneur’s road map for a successful enterprise. Some of the most significant recommendations for an effective business plan are detailed below: 1- Comprehensive business profile: A business plan must describe the business in relation to its features, size, types of goods or services it proposes to market and the general structure of the business as well. It is critically important to describe what the business is and what it is not. For instance, explaining Limited Liability aspects of the company is thus a necessary requirement. It will detail the industry background and potentiality of the firm to stay and survive in the market. This section needs to discuss the manufacturing and retailing aspects of the fashionable household goods and general marketing structure of the fashionable household goods. 2- The TWO statements for the core value statements: Vision and mission statements make business plan comprehensive and perfect. Though almost all the business plan doe include these two, mostly they fail to comply with basic requirements such as core value statements, business uniqueness etc. It is highly important that the business plan should specify the goals and mission of the business in relation to what it proposes to market, how it projects to achieve its goals and whom it plans to serve etc. As far as a fashionable household firm is concerned, the vision will be to continually deliver high quality new models of household items to help customers satisfy their varying and specific needs and wants. 3- Need to address business growth potential through Situation Analysis: Analyzing the business environments and describing the business growth potential are also essential to business plan. This section should describe the current situations and strengths of the fashionable household business. 4- Core marketing concepts of mix elements: Generally, business plans detail marketing mix elements, but most of them fail to address the core marketing concepts of the company in relation to how they respond to product, price, place and promotion. For instance, the marketing aspects of fashionable household products, the distribution channels that will be used throughout the stores located in Bristol, Plymouth, Exeter and Bournemouth, prices that will be charged for these products from the customers and any promotional activities that will be implemented to promote customers towards the business need to be well addressed. 5- Marketing with Strategic ideologies: Marketing will not happen automatically, but rather, careful undertaking of strategic initiatives is required. A successful business plan should detail strategic and tactic marketing. Marketing strategies may include segmentation strategies, targeting strategies and positioning strategies etc. Marketing strategies are key factors that determine the brand strategy, customer loyalty, customer base, increased returns and long term profitability and therefore fashionable household firm has to identify and describe its major marketing strategies in its business plan. 6- Monthly financial projections: Business plans do contain financial projections, but mostly these are presented quarterly or annually. Preparing monthly financial projections needs extensive financial estimation and careful budgeting, but still, monthly projections will be of greater use to financial departments. Cash flow statements, ratio analysis and profit and loss accounts should be prepared on monthly basis up to first three years. 7- Measuring competition rivalry: A simple competition analysis is generally found in a business plan, but measuring the competition rivalry among market players, identifying major competition strategies and recognizing effective solutions are hardly carried out in business plans. Measuring the competition rivalry is highly recommended for an effective business plan. For successful analysis, Porter’s five force analysis can be used and five factors such as competitive rivalry, substitution, potential entry of new businesses, bargaining of suppliers and customers can be evaluated. This can help the firm find most appropriate competitive strategy that can ensure greater competitive advantages. 8- Professional Plan: A successful business plan should give a detailed management structure showing the organization chart and duties and responsibilities of each manager in different levels of the organization. This not only helps the stakeholders understand the management powers and structure, but also the people inside the business to be aware of their own position and responsibilities. 9- How does it go: A business plan depicts points and milestones that the business is expected to reach, but often omits to clear how does it reach there and what specific strategies it may use to reach there. It is recommended that the business plan of fashionable household firm should describe its main business strategies such as corporate social responsibility, knowledge management, supply chain, mass customization and virtual integration and so on. 10- Success keys: A business plan should also depict the foremost measures or keys that the business feels to be effective to help the firm be successful in achieving competitive advantages. SWOT analysis of Fashionable Household Manufacturer and Retailer Bringing something new to the market has always attracted widespread customer attention. Discovering hidden opportunities for new products and services seems to be one of the most effective business strategies that can help a business stay long in the market. By designing and developing new variants of household items, large numbers of customers can be targeted. This is the core of the business idea behind fashionable household goods. The business will be formed as a Limited Liability Company by considering some of the family members to this business. This section of the paper presents brief analysis of Strengths, Weaknesses, Opportunities and Threats by using SWOT analysis to provide both internal and external analysis of the firm. Strengths Weaknesses Legal advantages of limited liability Household reliable brand Advantage of fashionable new items Advantages of multiple chains Restricted capital raising of limited liability company Others commitment to family business Lack of manufacturing expertise High per-unit costs Opportunities Threats Separate entity and tax advantages Business expansion Legal restriction for accounts keeping High Competition from online shoppers Strengths: A limited liability company, as its name implies, enjoys limited liability of its shareholders. By forming limited liability Company, the entrepreneur can keep his own assets and finances separate from the business and therefore his personal properties will not be legally considered for meeting the financial liabilities of the firm. From the legal perspective, both the entrepreneur and the business are considered separate and therefore the liability of the entrepreneur will be limited to the capital he raised while he formed the business (Warda, 2007, p. 10). As it is limited liability company, the company will enjoy perpetual existence which means that the company will remain existent even if one or more of the entrepreneurs die or cancel their ownerships. Household goods are always attracting large numbers of customers. Since the business concentrates on new style quality household items manufactured in new designs and fashionable outlooks, the business will certainly gain wider reputation and the word-of-mouths can create a long term customer loyalty aspect to the company. Moreover, it plans to operate its businesses through multiple chains in Bristol, Plymouth, Exeter and Bournemouth and this will have the advantages of economy in advertising, economy in stock transferring etc. Weaknesses: By including family members, the limited liability company will be private company and therefore capital raising will be restricted from family members and friends etc. It cannot issue shares to the general public and thus has relatively less access to higher capital as compared to that of a public limited company. Family members can be involved in a limited liability firm, but this may create contempt among the existing members. This can be overcome only by making others aware of the limited liability legal perspectives. Though the company enjoys limited liability, if a member of the company does something negligent or signs personal debt etc, the company will not legally protect him from the consequences of his own act (Warda, 2007, p. 10). Opportunities Limited liability companies are legally considered to be separate entities. Both sole trading and partnerships are not considered separate entities but their owners and businesses are same when they face legal issues. Moreover, limited liability companies are taxed only on their profits usually at the rate of 21 percent and are not liable to pay higher tax as being charged to sole traders and partnership firms. Limited liability companies are getting pass-through taxation hence they do not typically pay taxes at business levels (Fukao, 1995, p. 10-11). Since there can be greater demands for fashionable household items, the business can expand its markets to other areas and other countries too. Threats As compared to sole traders and partnerships, there are complex rules governing the accounts and financial management of limited liability firms. The limited liability company is required to provide double entry formats and balance sheets. Another major threat is that there are large multinational and other companies with well-established brands that produce and market household items and thus the competition is fierce. Entrepreneurial Strategies Entrepreneurial strategy is the means by which an enterprise establishes and reestablishes its basic set of relationships with its environment. This is closely related to widespread and more or less simultaneous change in the decision making patterns considered by business organizations (Murray, 1984, p. 1). Peng (2008, p. 130) identified Growth, innovation, network, financing/ governance and harvest/ exist as the five major entrepreneurial strategies. Carsrud and Brannback (2007, p. 52) found that product innovation, process innovation, concept innovation, business acquisition, franchising as some of the most significant strategies that entrepreneurs may depend on while entering an existing market. In today’s rigorously competitive business environments, both existing and start-up enterprises are required to consider most appropriate and effective strategies that should tactically help the firm generate better returns, achieve sustainable competitive advantage, stay long in the business, create strong customer base through loyalty programs etc. This section describes products innovation, process innovation and concept innovation as the major three entrepreneurial strategies. Most of researchers in the field of entrepreneurship have stressed that an entrepreneur is always an innovator too. Innovation is most important tool for entrepreneurs to find chances and make them opportunities for various business (Drucker (2007, p. 17) 1- Product Innovation Hundreds of new products enter to the market almost every day. Designing and developing new products that have not yet been to market are critical means to seeking opportunities and exploring to better business ideas. All new variants or new products or services coming to the market get succeeded because they are solutions to some unmet needs or wants of the customers. Fashionable household goods will certainly be amazing experiences to customers since they will provide solutions to customers’ urge for different products in different designs and layouts. Household items such as utensils, towels, blenders, mixers, electrical devices, linens, bedding, bed and frames and so on are available in the market, but customers are ready to pay higher when they are available in fashionable colors, fashionable layouts and fashionable designs that provide greater zeal of advanced technology. Entering an existing market with new products however is very expensive, but same time, is an effective means to eliminate risks associated with competition. All that come as new to markets may stay for a while and later gets saturated, and therefore, such businesses need to invest in Research and Development in order to continually design and develop newer variants of household items. 2- Process Innovation An entrepreneur may go for manufacturing a competing and already available product in the market in a different way rather than creating a new product. This is process innovation. Entrepreneurs can produce things differently with a view to eliminate production costs and provide them to market for relatively less cost. For example, the company doesn’t go for manufacturing anything new, but it manufactures the existing products by using latest technology that hasn’t been used by others, or by using more effective system which was unknown to others. An entrepreneur is an innovator as well and he may bring greater effectiveness and maximum efficiencies in manufacturing and marketing certain products and services by innovating the process. Once the new system or technology that the entrepreneur used for producing the existing products becomes known to others, he still has to innovate in the process of production. 3- Business Concept Innovation: Most entrepreneurs approach to the existing or new products and existing or new markets with new business concepts. Creative thinking may help some entrepreneurs find different business ideologies and develop newer concepts to designing, developing and marketing the goods or services. Mass customization, knowledge management and organizational learning among the people, corporate social responsibility, direct marketing and own store retailing are thus some of the new business concepts and dynamic business strategies that in turn helped many companies achieve sustainable competitive advantage and ensure business success. Strategic alliance through customer alliance, supplier alliance or investor alliance, franchising, new venture acquisition etc are some other types of business strategies and business concept innovation that have been practiced by many businesses in recent years and are found to be successful. An entrepreneur thus may produce a new product, or produce an existing one by using innovative production system or use innovative business concepts for establishing his business. References Books: Akehurst, G and Alexander, N, 1996, Retail marketing, Illustrated edition, Routledge Awe, S.C, 2012, The Entrepreneur's Information Sourcebook: Charting the Path to Small Business Success, Revised second edition, ABC-CLIO Carsrud AL & Brannback ME (2007), Entrepreneurship, Illustrated Edition, Greenwood Publishing Group Dosi, G, Teece, D. J and Chytry, J, 1998, Technology, organization, and competitiveness: perspectives on industrial and corporate change, Illustrated edition, Oxford university press Drucker P.F (2007), Innovation and entrepreneurship: practice and principles, Second and revised edition, Elsevier Dunne, P.M, 2007, Retailing, Cengage Learning Fukao, M, 1995, Financial Integration, Corporate Governance, and the Performance of Multinational Companies, Brookings Institution Press Kuratko, D. F, 2008, Entrepreneurship: Theory, Process, and Practice, Illustrated Eighth edition, Cengage Learning Moreno, J.D.J, Castillo, L.L and Masere, E.D.Z, 2007, Influence of entrepreneur type, region and sector effects on business self-confidence: Empirical evidence from Argentine firms, Entrepreneurship & Regional Development, Routledge O'Malley, S, 2008, Start Your Retail Career, Entrepreneur Press Peng, M.W, 2008, Global Strategy, Illustrated edition, Cengage Learning Samli, A.C , 1998, Strategic marketing for success in retailing, Illustrated edition, Greenwood Publishing Group Treffinger DJ, Isaksen SG & Stead-Dorval K.B 2005, Creative Problem Solving: An Introduction, Illustrated fourth Edition, Prufrock Press Inc Warda, M, 2007, The LLC and Corporation Start-Up Guide, Sourcebooks, Inc Zimmerer, T. W, Scarborough, N. M, and Wilson, D, 2008, Essentials of Entrepreneurship and Small Business Management, Fifth Edition, Prentice Hall, Pearson Education Inc Journals: Brockhaus, RH, 1987, Entrepreneurial Folklore, Journal of Small Business Management, EBSCO data base Cunningham, J. B., and J. Lishceron (January 1991), Defining Entrepreneurship, Journal of Small Business Management, Retrieved from EBSCO data base Murray, J.A, 1984, A Concept of Entrepreneurial Strategy, Strategic Management Journal, Retrieved from EBSCO data base Read More