Starting a Small and Medium-Sized Enterprises - Essay Example

Starting a new SME Contents Contents 2 Summary 3 Introduction 3 PESTLE 3 SWOT 6 Competition Analysis 6 Target Market 8 Conclusion 10 Reference List 11 Contents 2 Summary 3 Introduction 3 PESTLE 3 SWOT 6 Competition Analysis 6 Target Market 8 Conclusion 10 Reference List 11 Summary This project has helped in the understanding of internal market structure of the computing industry. The most important aspect about starting a business is that it should be able to cover its costs in the process. In order to do so, complete knowledge of the market structure is essential (Pinson and Jinnett, 2006). This paper has assisted in studying the computing industry in which it wishes to operate. A precise idea about products of the rivals is equally important, while initiating a business and this project has helped in the same. Introduction Jingo is a new SME, which will be established by Simventure, to provide computing products and services to its customers. The mission statement of the company would be “Best computing solutions in most affordable ways”. In order to achieve this mission, the company has established a vision that specifies the way in which it can act both incrementally and opportunistically. This will aim at providing cheapest products at the best affordable prices. The values that have been devised for the company are as follows: The company wishes to follow a customer-centric approach, which will place customers first. The company will focus on results in order to always grab opportunities. The company will be guided by principles of quality and discipline to promote efficiency. The company aspires to be one of the best places to work. The corporate objectives of the company are: Constant innovation to improve the technology and products and also, to provide them at affordable prices, that will be unmatched in quality and service. Become the best, in terms of customer service, to enhance growth process of the company. PESTLE Jingo wishes to establish itself in the United Kingdom, for which external environment of the country is studied in details: Factors Conditions Impacts Political The stable government has been focusing on development of an innovative and dynamic economy to promote business (Talloo, 2007). The taxation policy of the government. Issues of consumer protection and other environmental legislation. This will provide friendly business environment for the company. Will require the company to manufacture products in least toxic ways. Economic The chief economic factors of the economy, like, inflation rate, exchange rate and economic growth (Pride, Hughes and Kapoor, 2009). The confidence of consumers in economy of the country. These factors greatly affect the future of a company in any country. Better consumer confidence increases investments for businesses. Social The income distribution of people and demographic pattern of consumers. The standard of living of consumers is important in determining the target customers and the pricing of products. This will help the company to segment its products, according to customer profiles. Technological The rate of technological change and R&D level in the country is highly progressive. This in turn determines the minimum cost of production and efficient scale of production. This singular aspect will perhaps be of highest significance as the pace of adaptation to existing technologies will determine the company’s fate. Legal The legal restrictions of a country refer to specific laws that will affect the business, like, consumer law, anti-trust law and anti-discrimination law (Jain, Trehan and Trehan, n.d.). These legal restrictions dictate the profits of a company and therefore, become crucial for business. Environmental These directly refer to outside environmental impacts, owing to production and manufacturing process of the company (Hirigoyen, et. al., 2005). Eco-friendly products have a better scope for acceptance in the society. From 1980s, industrialized countries of the world had taken up extensive R&D programs in their computing industry to improve efficiency of this sector and in this regard, U.K. was no exception (Impagliazzo, Lundin and Wangler, 2011). Internationalization of research had largely depended on political factors. It had been observed that, in Britain, the public policy was largely based on privatization and liberalization and R&D in the computing industry there was based on competition (Santangelo, 2002). This means that Jingo can carry out its operations without any public intervention and develop in a competitive manner. In U.K., the technology sector is under a competitive tax regime and is supported by a great infrastructure, which will propel the growth of firms in this sector. This, therefore, will be beneficial for Jingo. The government in U.K. has been actively trying to stimulate its technology sector by three main ways: Firstly, it has introduced the concept of ‘Patent Box’, with an aim to reduce commercial cost of intellectual property. Secondly, the government offers generous and flexible credits for R&D programs in the technology sector. Finally, it has introduced significant tax reliefs to improve profitability of this sector (HM Government, 2013). The inflation rate of U.K. had been recorded to be 2% in December 2013, which indicates that the economy is slowly recovering from recession (Trading Economics, 2014a). The GDP per capita of the country has been recorded at 37849.57 US dollars in 2012 (Trading Economics, 2014b). In the past few years, there has been a steady growth in demand of computer and related products in workplaces, with rise in social and educational status of people. SWOT Attributes Impacts Strength The biggest strength for the company will be the supportive attitude of the government and favourable taxation devised for corporate houses. The robust growth of small and medium size businesses in U.K. will also contribute towards growth of the company. The rising use of technology by the population will further stimulate demand for products. The technology used by the company will also prove to be advantageous. Weakness The ever-changing government regulations can prove to be harmful for the company for adapting changes. Opportunity The biggest opportunity for the company will be to capitalize on growth of the service market and establish itself as one of the leading players there. Threat The biggest threat for the company will be a stiff competition that will be faced in the market and also, constant need for innovation. Competition Analysis Competitive analysis becomes the cornerstone for formulating effective policies and their execution (Fleisher and Bensoussan, 2007). It is important for the business to identify its competitors and products, which they offer to their customers, as this can provide a competitive edge to the company. The analysis of existing market segment reveals that there are six major players, which are important rivals for Jingo. Ping Computers is a premium brand, which has grounded its presence in higher end of the market. The quality and performance of the products are quite strong and additionally, it has very high style quotient. Compuland, on the other hand, has done exactly the opposite of Ping. It has mainly focused on the engineering sector and produced products that have scored brilliantly in both performance and quality. However, the product is low on style quotient. Everyday IT and Datastore, on the contrary, has not been able to provide products, which can boast of quality or performance. They chiefly cater to needs of solo business area and the service industry. Gearing Brothers, another direct rival, has been highly successful in the IT industry and has delivered products, proven in quality, performance and style. Perry Systems, on the other hand, has chosen to serve middle sized markets, which mainly consist of customers who are classy and professional. By studying patterns in the existing market, it appears that entering the service industry will be a wise decision. This is because the competitor providing service in this sector, Datastore, is weak in terms of both quality and performance. Apart from that, it is rationale also because service sector of the U.K. economy has recorded the strongest growth and is currently the largest contributor of GDP growth (Giles, 2014). Datastore has failed to provide superior quality product in the market segment it operates. Simventure has invested a substantial amount in the company and using the same; Jingo has developed its products and is expected to achieve 65% in quality. This is because the company is backed by technology, which can efficiently produce products that are expected to perform better (the performance index is forecasted to be around 75%). The engineers of Jingo have ensured that products will use efficient technology, which will help to improve the organizational performance. The service industry does not require highly sophisticated computers, which has enabled the technical department come up with cheap, but efficient technology. Style quotient is not very important for the service industry, so the company will produce products with average style (approximated 55%). In terms of features, the company has estimated its performance to be almost equal to its competitors (estimated 62%). Figure 1: Expected Achievement (Source: Author’s creation) Target Market In the previous section, it has already been established that the company will choose customers in the service industry. This section elaborates the rationale behind that idea. Before marketing the products, marketing managers must understand the target market. Target marketing is specifying the group of like-minded customers, who have similar needs and expectations (Lantos, 2010). The present market structure of the computing industry can be divided into six categories. Figure 2: Comparison of competitors (Source: Author’s creation) The analysis of the above graph reveals that the largest market share belongs to solo companies, followed by service. The market size of engineering industries and professional service is almost the same. The smallest market size belongs to the corporations. This means that with Simventure funding Jingo to produce computing products, it will be a wise decision to enter into the service industry as customer base of this segment is strong. The service companies serve small and medium-size businesses. In U.K., a considerable growth in the small and medium sized businesses has been reported, in recent times, propelled by a rise in demand in these sectors (Hesse, 2013). This would imply that these business houses will require more offices, computers and other physical capital, in turn raising demand for computing products and helping Jingo to prosper. The company does not have a very large budget to serve corporations, ICT or professional services. These markets are high-end with customers who are particularly concerned with style and entering these markets will require huge finances, which the company will not be able to afford. The solo business houses offer a possible target market, but growth of the small and medium sized services prompts Jingo to establish itself in the service sector. The price structure of the industry proves it to be highly competitive. The higher price charged by corporations, professional services and ICT business is justified, as they tend to serve the higher end of the market. The pricing by Jingo cannot be very high as its target customers is a business community, which work on small to medium scale. At the same time, pricing of the product should take into consideration the rivals’ prices. The analysis of this market structure and establishment of Jingo will definitely prove beneficial for Simventure. The investors can expect to get good returns from their investment, provided Jingo serves the customers efficiently. A company can grow only when it is capable of handling risks and this will require Simventure to bet on Jingo, its new enterprise. Conclusion This case study has focused on the establishment of a new SME called Jingo, which will be primarily funded by Simventure. Overall conditions for working are favourable for the company. The market structure has been studied in details, which has provided a greater insight in functioning of the competitors. After a detailed analysis of the market, it has been found that working for the service industry will be beneficial for the company, as the former is experiencing strong growth of late and has been one of the significant drivers of economic growth. It has been particularly recognized that small and medium sized industries have grown remarkably, which is the chief target market for Jingo. This implies that the company will enjoy a higher growth momentum, if it is able to capitalize on this growth. Reference List Fleisher, C. S. and Bensoussan, B. E., 2007. Business and competitive analysis: effective application of new and classic methods. New York: FT Press. Giles, C. 2014. UK economy in strongest annual growth since 2007, led by services. Financial Times, [online] 28 January. Available at: [1 February 2014]. Hesse, J., 2013. Smaller manufacturers rejoice as demand picks up. [online] Available at: 8 [1 February 2014]. Hirigoyen, J., Hall, G.C., Reid, S. and Reid, S., 2005. Investing in tomorrows company: improving sustainability communications between property and construction companies and the investment community. London: CIRIA. HM Government, 2013. A Guide to Taxation. [pdf] Crown. Available at: [1 February 2014]. Impagliazzo, J., Lundin, P. and Wangler, B., 2011. History of nordic computing. Berlin: Springer. Jain, T. R., Trehan, M. and Trehan, R., n.d. Business environment. New Delhi: FK Publications. Lantos, G. P., 2010. Consumer behavior in action: real-life applications for marketing managers. New York: M.E. Sharpe. Pinson, L. and Jinnett, J., 2006. Steps to small business start-up. New York: Kaplan Publishing. Pride, W., Hughes, R. and Kapoor, J., 2009. Business. Connecticut: Cengage Learning. Santangelo, G. D., 2002. Innovation in multinational corporations in the information age: the experience of the European ICT industry. Cheltenham: Edward Elgar Publishing. Talloo, T.J., 2007. Business organisation and management. New Delhi: Tata McGraw-Hill Education. Trading Economics, 2014a. United Kingdom inflation rate. [online] Available at: < http://www.tradingeconomics.com/united-kingdom/inflation-cpi> [1 February 2014]. Trading Economics, 2014b. United Kingdom Gdp Per Capita. [online] Available at: < http://www.tradingeconomics.com/united-kingdom/gdp-per-capita > [1 February 2014]. Read More