Introduction
Business becomes successful due to the adroitness and diligence of their leaders and managers. People are often impressed by the excellent quality of products and the outstanding services provided by these corporations, but they may not be fully aware of the innovative ideas of their entrepreneurs. It is slowly becoming an essential tool in promoting development and economic growth in various economies. First, new business provides people with the pride of being one’s boss(Trott, 2007). However, the trend in the emergence of new businesses is not consistent as it is characterized by a similar form of investment. However, several businesses are not successful due to the lack of entrepreneurship. Although many reasons have been cited as the basis for such failures, research conducted by investors has confirmed three of which to play a big role in the failure of new business venture (Murphy, 2006). They include poor knowledge of the requirement of starting a new business, poor planning, and poor understanding of the client’s tastes and preferences.
Idea generation
Any person or organization making a new business venture first must look at the availability of a conceived idea (Trott, 2007). Making a new business venture implies investing one’s time and resources in the business. Consequently, the idea must be great and can deliver and meet the intended need of the local market and create returns to the operators. Successful business ideas must be built on a stable foundation, which includes the form of business that the proposed new business venture should take, information on the product the business is to offer, and the expected competition (Mullins, 2010).
Effective new business opportunities should be founded on passion, skills, and personality (Mullins, 2010). At the same time, it requires an evaluation of the market industry to determine whether it is fast-growing or dying. It is also recommended that every start-up business adheres to the following procedures. First, the idea, product, or service should be tested to the potential customers to obtain real-world feedback (Murphy, 2006). This would determine whether the idea is relevant to the needs of the local market. Secondly, the business should find the targeted market with the greatest need to be satisfied and begin with it before expanding to other potential markets. Lastly, the idea should focus on satisfying certain specific needs within the market. This should be the main objective of starting up a new business venture (Pinson, 2008).
Strategic objectives
For a business to be successful strategic objectives must be formulated that are consistent with the market requirements (Trott, 2007). Effective entrepreneurs establish a vision that sets the context for strategic objectives and action plans. Strategic management requires agility to address present business needs as well as to prepare for its future commercial and market environment. Effective entrepreneurs need to focus on action while focusing on human resources and the organization’s hard assets. In addition to this, he should promote a working environment that adheres to legal and ethical principles (Murphy, 2006).
Market analysis and research
Starting a new business requires knowledge of the need of consumers to make a profit while meeting the needs of prospective consumers. It is therefore essential for a new business venture to understand the market, which consists of the customers and other sellers. The prospective market for a new business venture often falls into two forms of market, consumer market and industrial market (Mullins, 2010). Consumer market refers to the locally available consumers for the products while the latter deals with other sellers posing completion to the business. Often markets with a higher population have more demand and therefore more attractive for a new business venture. However, the presence of other sellers creating intense competition often makes it hard for a new business venture to survive (Hill, 2008).
The understanding market is therefore essential for identifying the needs of the prospective consumers (Addison, 2003). Similarly, it provides the ground on the essential problem or shortage that the business intends to solve. Once the needs are identified, the business would find it relevant to trade with the motivation to satisfy the local needs profitably. Businesses rely on customers to obtain money, which can then be turned into some product or service. Consequently, the problem that the business is to solve would motivate customers to give their money into a particular business with the understanding that it is to satisfy some specific needs. Addison, (2003) cites that the concept of need-satisfaction applies to all businesses, products, and services. For instance, when one is hungry he/she buys food because of the need to satisfy hunger. Similarly, the idea should be able to describe the magnitude of the problem and how the customers can cope with it. That is, problems that are nightmares to the customers will force them to part with their money easily as opposed to the problem that they can cope up with.
Owing to fact that customers are easily persuaded by-products or services which have a certain competitive advantage, it would be important for the solution offered by the proposed business to solve the entire problem facing the industry. Business solutions that offer a partial solution to the market face more risks of losing customers than one that offers an entire solution to the problem. For instance, if customers are going to be forced to buy part of the solution from one business and get the other part from someone else then this would course them more trouble (Trott, 2007). New business ventures should therefore survey the market and strive to satisfy the entire need facing the customers and the entire product industry to retain the customers. However, one still needs to find out if there had been any possible attempt to solve the problem using the said means and the challenges they encountered. This would help one to either adjust or conform to the business pricing strategy to match the market needs while remaining competitive. This calls for making the business offer more attractive to the customers than other available alternatives (Murphy, 2006). New business ventures can also become competitive by initiating personal touch with the customers despite the absence of a track record and reputation.
Understanding competition
Competitive rivalry forces in a business segment determine the number and the capability of each competitor running a similar business in the same target market. Many competitors tend to push the price of their products down as they seek to attract more customers to their business premises to increase their market share (Mintzberg, Ahlstrand and Lampel, 1998). Venturing into a market segment that is already overcrowded with competitors offering equally attractive products will give an entrepreneur little power in the situation(Porter, 1980).
Competitive strategy and scenario analysis
An entrepreneur assists in developing a strong competitive strategy for a business when considering relocating its operations to a new target market. According to Michael Porter (1980), an industry is controlled by five major forces whose interactions determine where competitive power lies about suppliers, new entrants, buyers, and threats caused by substitute products. Porter’s five-force tool will enable an entrepreneur to analyze the five major forces that will determine the competitive power of the business in this new market segment about the current business situation. Many competitors tend to push the price of their products down as they seek to attract more customers to their business premises to increase their market share. Lastly, an effective vision statement should be powerful and compelling enough to express the confidence and inspiration driving the store towards its future (Gluck, Kaufman, and Walleck, 2000).
According to the organization theory proposed by Max Weber, the environment is storage for two types of resources, symbolic and economic (Alvarez & Busenitz, 2001). Symbolic resources are things like stability, reputation, and safety. On the other hand, economic resources include factors of production such as capital, land, and machinery. A good strategy aims at obtaining economic resources and adapting them into symbolic ones to protect the firm from environmental uncertainties.
Financial planning
Finding the source of funding for a new business venture is one of the critical concepts that can be used to determine whether a new business will successfully take off and progress or fail at any stage (Harris, 2006). Moreover, knowing how to raise capital ensures that the business remains functional. Business requires finance for two distinct purposes: as initial capital for setting the business off and as a measure to ensure long term or emergency support to the business (Ritson, 2008).
The most critical point on finances is identifying the sources of finance that are available for the business. Various sources of finance are available for new business and it is therefore upon the people concerned to decide on what sources to use for their new business venture. However, finances from equity are more appropriate for new business ventures than other forms such as debt, grants, and loans (Trott, 2007). This is because equity is an individual’s or stakeholder’s or organization’s own money and therefore when injected into the new business it would easily transcend market fluctuation. On the other hand, money obtained from other sources needs to be refunded and therefore might expose the business to much stress even before the business stabilizes (Shapero, 1985).
A new business enterprise must first understand and know all the facilities and items the business requires for it to take off (Trott, 2007). This would include the appropriate type and quantity. Once the items and facilities required for the business to run are identified, the operator should then go ahead and check on the costs involved in each item or facility and calculate the total cost required. Such research would help in weighing the total cost for the items, products, or services against the available capital to be invested in the business. The next stage entails researching the market prices for the proposed product. This information is important for deciding on the appropriate pricing strategy. It will also help an individual in deciding on appropriate prices that could be charged on a product and still result in profit without causing strain to the customers (Brockhoff, 2006).
Reference List
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