Business Startup: Glasses Direct Case Study

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This paper offers an analysis of the viability of start up businesses. It is based on the success story of a young entrepreneur whose startup business shook and shaped U.K’s optician industry. James Murray was in the final year of his English degree at the University of West England when his entrepreneurial idea was borne. Apparently, Murray realized that glasses in the U.K are very costly when he had gone to buy himself some glasses for reading at a local outlet.

He conducted a survey and found out, that manufactures sale glasses to retailers at an exceptionally cheap price but retailers end up selling them to customers at exorbitant prices. He came up with the idea of setting up a company called Glasses Direct. He intended to purchase glasses directly from manufactures and sale them to clients at a fair price. His idea grew into a whopping business venture which shaped the entire optician industry in the U.K.

First, the paper examines factors that account for success in an entrepreneur. Understanding the market trends of the type of business one ventures in is one factor. This can be exemplified using Murray’s approach. Murray found out from an insider in a glasses laboratory that a pair of glasses in the store retailing at 150 Euros had cost only 7 Euros to manufacture (Laffey 2009).

Murray conducted a survey to analyze why the prices of glasses were that expensive. His survey enabled him to understand the glasses industry from both the retail and the supply chains. Having a grasp of the market trends empowers an entrepreneur with vital market knowledge which is essential in devising business strategies.

Another factor is seeking professional advice. Murray sought guidance from family members with experience in business who advised him on how to progress with his ideas (Laffey 2009).This enables an entrepreneur to make informed decisions. In addition, developing a business plan enables an entrepreneur to strategize accordingly. Business plans are essential in financial planning, marketing, delegation of duties and overall organization. Murray had a proper plan for the expenditure of his limited startup capital.

He prioritized essential expenditures like paying legal fees. He also paid for frames and lenses in advance. Suppliers were paid advance a month in arrears ensuring there was no cash flow problems (as cited in Moules 2006). Entrepreneurs should come up with innovative services that are unique to their businesses in order to capture many clients. Murray’s company used a website to reach more clients.

Clients would upload photos of themselves and see what different pairs of glasses would look like on them. The company also offered to cater for varifocals market; an approach that existing players had not employed. Moreover, entrepreneurs need to device workable marketing plans for their businesses. Murray’s Company explored both offline and online marketing campaigns (Laffey 2009).

Instead of revising for his exams Murray learnt about the glasses industry from both the retail end and the supply chains. Industry analysis is a vital tool that entrepreneurs need. Industry analysis occurs in a structured manner, and it helps entrepreneurs to gauge the profitability of their businesses now and in the future.

Industry analysis enables entrepreneurs to understand the market trends. This enables them to plan accordingly and come up with solutions or innovations that attract more clients. In addition, it enables them understand market dynamics and stay while prepared.

This can be exemplified by Murray’s deep understanding of the glasses industry in the U.K. Despite being a new entrant into the industry, his innovative ideas which depended on the vast understanding he had acquired about the industry, shook the giant players in the market.

Industry analysis equips entrepreneurs with essential market information thus, enabling them to stay ahead of their competitors including new entrants. New entrants bring increased competition because the number of consumers remains unchanged. This affects the existing businesses’ profitability. New entrants usually threaten or limit the profitability of old players in the market; a phenomenon that affects product quality or prices.

This can be shown from the price woes that Glasses Direct brought into the industry forcing other players like Specsavers to launch complaints regarding the pricing of glasses. When the threat of new entrants is high, completion stiffens and has the capability of lowering the profitability of the old players; like for the case of Glasses Direct. The author notes “Glasses Direct represented fundamental challenge to the established industry by unbundling sight tests and the sale of glasses” (Laffey 2009, p. 53).

For instance, the entry of laser surgery into the market lowered the demand for contact lenses hence affecting the profitability of the old businesses. Glasses Direct expanded its clientele base by supplying to government institutions in order to enhance its profitability following a threat from new entrants. On the other hand, when the threat of the new entrants is low, the industry encounters low competition; a feature that benefits the old guards.

In June 2005, Glasses Direct launched a brand extension, www.contactsdirect.co.uk. A brand refers to “a name, term, sign, symbol or design or a combination of them, intended to identify the goods and/or services of one seller or group of sellers and to differentiate them from the competition” (Borja 2003, p. 34).

Glasses Direct embarked on an aggressive marketing campaign and employed both offline and online methods to win customers. The company employed four marketing mix elements. The first element, product (p), refers to contact lenses supplied directly by Glasses Direct. This is a unique product because contact lenses could not be supplied directly before. Thus, Glasses Direct had a unique product (Direct supply of contact lenses).

The other element involved price (p). Glasses Direct relied on its business competitiveness concept of providing “affordable products’. The other element involved place (p)/ distribution. The company established a relationship with 50 U.K based practitioners (Opticians on Call) who assisted in addressing customer queries generated from the www.contactsdirect.co.uk.

The company became a supplier of seven government institutions. The other element was promotion (p). Promotions were done both online and offline. This also included after sales services like varifocals. The company also launched catalogue for its older customers. The marketing mix (4 p’s) formed the basis for the success of contactsdirect brand.

Glasses Direct established key management protocols by appointing a new Chief Executive Officer (CEO), Chief Financial Officer and a Director of Products and Operations. New ventures require a well defined management team to handle the daily operations.

These key positions include the CEO (chief administrator), a Managing Director (MD), Support or Customer care team, Human resource management office and financial officer. The CEO acts as the topmost chief administer who is essential in the overall management and decision making in the company.

The MD supervises all the activities. He forms the link between all other officers and the CEO. Recruiting well known and highly respected officers lends legitimacy to a firm. This is two fold. First, such officers have a proven track record, understand the market and have vast experience. Thus, their efficiency is guaranteed. Second, they can enhance the trust of the public in the company.

Well known individuals are brands on their own. They act as authorities in the market. Therefore, having such officers in a company goes along way in improving the company’s image. This is likely to draw potential investors because of good governance, performance and a high possibility for the business to flourish. These are crucial factors that influence potential investors’ decision to join the company.

Murray Wells accepted funding from venture capitalists. Venture refers to financial assistance offered to upcoming businesses that show prospects of success and cannot afford bank loans (Christofidis & Debande 2001). That was an exceptional idea because it gives the business money to expand its operations.

As a company expands, its needs for capital also become bigger. Additional capital might be required to increase production capacity, venture into new markets, and come up with new products or the general running of the company. The importance of venture capital to up coming business it two fold. One, venture capital enables upcoming businesses to acquire capital for expansion purposes. Second, the up coming entrepreneurs benefit from the vast business network that the venture capitalist may have.

Venture capital enables upcoming businesses to start life with a large assisting them to grow quickly. In addition, venture capitalist is usually individuals who have vast experience in conducting business. Therefore, the upcoming entrepreneur gains from the vast experience that the venture capitalist have. Venture capitalists offer a crucial network link between upcoming business owners and other key players in the industry (Dorf & Byers 2007). This can be justified by taking an example of Glasses Direct.

The 3 million pounds of venture capital they acquired from Index Ventures and Highland capital had significant financial outlays (as cited in Goodman 2007). “This move had other benefits because these firms had previously funded high profile internet start-ups a feature that gave further credibility to Glass Direct” (55). The investment enabled Glass Direct to higher high profile individuals to manage the company affairs. The company realized increased profits in spite of the liquidity crisis of 2007.

References

Borja, B 2003, Design Management: using design to build brand value and corporate innovation. Skyhorse Publishers, New York.

Christofidis, C & Debande, O 2001, Financing Innovate Firms Through Venture Capital. European Investment Bank, Luxembourg.

Dorf, R & Byers, T 2007, Technology Ventures, McGraw-Hill Higher Education Publishers, New York.

Laffey, D 2009, ‘Glasses Direct: A Case Study of Market Entry in the U.K. Opticians Market’. Journal of Strategic Management Education, Vol. 5 no. 1, pp. 45-56.

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