Executive Summary
Starting a business venture is a vision held by many people. This is because entrepreneurship leads to self- reliance and encourage innovation. However, people desiring to start businesses notwithstanding; it is never easy. This is so because, starting a new business venture calls for commitment and knowledge.
To craft the business acumen into reality, individual need to understand the factors which can ultimately determine smooth progress towards achieving the primary goals. Knowledge on factors such as; a workable business idea, detailed business plan, finance, marketing strategy and infrastructure contributes to the success of a business (Pearce and Robinson, 2011).
Introduction
Business opportunities prevail or occur in different environments. For a business to be successful, the environment should be favorable. Once one has identified an opportunity he or she has to analyze the environment to determine the viability of the business opportunity. This can be achieved successfully by using professional tools such as SWOT, Porters Five Forces and PESTEL among other recognized tools. Furthermore, the entrepreneur has to gather the necessary resources in order to start and operate a successful business.
When individuals decide to venture into any type of business, they are required to attract or possess certain prerequisite skills and knowledge that are necessary. Moreover, they require capital, machinery and an accessible market. Managerial and technical skills are all necessary and can be acquired by interacting with people who have been in business for long as well as formal training.
Business Idea/Background
According to Ireland et al (2008), when coming up with a business idea, innovation is important. To ascertain whether a business idea is feasible or not, an entrepreneur has to carry out a feasibility study. Once the viability of a business idea has been demonstrated from findings in the feasibility study, the next important aspect is to develop a comprehensive business plan. It is through developing a business plan that a hazy idea is transformed into an implementable business.
Joyce and Woods (2001) also argue that business ideas whose viability has been demonstrated through a feasibility survey and a business plan developed are more likely to receive support from other firms and interested investors in terms of financial or management backing. Besides, a business concept when implemented in a timely manner i.e. when service or a product is in demand holds high-profit potential.
From our feasibility research, we resolved to start a snack bar business, with the trading name of “Eating Korner”. Our line of business will involve selling different types of snacks. These will include and not limited to; potato chips, muffins, queen cakes, fruit salad, cookies and biscuits, popcorn, also candy.
A snack bar is appropriate, in this area, because it is highly populated with college students, itinerant travelers and office workers. Therefore, there is a ready market for our services. This business responds to a real market gap in the area. From our own research, other similar food shops are scattered around the town thus constraining peoples’ movement during lunch hours.
Eating Korner Mission Statement
A Mission statement is important for every business. A mission statement defines the business primary objectives and purposes. Hence, the primary function is defining the measure of business success. A business or entity that seeks to carry out its operations without a mission statement risks having no ability to quantify its intended objective. The mission statement for Eating Korner is to be one of the best snack bars in the town and eventually in the whole country by selling the best, affordable and quality snacks to its customers.
Eating Korner Vision Statement
Joyce and Woods (2001) notes that the organization Vision statement is a process that identifies the purpose and vision of a business and how the needs of customers are going to be satisfied. The purpose of our snack bar is to provide quality and fresh snacks every day to guarantee our customer’s satisfaction.
Our primary goal is to ensure we run our snack bar competitively and provide value to our customers. Another key goal is to earn more profits and expand more and be recognized as the best snack bar in town. From research and interviews we have conducted, we have learned that a compelling vision and commitment will ensure the future of our business and guide it through changing times.
Eating Korner SWOT Analysis
SWOT is an acronym of Strength, Weakness, Opportunities and Threats. Strengths are the strong points of an organization i.e. which the organization is advantaged in. SWOT analysis evaluates the ‘strengths, weaknesses, opportunities and threats’ in or affecting a business activity or organization (Nadine and Anne, 2009).
Through performing a SWOT analysis, a business person comes to understand a thing to anchor on to grow the business and outwit the competition. These positive aspects, when properly harnessed and enhanced, can propel an organization to much greater heights. In every business organization, a number of things or factors either are still being developed or put the organization at a disadvantage.
In many organizations, there are elements, which tend to decline or diminish a business (Peteraf, 1993). These issues originate from within a business and are put down as weaknesses in a SWOT matrix. Unless a business organization takes care of the weaknesses, they are likely to bring the business down or place it in a disadvantaged position in comparison to the competitors.
Opportunities can be defined as chances that an organization or individual can maximize in order to gain a competitive advantage i.e. overcome the pressure and intimidations of the competitor (Peteraf, 1993). Opportunities are external factors that a person or organization may have very minimal authority to influence.
Threats refer to factors in the external environment of an organization that are likely to affect the organization negatively.
Based on the SWOT analysis we did, we have set our objectives and identified factors that will make us achieve our objectives and those that may make us not able to achieve the set objectives. The strengths of Eating Korner business that will give us an advantage over our competitors include; the strategic location of our snack bar and freshly made snacks.
A weakness that we have recognized that may give others in the same business advantage over us is that our snack bar is only for take away(s). This means that we will lose those customers who have time to sit down and enjoy their snacks. Also there are costs associated with setting up the business and weak brand name, since we are new entrants.
Considering opportunities, there are great opportunities for our snack bar to make more profits every day in this environment. The strategic location, low local taxes and flexible peak hours of our snack bar offers our snack bar great chances of being successful. Through SWOT analysis, we have evaluated external threats that could create challenges to our business. Such external threats include security in the area, changing eating lifestyles, lack of enough financial resources and skilled personnel.
SWOT analysis is necessary as we will be able to me minimize our weaknesses and concentrate on our strengths as we take advantage of opportunities emerging every day.
Eating Korner SWOT Analysis (Author, 2011)
Porters Generic Strategies
Michael Porter identified a type of scheme consisting of three universal strategies that firms often use to attain and maintain competitive advantage (Joyce and Woods, 2001). He defined these three competitive strategies along two magnitudes; strategic strength and scope.
He termed strategic strength as a supply side inclination and covers the strength or strong competencies of a business (Nadine and Anne, 2009). On defining strategic scope, Porter illustrated that it addresses the demand side of an organization and encompasses the composition and size of the market the organization intend to target.
Porter asserts that management should choose a strategy that will grant it a competitive advantage. The strategy should be built on the strengths of the business and the industry it is involved in (Sanchez and Heene, 2004). Porter points out that cost leadership and differentiation strategy are better suited for bigger and established firms (Nadine and Anne, 2009).
Emerging firms or businesses can utilize focus strategy by applying these strengths either narrowly or broadly. Porter identifies the differentiation, focus and cost leadership as strategies applicable at the business level or unit. These strategies are referred to as generic or competitive strategies. Moreover, the strategies are not firm or industry dependent.
Porters Generic Strategies (Author, 2011)
Porters Generic Strategies Analysis
Cost Leadership Strategy
The strategy emphasizes working towards accomplishing a common goal of a low-priced product. Nadine and Anne (2009) explain that cost leadership approach embraces low or less producers of service or a product in the industry. The firm sells its products under the average industry recommended prices to attain market share. Alternatively, the firm can sell its product or services at an average industry price to get higher profits than the rivals.
In a situation where price is a prevailing factor, the firm can be forced to sustain some profitability while the rivals suffer losses. In case of no price wars, prompted by the firm maturity and a price decline, the company can afford to produce at a cheaper price. Hence such firms will enjoy or remain profitable for some time. However, the cost leadership is applicable or targets wider markets.
According to Nadine and Anne (2009) ways in which firms attain cost advantage are many. Some of them include; gaining exclusive access to diverse sources of low cost material, improving progression efficiencies, vertical integration and making optimal outsourcing decisions, and avoiding certain costs. If rival firms are not capable of reducing their costs by an equivalent amount, the firm might be able to support a competitive gain based on cost leadership.
Peteraf (1993) gives the internal strengths of firms which are likely to succeed in cost leadership. A firm needs to have access to capital to create important investment in productive assets; this investment signals obstacles to entry that many firms may not achieve easily. A firm which has elaborate distribution channels is also likely to succeed in cost leadership strategy. Other strengths include; good skills in designing efficient products and expertise in manufacturing process engineering
Differentiation Strategy
This strategy entails the creation or development of a service or a product that provides unique attribute value of customers. The attribute associated with the product or service makes customers perceive the product as superior to that of the rivals.
The worth added by the uniqueness of the product may enable a firm to increase the price for it. By increasing the price, the firm normally hopes to cover the added costs associated with the new product uniqueness. Because of the product or service unique characteristics, when the suppliers increase the normal cost, a firm may pass this increase to the consumers. This is achieved especially when customers do not have substitute for similar product.
Also Sanchez and Heene (2004) give the internal characteristic strengths of firms which are able to succeed in a different strategy. These firms should have; access to leading scientific research, good reputation for quality and originality, creative product development team and efficient sales teams to articulate the skills to communicate product’s strength.
However, the risk connected with the strategy is there is a likelihood of imitation by rivals and changes in customer preferences. Also, some firms pursuing some strategies such as focus may have a greater advantage of achieving even enhanced differentiation in their market segments (Sanchez and Heene, 2004).
Focus Strategy
This strategy concentrates on a limited or narrow segment. Within the segment, the strategy attempts to accomplish either differentiation or attain cost advantage. The hypothesis entails that, the needs or wishes of a group can be serviced by focusing completely on it. A firm employing the focus strategy experiences increased level of customer loyalty. Hence, this entrenched loyalty may discourage other rival firms competing directly.
Firms embracing focus strategy usually have lower volumes because of their constricted or narrow markets. This limits their bargaining strength with their suppliers. However, in cases where a firm embraces differentiation focused strategy, they are able to share the high costs with the customers. This is because close substitute are not present or do not exist altogether.
Also firms that use focus strategy are better positioned to customize a wide range of product’s creation strengths to a comparatively narrow market segment they recognize. The major issues associated with focus strategies are imitation and changes in target market segment. The focus strategy gives a cost leader a broader market for a characterize product or service to enhance competition with rivals directly. According to Joyce and Woods (2001) focusers may carve out sub- segments they can serve better.
Strategic Planning Analysis
According to Ireland et al (2008), strategic planning is the process of looking at the present and charting long term objectives or direction for the business.
Effective strategic planning drives a business entity to meet its business duties. Strategic planning helps a business to effectively work towards realizing its goals and objectives in an orderly manner. SWOT Analysis of major activities in the business such as selling, marketing, taking orders etc. helps business operators to set up ways on how efficiently and speed can be achieved by removing unnecessary steps, reducing costs and improving quality (Ireland et al, 2008).
Consequently, product and service planning should also be part of a business goal to adapt to the needs of the psychological needs of customers to promote greater enjoyment and satisfaction.
Michael Porte’s generic strategy model stands as one of the most strategic management tool.
An organization can increase performance by either striving to differentiate its line of services or by minimizing the cost of production from those of its competitors. These two approaches can be followed by a niche of organizational strength on a designated market segment (Sanchez and Heene, 2004).
A firm that fails to acknowledge the strategic decision to embrace one of these models is at risk of being “stuck in the middle” (Ireland et al, 2008). Besides, a firm that aims at trying both the differentiators and cost leader can achieve neither and during the process may confuse its esteemed customers. According to our company mission, we aim at being the best snack bars in the town by providing the best, affordable and quality snacks to our customers.
We are committed to these services. According to the SWOT analysis some of the Eating Korner strengths are strategic location, and the availability of fresh snacks. A differentiation strategy embraces the development of a product or service that gives a unique element. This is done in order to entice or appeal to customers. The unique characteristic of a product makes customer to view it as superior compared to that of competitors.
Focus Strategy at Eating Korner
Whereas other strategies focus are aimed at achieving organization’s goals industry wide, the focus strategy will assist us build on a particular market segment. The focus strategy will align with our vision of serving our strategic target more efficiently since we are new entrants in the market.
Through the strategy the Eating Korner will meet the differentiation by addressing the needs of a specific target or lower cost in serving the target. Although the strategy does not achieve differentiation or low cost on market perspective as a whole, it will assist the Eating Korner achieve one or both in narrow market segment.
However, the strategy will have some limitation on our organization overall market share. In this case, the strategy will involve a trade off on profitability and sales volume rather than a trade-off with the general cost situation.
The SWOT analysis of Eating Korner indicates some of the weakness is the lack of enough resources to expand its business objectives. Resources are at the heart of business operation i.e. business is about using resources towards more resources. Pearce and (Sanchez and Heene, 2004) illustrates that having a strong financial background can not only guarantee commencement of the business, but can be important in sustaining business for the first initial months when the business is not making any sales.
The approximate budget for Eating Korner is amounting to $6,000. As per our analysis, this amount of money is less and will cover rental expenses, acquiring permits from the local and health authorities as required by the law, advertisement and salaries. Additionally, the money will be used to purchase other business infrastructures such as kitchen equipment’s, counter and shelves and microwave. The focus strategy will be important because it will encourage less spending and place more emphasis on the value of service.
Eating Korner will offer its service to designated market segment i.e. college students, travelers and office workers at a premium rate to satisfy them.
Besides, focus strategy is a necessity to assist Eating Korner competes broadly with established and entrenched rivals in the same business who posses financial might and are carrying out similar business activities. The focus strategy will allow Eating Korner to reinvent its services, build strong supplier relationships and front creative advertisement which will lead to improved and better services in more ways (Joyce and Woods, 2001).
The important reason for this strategy is to grant customer satisfaction due to the uniqueness of our service rather than what our organization takes to create the service. Although the strategy will make the firm charge higher prices for the service, what matters is the quality.
Conclusion
Starting a business venture is desired by many people i.e. many people dream of starting a business at some point. However, few manage to actually start personal businesses because it is a demanding endeavor.
Before venturing into a business, a person has to carefully assess the environment so as to determine the viability of available business opportunities. The business idea that one settles on have to be creative and fresh enough.
However, no matter how creative the business idea is, it only becomes feasible after one has developed a comprehensive business plan detailing how the business is to be realized. Business plan development requires an individual to look into pertinent issues like financial resources, marketing strategies, competition and long-term projections. This is done through performing a SWOT analysis.
SWOT analysis is important for businesses. It assists in evaluating the strength, weaknesses, opportunities and threat of a business. By performing a SWOT analysis, a business person or an organization understands factors to anchor on to grow the business and outwit competitors or rivals. When strategically managed or harnessed, SWOT mechanism can propel an organization to much greater competitive edge.
Porter’s generic strategies are important for businesses who want to achieve competitive advantage over their competitors. Porter illustrates that the three strategies can be applied by any given business basing on a number of factors. These factors include; the size of the firm, intended value of Return on Investment and market segment.
Porter identifies three competitive strategies. He asserts that in cost leadership strategy, a firm manages and organizes their activity that maximizes value as to offer a service at a reduced cost. In differentiation strategy a firm gains its strength by convincing a potential customer that the service or the product being offered is unique than a similar product or service offered by rivals.
The main characteristic of the strategy is creating uniqueness rather than offering a product at a reduced cost. In focus strategy, organizations differentiate their service or products to create uniqueness and appeal to consumers. This may assume different forms, customer service and brand image among others. Porter argues that differentiation is not an organizational strategy to ignore costs in focus strategy, although costs are not the major strategic objective.
Appendices
1. Sales Forecast for the first four months
(Author, 2011)
2. Interview Questions
- Do you like snacks
- What is the perception of people’s about snacks in this area?
- What should be done for you to have timely snacks and nutrition balance during your working days
- What should be done to encourage snack consumption in this area?
- Do you have any other question?
End
Differentiation Strategy (Author, 2011)
References List
Successful Differentiation
Ireland, D.R., Hoskisson, R.E., & Hitt, E.M. (2008). Understanding Business Strategy: Concepts and Cases, London: Cengage Learning
Joyce, P. & Woods, A. (2001). Strategic Management: A Fresh Approach to Developing Skills, Knowledge and Creativity. New York: Kogan Page Publishers
Nadine, P., & Anne, R. (2009). SWOT Analysis – Idea, Methodology and a Practical Approach. San Francisco: GRIN Verlag.
Pearce, J.A., & Robinson, R. B. (2011). Strategic Management: Formulation, implementation, and control. Boston: McGraw-Hill/Irwin
Peteraf, M.A. (1993). “The cornerstones of competitive advantage: a resource-based view”. Strategic Management Journal, 14 (3), 179–191
Sanchez, R., & Heene, A. (2004). The New Strategic Management: Organizations, Competition and Competence. New York: John Wiley & Sons