New Venture Development Process Report (Assessment)

Is There an Opportunity Here?

Type of Business

P’kolino is the company specializing in development and marketing of playroom furniture and toys. The success of this enterprise relies mostly on the uniqueness of their products and effective use of resources. It should be noted that they are going to outsource the manufacturing process to Brazil, which would result in the reduction of expenditures.

Need for the Business

Due to the fact that the population of the United States is constantly growing, P’kolino has good chances of finding a niche in playroom furniture market. According to their estimations, there are at least thirty million children, whose parents may want to buy furniture as well as toys. Furthermore, there is a growing demand for the products, which would best contribute to physical and mental development of the child, and this is one of the reasons why P’kolino can receive competitive advantage over other firms, working in this area (Bygrave & Zacharis, 2010, p 270). Apart from that, the company that would be able produce both furniture and toys will also have an opportunity to attract customers and win their favor. Thus, there is a great likelihood that, P’kolino may succeed.

Target Customers

P’kolino is going to target mostly well-educated and well-to-do women, who are very sensitive about the quality of the product, rather than about its price. These are the so-called “concerned” parents who believe that playroom furniture and toys can play an important role in the psychological development of their children (Bygrave & Zacharis, 2010, p 298). Most likely, their age would range from 23 to 30. They will spend a considerable amount of time in order to collect information about different products and evaluate them. They are the customers, who usually make an informed purchasing decision.

Product Competency

Overall, the management of P’kolino pays special attention to such business process as product development. From their point, of view, the furniture and toys, produced by P’kolino, will have such qualities as the improved educational value, increased functionality, and the multi-purpose nature (Bygrave & Zacharis, 2010, p 292). It is supposed that these attributes will distinguish them among other products of similar type. As it has been noted earlier, they are meant for people, who are not very concerned about the price.

Benefit Analysis

This case study does not focus on the investment, required for this project, and from this standpoint, it is rather difficult to make any predictions as to how profitable this enterprise will be. Yet, we have to emphasize an idea that this enterprise can succeed only under the condition that their product is genuinely superior to others. The thing is that P’kolino cannot obtain advantage over other firms by setting low prices, because they do not have the capacity for mass scale production. The only possible strategy is to show the distinctive qualities of their playroom furniture and toys.

Is it an Opportunity for the Team in the Case?

Business Competency

This enterprise will face serious challenges while entering the market, because there are many well-known companies, working in this area, for example, Brio, Little Tyke, Imaginarium and many others. They have already established their reputation, which ensures customers’ loyalty (Bygrave & Zacharis, 2010, p 279). The critical issue is that the customers, who are not price sensitive, do not usually, switch from one company to another. They are not looking for low prices and they are not likely to be influenced by commercials (Lawfer, 2004). Thus, it takes something really special to make them change their opinion.

The competence of the team

The founders and leaders of this organization are quite competent in business administration, marketing, and design. The problem is that none of them has ever worked in this particular industry. Design and production of toys as well as furniture is a very complicated process and one has to have in-depth knowledge of it in order to reach success. Nonetheless, diligence, willingness to learn and proficiency can overcome this obstacle.

Resources needed

There are several elements, which are indispensible for the success of this venture. The management of this company ought to create a reliable supply chain. For instance, furniture production can require wood, plastic, still, metal and other materials. The firms, working in this area, take special care in effort to ensure that materials are of the highest quality (Edwards, 2000). The same goes for toy industry. Additionally, they will need to find sales outlets for the distribution of their products. Most importantly, they must make sure that the outsourcer or the manufacturing company will provide products of the highest quality.

The likelihood of success

Provided that this organization has a team of qualified and motivated employees, who are willing to create products of excellent quality, they have every chance of succeeding in this area.

Overall Potential

SWOT analysis

Strengths

1. highly-qualified team;
2. superior quality of the product

Weaknesses

1. relative inexperience of the management;
2. lack of flexible pricing policies.

Opportunities

Increasing demand for playroom furniture and toys that would best contribute to psychological and physical development of the child.

Threats

1. highly competitive market,
2. substitute products,
3. potential lawsuits;
4. problems with suppliers.

Judging from SWOT analysis and Timmon’s Quick Screen¹, we can argue that this enterprise is exposed to many external threats and risks. The most urgent problems are high intensity of competition, absence of infrastructure, and inflexible pricing policies. If we adopt Model of Five, developed by Michael Porter (2008) we can assume that there will be a great likelihood of substitute products.

Recommendations

As a potential investor, I would not be interested in this venture, because it involves too many risks like low demand for the product, intense rivalry with other firms, copycats (firms which create substitute products), or poor organizational performance. P’kolino will find it very difficult to difficult to distinguish itself among companies of this type.

If I had been the owner of this enterprise, I would have worked out more flexible pricing policies. Their products are oriented only toward people with high level of income. It seems to me that their furniture and toys should also suit the needs of middle-class people, who cannot afford to buy too expensive goods.

At this stage, the team should conduct a thorough research of this market and their would-be customers. They need to know exactly what these people expect from the manufacturers. It seems it has not been done. Furthermore, they should take more time, while selecting their suppliers and outsourcers because a mistake at this stage can put an end to this venture.

Appendix

Timmon’s Quick Screen

Reference List

Bygrave W. & Zacharis A. 2010. Entrepreneurship. “Case: P’kolino”. NY: John Wiley and Sons.

Edwards C. 2000 Encyclopedia of furniture materials, trades, and techniques. New Jersey: Ashgate Publishing.

Lawfer M. 2004. Why Customers Come Back: How to Create Lasting Customer Loyalty. NY: Career Press.

Porter M. 2004. Competitive strategy: techniques for analyzing industries and competitors. NY: Free Press.

Porter M. 2008. On Competition. Cambridge: Harvard Business Press.

Footnotes

1. See Appendix.