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The Business Start-up Development Essay

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Updated: Jun 16th, 2021

Abstract

This report delivers a proposed business strategy in establishing an enterprise to provide consumers with a product aimed at transforming their lives. The report focuses on the different competencies that will enable a business to compete favorably and create a successful model across market segments. An analysis of the business through Porters’ Five Forces is provided, along with a consideration of the capacity of the business to achieve tremendous gains irrespective of existing trade difficulties. The report includes an introduction, a marketing mix analysis, a feasibility review, a competitive environment analysis, financial statements, and a commentary, business aims and strategy, and, finally, a conclusion.

Introduction

The development of a business start-up is a complex set of actions that have an overall purpose of establishing a new, compelling business idea and the means of the efficient implementation of this idea (DaSilva & Trkman 2014). Primarily, it is essential to carry out market research in order to identify existing market gaps and segments of consumers that could be targeted. Additionally, an initial feasibility study is necessary because it is of high importance to develop a profound understanding of targeted consumers’ preferences (Cortimiglia, Ghezzi & Frank 2016).

Accordingly, market research was carried out, and, for the purposes of this assignment, it was focused on the market gap in alternative weight loss tools that would be appealing for middle-class and upper-class customers in urban areas who want to maintain both healthy and trendy lifestyles. Therefore, the initial business idea for the start-up is the following: a company that will produce and sell high-end sports bicycles with fitness-tracking features should be established. It is possible to mention that this business idea is in compliance with two primary kinds of demand of the targeted group: to have an effective weight loss device and to own high-end, fashionable production.

Marketing Mix

The application of the marketing mix, which constitutes such aspects as product, pricing, promotion, and placement, to the proposed business idea is of high significance because it provides a business with an opportunity for efficient and sustainable growth (DaSilva & Trkman 2014). The initial idea of producing high-end sports bicycles is evidently appealing to individuals who want to be in control of their weight, but rarely find time to exercise. As the problems of obesity and lack of exercise are considerably common in contemporary society, the link between the target market and the proposed business idea is apparent, because the identified issues are more common among inhabitants of urban areas.

Accordingly, four integral elements of the marketing mix should be discussed in order to determine their appropriateness for the proposed business idea. The product itself is highly applicable to the selected segment due to two reasons: (1) bicycles are an efficient means of losing weight; (2) high-end production and fitness-tracking features are appealing for middle-class and upper-class consumers. Therefore, this product will be in demand within the targeted population. The second aspect is pricing strategy. In this particular case, relatively high pricing will be justified by the financial abilities of the targeted group since middle-class and upper-class consumers in urban areas have a higher level of income compared to the ones from rural or suburban areas. If the pricing is supported by an aggressive marketing campaign that appeals to the sense of a healthy and trendy lifestyle, the product can efficiently enter the market and be competitive.

Placement of the product is the third essential aspect of the marketing mix. It is possible to suggest that the company should establish its stores in middle-class, upper-middle-class, and upper-class neighborhoods, as it is the most efficient way of reaching the targeted population. Trendy shopping centers should also be considered suitable placement opportunities. Additionally, it is critical to mention that the placement of the product is closely connected with the promotion, the fourth aspect of the marketing mix. Targeted consumers should be able to reach the product easily while marketing and advertising efforts should reinforce their interest in the product.

Feasibility Study

In order to implement the proposed business idea, the company should utilize a sufficient amount of resources that are needed for the production of high-end sports bicycles. Also, as the product should have fitness-tracking features, it is essential that the production team is equipped with skilled workers, who are experienced in high-end technologies. A considerably large part of the company’s initial capital should be used to purchase manufacturing equipment that is in compliance with high industry standards of producing sports bicycles as well as fitness-tracking devices because the quality of the final product directly depends on it.

One of the primary objectives of the feasibility study is to provide evidence that the product could be easily and effectively produced. It is essential to notice that manufacturing technologies for both sports bicycles and fitness-tracking devices are already available. Therefore, the most important aspect of the successful production process is to hire highly skilled labor from different industries and make them cooperate in the process of working on the product. Additionally, as was already mentioned, high-end manufacturing equipment is also an important aspect of successful production.

Competitive Environment

It could be hardly doubted that entering the market with the initial product idea, despite the fact that it has considerable advantages, will be difficult due to high competition (Gans & Ryall 2017). Thus, this section will dwell upon the investigation of theoretical frameworks that could support the company’s growth. First of all, Porter’s Five Forces model will be useful in identifying a strategy that ensures success in the market. The competitive rivalry will be tackled through positioning the business based on Porter’s Five Forces, specifically through understanding supplier power, buyers’ power, the threat of substitutes, like indoor gyms, and the threat of entry due to the lucrative nature of the business. The notion that the bicycles will be targeting customers with significant complications, linked to necessary weight loss and restricted time, prompts the need for the incorporation of advanced technology in making the products to ensure they hit the market hard (Porter & Heppelmann 2014).

Secondly, it is possible to use a PEST Analysis framework, as it is useful in identifying essential economic and technological elements. It will be important to utilize all the available financial resources in developing high-quality, unique bicycles. As mentioned previously in the Marketing Mix section, the bicycle market is highly competitive, and thus a unique product is needed. Moreover, the initial market research should further provide information regarding the technology used by competitors in making their bicycles. The company should then be able to make any upgrades on what is already available within the current market in a bid to attract customers.

Financial Reports and Commentary

The business should have a projected financial statement in place that will serve as a point of reference for decision-making. The research methodology is both primary and secondary and entails interviewing potential consumers and reviewing journals on market dynamics. Also, it is essential to mention that the methodology of the work is largely based on frameworks provided by Cortimiglia, Ghezzi, and Frank (2016) and Dobbs (2014). Below is the projected profit and loss statement. The estimations that are provided are based on evidence from the scholarly literature on the topic (Dobbs 2014; Massa, Tucci & Afuah 2017). The major components of the statement include operating expenses, gross profit, and net earnings. The operating expenses include wages and salaries, rental fees, and advertising costs.

Projected Profit and Loss Statement for the year (in Millions):

  • Revenue
    • 13240
  • Cost of goods sold
    • 4560
  • Gross profit
    • 8680
  • Expenses
  • Wages and Salaries
    • 325
  • Rent fee
    • 250
  • Selling and distribution fee
    • 550
  • Advertising cost
    • 600
  • Net Operating Profit
    • 6955

The following assumptions were made in the process of preparing the data. The advertising cost would be high as the initial stage of the business involves more promotional activities aimed at popularising its existence amongst customers. Another assumption was that the selling and distribution fee would also be high due to the initial activities aimed at ensuring the products are supplied widely to increase their availability in the market. Lastly, the revenue figures are relatively higher as it is presumed that there would be large profits as a result of numerous sales to the identified target group. These assumptions were justified by previous market research.

It is estimated that the company should have an initial capital of about $15,000 (million) in order to successfully start the manufacturing process and enter the market. Primarily, a significant part of the capital will be used to hire high-skilled personnel and buy manufacturing equipment. The rest of the capital should be used for the establishment of an efficient supply chain and carrying out promotional, marketing, and advertising activities.

Business Aims and Strategy

The top priorities using SMART goals are to set growth targets that will be specific, measurable, attainable, relevant, and timely. The essence of SMART goals is to provide a roadmap for asserting guidance on areas of strength to take on market opportunities and weaknesses to recommend corrective models (Massa, Tucci & Afuah 2017). The goals of the business are as follows:

  1. Be a leader in the bicycle industry.
  2. Increase market share by 15% over the next two years.
  3. Reduce operating costs by 20% over the next three years by improving the efficacy of the production process.
  4. Increase the volume of sales by 15% within one year.

The stated goals are of great importance to the business. In order to achieve them, the finance department should carry out an in-depth analysis in order to identify low-cost suppliers to reduce operating costs. Also, the marketing department would be involved in creating and implementing a plan that will facilitate an increase in sales. The department will have a benchmark on the projected sales revenue with deadlines on when they should be achieved. Moreover, the organization will equally consider consumer feedback to ascertain the success of the entity. Through these strategies, the business will be in a position to increase its market share and eventually become a leader in the bicycle industry.

Conclusion

In conclusion, the company will have a market development strategy that will allow it to concentrate on creating more market segments for the bicycle and, as a result, increase its volumes of sales, and see tremendous growth. Most importantly, by focusing on manufacturing high-quality and unique products, the company will be able to remain competitive in the face of stiff competition. Above all, integrating new technologies will facilitate the production of unique bike models. Indisputably, these factors will ultimately lead to business success.

Reference List

Cortimiglia, M, Ghezzi, A & Frank, A 2016, ‘Business model innovation and strategy making nexus: evidence from a cross-industry mixed-methods study’, R&D Management, vol. 46, no. 3, pp. 414-432.

DaSilva, C & Trkman, P 2014, ‘Business model: what it is and what it is not’, Long Range Planning, vol. 47, no. 6, pp. 379-389.

Dobbs, M 2014, ‘Guidelines for applying Porter’s five forces framework: a set of industry analysis templates’, Competitiveness Review, vol. 24, no. 1, pp. 32-45.

Gans, J & Ryall, M 2017, ‘Value capture theory: a strategic management review’, Strategic Management Journal, vol. 38, no.1, pp. 17-41.

Massa, L, Tucci, C & Afuah, A 2017, ‘Critical assessment of business model research’, Academy of Management Annals, vol. 11, no.1, pp. 73-104.

Porter, M & Heppelmann, J 2014, ‘How smart, connected products are transforming competition’, Harvard Business Review, vol. 92, no.11, pp. 64-88.

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