Entrepreneurship Introduction
In order for entrepreneurship to be successful and for a business idea to be implemented effectively, the manager needs to have special skills, character, determination, and self-confidence. Amina already has the experience, and her projects are flourishing, so she knows exactly how to make business plans, keep records, calculate profitability, find profits, and use marketing tools. Psychological factors are no less important for starting a business and show the level of a person’s desire for self-realization, and they should not disappear over time. Amina has creativity, flexibility, and motivation, so she will adapt her product quickly to market conditions and generate new ideas following the challenges that may arise (BUSG2001, 2021). An entrepreneur should not lose faith in himself and his business during marketing activities. If the manager does not believe in their own business, both the launch and the sale of the product are doomed to failure. Amina is willing to take care of and serve the business when she opens it, and later, she believes in her idea and is willing to devote a lot of time and resources to it.
Describing Potential Customers
Market research demonstrates that Sunshine Bag’s potential customers are women. However, if women represent 42 percent of the population in the Middle East and consider that every three years, they buy a new beach bag, the first year, the company will win 1 percent of the market segment (BUSG2001, 2021). Meanwhile, it is significant to mention that due to the functionality of the Sunshine Bag and because the bag has wheels that can move around in the sand, it can be used by children. Considering that teenagers aspire to be independent, they, too, will be potential clients of the brand. At the same time, recognizing that men also use sunscreen, it is likely that at least a not significant number of them will become buyers of the product.
Should the Business Focus on Selling Their Product to Current Target Market?
At the market introduction stage, it should be remembered that the company will potentially cover the entire region of the Middle East, which indicates a large scale. It is also worth noting that all countries in the Middle East have similar climatic conditions and needs, so their residents are potential buyers of Sunshine Bag. Currently, the states of Europe differ in the demand of buyers, so, probably, the product will not be popular. Consequently, the focus should be on a particular market in the Middle East.
Methods to Asses and Select Business Ideas
Several significant factors must be considered to select the right business idea and assess its viability. The first method involves market testing, with a unique niche in the region being ideal for choosing an idea. The Sunshine Bag is fitting because there is no similar bag with wheels that can easily move even in the sand. It is also vital to calculate the market volume to determine the possible profits and evaluate the effectiveness. The product will cover about 1% of the population, and it is enough to make the business profitable (BUSG2001, 2021). The second, no less influential factor in choosing a business idea is start-up capital. Amina has 100 000 QAR to start and is ready to take another 300,000 QAR on credit, which indicates her ability to implement the business idea. When evaluating a project, it is necessary to immediately analyze what technology it will be implemented and what resources are needed, such as production. The creation of the bag requires, first of all, waterproof fabric and a production facility where sewing will be done.
Analysing Competition to Determine Sources of Differentiation
Competitor analysis is the process by which a business obtains information to identify key players and examine their activities. Since this is a bag designed for people who lead an active lifestyle, the main competitors are sporting goods companies both in physical stores and online. Their main advantage is a large size, but at the same time, the Sunshine Bag is also roomy enough to easily fit all the necessary equipment, including chairs (BUSG2001, 2021). It is not bulky and folds effortlessly, making it more convenient for potential customers. Thus, its smaller size will not be a weakness of the product, but on the contrary, will ensure its comfort and convenience for clients.
What Is Their Competitive Advantage?
The foremost competitive advantage of the bag is its ability to move easily in the sand. Moreover, it is made of quick-drying materials and has a shoulder strap. Thus, people will be able to take it in all weather conditions and have no difficulty moving around. The starting price is also an advantage; the bag will cost 125 QAR, which is 5 QAR less than the bottom mark of the rivals.
Understanding and Constructing a Business Plan
In order to create and implement a successful business plan, it is first essential to assess the strengths, weaknesses, and advantages, and disadvantages of the idea. For this purpose, it is important to analyze the internal and external environment of the company. Therefore, for a successfully implemented business plan, it is crucial to have a clear idea and description of the product to be launched. The next stage of the business plan is market research and the study of competitors. It is required to produce a strategy to achieve effective advertising and sales of goods. Additionally, it is crucial to determine the main segment of customers and decide on the product’s manufacturing. It is interesting to remark that it is also advisable to calculate the possible profits and costs of production. Thus, a business plan is created to attract investors who will invest in the project initially.
Basics of a Marketing Plan
The production of goods will be carried out in Lebanon because renting premises and employees’ wages are lower there. Thus, including the payment for transportation services, which will deliver the prepared bags to Qatar, this method is more profitable. However, it is necessary to indicate that the sale of bags will be through sports stores in Qatar. This is because possible clients will be looking for comfortable and roomy bags in sports stores (BUSG2001, 2021). In order to attract customers’ attention to the product, it is essential to use effective advertising. The company uses video marketing because, in opposition to watching a two-minute video and reading an article, which will take 10-15 minutes, many people will prefer video. The video should make it interesting and point out the main advantages of Sunshine Bag.
What Other Choices of Distribution Should be Considered?
In addition to selling through the sporting goods store, wholesale sales of five or more items need to be considered. Meanwhile, the possibility of direct sales, where the bag can be ordered directly through the phone at Amina’s company, should be evaluated. I would recommend that the focus is on the opportunity of direct sales, which would make it probable to make more profit.
How Would the Market Plan Be Approached?
The approach to business planning will include a preliminary analysis of the market, according to which Amina can identify whether a product is relevant in a particular segment. Meanwhile, planning also includes establishing goals and objectives, and defining marketing. Additionally, the cost and calculation of expenses and approximate profits are also important. The final step is to control all the previous processes.
Preparing the Business Financial Analysis for Investors or Loans
For the first year, the calculations are made in accordance with the figures provided, the next three years show the financial forecast of the enterprise. From the analysis of income and expenses, it is obvious that the company will pay the loan and interest for the first three years, although it would still make a profit. It is essential to mention that the income will be minimal in the first year because of the relatively small production of goods. Although in the second year, the demand will develop, which will allow producing more bags, as a consequence the sales and earnings will increase. Thus, demand is predicted to increase in the first three years of the firm’s operations, resulting in a higher price for Sunshine Bag. Additionally, it is forecasted that the company will not only be able to pay the stipulated salary of the employee but also to raise it. The table shows that if a business repays a bank loan, it will be able to make a significant profit. Thus, the proposed business idea looks viable for the bank to approve a loan of QR300,000.
Figure 1. Sales Budget
Figure 2. Income Statement
Break-Even Point = Fixed Costs ÷ (Sales price per unit – Variable costs per unit).
Fixed Costs = Cost of Goods Sold. Variable costs per unit = QAR 100 250 (total operating expenses) ÷ QAR 3200 (forecasted unit sales) = 31 QAR. Break-Even Point = QAR 160 000 ÷ (QAR 125 – QAR 31) = 1703 units. Assuming sales of 3,200 units for a year, a product price of 125, Fixed Costs of 160, 000, and Variable costs per unit of 31, the break-even point in the first year would be 1,703 units.
Evaluate Equity and Non-Equity Funding Sources
The company does not borrow with equity financing, so it does not pay interest. Although profits would have to be shared with the investor, a portion of the investor’s shares and power in the business would be granted. It is worth noting that by using equity financing, the company does not take a loan, accordingly, does not pay interest. However, Amina’s company did not choose an equity source of income but rather a loan from a bank (BUSG2001, 2021). Consequently, the business will pay the loan and the interest on it for the first three years. Considering that the business owner does not want to sell the business idea, then for her to be the unacceptable option of giving the interest in the company to an investor. Thus, for this business idea, a non-equity source of financing is an appropriate option.
Reference
BUSG2001. Final Exam Case Study, 2021.